Volaris Reports First Quarter 2014 Results: Improving Operational Efficiency in a Challenging Revenue Environment

MEXICO CITY, April 29, 2014 /PRNewswire/ -- Volaris* (NYSE: VLRS and BMV: VOLAR), the ultra-low-cost airline serving Mexico and the US, today announced its financial results for the first quarter 2014.

First Quarter 2014 Highlights

The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS). Unless otherwise stated, all comparisons with prior periods refer to the first quarter of 2013.

  • Total operating revenues were Ps.2,775 million for the first quarter, a decrease of 9%, reflecting a challenging macroeconomic and pricing environment, as well as a seasonal impact. Holy week, one of the most active travel weeks in Mexico, happened in April of 2014, as opposed to March of 2013.
  • Non-ticket revenues increased 9%, reaching Ps.514 million. Non-ticket revenues excluding cargo per passenger increased 10%, reaching Ps.208 (US$16), in line with our ancillary revenue generation strategy.
  • Total operating revenue per available seat mile (TRASM) decreased to Ps.101.2 cents (US$7.7 cents), an 18% decrease year over year.
  • Operating expenses per available seat mile (CASM) decreased to Ps.119.0 cents (US$9.1 cents), a 3% decrease year over year. CASM excluding fuel decreased 2%, reaching Ps.72.1 cents (US$5.5 cents), reflecting firm cost control.
  • Adjusted EBITDAR was Ps.162 million with a net loss of Ps.370 million (Ps.0.37 cents per share / US$0.28 cents per ADS).
  • We continued to build our markets, as we booked 10% more passengers in the quarter compared to the first quarter of 2013, operated at an 81% load factor, and advanced our product unbundling strategy of growing non-ticket revenues. Aircraft utilization increased to 12.4 block hours per day.

Volaris CEO Enrique Beltranena commented: "In the first quarter of 2014, market conditions were very difficult. While I am disappointed in the quarter's financial results, we responded well to the challenges. We managed capacity and pricing in a responsible way, reaffirmed our cost control discipline and grew non-ticket revenues. The entire team remains sharply focused on driving significant long term value growth and financial success, by firmly executing our Volaris ULCC model.

  • Sluggish Mexican economic growth resulted in a very competitive pricing environment. We have responded and will continue to do so by incisively managing capacity, pricing and load factor while maintaining market share.
  • Consistent with our point-to-point, core "Visiting Friends and Relatives" (VFR) traffic and bus switching strategy, we will maintain our effort to manage the fare environment, affected by macroeconomic conditions and competitive pricing, without jeopardizing the healthy market demand, in particular driven by travelers that already have and can continue to switch from buses to air travel.
  • The Volaris ULCC model's strength was demonstrated in a challenging quarter by substantial growth of non-ticket revenues, by expanding our ancillary product offering and increasing customer acceptance.
  • We continued to reduce unit costs further and maintain our leadership as the lowest unit cost operator in the Americas. Our leading CASM positions us well in both the domestic Mexico market and cross border into the US."

A Challenging Macroeconomic Environment in the First Quarter …

  • Slower Mexican economic growth and weak demand:
    • GDP growth estimates for the full year have been revised downward again to 3.1%, according to the Mexican Central Bank survey.
    • Consumer confidence decreased 11% year over year in the first quarter of 2014.
    • The Mexican General Economic Activity Indicator (IGAE) increase was only 1.0% and 1.7% in January and February of 2014, respectively, compared to the same periods in 2013.
    • Same store sales from the Mexican National Association of Supermarkets and Department Stores (ANTAD) decreased 1.7%, 0.2% and 2.4% in January, February and March, respectively, compared to the same periods in 2013.
  • Exchange rate volatility: The Mexican peso depreciated 4.6% year over year against the US dollar, as the exchange rate devalued from an average of Ps.12.66 pesos per US dollar in the first quarter of 2013 to Ps.13.23 pesos per US dollar during the first quarter of 2014.
  • Fuel costs decrease: The average economic fuel cost per gallon decreased 0.7% year over year in the first quarter of 2014.

