Volaris Reports Third Quarter 2013 EBITDAR Margin of 27%, with Record Quarterly Revenue of Ps.3,722 million

MEXICO CITY, Oct. 28, 2013 /PRNewswire/ — Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (“Volaris” or the “Company”), (NYSE: VLRS, BMV: VOLAR), an ultra-low-cost airline based in Mexico, today announced its financial results for the third quarter of 2013. 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 third quarter of 2012.

Third Quarter 2013 Highlights

• Total operating revenue increased 11.1% year over year to a record Ps.3,722 million.
• Adjusted EBITDAR was Ps.1,016 million, an increase of 15.5% year over year. Adjusted EBITDAR margin reached 27.3%, the highest quarterly EBITDAR margin achieved by the Company in the last three years.
• Operating expenses per available seat mile (CASM) decreased to Ps.113.9 cents (US$8.8 cents) a 4.7% decrease year over year. CASM excluding fuel, decreased 2.9% in the same period.
• Load factor increased 3.6 percentage points to 87.5%, the highest quarterly load factor in the Company’s history.
• Net income excluding special items increased 38.7%, to Ps.319 million.
“We are very excited now that Volaris is a public company and we want to thank our investors for their support in the transaction,” said Enrique Beltranena, Volaris’ CEO. “In the quarter, Volaris delivered record operating revenue, maintained its growth trajectory and grew its market share while lowering fares and giving more options to our customers to choose what they want to pay for. Despite slower growth in the Mexican economy and the challenging competitive environment in Mexico during the quarter, these results show that our ultra-low-cost model is the right strategy forMexico and all of our target markets.”

Market Drivers

• Slower Mexico and US economic growth: The Mexican General Economic Activity Indicator (IGAE) increased an average of only 1.1% during the first eight months of 2013. Based on the weaker than expected economic activity, Mexico’s Central Bank cut its full year 2013 GDP growth estimate to 1.4%, in the last survey of economic expectations published on October 1, 2013. Similarly, in its latest summary of economic projections released on September 18, 2013, the US Federal Reserve cut its full year 2013 GDP growth estimate for the US to 2%-2.3%.
• Weather conditions: In September 2013, as a result of adverse weather conditions and airport shutdowns in connection with hurricane “Ingrid” and tropical storm “Manuel”, Volaris canceled 18 flights, delayed more than 145 flights, and re-accommodated more than 2,200 passengers who were unable to fly as scheduled. The storms impacted 13 states in Mexico, resulting in a decline in bookings for the period. Volaris worked in coordination with the federal, state, and local authorities to assist people who were stranded in Acapulco due to the storms, transporting more than 1,600 customers on 11 humanitarian aid flights free of charge on the Acapulco – Mexico City route, which it does not operate regularly.
• Exchange rate depreciation: The Mexican peso depreciated 3.6% quarter on quarter against the US dollar, as the exchange rate devalued from an average of Ps.12.46 pesos per US dollar in the second quarter 2013 to Ps.12.91 pesos per US dollar during the third quarter of 2013.
• Fuel costs decrease: The average economic fuel cost per gallon decreased 4.8% year over year in the third quarter 2013.
• Air traffic volume increase: Volaris accounted for 48% of the passenger volume growth in the first eight months of the year, among domestic carriers, according to the Mexican DGAC (Direccion General de Aeronautica Civil). The DGAC reported an overall passenger increase for the Mexican carriers of 9.5% for the same period.
• New routes and operations: During the third quarter 2013, Volaris launched six new domestic routes. Operations, measured in total departures, increased 15.6% year over year.

Record Operating Revenue

For the third quarter 2013, Volaris’ total operating revenue was Ps.3,722 million, which represented an increase of 11.1% year over year compared to the third quarter 2012. The load factor was 87.5%, the highest quarterly load factor in the Company’s history, and a 3.6% increase year over year driven by our low-fare strategy.

Volaris booked 2.6 million passengers in the third quarter 2013, 25.4% more than in the third quarter of 2012. This increase in passengers was a result of our ongoing strategy to stimulate demand by targeting passengers who travel by bus and by offering lower base fares, which were lowered 12.8% year over year.

As compared to the third quarter 2012, passenger revenue per available seat mile (RASM) was 6.2% lower and total operating revenue per available seat mile (TRASM) was 4.6% lower, resulting from our lower fare structure combined with an increase in the domestic competitive environment that put additional pressure on our base fares in certain key markets.

Volaris traffic, measured in terms of revenue passenger miles (RPMs), increased by 21.6% year over year in the third quarter 2013 with the incorporation of nine new aircraft from October 1, 2012 to September 30, 2013.

During this period, our non-ticket revenue increased to Ps.503 million, a 24.8% increase as compared to third quarter 2012.

Continued Cost Discipline

The operating expenses per available seat mile (CASM) for the third quarter 2013 were Ps.113.9 cents, a 4.7% reduction compared to the third quarter of 2012, primarily driven by efficiency benefits and sustained cost control discipline. CASM excluding fuel also decreased 2.9% year over year.

Strong Balance Sheet and Liquidity

As of September 30, 2013, Volaris had Ps.2,974 million in unrestricted cash and cash equivalents, representing 23% of last twelve month total operating revenues. The Company recorded negative net debt (or a positive net cash position) of Ps.2,565 million and total equity reached 4,135 million.

During the third quarter 2013, Volaris incurred capital expenditures of Ps.163 million. The Company paid Ps.99 million in pre-delivery payments for future deliveries of aircraft net of refunds, and recorded additional purchases of rotable spare parts, furniture and equipment totaling Ps.64 million. The Company also obtained an extension of its pre-delivery payments facility for eight new aircraft with Santander and Bancomext for US$71 million, which now covers aircraft deliveries through the first half of 2016.

Young and Fuel Efficient Fleet

As of September 30, 2013, reflecting our strategy to further reduce our unit cost, Volaris has continued to take deliveries of larger A320 aircraft, bringing our mix of A320/A319s to a 50/50 split. The Company´s fleet was comprised of 44 aircraft (22 Airbus A320 and 22 Airbus A319), with an average age of 4.2 years. During the third quarter of 2013 Volaris received one new Airbus A320 aircraft equipped with sharklets.

On August 19, 2013, the Company selected Pratt & Whitney and International Aero Engines (IAE) to power its fleet of 30 A320neo and 14 A320ceo to be delivered between 2015 and 2020.

Other Current Highlights

In October, we successfully migrated to our new reservations system, called Navitaire, which will enable us to further develop our non-ticket revenues. We also took advantage of this platform migration to re-launch our new webpage and implement our new baggage policy.