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Volaris Corporate Presentation December 2013

This corporate presentation by Volaris, a Mexican ultra-low-cost carrier, highlights the company's recent growth and opportunities. Key points include: Volaris had record load factors of 87.5% in the third quarter of 2013 and the lowest unit costs in the Americas. The company aims to stimulate demand through low base fares while increasing ancillary revenues. Volaris also sees potential to capture passenger traffic shifting from bus to air travel and has opportunities to expand its route network both domestically in Mexico and internationally.

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Volaris Corporate Presentation December 2013
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. 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. 2
Third quarter 2013 highlights and recent developments Strong balance sheet: Successful IPO of US$398 million in September 2013, cash of 23% of LTM revenues and net debt negative Demand stimulation and high passenger volume: Record load factor of 87.5% in 3Q Cost control: CASM decreased to Ps.113.9 cents (US$8.8 cents) in 3Q, lowest in the Americas Non-ticket revenue growth potential: Migration to new reservation system (Navitaire), new webpage and new baggage policy in October Expanding US presence: Phoenix and San Antonio launched in 4Q 3
Volaris – a Mexican Ultra-Low-Cost Carrier Lowest unit cost carrier in the Americas(1) 2008 Unit cost (CASM ex-fuel; cents, USD)(2) Passenger demand (RPMs, bn) Aircraft (End of Period) 5.5 2012 5.4 Volaris’ destinations CAGR -0.4% Fresno 3.2 7.7 +24.6% Chicago/Midway/O’Hare Sacramento San Francisco/Oakland San Jose Los Angeles San Diego Denver Las Vegas Mexicali Phoenix Tijuana Ciudad Juarez 21 41 Hermosillo San Antonio Chihuahua Ciudad Obregón Monterrey Los Mochis +18.2% La Paz Passengers (mm)(3) 3.5 7.4 +20.6% Operating revenue (mm, USD)(2) 397 887 +22.3% Adj. EBITDAR (mm. USD)(2) 67 188 +29.4% 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 Source: Company data, SCT-DGAC Orlando Culiacán Zacatecas San Luis Potosí Mazatlán León Aguascalientes Mérida Tepic Cancún Querétaro Guadalajara Morelia Puerto Vallarta Cd. de México/D.F. Colima Veracruz Toluca Puebla Manzanillo Uruapan Tuxtla Gutiérrez Acapulco Oaxaca Los Cabos Domestic market share (4) 12.2% 2008 20.5% 22.9% 2012 Sep-13 4
Volaris’ low base fares stimulate demand and drive continuing growth 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 Lower base fares Lower cost Stimulation of demand Resilient ULCC business model driving high, profitable growth More ancillary revenue More capacity Source: Company data 5
Volaris has a best-in-class unit cost structure Lowest unit cost in the Americas(1) CASM and CASM ex-fuel (LTM Sep 2013, USD cents)(3) 15.5 14.8 14.2 13.2 5.5 5.1 5.0 10.9 10.2 4.8 5.4 9.3 10 4.0 4.2 3.7 10.0 9.7 7.8 5.6 Volaris Denotes fuel cost per ASM Latam Aeroméxico Gol Latin American Carriers 9.2 6.7 Copa 5.4 6.0 Allegiant Spirit 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 DCOMPS US Network Carriers(2) 6
Focus on fleet utilization and efficiency drives higher revenue and lower cost High density configuration(3) Load factor Implied passengers (as of Sept 2013) per aircraft(1) Volaris A320 174 seats per aircraft 84% 77% 123 Interjet Interjet A320 150 seats per aircraft 146 Aeroméxico Aeroméxico 737-800 160 seats per aircraft 75% 113 High daily utilization(2) Block hours per day (1H13) 12.2 Young, fuel efficient fleet (3) Average age (Yrs, Sep 2013) 12.0 10.6 11.3 9.5 8.8 9.2 8.1 6.7 4.2 YTD Sep13A 1H13 Aeroméxico(3)Interjet (3) Global A320 Global A319 Mexican Average Aeroméxico Interjet 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) Aeroméxico and Interjet represent domestic competitors of Volaris Source: Company data, airlines public information, DGAC, Airbus, DIIO MI 7
Unbundled model drives Volaris’ low base fares Unbundling and a low cost structure support Volaris’ low base fares… …stimulating demand and increasing load factor… …resulting in higher ancillary and stronger overall revenue growth Average base fare (USD)(1,2) Load factor TRASM (US cents) (2) 2009 – 2012 Change: +12.0 pp 179 178 2009 – 2012 Change: +28.4% 83% 171 9.7 7.6 137 113 71% 109 104 100 2009 – 2012 Change: +4.0% 2009 2010 2011 2012 2009 2012 2009 2012 Aeroméxico Notes: (1) Average fare calculated as passenger revenue divided by number of booked passengers (2) Converted using an average annual MXN/USD exchange rate Source: Company data, Aeromexico public information 8
