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Volaris corporate presentation august 2016

Volaris is the leading ultra-low-cost airline in Mexico, serving 65 destinations in Mexico, the United States, and Central America. It has a young and fuel efficient fleet of 64 aircraft that enable it to have the lowest unit costs in the Americas. Volaris has experienced strong growth over the past years through capacity increases, network expansion, and stimulating demand through low base fares and ancillary revenues. It is well positioned for continued profitable growth by further reducing costs, expanding its fleet and network, and increasing total revenues.

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Volaris: the leading ultra-low-cost airline serving Mexico, USA and Central America August 2016
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. Disclaimer 2
Serving 65 destinations throughout Mexico (40), USA (23) and Central America (2) Volaris’ destinations (1) Converted to USD at an average annual exchange rate Source: Company data 2008 2015 1H 2016 2008- 2015 CAGR Unit cost (CASM ex-fuel; cents, USD)(1) 5.5 4.9 4.7 -1.6% Passenger demand (RPMs, bn) 3.2 11.6 6.7 +20.2% Aircraft (End of period) 21 56 64 +15.0% Routes (End of period) 42 148 154 +19.7% Passengers (mm) 3.5 12.0 7.1 +19.2% Operating revenue (bn, MXN) 4.4 18.2 10.3 +22.5% Adj. EBITDAR (bn. MXN) 0.7 6.5 4.0 +37.5% Adj. ROIC (pre- tax) 11% 22% 22% +11 pp. 3 Portland Reno Sacramento San Francisco/OaklandSan Jose Fresno Ontario Los Angeles San Diego Las Vegas Phoenix Denver Dallas Houston San Antonio Chicago New York Orlando Fort Lauderdale Tijuana Mexicali La Paz Los Cabos Hermosillo Cd. Juarez Chihuahua Cd. Obregon MonterreyLos Mochis Torreon Culiacan Mazatlan Durango Tampico Zacatecas San Luis Aguascalientes Guadalajara Puerto Vallarta Leon Uruapan Morelia Queretaro Mex.City Toluca Veracruz Acapulco Huatulco Tapachula Puebla Oaxaca Tuxtla Villahermosa Chetumal Cancun Merida Guatemala San Jose, CR San Juan, PR Austin Seattle Volaris: snapshot at 30,000 feet
Volaris’ flight path for demand stimulation and continued growth Capacity increase Cost reduction “Clean”, low base fares More customers More ancillaries (“You decide”) Resilient ULCC business model driving high, profitable growth 4
Volaris’ consistent execution of its ULCC business model well positioned for growth Diversified and resilient point-to-point network Successful price unbundling Strong penetration of Mexican air travel market Proven ancillary revenue model Bus to air substitution Upside in ancillary revenue Continue geographic diversification through international growth Attractive emerging air travel market in Mexico Flexible fleet plan and utilization; capacity management Sustained profitability with strong balance sheet Continue cost reductions Continue route frequency increase OpportunitiesAccomplishments 5
Accomplishments
4.7 10.6 8.0 7.9 7.1 6.0 6.2 4.7 8.5 5.7 5.6 10.5 1.7 2.5 2.2 2.0 2.1 2.5 2.3 1.4 2.4 1.8 1.7 1.9 (1) Based on CASM among the publicly-traded airlines (2) Non-USD data converted to USD at an average exchange rate (3) DCOMPS= Direct Competitors: Average CASM and CASM ex-fuel; US network carriers include: Delta, United, Alaska Airlines and American Airlines (4) As of June 30, 2016 Source: Company data, airlines public information Volaris has a best-in-class unit cost structure Lowest unit cost in the Americas (1) CASM and CASM ex-fuel (1H 2016, USD cents) (2) Cost structure 7 • Economies of scale - Dilute fixed costs - High seat density • Young and fuel efficient fleet - Sharklet rollout - Average age of 4.5 years (4) - Low fuel burn • Productive network - Point-to-point - No connections complexity • High aircraft utilization - On average 12.7 block hours a day during 1H 2016 Latin American carriers US LCCs US network carriers (3) Continued cost improvement potential In line with best-in-class ULCCs 6.4 13.1 10.2 9.9 9.3 8.6 8.5 10.9 7.6 7.3 12.5 6.1
. Spirit Allegiant Copa Gol Interjet Aeromexico Latam Southwest US network carriers Avianca Volaris’ cost structure enables us to lower base fares and increase ancillaries Volaris’ TRASM is below most competitors’ CASM (1) TRASM and CASM (1H 2016, USD cents) (2) 8 Volaris’ resilient ULCC model TRASM CASM CASM CASM CASM CASM CASM CASM CASM CASM CASM 7.3 7.3 7.6 8.5 8.6 9.3 9.9 10.2 10.9 12.5 13.1 (1) Based on CASM and TRASM among the publicly-traded airlines (2) Non-USD data converted to USD at an average exchange rate (3) US network carriers direct competitors include: Delta, United, Alaska Airlines and American Airlines Source: Company data, airlines public information Overlap: 2 5 % (3)
