Volaris corporate presentation - cowen transportation conference

1. Volaris
The Leading Ultra-Low-Cost Airline Serving Mexico and the US
Cowen and Company 7th Annual Global Transportation Conference
September 2014

2. Disclaimer
2
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. 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 or 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.

3. Second quarter 2014 highlights and recent developments
3
Strong balance sheet: Cash of 16% of LTM revenues and net debt negative of Ps.1.3 billion
Rational capacity management in domestic market and redeployment to international market: Domestic and international capacity grew 12% and 25% y-o-y, respectively, and network diversification
Cost control: CASM ex. fuel in 2Q14 decreased 2% y-o-y to Ps.70.4 cents (US$5.4 cents), lowest in the Americas
Unit revenue improvement: Q-o-q TRASM improved 12% as a result of a sequential monthly improvement average base fare and non-ticket revenue per passenger growth
Non-ticket revenues growth: Non-ticket revenues excluding cargo per passenger increased 46% y-o-y. Our strategy continued to unfold during the quarter, as the new baggage policy was fully implemented

4. Sacramento
San Francisco/Oakland
Los Angeles
San Diego
Tijuana
San Jose
Fresno
Mexicali
Las Vegas
Chicago/Midway/O’Hare
Denver
Orlando
Hermosillo
Chihuahua
Monterrey
Cancún
La Paz
Los Cabos
Los Mochis
Culiacán
Mérida
Tuxtla Gutiérrez
Acapulco
Puebla
Toluca
Tepic
Zacatecas
Mazatlán
Guadalajara
Aguascalientes
Puerto Vallarta
Uruapan
Colima
Morelia
Oaxaca
León
Querétaro
Cd. de México/D.F.
Ciudad Juárez
Volaris – The Mexican Ultra-Low-Cost Carrier
Notes:
(1) Based on CASM among the publicly-traded airlines
(2) Converted at average annual MXN/USD spot exchange rate
(3) Corresponds to the number of booked passengers
(4) Based on number of passengers
(5) Figures for international and domestic revenue calculated as of July YTD 2014.
Source: Company data, SCT-DGAC
Lowest unit cost carrier in the Americas(1)
2008
2013
CAGR
Unit cost
(CASM ex-fuel; cents, USD)(2)
5.5
5.5
0.0%
Passenger demand
(RPMs, bn)
3.2
9.0
+23.0%
Aircraft
(End of Period)
21
44
+15.9%
Passengers (mm)(3)
3.5
8.9
+20.5%
Operating revenue
(mm, USD)(2)
397
1,018
+20.7%
Adj. EBITDAR
(mm. USD)(2)
67
220
+26.8%
Adj. ROIC (pre- tax)
11.0%
15.1%
+4.1pp
Volaris’ destinations
4
Phoenix
San Luis Potosí
Ciudad Obregón
Veracruz
San Antonio
Ontario
Villahermosa
Tampico
Portland
Domestic market share (4)
Intl. Op. Revenue(5) 27%
Tapachula
Huatulco
12.2%
20.7%
22.7%
23.5%
2008
2012
2013
Jul YTD 2014
Dom. Op. Revenue(5) 73%

5. Volaris’ low base fares stimulate demand and drive continuing growth
Stimulation
of
demand
More
ancillary revenue
More capacity
Lower base fares
Resilient ULCC business model driving high, profitable growth
Lower cost
Since its launch, Volaris has stimulated new demand in the Mexican market through an aggressive revenue management strategy that drives lower fares and higher load factors
5

6. Notes;
(1)MXN amounts were converted to USD at the avg. rate of MXN/USD 13.00 as of 2Q14
(2)Ancillary revenues exclude charter and cargo revenues
(3)Estimated information as of June 2014. Narrow body aircraft only. Source: Company data, data airlines public information, DGAC reports, MI DIIO
Volaris’ ULCC business model is clearly differentiated from legacies, hybrids and other LCCs
Aeromexico
Interjet
VivaAerobus
Volaris
2Q ‘14
2Q ‘14
2Q ‘14
2Q ‘14
CASM 2Q14




(cents, USD)(1)
14.09
13.67
-
8.96
Low ticket prices 2Q14

≈


Average Fare (USD)(1)
165.9
106.5
-
85.1
High ancillaries revenue




Ancillaries rev. per pax (USD)(1)(2)
6.2
5.8
-
19.3
Modern fleet

≈


Average age fleet (years)
9.8
6.0
20.6
4.1
High daily utilization




Block hours per day(3)
11.8
8.7
8.5
11.9
Other (e.g.. no GDS)

