Volaris: the leading ultra-low-cost airline serving Mexico, USA and Central America - November 2017
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Volaris: the leading ultra-low-cost airline
serving Mexico, USA and Central America
November 2017
Disclaimer
The information ("Confidential Information") contained in this presentation is confidential and is provided by
Controladora Vuela Compañía de Aviación, S.A.B. de C.V., (d/b/a Volaris, the "Company") confidentially to you solely
for your reference and may not be retransmitted or distributed to any other persons for any purpose whatsoever.
The Confidential Information is subject to change without notice, its accuracy is not guaranteed, it has not been
independently verified and it may not contain all material information concerning the Company. Neither the Company,
nor any of their respective directors makes any representation or warranty (express or implied) regarding, or
assumes any responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any
information or opinions contained herein. None of the Company nor any of their respective directors, officers,
employees, stockholders or affiliates nor any other person accepts any liability (in negligence, or otherwise)
whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in
connection therewith. No reliance may be placed for any purposes whatsoever on the information set forth in this
presentation or on its completeness.
This presentation does not constitute or form part of any offer or invitation for sale or subscription of or solicitation or
invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied
on in connection with any contract or commitment whatsoever. Recipients of this presentation are not to construe the
contents of this presentation as legal, tax or investment advice and should consult their own advisers in this regard.
This presentation contains statements that constitute forward-looking statements which involve risks and
uncertainties. These statements include descriptions regarding the intent, belief or current expectations of the
Company or its officers with respect to the consolidated results of operations and financial condition, and future
events and plans of the Company. These statements can be recognized by the use of words such as "expects,"
"plans," "will," "estimates," "projects," or words of similar meaning. Such forward-looking statements are not
guarantees of future performance and actual results may differ significantly from those in the forward-looking
statements as a result of various factors and assumptions. You are cautioned not to place undue reliance on these
forward looking statements, which are based on the current view of the management of the Company on future
events. The Company does not undertake to revise forward-looking statements to reflect future events or
circumstances.
2
Volaris: snapshot at 30,000 feet
Serving 68 destinations throughout Mexico (40), USA (24) and Central America (4)
Sep 17 CAGR
2008 2016
LTM (08-16)
Unit cost
(CASM ex-
5.5 4.8 4.9 -1.6%
fuel; cents,
USD)(1)
Passenger
demand 3.2 14.3 15.6 20.6%
(RPMs, bn)
Aircraft
21 69 67 16.0%
(End of period)
Routes
42 162 164 18.4%
(End of period)
Passengers
3.5 15.0 16.2 20.0%
(mm)
Operating
revenue 4.4 23.5 24.7 23.3%
(bn, MXN)
Adj. EBITDAR
0.7 8.9 7.0 37.4%
(bn. MXN)
Adj. ROIC
11% 20% 14% +9 pp.
