Volaris Reports Second Quarter 2014 Results: Disciplined Capacity Management and Record Non-Ticket
28-Jul-2014 Volaris Reports Second Quarter 2014 Results: Disciplined Capacity Management and Record Non-Ticket Revenue per Passenger
Volaris* (NYSE: VLRS and BMV: VOLAR), the ultra-low-cost airline serving Mexico and the US, today announced its financial results for the second quarter 2014.
Second Quarter 2014 Highlights
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 second quarter of 2013.
- Total operating revenues were Ps.3,308 million for the second quarter, an increase of 9%, due to a seasonally stronger second quarter and non-ticket revenue growth.
- Non-ticket revenues increased 44%, reaching Ps.659 million. Non-ticket revenue per passenger increased 26%, reaching Ps.275 (US$21), an important step forward in achieving our product unbundling strategy.
- Total operating revenue per available seat mile (TRASM) decreased to Ps.113.2 cents (US$8.7 cents), a 5% decrease.
- Operating expenses per available seat mile (CASM) excluding fuel decreased 1%, reaching Ps.70.4 cents (US$5.4 cents), reflecting Volaris' constant sharp focus on cost control.
- Adjusted EBITDAR was Ps.595 million with a net loss of Ps.75 million (Ps.0.07 per share / US$0.06 per ADS).
Volaris CEO Enrique Beltranena commented: "In the second quarter of 2014, fare and demand environment showed early signs of stabilization and then gradual recovery from the challenging fourth quarter 2013 and first quarter 2014 market conditions. The Volaris team turned around our key performance indicators throughout the most difficult months of the last years, resulting in an improvement compared to the first quarter. We consciously managed ASM capacity both, in terms of quantity and quality. Volaris delivered a monthly sequential improvement in total unit revenues. Capacity growth was controlled and redeployed where needed. Such improvement is uncommon in the aviation industry in such short timeframe. We are cautiously encouraged by the recent trends, and continue to see evidence of improvement in the economic environment and in our business performance going forward."
An Improving, But Still Fragile, Macroeconomic Environment and Competitive Landscape Contribute to the Beginning of a Turnaround in the Second Quarter
- The Mexican macroeconomic environment:
- GDP growth estimates for the full year are 2.6%, according to the Mexican Central Bank survey from June 2014.
- Consumer confidence decreased 2.4% year over year in June of 2014.
- The Mexican General Economic Activity Indicator (IGAE) increased 1.4% in May of 2014 compared to the same period in 2013.
- Mexican peso volatility: The Mexican peso depreciated 4.3% year over year against the US dollar, as the exchange rate devalued from an average of Ps.12.46 pesos per US dollar in the second quarter of 2013 to Ps.13.00 pesos per US dollar during the second quarter of 2014.
- Fuel costs increase: The average economic fuel cost per gallon increased 6.5% year over year in the second quarter of 2014.
The Volaris ULCC Model Drives Progress in a Slightly Improved Market Environment
- Unit revenue improvement: Quarter-over-quarter TRASM improved 12% as a result of a sequential monthly improvement average base fare and non-ticket revenue per passenger growth.
- Rational capacity management in the domestic market and redeployment to the international market: Domestic market capacity grew 12% and international market capacity increased 25% in the second quarter year over year, coupled with network diversification.
- Non-ticket revenues growth: Non-ticket revenues excluding cargo per passenger increased 46% year over year. Our non-ticket revenues strategy continued to unfold during the second quarter 2014, as the new baggage policy and the retail on-board program was rolled-out and the entire ancillary suite expanded and gained greater customer acceptance.
- Air traffic volume increase: The DGAC (Direccion General de Aeronautica Civil) reported an overall passenger increase for Mexican carriers of 12% for the first five months of 2014 and Volaris market share remained at 23% in total market, the second largest operator among Mexican carriers.
- New routes and operations: During the second quarter, Volaris launched three new point-to-point routes (two domestic and one international), focusing on our VFR customer base.
