APRIL 20TH, 2017
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Volaris Reports First Quarter 2017 Results: 19% Adjusted EBITDAR Margin

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 first quarter 2017.

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

First Quarter 2017 Highlights

Total operating revenues reached Ps.5,656 million for the first quarter, an increase of 9.1% year over year.
Non-ticket revenues were Ps.1,631 million for the first quarter, an increase of 27.8% year over year. Non-ticket revenues per passenger for the first quarter were Ps.411, increasing 10.6% year over year.
Total operating revenues per available seat mile (TRASM) were Ps.124.4 cents for the first quarter, a decrease of 6.6% year over year. This is partially explained by a seasonality effect from the shift of Holy and Easter weeks this year, taking place entirely in April.
Operating expenses per available seat mile (CASM) were Ps.141.4 cents for the first quarter, an increase of 26.6% year over year; with an average economic fuel cost per gallon of Ps. 37.1, increasing 67.8% year-on-year, and an average exchange rate of Ps.20.4, a year-on-year increase of 13.2%.
Adjusted EBITDAR was Ps.1,055 million for the first quarter, a decrease of 51.5% year over year. Adjusted EBITDAR margin was 18.7% for the first quarter, a decrease in margin of 23.3 percentage points.
Operating loss was Ps.772 million for the first quarter, with an operating margin of -13.7%, equal to a year over year operating margin decrease of 29.8 percentage points.
At the end of the first quarter, the Mexican peso appreciated 9.0% with respect to the end of period exchange rate of the previous quarter. The Company booked a foreign exchange loss of Ps.1,145 million as a consequence of our US dollar net monetary asset position. Net loss was Ps.1,361 million (Ps.1.34 per share / US$0.71 per ADS) for the first quarter, with a net margin of -24.1%.
Net cash flow provided by operating activities was Ps.469 million for the first quarter. As of March 31, 2017, cash and cash equivalents were Ps.6,839 million.
Volaris´ CEO Enrique Beltranena commented: “During the first quarter, we faced a challenging market and geopolitical environment, with a tough seasonality comparison versus the previous year. However, Volaris responded by managing capacity and executing its ULCC model to continue stimulating market demand and adapt rapidly to these conditions. We remain cautiously optimistic of demand and thus we will continue prudently managing capacity based on market demand. Going forward, we believe that the Company’s fundamentals remain strong and our solid financial position will enable us to execute our long-term growth plans.”

Resilient Macroeconomics and Consumer Demand, Although Exchange Rate and Fuel Price Pressures

Resilient macro and consumer demand: The macroeconomic indicators in Mexico continue to be solid, with same store sales increasing 4%1 during March, remittances increasing 2%2 in January and February and consumer confidence recovering strength towards the end of the quarter.
Air traffic volume increase: The Mexican DGAC reported overall passenger volume growth for Mexican carriers of 15% year over year in January and February; domestic overall passenger volume increased 14%, while international overall passenger volume increased 19%.
Exchange rate volatility: The Mexican peso depreciated 13.2% year over year against the US dollar, from an average exchange rate of Ps.18.0 pesos per US dollar in the first quarter 2016 to Ps.20.4 pesos per US dollar during the first quarter 2017.
Higher fuel prices: The average economic fuel cost per gallon increased 67.8%, year over year, to Ps.37.1 per gallon (US$2.0) in the first quarter 2017, year over year.
Strengthened ULCC Model with Further Non-Ticket Revenue Expansion

Passenger traffic stimulation: Volaris booked 4.0 million passengers in the first quarter of 2017, up 15.6% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 14.4% for the same period. System load factor during the quarter decreased 1.8 percentage points year over year to 83.2%.
Pressured and seasonally weak unit revenue partially offset by managing capacity: For the first quarter of 2017, yield decreased 9.9% with TRASM decreasing 6.6%, year over year, partially explained by a seasonality effect from the shift of Holy and Easter weeks this year. During the first quarter, in terms of ASMs, domestic capacity grew 12.8%, while international capacity increased 26.2%.
Non-ticket revenue growth: Non-ticket revenues and non-ticket revenues per passenger increased 27.8% and 10.6% year over year for the first quarter of 2017, respectively. Non-ticket revenue generation continues to grow with new products such as the new combos offering for “more flexibility”, “more baggage” and “more speed” appealing to particular customers’ needs. Effective March 1st the Company began charging for the first checked bag in new bookings for flights to and from the US and Puerto Rico.
New routes: In the first quarter 2017, Volaris began operations in six new international routes (Guadalajara – Miami, Guadalajara – Milwaukee, Mexico City – Houston, Mexico City – New York (JFK), Mexico City – Miami and San Jose, Costa Rica – San Salvador).
Exchange Rate and Fuel Price Pressure

In the first quarter 2017, 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 by 13.2%, year over year. CASM for the first quarter was Ps.141.4 cents, a 26.6% increase compared to the first quarter 2016, mainly driven by fuel price increase and foreign exchange rate pressures. However, at the end of the first quarter, the Mexican peso appreciated 9.0% with respect the end of previous quarter, leading to an exchange rate loss of Ps.1,145 million as result of our US dollar net monetary asset position.

Young and Fuel Efficient Fleet

During the first quarter 2017, the Company did not incorporate any additional aircraft and one aircraft was redelivered in March. As of March 31, 2017, Volaris fleet was composed of 68 aircraft (14 A319s, 44 A320s and 10 A321s), with an average age of 4.4 years. At the end of the first quarter 2017, Volaris’ fleet had an average of 179 seats, 62% of which were in sharklet-equipped aircraft.

Solid Balance Sheet and Good Liquidity

Net cash flow provided by operating activities was Ps.469 million for the first quarter. As of March 31, 2017, cash and cash equivalents were Ps.6,839 million. Volaris registered negative net debt (or a positive net cash position) of Ps.4,804 million and total equity of Ps.9,222 million.

Active in Fuel Risk Management

Volaris remains active in its fuel risk management program. Volaris utilized call options to hedge 52% of its first quarter 2017 fuel consumption, at an average strike price of US $1.64 per gallon, which combined with the 48% unhedged consumption, resulted in a blended average economic fuel cost of US$2.0 per gallon.