Volaris: the leading ultra-low-cost airline serving Mexico, USA and Central America January 2018
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. Neither the Company, nor any of their respective directors makes any representation or warranty (express or implied) regarding, or assumes any responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information or opinions contained herein. None of the Company nor any of their respective directors, officers, employees, stockholders or affiliates nor any other person accepts any liability (in negligence, or otherwise) whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. No reliance may be placed for any purposes whatsoever on the information set forth in this presentation or on its completeness. This presentation does not constitute or form part of any offer or invitation for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Recipients of this presentation are not to construe the contents of this presentation as legal, tax or investment advice and should consult their own advisers in this regard. This presentation contains statements that constitute forward-looking statements which involve risks and uncertainties. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition, and future events and plans of the Company. These statements can be recognized by the use of words such as "expects," "plans," "will," "estimates," "projects," or words of similar meaning. Such forward-looking statements are not guarantees of future performance and actual results may differ significantly from those in the forward-looking statements as a result of various factors and assumptions. You are cautioned not to place undue reliance on these forward looking statements, which are based on the current view of the management of the Company on future events. The Company does not undertake to revise forward-looking statements to reflect future events or circumstances. 2
Volaris: snapshot at 30,000 feet Serving 69 destinations throughout Mexico (40), USA (25) and Central America (4) Sep 17 CAGR 2008 2016 LTM (08-16) Unit cost (CASM ex- 5.5 4.8 4.9 -1.6% fuel; cents, USD) (1) Passenger demand 3.2 14.3 15.6 20.6% (RPMs, bn) Aircraft 21 69 67 16.0% (End of period) Routes 42 162 164 18.4% (End of period) Passengers 3.5 15.0 16.2 20.0% (mm) Operating revenue 4.4 23.5 24.7 23.3% (bn, MXN) Adj. EBITDAR 0.7 8.9 7.0 37.4% (bn. MXN) Adj. ROIC 11% 20% 14% +9 pp. (pre-tax) 3 (1) Converted to USD at an average period exchange rate
Volaris’ flight path for demand stimulation and continued growth Capacity increase Cost reduction More Resilient ULCC ancillaries business model (“You decide”) driving high, profitable growth “Clean”, low base fares More customers 4
Volaris’ consistent execution of its ULCC business model well positioned for growth Accomplishments Opportunities Strong penetration of Mexican air Attractive emerging air travel market in travel market Mexico Diversified and resilient point-to-point Continue geographic diversification network through international growth Bus to air substitution Continue route frequency increase Successful price unbundling Upside in ancillary revenue Flexible fleet plan and utilization; Proven ancillary revenue model capacity management Sustained profitability with strong Continue cost reductions balance sheet 5
Accomplishments
Volaris has a best-in-class unit cost structure Long-term unit cost advantage CASM and CASM ex-fuel (LTM September 2017, USD cents) Cost structure • Economies of scale In line with best-in-class - Dilute fixed costs ULCCs - High seat density • Young and fuel efficient fleet 13.6 13.0 13.2 - Sharklet rollout 11.4 - Average age of 4.6 years 2.5 11.1 3.5 2.9 10.5 10.3 10.2 - NEO Engines rollout 2.5 9.1 2.6 9.0 8.8 2.3 - Low fuel burn 2.5 3.0 7.7 7.4 6.9 2.5 2.5 • Productive network 2.4 2.0 5.7 5.5 2.7 2.0 - Point-to-point 10.7 10.1 10.1 1.6 1.7 8.8 - No connections complexity 8.4 8.1 7.7 7.3 6.6 6.5 6.4 • High aircraft utilization 5.7 4.9 4.7 4.0 3.8 - 3Q17 average 13 block hours per day Latin American carriers US LCCs WW LCCs US network Continued cost carriers improvement potential (1) DCOMPS = Direct Competitors: Delta, American Airlines, Alaska Airlines and United | (Average CASM and CASM ex-fuel) 7 Note: Non-USD data converted to USD using an average exchange rate for the period Source: Airlines public information
Non-ticket revenues continue to grow, with upside potential Non-ticket revenue per passenger Ancillaries Volaris (MXN) per passenger • Apply revenue management techniques 2011-2016 CAGR: + 21.9% - Pricing by route, season, day 424 381 - Fully dynamic pricing for some products 338 • Add products 279 211 - New products & services 204 142 - Enhancements to existing products • Improve presence - More touch-points to sell ancillaries throughout the journey 2011 2012 2013 2014 2015 2016 YTD Sep 2017 - Allow customization Best-in class ULCCs, including first bag fee • Benefit from network diversification (Sep 2017 LTM, as % of total operating revenue) (1) - More international capacity 48% 45% • First checked bag 43% - USA and Puerto Rico 27% - Costa Rican AOC Increasing non-ticket revenue allows to Volaris Wizz Allegiant Spirit reduce fare further and stimulate Non-ticket revenue per demand pax (USD) $21.91 $31.44 $29.20 $52.51 8 (1) Converted to USD using an average exchange rate for the period Source: Airlines public information
Network enhancement: connecting the dots and diversifying further LTM Dec 2017 Volaris diversified its network by starting operations in 34 routes and 5 stations Volaris’ LTM Sept 2017 new routes New routes Domestic International Guadalajara 3 2 Mexico City - 4 Costa Rica - 4 Tijuana 1 2 Los Angeles - 4 Monterrey 3 1 Other 1 9 Total 8 26 New stations Central DOM USA America Cozumel Miami San Salvador Milwaukee Managua New International New Domestic New Volaris Costa Rica 9 Note: Excludes routes and stations announced to start operations
…supporting strong capacity growth 2017 capacity growth contribution + Additional frequencies 6.8% + Joining existing airports 3.1% + New airports 1.5% + Volaris Costa Rica 1.5% = 12.9% Total ASM growth Our network is well positioned for diversified growth 10
Growth opportunities
In recent years, Mexico’s volume growth has been robust despite challenging economic environment Mexico passenger market volume has increased since 2011 Passenger volume (millions) Main industry growth drivers 2011 - 2017 CAGR: +5% 90 82 • Strong demand and 75 15 13 increasing middle 66 61 12 57 class 11 52 29 10 27 9 26 • LCC gaining market 8 23 21 19 through low fares 19 45 -44% LCC share (1) 42 37 33 30 28 25 • High improvement potential: 2011 2012 2013 2014 2015 2016 2017 -Domestic air trips Domestic USA Other international per capita in Mexico 0.42 vs. Colombia 0.66 4.0% 8.3% 8.3% 8.3% 12.3% 10.4% 10.6% (3) Yoy growth 4.0% 4.0% 1.4% 2.3% 2.6% 2.3% 1.8% GDP growth (2) 1.0 2.1 6.1 3.7 4.7 4.5 6.4 GDP multiplier 3x GDP multiplier in recent years (1) Considers Volaris and VivaAerobus domestic market share LTM November 2017 (2) Values according to INEGI ´ s new methodology 12 (3) Yoy growth for LTM September 2016 vs. LTM September 2017 Source: DGAC-SCT, INEGI and Banco de México
Volaris growth has surpassed market growth in both domestic and international markets Domestic passenger growth (%) International passenger growth (%) 13 Source: DGAC
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