July 2016

Los Angeles: Travel Prospects from and South America

Travel Performance - Mexico  Direct arrivals from Mexico’s main feeder cities to Los Angeles grew by an estimated 23% through YTD July as carriers delivered 21.9% more seats (133 thousand seats) versus a year ago.  American , which began service to LAX from in September 2015, is providing a full year of service in 2016.  Interjet began service from in February 2016 which has also contributed to the growth in arrivals so far this year.  The outlook for 2016 remains positive as planned seat capacity is expected to grow by 19.3% which will result in direct air arrivals growing by 21.8% if carriers can maintain load factors.

Travel Performance – South America  Direct arrivals from South America fell by 4.9% through YTD July despite a 2.2% increase in seat capacity. Load factors fell to 79% through July versus 85% a year ago.  If carriers maintain the lower load factors, direct arrivals from South America will fall by 3% despite carriers’ plans to provide 1.1% more seats 2016.  Carriers plan to provide fewer seats in 2016 from Brazil, Panama and El Salvador.  Arrivals from Colombia will double as will provide a full 12 months of service in 2016.

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Table of Contents

Los Angeles – Mexico Performance & Outlook 3 2016 Outlook for Capacity & Direct Arrivals from Mexico to Los Angeles 5

Los Angeles – South America Direct Air Arrivals & Capacity 6 Outlook for 2016 7 Summary of Seat Capacity and Arrivals from South America for 2016 8

©REDmarke Research 2

Los Angeles – Mexico Performance & Outlook

Direct air arrivals from the main feeder cities in Mexico to Los Angeles grew by an estimated 23% through YTD July 2016. Arrivals grew from three out of five feeder cities. Arrivals from Morelia and Hermosillo were down by 3.6% and 1.1% respectively.

YTD July 2016 Direct Air Arrivals from Mexico to Los Angeles Carrier Mexico City Hermosillo Guadalajara Morelia Zacatecas Total % Change

Aeromexico 191,635 6,201 71,134 268,970 12.2% 26,556 26,556 -50.7% 27,003 27,003 1.8% 33,985 95,573 19,215 14,875 163,648 11.0% Delta Airlines 31,401 31,401 -18.0% 57,148 23,341 80,489 100% Interjet 30,473 30,473 100% Total 309,771 6,201 278,478 19,215 14,875 628,539 23.0% % Change 25.9% -1.1% 23.9% -3.6% 4.8% 23.0% Source: Los Angeles International Airport; US BTS and REDmarke Research.

Direct air arrivals reached their highest level in more than 7 years through YTD July.

Direct Air Arrivals from Mexico’s Feeder Cities into LAX (YTD July each year)

628,539

517,195 511,028 474,744 472,235 467,433 464,665 405,365

2009 2010 2011 2012 2013 2014 2015 2016

Source: Los Angeles International Airport; US BTS and REDmarke Research.

©REDmarke Research 3

Carriers provided 21.9% more seats (133 thousand seats) to Los Angeles from the five major feeder cities in Mexico through YTD July 2016. New service by Interjet from Guadalajara and an increase in capacity by Aeromexico, American Airlines and Volaris more than compensated for a reduction in capacity by Alaska Airlines.

Direct Seat Capacity from Mexico to Los Angeles YTD July 2016 United American Delta % Change Aeromexico Alaska Airlines Volaris Interjet Total % Change Airlines Airlines Airlines Mexico City 225,128 30,728 67,410 39,140 362,406 25.5% Hermosillo 10,500 10,500 1.4% Guadalajara 81,868 34,555 27,136 105,691 39,800 35,850 324,900 22.8% Morelia 24,135 24,135 -6.4% Zacatecas 18,226 18,226 3.0% Total 317,496 34,555 30,728 94,546 187,192 39,800 35,850 740,167 21.9% % Change 12.9% -50.3% 2.2% 100% 9.9% -18.4% 100.0% 21.9% Source: REDmarke Research calculations.

Total seat capacity reached 740 thousand through YTD July 2016.

Seat Capacity from Mexico’s Feeder Cities up 24.0% (YTD July) 740,167 638,575 584,806 603,204 607,093 530,327 543,116 531,906

2009 2010 2011 2012 2013 2014 2015 2016

Source: LAX, US BTS and REDmarke Research calculation.

©REDmarke Research 4

2016 Outlook for Capacity & Direct Arrivals from Mexico to Los Angeles

Carriers plan to deliver 211 thousand more seats to LAX from the five major feeder cities in Mexico during 2016. Interjet’s new service from Guadalajara will contribute 82 thousand of the additional seats. A full year of service from Mexico City by American Airlines will also help grow capacity in 2016.