Second Quarter Operating Revenues: Challenging Start to the Quarter, Trends Improving
Volaris booked 2.4 million passengers in the second quarter 2014. This equates to a 15% growth rate in the second quarter 2014 as compared to the second quarter in 2013.
Volaris traffic (measured in terms of revenue passenger miles or RPMs) increased 14% in the second quarter 2014 year over year.
For the second quarter 2014, Volaris' total operating revenues were Ps.3,308 million, an increase of 9% year over year. Average fare decreased 10% in the second quarter 2014 year over year.
During the second quarter 2014, our non-ticket revenues and non-ticket revenue per passenger reached Ps.659 million and Ps.275, respectively. Non-ticket revenues excluding cargo per passenger increased 46% in the second quarter year over year.
Passenger revenue per available seat mile (RASM) was 11% lower compared to the second quarter 2013, and total operating revenue per available seat mile (TRASM) was 5% lower, resulting from a weak fare environment, partially offset by stronger non-ticket revenues.
Rigorous Cost Discipline: A Key Component of the Volaris ULCC Model
CASM for the second quarter 2014 was Ps.116.4 cents (US$8.9 cents), a 1% increase compared to the second quarter of 2013, driven by a higher economic fuel cost per gallon and a higher average exchange rate during the quarter. CASM excluding fuel decreased 2% year over year to Ps.70.4 cents (US$5.4 cents) in the second quarter.
Young and Fuel Efficient Fleet: Increasing Cost Efficiency
Reflecting our strategy to further reduce unit costs, Volaris has continued to take deliveries of larger sharklet-equipped A320 aircraft. During the second quarter of 2014 Volaris received two new sharklet-equipped A320s, bringing our seat mix of A320/A319 to a 65/35 percent split.
As of June 30, 2014, the Company´s fleet was comprised of 48 aircraft (29 A320s and 19 A319s), with an average age of 4.1 years.
Strong Balance Sheet and Liquidity: A Foundation for Long Term Growth
As of June 30, 2014, Volaris had Ps.2,088 million in unrestricted cash and cash equivalents. The Company recorded negative net debt (or a positive net cash position) of Ps.1,330 million and total equity was Ps.3,526 million.
Volaris was net cash flow from operating activities neutral during the second quarter. During the second quarter 2014, Volaris incurred capital expenditures of Ps.215 million, which included pre-delivery payments for future deliveries of aircraft net of refunds of Ps.89 million and acquisitions of rotable spare parts, furniture and equipment of Ps.126 million.
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.
Conference Call/Webcast Details:
Volaris will conduct a conference call to discuss these results today, July 28, 2014, at 11:00 a.m. ET. A live audio webcast of the conference call will be available to the public on a listen-only basis at http://ir.volaris.com
|
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries |
||||
|