(pre-tax)
3
(1) Converted to USD at an average period exchange rate
Volaris’ flight path for demand stimulation and
continued growth
Capacity
increase
Cost
reduction
More
Resilient ULCC
ancillaries
(“You decide”) business model
driving high,
profitable growth
“Clean”,
low
base
fares
More
customers
4
Volaris’ consistent execution of its ULCC business
model well positioned for growth
Accomplishments Opportunities
Strong penetration of Mexican air Attractive emerging air travel market in
travel market Mexico
Diversified and resilient point-to-point Continue geographic diversification
network through international growth
Bus to air substitution Continue route frequency increase
Successful price unbundling Upside in ancillary revenue
Flexible fleet plan and utilization;
Proven ancillary revenue model
capacity management
Sustained profitability with strong
Continue cost reductions
balance sheet
5Accomplishments
Volaris has a best-in-class unit cost structure
Long-term unit cost advantage
CASM and CASM ex-fuel (LTM September 2017, USD cents) Cost structure
• Economies of scale
In line with best-in-class
- Dilute fixed costs
ULCCs
- High seat density
13.6 • Young and fuel efficient fleet
13.0 13.2
- Sharklet rollout
3.5 2.9 11.1 11.4 2.5 - Average age of 4.6 years
10.3 10.2 10.5
2.5 - NEO Engines rollout
2.6 9.1 8.8 9.0
2.3 - Low fuel burn
3.0 2.5 7.7 7.4
2.5 2.4 2.5
6.9
2.0
• Productive network
2.0 2.7 5.7 5.5
10.7 - Point-to-point
10.1 10.1 1.6 1.7
8.4 8.8 8.1 - No connections complexity
7.3 7.7 6.6
6.4 6.5
4.9
5.7
4.7 4.0
3.8
• High aircraft utilization
- 3Q17 average 13 block hours
per day
Latin American carriers US LCCs WW LCCs US network
carriers Continued cost
improvement potential
(1) DCOMPS = Direct Competitors: Delta, American Airlines, Alaska Airlines and United | (Average CASM and CASM ex-fuel)
Note: Non-USD data converted to USD using an average exchange rate for the period
7
Source: Airlines public informationNon-ticket revenues continue to grow, with
upside potential
Non-ticket revenue per passenger
Volaris (MXN) per passenger Ancillaries
2011-2016 CAGR: + 21,9% • Apply revenue management techniques
- Pricing by route, season, day
424
381 - Fully dynamic pricing for some products
338
279 • Add products
204 211 - New products & services
142 - Enhancements to existing products
• Improve presence
- More touch-points to sell ancillaries throughout
2011 2012 2013 2014 2015 2016 YTD Sep the journey
2017 - Allow customization
Best-in class ULCCs, including first bag fee
• Benefit from network diversification
(Sep 2017 LTM, as % of total operating revenue)(1)
- More international capacity
45% 48%
43% • First checked bag
- USA and Puerto Rico
27%
- Costa Rican AOC
Volaris Wizz Allegiant Spirit Increasing non-ticket revenue allows to
Non-ticket reduce fare further and stimulate
revenue per demand
pax (USD) $21.91 $31.44 $29.20 $52.51
(1) Converted to USD using an average exchange rate for the period 8
Source: Airlines public informationNetwork enhancement: connecting the dots and
diversifying further
LTM Sep 2017 Volaris diversified its network by starting operations in 19 routes and 5 stations
Volaris’ LTM July 2017 new routes
New routes
Domestic International
Guadalajara 3 2
Mexico City - 6
Costa Rica - 3
Other - 5
Total 3 16
New stations
Central
DOM USA
America
Cozumel Miami San Salvador
Milwaukee Managua
New International
New Domestic
New Volaris Costa Rica
9
Note: Excludes routes and stations announced to start operations…supporting strong capacity growth
9M 2017 capacity growth contribution (YoY)
+ Additional frequencies 9.5%
+ Joining existing airports 2.5%
+ New airports 1.2%
+ Volaris Costa Rica 1.1%
= Total ASM growth 14.3%
Our network is well positioned for diversified growth
10Growth opportunities
In recent years, Mexico’s volume growth has been
robust despite challenging economic environment
Mexico passenger market volume has increased since 2011
Passenger volume (millions)
Main industry growth
2011 - 2016 CAGR: +8.6%
88 drivers
82
75 14 • Strong demand and
66 13 increasing middle
61 12
57 11 class
52 10 27 30
8 9 26 • LCC gaining market
21 23 through low fares
19 19
- 44% LCC share(1)
37 42 45
25 28 30 33 • High improvement
potential:
- Domestic air trips
2011 2012 2013 2014 2015 2016 LTM Sep
2017 per capita in
Domestic USA Other international Mexico 0.42 vs.
