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Investor updateJune 2020
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. 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.
Disclaimer
Volaris, the Ultra Low Cost Carrier with high growth potential in the Americas
3
Among the lowest cost airlines in the world, enabling an unparalleled competitive position
Bus switching, a source of high growth potential in underpenetrated markets in Mexico and US
Low fares and point-to-point network that support market leadership and stimulation
Further growth opportunities in current markets, new geographies and ancillary revenues
Multiple actions taken to address impacts from COVID19 pandemic quickly and decisively
Company Overview
Volaris: the high growth ULCC of Latin America
*Information as of 1Q20Note: Destinations map as filed in the latest 20-F form
5
Volaris is the largest Mexican carrier MXN $10.7 billion cash and cash equivalents (30% LTM operating revenues)
82 aircraft
22M passengers
70 destinations
214 routes
USD $54.0 average base fare
USD cents $4.13 CASM ex-fuel*
USD cents $6.25 CASM*
Volaris has transported 120+ million passengers since inception Key Statistics Mar’20 LTM
%
Volaris is the clear market leader
6
Airlines with Operations in Mexico
Passengers Apr’20 LTM(based on AFAC-SCT)
Passengers Apr’20 LTM (based on traffic reports)
+42%
Note: Volaris includes Costa Rica subsidiarySource: AFAC-SCT and Traffic reports
The key to Volaris’ success has been its disruptive model that has made air travel accessible to all
7
RESILIENT ULCC
BUSINESS MODEL
Capacityincrease
Cost reduction
Lowbase fares
More customers
More ancillaries
Relentless focus on costs
8
Cost reductionCASM ex-fuel
CASM
Volaris is among the lowest unit-cost operators worldwide
…with clear result in unit cost reductions… …among the best unit costs in the World
Fleet• NEO A321 / A320• Fleet upgauge
Productivity• Increased productivity
and utilization• New fuel consumption
initiatives
Back office• New distribution
strategy• New, lower cost
providers
Multiple efficiency initiatives…
2012
2013
2014
2015
2016
2017
2018
2019
1Q20
20
2011
Volaris’ CASM excl. fuel (USD cents)
CAGR(2011 to 2019)
- 4.2%
CASM (USD cents, FY19)(1)
(1) Presenting average CASM and CASM ex-fuel. "US LCCs": Southwest, Allegiant, Jet Blue, Spirit; "Latin American carriers": Avianca, Azul, Copa, Aeromexico, LATAM and Gol; "US legacy carriers": Delta, American Airlines, Alaska Airlines and United AirlinesNote: Non-USD data converted to USD using an average exchange rate for the period
Until the third week of Mar’20 traffic started to decline given the COVID-19 outbreak. On March 24th, the Company announced a decrease in ASMs for the
end of March and April of ~50%
Proven ability to stimulate demand
Note: Volaris has lower base fares than buses in bus segments above 6 hours long*Fares by segment observed in December 2019Source: AFAC-SCT; ground public Mexican transportation
9
Low base fares
Growing demand through lower fares…
Volaris’ booked passengers Average base fare (MXN)
0
10
20
30M
1,000
1,100
1,200
1,300
1,400
1,500
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Average base fare (MXN)
900
Volaris' bookedpassengers
PassengersAvg. base fare
Volaris fares are lower than bus fares in many markets
Average fare(MXN, 2019)
41% of all routes compete only with buses
Route Volaris Hrs. Bus* Hrs.
Culiacan-Tijuana 763 2.2 1,461 15.5
Guadalajara-Tijuana 1,092 3.1 1,575 31.0
Mexico - Tijuana 1,235 3.8 2,243 29.7
Bajio-Tijuana 1,026 3.2 2,503 25.8
Cancun- Mexico 717 2.6 1,330 25.9
Durango-Tijuana 1,235 2.6 1,968 20.2
Mexican demographics and bus market continue to be a sizeable opportunity for growth
Source: CONAPO, SCT and bus market information 201810
Growing, young population
Bus passengers
3,094
Air passengers
96 4650
InternationalDomestic
41% of Volaris routes without air competition68 routes in which Volaris pioneered air service6% first time flyers on any given Volaris aircraft (1.2M in 2019)
More customers
10 5 0 5 10
Male Female
Million inhabitants0-19 years 20-64 years 65+ years
020
6040
80
020
6040
80+100 +100
Mexican demographic composition by age
Emerging middle class
26% 20%
35%25%
17%30%
14% 17%7% 8%
2010 2025ELow Low-Mid Medium Mid-High High
+17pp
Mexican middle class as a % of population
Huge bus market
1% bus switching= +67% (+31M)
domestic air passengers
Income ranges:
Big improvements in non-ticket revenues, now among the top 10
Financial information converted to USD using an average Exchange rate for the period only for purposes of the presentation 11
Avenues of Growth
Non-Ticket Revenue ResultsNon-ticket as % of Total Revenue (%, 1Q20)
Volaris Non-Ticket per Passenger (USD)
Ancillaries
Non-ticket revenue substitutes base fare; customers are less price sensitive to ancillaries
Execute full dynamic pricingFind the optimal price