Low costs and low base fares – a significant competitive advantage Breakeven fare (LTM Sep 2013) USD(3,4) % Above Volaris +126% +92% +78% +72% +54% $226 $154 $178 $172 $192 $100 Volaris (1) Alaska (1) Aeroméxico Delta American Notes: (1) Converted using an average annual MXN/USD exchange rate (2) Average Stage Length calculated as (Total miles flown / Number of flights) during LTM 3Q13 (3) Breakeven fare calculated as ((Average stage length * (CASM – Ancillary revenue (or Other revenue) per ASM)) / 100)/(Load factor /100) (4) Group of airlines represent domestic and international competitors of Volaris Source: Company data, Airlines public information, TheAirlineAnalyst. DIIO MI, MIT ADP United 9
Bus passenger shift to air travel Significant upside for air travel Total bus trips (mm) Air travel time and cost savings Total air travel trips (mm) Mexico City – Tijuana Travel time (Hrs) 2,758 Fare (USD)(2) 135 40.5 36.5 hours less 15% cost savings 2,683 114 4.0 57 74 28 Bus 74 2012 Bus (1) Volaris 29 2012 Air Executive & luxury First, economy & other • Mexico is almost three times the size of the state of Texas International Domestic • The distance between Tijuana and Cancún is similar to the distance between New York City and San Francisco Notes: (1) Executive and luxury class (2) MXN amounts were converted to USD at the rate of MXN/USD 13.0235 as of June 30, 2013 Source: Company data, Secretaría de Comunicaciones y Transportes (SCT) 10
Rapidly expanding share in core markets Stimulation of growth through our ULCC model Passenger volume growth: 2011 vs. 2012 Volaris focus cities – Domestic market 2x 6x 2x International market 5x 2x 13x 4x 65% 186% 147% 45% 33% 7% 15% Tijuana 25% 69% 38% 13% 6% Guadalajara Cancun Mexico City Airport 46% 11% Morelia Mexico City Aguascalientes Volaris A significant portion of our capacity faces no competition Percentage of Volaris’ domestic capacity(1) competing with: 73% 55% 35% 22% Aeroméxico Interjet Vivaaerobús Non-competed Notes: (1) Offered seats for 4Q 2013 Source: SCT-DGAC, DIIO MI 11
Unbundled strategy: “Tú decides” – You decide Pre-flight Flight planning At the airport • V-Club subscription • Seat assignment • Excess baggage • Co-branded credit cards • Change / booking fees • Priority boarding • V-Shop • Insurance • Strollers Onboard aircraft • Advertising • Food and beverage(1) Post-flight • Hotel rooms • Car rentals • Airport shuttle Notes: (1) In process of implementation Source: Company data 12
Acceleration of Volaris’ non-ticket revenues Increased contribution of non-ticket revenue to the top line 2009 – 2012 CAGR: +68.6% Non-ticket revenue (USD mm)(1) 200 149 150 115 100 50 68 39 24 0 Contribution to Operating Revenue 2009 2010 2011 2012 LTM Sep 13 7% 7% 9% 13% 15% Non-ticket revenue per passenger Best-in class US LCCs (LTM Sep13, USD) Volaris (USD)(1) 53 +35.5% 46 2009 – 2011 CAGR: +27.6% 7.0 8.9 11.4 2009 2010 2011 Notes: (1) Converted using an average annual MXN/USD exchange rate Source: Company data, Airlines public information 15.5 17.3 2012 LTM Sep 13 Allegiant Spirit 13
Volaris’ revenue strategy delivers a resilient and defensible network Strong foothold in competing markets Volaris domestic market share(1) Domestic market share in top Volaris’ cities(2) Tijuana Vivaaerobús Interjet 1% 12% Aeroméxico 14% 35% 23% Volaris 73% Guadalajara Total Others 13% Volaris' routes Volaris 38% Interjet 22% Aeroméxico 27% Volaris international market share (Mexico – US)(1) Cancún 39% Interjet 23% 8% Total Notes: (1) Passengers for September 2013 (2) Seats, September 2013 Source: SCT-DGAC, DIIO MI Others 21% Volaris' routes Mexico City Others 10% Interjet 32% Volaris 30% Aeroméxico 26% Volaris 14% Aeroméxico 44% 14
Substantial growth opportunity in the US-Mexico VFR / leisure travel market San Francisco 0.7mm Bakersfield 0.4mm Sacramento 0.3mm Fresno 0.5mm Las Vegas 0.4mm San Jose 0.4mm Albuquerque 0.2mm Phoenix 1.2mm Los Angeles 4.6mm Tucson 0.3mm San Diego 0.9mm San Bernardino 1.7mm Chicago 1.5mm Denver 0.5mm Austin 0.4mm El Paso 0.6mm Washington 0.1mm Dallas 1.5mm San Antonio 0.9mm New York 0.5mm Philadelphia 0.1mm Atlanta 0.3mm Houston 1.5mm Mission 0.6mm Orlando 0.1mm Tampa 0.1mm San Benito 0.3mm Denotes Volaris presence(1) Denotes other cities with large Mexican origin populations(1,2) 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 Significant Mexican origin population(2) of 33.5 million in the US 15