≈


Legacy > LCC/Hybrid > ULCC
6

7. 5.4
9.8
9.1
8.0
8.1
6.6
5.7
6.0
9.5
3.5
5.2
4.9
5.6
4.7
4.1
4.6
3.9
4.7
LatAm
AM
Gol
Interjet
Copa
Allegiant
Spirit
D Comps
Volaris has a best-in-class unit cost structure
Denotes fuel cost per ASM
Lowest unit cost in the Americas(1)
CASM and CASM ex-fuel (1H 2014, USD cents)(3)
7
Latin American Carriers
US Network Carriers(2)
Best-In-Class US LCCs
Notes:
(1) Based on CASM among the publicly-traded airlines
(2) DCOMPS= Direct Competitors: Average CASM and CASM ex-fuel; US network carriers include: Delta, United, Alaska Airlines, American Airlines
(3) Non USD data converted using average exchange rates for the corresponding period
Source: Company data, Airlines public information
14.2
9.9
10.3
14.9
13.6
13.9
9.0
10.7
12.8

8. 11.9
11.8
8.7
8.8
8.1
Aeromexico
Interjet
Global A320
Global A319
Young, fuel efficient fleet (3)
Interjet
Focus on fleet utilization and efficiency drives higher revenue and lower cost
Notes:
(1)Implied passengers per aircraft is calculated as available seats per aircraft multiplied by the load factor
(2)Block hours per day calculated as ((Total block hours for the period / Monthly average number of aircraft) / Number of days for the period)
(3)Aeromexico and Interjet represent domestic competitors of Volaris
(4)Interjet load factor obtained from DGAC report, seat load factor, as of June YTD 2014 Source: Company data, airlines public information, DGAC, Airbus, miDiio
Load factor
(June YTD 2014)
Implied passengers
per aircraft(1)
82%
69%
79%
143
104
126
Interjet A320
150 seats per aircraft
Aeromexico 737-800
160 seats per aircraft
High daily utilization(3)
Volaris A320
174 seats per aircraft
High density configuration(3)
Aeromexico
Block hours per day (June YTD 2014)
Average age (Yrs, June YTD 2014)
8
10.3
9.1
6.0
4.2
Mexican average
Aeromexico
Interjet
(4)

9. 145
121
Bus
Bus passenger shift to air travel
Notes:
(1) Executive and luxury class
(2) Fare figures calculated with average prices for May 2014
(3) MXN amounts were converted to USD at the rate of MXN/USD 13.1010
Source: Company data, Secretaría de Comunicaciones y Transportes (SCT)
Air travel time and cost savings
Significant upside for air travel
Fare (USD)(2,3)
Travel time (Hrs)
Mexico City – Tijuana
(1)
Total air travel trips
(mm)
Total bus trips
(mm)
40.5
4.0
Bus
Air
36.5 hours less
•Mexico is almost three times the size of the state of Texas
•The distance between Tijuana and Cancún is similar to the distance between New York City and San Francisco
9
16.5% cost savings
30
30
60
2013
International
Domestic
2013
Executive & luxury
First, economy and other
2,781
2,706
75

10. • Excess
baggage
• Checked
bag limited
to 1 piece
(25kgs.)
• Carry-on
(oversized)
• Strollers
• Priority
boarding
• Check-in
Unbundled strategy: “Tú decides” – You decide
• V-Club
subscription
(82k active
suscriptions)
• Co-branded
credit cards
(76k active
cardholders)
• V-Shop
• VEmpresa
• Advertising
• Food and
beverage
• Hotel
rooms
• Car rentals
• Airport
shuttle
Pre-flight(1) Flight
planning
At the
airport
Onboard
aircraft
Post-flight
• Seat
assignment
• Change /
booking fees
• Insurance
• Packages
•Additional forms
of payment
Notes:
(1) V-Club & Co-branded credit cards figures as of July 31th,2014 10

11. 24
39
68
115
148
163
2009
2010
2011
2012
2013
LTM Jun 14
7.0
8.9
11.4
15.5
16.5
17.3
2009
2010
2011
2012
2013
LTM Jun 14
Acceleration of Volaris’ non-ticket revenues
Notes:
(1) Converted using an average annual MXN/USD exchange rate
Source: Company data, Airlines public information
Increased contribution of non-ticket revenue to the top line
Non-ticket revenue per passenger
Volaris (USD)(1)
Best-in class US LCCs (1H14, USD)
Contribution to Operating Revenue
7%
7%
9%
13%
14%
2009 – 2013 CAGR: +57.6%
2009 – 2013 CAGR: +24.0%
Non-ticket revenue
(USD mm)(1)
11
45
56
Allegiant
Spirit
16%