Achieve full potential personalizationBased on customer profile not products
Improved top generatorsLaunched new plus fare
Implemented new ideasMulticurrency, widgets, simplicity
Renew subscription programsEngage and retain frequent customers
Launched new business unitYaVas
142204 211
279338
381429
479 514539 564
2011 2012 2013 2014 2015 2016 2017 2018 2Q19 3Q19 1Q20
2011-2019 CAGR: 19%
Volaris’ fleet plan drives lower unit costs; NEO fleet is the main competitive structural advantage
12(1) Net fleet after contractual additions and returns. The Company fleet schedule is subject to changes
18 15 12 8 7 3 3
36 43 4343 41 40 40
32
210 10
10 10 10 1010
1 6 12 17 26 3540
46
68 20
56
69 7177
8289
96105
2015 2016 2017 2018 2019 2020E 2021E 2022E
A321neoA320neoA321A320A319
6
8
Currently managing fleet deliveries and redeliveriesto reflect lower growth and capacity adjustments
Capacityincrease
Fleet plan
NEO% 8% 21% 28% 36% 45% 57%
Recent Developments
“I am especially proud of the job of our ambassadors and their selfless attitude facing this unprecedented challenge. Volaris is taking crucial actions to prioritize the health of our ambassadors and customers while protecting the
business. We are implementing decisive actions to mitigate the operational and financial impacts of COVID-19 pandemic by making deep schedule reductions for April and May, drastically reducing spending and carefully managing our liquidity position. We are not hesitating to make difficult decisions to ensure the long-term success of our airline.”
Enrique Beltranena, CEO & President of Volaris
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Play offense, not just defense
Multiple actions taken to address impacts from COVID19 quickly and decisively
Defendagainstsales declines
Preserve liquidity and cash
Protect our ambassadors and customers
• Launched new biosecurity and cleaning protocol• Communicating pro-actively with all staff,
especially with crews and airport staff• Activated home office technologies & protocols• Implemented online training• Implemented leave of absence & vacation program
ESG“Avión AyudaVolaris”
• Decreased scheduled capacity to defend profitability
• Implemented a customer centric view on changes and electronic credit without cash burn
• Launched new volaris.com, close communication on social media, email
• Executed strict cash preservation program• Holding twice weekly cash meeting to determine
cash outflows for the week to stretch payables accounts
• Contacting all major vendors and partners to ask for reductions and better payment terms
• Closely monitoring capacity reductions from competitors for possible opportunities
• Testing new ancillaries (“flexibility combo”)• Targeted promotions to test stimulation potential
• Operated 25% of original capacity in 2Q20• Added back capacity for June at ~38% vs. original
schedule• Further capacity increases dependent on demand
and sales triggers• Central America remains closed until ~mid- July
Reduce costs
Review fleet and network
• Aircraft already in manufacturing as of COVID19 start will be delivered in 2020 (7 aircraft)
• The current intention going forward is to freeze net fleet growth in 2021, 22, 23
• Put in place cost contingency plan• Maintained labor base at reduced compensation
levels• Reduced capital expenditures to a minimum• Cut non-essential expenses
• Transported 29 tons in health equipment destined for professionals fighting COVID19 in 15 different cities in Mexico
• Transported health workers of the Mexican National Institute of Social Security (IMSS), volunteers of the Mexican Red Cross and disaster relief NGO CADENA
Adjust capacity
Safety and health of ambassadors and customers is a top priority
15
Protect ambassadors and customers
• Followed and implemented protocols and guidelines issued by the International Air Transportation Association (IATA) and health organizations
• Cleaning and bio-risk prevention recommendations
• Pro-active & close communication with crews and airport staff
• Activated home office technologies & protocols
• Online training
• Leave of absence and vacation program implemented
New biosecurity and cleaning protocol
Onboard
Landing
Check-in&
Boarding
Aircraft • Aircraft sanitization with industrial grade products
• Mobile check-in is promoted• Health questionnaire requirement for
customers• Body temperature checks• Shoe disinfection• Use of face mask is mandatory
throughout the entire travel process
Crew
• Air in the cabin renewed every 3 min• Hand sanitization provided• Face masks available for customers
• Disembark in a controlled manner by row• Baggage sprayed with disinfectant• Social distancing on ground
Implemented safety and hygiene protocols to protect the well-being of our passengers,
crew and ground personnel
• Health risk prevention gear and equipment with face masks, eye protection and gloves provided to the crew