142 204 211 279 338 353 2011 2012 2013 2014 2015 LTM Jun 2016 Non-ticket revenues continue to grow, with upside potential (1) Mexican legislation does not allow to charge for the first bag (2) Converted to USD using an average exchange rate for the period Source: Company data, airlines public information Non-ticket revenue per passenger Volaris(MXN) per passenger Best-in class ULCCs, including first bag fee (1) (1H 2016, USD per passenger) (2) 2009 – 2015 CAGR: +23.7% 2.5x Ancillaries • Apply revenue management techniques - Pricing by route, season, day - Fully dynamic pricing for some products • Add products - New products & services - Enhancements to existing products • Improve presence - More touch-points to sell ancillaries throughout the journey - Allow customization • Benefit from network diversification - More international capacity Increasing non-ticket revenue allows to reduce fare further and stimulate demand 9 20 30 50 52 Volaris Wizz Allegiant Spirit
Network enhancement: connecting the dots and diversifying further Note: Excludes routes and stations announced to start operations in 2H16. New routes Domestic International Cancun +1 +2 Guadalajara +1 +2 Mexico City +5 Other +5 +3 Tijuana Total +12 +7 New stations USA Mexico Central America San Juan, PR Chetumal San Jose, CR New York Zihuatanejo Reynosa June LTM, Volaris diversified its network by opening 19 routes and 6 stations Volaris’ LTM new routes New International New Domestic 10
…supporting strong capacity growth Joining existing airports Additional frequencies New airports 19.3% 3.0% 1.2% Total ASM growth 1H 2016 capacity growth contribution (yoy) 23.5% Our network is well positioned for diversified growth = + + + 11 Source: Company data
Growth opportunities
24 39 18 27 6 12 2010 2011 2012 2013 2014 2015 LTM Jun 2016 Domestic USA Other international Yoy growth 3.3% 4.0% 8.3% 8.3% 8.3% 12.3% 12.2% GDP growth 5.1% 4.0% 3.8% 1.7% 2.1% 2.5% 2.3% GDP multiplier 0.6 1.0 2.2 5.0 3.9 4.9 5.3 In recent years, volume growth has been robust despite challenging economic environment (1) LTM June 2015 vs. LTM June 2016 growth (2) GDP growth expectations from Banxico July’s survey Source: DGAC-SCT; INEGI; Banco de México Mexico passenger market volume has increased since 2010 50 52 57 61 67 75 Passenger volume (millions) CAGR: 8.2% 13 78 (1) (2)
(1) WB= wide body, NB= narrow body and RJ= regional jet (2) Only domestic market (3) Only Mexican carriers Source: DGAC, Diio Mi, Banco de México 2.8% 8.2% 8.8% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% GDP Passengers RPMs …and supply has met the strong market demand DemandSupply (WB + NB + RJ) (1) 2.9x GDP 4.9% 6.5% 7.2% 0% 2% 4% 6% 8% 10% 12% Fleet seats Aircraft ASMs 2010-2015 Capacity growth (CAGR) 2010-2015 Demand growth (CAGR) (2) (2) 14 (3)
(1) Minimum stage length of 170 miles (2) Minimum stage length of 200 miles; CAM stands for Central America; SAM stands for South America (3) South and northbound leisure routes (4) Figures calculated as of September 2015 (5) Data from ALTA Yearbook 2014 Source: Company data, SCT-DGAC and DIIO MI Market Intelligence for the Aviation Industry; ALTA 0 10 20 30 40 50 0 25 50 75 100 USA (Leisure) USA (VFR) CAM, SAM, Canada, Caribbean Significant untapped opportunities Domestic – growth potential of approx. 120 routes (4) International – growth potential of approx.130 routes (4) (3) Number of routes (1) Number of routes (2) Routes served Growth potential 15 In terms of air trips per capita Mexico has plenty potential to grow 2014 air trips per capita(5) 2.05 0.55 0.45 0.42 0.27 0.25 0.21 0.04 0.01 USA Chile Brazil Colombia Peru Mexico Argentina Costa Rica Paraguay
2012 2015 First, economy and other Exectutive and LuxuryExecutive and Luxury ULCC model First sell Trial Ticket giveaway #Nomáscamión Strong conversion rate Volaris contributed by stimulating demand from bus to air substitution Source: Company data, Secretaría de Comunicaciones y Transportes (SCT), Dec. 2014 Bus switching programSignificant upside for air travel Total air travel passengers in Mexico (mm) Total bus passengers in Mexico (mm) 2,758 33 Mass media campaigns Digital capabilities Attracting 1st time flyers 16 Education 2,918 2,683 2,834 74 79 28 37 27 38 2012 2015 Domestic International 55 75
Drivers of continued profitable growth Uniquely positioned to capture growth in underpenetrated Mexican aviation market Reduce unit costs Fleet growth Expand network Increase total revenues • Deepen footprint in markets with high demand stimulation • Grow ancillary revenue to world class ULCC benchmarks • 54 additional aircraft to be delivered • Up-gauge fleet from A319 to A320/A321 • Higher seat density configuration • Expand network geographically Source: Company data • Neo incorporation - Fuel efficiency 17 • Price, product, presence