Attractive growth opportunities in Mexico and throughout the Americas Domestic – growth potential of nearly 180 routes International – growth potential of about 150 routes Number of routes(1) Number of routes(2) 100 90 90 80 80 70 70 60 99 100 60 50 48 48 41 40 48 50 40 38 40 32 30 20 30 13 13 13 20 10 10 0 0 USA (Leisure) Routes served (3) USA (VFR) CAM, SAM, Canada, Caribbean Growth potential 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 16
Fleet and financials 17
A higher density fleet generates more incremental capacity with fewer additional aircraft Projected fleet under current contracts (number of aircraft)(1) A320 A319 2012-2020E Growth: +68% XXX 69 44 41 24 47 20 XXX 18 51 17 50 12 50 57 9 49 2 29 39 41 24 33 17 2012 2013E 2014E 2015E 2016E 2017E 57 47 2018E 2019E 69 2020E Projected capacity in number of seats (end of period; 000s)(2) A320 A319 2012-2020E Growth: +87% XXX 12.0 9.9 XXX 6.4 3.5 7.1 2.9 7.6 8.2 8.5 1.7 2.6 2.4 8.4 1.3 8.5 0.3 9.9 12.0 7.1 3.0 Average capacity per aircraft (seats) 5.7 8.2 5.0 6.8 4.2 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 156 160 163 164 167 169 173 174 174 Notes: (1) Net fleet after additions and returns (2) Assumes that all A319 aircraft have 144 seats and all A320 aircraft have 174 seats Sources: Company information 18
Leading financial performance on strong revenue growth Revenue(1) Adj. EBITDAR(1) 300 1,200 1,023 714 800 536 600 400 239 250 887 (USD mm) (USD mm) 1,000 374 200 188 200 150 140 117 100 100 50 0 0 2009 2010 2011 2012 LTM Sep 13 2009 Revenue CAGR 2009 - 2012 2010 2011 2012 LTM Sep 13 LTM Sep 2013 Adj. EBITDAR margin 40% 30% 27.0% 33.4% 23.4% 30% 20% 21.5% 16.4% 20% 13.2% 11.1% 10% 0% 9.6% 10% 0% Volaris Copa Latam Gol Copa Aeroméxico Gol Note: (1) Converted using an average MXN/USD exchange rate for the corresponding period Source: Company data, airlines public information 19
Poised for future value creation Sep YTD Sep YTD ‘12 ‘13 Change (YoY) Continue growth in available seats with a highly efficient fleet • Switch from A319 to A320 TRASM (cents, USD) (1) 9.5 9.7 3% • Sharklet and NEO technology • Maintain high utilization CASM (cents, USD) (1) 9.2 9.2 0% Operating revenue (mm, USD) (1) 640 774 21% Adj. EBITDAR (mm, USD) (1) 132 183 39% Adj. EBITDAR margin 21% 24% 3pp Continue growth in our non-ticket revenues Maintain cost discipline Continue to align employee incentives Focus on shareholder return Notes; (1) MXN amounts were converted to USD at the avg. rate of MXN/USD 13.24 as of Sep 30 2012 and at the avg. rate of MXN/USD 12.68 as of Sep 30, 2013 Source: Company data 20
Balance sheet well positioned for growth • IPO provided sufficient liquidity / capital LTM Sep 2013 Liquidity – Cash and Equivalents / Op. Revenue for growth over the next years 38.8% • Minimal on-balance sheet debt • $31mm(1) of debt after the IPO and 29.8% debt payment 22.8% • Strong cash position • $229mm of cash and equivalents as of September 2013 7.7% • Fully financed fleet order through the second quarter of 2016 Copa Gol Latam Note: (1) Principal + interest debt Source: Company data, Airlines public information 21
Appendix 22
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. 23
Consolidated statements of operations summary MXN millions unless otherwise stated(2) 2010A 2011A(3) 2012A 3Q 2013A September September YTD YTD 2013A 2013A(1) (USD millions) 8,385 644 1434 110 9,819 755 % of total operating revenues Passenger Non-ticket Total operating revenues 6,278 499 6,777 8,036 842 8,878 10,177 1,510 11,687 3,219 502.871 3,722 Fuel Aircraft and engines rent expense Salaries and benefits Landing, take off and navigation expenses Sales, marketing and distribution expenses Maintenance expenses Other operating expense Depreciation and amortization Total operating expenses 2,146 1,197 852 868 615 276 255 57 6,266 3,823 1,508 1,120 1,282 750 380 285 103 9,251 4,730 1,886 1,303 1,640 752 499 288 211 11,309 1,400 562 397 498 179 138 93 81 3,348 3,716 1,592 1144 1417 525 430 264 216 9,305 286 122 88 109 40 33 20 17 715 37.8 16.2 11.6 14.4 5.4 4.4 2.7 2.2 94.8 EBIT Operating margin (%) 511 7.5 (373) (4.2) 378 3.2 374 10.0 514 5.2 40 5.2 5.2 Finance income Finance cost Exchange (loss) gain, net Taxes on profits 5 (56) (56) 239 6 (58) 110 0 14 (90) (95) (3) 7 (84) 26 (69) 19 (120) 46 (97) 1 (9) 4 (7) 0.2 (1.2) 0.5 (1.0) Net income (loss) Net margin (%) Net income (loss) excluding special items (4) 643 9.5 643 (315) (3.6) (315) 203 1.7 203 254 6.8 320 362 3.7 428 28 3.7 33 3.7 1,770 26.1 1,238 13.9 2,475 21.2 1016 27.3 2,322 23.7 178 23.7 23.7 Adjusted EBITDAR Adj. EBITDAR margin (%) EPS Basic (cents) 30.2 44.4 301.6 444.2 4.4 3.4 EPADS Basic (cents) 85.4 14.6 100.0 34.1 Notes: (1) MXN amounts were converted to USD at the rate of MXN/USD 13.0119 as of Sep 30, 2013 (2) Financial information 2010-2012 audited; 2013 unaudited (3) Financial statements restated (4) Special items includes debt prepayment penalty by Ps.65 million Source: Company data 24
