Around-The-Globe-Mexico-Spotlight

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Around the Globe Series: Spotlight on Mexico

Alex Pace CEO, Global Marketing & Sales MEXICO- RESILIANT MARKET PLANING AND PAYING FOR FUTURE TRAVEL

Heather Huckeba Teresa Solis

Director of Research Director for Tourism and Visit California Regional Development Deloitte S - Latam Mexico Research Heather Huckeba Public To what degree are cases increasing, stable or falling in the International Market? To what degree Health have vaccinations been distributed? Are there travel restrictions due to public health imposed Crisis either by the International Market, or by the USA towards that Market?

Do the overall macro-economic conditions within the International Market favor resumption of Economic travel? Forecasts will rely heavily on these inputs (expected GDP, currency exchange rates, etc.) to Crisis predict growth in International travel.

Consumer What are the consumer attitudes and behaviors relative to traveling in general, and to the USA Sentiment and to California in particular? Local consumer sentiment could influence a country to either out- perform or under-perform forecast expectations.

CALIFORNIA TOURISM Is California ready to welcome back visitors? PRODUCT READINESS Do consumers feel that California is ready to welcome visitors back? International Spend Forecast and Economic Rate of Recovery

2019 2020 2021 2022 2023 2024 2025 2020 2021 2022 2023 2024 2025 Total $28,137 $5,293 $9,022 $15,687 $21,704 $26,657 $30,046 19 32 56 77 95 107 Mexico $4,256 $1,028 $1,922 $2,914 $3,673 $4,231 $4,468 24 45 68 86 99 105 Land $3,389 $684 $1,469 $2,245 $2,838 $3,276 $3,465 20 43 66 84 97 102 Air $866 $344 $453 $669 $835 $955 $1,003 40 52 77 96 110 116 China $4,015 $431 $934 $1,939 $3,054 $3,958 $4,456 11 23 48 76 99 111 Canada $3,163 $694 $1,370 $2,365 $2,957 $3,334 $3,520 22 43 75 93 105 111 United Kingdom $1,423 $216 $433 $802 $1,148 $1,384 $1,528 15 30 56 81 97 107 Japan $1,369 $281 $520 $892 $1,142 $1,247 $1,326 21 38 65 83 91 97 Australia $1,288 $211 $456 $844 $1,108 $1,275 $1,412 16 35 65 86 99 110 France $1,276 $177 $414 $764 $1,053 $1,200 $1,294 14 32 60 83 94 101 South Korea $1,233 $327 $529 $829 $1,081 $1,255 $1,419 26 43 67 88 102 115 India $1,167 $258 $423 $685 $894 $1,020 $1,154 22 36 59 77 87 99 Germany $934 $116 $215 $442 $686 $881 $985 12 23 47 73 94 105 Middle East $770 $226 $287 $510 $639 $684 $707 29 37 66 83 89 92 Scandinavia $661 $118 $225 $380 $488 $576 $682 18 34 58 74 87 103 Italy $471 $43 $95 $205 $308 $384 $466 9 20 43 65 82 99 Brazil $445 $79 $146 $230 $310 $373 $416 18 33 52 70 84 93

Heat map color-coding is applied vertically for each year to Heat map color-coding is applied across all countries and all show highest value/lower value share of spend each year. years to indicate expectations for faster vs. slower recovery rate.

Source: Visit California Research / Tourism Economics – April 2021 Forecast COVID-19 Cases & Deaths Public Health

Tests Per 1,000 1,163 627 -- 757 -- -- 615 184 862 77 45 156 1,912 Tests 14.3 5250.4 -- 16.5 -- 13.7 9.0 10.4 16.8 18.9 4.1 62.8 258.7 Per Case

Public Vaccination Share and Rate Health

Time to Reach 75% 3 mos 2.1 yrs 11 mos 6 mos 16 mos 8 mos 7 mos 15 mos 9 mos 5.1 yrs 18 mos 6.4 yrs 5 mos

Consumer Intent to Travel Internationally Sentiment (Next 12 Months)

76%

57% 57% 52% 47% 43% 41% 37% 35% 33%

10%

India China Mexico UK Brazil Germany France Canada Australia South Korea Japan

Source: Brand USA / Engine / ORC (March 2021) International Airlift to California by Market

• The chart shows international non-stop seats to California by market for the current month and year-over-year comparison.