12. 48
48
41
40
38
13
0
5
10
15
20
25
30
35
40
45
50
99
48
32
0
10
20
30
40
50
60
70
80
90
100
USA (Leisure)
USA (VFR)
CAM, SAM, Canada, Caribbean
Attractive growth opportunities in Mexico and throughout the Americas
Domestic – growth potential of nearly 160 routes
International – growth potential of about 154 routes
(3)
Notes:
(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
Source: Company data
Number of routes(1)
Number of routes(2)
Routes served
Growth potential
12

13. Substantial growth opportunity in the US-Mexico VFR /
leisure travel market
Notes:
(1) Represents Mexican origin population figures as per population data released on May 26, 2011
(2) Mexican origin is based on self-described ancestry, lineage, heritage, nationality group or country of birth.
Source: Pew Research Hispanic Center
Denotes Volaris
presence(1)
Denotes other cities with large
Mexican origin populations(1,2)
Significant Mexican origin
population(2) of 33.7 million
in the US
Orlando
0.1mm
San
Francisco
0.7mm
San Jose
0.4mm
San
Diego
0.9mm
Denver
Sacramento 0.5mm
0.3mm
Chicago
1.5mm
Fresno
0.5mm
Los Angeles
4.6mm
Las Vegas
0.4mm
San
Bernardino
1.7mm
Phoenix
1.2mm
Tucson
0.3mm
Albuquerque
0.2mm
El Paso
0.6mm
San Antonio
0.9mm
Bakersfield
0.4mm
Austin
0.4mm
Dallas
1.5mm
Houston
1.5mm
Atlanta
0.3mm
Washington
0.1mm
New York
0.5mm
Philadelphia
0.1mm
San Benito
0.3mm
Mission
0.6mm
Tampa
0.1mm
13
Portland
0.2mm

14. Positive expansion, managing capacity and diversification of routes
Notes: (1) Capacity measured by ASM’s Source: Data company, SCT-DGAC, DIIO MI
Percentage of Volaris’ 3Q14 domestic capacity competing with:
Solid expansion for Volaris
A significant portion of our capacity faces no competition
14
67%
56%
41%
23%
Aeromexico
Interjet
Vivaaerobus
Non-competed
Volaris domestic routes
Volaris international routes
39
50
78
89
Dec '11
Dec '12
Dec '13
Jul '14
17
23
26
28
Dec '11
Dec '12
Dec '13
Jul '14
More than 2x
More than 1.5x

15. Fleet and financials
15

16. 20
18
17
12
24
23
22
19
9
14
23
44
50
53
54
2
FY13
FY14
FY15
FY16
A319
A320
A320 w/Sharklets
A320 NEO w/Sharklets
A higher density fleet generates more incremental capacity with fewer additional aircraft
Projected fleet under current contracts (number of aircraft)(1)
Notes:
(1)Net fleet after additions and returns
(2)Figure calculated as of September 2014 Source: Company data
18%
26%
43%
% % of year-end fleet w/Sharklets
Order book of 62 Aircraft supports growth(2)
16
Seat growth (EoP)
16%
7%
8%

17. 28%
20%
14%
10%
0%
10%
20%
30%
Copa
GOL
LATAM
Solid financial performance
Note:
(1)Converted using an average MXN/USD exchange rate for the corresponding period Source: Company data, airlines public information
Operating revenues(1)
Adj. EBITDAR(1)
Operating Revenues CAGR 2009 - 2013
LTM 1H 2014 Adj. EBITDAR margin
17
117
140
100
188
220
173
0
50
100
150
200
250
2009
2010
2011
2012
2013
LTM 1H14
(USD mm)
374
536
714
887
1,018
996
0
200
400
600
800
1,000
1,200
2009
2010
2011
2012
2013
LTM 1H14
(USD mm)
17.4%
28.9%
18.1%
17.7%
0.0%
10.0%
20.0%
30.0%
Copa
Gol
AM

18. LTM Liquidity – Cash and Equivalents / Op. Revenue(2)
Balance sheet well positioned for growth
Note:
(1)Principal + interest debt Source: Company data, Airlines public information
18
•IPO provided sufficient liquidity / capital for growth over the next years
•Minimal on-balance sheet debt
•USD $58mm(1) of financial debt as of June 2014
•Strong cash position
•USD $160mm of cash and equivalents as of June 2014
•Fully financed PDPs through the second quarter of 2016
16.1%
32.4%
28.7%
12.0%
8.2%
Copa
Gol
AM
LatAm