… but the Volaris ULCC Model Further Strengthened

  • Air traffic volume increases: Among Mexican carriers, Volaris generated 26% of the passenger volume growth in January and February 2014 and increased market share to 23% in both domestic and international markets, remaining the second largest operator among Mexican carriers, according to the Mexican DGAC (Direccion General de Aeronautica Civil). The DGAC reported an overall passenger increase for Mexican carriers of 12% for the same period.
  • New routes and operations: During the first quarter, Volaris launched 8 new point-to-point routes from Monterrey, focusing on our VFR customer base. Total departures increased 7% year over year.
  • Non-ticket revenues expansion: After the launch of our new ancillary revenue platform in the fourth quarter 2013, our non-ticket revenue strategy continued to develop during the first quarter 2014, as the new baggage policy and the retail on-board program has been rolled-out and the entire ancillary suite has expanded and gained greater customer acceptance. Non-ticket revenues excluding cargo per passenger increased 10% year over year.
  • Bus switching offerings and initiatives designed to attract bus passengers to Volaris, were further developed and implemented.
  • Disciplined capacity management was implemented network-wide, in particular in the domestic market (Tijuana and Guadalajara bases).

First Quarter Operating Revenues: Slower Mexican Economy, Tough Year Over Year Comps

Volaris booked 2.2 million passengers in the first quarter 2014. This equates to a 10% growth rate in the first quarter 2014 as compared to the first quarter in 2013, even though Holy week occurred in April this year.

Volaris traffic (measured in terms of revenue passenger miles or RPMs) increased 11% in the first quarter 2014 year over year.

While the increase in passenger volume and improving RPMs highlight our growth in the market, the weak Mexican economy and competitive pricing environment resulted in a weak fare environment. In response to these market conditions, we elected to modulate our ASM growth in the period to 11% year over year, and even reducing by 7% versus the fourth quarter 2013.

For the first quarter 2014, Volaris' total operating revenues were Ps.2,775 million, a decrease of 9.3% year over year. Average fare decreased 20.7% in the first quarter 2014 year over year.

During the first quarter 2014, our non-ticket revenues and non-ticket revenues per passenger reached Ps.514 million and Ps.238, respectively. Non-ticket revenue excluding cargo per passenger increased 10% in the first quarter year over year.

Passenger revenue per available seat mile (RASM) was 21% lower compared to the first quarter 2013, and total operating revenue per available seat mile (TRASM) was 18% lower, resulting from a weak fare environment.

Continued Cost Discipline Strengthens "Lowest Cost Operator in the Americas" Position

CASM for the first quarter 2014 was Ps.119.0 cents (US$9.1 cents), a 2.6% reduction compared to the first quarter of 2013, primarily driven by efficiency benefits and sustained cost control discipline. CASM excluding fuel also decreased 2.3% year over year to Ps.72.1 cents (US$5.5 cents) in the first quarter 2014 and we remain the lowest CASM operator in the Americas.

Reflecting our strategy to further reduce unit costs, Volaris has continued to take deliveries of larger sharklet-equipped A320 aircraft, bringing our seat mix of A320/A319 to a 59/41 percent split.

We further reduced sales, marketing and distribution expenses to 5.7% as percent of total operating revenues, mainly due to our reservations system change.

Strong Balance Sheet and Liquidity Supports Strategy and Plans for 2014 and Beyond

As of March 31, 2014, Volaris had Ps.2,240 million in unrestricted cash and cash equivalents. The Company recorded negative net debt (or a positive net cash position) of Ps.1,573 million and total equity was Ps.3,593 million.

During the first quarter 2014, Volaris incurred capital expenditures of Ps.228 million, which included pre-delivery payments for future deliveries of aircraft net of refunds of Ps.83 million and acquisitions of rotable spare parts, furniture and equipment of Ps.145 million.

Young and Fuel Efficient Fleet Underpins Long Term Growth/Increasing Cost Efficiency

As of March 31, 2014, the Company´s fleet was comprised of 46 aircraft (27 A320s and 19 A319s), with an average age of 4.0 years. During the first quarter of 2014 Volaris received three new sharklet-equipped A320s and returned one vintage A319.

Investors are urged to read carefully the Company's periodic reports filed with or furnished to the Securities and Exchange Commission, for additional information regarding the Company.

Conference Call/Webcast Details:

Volaris will conduct a conference call to discuss these results tomorrow, April 29, 2014, at 11:00 a.m. ET. A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.volaris.com  

About Volaris:

Controladora Vuela Compania de Aviacion, S.A.B. de C.V. ("Volaris" or the "Company") (NYSE: VLRS and BMV: VOLAR), is an ultra-low-cost carrier (ULCC), with "point to point" service, serving Mexico and the US. Volaris offers low base fares to build its market, providing quality service and extensive customer choice. Since beginning operations in March 2006, Volaris has increased its routes from five to more than 100 and its fleet from four to 46 aircraft. Volaris offers more than 200 daily flight segments on routes that connect 33 cities in Mexico and 13 cities in the United States with the youngest aircraft fleet in Mexico. Volaris targets passengers who are visiting friends and relatives, cost-conscious business people and leisure travelers in Mexico and to select destinations in the United States. Volaris has received the ESR Award for Social Corporate Responsibility for three consecutive years.

