Avianca Holdings Reports Operating Profit of $37.6 Million

Despite seasonality and a traditionally weak second quarter for airlines in the region, Avianca's results proved to be strong, obtaining the best second quarter in terms of EBITDAR margin over the last three years. The latter was mainly driven by the cost saving and network optimization initiatives, stronger domestic markets and robust traffic numbers in Avianca's key markets such as South America, the Caribbean and Europe. As such, during June 2016, routes to Europe reached an average consolidated load factor of 92.8%.

As part of our network optimization process, the Company continues to selectively grow in specific high potential markets. Accordingly, Avianca is the first airline to launch an international direct service to Cuzco, with 3 weekly frequencies from our Bogota Hub. Furthermore, over the second quarter of 2016 and in line with the optimization strategy, Avianca transported more than seven million passengers and maintained a stable load factor of 78.1%.

During the quarter, our loyalty program LifeMiles, continued to expand as the cobranded credit card base grew 25.5%, reaching 485,000 credit cards by quarter end. Furthermore the program ended with more than 6.7 million members, which represents a 9.3% increase over the same quarter of 2015.

As a result of the cost saving initiatives and lower oil prices total operating costs1 dropped 12.1%. In line with this, cost per available seat kilometer (CASK1) decreased 18.1% to 8.02 cents, while CASK ex-fuel1 declined 12.3% to 6.37 cents.

Total operating revenues declined 10.7% as a result of a 16.1% yield dilution which was partially offset by a 6.5% increase in passenger traffic (RPK´s)

The quarter ended with an EBITDAR1 of $178.4 million, while EBITDAR margin1 reached 18.5%, a 528 basis points increase when compared to the same period of 2015. Adjusted Net income1, excluding special items totaled -$4.0 million and adjusted net income margin reached -0.4%, an increase of 192bps over 2Q2015. As such, Avianca Holdings S.A. reaffirms its 2016 EBIT margin guidance between 5.5% and 7.5%.

In line with the Company's fleet plan, between April and June 2016, the Company took delivery of one Airbus A320S (equipped with sharklets), while phasing out five aircraft: three Airbus A319 and two Embraer E190. Avianca Holdings S.A. and its subsidiaries ended the quarter with a consolidated operating fleet of 174 aircraft.

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