Consolidated statements of financial position summary MXN millions unless otherwise stated(5) 2010A 2011A(6) 2012A(6) September 2013 A September 2013A Cash and cash equivalents Current guarantee deposits Other current assets Total current assets 677 330 390 1,397 441 170 520 1,131 822 238 755 1,815 2,974 406 1,176 4,555 (USD millions) 229 31 90 350 Rotable spare parts, furniture and equipment, net Non-current guarantee deposits Other non-current assets Total assets Unearned transportation revenue Short-term financial debt Other short-term liabilities Total short-term liabilities Long-term financial debt Other long-term liabilities Total liabilities 921 1,041 342 3,701 505 251 1,171 1,927 384 164 2,475 1,517 2,002 412 5,062 825 687 1,667 3,179 725 298 4,202 1,195 2,245 447 5,702 1,259 527 1,936 3,722 633 272 4,627 1,062 2,445 390 8,452 1,513 134 2,146 3,794 275 249 4,318 82 188 30 650 116 10 165 292 21 19 332 Total equity 1,226 860 1,075 4,135 318 Total liabilities and equity 3,701 5,062 5,702 8,452 650 (42) 971 338 (2,565) (197) 2.1% 2.1% Net debt(2) Total debt / Total capitalization(7) Adjusted debt(3) 9,014 11,969 14,360 14,961 1,150 Adjusted net debt(4) 8,337 11,528 13,538 11,987 921 Nota: (1) MXN amounts were converted to MXN/USD 13.019 as of Sep 30, 2013 (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) Financial information 2010-2012 audited; 2013 unaudited (6) Financial statements restated (7) Total Capitalization = Total Debt + Equity @ Market Value Source: Company data 25
Consolidated statements of cash flows summary Sept YTD 2013A Sept YTD 2013A(1) (USD millions) MXN millions unless otherwise stated(2) 2010A 2011A(3) 2012A Cash flow from operating activities Income (loss) before income tax Depreciation and amortization Guarantee deposits Unearned transportation revenue Changes in working capital and provisions 404 62 (316) 207 182 (315) 103 (801) 321 544 207 211 (311) 433 (43) 459 216 (368) 255 (128) 35 17 (28) 20 (10) 539 (148) 497 434 33 (321) (1215) (856) (743) (57) - 587 1043 719 55 (321) (628) 187 (24) (2) Cash flow from financing activities Legal costs incurred on behalf of shareholders Interest paid Payments of financial debt Proceeds from financial debt (76) (60) 46 (55) (261) 879 (127) (694) 550 (62) (1236) 3004 (5) (95) 231 Net cash flows (used in) provided by financing activities (90) 562 (272) 1706 131 Increase (decrease) in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 128 (25) 575 677 (213) (22) 677 441 412 (31) 441 822 2116 35 822 2974 163 3 63 229 Net cash flows provided by (used in) operating activities Cash flow from investing activities Acquisitions of rotable spare parts, furniture, equipment and intangible assets Proceeds from disposals of rotable spare parts, furniture and equipment Net cash flows (used in) provided by investing activities Notes: (1) MXN amounts were converted to USD at the rate MXN/USD13.0119 as of September 30, 2013 (2) Financial information 2010-2012 audited; 2013 unaudited (3) Financial statements restated Source: Company data 26
Adj. EBITDA and Adj. EBITDAR reconciliation MXN millions unless otherwise stated(2) 2010A 2011A(3) 2012A 3Q 2013A Sept YTD 2013A SEPT 2013 2013A(1) (USD millions) 643 (315) 204 253 362 28 52 (5) (239) 57 5 513 58 (6) 0 103 (160) 90 (14) 3 211 494 (84) 6 (69) 81 187 120 (19) 97 216 776 9 (1) 7 17 60 Exchange (gain) loss, net Other financing cost (income), net Adjusted EBITDA 56 3 573 (110) (270) 95 589 (26) 161 (46) 730 (4) 56 Aircraft and engines rent expense Adjusted EBITDAR 1,197 1,770 1,508 1,238 1,886 2,475 562 723 1592 2,322 122 178 Net income (loss) Plus (minus): Finance costs Finance income (Benefit)/provision for income taxes Depreciation and amortization Business alliance amortization EBITDA Notes: (1) MXN amounts were converted to USD at the rate of MXN/USD13.0119 as of September 30, 2013 (2) Financial information 2010-2012 audited; 2013 unaudited (3) Financial statements restated Source: Company data 27

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Volaris Corporate Presentation December 2013

  • 1.