Liquidity, cash preservation and cost reduction measures to face COVID-19
• As of March 31st, 2020, cash and cash equivalentswere $10.7 billion pesos (30% LTM operating revenues), mainly denominated in US Dollars
• Solid balance sheet with only interest-bearing obligations in the short term
• Diligent cash preservation program with a high level of scrutiny on payment terms
• Stablished a “Treasury war room” to diligently review each payment and reduce non-operational expenses
• Obtained extended payment periods and discounts with most suppliers for the months of April, May and June
• Received cooperation from most of our lessors, airport groups and other main business partners
16
Liquidity and cash preservation Obtained extended payment periods with suppliers
Successfully completed comprehensive negotiations will help the Company to overcome the current contingency
• “Cost Contingency Program” Implemented in order to face COVID-19 with benefits of ~USD $200M, mainly in payment deferrals:
– Aircraft rents (with all lessors)
– Major maintenance and line maintenance suppliers
– Airports (almost all domestic and international)
– Operations (main training simulator supplier)
– IT services (almost all suppliers)
Liquidity, cash preservation and cost reduction measures to face COVID-19
17
Main cost initiatives
• Cost contingency plan in place to achieve discounts and payment deferrals with main suppliers, aircraft's and engine’s lessors, airport groups
• Maintained labor base at reduced compensation levels:
• Operational personnel: up to 82% has agreed to voluntarily leave of absences for periods of up to 90 days
• Administrative personnel: wages reduction amongst the different organizational layers from 80% at the C-suite level to 20% in lower levels
• Board of Directors: 100% and 40% of annual compensation waived by non-independent members, and independent members, respectively
• Capital expenditures reduced to a minimum and cut non-essential expenses for the rest of the year
2020 cost contingency plan
Operations
Maintenance
Airports
Salaries &Benefits
IT
Fixed
Variable
Activity & payment deferralCost reduction / avoidance
47%
10%53%
90%
• Consumables• Travel expenses and uniforms• Offices rentals in certain airports free of charge
• Training and travel expenses• Implementation of e-learning courses• Increase of credit days
• Leave of absence & headcount freeze• Cancellation of variable compensation• Cancelation of salary increase for admin
• Landings, parking and overnight fees• Airport services
• IT capex postponed• Negotiations to fix FX• Non-essential projects paused
2020 liquidity, cash preservation and cost reduction plan of ~ USD $200M(1)(1) Updated as of May 22, 2020
Actions to address impacts from COVID19 pandemic
18
Capacity Network
April2020
May2020
June2020
July2020
Routes 99 34 74
Stations 50 24 48
Domestic 40 21 36
International 10 3 12
Segments 1,938 1,407 4,519
Domestic 1,693 1,309 4,045
International 245 98 474
Average daily segments 65 45 151ASMs(in millions, scheduled & charter)
365 247 *
Domestic 293 219 *
International 72 28 *Total Load Factor(in %, scheduled, RPMs/ASMs)
87.4% 87.5% *
• Flexible and strategic operational plan to reduce capacity
• Cancelled and consolidated flights to defend profitability
• Capacity reductions:‒ April 2020: ASMs decreased by 82% YoY‒ May 2020: ASMs decreased by 88% YoY‒ June 2020: added back capacity of ~38% vs. original
schedule
• Capacity increases dependent on demand and sales triggers
• Flight network adjustments as of June 2020:
‒ 151 daily flights‒ 74 routes (60 domestic & 14 international)‒ 48 airports offered (36 domestic & 12 international)‒ Operations in Central America remain closed
After 3 months of COVID impact, countries start recovering capacity, pointing towards a gradual 3Q recovery in demand for Mexico
Note: Capacity as of June 8th, 2020Source: OAG 19
Country domestic capacity monitoring - seats
0
5
10
15
20M
US
China
Jan'20 Feb Mar Apr May Jun Jul0
1
1.5
2M
Mexico
Thailand
Jan'20 Feb Mar Apr May Jun Jul
SpainTurkey
Financial Information
Financial results
21
28.6
35.5
LTM Mar 2019 LTM Mar 2020
1.52.1
1Q 2019 1Q 2020
March 2020 LTM Revenues (B, MXN)
1Q 2020 EBITDAR Margin(1)
Revenue CAGR 2011 – 2019
1Q 2020 EBITDAR (B, MXN)
19%
9% 8% 8%5%
3%
Volaris Azul Aeromexico Gol Latam Copa Avianca
(1) LATAM airlines public information as of 4Q19Source: Airlines public information
24%
707
Balance sheet and liquidity
22
Adjusted Net Debt to LTM EBITDAR ratio
Unrestricted Cash (B, MXN)
1Q20 Adjusted Net Debt to LTM EBITDAR(1)
Volaris is NYSE listed, SEC registered and under SOX compliance
1Q20 Cash and Equivalents as % of LTM Operating Revenue(1)
(1) Copa, Azul, Gol, LATAM Airlines and Avianca public information as of December 2019 Source: Airlines public information
31% 30%28%
21%19% 20%
7%
Copa Volaris Azul Gol Latam Aeromexico Avianca