Colombia 0.66
4.0% 8.3% 8.3% 8.3% 12.3% 10.4% 10.6% (3)
Yoy growth
GDP growth (2) 4.0% 4.0% 1.4% 2.3% 2.6% 2.3% 1.8%
GDP multiplier 1.0 2.1 6.1 3.7 4.7 4.5 6.4
3x GDP multiplier in
recent years
(1) Considers Volaris and VivaAerobus domestic market share LTM September 2017
(2) Values according to INEGI´s new methodology
(3) Yoy growth for LTM September 2016 vs. LTM September 2017 12
Source: DGAC-SCT, INEGI and Banco de MéxicoVolaris growth has surpassed market growth in
both domestic and international markets
Domestic passenger growth (%)
25.2% 24.8%
23.0%
19.7%
13.0% 12.8%
10.3% 9.4%
8.6% 7.9% 7.7% 8.8%
2012 2013 2014 2015 2016 LTM Sep 2017
Market Volaris
International passenger growth (%)
33.3%
26.9%
23.4%
19.6%
13.8%
10.3% 11.6% 10.2%
8.1% 8.8% 8.0%
6.5%
2012 2013 2014 2015 2016 LTM Sep 2017
Market Volaris
13
Source: DGACVolaris has been the engine of growth for VFR and
leisure markets in Mexico
Segment passenger CAGR Volaris vs. market (2010-2016) Volaris’ main growth drivers
Tijuana
• Low costs allow Volaris to offer
lower fares and make flying
10% 12%
Hermosillo possible
Market Volaris • Fleet
growth growth
5% 17% - Up-gauging: A320neo with 186
seats and A321 with 230 seats
Monterrey
- Young and fuel efficient:
Los Cabos average of 4.6(1) years; new
Culiacan
9% 38% generation aircraft
• Productive network with high
10% 28%
8% 23%
Guadalajara
Cancun utilization
Vallarta
13% 27%
- Around 20 new routes per year
8% 19%
11% 34%
- Avg. 13 block hours/day in 3Q
Mexico City 2017
• High and healthy load factors
11% 61%
- 85% in LTM Sep 2017
• 27% domestic passengers market
share as of LTM Sep. 2017
2016, Volaris was the source of 46% of the growth among Mexican carriers
(1) Data as of September 2017 14
Note: Markets not mutually exclusive, contested domestic marketsSignificant untapped opportunities
Domestic – growth potential of approx. 110 International – growth potential of approx. 130
routes (4) routes (4)
Number of routes (1) Number of routes (2)
50 100
40
75
30
50
20
10 25
0 0
USA (VFR) USA (Leisure) CAM, SAM,
Canada,
Routes served Growth potential Caribbean
In terms of air trips per capita Mexico has plenty potential to grow
2016 air trips per capita (domestic)(5)
2.23
0.61
0.43 0.36 0.34 0.33 0.25
United States Chile Brazil Colombia Peru Mexico Argentina
(1) Minimum stage length of 170 miles (4) Figures calculated as of June 2017
(2) Minimum stage length of 200 miles; CAM stands for Central America; SAM stands (5) Data from the World Bank
for South America Source: World bank, DGAC, DIIO MI Market Intelligence for the Aviation 15
(3) South and northbound leisure routes Industry and ALTAVolaris contributed by stimulating demand from
bus to air substitution
Significant upside for air travel Bus switching program
Total bus passengers in Total air travel passengers
Mexico (mm) in Mexico (mm)
Education
Mass media campaigns
“Tarifa no + camion” positioning
2,971 Digital capabilities
2,758
Trial
2,683 2,891
Ticket giveaway
#Nomáscamión
First sell
82
55 40 Strong conversion
80 29 rate
74
33 42
28
2012 2016 2012 2016 ULCC model
First, economy and other Domestic
Attracting 1st
Executive and luxury International time flyers
16
Source: Secretaría de Comunicaciones y Transportes (SCT), 2016Volaris’ Costa Rican AOC provides growth
potential in Central America
Central America key insights Potential markets (1)
New York
Chicago
• The right market
- Costa Rica is top three middle class growth Los Angeles
of LATAM