Fleet and financials
18 15 12 5 16 15 15 15 20 28 28 28 0 2 8 182 10 10 10 0 0 2 6 2015 2016E 2017E 2018E A319 A320 A320 w/sharklets A320 NEO w/sharklets A321 w/sharklets A321 NEO w/sharklets Fleet plan with flexibility that enables capacity management Projected fleet under current contracts (number of aircraft) (1) (1) Net fleet after additions and returns (2) Percentage of year-end seats with sharklets (3) Year-end average seats per aircraft (4) Figure calculated as of August 2016 Source: Company data Backlog of 54 Aircraft to support growth (4) Seat growth % seats w/Sharklets (2) 18% 61% 20% 68% 11% 78% Avg. seats per aircraft (3) 178 182 188 70 75 82 56 2016-2018 PDPs fully financed First two A320neo 19
39% 25% 25% 23% 21% 20% 19% 0% 10% 20% 30% 40% Aeromexico Interjet Copa Latam Avianca Gol Source: Company data, airlines public information 1.2 2.5 2.8 3.1 6.5 8.0 0 3 6 9 2011 2012 2013 2014 2015 LTM Jun 2016 (MXNbn) 8.9 11.7 13.0 14.0 18.2 20.6 0 7 14 21 2011 2012 2013 2014 2015 LTM Jun 2016 (MXNbn) Revenue CAGR 2011 - 2015 LTM June 2016 Adj. EBITDAR margin High growth and solid financial performance Revenue Adj. EBITDAR 20 20% CAGR 51% CAGR 20% 16% 15% 14% 7% 7% 5% 0% 10% 20% Interjet Latam Avianca Aeromexico Gol Copa
3.0x 3.2x 4.7x 5.9x 6.3x 7.5x 7.6x 36% 34% 15% 14% 13% 10% 8% Strong balance sheet and liquidity, well funded for continued growth 21(1) Figures converted to USD at June end of the period spot exchange rate $18.91 for convenience purposes only Source: Company data, airlines public information • Unrestricted cash of $6.9 billion pesos (US$ 366 million(1)) as of June 30, 2016. • Net cash position of $6.1 billion pesos (US$ 323 million(1)) as of June 30, 2016. • Adjusted long term net debt to EBITDAR of 3.2x as of June 30, 2016. • Fully financed pre-delivery payments through 2018 and executed sale- leasebacks for 2016 deliveries. • Expected 2016 net CAPEX neutral (US$ 0 to -10 million): • PDPs: from US$ -50 to -45 million, net of PDP reimbursements (8 aircraft order book deliveries) • Major maintenance: US$ 25 to 35 million • Other: from US$ 10 to 15 million Adj. net debt/EBITDAR LTM liquidity-cash and equivalents as a % of LTM Op. Revenue
Appendix
Fuel hedging position 23 (1) Approximate percentage of gallons hedged as of August 22, 2016 Period Total % hedged(1) Avg. price (gal/USD$) Instrument 3Q16 55% $1.99 Call 4Q16 55% $1.99 Call 1Q17 50% $1.64 Call 2Q17 50% $1.61 Call 3Q17 50% $1.44 Call 4Q17 50% $1.40 Call 1Q18 50% $1.63 Call 2Q18 40% $1.68 Call 3Q18 10% $1.55 Call
(1) Full year 2015 figures converted to USD at December end of the period spot exchange rate $17.2065, respectively, for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Audited financial information 2013A – 2015A (4) Includes debt prepayment of Ps.570 million Source: Company data Consolidated statements of operations summary MXN millions unless otherwise stated (3) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016(2) % of total operating revenues (USD millions) (USD millions) Passenger 11,117 11,303 14,130 821 3,814 202 74.3 Non-ticket 1,885 2,733 4,049 235 1,317 70 25.7 Total operating revenues 13,002 14,037 18,180 1,057 5,131 271 100 Fuel 5,086 5,364 4,721 274 1,360 72 26.5 Aircraft and engine rent expense 2,187 2,535 3,525 205 1,293 68 25.2 Landing, take off and navigation expenses 1,924 2,066 2,595 151 724 38 14.1 Salaries and benefits 1,563 1,577 1,903 111 580 31 11.3 Sales, marketing and distribution expenses 704 817 1,089 63 300 16 5.8 Maintenance expenses 572 665 875 51 306 16 6.0 Other operating expense, net 347 468 505 29 42 2 0.8 Depreciation and amortization 302 343 457 27 138 7 2.7 Total operating expenses 12,685 13,833 15,669 911 4,743 251 92.4 6 EBIT 317 204 2,510 146 388 21 7.6 Operating margin (%) 2.4 1.5 13.8 13.8 7.6 7.6 Finance income 25 23 47 3 20 1 0.4 Finance cost (126) (32) (22) (1) (8) - (0.2) Exchange gain, net 66 449 967 56 923 49 18.0 Income tax expense (18) (39) (1,038) (60) (388) (21) (7.6) Net income 265 (4) 605 2,464 143 935 49 18.2 Net margin (%) 2.0 4.3 13.6 13.6 18.2 18.2 Adjusted EBITDAR 2,806 3,081 6,492 377 1,819 96 35.5 Adj. EBITDAR margin (%) 21.6 22.0 35.7 35.7 35.5 35.5 EPS Basic and Diluted (Pesos) 0.31 0.60 2.43 0.14 0.92 0.05 EPADS Basic and Diluted (Pesos) 3.10 6.00 24.35 1.42 9.24 0.49 24
