Volaris Reports Second Quarter 2014 Results: Disciplined Capacity Management and Record Non-Ticket Revenue per Passenger

MEXICO CITY, July 28, 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 second quarter 2014.

Second 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 second quarter of 2013.

  • Total operating revenues were Ps.3,308 million for the second quarter, an increase of 9%, due to a seasonally stronger second quarter and non-ticket revenue growth.
  • Non-ticket revenues increased 44%, reaching Ps.659 million. Non-ticket revenue per passenger increased 26%, reaching Ps.275 (US$21), an important step forward in achieving our product unbundling strategy.
  • Total operating revenue per available seat mile (TRASM) decreased to Ps.113.2 cents (US$8.7 cents), a 5% decrease.
  • Operating expenses per available seat mile (CASM) excluding fuel decreased 1%, reaching Ps.70.4 cents (US$5.4 cents), reflecting Volaris' constant sharp focus on cost control.
  • Adjusted EBITDAR was Ps.595 million with a net loss of Ps.75 million (Ps.0.07 per share / US$0.06 per ADS).

Volaris CEO Enrique Beltranena commented: "In the second quarter of 2014, fare and demand environment showed early signs of stabilization and then gradual recovery from the challenging fourth quarter 2013 and first quarter 2014 market conditions. The Volaris team turned around our key performance indicators throughout the most difficult months of the last years, resulting in an improvement compared to the first quarter. We consciously managed ASM capacity both, in terms of quantity and quality. Volaris delivered a monthly sequential improvement in total unit revenues. Capacity growth was controlled and redeployed where needed. Such improvement is uncommon in the aviation industry in such short timeframe. We are cautiously encouraged by the recent trends, and continue to see evidence of improvement in the economic environment and in our business performance going forward."

An Improving, But Still Fragile, Macroeconomic Environment and Competitive Landscape Contribute to the Beginning of a Turnaround in the Second Quarter

  • The Mexican macroeconomic environment:
    • GDP growth estimates for the full year are 2.6%, according to the Mexican Central Bank survey from June 2014.
    • Consumer confidence decreased 2.4% year over year in June of 2014.
    • The Mexican General Economic Activity Indicator (IGAE) increased 1.4% in May of 2014 compared to the same period in 2013.
  • Mexican peso volatility: The Mexican peso depreciated 4.3% year over year against the US dollar, as the exchange rate devalued from an average of Ps.12.46 pesos per US dollar in the second quarter of 2013 to Ps.13.00 pesos per US dollar during the second quarter of 2014.
  • Fuel costs increase: The average economic fuel cost per gallon increased 6.5% year over year in the second quarter of 2014.

The Volaris ULCC Model Drives Progress in a Slightly Improved Market Environment

  • Unit revenue improvement: Quarter-over-quarter TRASM improved 12% as a result of a sequential monthly improvement average base fare and non-ticket revenue per passenger growth.
  • Rational capacity management in the domestic market and redeployment to the international market: Domestic market capacity grew 12% and international market capacity increased 25% in the second quarter year over year, coupled with network diversification.
  • Non-ticket revenues growth: Non-ticket revenues excluding cargo per passenger increased 46% year over year. Our non-ticket revenues strategy continued to unfold during the second quarter 2014, as the new baggage policy and the retail on-board program was rolled-out and the entire ancillary suite expanded and gained greater customer acceptance.
  • Air traffic volume increase: The DGAC (Direccion General de Aeronautica Civil) reported an overall passenger increase for Mexican carriers of 12% for the first five months of 2014 and Volaris market share remained at 23% in total market, the second largest operator among Mexican carriers.
  • New routes and operations: During the second quarter, Volaris launched three new point-to-point routes (two domestic and one international), focusing on our VFR customer base.

Second Quarter Operating Revenues: Challenging Start to the Quarter, Trends Improving

Volaris booked 2.4 million passengers in the second quarter 2014. This equates to a 15% growth rate in the second quarter 2014 as compared to the second quarter in 2013.

Volaris traffic (measured in terms of revenue passenger miles or RPMs) increased 14% in the second quarter 2014 year over year.

For the second quarter 2014, Volaris' total operating revenues were Ps.3,308 million, an increase of 9% year over year. Average fare decreased 10% in the second quarter 2014 year over year.

During the second quarter 2014, our non-ticket revenues and non-ticket revenue per passenger reached Ps.659 million and Ps.275, respectively. Non-ticket revenues excluding cargo per passenger increased 46% in the second quarter year over year.

Passenger revenue per available seat mile (RASM) was 11% lower compared to the second quarter 2013, and total operating revenue per available seat mile (TRASM) was 5% lower, resulting from a weak fare environment, partially offset by stronger non-ticket revenues.