  • 2.
    Disclaimer 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. 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. 2
  • 3.
    Third quarter 2013highlights and recent developments Strong balance sheet: Successful IPO of US$398 million in September 2013, cash of 23% of LTM revenues and net debt negative Demand stimulation and high passenger volume: Record load factor of 87.5% in 3Q Cost control: CASM decreased to Ps.113.9 cents (US$8.8 cents) in 3Q, lowest in the Americas Non-ticket revenue growth potential: Migration to new reservation system (Navitaire), new webpage and new baggage policy in October Expanding US presence: Phoenix and San Antonio launched in 4Q 3
  • 4.
    Volaris – aMexican Ultra-Low-Cost Carrier Lowest unit cost carrier in the Americas(1) 2008 Unit cost (CASM ex-fuel; cents, USD)(2) Passenger demand (RPMs, bn) Aircraft (End of Period) 5.5 2012 5.4 Volaris’ destinations CAGR -0.4% Fresno 3.2 7.7 +24.6% Chicago/Midway/O’Hare Sacramento San Francisco/Oakland San Jose Los Angeles San Diego Denver Las Vegas Mexicali Phoenix Tijuana Ciudad Juarez 21 41 Hermosillo San Antonio Chihuahua Ciudad Obregón Monterrey Los Mochis +18.2% La Paz Passengers (mm)(3) 3.5 7.4 +20.6% Operating revenue (mm, USD)(2) 397 887 +22.3% Adj. EBITDAR (mm. USD)(2) 67 188 +29.4% 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 Source: Company data, SCT-DGAC Orlando Culiacán Zacatecas San Luis Potosí Mazatlán León Aguascalientes Mérida Tepic Cancún Querétaro Guadalajara Morelia Puerto Vallarta Cd. de México/D.F. Colima Veracruz Toluca Puebla Manzanillo Uruapan Tuxtla Gutiérrez Acapulco Oaxaca Los Cabos Domestic market share (4) 12.2% 2008 20.5% 22.9% 2012 Sep-13 4
  • 5.
    Volaris’ low basefares stimulate demand and drive continuing growth 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 Lower base fares Lower cost Stimulation of demand Resilient ULCC business model driving high, profitable growth More ancillary revenue More capacity Source: Company data 5
  • 6.
    Volaris has abest-in-class unit cost structure Lowest unit cost in the Americas(1) CASM and CASM ex-fuel (LTM Sep 2013, USD cents)(3) 15.5 14.8 14.2 13.2 5.5 5.1 5.0 10.9 10.2 4.8 5.4 9.3 10 4.0 4.2 3.7 10.0 9.7 7.8 5.6 Volaris Denotes fuel cost per ASM Latam Aeroméxico Gol Latin American Carriers 9.2 6.7 Copa 5.4 6.0 Allegiant Spirit 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 DCOMPS US Network Carriers(2) 6
  • 7.
    Focus on fleetutilization and efficiency drives higher revenue and lower cost High density configuration(3) Load factor Implied passengers (as of Sept 2013) per aircraft(1) Volaris A320 174 seats per aircraft 84% 77% 123 Interjet Interjet A320 150 seats per aircraft 146 Aeroméxico Aeroméxico 737-800 160 seats per aircraft 75% 113 High daily utilization(2) Block hours per day (1H13) 12.2 Young, fuel efficient fleet (3) Average age (Yrs, Sep 2013) 12.0 10.6 11.3 9.5 8.8 9.2 8.1 6.7 4.2 YTD Sep13A 1H13 Aeroméxico(3)Interjet (3) Global A320 Global A319 Mexican Average Aeroméxico Interjet 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) Aeroméxico and Interjet represent domestic competitors of Volaris Source: Company data, airlines public information, DGAC, Airbus, DIIO MI 7
  • 8.
    Unbundled model drivesVolaris’ low base fares Unbundling and a low cost structure support Volaris’ low base fares… …stimulating demand and increasing load factor… …resulting in higher ancillary and stronger overall revenue growth Average base fare (USD)(1,2) Load factor TRASM (US cents) (2) 2009 – 2012 Change: +12.0 pp 179 178 2009 – 2012 Change: +28.4% 83% 171 9.7 7.6 137 113 71% 109 104 100 2009 – 2012 Change: +4.0% 2009 2010 2011 2012 2009 2012 2009 2012 Aeroméxico Notes: (1) Average fare calculated as passenger revenue divided by number of booked passengers (2) Converted using an average annual MXN/USD exchange rate Source: Company data, Aeromexico public information 8
  • 9.
    Low costs andlow base fares – a significant competitive advantage Breakeven fare (LTM Sep 2013) USD(3,4) % Above Volaris +126% +92% +78% +72% +54% $226 $154 $178 $172 $192 $100 Volaris (1) Alaska (1) Aeroméxico Delta American Notes: (1) Converted using an average annual MXN/USD exchange rate (2) Average Stage Length calculated as (Total miles flown / Number of flights) during LTM 3Q13 (3) Breakeven fare calculated as ((Average stage length * (CASM – Ancillary revenue (or Other revenue) per ASM)) / 100)/(Load factor /100) (4) Group of airlines represent domestic and international competitors of Volaris Source: Company data, Airlines public information, TheAirlineAnalyst. DIIO MI, MIT ADP United 9
  • 10.