Financial and Operating Indicators |
||||
|
Unaudited
|
Three months
|
Three months
|
Three months
|
Variance
|
|
Total operating revenues (millions) |
254 |
3,308 |
3,035 |
9.0% |
|
Total operating expenses (millions) |
261 |
3,403 |
2,933 |
16.0% |
|
EBIT (millions) |
(7) |
(95) |
102 |
NA |
|
EBIT margin |
(2.9%) |
(2.9%) |
3.4% |
(6.3) pp |
|
Adjusted EBITDA (millions) |
(2) |
(34) |
156 |
NA |
|
Adjusted EBITDA margin |
(1.0%) |
(1.0%) |
5.2% |
(6.2) pp |
|
Adjusted EBITDAR (millions) |
46 |
595 |
673 |
(11.6%) |
|
Adjusted EBITDAR margin |
18.0% |
18.0% |
22.2% |
(4.2) pp |
|
Net (loss) income (millions) |
(6) |
(75) |
173 |
NA |
|
Net margin |
(2.3%) |
(2.3%) |
5.7% |
(8.0) pp |
|
Earnings per share: |
||||
|
Basic |
- |
(0.07) |
0.22 |
NA |
|
Diluted |
- |
(0.07) |
0.22 |
NA |
|
Earnings per ADS: |
||||
|
Basic |
(0.06) |
(0.74) |
2.15 |
NA |
|
Diluted |
(0.06) |
(0.74) |
2.15 |
NA |
|
Weighted average shares outstanding: |
||||
|
Basic |
- |
1,011,876,677 |
809,777,350 |
25.0% |
|
Diluted |
- |
1,011,876,677 |
809,777,350 |
25.0% |
|
Available seat miles (ASMs) (millions) |
- |
2,923 |
2,540 |
15.1% |
|
Domestic |
- |
2,203 |
1,965 |
12.1% |
|
International |
- |
720 |
574 |
25.4% |
|
Revenue passenger miles (RPMs) (millions) |
- |
2,386 |
2,101 |
13.6% |
|
Domestic |
- |
1,764 |
1,591 |
10.9% |
|
International |
- |
622 |
509 |
22.0% |
|
Load factor |
- |
81.6% |
82.7% |
(1.1) pp |
|
Domestic |
- |
80.1% |
81.0% |
(0.9) pp |
|
International |
- |
86.4% |
88.7% |
(2.3) pp |
|
Total operating revenue per ASM (TRASM) (cents) |
8.7 |
113.2 |
119.5 |
(5.3%) |
|
Passenger revenue per ASM (RASM) (cents) |
7.0 |
90.6 |
101.5 |
(10.7%) |
|
Passenger revenue per RPM (yield) (cents) |
8.5 |
111.0 |
122.8 |
(9.5%) |
|
Average fare |
84.9 |
1,107 |
1,234 |
(10.3%) |
|
Non-ticket revenue per passenger |
21.1 |
275 |
219 |
26.0% |
|
Non-ticket revenue excluding cargo per passenger |
19.3 |
252 |
172 |
46.4% |
|
Operating expenses per ASM (CASM) (cents) |
8.9 |
116.4 |
115.5 |
0.8% |
|
CASM ex fuel (cents) |
5.4 |
70.4 |
71.5 |
(1.5%) |
|
Booked passengers (thousands) |
- |
2,393 |
2,090 |
14.5% |
|
Departures |
- |
18,498 |
16,124 |
14.7% |
|
Block hours |
- |
48,801 |
42,841 |
13.9% |
|
Fuel gallons consumed (millions) |
- |
34.1 |
30.2 |
13.0% |
|
Average economic fuel cost per gallon |
3.0 |
39.4 |
37.0 |
6.5% |
|
Aircraft at end of period |
- |
48 |
43 |
11.6% |
|
Average aircraft utilization (block hours) |
- |
12.4 |
12.1 |
2.3% |
|
Average exchange rate |
- |
13.00 |
12.46 |
4.3% |
|
*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only. |
||||
|
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries |
||||
|
Financial and Operating Indicators |
||||
|
Unaudited
|
Six months
|
Six months
|
Six months
|
Variance
|
|
Total operating revenues (millions) |
467 |
6,084 |
6,097 |
(0.2%) |
|
Total operating expenses (millions) |
511 |
6,667 |
5,957 |
11.9% |
|
EBIT (millions) |
(45) |
(583) |
140 |
NA |
|
EBIT margin |
(9.6%) |
(9.6%) |
2.3% |
(11.9) pp |
|