Rigorous Cost Discipline: A Key Component of the Volaris ULCC Model

CASM for the second quarter 2014 was Ps.116.4 cents (US$8.9 cents), a 1% increase compared to the second quarter of 2013, driven by a higher economic fuel cost per gallon and a higher average exchange rate during the quarter. CASM excluding fuel decreased 2% year over year to Ps.70.4 cents (US$5.4 cents) in the second quarter.

Young and Fuel Efficient Fleet: Increasing Cost Efficiency

Reflecting our strategy to further reduce unit costs, Volaris has continued to take deliveries of larger sharklet-equipped A320 aircraft. During the second quarter of 2014 Volaris received two new sharklet-equipped A320s, bringing our seat mix of A320/A319 to a 65/35 percent split.

As of June 30, 2014, the Company´s fleet was comprised of 48 aircraft (29 A320s and 19 A319s), with an average age of 4.1 years.

Strong Balance Sheet and Liquidity: A Foundation for Long Term Growth

As of June 30, 2014, Volaris had Ps.2,088 million in unrestricted cash and cash equivalents. The Company recorded negative net debt (or a positive net cash position) of Ps.1,330 million and total equity was Ps.3,526 million.

Volaris was net cash flow from operating activities neutral during the second quarter. During the second quarter 2014, Volaris incurred capital expenditures of Ps.215 million, which included pre-delivery payments for future deliveries of aircraft net of refunds of Ps.89 million and acquisitions of rotable spare parts, furniture and equipment of Ps.126 million.

Investors are urged to carefully read 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 today, July 28, 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" operations, 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 115 and its fleet from four to 48 aircraft. Volaris offers more than 220 daily flight segments on routes that connect 35 cities in Mexico and 15 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 five 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:
Cynthia Llanos / cllanos@gcya.net / +52 1 55 4577 0803

 

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 June 30,
2014
(US Dollars)*

Three months
ended June 30,
2014

Three months
ended June 30,
2013

Variance
(%)

Total operating revenues (millions)

254

3,308

3,035

9.0%

Total operating expenses (millions)

261

3,403

2,933

16.0%

EBIT (millions)

(7)

(95)

102

NA

EBIT margin

(2.9%)

(2.9%)

3.4%

(6.3) pp

Adjusted EBITDA (millions)

(2)

(34)

156

NA

Adjusted EBITDA margin

(1.0%)

(1.0%)

5.2%

(6.2) pp

Adjusted EBITDAR (millions)

46

595

673

(11.6%)

Adjusted EBITDAR margin

18.0%

18.0%

22.2%

(4.2) pp

Net (loss) income (millions)

(6)

(75)

173

NA

Net margin

(2.3%)

(2.3%)

5.7%

(8.0) pp

Earnings per share:





Basic

-

(0.07)

0.22

NA

Diluted

-

(0.07)

0.22

NA

Earnings per ADS:





Basic

(0.06)

(0.74)

2.15

NA

Diluted

(0.06)

(0.74)

2.15

NA

Weighted average shares outstanding:





Basic

-

1,011,876,677

809,777,350

25.0%

Diluted

-

1,011,876,677

809,777,350

25.0%

Available seat miles (ASMs) (millions)

-

2,923

2,540

15.1%

    Domestic

-

2,203

1,965

12.1%

    International

-

720

574

25.4%

Revenue passenger miles (RPMs) (millions)

-

2,386

2,101

13.6%

    Domestic

-

1,764

1,591

10.9%

    International

-

622

509

22.0%

Load factor

-

81.6%

82.7%

(1.1) pp

    Domestic

-

80.1%

81.0%

(0.9) pp

    International

-

86.4%

88.7%

(2.3) pp

Total operating revenue per ASM (TRASM) (cents)

8.7

113.2

119.5

(5.3%)

Passenger revenue per ASM (RASM) (cents)

7.0

90.6

101.5

(10.7%)

Passenger revenue per RPM (yield) (cents)

8.5

111.0

122.8

(9.5%)

Average fare

84.9

1,107

1,234

(10.3%)

Non-ticket revenue per passenger

21.1

275

219

26.0%

Non-ticket revenue excluding cargo per passenger

19.3

252

172

46.4%

Operating expenses per ASM (CASM) (cents)

8.9

116.4

115.5

0.8%

CASM ex fuel (cents)

5.4

70.4

71.5

(1.5%)

Booked passengers (thousands)

-

2,393

2,090

14.5%

Departures

-

18,498

16,124

14.7%

Block hours

-

48,801

42,841

13.9%

Fuel gallons consumed (millions)

-

34.1

30.2

13.0%

Average economic fuel cost per gallon

3.0

39.4

37.0

6.5%

Aircraft at end of period

-

48

43

11.6%

Average aircraft utilization (block hours)

-

12.4

12.1

2.3%

Average exchange rate

-

13.00

12.46

4.3%

*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only.