    Bus passenger shiftto air travel Significant upside for air travel Total bus trips (mm) Air travel time and cost savings Total air travel trips (mm) Mexico City – Tijuana Travel time (Hrs) 2,758 Fare (USD)(2) 135 40.5 36.5 hours less 15% cost savings 2,683 114 4.0 57 74 28 Bus 74 2012 Bus (1) Volaris 29 2012 Air Executive & luxury First, economy & other • Mexico is almost three times the size of the state of Texas International Domestic • The distance between Tijuana and Cancún is similar to the distance between New York City and San Francisco Notes: (1) Executive and luxury class (2) MXN amounts were converted to USD at the rate of MXN/USD 13.0235 as of June 30, 2013 Source: Company data, Secretaría de Comunicaciones y Transportes (SCT) 10
  • 11.
    Rapidly expanding sharein core markets Stimulation of growth through our ULCC model Passenger volume growth: 2011 vs. 2012 Volaris focus cities – Domestic market 2x 6x 2x International market 5x 2x 13x 4x 65% 186% 147% 45% 33% 7% 15% Tijuana 25% 69% 38% 13% 6% Guadalajara Cancun Mexico City Airport 46% 11% Morelia Mexico City Aguascalientes Volaris A significant portion of our capacity faces no competition Percentage of Volaris’ domestic capacity(1) competing with: 73% 55% 35% 22% Aeroméxico Interjet Vivaaerobús Non-competed Notes: (1) Offered seats for 4Q 2013 Source: SCT-DGAC, DIIO MI 11
  • 12.
    Unbundled strategy: “Túdecides” – You decide Pre-flight Flight planning At the airport • V-Club subscription • Seat assignment • Excess baggage • Co-branded credit cards • Change / booking fees • Priority boarding • V-Shop • Insurance • Strollers Onboard aircraft • Advertising • Food and beverage(1) Post-flight • Hotel rooms • Car rentals • Airport shuttle Notes: (1) In process of implementation Source: Company data 12
  • 13.
    Acceleration of Volaris’non-ticket revenues Increased contribution of non-ticket revenue to the top line 2009 – 2012 CAGR: +68.6% Non-ticket revenue (USD mm)(1) 200 149 150 115 100 50 68 39 24 0 Contribution to Operating Revenue 2009 2010 2011 2012 LTM Sep 13 7% 7% 9% 13% 15% Non-ticket revenue per passenger Best-in class US LCCs (LTM Sep13, USD) Volaris (USD)(1) 53 +35.5% 46 2009 – 2011 CAGR: +27.6% 7.0 8.9 11.4 2009 2010 2011 Notes: (1) Converted using an average annual MXN/USD exchange rate Source: Company data, Airlines public information 15.5 17.3 2012 LTM Sep 13 Allegiant Spirit 13
  • 14.
    Volaris’ revenue strategydelivers a resilient and defensible network Strong foothold in competing markets Volaris domestic market share(1) Domestic market share in top Volaris’ cities(2) Tijuana Vivaaerobús Interjet 1% 12% Aeroméxico 14% 35% 23% Volaris 73% Guadalajara Total Others 13% Volaris' routes Volaris 38% Interjet 22% Aeroméxico 27% Volaris international market share (Mexico – US)(1) Cancún 39% Interjet 23% 8% Total Notes: (1) Passengers for September 2013 (2) Seats, September 2013 Source: SCT-DGAC, DIIO MI Others 21% Volaris' routes Mexico City Others 10% Interjet 32% Volaris 30% Aeroméxico 26% Volaris 14% Aeroméxico 44% 14
  • 15.
    Substantial growth opportunityin the US-Mexico VFR / leisure travel market San Francisco 0.7mm Bakersfield 0.4mm Sacramento 0.3mm Fresno 0.5mm Las Vegas 0.4mm San Jose 0.4mm Albuquerque 0.2mm Phoenix 1.2mm Los Angeles 4.6mm Tucson 0.3mm San Diego 0.9mm San Bernardino 1.7mm Chicago 1.5mm Denver 0.5mm Austin 0.4mm El Paso 0.6mm Washington 0.1mm Dallas 1.5mm San Antonio 0.9mm New York 0.5mm Philadelphia 0.1mm Atlanta 0.3mm Houston 1.5mm Mission 0.6mm Orlando 0.1mm Tampa 0.1mm San Benito 0.3mm Denotes Volaris presence(1) Denotes other cities with large Mexican origin populations(1,2) 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 Significant Mexican origin population(2) of 33.5 million in the US 15
  • 16.
    Attractive growth opportunitiesin Mexico and throughout the Americas Domestic – growth potential of nearly 180 routes International – growth potential of about 150 routes Number of routes(1) Number of routes(2) 100 90 90 80 80 70 70 60 99 100 60 50 48 48 41 40 48 50 40 38 40 32 30 20 30 13 13 13 20 10 10 0 0 USA (Leisure) Routes served (3) USA (VFR) CAM, SAM, Canada, Caribbean Growth potential 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 16
  • 17.