Adjusted EBITDA (millions) |
(36) |
(465) |
276 |
NA |
|
Adjusted EBITDA margin |
(7.6%) |
(7.6%) |
4.5% |
(12.1) pp |
|
Adjusted EBITDAR (millions) |
58 |
1,306 |
(42.0%) |
|
|
Adjusted EBITDAR margin |
12.4% |
12.4% |
21.4% |
(9.0) pp |
|
Net (loss) income (millions) |
(34) |
(445) |
109 |
NA |
|
Net margin |
(7.3%) |
(7.3%) |
1.8% |
(9.1) pp |
|
Earnings per share: |
||||
|
Basic |
- |
(0.44) |
0.14 |
NA |
|
Diluted |
- |
(0.44) |
0.14 |
NA |
|
Earnings per ADS: |
||||
|
Basic |
(0.34) |
(4.40) |
1.40 |
NA |
|
Diluted |
(0.34) |
(4.40) |
1.40 |
NA |
|
Weighted average shares outstanding: |
||||
|
Basic |
- |
1,011,876,677 |
803,382,392 |
26.0% |
|
Diluted |
- |
1,011,876,677 |
803,382,392 |
26.0% |
|
Available seat miles (ASMs) (millions) |
- |
5,665 |
5,015 |
13.0% |
|
Domestic |
- |
4,247 |
3,822 |
11.1% |
|
International |
- |
1,418 |
1,192 |
18.9% |
|
Revenue passenger miles (RPMs) (millions) |
- |
4,600 |
4,101 |
12.2% |
|
Domestic |
- |
3,403 |
3,067 |
10.9% |
|
International |
- |
1,197 |
1,034 |
15.8% |
|
Load factor |
- |
81.2% |
81.8% |
(0.6) pp |
|
Domestic |
- |
80.1% |
80.2% |
(0.1) pp |
|
International |
- |
84.4% |
86.7% |
(2.3) pp |
|
Total operating revenue per ASM (TRASM) (cents) |
8.2 |
107.4 |
121.6 |
(11.7%) |
|
Passenger revenue per ASM (RASM) (cents) |
6.7 |
86.7 |
103.0 |
(15.9%) |
|
Passenger revenue per RPM (yield) (cents) |
8.2 |
106.8 |
126.0 |
(15.3%) |
|
Average fare |
82.7 |
1,078 |
1,275 |
(15.5%) |
|
Non-ticket revenue per passenger |
19.8 |
258 |
230 |
12.1% |
|
Non-ticket revenue excluding cargo per passenger |
17.7 |
231 |
181 |
28.0% |
|
Operating expenses per ASM (CASM) (cents) |
9.0 |
117.7 |
118.8 |
(0.9%) |
|
CASM ex fuel (cents) |
5.5 |
71.2 |
72.6 |
(1.9%) |
|
Booked passengers (thousands) |
- |
4,554 |
4,050 |
12.4% |
|
Departures |
- |
35,321 |
31,823 |
11.0% |
|
Block hours |
- |
94,051 |
85,073 |
10.6% |
|
Fuel gallons consumed (millions) |
- |
65.7 |
59.4 |
10.6% |
|
Average economic fuel cost per gallon |
3.1 |
40.1 |
39.0 |
2.7% |
|
Aircraft at end of period |
- |
48 |
43 |
11.6% |
|
Average aircraft utilization (block hours) |
- |
12.4 |
12.0 |
3.6% |
|
Average exchange rate |
- |
13.12 |
12.56 |
4.4% |
|
*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only. |
||||
|
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries |
||||
|
Consolidated Statement of Operations |
||||
|
Unaudited
|
Three months
|
Three months
|
Three months ended June 30,
|
Variance
|
|
Operating revenues: |
||||
|
Passenger |
203 |
2,649 |
2,579 |
2.7% |
|
Non-ticket |
51 |
659 |
457 |
44.3% |
|
254 |
3,308 |
3,035 |
9.0% |
|
|
Other operating income |
(0) |
(1) |
(2) |
(61.8%) |
|
Fuel |
103 |
1,345 |
1,118 |
20.4% |
|
Aircraft and engine rent expense |
48 |
629 |
516 |
21.9% |
|
Landing, take-off and navigation expenses |
40 |
526 |
458 |
14.8% |
|
Salaries and benefits |
30 |
390 |
384 |
1.6% |
|
Sales, marketing and distribution expenses |
15 |
195 |
159 |
22.3% |
|
Maintenance expenses |
11 |
148 |
151 |
(2.0%) |
|