- Costa Rica GDP growth of 4.2% in 2016 Dallas
San Antonio Houston
- Population of ~45M in Central America Orlando
Miami
- VFR potential in the region and to the USA,
Costa Rica is the country with the most La Habana
Guadalajara Puerto Rico
immigrants as a % of its population Mexico City
Cancun
Santo Domingo
- Bus switching potential
• The right moment San Salvador
Guatemala
Managua Cartagena
- No ULCC presence in the region
- Local competitors have 38% of capacity San José, CR
Medellin
share while US carriers 46% Bogota
- High average fare and yield environment
Quito
• The right ULCC model Guayaquil
- Growth sustainable and proved model, easily
translatable to Central America
- Ancillary revenue potential
Lima
- USD denominated revenue contributing to
FX natural hedge La Paz
Volaris’ Central American operation full potential of 18-22 aircraft
(1) Subject to authorization from the corresponding authorities 17
Source: World Bank, ALTA, MI-DIIO, CEPAL InfareDrivers of continued profitable growth
Uniquely positioned to capture growth in underpenetrated Mexican aviation market
• Grow ancillary revenue • Up-gauge fleet from
to world class ULCC A319 to A320/A321
benchmarks
• Neo incorporation
• Price, product,
Increase - Fuel efficiency
presence Reduce
total
unit costs
revenues
Expand Fleet • 44 additional aircraft
• Expand network
network growth to be delivered
geographically
• Deepen footprint in • Higher seat density
markets with high configuration
demand stimulation
18Fleet and financials
Volaris’ fleet plan supports its strategy to drive
lower unit costs
Contractual fleet obligations (number of aircraft)(1)
79 • A321 (CEO and NEO)
69 71 5 - 230 seats (up-gauge)
10 - ~10% CASM dilution(2)
10 10
6 13
• A320 NEO
28 - Combined fuel consumption
28 reduction by approx. 15-16% per
28
seat(2)
15
15 • A320 CEO with sharklets
15
15 - Fuel consumption reduction by
12 8 approx. 3%(2)
2016 2017E 2018E
• All PDP requirements fully
A319 A320
financed for next four years
A320 w/sharklets A320neo w/sharklets
A321 w/sharklets A321neo w/sharklets
Backlog of 41 Aircraft to support growth (3)
Note: NEO stands for the Airbus new engine option; CEO stands for the Airbus current engine option
(1) Net fleet after additions and returns
(2) Source: Airbus
20
(3) Figure calculated as of November 15, 2017High growth and solid financial performance
Revenues Adj. EBITDAR
30 10 8.9
2011 - 2016 CAGR: +21.5% 23.5 24.7 2011 - 2016 CAGR: +48.3%
7.0
18.2 6.5
(MXN bn)
(MXN bn)
13.0 14.0
15 11.7 5
8.9 2.8 3.1
2.5
1.2
0 0
2011 2012 2013 2014 2015 2016 LTM Sep 2011 2012 2013 2014 2015 2016 LTM Sep
2017 2017
Revenue CAGR 2011 - 2016 LTM September 2017 Adj. EBITDAR margin
22% 30%
20% 28%
26%
17% 25%
22%
21% 21% 20%
11% 10%
9%
4%
2%
Volaris Azul Interjet Latam Gol Aeromexico Copa Avianca Azul Volaris Copa Aeromexico Latam Avianca Gol Interjet
21
Source: Airlines public informationVolaris’ international expansion has been key in
constructing a better hedge for FX volatility
Increasing international operation brings higher USD revenues
Volaris’ revenues breakdown, MXN billion (International revenues priced in USD)
11.7 13.0 14.0 18.2 23.5 18.2
24% 26% 27% 31% 28%
33%
76% 74% 73% 69% 72%
67%
2012 2013 2014 2015 2016 YTD Sep
2017
Domestic International
22Strong balance sheet and liquidity, well funded
for continued growth
Liquidity-cash and equivalents as a % of LTM Op. Revenue
• Unrestricted cash of $5.4 billion pesos 22%
(US$ 295 million) as of Sep 30, 2017.