Non-Resident Arrivals at CA Ports of Entries

• The chart shows non-resident arrivals at California Ports of Entry by market for the current month and year-over-year comparison.

What do Mexico and India have in common?

Airlift from Mexico to CA New testing requirement

4.6%

Non-resident arrivals from Mexico to CA

New testing requirement

Visit California April 2021 Mexican Economy Mexico´s GDP annual performance in 2020 (%)

Mexico´s GDP annual performance, 2020 Sciences Health Telecom Food & Beverages Energy Financial services Mining Services Retail Manufacturing Construction Tourism

Our forecast is that the Mexican economy will expand 4.1% this year. The sectors linked to exports will grow significantly, but those associated with the domestic market will remain weak.

Gross Domestic Product (GDP % Annual variation) Approval of new Economic Stimulus Package in the USA

Better than expected performance in first two months of 2021

RISKS:

Deeper affectation| in industrial production

Continued deterioration of investment climate A third wave of Covid-19 with higher fatality than previous ones

Increase in global risks

© 2021 Deloitte Asesoría Financiera, S.C. Brand USA 27 The way back to travel Mexicans as International Travelers Mexican tourists abroad International travel by Mexican nationals residents in the country, which had decreased in expenditure -15% in 2019 compared to the previous year, hit a record low in 2020 with a decrease in travelers in -61.63%.

Mexican tourists abroad 2020 vs 2019

2019 2020 % Var

Total Visitors 75 million 33 million -55.29

International Tourists 17 million 6 million -61.63

Inbound Tourists 10 million 3 million -67.70

Border Tourists 6 million 3 million -51.90

Excursionists 57 million 26 million -53.33

Total expenditure 8 , 931 million USD 3, 235 billion USD -63.78

Average spending 118.59 96.07 -18.98

Source: Banco de México 2020.

© 2021 Deloitte Asesoría Financiera, S.C. Brand USA 33 Anxiety Index Despite the high level of health and financial concerns by the Mexican population, Deloitte´s Global Consumer Anxiety showed Mexico in the seventh lowest record in our measurement for March 31st, 2021.

Methodology The global anxiety index is calculated by aggregating responses by respondents by country to the question “I am more anxious tan last week?” and taking the difference between the percentage users responding “agree” or “strongly agree” and the percentage of users responding with “disagree” or “strongly disagree”. A positive percentage indicates that in aggregate, respondents are more anxious than last week, and a negative, less anxious. *Net Anxiety = (% Agree) - (% Disagree)

Source: Deloitte State of the Consumer Tracker, 2021. © 2021 Deloitte Asesoría Financiera, S.C. Brand USA 36 Consumer Travel Sentiment According to the survey on March 31st Mexicans concerns refer more to health than economic issues, though these are considerably higher if compared with US. Mexico USA

Source: Deloitte State of the Consumer Tracker, 2021.

© 2021 Deloitte Asesoría Financiera, S.C. Brand USA 37 Consumer Travel Sentiment Maybe surprisingly, Mexican younger travelers and seniors have a higher degree of confidence in air travel and staying at hotels. 55+ 35 - 54 18 - 34

© 2021 Deloitte Asesoría Financiera, S.C. Brand USA 38 Travel Plans While all segments are increasing their travel planning, it calls the attention to observe the interest of younger generation in international travel, rail and cruise experiences, of which there is almost no offer in Mexico.

55+ 35 - 54 18 - 34

• Mexicans long for travel, particularly the international kind, which maintains an aspirational status. • Mexican international travelers in middle-high and high income households have started to plan for holidays as a result of the gradual recovery of confidence, due to the availability of vaccination programs, gradually in Mexico and rapidly in the USA.

• There may be a transitional period for Mexican travelers to regain confidence in participating in high density venues: shopping, cruises and sporting events.