 

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

Financial and Operating Indicators


Unaudited
(In Mexican pesos, except otherwise indicated)

Six months
ended June 30,
2014
(US Dollars)*

Six months
ended June 30,
2014

Six months
ended June 30,
2013

Variance
(%)

Total operating revenues (millions)

467

6,084

6,097

(0.2%)

Total operating expenses (millions)

511

6,667

5,957

11.9%

EBIT (millions)

(45)

(583)

140

NA

EBIT margin

(9.6%)

(9.6%)

2.3%

(11.9) pp

Adjusted EBITDA (millions)

(36)

(465)

276

NA

Adjusted EBITDA margin

(7.6%)

(7.6%)

4.5%

(12.1) pp

Adjusted EBITDAR (millions)

58

757

1,306

(42.0%)

Adjusted EBITDAR margin

12.4%

12.4%

21.4%

(9.0) pp

Net (loss) income (millions)

(34)

(445)

109

NA

Net margin

(7.3%)

(7.3%)

1.8%

(9.1) pp

Earnings per share:





Basic

-

(0.44)

0.14

NA

Diluted

-

(0.44)

0.14

NA

Earnings per ADS:





Basic

(0.34)

(4.40)

1.40

NA

Diluted

(0.34)

(4.40)

1.40

NA

Weighted average shares outstanding:





Basic

-

1,011,876,677

803,382,392

26.0%

Diluted

-

1,011,876,677

803,382,392

26.0%

Available seat miles (ASMs) (millions)

-

5,665

5,015

13.0%

    Domestic

-

4,247

3,822

11.1%

    International

-

1,418

1,192

18.9%

Revenue passenger miles (RPMs) (millions)

-

4,600

4,101

12.2%

    Domestic

-

3,403

3,067

10.9%

    International

-

1,197

1,034

15.8%

Load factor

-

81.2%

81.8%

(0.6) pp

    Domestic

-

80.1%

80.2%

(0.1) pp

    International

-

84.4%

86.7%

(2.3) pp

Total operating revenue per ASM (TRASM) (cents)

8.2

107.4

121.6

(11.7%)

Passenger revenue per ASM (RASM) (cents)

6.7

86.7

103.0

(15.9%)

Passenger revenue per RPM (yield) (cents)

8.2

106.8

126.0

(15.3%)

Average fare

82.7

1,078

1,275

(15.5%)

Non-ticket revenue per passenger

19.8

258

230

12.1%

Non-ticket revenue excluding cargo per passenger

17.7

231

181

28.0%

Operating expenses per ASM (CASM) (cents)

9.0

117.7

118.8

(0.9%)

CASM ex fuel (cents)

5.5

71.2

72.6

(1.9%)

Booked passengers (thousands)

-

4,554

4,050

12.4%

Departures

-

35,321

31,823

11.0%

Block hours

-

94,051

85,073

10.6%

Fuel gallons consumed (millions)

-

65.7

59.4

10.6%

Average economic fuel cost per gallon

3.1

40.1

39.0

2.7%

Aircraft at end of period

-

48

43

11.6%

Average aircraft utilization (block hours)

-

12.4

12.0

3.6%

Average exchange rate

-

13.12

12.56

4.4%

*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only.

 

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 June 30,
2014
(US Dollars)*

Three months
ended June 30,
2014

Three months

 ended June 30,
2013

Variance
 (%)

Operating revenues:





Passenger

203

2,649

2,579

2.7%

Non-ticket

51

659

457

44.3%


254

3,308

3,035

9.0%






Other operating income

(0)

(1)

(2)

(61.8%)

Fuel

103

1,345

1,118

20.4%

Aircraft and engine rent expense

48

629

516

21.9%

Landing, take-off and navigation expenses

40

526

458

14.8%

Salaries and benefits

30

390

384

1.6%

Sales, marketing and distribution expenses

15

195

159

22.3%

Maintenance expenses

11

148

151

(2.0%)

Other operating expenses

8

110

94

16.8%

Depreciation and amortization

5

61

54

12.1%

Operating expenses

261

3,403

2,933

16.0%






Operating (loss) income

(7)

(95)

102

NA






Finance income

0

5

8

(35.7%)

Finance cost

(1)

(9)

(18)

(52.6%)

Exchange gain (loss), net

(1)

(15)

127

NA

Comprehensive financing result

(1)

(18)

117

NA






Loss before income tax

(9)

(113)

220

NA

Income tax benefit

3

38

(46)

NA

Net (loss) income

(6)

(75)

173

NA






Attribution of net loss:





Equity holders of the parent

(6)

(75)

174

NA

Non-controlling interest

-

-

(1)

NA

Net (loss) income

(6)

(75)

173

NA

*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only.