For more information, please visit: www.volaris.com

Forward-looking Statements:

Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. When used in this release, the words "expects," "estimates," "plans," "anticipates," "indicates," "believes," "forecast," "guidance," "outlook," "may," "will," "should," "seeks," "targets" and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals, or actions the Company may take in the future, are forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the delivery schedule of aircraft on order, announced new service routes and customer savings programs. All forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations, including the competitive environment in the airline industry; the Company's ability to keep costs low; changes in fuel costs; the impact of worldwide economic conditions on customer travel behavior; the Company's ability to generate non-ticket revenues; and government regulation. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings.

Investor Relations Contact:
Andres Pliego / Investor Relations / ir@volaris.com / +52 55 5261 6444

Media Contact:
Jimena Llano / jimena.llano@volaris.com / +52 1 55 4577 0857

 

Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries
Financial and Operating Indicators


Unaudited
(In Mexican pesos, except otherwise indicated)

Three months ended
March 31, 2014
(US Dollars)*

Three months ended March 31, 2014

Three months ended March 31, 2013

Var
(%)

Total operating revenues (millions)

212

2,775

3,062

(9.3%)

Total operating expenses (millions)

249

3,263

3,024

7.9%

EBIT (millions)

(37)

(488)

38

NA

EBIT margin

(17.6%)

(17.6%)

1.2%

(18.8) pp

Adjusted EBITDA (millions)

(33)

(430)

119

NA

Adjusted EBITDA margin

(15.5%)

(15.5%)

3.9%

(19.4) pp

Adjusted EBITDAR (millions)

12

162

634

(74.4%)

Adjusted EBITDAR margin

5.9%

5.9%

20.7%

(14.8) pp

Net loss (millions)

(28)

(370)

(65)

>100%

Net margin

(13.3%)

(13.3%)

(2.1%)

(11.2) pp

Earnings per share:





Basic (cents)

-

(0.37)

(0.08)

>100%

Diluted (cents)

-

(0.37)

(0.08)

>100%

Earnings per ADS:





Basic (cents)

(0.28)

(3.66)

(0.78)

>100%

Diluted (cents)

(0.28)

(3.66)

(0.78)

>100%

Weighted average shares outstanding:





Basic

-

1,011,876,677

796,916,380**

27.0%

Diluted

-

1,011,876,677

796,916,380**

27.0%

Available seat miles (ASMs) (millions)

-

2,742

2,475

10.8%

Revenue passenger miles (RPMs) (millions)

-

2,214

2,000

10.7%

Load factor

-

80.7%

80.8%

(0.1)pp

Total operating revenue per ASM (TRASM) (cents)

7.7

101.2

123.7

(18.2%)

Passenger revenue per ASM (RASM) (cents)

6.3

82.5

104.5

(21.1%)

Passenger revenue per RPM (yield) (cents)

7.8

102.1

129.4

(21.0%)

Average fare

80.0

1,046

1,320

(20.7%)

Non-ticket revenue per passenger

18.2

238

242

(1.6%)

Non-ticket revenue excluding cargo per passenger

15.9

208

190

9.8%

Operating expenses per ASM (CASM) (cents)

9.1

119.0

122.2

(2.6%)

CASM ex fuel (cents)

5.5

72.1

73.7

(2.3%)

Booked passengers (thousands)

-

2,161

1,961

10.2%

Departures

-

16,823

15,699

7.2%

Block hours

-

45,250

42,232

7.1%

Fuel gallons consumed (millions)

-

31.6

29.2

8.2%

Average economic fuel cost per gallon

3.1

40.8

41.1

(0.7%)

Aircraft at end of period

-

46

43

7.0%

Average aircraft utilization (block hours)

-

12.4

11.9

4.9%

Average exchange rate

-

13.23

12.66

4.6%

*Peso amounts were converted to US dollars at the rate of Ps.13.0837 for convenience purposes only.