Consolidated statements of financial position summary (1) Full year 2015 figures converted to USD at December end of the period spot exchange rate $17.2065 for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Net debt = financial debt - cash and cash equivalents (4) Adjusted debt = (LTM aircraft rent expense x 7) + financial debt (5) Adjusted net debt = adjusted debt - cash and cash equivalents (6) Audited financial information 2013A – 2015A Source: Company data MXN millions unless otherwise stated (6) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016 (2) (USD millions) (USD millions) Cash and cash equivalents 2,451 2,265 5,157 300 6,930 366 Current guarantee deposits 499 545 861 50 1,170 62 Other current assets 1,050 879 1,223 71 1,748 92 Total current assets 4,000 3,689 7,241 421 9,848 521 Rotable spare parts, furniture and equipment, net 1,341 2,223 2,550 148 1,864 99 Non-current guarantee deposits 2,603 3,541 4,704 273 5,485 290 Other non-current assets 434 452 765 44 1,182 63 Total assets 8,378 9,905 15,261 887 18,380 972 Unearned transportation revenue 1,393 1,421 1,957 114 3,006 159 Short-term financial debt 268 823 1,371 80 395 21 Other short-term liabilities 2,211 2,524 3,774 219 4,638 245 Total short-term liabilities 3,872 4,768 7,103 413 8,039 425 Long-term financial debt 294 425 220 13 425 22 Other long-term liabilities 250 242 1,113 65 1,304 69 Total liabilities 4,415 5,435 8,436 490 9,769 517 Total equity 3,962 4,470 6,825 397 8,611 455 Total liabilities and equity 8,378 9,905 15,261 877 18,380 972 Net debt (3) (1,888) (1,017) (3,566) (207) (6,109) (323) Adjusted debt (4) 15,874 18,990 26,268 1,527 32,153 1,700 Adjusted net debt (5) 13,423 16,725 21,111 1,227 25,223 1,334 25
Consolidated statements of cash flows summary (1) Full year 2015 figures converted to USD at December end of the period spot exchange rate $17.2065 for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Audited financial information 2013A - 2015A. (4) Includes debt prepayment premium Source: Company data MXN millions unless otherwise stated (3) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016(2) (USD millions) (USD millions) Cash flow from operating activities Income before income tax 283 644 3,502 204 1,323 70 Depreciation and amortization 302 343 457 27 138 7 Guarantee deposits (620) (695) (1,165) (68) (471) (25) Unearned transportation revenue 135 27 536 31 448 24 Changes in working capital and provisions (61) 14 (261) (15) (1,244) (66) Net cash flows provided by operating activities 39 334 3,070 178 194 10 Cash flow from investing activities Acquisitions of rotable spare parts, furniture, equipment and intangible assets (1,161) (1,603) (1,456) (85) (294) (16) Pre-delivery payments reimbursements 698 396 670 39 453 24 Proceeds from disposals of rotable spare parts, furniture and equipment 151 22 185 11 171 9 Net cash flows (used in) provided by investing activities (312) (1,185) (601) (35) 331 18 Cash flow from financing activities Treasury shares - - - - (8) - Payments of Treasury Shares - (7) - - - - Net proceeds from initial public offering 2,578 - - - - - Transaction costs on issue of shares (38) - - - - - Proceeds from exercised treasury shares 26 - 23 1 4 - Interest paid (65) (23) (42) (2) (10) (1) Other finance costs - (11) (40) (2) - - Payments of financial debt (1,084) (4) (400) (801) (47) (553) (29) Proceeds from financial debt 444 966 925 54 196 10 Net cash flows provided by (used in) financing activities 1,861 525 65 4 (370) (20) Increase (decrease) in cash and cash equivalents 1,587 (326) 2,533 147 155 8 Net foreign exchange differences 41 141 359 21 409 22 Cash and cash equivalents at beginning of period 822 2,451 2,265 132 6,366 337 Cash and cash equivalents at end of period 2,451 2,265 5,157 300 6,930 366 26
Adj. EBITDA and Adj. EBITDAR reconciliation (1) Full year 2015 figures converted to USD at December end of the period spot exchange rate $17.2065 for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Audited financial information 2013A - 2015A Source: Company data MXN millions unless otherwise stated (3) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016 (2) (USD millions) (USD millions) Net income 265 605 2,464 143 935 49 Plus (minus): Finance costs 126 32 22 1 8 - Finance income (25) (23) (47) (3) (20) (1) (Benefit)/provision for income taxes 18 39 1,038 60 388 21 Depreciation and amortization 302 343 457 27 138 7 EBITDA 685 995 3,934 229 1,449 76 Exchange (gain) loss, net (66) (449) (967) (56) (923) (49) Adjusted EBITDA 619 547 2,967 172 526 28 Aircraft and engine rent expense 2,187 2,535 3,525 205 1,293 68 Adjusted EBITDAR 2,806 3,081 6,492 377 1,819 96 27

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Volaris corporate presentation august 2016

  • 1.