 

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

Consolidated Statement of Operations


Unaudited
(In millions of Mexican pesos)

Six months
ended June 30,
2014
(US Dollars)*

Six months
ended June 30,
2014

Six months
ended June 30,
2013

Variance
 (%)

Operating revenues:





Passenger

377

4,910

5,166

(5.0%)

Non-ticket

90

1,173

931

26.1%


467

6,084

6,097

(0.2%)






Other operating income

(0)

(4)

(26)

(83.1%)

Fuel

202

2,632

2,316

13.6%

Aircraft and engine rent expense

94

1,222

1,031

18.6%

Landing, take-off and navigation expenses

80

1,046

919

13.8%

Salaries and benefits

60

779

747

4.3%

Sales, marketing and distribution expenses

27

352

346

1.9%

Maintenance expenses

23

306

292

4.9%

Other operating expenses

17

215

197

9.3%

Depreciation and amortization

9

118

135

(12.6%)

Operating expenses

512

6,667

5,957

11.9%






Operating (loss) income

(45)

(583)

140

NA






Finance income

1

10

13

(19.3%)

Finance cost

(1)

(14)

(36)

(61.8%)

Exchange gain (loss), net

(0)

(4)

19

NA

Comprehensive financing result

(1)

(7)

(4)

63.6%






Loss before income tax

(45)

(590)

136

NA

Income tax benefit

11

145

(27)

NA

Net (loss) income

(34)

(445)

109

NA






Attribution of net loss:





Equity holders of the parent

(34)

(445)

112

NA

Non-controlling interest

-

-

(3)

NA

Net (loss) income

(34)

(445)

109

NA

*Peso amounts were converted to US dollars at the rate of Ps.13.0323 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)

June 30, 2014
Unaudited

June 30, 2014
Unaudited

December 31,
2013 Audited

(US Dollars)*

Assets




Cash and cash equivalents

160

2,088

2,451

Accounts receivable

52

683

602

Inventories

10

124

114

Prepaid expenses and other current assets

29

376

323

Financial instruments

1

8

11

Guarantee deposits

43

558

499

Total current assets

294

3,837

4,000

Rotable spare parts, furniture and equipment, net

129

1,679

1,341

Intangible assets, net

5

68

79

Deferred income tax

35

457

305

Guarantee deposits

212

2,760

2,603

Other assets

4

53

49

Total assets

679

8,854

8,378

Liabilities




Unearned transportation revenue

149

1,940

1,393

Accounts payable

38

499

537

Accrued liabilities

77

1,010

1,033

Taxes and fees payable

66

855

599

Financial instruments

2

32

32

Financial debt

10

131

268

Other liabilities

1

7

9

Total short-term liabilities

343

4,473

3,872

Financial instruments

5

60

74

Financial debt

48

627

294

Accrued liabilities

9

118

138

Other liabilities

1

13

11

Employee benefits

-

6

5

Deferred income taxes

2

30

22

Total liabilities

409

5,328

4,415

Equity




Capital stock

228

2,974

2,974

Treasury shares

(8)

(108)

(108)

Contributions for future capital increases

-

-

-

Legal reserve

3

38

38

Additional paid-in capital

137

1,786

1,786

Accumulated losses

(85)

(1,106)

(661)

Accumulated other comprehensive losses

(4)

(58)

(66)

Total equity attributable to equity holders of the parent

271

3,526

3,962

Non-controlling interest

-

-

-

Total equity

271

3,526

3,962

Total liabilities and equity

679

8,854

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.13.0323 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 Summary


Unaudited
(In millions of Mexican pesos)

Thee months
ended

June 30, 2014
(US Dollars)*

Three months
ended

June 30, 2014

Three months
ended

June 30, 2013





Net cash flow (used in) provided by operating activities

(1)

(8)

355

Net cash flow (used in) provided by investing activities

(17)

(215)

77

Net cash flow provided by (used in) financing activities

7

85

(246)

(Decrease) increase in cash and cash equivalents

(11)

(139)

185

Net foreign exchange differences

(1)

(13)

14

Cash and cash equivalents at beginning of period

172

2,240

926

Cash and cash equivalents at end of period

160

2,088

1,126

*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only.

 

Unaudited
(In millions of Mexican pesos)

Six months ended

June 30, 2014
(US Dollars)*

Six months ended

June 30, 2014

Six months ended

June 30, 2013





Net cash flow (used in) provided by operating activities

(7)

(94)

626

Net cash flow (used in) provided by investing activities

(34)

(443)

138

Net cash flow provided by (used in) financing activities

14

184

(450)

(Decrease) increase in cash and cash equivalents

(27)

(353)

314

Net foreign exchange differences

(1)

(9)

(11)

Cash and cash equivalents at beginning of period

188

2,451

822

Cash and cash equivalents at end of period

160

2,088

1,126

*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only.

 

SOURCE Volaris



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