• Corporations may restrict Business travel due to risk concerns in the short term, as well as cost-cutting and carbon emission targets in the mid-term. • Home Office, Online Learning, Telemedicine and Digital commerce advanced sharply as result of Covid- 19. These changes open opportunities to develop new high value travel experiences.

• Projected expectations regarding the exchange rate of the Mexican peso during 2021 will encourage the continuation of shopping activities during international travel.

Social distancing and mobility restrictions have actually increased the psychological allure of international travel. Nevertheless, travel decision factors include the perception of risk to be infected by Covid-19 during 01 travel, the potential of plan disruptions and unexpected additional costs.

The interdependence of Mexican and US economies have caused goods and persons mobility to continue flowing despite Covid-19. Despite the huge fall in tourism flows, the Mexican market was closer to the 02 behavior of local markets in the US than to long-haul source markets.

Leisure travel, outdoor activities and e-shopping will be particularly attractive to Mexican travelers in 2021. Business travel, Entertainment venues, busy retail malls, casinos, cruises and youth camps are likely to 03 gradually start to recover only in the second half of the year or, most likely, 2022.

There will be clear interest for Mexicans to travel to the US for leisure and longer international stays 04 combining vacation time with home-office, home study and in-situ learning and wellness experiences.

Content Creator / Photographer Visit California Digital Influencer Advisory Board Member

Miguel Aguiñiga Esteban Velasquez Wilhelm

Director of Market Vice President, Latin Development America and the Caribbean Volaris Sabre Corporation Industry Recovery April 2021 Volaris is set and financially capitalized to grow and capture opportunities

Among the lowest cost airlines in the world

Our ancillary revenue focus and point-to-point network support market leadership and stimulation

Demographics and bus to air substitution strategy fuels long term growth

Fast recovery in terms of ASMs during COVID-19 as Volaris fills the void created by current market opportunities and VFR resilience

Flexible fleet and labor contracts provide a unique toolset to capitalize on current and secular growth opportunities

Solid liquidity and best positioned to deliver return on invested capital (ROIC) 47 48

Company Overview The highest-growth ultra-low-cost carrier of Latin America

Volaris is the largest Mexican carrier (1) Volaris ultra-low-cost model

Volaris has transported 135+ million passengers • Ultra-low-cost airline serving Mexico, the U.S. and Central since inception and almost 10M since COVID-19 started America • Young fleet (5.3 yrs. on average) with 87 aircraft (35% NEOs) (1)

NEW YORK • 14.7 M passengers in 2020

WASHINGTON, D.C. • 161 routes: 100 domestic and 61 international (1) • 68 airports offered: 43 domestic and 25 international (1) – with opportunity to increase market share in Mexico City Airport

• Highly productive airline with high asset utilization • 58 full time employees per aircraft with variable, performance - based compensation structure and only one union • 12.9 and 11.3 block hours per day in 2019 and 4Q20 • Operated 102% of capacity during December 2020 vs GUATEMALA previous year SAN SALVADOR • Member of the Dow Jones Sustainability MILA Pacific SAN JOSE Alliance Index since November 2020 Note: (1) As of March 2021 49 Volaris the biggest ultra low-cost airline in Mexico (2021).

Important Data (Feb 2021) Volaris with ultra-low cost model

▪ 85 Exclusive routes 4.42M Fans 1.9M Followers

▪ 1.6 M Passengers in January 2021 404k Followers

▪ 73.9% January´s Load Factor 4,973 ambassadors

▪ 337 Daily Operations in March 97 new aircrafts between 2021-2028

▪ During Q1 2021, we will operate an average OTP 90.2% (on time operations) of 80% of capacity compared to 2020. TOP 5 Airlines with the youngest ▪ 40% of our routes compete with bus fares. fleet 5.4 years (average)

50 (1) A Marzo 2021 Volaris reached 40.5% domestic market share and 13.8% international market share in January 2021 Market share (On board passengers, M)

Domestic International

51 Source: AFAC-SCT Jan'21 Total international and USA market below last year by 59% and 44%; respectively

INTERNATIONAL Market volume Market volume (On board passengers, 2020) (On board passengers, 2015/2020)

Note: Includes all markets. Source: SCT-AFAC latest report (Jan'21) Volaris has 6 routes in California connecting 10 direct destinations.