Other operating expenses |
8 |
110 |
94 |
16.8% |
|
Depreciation and amortization |
5 |
61 |
54 |
12.1% |
|
Operating expenses |
261 |
3,403 |
2,933 |
16.0% |
|
Operating (loss) income |
(7) |
(95) |
102 |
NA |
|
Finance income |
0 |
5 |
8 |
(35.7%) |
|
Finance cost |
(1) |
(9) |
(18) |
(52.6%) |
|
Exchange gain (loss), net |
(1) |
(15) |
127 |
NA |
|
Comprehensive financing result |
(1) |
(18) |
117 |
NA |
|
Loss before income tax |
(9) |
(113) |
220 |
NA |
|
Income tax benefit |
3 |
38 |
(46) |
NA |
|
Net (loss) income |
(6) |
(75) |
173 |
NA |
|
Attribution of net loss: |
||||
|
Equity holders of the parent |
(6) |
(75) |
174 |
NA |
|
Non-controlling interest |
- |
- |
(1) |
NA |
|
Net (loss) income |
(6) |
(75) |
173 |
NA |
|
*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only. |
||||
|
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries |
||||
|
Consolidated Statement of Operations |
||||
|
Unaudited
|
Six months
|
Six months
|
Six months
|
Variance
|
|
Operating revenues: |
||||
|
Passenger |
377 |
4,910 |
5,166 |
(5.0%) |
|
Non-ticket |
90 |
1,173 |
931 |
26.1% |
|
467 |
6,084 |
6,097 |
(0.2%) |
|
|
Other operating income |
(0) |
(4) |
(26) |
(83.1%) |
|
Fuel |
202 |
2,632 |
2,316 |
13.6% |
|
Aircraft and engine rent expense |
94 |
1,222 |
1,031 |
18.6% |
|
Landing, take-off and navigation expenses |
80 |
1,046 |
919 |
13.8% |
|
Salaries and benefits |
60 |
779 |
4.3% |
|
|
Sales, marketing and distribution expenses |
27 |
352 |
346 |
1.9% |
|
Maintenance expenses |
23 |
306 |
292 |
4.9% |
|
Other operating expenses |
17 |
215 |
197 |
9.3% |
|
Depreciation and amortization |
9 |
118 |
135 |
(12.6%) |
|
Operating expenses |
512 |
6,667 |
5,957 |
11.9% |
|
Operating (loss) income |
(45) |
(583) |
140 |
NA |
|
Finance income |
1 |
10 |
13 |
(19.3%) |
|
Finance cost |
(1) |
(14) |
(36) |
(61.8%) |
|
Exchange gain (loss), net |
(0) |
(4) |
19 |
NA |
|
Comprehensive financing result |
(1) |
(7) |
(4) |
63.6% |
|
Loss before income tax |
(45) |
(590) |
136 |
NA |
|
Income tax benefit |
11 |
145 |
(27) |
NA |
|
Net (loss) income |
(34) |
(445) |
109 |
NA |
|
Attribution of net loss: |
||||
|
Equity holders of the parent |
(34) |
(445) |
112 |
NA |
|
Non-controlling interest |
- |
- |
(3) |
NA |
|
Net (loss) income |
(34) |
(445) |
109 |
NA |
|
*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only. |
||||
|
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries |
||||
|
Consolidated Statement of Financial Position |
||||
|
(In millions of Mexican pesos) |
June 30, 2014
|
June 30, 2014
|
December 31,
|
|
|
(US Dollars)* |
||||
|
Assets |
||||
|
Cash and cash equivalents |
160 |
2,088 |
2,451 |
|
|
Accounts receivable |
52 |
683 |
602 |
|
|
Inventories |
10 |
124 |
114 |
|
|
Prepaid expenses and other current assets |
29 |
376 |
323 |
|
|
Financial instruments |
1 |
8 |
11 |
|
|
Guarantee deposits |
43 |
558 |
499 |
|
|
Total current assets |
294 |
3,837 |
4,000 |
|
|
Rotable spare parts, furniture and equipment, net |
129 |
1,679 |
1,341 |