    Volaris: the leadingultra-low-cost airline serving Mexico, USA and Central America August 2016
  • 2.
    The information ("ConfidentialInformation") 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. Disclaimer 2
  • 3.
    Serving 65 destinationsthroughout Mexico (40), USA (23) and Central America (2) Volaris’ destinations (1) Converted to USD at an average annual exchange rate Source: Company data 2008 2015 1H 2016 2008- 2015 CAGR Unit cost (CASM ex-fuel; cents, USD)(1) 5.5 4.9 4.7 -1.6% Passenger demand (RPMs, bn) 3.2 11.6 6.7 +20.2% Aircraft (End of period) 21 56 64 +15.0% Routes (End of period) 42 148 154 +19.7% Passengers (mm) 3.5 12.0 7.1 +19.2% Operating revenue (bn, MXN) 4.4 18.2 10.3 +22.5% Adj. EBITDAR (bn. MXN) 0.7 6.5 4.0 +37.5% Adj. ROIC (pre- tax) 11% 22% 22% +11 pp. 3 Portland Reno Sacramento San Francisco/OaklandSan Jose Fresno Ontario Los Angeles San Diego Las Vegas Phoenix Denver Dallas Houston San Antonio Chicago New York Orlando Fort Lauderdale Tijuana Mexicali La Paz Los Cabos Hermosillo Cd. Juarez Chihuahua Cd. Obregon MonterreyLos Mochis Torreon Culiacan Mazatlan Durango Tampico Zacatecas San Luis Aguascalientes Guadalajara Puerto Vallarta Leon Uruapan Morelia Queretaro Mex.City Toluca Veracruz Acapulco Huatulco Tapachula Puebla Oaxaca Tuxtla Villahermosa Chetumal Cancun Merida Guatemala San Jose, CR San Juan, PR Austin Seattle Volaris: snapshot at 30,000 feet
  • 4.
    Volaris’ flight pathfor demand stimulation and continued growth Capacity increase Cost reduction “Clean”, low base fares More customers More ancillaries (“You decide”) Resilient ULCC business model driving high, profitable growth 4
  • 5.
    Volaris’ consistent executionof its ULCC business model well positioned for growth Diversified and resilient point-to-point network Successful price unbundling Strong penetration of Mexican air travel market Proven ancillary revenue model Bus to air substitution Upside in ancillary revenue Continue geographic diversification through international growth Attractive emerging air travel market in Mexico Flexible fleet plan and utilization; capacity management Sustained profitability with strong balance sheet Continue cost reductions Continue route frequency increase OpportunitiesAccomplishments 5
  • 6.
  • 7.
    4.7 10.6 8.0 7.9 7.1 6.0 6.2 4.7 8.5 5.75.6 10.5 1.7 2.5 2.2 2.0 2.1 2.5 2.3 1.4 2.4 1.8 1.7 1.9 (1) Based on CASM among the publicly-traded airlines (2) Non-USD data converted to USD at an average exchange rate (3) DCOMPS= Direct Competitors: Average CASM and CASM ex-fuel; US network carriers include: Delta, United, Alaska Airlines and American Airlines (4) As of June 30, 2016 Source: Company data, airlines public information Volaris has a best-in-class unit cost structure Lowest unit cost in the Americas (1) CASM and CASM ex-fuel (1H 2016, USD cents) (2) Cost structure 7 • Economies of scale - Dilute fixed costs - High seat density • Young and fuel efficient fleet - Sharklet rollout - Average age of 4.5 years (4) - Low fuel burn • Productive network - Point-to-point - No connections complexity • High aircraft utilization - On average 12.7 block hours a day during 1H 2016 Latin American carriers US LCCs US network carriers (3) Continued cost improvement potential In line with best-in-class ULCCs 6.4 13.1 10.2 9.9 9.3 8.6 8.5 10.9 7.6 7.3 12.5 6.1
  • 8.
    . Spirit AllegiantCopa Gol Interjet Aeromexico Latam Southwest US network carriers Avianca Volaris’ cost structure enables us to lower base fares and increase ancillaries Volaris’ TRASM is below most competitors’ CASM (1) TRASM and CASM (1H 2016, USD cents) (2) 8 Volaris’ resilient ULCC model TRASM CASM CASM CASM CASM CASM CASM CASM CASM CASM CASM 7.3 7.3 7.6 8.5 8.6 9.3 9.9 10.2 10.9 12.5 13.1 (1) Based on CASM and TRASM among the publicly-traded airlines (2) Non-USD data converted to USD at an average exchange rate (3) US network carriers direct competitors include: Delta, United, Alaska Airlines and American Airlines Source: Company data, airlines public information Overlap: 2 5 % (3)
  • 9.
    142 204 211 279 338 353 20112012 2013 2014 2015 LTM Jun 2016 Non-ticket revenues continue to grow, with upside potential (1) Mexican legislation does not allow to charge for the first bag (2) Converted to USD using an average exchange rate for the period Source: Company data, airlines public information Non-ticket revenue per passenger Volaris(MXN) per passenger Best-in class ULCCs, including first bag fee (1) (1H 2016, USD per passenger) (2) 2009 – 2015 CAGR: +23.7% 2.5x Ancillaries • Apply revenue management techniques - Pricing by route, season, day - Fully dynamic pricing for some products • Add products - New products & services - Enhancements to existing products • Improve presence - More touch-points to sell ancillaries throughout the journey - Allow customization • Benefit from network diversification - More international capacity Increasing non-ticket revenue allows to reduce fare further and stimulate demand 9 20 30 50 52 Volaris Wizz Allegiant Spirit
  • 10.