  • 18.
    A higher densityfleet generates more incremental capacity with fewer additional aircraft Projected fleet under current contracts (number of aircraft)(1) A320 A319 2012-2020E Growth: +68% XXX 69 44 41 24 47 20 XXX 18 51 17 50 12 50 57 9 49 2 29 39 41 24 33 17 2012 2013E 2014E 2015E 2016E 2017E 57 47 2018E 2019E 69 2020E Projected capacity in number of seats (end of period; 000s)(2) A320 A319 2012-2020E Growth: +87% XXX 12.0 9.9 XXX 6.4 3.5 7.1 2.9 7.6 8.2 8.5 1.7 2.6 2.4 8.4 1.3 8.5 0.3 9.9 12.0 7.1 3.0 Average capacity per aircraft (seats) 5.7 8.2 5.0 6.8 4.2 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 156 160 163 164 167 169 173 174 174 Notes: (1) Net fleet after additions and returns (2) Assumes that all A319 aircraft have 144 seats and all A320 aircraft have 174 seats Sources: Company information 18
  • 19.
    Leading financial performanceon strong revenue growth Revenue(1) Adj. EBITDAR(1) 300 1,200 1,023 714 800 536 600 400 239 250 887 (USD mm) (USD mm) 1,000 374 200 188 200 150 140 117 100 100 50 0 0 2009 2010 2011 2012 LTM Sep 13 2009 Revenue CAGR 2009 - 2012 2010 2011 2012 LTM Sep 13 LTM Sep 2013 Adj. EBITDAR margin 40% 30% 27.0% 33.4% 23.4% 30% 20% 21.5% 16.4% 20% 13.2% 11.1% 10% 0% 9.6% 10% 0% Volaris Copa Latam Gol Copa Aeroméxico Gol Note: (1) Converted using an average MXN/USD exchange rate for the corresponding period Source: Company data, airlines public information 19
  • 20.
    Poised for futurevalue creation Sep YTD Sep YTD ‘12 ‘13 Change (YoY) Continue growth in available seats with a highly efficient fleet • Switch from A319 to A320 TRASM (cents, USD) (1) 9.5 9.7 3% • Sharklet and NEO technology • Maintain high utilization CASM (cents, USD) (1) 9.2 9.2 0% Operating revenue (mm, USD) (1) 640 774 21% Adj. EBITDAR (mm, USD) (1) 132 183 39% Adj. EBITDAR margin 21% 24% 3pp Continue growth in our non-ticket revenues Maintain cost discipline Continue to align employee incentives Focus on shareholder return Notes; (1) MXN amounts were converted to USD at the avg. rate of MXN/USD 13.24 as of Sep 30 2012 and at the avg. rate of MXN/USD 12.68 as of Sep 30, 2013 Source: Company data 20
  • 21.
    Balance sheet wellpositioned for growth • IPO provided sufficient liquidity / capital LTM Sep 2013 Liquidity – Cash and Equivalents / Op. Revenue for growth over the next years 38.8% • Minimal on-balance sheet debt • $31mm(1) of debt after the IPO and 29.8% debt payment 22.8% • Strong cash position • $229mm of cash and equivalents as of September 2013 7.7% • Fully financed fleet order through the second quarter of 2016 Copa Gol Latam Note: (1) Principal + interest debt Source: Company data, Airlines public information 21
  • 22.
  • 23.
    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. 23
  • 24.
    Consolidated statements ofoperations summary MXN millions unless otherwise stated(2) 2010A 2011A(3) 2012A 3Q 2013A September September YTD YTD 2013A 2013A(1) (USD millions) 8,385 644 1434 110 9,819 755 % of total operating revenues Passenger Non-ticket Total operating revenues 6,278 499 6,777 8,036 842 8,878 10,177 1,510 11,687 3,219 502.871 3,722 Fuel Aircraft and engines rent expense Salaries and benefits Landing, take off and navigation expenses Sales, marketing and distribution expenses Maintenance expenses Other operating expense Depreciation and amortization Total operating expenses 2,146 1,197 852 868 615 276 255 57 6,266 3,823 1,508 1,120 1,282 750 380 285 103 9,251 4,730 1,886 1,303 1,640 752 499 288 211 11,309 1,400 562 397 498 179 138 93 81 3,348 3,716 1,592 1144 1417 525 430 264 216 9,305 286 122 88 109 40 33 20 17 715 37.8 16.2 11.6 14.4 5.4 4.4 2.7 2.2 94.8 EBIT Operating margin (%) 511 7.5 (373) (4.2) 378 3.2 374 10.0 514 5.2 40 5.2 5.2 Finance income Finance cost Exchange (loss) gain, net Taxes on profits 5 (56) (56) 239 6 (58) 110 0 14 (90) (95) (3) 7 (84) 26 (69) 19 (120) 46 (97) 1 (9) 4 (7) 0.2 (1.2) 0.5 (1.0) Net income (loss) Net margin (%) Net income (loss) excluding special items (4) 643 9.5 643 (315) (3.6) (315) 203 1.7 203 254 6.8 320 362 3.7 428 28 3.7 33 3.7 1,770 26.1 1,238 13.9 2,475 21.2 1016 27.3 2,322 23.7 178 23.7 23.7 Adjusted EBITDAR Adj. EBITDAR margin (%) EPS Basic (cents) 30.2 44.4 301.6 444.2 4.4 3.4 EPADS Basic (cents) 85.4 14.6 100.0 34.1 Notes: (1) MXN amounts were converted to USD at the rate of MXN/USD 13.0119 as of Sep 30, 2013 (2) Financial information 2010-2012 audited; 2013 unaudited (3) Financial statements restated (4) Special items includes debt prepayment penalty by Ps.65 million Source: Company data 24
  • 25.