• Net cash position of $3.0 billion pesos
12%
(US$ 164 million) as of Sep 30, 2017. 10% 9% 9%
7% 7% 6%
• Adjusted net debt to EBITDAR of 5.6x as
of Sep 30, 2017.
• Fully financed pre-delivery payments. Volaris Avianca Copa Latam Aeromexico Interjet Azul Gol
Adj. net debt / EBITDAR
• Expected 2017 net CAPEX (US$ 120 to -
140 million): 7.1x
• PDPs: from US$ 60 to 65 million,
5.6x 5.6x
net of PDP reimbursements 5.1x 5.2x 5.3x
4.8x
• Major maintenance: US$ 50 to 60
million
• Other: from US$ 10 to 15 million 2.7x
Copa Azul Latam Aeromexico Gol Avianca Volaris Interjet
23
Non-USD data converted to USD using an end of period exchange rate for the period
Source: Airlines public informationAppendix
Fuel price protection
Period Total % hedged(1) Avg. price (gal/USD$) Instrument
4Q17 57% $1.40 Call
1Q18 50% $1.63 Call
2Q18 50% $1.74 Call
3Q18 45% $1.78 Call
4Q18 35% $1.85 Call
25
(1) Approximate percentage of gallons hedged as of June 30, 2017Consolidated statements of operations summary
% of total
operating
MXN millions unless otherwise stated (3) 2014A 2015A 2016A 2016A(1) 3Q 2017 3Q 2017(2) revenues
(USD (USD
millions) millions)
Passenger 11,303 14,130 17,790 861 4,773 262 73
Non-ticket 2,733 4,049 5,722 277 1,809 99 27
Total operating revenues 14,037 18,180 23,512 1,138 6,582 362 100
Other operating income (22) (193) (497) (24) (8) - -
Fuel 5,364 4,721 5,741 278 1,698 93 26
Aircraft and engine rent expenses 2,535 3,525 5,590 271 1,384 76 21
Landing, take off and navigation expenses 2,066 2,595 3,272 158 989 54 15
Salaries and benefits 1,577 1,903 2,420 117 695 38 11
Sales, marketing and distribution expenses 817 1,089 1,413 68 468 26 7
Maintenance expenses 665 875 1,344 65 324 18 5
Other operating expenses 490 698 952 46 249 14 4
Depreciation and amortization 343 457 537 26 150 8 2
Total operating expenses 13,833 15,669 20,773 1,005 5,948 327 90
6
EBIT 204 2,510 2,740 133 634 35 10
Operating margin (%) 1.5 13.8 11.7 11.7 9.6 9.6
Finance income 23 47 103 5 30 2 -
Finance cost (32) (22) (35) (2) (20) (1) -
Exchange gain, net 449 967 2,170 105 125 7 2
Income tax expense (39) (1,038) (1,457) (71) (39) (2) (1)
Net income 605 2,464 3,519 170 731 40 11
Net margin (%) 4.3 13.6 15.0 15.0 11.1 11.1
EPS Basic and Diluted (Pesos) 0.60 2.43 3.48 0.17 0.72 0.04
EPADS Basic and Diluted (Pesos) 5.98 24.35 34.78 1.68 7.22 0.40
(1) Full year 2016 figures converted to USD at December end of the period spot exchange rate $20.6640 for convenience purposes only
(2) 3Q 2017 figures converted to USD at September end of the period spot exchange rate $18.20 for convenience purposes only 26
(3) Audited financial information 2014A – 2016AConsolidated statements of financial position
summary
MXN millions unless otherwise
stated (5) 2014A 2015A(6) 2016A 2016A(1) 3Q 2017 3Q 2017(7)
(USD (USD
millions) millions)
Cash and cash equivalents 2,265 5,157 7,071 342 5,373 295
Current guarantee deposits 545 873 1,167 56 1,303 72
Other current assets 879 1,193 3,313 160 4,542 178
Total current assets 3,689 7,224 11,551 559 9,915 545
Rotable spare parts, furniture and
2,223 2,550 2,525 122 3.548 195
equipment, net
Non-current guarantee deposits 3,541 4,693 6,560 317 5,941 326
Other non-current assets 452 765 1,146 55 961 598
Total assets 9,905 15,232 21,782 1,054 20,365 1,119
Unearned transportation revenue 1,421 1,957 2,154 104 2,453 135
