MEXICO CITY—(BUSINESS WIRE)—Volaris* (NYSE: VLRS and BMV: VOLAR), the ultra-low-cost airline serving Mexico, the United States and Central America, today announced its financial results for the third quarter 2016.

The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS).

Third Quarter 2016 Highlights

Total operating revenues reached Ps.6,731 million for the third quarter, an increase of 29.0% year over year.
Non-ticket revenues were Ps.1,525 million for the third quarter, an increase of 43.4% year over year. Non-ticket revenues per passenger for the third quarter were Ps.384, increasing 20.6% year over year.
Total operating revenues per available seat mile (TRASM) rose to Ps.155.0 cents for the third quarter, an increase of 15.3% year over year.
Operating expenses per available seat mile (CASM) were Ps.131.0 cents for the third quarter, an increase of 22.9% year over year.
Adjusted EBITDAR was Ps.2,665 million for the third quarter, an increase of 25.6% year over year. Adjusted EBITDAR margin was 39.6% for the third quarter, a decrease in margin of 1.0 percentage point.
Operating income was Ps.1,043 million for the third quarter, with an operating margin of 15.5%, equal to a year over year operating margin decrease of 5.2 percentage points.
Net income was Ps.1,010 million (Ps.1.00 per share / US$0.51 per ADS) for the third quarter, with a net margin of 15.0%, a year over year margin decrease of 7.1 percentage points.
Net increase of cash and cash equivalents was Ps.63 million for the third quarter. As of September 30, 2016, cash and cash equivalents were Ps.6,993 million.
Volaris´ CEO Enrique Beltranena commented: “Volaris delivered another solid quarterly financial performance, driven by its ULCC model and a world-class operation. Passenger demand stimulation and non-ticket revenue growth remain the cornerstone of our business model, allowing us to expand unit revenue and deploy capacity in a profitable way.”

Traffic Volume Growth Supported by Healthy Demand Environment, Despite Exchange Rate and Fuel Price Pressures

Air traffic volume increase: The Mexican DGAC reported overall passenger volume growth for Mexican carriers of 13.2% year over year in the third quarter. Domestic passenger volume increased 12.5%, while international passenger volume increased 15.6%.
Exchange rate volatility: The Mexican peso depreciated 14.1% year over year against the US dollar, from an average of Ps.16.4 pesos per US dollar in the third quarter 2015 to Ps.18.7 pesos per US dollar during the third quarter 2016.
Higher fuel prices: The average economic fuel cost per gallon increased 7.8% to Ps.30.8 per gallon (US$1.6) in the third quarter 2016, year over year.
Unit Revenue Improvements Driven by Volume and Non-Ticket Revenue Expansion

Passenger traffic stimulation: Volaris booked 4.0 million passengers in the third quarter of 2016, up 18.9% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 18.3% for the same period. System load factor during the quarter increased 4.8 percentage points year over year to 87.9%.
Unit revenue improvement and demand driven capacity growth: For the third quarter of 2016, TRASM increased 15.3%, with yield increasing 5.8%, year over year. During the third quarter, in terms of ASMs, domestic capacity grew 9.8%, while international capacity increased 16.5% responding to a strong demand from both markets.
Non-ticket revenues growth: Non-ticket revenues and non-ticket revenues per passenger increased 43.4% and 20.6% year over year for the third quarter of 2016, respectively. The Company has been increasing its product offering, such as insurance services, as well as expanding the offering of commission based products on mobile, while continuing with its dynamic pricing strategy.
New routes: In the third quarter 2016, Volaris launched five new international routes (Dallas-Monterrey, Durango-Los Angeles, Guadalajara-Seattle, Guadalajara-San Francisco and Austin-Guadalajara).
Unit Cost Pressured by Exchange Rate Volatility

In the third quarter 2016, Volaris continued to experience pressure in US-dollar denominated costs, such as aircraft and engine rent expenses, international airport costs, and maintenance expenses due to the depreciation of the Mexican peso. The CASM for the third quarter was Ps.131.0 cents, a 22.9% increase compared to the third quarter 2015, mainly driven by FX and fuel price pressures.

Young and Fuel Efficient Fleet, Up-gauging/Increasing Seats Per Aircraft

During the third quarter 2016, the Company incorporated three additional aircraft comprised of one A320neo and two A321s. As of September 30, 2016, Volaris fleet was composed of 65 aircraft (16 A319s, 43 A320s and 6 A321s), with an average age of 4.5 years, resulting in the youngest fleet in Mexico and one of the youngest in the Americas. At the end of the third quarter 2016, Volaris’ fleet had an average of 174 seats per aircraft, an increase from 168 seats in the third quarter of 2015, and 53% of the fleet’s seats were in sharklet-equipped aircraft. During the quarter the Company also became the first NEO aricraft operator in North America.

Solid Balance Sheet and Good Liquidity

The net increase in cash and cash equivalents was equal to Ps.63 million during the third quarter. As of September 30, 2016, Volaris’ unrestricted cash and cash equivalents balance was Ps.6,993 million. Volaris registered negative net debt (or a positive net cash position) of Ps.6,001 million and total equity of Ps.9,633 million.

Active in Fuel Risk Management

Volaris remains active in its fuel risk management program. Volaris utilized call options to hedge 54% of its third quarter 2016 fuel consumption, at an average strike price of US $1.99 per gallon, which combined with the 46% unhedged consumption, resulted in a blended average economic fuel cost of US$1.6 per gallon.