    Consolidated statements offinancial position summary MXN millions unless otherwise stated(5) 2010A 2011A(6) 2012A(6) September 2013 A September 2013A Cash and cash equivalents Current guarantee deposits Other current assets Total current assets 677 330 390 1,397 441 170 520 1,131 822 238 755 1,815 2,974 406 1,176 4,555 (USD millions) 229 31 90 350 Rotable spare parts, furniture and equipment, net Non-current guarantee deposits Other non-current assets Total assets Unearned transportation revenue Short-term financial debt Other short-term liabilities Total short-term liabilities Long-term financial debt Other long-term liabilities Total liabilities 921 1,041 342 3,701 505 251 1,171 1,927 384 164 2,475 1,517 2,002 412 5,062 825 687 1,667 3,179 725 298 4,202 1,195 2,245 447 5,702 1,259 527 1,936 3,722 633 272 4,627 1,062 2,445 390 8,452 1,513 134 2,146 3,794 275 249 4,318 82 188 30 650 116 10 165 292 21 19 332 Total equity 1,226 860 1,075 4,135 318 Total liabilities and equity 3,701 5,062 5,702 8,452 650 (42) 971 338 (2,565) (197) 2.1% 2.1% Net debt(2) Total debt / Total capitalization(7) Adjusted debt(3) 9,014 11,969 14,360 14,961 1,150 Adjusted net debt(4) 8,337 11,528 13,538 11,987 921 Nota: (1) MXN amounts were converted to MXN/USD 13.019 as of Sep 30, 2013 (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) Financial information 2010-2012 audited; 2013 unaudited (6) Financial statements restated (7) Total Capitalization = Total Debt + Equity @ Market Value Source: Company data 25
  • 26.
    Consolidated statements ofcash flows summary Sept YTD 2013A Sept YTD 2013A(1) (USD millions) MXN millions unless otherwise stated(2) 2010A 2011A(3) 2012A Cash flow from operating activities Income (loss) before income tax Depreciation and amortization Guarantee deposits Unearned transportation revenue Changes in working capital and provisions 404 62 (316) 207 182 (315) 103 (801) 321 544 207 211 (311) 433 (43) 459 216 (368) 255 (128) 35 17 (28) 20 (10) 539 (148) 497 434 33 (321) (1215) (856) (743) (57) - 587 1043 719 55 (321) (628) 187 (24) (2) Cash flow from financing activities Legal costs incurred on behalf of shareholders Interest paid Payments of financial debt Proceeds from financial debt (76) (60) 46 (55) (261) 879 (127) (694) 550 (62) (1236) 3004 (5) (95) 231 Net cash flows (used in) provided by financing activities (90) 562 (272) 1706 131 Increase (decrease) in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 128 (25) 575 677 (213) (22) 677 441 412 (31) 441 822 2116 35 822 2974 163 3 63 229 Net cash flows provided by (used in) operating activities Cash flow from investing activities Acquisitions of rotable spare parts, furniture, equipment and intangible assets Proceeds from disposals of rotable spare parts, furniture and equipment Net cash flows (used in) provided by investing activities Notes: (1) MXN amounts were converted to USD at the rate MXN/USD13.0119 as of September 30, 2013 (2) Financial information 2010-2012 audited; 2013 unaudited (3) Financial statements restated Source: Company data 26
  • 27.
    Adj. EBITDA andAdj. EBITDAR reconciliation MXN millions unless otherwise stated(2) 2010A 2011A(3) 2012A 3Q 2013A Sept YTD 2013A SEPT 2013 2013A(1) (USD millions) 643 (315) 204 253 362 28 52 (5) (239) 57 5 513 58 (6) 0 103 (160) 90 (14) 3 211 494 (84) 6 (69) 81 187 120 (19) 97 216 776 9 (1) 7 17 60 Exchange (gain) loss, net Other financing cost (income), net Adjusted EBITDA 56 3 573 (110) (270) 95 589 (26) 161 (46) 730 (4) 56 Aircraft and engines rent expense Adjusted EBITDAR 1,197 1,770 1,508 1,238 1,886 2,475 562 723 1592 2,322 122 178 Net income (loss) Plus (minus): Finance costs Finance income (Benefit)/provision for income taxes Depreciation and amortization Business alliance amortization EBITDA Notes: (1) MXN amounts were converted to USD at the rate of MXN/USD13.0119 as of September 30, 2013 (2) Financial information 2010-2012 audited; 2013 unaudited (3) Financial statements restated Source: Company data 27