6 destinations connecting California to MEX and CAM

to Sacramento 10 destinations Oakland MEX and CAM from California San José Los Ángeles Ontario Fresno Tijuana/CBX San Diego 4,077 flights to CAL 2020

Zacatecas Mérida Aguascalientes 573,892 passengers en 2020 Guadalajara León/Bajío Cd. de Mexico. Morelia Oaxaca Guatemala El Salvador Cities in California

Cities flying to CAL

53 Volaris operates 35 destinations from Tijuana, 23 routes are exclusive

Map of routes operated by Volaris from Tijuana

35 Cities connecting California via TIJ / CBX to MEX, 23 exclusive routes.

2,345,426 passengers en 2020

Tijuana is the station with the highest recovery in the market; Volaris is approximately 3x larger than the rest of the market in Tijuana

54 Volaris is approximately 3x larger than the rest of the market in Tijuana.

Recovery vs. 2019 (Seats,%) - January Presence at TIJ (Seats) - January

Per Station Airlines

+289%

Nota: MECE 55 Fuente: OAG Volaris is the largest source of recovery in Tijuana, generating up to 80%

Recovery in Tijuana Apr'20 to Jan'21 (Seats,%)

56 Fuente: OAG RECOVERY INSIGHTS

Esteban Velasquez VP for Latin America and the Caribbean The Four Dimensions of Recovery

COVID-19 Evolution Government Supplier Actions Traveler Sentiment Actions

• COVID-19 cases • Restrictions • Changes in seating • Traveler Sentiment capacity and offer Survey • General market trends • Travel requirements

Insights

• Number of new cases is on the rise again in many countries

• Most of the APAC countries have virus well contained. Except Philippines and Mongolia, where numbers reach a new peak and India where number of new cases are growing

• In EMEA, for most of the Europe, the number of new cases is on the rise. Only some countries don't experience a surge in Covid-19 cases (Spain, UK, Denmark). Number of cases is also climbing in Iraq and Jordan. On the contrary, Israel has virus well contained. • New COVID-19 cases are rising across LAC countries, the same is true for NAM, but the pace of increase is slower. Mexico statistics until April10: • 2.2M confirmed cases / 206k deaths

• Vaccine reports: 10.98M doses administered / 1,66M people fully vaccinated Sources Johnsconfidential Hopkins | ©2021 University Sabre GLBL Inc. All rights reserved. 59 COVID-19 Travel Regulations Map Government Actions

Insights

• Airlines continue to adjust capacities closer to departure date based on evolving COVID situation, government restrictions, and traveler demand.

• Capacity recovery for Mexico on the Week of April 05 April stands at 79% of 2019 level

Sources Sabre Market Intelligence

• Audience: Citizens and residents of Latin American countries • Languages: Spanish and Portuguese • Distribution: Social Networks and Saber clients (agencies and airlines)

5 key points from Mexico: 1. Many Latin Americans are eager to get back on the road once travel restrictions are lifted. • The country with the most positive travel sentiment was Mexico, with 52% of respondents expecting to travel within 3 months once restrictions are lifted. 2. While travelers will demand schedule flexibility and enhanced safety measures, price is still king. • In Mexico 38% of respondents chose price as the most important factor. 3. While Latin Americans seem eager to travel, many will choose a destination close to home. • 72% of respondents from Mexico would choose short-haul flight. confidential | ©2021 Sabre GLBL Inc. All rights reserved. 62 Sabre does not guarantee the completeness or accuracy of this information, nor should it be disclosed to any third party or used for any purpose other than for which it was disclosed.

The NOW normal trends

Deglobalization Demand Dislocation Market Evolution Industry Consolidation

Inter-Americas travel Leisure and essential Consumers embrace Consolidation is more recovery outpacing travel leading recovery e-commerce (OTAs), pronounced with EMEA & APAC while other agencies will airlines than agencies destinations realign product offerings

Source: Secretaria de Turismo