19. Appendix
19

20. Non-IFRS Terms Glossary
•Available seat miles (ASMs): Number of seats available for passengers multiplied by the number of miles the seats are flown.
•Block hours: Number of hours during which the aircraft is in revenue service, measured from the time it leaves the gate until the time it arrives to the gate at destination.
•Revenue passenger miles (RPMs): Means the number of miles flown by passengers.
•TRASM: Total revenue divided by ASMs.
•RASM: Passenger revenue divided by ASMs.
•CASM: Total operating expenses, net divided by ASMs.
•CASM ex fuel: Total operating expenses, net excluding fuel expense divided by ASMs.
•Load factor: RPMs divided by ASMs and expressed as a percentage.
•EBITDA: Earnings before interest, taxes, depreciation and amortization.
•EBITDAR: Earnings before interest, taxes, depreciation, amortization and aircraft rent expense.
•Adj. EBITDAR: EBITDAR adjusted by non-cash and non-recurring items.
•Adj. Debt: Financial debt plus seven times the aircraft rent expense.
•Adj. Net debt: Adj. Debt minus cash and cash equivalents.
•VFR: Passengers who are visiting friends and relatives.
20

21. MXN millions unless otherwise stated (2)
2010A
2011A
2012A
2013A
1H 2014A
1H 2014A
% of total operating revenues
(USD millions)
Passenger
6,278
8,036
10,177
11,117
4,910
377
80.7
Non-ticket
499
842
1,510
1,885
1,173
90
19.3
Total operating revenues
6,777
8,878
11,687
13,002
6,084
467
100
Fuel
2,146
3,823
4,730
5,086
2,632
202
43.3
Aircraft and engines rent expense
1,197
1,508
1,886
2,187
1,222
94
20.1
Salaries and benefits
852
1,120
1,303
1,563
779
60
12.8
Landing, take off and navigation expenses
868
1,282
1,640
1,924
1,046
80
17.2
Sales, marketing and distribution expenses
615
750
752
704
352
27
5.8
Maintenance expenses
276
380
499
572
306
23
5.0
Other operating expense
255
285
288
347
211
16
3.5
Depreciation and amortization
57
103
211
302
118
9
1.9
Total operating expenses
6,266
9,251
11,309
12,685
6,667
512
109.6
6
EBIT
511
(373)
378
317
(583)
(45)
(9.6)
Operating margin (%)
7.5
(4.2)
3.2
2.4
(9.6)
(9.6)
Finance income
5
6
14
25
10
1
0.2
Finance cost
(56)
(58)
(90)
(126)
(14)
(1)
(0.2)
Exchange (loss) gain, net
(56)
110
(95)
66
(4)
(0)
(0.1)
Income tax benefit (expense)
239
0
(3)
(17)
145
11
2.4
Net income (loss)
643
(315)
203
265
(445)
(34)
(7.3)
Net margin (%)
9.5
(3.6)
1.7
2.0
(7.3)
(7.3)
Net income (loss) excluding special items (3)
643
(315)
203
379
(445)
(34)
(7.3)
Adjusted EBITDAR
1,770
1,238
2,475
2,806
757
58
12.4
Adj. EBITDAR margin (%)
26.1
13.9
21.2
21.6
12.4
12.4
EPS Basic and Diluted(cents)
31.0
(44.0)
(3.4)
EPADS Basic and Diluted (cents)
310.4
(439.7)
(33.7)
Consolidated statements of operations summary
21
Notes:
(1) MXN amounts were converted to USD at the rate of USD/MXN 13.0323 as of June 30, 2014
(2) Audited financial information 2010A – 2013A
(3) Excludes debt prepayment of Ps.65 million, and reservation system migration costs and other non-recurring items of Ps.48 million.
Source: Company data