    Network enhancement: connectingthe dots and diversifying further Note: Excludes routes and stations announced to start operations in 2H16. New routes Domestic International Cancun +1 +2 Guadalajara +1 +2 Mexico City +5 Other +5 +3 Tijuana Total +12 +7 New stations USA Mexico Central America San Juan, PR Chetumal San Jose, CR New York Zihuatanejo Reynosa June LTM, Volaris diversified its network by opening 19 routes and 6 stations Volaris’ LTM new routes New International New Domestic 10
  • 11.
    …supporting strong capacitygrowth Joining existing airports Additional frequencies New airports 19.3% 3.0% 1.2% Total ASM growth 1H 2016 capacity growth contribution (yoy) 23.5% Our network is well positioned for diversified growth = + + + 11 Source: Company data
  • 12.
  • 13.
    24 39 18 27 6 12 2010 2011 20122013 2014 2015 LTM Jun 2016 Domestic USA Other international Yoy growth 3.3% 4.0% 8.3% 8.3% 8.3% 12.3% 12.2% GDP growth 5.1% 4.0% 3.8% 1.7% 2.1% 2.5% 2.3% GDP multiplier 0.6 1.0 2.2 5.0 3.9 4.9 5.3 In recent years, volume growth has been robust despite challenging economic environment (1) LTM June 2015 vs. LTM June 2016 growth (2) GDP growth expectations from Banxico July’s survey Source: DGAC-SCT; INEGI; Banco de México Mexico passenger market volume has increased since 2010 50 52 57 61 67 75 Passenger volume (millions) CAGR: 8.2% 13 78 (1) (2)
  • 14.
    (1) WB= widebody, NB= narrow body and RJ= regional jet (2) Only domestic market (3) Only Mexican carriers Source: DGAC, Diio Mi, Banco de México 2.8% 8.2% 8.8% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% GDP Passengers RPMs …and supply has met the strong market demand DemandSupply (WB + NB + RJ) (1) 2.9x GDP 4.9% 6.5% 7.2% 0% 2% 4% 6% 8% 10% 12% Fleet seats Aircraft ASMs 2010-2015 Capacity growth (CAGR) 2010-2015 Demand growth (CAGR) (2) (2) 14 (3)
  • 15.
    (1) Minimum stagelength of 170 miles (2) Minimum stage length of 200 miles; CAM stands for Central America; SAM stands for South America (3) South and northbound leisure routes (4) Figures calculated as of September 2015 (5) Data from ALTA Yearbook 2014 Source: Company data, SCT-DGAC and DIIO MI Market Intelligence for the Aviation Industry; ALTA 0 10 20 30 40 50 0 25 50 75 100 USA (Leisure) USA (VFR) CAM, SAM, Canada, Caribbean Significant untapped opportunities Domestic – growth potential of approx. 120 routes (4) International – growth potential of approx.130 routes (4) (3) Number of routes (1) Number of routes (2) Routes served Growth potential 15 In terms of air trips per capita Mexico has plenty potential to grow 2014 air trips per capita(5) 2.05 0.55 0.45 0.42 0.27 0.25 0.21 0.04 0.01 USA Chile Brazil Colombia Peru Mexico Argentina Costa Rica Paraguay
  • 16.
    2012 2015 First, economyand other Exectutive and LuxuryExecutive and Luxury ULCC model First sell Trial Ticket giveaway #Nomáscamión Strong conversion rate Volaris contributed by stimulating demand from bus to air substitution Source: Company data, Secretaría de Comunicaciones y Transportes (SCT), Dec. 2014 Bus switching programSignificant upside for air travel Total air travel passengers in Mexico (mm) Total bus passengers in Mexico (mm) 2,758 33 Mass media campaigns Digital capabilities Attracting 1st time flyers 16 Education 2,918 2,683 2,834 74 79 28 37 27 38 2012 2015 Domestic International 55 75
  • 17.
    Drivers of continuedprofitable growth Uniquely positioned to capture growth in underpenetrated Mexican aviation market Reduce unit costs Fleet growth Expand network Increase total revenues • Deepen footprint in markets with high demand stimulation • Grow ancillary revenue to world class ULCC benchmarks • 54 additional aircraft to be delivered • Up-gauge fleet from A319 to A320/A321 • Higher seat density configuration • Expand network geographically Source: Company data • Neo incorporation - Fuel efficiency 17 • Price, product, presence
  • 18.
  • 19.
