Volaris: the #1 ULCC Airline Serving Mexico, USA and Central America
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Volaris: The #1 ULCC Airline Serving Mexico, USA and Central America June 2019 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. 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This presentation contains statements that constitute forward-looking statements which involve risks and uncertainties. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee or assurance of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. In addition, in this presentation, the words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to our company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this presentation. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward- looking statements. Volaris is the largest point-to-point domestic carrier and the #1 foreign airline with the most destinations in the U.S. Serving 67 destinations throughout Mexico (40), USA and Central America (27) CAGR 2008 2018 (08-18) Unit cost (CASM 5.5 4.5 -1.9% ex-fuel; cents,USD)(1) ASMs 4.9 21 15.7% Aircraft 21 77 13.8% (End of period) Routes 42 194 16.5% (End of period) Passengers (mm) 3.5 18.3 17.9% Destinations Volaris Operating revenue 4.4 27.3 20.1% (bn, MXN) Frontier Adj. EBITDAR (bn. 0.7 5.9 23.8% MXN) 3 (1) Converted to USD at an average period exchange rate Sequential TRASM improvement and continuous CASM ex-fuel reduction TRASM improvement (% y-o-y) CASM ex fuel reduction (% y-o-y) 4 The Mexican aviation market continues to be a high growth emerging market Passengers from Mexico (2014-2018) CAGR 100M 96 (14-18) 90 83 10% 80 75 67 Other 8% 60 International US 32% Volaris’ 40 contribution for domestic growth (1) 20 Domestic 11% 0 2014 2015 2016 2017 2018 Growth 8 12 11 9 7 (%) Emerging markets grow far more and faster (1) For 2006-2018 period than developed markets 5 Source: DGAC ASM deployment in line with first time travelers’ volume growth May May Variance 2019 2018 Volaris ASMs evolution RPMs (in millions, scheduled & charter) Domestic 1,309 1,038 26.0% International 513 407 26.3% Total 1,822 1,445 26.1% 15% ASMs (in millions, scheduled & charter) 13 13 12 Domestic 1,443 1,174 22.9% 11 International 629 512 22.9% 10 9 Total 2,072 1,686 22.9% Load Factor (in %, scheduled) 5 Domestic 90.7% 88.4% 2.3 pp International 81.8% 79.7% 2.1 pp Total 88.0% 85.8% 2.2 pp 0 Passengers Domesc Internaonal (in thousands, scheduled & charter) Domestic 1,569 1,215 29.1% -5 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 International 357 286 25.1% Total 1,926 1,501 28.3% Load Factor 82.2% 85.7% 83.5% 86.5% 83.2% Approximately 6% of our passengers are first time flyers and 10% considered taking a bus before purchasing a ticket on Volaris(1) 6 (1) 2018 NPS internal survey Air transportation market is still only a fraction of the bus market Significant upside for air travel Bus switching program Education Total bus passengers in Total air travel passengers Mass media campaigns Mexico (M) in Mexico (M) #Nomáscamión positioning Digital capabilities Trial 3,094 Ticket giveaway 96 #Nomáscamión 2,757 3,010 First sell 50 57 Strong conversion 2,683 rate 29 ULCC model Attracting 1st time flyers 28 46 74 84 -We have identified ~38 million Mexicans that 20122012 2018 2018 20122012 2018 2017 have never traveled by plane(1) First, economy and other Domestic International Executive and luxury -A third of our 2018 growth was composed by first time air travelers (1) Internal data for 2018 7 Source: Secretaría de Comunicaciones y Transportes (SCT), 2018 More passengers fly with Volaris due to low fares, even lower than buses(1) Growing demand through lower fares Average total fare (MXN, 2018) Route Volaris Hrs. Bus* Hrs. Culiacan-Tijuana 564 2.2 1,100 15.5 Guadalajara- 979 3.1 2,774 31.0 Tijuana Mexico - Tijuana 1,097 3.8 1,805 29.7 Bajio-Tijuana 842 3.2 2,676 25.8 Cancun- Mexico 664 2.6 1,205 25.9 Durango-Tijuana 1,497 2.6 2,263 20.2 24.5% of our total ASM’s capacity has no airline competition(2) (1) In segments above 6 hours (2) FY2018 information *Fares by segment observed in December, 2018; passengers and base fare smoothed using 12 months simple moving average 8 Source: Banco de México and ground carriers public information Source: Source: DGAC passengers, passengers, M) (On board Market share showing the ULCC model penetration modelULCC the showing inmarket domestic market leader nowisthe Volaris 20 1 3 30 2014 33 2 Market Domestic 0 1 5 37 20 1 6 42 2017 45 20 1 8 50 1Q' 1 12 9 2013 44 15 18 15 3 5 30 International Market International 2014 44 16 17 15 5 32 2 0 15 45 17 15 13 4 6 36 2 0 1 6 45 17 13 12 5 7 39 20 1 7 46 17 13 11 6 7 44 2 01 8 46 17 12 10 8 7 47 1 Q '19 49 15 11 9 8 7 13 9 Volaris with only 14% of total seats offered at the AICM Total market seats per competitor 2018 AICM’ seat share by competitor 2018 Note: Excluding small competitors and Central America for Volaris; MECE 10 Source: MI-DIIO Non-ticket revenues continue to grow, with upside potential Non-ticket revenue per passenger Volaris (MXN) per passenger Ancillaries • Apply revenue management 2011-2018 CAGR: 19% techniques 517 479 - Pricing by route, season, day 429 - Fully dynamic pricing for some products 381 338 - Focus on our most important ancillary 279 products 204 211 142 • Add products - New products & services: Third fare, membership programs (Vclub, Vpass), 2011 2012 2013 2014 2015 2016 2017 2018 1Q19 YaVas travel experience platform Best-in class ULCCs, including first bag fee - Enhancements to existing products (1Q 2019(1) as % of total operating revenue)(2) • Improve digital channels - Expansion of our payment portfolio, now 50% 51% offering deferred payments to US citizens 43% - Multi-currency processing service 36% - More touch-points to sell ancillaries throughout the journey • Benefit from network diversification Non-ticket Volaris Ryan Air Wizz Spirit revenue per pax Increasing non-ticket revenue allows to $27 $21 $32 $56 (USD) reduce fare further and stimulate demand (1) Airlines public information for 1Q 2019 11 (2) Financial information converted to USD using an average exchange rate for the period only for purposes of the presentation Volaris’ Costa Rican AOC provides growth potential in Central America and to the U.S.