Short-term financial debt 823 1,371 1,051 51 1,491 82
Other short-term liabilities 2,524 3,745 4,683 227 4,354 239
Total short-term liabilities 4,768 7,073 7,888 382 8,298 456
Long-term financial debt 425 220 943 46 900 49
Other long-term liabilities 242 1,113 2,157 104 1,665 92
Total liabilities 5,435 8,407 10,988 532 10,863 597
Total equity 4,470 6,825 10,794 522 9,502 522
Total liabilities and equity 9,905 15,232 21,782 1,054 20,365 1,119
Net debt (2) (1,017) (3,566) (5,077) (246) (2,982) (164)
Adjusted debt (3) 18,990 26,268 41,125 1,990 44,762 2,459
Adjusted net debt (4) 16,725 21,111 34,053 1,648 39,389 2,164
(1) Full year 2016 figures converted to USD at December end of the period spot exchange rate $20.66 for convenience purposes only
(2) Net debt = financial debt - cash and cash equivalents
(3) Adjusted debt = (LTM aircraft rent expense x 7) + financial debt
(4) Adjusted net debt = adjusted debt - cash and cash equivalents
(5) Audited financial information 2014A – 2016A
(6) Certain amounts related to prepaid income tax and guarantee deposits, presented in the consolidated statement of financial position have been reclassified in
2015A, in order to be comparative with the classification between current and non-current assets presented during 2016A 27
(7) 3Q 2017 figures converted to USD at September end of the period spot exchange rate $18.20 respectively, for convenience purposes onlyConsolidated statements of cash flows summary
MXN millions unless otherwise stated (3) 2014A 2015A 2016A 2016A(1) 3Q 2017 3Q 2017(2)
(USD (USD
millions) millions)
Cash flow from operating activities
Income before income tax 644 3,502 4,977 241 769 42
Depreciation and amortization 343 457 537 26 150 8
Guarantee deposits (695) (1,165) (1,957) (95) (303) (17)
Unearned transportation revenue 27 536 196 10 843 46
Changes in working capital and provisions 14 (261) (2,773) (134) (1,844) (100)
Net cash flows provided (used in) by operating activities 334 3,070 979 47 (385) (21)
Cash flow from investing activities
Acquisitions of rotable spare parts, furniture, equipment and
intangible assets (1,603) (1,456) (2,259) (109) (565) (31)
Pre-delivery payments reimbursements 396 670 1,733 84 - -
Proceeds from disposals of rotable spare parts, furniture
and equipment 22 185 498 24 - -
Net cash flows used in by investing activities (1,185) (601) (28) (1) (565) (31)
Cash flow from financing activities
Treasury shares purchase (7) - (17) (1) - -
Proceeds from exercised stock options - 23 20 1 1 -
Interest paid (23) (42) (39) (2) (23) (1)
Other finance costs (11) (40) (138) (7) - -
Payments of financial debt (400) (801) (1,531) (74) (207) (11)
Proceeds from financial debt 966 925 1,716 83 497 27
Net cash flows provided by financing activities 525 65 11 1 268 15
(Decrease) increase in cash and cash equivalents (326) 2,533 962 47 (681) (37)
Net foreign exchange differences 141 359 952 46 73 4
Cash and cash equivalents at beginning of period 2,451 2,265 5,157 250 5,981 329
Cash and cash equivalents at end of period 2,265 5,157 7,071 342 5,373 295
(1) Full year 2016 figures converted to USD at December end of the period spot exchange rate $20.66 for convenience purposes only
(2) 3Q 2017 figures converted to USD at September end of the period spot exchange rate $18.20 for convenience purposes only 28
(3) Audited financial information 2014A – 2016AYou can also read
