Volaris Reports Record Second Quarter 2016 Results: 35% Adjusted EBITDAR Margin

Volaris* (NYSE:VLRS and BMV:VOLAR), the ultra-low-cost airline serving Mexico, the United States and Central America, today announced its financial results for the second quarter 2016.

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

Second Quarter 2016 Highlights

-- Total operating revenues reached Ps.5,131 million for the second quarter, an increase of 25.2% year over year.

-- Non-ticket revenues were Ps.1,317 million for the second quarter, an increase of 34.7% year over year. Non-ticket revenues per passenger for the second quarter were Ps.362, increasing 6.6% year over year.

-- Total operating revenues per available seat mile (TRASM) rose to Ps.128.9 cents for the second quarter, an increase of 4.8% year over year.

-- Operating expenses per available seat mile (CASM) were Ps.119.2 cents for the second quarter, an increase of 5.9% year over year.

-- Adjusted EBITDAR was Ps.1,819 million for the second quarter, an increase of 42.1% year over year. Adjusted EBITDAR margin was 35.5% for the second quarter, a margin expansion of 4.3 percentage points.

-- Operating income was Ps.388 million for the second quarter, with an operating margin of 7.6%, equal to a year over year operating margin decrease of 0.9 percentage points.

-- Net income was Ps.935 million (Ps.0.92 per share / US$0.49 per ADS) for the second quarter, with a net margin of 18.2%, a year over year margin increase of 9.6 percentage points.

-- Net increase of cash and cash equivalents was Ps.564 million for the second quarter. As of June 30, 2016, unrestricted cash and cash equivalents were Ps.6,930 million.

Volaris CEO Enrique Beltranena commented: "Volaris' performance highlights the resilience of its ULCC model that combines high growth, expanding unit revenue, and managing unit costs down. These results reflect our ability to stimulate demand with low base fares, successfully switch bus passengers to air travel and further unbundle our product offering. We will work to continue balancing our growth with profitability to create shareholder value."

Solid Demand Supports Traffic Volume Growth, Despite Exchange Rate and Fuel Price Volatility

-- Air traffic volume increase: The Mexican DGAC reported overall passenger volume growth for Mexican carriers of 9.0% year over year in April and May. Domestic passenger volume increased 9.2%, while international passenger volume increased 8.2%.

-- Exchange rate volatility: The Mexican peso depreciated 17.9% year over year against the US dollar, from an average of Ps.15.31 pesos per US dollar in the second quarter 2015 to Ps.18.05 pesos per US dollar during the second quarter 2016.

-- Lower fuel prices: The average economic fuel cost per gallon decreased 8.6% to Ps.28.3 per gallon (US$1.5) in the second quarter 2016, year over year.

Unit Revenue Improvements Driven by Volume and Non-Ticket Revenue Expansion, Despite Adverse Seasonality

-- Passenger traffic stimulation: Volaris booked 3.6 million passengers in the second quarter of 2016, up 26.4% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 24.0% for the same period.

-- Unit revenue improvement and demand driven capacity growth: For the second quarter of 2016, TRASM increased 4.8%, while yield decreased 1.5%, year over year. During the second quarter, in terms of ASMs, domestic capacity grew 19.3%, while international capacity increased 19.9% responding to a strong demand from both markets. This was accomplished despite the effects of adverse seasonality due to high traffic in Holy and Easter weeks falling in the first quarter, unlike 2015 when they fell predominantly in the second quarter. System load factor during the quarter increased 3.2 percentage points year over year to 86.1%.

-- Non-ticket revenues growth:Non-ticket revenues and non-ticket revenues per passenger increased 34.7% and 6.6% year over year for the second quarter of 2016, respectively. The Company has been expanding its product offering and improving its presence in mobile, web and airport kiosks, while more dynamically pricing its ancillaries.

-- New routes:In the second quarter 2016, Volaris launched eight new routes, six domestic and two international.

Exchange Rate Pressures Challenge Fuel Savings

In the second quarter 2016, Volaris continued to experience pressure in US-dollar denominated costs, such as aircraft and engine rent expenses, international airport costs, and maintenance expenses due to the depreciation of the Mexican peso. The CASM for the second quarter was Ps.119.2 cents, a 5.9% increase compared to the second quarter 2015, mainly driven by FX pressures.

Young and Fuel Efficient Fleet Supporting Lower Operating Costs

During the second quarter, the Company incorporated five additional aircraft comprised of three A320s and two A321s. As of June 30, 2016, Volaris fleet was composed of 64 aircraft (18 A319s, 42 A320s and 4 A321s), with an average age of 4.5 years. At the end of the second quarter 2016 Volaris' fleet had an average of 171 seats per aircraft, an increase from 168 seats in the second quarter of 2015, and 51% of our seats were in sharklet-equipped aircraft.

Cash Flow Generation, Solid Balance Sheet and Good Liquidity

The net increase in cash and cash equivalents was equal to Ps.564 million during the second quarter, mainly driven by positive operating cash flow of Ps.194 million and by net foreign exchange differences on cash balance by Ps.409 million. As of June 30, 2016, Volaris' unrestricted cash and cash equivalents balance was Ps.6,930 million. Volaris registered negative net debt (or a positive net cash position) of Ps.6,109 million and total equity of Ps.8,611 million.

Active in Fuel Risk Management

Volaris remains active in its fuel risk management program. Volaris utilized call options to hedge 62% of its second quarter 2016 fuel consumption, at an average strike price of US $1.95 per gallon, which combined with the 38% unhedged consumption, resulted in a blended average economic fuel cost of US$1.50 per gallon.

Investors are urged to carefully read the Company's periodic reports filed with or furnished to the Securities and Exchange Commission, for additional information regarding the Company.

Refer to full documentation in attachments box, located at the top left, below the headline.