22. Consolidated statements of financial position summary
Nota: (1) MXN amounts were converted to USD/MXN 13.0323 as of June 30, 2014 (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 2010A – 2013A Source: Company data
22
MXN millions unless otherwise stated (5)
2010A
2011A
2012A
2013A
1H 2014A
1H 2014A
(USD millions)
Cash and cash equivalents
677
441
822
2,451
2,088
160
Current guarantee deposits
330
170
238
499
558
43
Other current assets
390
520
755
1,050
1,191
91
Total current assets
1,397
1,131
1,815
4,000
3,837
294
Rotable spare parts, furniture and equipment, net
921
1,517
1,195
1,341
1,679
129
Non-current guarantee deposits
1,041
2,002
2,245
2,603
2,760
212
Other non-current assets
342
412
447
434
578
44
Total assets
3,701
5,062
5,702
8,378
8,854
679
Unearned transportation revenue
505
825
1,259
1,393
1,940
149
Short-term financial debt
251
687
527
268
131
10
Other short-term liabilities
1,171
1,667
1,936
2,211
2,403
184
Total short-term liabilities
1,927
3,179
3,722
3,872
4,473
343
Long-term financial debt
384
725
633
294
627
48
Other long-term liabilities
164
298
272
250
228
17
Total liabilities
2,475
4,202
4,627
4,416
5,328
409
Total equity
1,226
860
1,075
3,962
3,526
271
Total liabilities and equity
3,701
5,062
5,702
8,378
8,854
679
Net debt (2)
(42)
971
338
(1,889)
(1,330)
(102)
Adjusted debt (3)
9,014
11,969
14,360
15,874
17,409
1,337
Adjusted net debt (4)
8,337
11,528
13,538
13,423
15,321
1,177

23. Consolidated statements of cash flows summary
MXN millions unless otherwise stated (2)
2010A
2011A
2012A
2013A
1H 2014A
1H 2014A (1)
(USD millions)
Cash flow from operating activities
Income (loss) before income tax
404
(315)
207
283
(590)
(45)
Depreciation and amortization
62
103
211
302
118
9
Guarantee deposits
(316)
(801)
(311)
(620)
(215)
(16)
Unearned transportation revenue
207
321
433
135
546
42
Changes in working capital and provisions
182
544
(43)
(61)
47
4
Net cash flows provided by (used in) operating activities
539
(148)
497
39
(94)
(7)
Cash flow from investing activities
Acquisitions of rotable spare parts, furniture, equipment and intangible assets
(321)
(1,215)
(856)
(1,161)
(720)
(55)
Proceeds from disposals of rotable spare parts, furniture and equipment
-
587
1,043
849
277
21
Net cash flows (used in) provided by investing activities
(321)
(628)
187
(312)
(443)
(34)
Cash flow from financing activities
Legal costs incurred on behalf of shareholders
(76)
-
-
-
-
-
Net proceeds from initial public offering
-
-
-
2,578
-
-
Transaction costs on issue of shares
-
-
-
(38)
-
-
Proceeds from exercised treasury shares
-
-
-
26
-
-
Interest paid
(60)
(55)
(127)
(65)
(11)
(1)
Payments of financial debt
-
(261)
(694)
(1,084)
(271)
(21)
Proceeds from financial debt
46
879
550
444
465
36
Net cash flows (used in) provided by financing activities
(90)
562
(272)
1,861
184
14
Increase (decrease) in cash and cash equivalents
128
(213)
412
1,588
(353)
(27)
Net foreign exchange differences
(25)
(22)
(31)
41
(9)
(1)
Cash and cash equivalents at beginning of period
575
677
441
822
2,451
188
Cash and cash equivalents at end of period
677
441
822
2,451
2,088
160
Notes: (1) MXN amounts were converted to USD at the rate USD/MXN 13.0323 as of June 30, 2014 (2) Audited financial information 2010A - 2013A Source: Company data
23

24. Adj. EBITDA and Adj. EBITDAR reconciliation
MXN millions unless otherwise stated (2)
2010A
2011A
2012A
2013A
1H 2014A
1H 2014A (1)
(USD millions)
Net income (loss)
643
(315)
203
265
(445)
(34)
Plus (minus):
Finance costs
52
58
90
126
(14)
(1)
Finance income
(5)
(6)
(14)
(25)
10
1
(Benefit)/provision for income taxes
(239)
0
3
17
145
11
Depreciation and amortization
57
103
211
302
118
9
Business alliance amortization
5
-
-
-
-
-
EBITDA
513
(160)
494
685
(185)
(14)
Exchange (gain) loss, net
56
(110)
95
(66)
(4)
(0)
Other financing cost (income), net
3
-
-
-
-
-
Adjusted EBITDA
573
(270)
589
619
(189)
(14)
Aircraft and engine rent expense
1,197
1,508
1,886
2,187
1,222
94
Adjusted EBITDAR
1,770
1,238
2,475
2,806
1,034
79
Notes:
(1) MXN amounts were converted to USD at the rate of MXN/USD 13.0323 as of June 30, 2014
(2) Audited financial information 2010A - 2013A
Source: Company data
24