    18 15 125 16 15 15 15 20 28 28 28 0 2 8 182 10 10 10 0 0 2 6 2015 2016E 2017E 2018E A319 A320 A320 w/sharklets A320 NEO w/sharklets A321 w/sharklets A321 NEO w/sharklets Fleet plan with flexibility that enables capacity management Projected fleet under current contracts (number of aircraft) (1) (1) Net fleet after additions and returns (2) Percentage of year-end seats with sharklets (3) Year-end average seats per aircraft (4) Figure calculated as of August 2016 Source: Company data Backlog of 54 Aircraft to support growth (4) Seat growth % seats w/Sharklets (2) 18% 61% 20% 68% 11% 78% Avg. seats per aircraft (3) 178 182 188 70 75 82 56 2016-2018 PDPs fully financed First two A320neo 19
  • 20.
    39% 25% 25% 23% 21% 20% 19% 0% 10% 20% 30% 40% AeromexicoInterjet Copa Latam Avianca Gol Source: Company data, airlines public information 1.2 2.5 2.8 3.1 6.5 8.0 0 3 6 9 2011 2012 2013 2014 2015 LTM Jun 2016 (MXNbn) 8.9 11.7 13.0 14.0 18.2 20.6 0 7 14 21 2011 2012 2013 2014 2015 LTM Jun 2016 (MXNbn) Revenue CAGR 2011 - 2015 LTM June 2016 Adj. EBITDAR margin High growth and solid financial performance Revenue Adj. EBITDAR 20 20% CAGR 51% CAGR 20% 16% 15% 14% 7% 7% 5% 0% 10% 20% Interjet Latam Avianca Aeromexico Gol Copa
  • 21.
    3.0x 3.2x 4.7x 5.9x 6.3x 7.5x7.6x 36% 34% 15% 14% 13% 10% 8% Strong balance sheet and liquidity, well funded for continued growth 21(1) Figures converted to USD at June end of the period spot exchange rate $18.91 for convenience purposes only Source: Company data, airlines public information • Unrestricted cash of $6.9 billion pesos (US$ 366 million(1)) as of June 30, 2016. • Net cash position of $6.1 billion pesos (US$ 323 million(1)) as of June 30, 2016. • Adjusted long term net debt to EBITDAR of 3.2x as of June 30, 2016. • Fully financed pre-delivery payments through 2018 and executed sale- leasebacks for 2016 deliveries. • Expected 2016 net CAPEX neutral (US$ 0 to -10 million): • PDPs: from US$ -50 to -45 million, net of PDP reimbursements (8 aircraft order book deliveries) • Major maintenance: US$ 25 to 35 million • Other: from US$ 10 to 15 million Adj. net debt/EBITDAR LTM liquidity-cash and equivalents as a % of LTM Op. Revenue
  • 22.
  • 23.
    Fuel hedging position 23 (1)Approximate percentage of gallons hedged as of August 22, 2016 Period Total % hedged(1) Avg. price (gal/USD$) Instrument 3Q16 55% $1.99 Call 4Q16 55% $1.99 Call 1Q17 50% $1.64 Call 2Q17 50% $1.61 Call 3Q17 50% $1.44 Call 4Q17 50% $1.40 Call 1Q18 50% $1.63 Call 2Q18 40% $1.68 Call 3Q18 10% $1.55 Call
  • 24.
    (1) Full year2015 figures converted to USD at December end of the period spot exchange rate $17.2065, respectively, for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Audited financial information 2013A – 2015A (4) Includes debt prepayment of Ps.570 million Source: Company data Consolidated statements of operations summary MXN millions unless otherwise stated (3) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016(2) % of total operating revenues (USD millions) (USD millions) Passenger 11,117 11,303 14,130 821 3,814 202 74.3 Non-ticket 1,885 2,733 4,049 235 1,317 70 25.7 Total operating revenues 13,002 14,037 18,180 1,057 5,131 271 100 Fuel 5,086 5,364 4,721 274 1,360 72 26.5 Aircraft and engine rent expense 2,187 2,535 3,525 205 1,293 68 25.2 Landing, take off and navigation expenses 1,924 2,066 2,595 151 724 38 14.1 Salaries and benefits 1,563 1,577 1,903 111 580 31 11.3 Sales, marketing and distribution expenses 704 817 1,089 63 300 16 5.8 Maintenance expenses 572 665 875 51 306 16 6.0 Other operating expense, net 347 468 505 29 42 2 0.8 Depreciation and amortization 302 343 457 27 138 7 2.7 Total operating expenses 12,685 13,833 15,669 911 4,743 251 92.4 6 EBIT 317 204 2,510 146 388 21 7.6 Operating margin (%) 2.4 1.5 13.8 13.8 7.6 7.6 Finance income 25 23 47 3 20 1 0.4 Finance cost (126) (32) (22) (1) (8) - (0.2) Exchange gain, net 66 449 967 56 923 49 18.0 Income tax expense (18) (39) (1,038) (60) (388) (21) (7.6) Net income 265 (4) 605 2,464 143 935 49 18.2 Net margin (%) 2.0 4.3 13.6 13.6 18.2 18.2 Adjusted EBITDAR 2,806 3,081 6,492 377 1,819 96 35.5 Adj. EBITDAR margin (%) 21.6 22.0 35.7 35.7 35.5 35.5 EPS Basic and Diluted (Pesos) 0.31 0.60 2.43 0.14 0.92 0.05 EPADS Basic and Diluted (Pesos) 3.10 6.00 24.35 1.42 9.24 0.49 24
  • 25.
