Volaris Reports Record First Quarter 2016 Results: 42% Adjusted EBITDAR Margin

The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS).

First Quarter 2016 Highlights

• Total operating revenues were Ps.5,182 million for the first quarter, an increase of 37.5% year over year.
• Non-ticket revenues were Ps.1,276 million for the first quarter, an increase of 50.8% year over year. Non-ticket revenues per passenger for the first quarter was Ps.372, increasing 10.4% year over year.
• Total operating revenues per available seat mile (TRASM) rose to Ps.133.2 cents for the first quarter, an increase of 7.5% year over year.
• Operating expenses per available seat mile (CASM) were Ps.111.7 cents for the first quarter, a decrease of 0.7% year over year.
• Adjusted EBITDAR was Ps.2,175 million for the first quarter, an increase of 80.6% year over year. Adjusted EBITDAR margin was 42.0% for the first quarter, a margin expansion of 10.0 percentage points.
• Operating income was Ps.836 million for the first quarter, with an operating margin of 16.1%, equal to a year over year operating margin improvement of 6.9 percentage points.
• Net income was Ps.602 million (Ps.0.59 per share / US$0.34 per ADS) for the first quarter, with a net margin of 11.6%.
• Net increase of cash and cash equivalents was Ps.1,209 million for the first quarter. Unrestricted cash and cash equivalents was Ps.6,366 million.

Volaris´ CEO Enrique Beltranena commented: "The strong passenger demand environment in the first quarter of 2016, supported by seasonality, continued fueling Volaris' financial results and achieving record first quarter margins. Our low base fares and bus switching campaign strategy continue to be the cornerstone of our unbundled business model to stimulate demand for both domestic and international travel in Mexico and the United States."

Macroeconomic Environment Supports Traffic Volume Growth; Still Exchange Rate Volatile

• Air traffic volume increase: The Mexican DGAC reported an overall passenger volume growth for Mexican carriers of 15.0% year over year in January and February. Domestic passenger volume increased 13.2%, while international passenger volume increased 21.9%.
• Exchange rate volatility: The Mexican peso depreciated 21% year over year against the US dollar, from an average of Ps.14.93 pesos per US dollar in the first quarter 2015 to Ps.18.02 pesos per US dollar during the first quarter 2016.
• Lower fuel prices: The average economic fuel cost per gallon decreased 25.6% to Ps.22.1 per gallon (US$1.3) in the first quarter 2016, year over year.

Unit Revenues Improvements Driven by a Strong Demand and Seasonality, with Non-Ticket Revenue Expansion

• Passenger traffic stimulation: Volaris booked 3.4 million passengers in the first quarter of 2016, a 36.6% year over year growth. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 35.8% for the same period.
• Unit revenues improvement and demand driven capacity growth: For the first quarter of 2016, TRASM increased 7.5%, while yield decreased 1.6%, year over year. During the first quarter, in terms of ASMs, domestic capacity grew 28.4%, while international capacity increased 26.7% responding to a seasonally strong demand in both markets.
• Non-ticket revenues growth: Non-ticket revenues per passenger increased 10.4% year over year for the first quarter of 2016, as the Company continued implementing dynamic pricing strategies and increasing car rental and hotel content.
• New routes: In the first quarter 2016, Volaris launched four new domestic routes.

Fuel Savings Offset Exchange Rate Pressures

In the first quarter 2016, Volaris continued to experience pressure in US-dollar denominated costs, such as aircraft rents, international airport costs, and maintenance expenses due to the depreciation of the Mexican peso. Despite these challenges, the CASM for the first quarter was Ps.111.7 cents, a 0.7% decrease compared to the first quarter 2015, mainly driven by lower fuel prices.

Young and Fuel Efficient Fleet

As of March 31, 2016, Volaris fleet was comprised of 59 aircraft (18 A319s, 39 A320s and 2 A321s), with an average age of 4.6 years.

Strong Cash Flow Generation, Solid Balance Sheet and Good Liquidity

The net increase in cash and cash equivalents was equal to Ps.1,209 million during the first quarter, mainly driven by generation of operating cash flow of Ps.1,329 million. As of March 31, 2016, Volaris' unrestricted cash and cash equivalents balance was Ps.6,366 million. Volaris registered negative net debt (or a positive net cash position) of Ps.5,265 million and total equity of Ps.7,484 million.

During the first quarter 2016, Volaris obtained positive cash flow from investing activities of Ps.435 million, which included reimbursements of aircraft pre-delivery payments of Ps.446 million and net acquisition of rotable spare parts, furniture and equipment and intangibles assets for Ps.11 million.

Active in Fuel Risk Management

Volaris has continued to remain active in its fuel risk management program. Volaris hedged 55% of its first quarter fuel consumption of 2016, at an average strike price of US $1.94 per gallon, which combined with the 45% unhedged consumption, resulted in a blended average economic fuel cost of US$1.27 per gallon.