Annual Seats & Passenger Outlook from key Mexico Cities to Los Angeles % Change % Change City Carrier Capacity Passengers from 2015 from 2015 Mexico City Aeromexico 378,265 9.5% 309,973 9.0% United 54,480 5.0% 47,150 5.5% Volaris 78,738 38.9% 66,530 36.3% AA 116,370 205.8% 98,764 248.9% Hermosillo Aeromexico 16,550 -7.8% 9,529 -6.8% Guadalajara Aeromexico 144,038 6.2% 121,627 7.5% Alaska 61,490 -0.4% 46,107 -0.2% Delta 66,560 -17.8% 54,871 -12.1% Volaris 188,389 10.6% 165,234 11.2% AA 46,720 76.3% 39,987 107.0% Interjet 81,750 100.0% 69,488 100.0% Morelia Volaris 42,751 -1.1% 32,639 0.8% Zacatecas Volaris 32,546 6.6% 27,055 7.6% Total 1,308,647 19.3% 1,088,953 21.8% Sources: OAG and REDmarke calculations

The increase in seat capacity will result in direct air arrivals from Mexico’s main feeder cities growing by 22% in 2016.

2016 Outlook for Capacity & Direct Arrivals from Mexico to Los Angeles

1,308,647

1,097,340 19.3% 1,088,953 1,013,488 968,808 927,200 8.3% 893,836 836,661 857,416 776,216 21.8% 2012 4.2% 2013 2014 2015 2016

Seat Capacity Passengers

Sources: OAG for capacity. REDmarke Research for direct air arrivals

©REDmarke Research 5

Mexico City will receive an additional 97 thousand seats in 2016 as American Airlines provides a full 12 months of service. New service by Interjet will result in Guadalajara gaining 114 thousand seats in 2016.

2016 Outlook for Capacity & Direct Arrivals from Mexico to Los Angeles 2014 2015 2016 % Change Seat Capacity Mexico City 464,368 530,422 627,853 18.4% Hermosillo 19,374 17,950 16,550 -7.8% Guadalajara 453,372 475,192 588,947 23.9% Morelia 46,740 43,242 42,751 -1.1% Zacatecas 29,634 30,534 32,546 6.6% Total 1,013,488 1,097,340 1,308,647 19.3% Direct Arrivals Mexico City 394,328 436,308 522,417 19.7% Hermosillo 13,660 10,229 9,529 -6.8% Guadalajara 390,504 389,763 497,314 27.6% Morelia 35,077 32,390 32,639 0.8% Zacatecas 23,847 25,146 27,055 7.6% Total 857,416 893,836 1,088,953 21.8% Sources: OAG & REDmarke Research calculations.

Carriers plan to provide a total of 211 thousand more seats to LAX in 2016 from the five major feeder cities in Mexico. If carriers can maintain their load factors, they will deliver nearly 1.1 million passengers to LAX in 2016.

Los Angeles – South America Direct Air Arrivals & Capacity

Direct air arrivals from South America into LAX fell by 4.9% through July 2016 or by 20,719 passengers despite a 2.2% increase in seat capacity. Carriers saw their load factors fall to 79% from 85% a year ago through July.

Direct Passengers & Seat Capacity to Los Angeles YTD July Passengers Passengers Seats Seats Country Carrier % Change % Change 2015 2016 2015 2016 Brazil 12,432 11,193 -10.0% 23,270 19,862 -14.6% Brazil American Airlines 42,628 40,396 -5.2% 51,939 49,125 -5.4% Colombia Avianca 4,132 25,485 100.0% 4,480 30,500 100.0% Peru Lan Airlines 88,193 92,019 4.3% 95,660 94,052 -1.7% Panama COPA 87,695 79,896 -8.9% 105,304 98,433 -6.5% El Salvador Delta 28,561 21,679 -24.1% 33,936 24,480 -27.9% El Salvador Avianca 98,977 68,422 -30.9% 114,802 120,826 5.2% Guatemala Avianca 26,006 27,401 5.4% 30,194 31,920 5.7% Guatemala Delta 35,233 36,647 4.0% 40,183 41,447 3.1% Total 423,857 403,138 -4.9% 499,768 510,645 2.2% Sources: LAX, US BTS, OAG and REDmarke Research.