**Per share amounts reflect the retrospective application of the stock split adopted on June 11, 2013.

 

Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Operations


Unaudited
(In millions of Mexican pesos)

Three months ended March 31, 2014
(US Dollars)*

Three months ended March 31, 2014

Three months ended March 31, 2013

Var
 (%)

Operating revenues:





Passenger

173

2,261

2,588

(12.6%)

Non-ticket

39

514

474

8.5%


212

2,775

3,062

(9.3%)






Other operating income

-

(4)

(24)

(84.6%)

Fuel

98

1,287

1,199

7.4%

Aircraft and engine rent expense

45

593

514

15.3%

Salaries and benefits

30

389

363

7.2%

Landing, take-off and navigation expenses

40

520

461

12.8%

Sales, marketing and distribution expenses

12

158

187

(15.5%)

Maintenance expenses

12

159

141

12.2%

Other operating expenses

8

105

102

2.4%

Depreciation and amortization

4

58

81

(29.0%)

Operating expenses

249

3,263

3,024

7.9%






Operating (loss) income

(37)

(488)

38

NA






Finance income

-

5

4

12.4%

Finance cost

-

(5)

(18)

(70.8%)

Exchange gain (loss), net

1

11

(108)

NA

Comprehensive financing result

1

11

(122)

NA






Loss before income tax

(36)

(477)

(84)

>100%

Income tax benefit

8

107

19

>100%

Net loss

(28)

(370)

(65)

>100%






Attribution of net loss:





Equity holders of the parent

(28)

(370)

(62)

>100%

Non-controlling interest

-

-

(2)

NA

Net loss

(28)

(370)

(65)

>100%

*Peso amounts were converted to US dollars at the rate of Ps.13.0837 for convenience purposes only.

 

Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Financial Position


(In millions of Mexican pesos)

March 31, 2014
Unaudited

March 31, 2014
Unaudited

December 31, 2013
Audited

(US Dollars)*

Assets




Cash and cash equivalents

171

2,240

2,451

Accounts receivable

51

671

602

Inventories

9

123

114

Prepaid expenses and other current assets

26

338

323

Financial instruments

-

2

11

Guarantee deposits

39

512

499

Total current assets

297

3,886

4,000

Rotable spare parts, furniture and equipment, net

116

1,520

1,341

Intangible assets, net

6

73

79

Deferred income tax

32

416

305

Guarantee deposits

210

2,750

2,603

Other assets

4

58

49

Total assets

665

8,702

8,378

Liabilities




Unearned transportation revenue

138

1,804

1,393

Accounts payable

39

508

537

Accrued liabilities

74

974

1,033

Taxes and fees payable

67

876

599

Financial instruments

2

31

32

Financial debt

10

136

268

Other liabilities

1

12

9

Total short-term liabilities

332

4,340

3,872

Financial instruments

5

66

74

Financial debt

41

531

294

Accrued liabilities

10

130

138

Other liabilities

1

12

11

Employee benefits

-

6

5

Deferred income taxes

2

24

22

Total liabilities

390

5,109

4,415

Equity




Capital stock

227

2,974

2,974

Treasury shares

(8)

(108)

(108)

Contributions for future capital increases

-

-

-

Legal reserve

3

38

38

Additional paid-in capital

136

1,786

1,786

Accumulated losses

(79)

(1,031)

(661)

Accumulated other comprehensive losses

(5)

(66)

(66)

Total equity attributable to equity holders of the parent

275

3,593

3,962

Non-controlling interest

-

-

-

Total equity

275

3,593

3,962

Total liabilities and equity

665

8,702

8,378





Total shares outstanding basic and diluted


1,011,876,677

1,011,876,677

*Peso amounts were converted to US dollars at the rate of Ps.13.0837 for convenience purposes only.







 

Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Cash Flows – Cash Flow Data


Unaudited
(In millions of Mexican pesos)

Three months ended

March 31, 2014
(US Dollars)*

Three months ended

March 31, 2014

Three months ended

March 31, 2013





Net cash flow (used in) provided by operating activities

(7)

(86)

272

Net cash flow (used in) provided by investing activities

(17)

(227)

62

Net cash flow provided by (used in) financing activities

8

99

(204)

(Decrease) increase in cash and cash equivalents

(16)

(215)

129

Net foreign exchange differences

-

4

(25)

Cash and cash equivalents at beginning of period

187

2,451

822

Cash and cash equivalents at end of period

171

2,240

926

*Peso amounts were converted to US dollars at the rate of Ps.13.0837 for convenience purposes only.

 

SOURCE Volaris



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