    Consolidated statements offinancial position summary (1) Full year 2015 figures converted to USD at December end of the period spot exchange rate $17.2065 for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Net debt = financial debt - cash and cash equivalents (4) Adjusted debt = (LTM aircraft rent expense x 7) + financial debt (5) Adjusted net debt = adjusted debt - cash and cash equivalents (6) Audited financial information 2013A – 2015A Source: Company data MXN millions unless otherwise stated (6) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016 (2) (USD millions) (USD millions) Cash and cash equivalents 2,451 2,265 5,157 300 6,930 366 Current guarantee deposits 499 545 861 50 1,170 62 Other current assets 1,050 879 1,223 71 1,748 92 Total current assets 4,000 3,689 7,241 421 9,848 521 Rotable spare parts, furniture and equipment, net 1,341 2,223 2,550 148 1,864 99 Non-current guarantee deposits 2,603 3,541 4,704 273 5,485 290 Other non-current assets 434 452 765 44 1,182 63 Total assets 8,378 9,905 15,261 887 18,380 972 Unearned transportation revenue 1,393 1,421 1,957 114 3,006 159 Short-term financial debt 268 823 1,371 80 395 21 Other short-term liabilities 2,211 2,524 3,774 219 4,638 245 Total short-term liabilities 3,872 4,768 7,103 413 8,039 425 Long-term financial debt 294 425 220 13 425 22 Other long-term liabilities 250 242 1,113 65 1,304 69 Total liabilities 4,415 5,435 8,436 490 9,769 517 Total equity 3,962 4,470 6,825 397 8,611 455 Total liabilities and equity 8,378 9,905 15,261 877 18,380 972 Net debt (3) (1,888) (1,017) (3,566) (207) (6,109) (323) Adjusted debt (4) 15,874 18,990 26,268 1,527 32,153 1,700 Adjusted net debt (5) 13,423 16,725 21,111 1,227 25,223 1,334 25
  • 26.
    Consolidated statements ofcash flows summary (1) Full year 2015 figures converted to USD at December end of the period spot exchange rate $17.2065 for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Audited financial information 2013A - 2015A. (4) Includes debt prepayment premium Source: Company data MXN millions unless otherwise stated (3) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016(2) (USD millions) (USD millions) Cash flow from operating activities Income before income tax 283 644 3,502 204 1,323 70 Depreciation and amortization 302 343 457 27 138 7 Guarantee deposits (620) (695) (1,165) (68) (471) (25) Unearned transportation revenue 135 27 536 31 448 24 Changes in working capital and provisions (61) 14 (261) (15) (1,244) (66) Net cash flows provided by operating activities 39 334 3,070 178 194 10 Cash flow from investing activities Acquisitions of rotable spare parts, furniture, equipment and intangible assets (1,161) (1,603) (1,456) (85) (294) (16) Pre-delivery payments reimbursements 698 396 670 39 453 24 Proceeds from disposals of rotable spare parts, furniture and equipment 151 22 185 11 171 9 Net cash flows (used in) provided by investing activities (312) (1,185) (601) (35) 331 18 Cash flow from financing activities Treasury shares - - - - (8) - Payments of Treasury Shares - (7) - - - - Net proceeds from initial public offering 2,578 - - - - - Transaction costs on issue of shares (38) - - - - - Proceeds from exercised treasury shares 26 - 23 1 4 - Interest paid (65) (23) (42) (2) (10) (1) Other finance costs - (11) (40) (2) - - Payments of financial debt (1,084) (4) (400) (801) (47) (553) (29) Proceeds from financial debt 444 966 925 54 196 10 Net cash flows provided by (used in) financing activities 1,861 525 65 4 (370) (20) Increase (decrease) in cash and cash equivalents 1,587 (326) 2,533 147 155 8 Net foreign exchange differences 41 141 359 21 409 22 Cash and cash equivalents at beginning of period 822 2,451 2,265 132 6,366 337 Cash and cash equivalents at end of period 2,451 2,265 5,157 300 6,930 366 26
  • 27.
    Adj. EBITDA andAdj. EBITDAR reconciliation (1) Full year 2015 figures converted to USD at December end of the period spot exchange rate $17.2065 for convenience purposes only (2) 2Q 2016 figures converted to USD at June end of the period spot exchange rate $18.9113, respectively, for convenience purposes only (3) Audited financial information 2013A - 2015A Source: Company data MXN millions unless otherwise stated (3) 2013A 2014A 2015A 2015A (1) 2Q 2016 2Q 2016 (2) (USD millions) (USD millions) Net income 265 605 2,464 143 935 49 Plus (minus): Finance costs 126 32 22 1 8 - Finance income (25) (23) (47) (3) (20) (1) (Benefit)/provision for income taxes 18 39 1,038 60 388 21 Depreciation and amortization 302 343 457 27 138 7 EBITDA 685 995 3,934 229 1,449 76 Exchange (gain) loss, net (66) (449) (967) (56) (923) (49) Adjusted EBITDA 619 547 2,967 172 526 28 Aircraft and engine rent expense 2,187 2,535 3,525 205 1,293 68 Adjusted EBITDAR 2,806 3,081 6,492 377 1,819 96 27