©REDmarke Research 6

YTD July Seat Capacity and Direct Air Arrivals

510,645 499,768 461,264 399,560423,857 403,138 376,984 2.2% 328,345 8.3% 313,904 2012 286,283 -4.9% 2013 6.1% 2014 2015 2016

Seat Capacity Passengers

Sources: OAG and REDmarke Research calculations.

Outlook for 2016

Direct air arrivals from South/Central America to LAX will fall by 3% in 2016 based on the current outlook for seat capacity and load factors. Carriers plan to increase seat capacity by 1.1% (10 thousand seats) but lower load factors will result in a decline in arrivals. Carriers plan to provide 9 thousand fewer seats from Brazil and 10 thousand fewer seats from Panama in 2016.

2016 Outlook for Capacity & Direct Arrivals from South & Central America to LAX 2014 2015 2016 % Change Seat Capacity Brazil 141,728 125,493 116,869 -6.9% Peru 153,962 161,694 165,044 2.1% Colombia 0 25,926 52,250 101.5% Panama 168,630 175,990 165,731 -5.8% Gutamalea 129,752 123,254 127,759 3.7% El Salvador 230,668 253,192 247,262 -2.3% Total 824,740 865,549 874,915 1.1% Direct Arrivals Brazil 95,007 92,423 86,768 -6.1% Peru 151,604 148,166 155,911 5.2% Colombia 20,964 43,308 106.6% Panama 145,089 144,192 133,816 -7.2% Guatemala 113,457 106,101 111,167 4.8% El Salvador 199,249 191,045 151,182 -20.9% Total 704,406 702,891 682,152 -3.0% Sources: OAG & REDmarke Research calculations.

©REDmarke Research 7

Direct air arrivals will fall to an estimated 682 thousand in 2016 from South and Central America despite Avianca providing service for all 12 months in 2016 rather than the six months of service it provided in 2015. A reduction in seat capacity by AA, Korean Air and COPA is the main reason for the decline in direct arrivals in 2016.

Direct Arrivals to LAX from S. America in 2016 (Number of direct arrivals to LAX from main South American Countries) Month Brazil Peru Colombia Panama Guatemala El Salvador Total % Change January 8,328 13,122 4,127 13,293 10,548 13,450 62,868 4.7% February 5,809 12,131 3,085 10,653 8,366 10,757 50,800 6.1% March 5,979 12,908 3,636 10,218 9,207 13,792 55,741 4.1% April 7,806 13,512 3,517 10,465 8,946 13,097 57,343 -1.0% May 7,856 13,935 3,458 11,640 8,908 12,816 58,613 3.4% June 7,866 13,465 3,974 12,152 8,594 12,460 58,512 2.2% July 7,945 12,946 3,688 11,475 9,479 13,730 59,262 -10.4% August 7,546 12,946 3,688 11,475 9,563 14,497 59,714 -12.5% September 6,690 12,528 3,483 9,994 8,256 10,858 51,808 -9.9% October 7,003 12,946 3,688 10,488 8,262 10,158 52,544 -7.0% November 6,026 12,528 3,483 10,488 9,341 12,130 53,995 -7.1% December 7,913 12,946 3,483 11,475 11,698 13,438 60,952 -5.6% Total 86,768 155,911 43,308 133,816 111,167 151,182 682,152 -3.2% % Change -6.1% 5.2% 106.6% -7.2% 4.8% -20.9% -3.0% Sources: LAX, US BTS & REDmarke Research.

Summary of Seat Capacity and Arrivals from South America for 2016

Carriers plan to provide 875 thousand seats to LAX from the six South and Central American countries indicated in the table below or just 1.1% more than in 2015. Load factors however, have fallen from 85% through YTD July last year to just 79% through YTD July this year. If carriers maintain these low load factors, direct arrivals will fall by 3% to 682,152 passengers in 2016.

2016 Annual Seat Capacity and Direct Air Arrivals

Country Carrier Seats Passengers % Change Brazil AA 83,055 67,554 -6.1% Korean Air 33,814 19,214 -6.2% Peru Lan Airlines 165,044 155,911 5.2% Colombia Avianca 52,250 43,308 107% Panama COPA 165,731 133,816 -7.2% Guatemala Delta 72,889 63,644 5.4% Avianca 54,870 47,523 3.9% El Salvador Avianca 207,742 116,736 -20.6% Delta 39,520 34,446 -21.7% Total 874,915 682,152 -3.0%

Sources: REDmarke Research estimates based on planned capacity and historical load factors.

©REDmarke Research 8