|
|
Intangible assets, net |
5 |
68 |
79 |
|
|
Deferred income tax |
35 |
457 |
305 |
|
|
Guarantee deposits |
212 |
2,760 |
2,603 |
|
|
Other assets |
4 |
53 |
49 |
|
|
Total assets |
679 |
8,854 |
8,378 |
|
|
Liabilities |
||||
|
Unearned transportation revenue |
149 |
1,940 |
1,393 |
|
|
Accounts payable |
38 |
499 |
537 |
|
|
Accrued liabilities |
77 |
1,010 |
1,033 |
|
|
Taxes and fees payable |
66 |
855 |
599 |
|
|
Financial instruments |
2 |
32 |
32 |
|
|
Financial debt |
10 |
131 |
268 |
|
|
Other liabilities |
1 |
7 |
9 |
|
|
Total short-term liabilities |
343 |
4,473 |
3,872 |
|
|
Financial instruments |
5 |
60 |
74 |
|
|
Financial debt |
48 |
627 |
294 |
|
|
Accrued liabilities |
9 |
118 |
138 |
|
|
Other liabilities |
1 |
13 |
11 |
|
|
Employee benefits |
- |
6 |
5 |
|
|
Deferred income taxes |
2 |
30 |
22 |
|
|
Total liabilities |
409 |
5,328 |
4,415 |
|
|
Equity |
||||
|
Capital stock |
228 |
2,974 |
2,974 |
|
|
Treasury shares |
(8) |
(108) |
(108) |
|
|
Contributions for future capital increases |
- |
- |
- |
|
|
Legal reserve |
3 |
38 |
38 |
|
|
Additional paid-in capital |
137 |
1,786 |
1,786 |
|
|
Accumulated losses |
(85) |
(1,106) |
(661) |
|
|
Accumulated other comprehensive losses |
(4) |
(58) |
(66) |
|
|
Total equity attributable to equity holders of the parent |
271 |
3,526 |
3,962 |
|
|
Non-controlling interest |
- |
- |
- |
|
|
Total equity |
271 |
3,526 |
3,962 |
|
|
Total liabilities and equity |
679 |
8,854 |
8,378 |
|
|
Total shares outstanding basic and diluted |
1,011,876,677 |
1,011,876,677 |
||
|
*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only. |
||||
|
Controladora Vuela Compania de Aviacion, S.A.B. de C.V. and Subsidiaries |
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|
Consolidated Statement of Cash Flows - Cash Flow Data Summary |
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Unaudited
|
Thee months
June 30, 2014
|
Three months
June 30, 2014 |
Three months
June 30, 2013 |
|
Net cash flow (used in) provided by operating activities |
(1) |
(8) |
355 |
|
Net cash flow (used in) provided by investing activities |
(17) |
(215) |
77 |
|
Net cash flow provided by (used in) financing activities |
7 |
85 |
(246) |
|
(Decrease) increase in cash and cash equivalents |
(11) |
(139) |
185 |
|
Net foreign exchange differences |
(1) |
(13) |
14 |
|
Cash and cash equivalents at beginning of period |
172 |
2,240 |
926 |
|
Cash and cash equivalents at end of period |
160 |
2,088 |
1,126 |
|
*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only. |
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Unaudited
|
Six months ended June 30, 2014
|
Six months ended June 30, 2014 |
Six months ended June 30, 2013 |
|
Net cash flow (used in) provided by operating activities |
(7) |
(94) |
626 |
|
Net cash flow (used in) provided by investing activities |
(34) |
(443) |
138 |
|
Net cash flow provided by (used in) financing activities |
14 |
184 |
(450) |
|
(Decrease) increase in cash and cash equivalents |
(27) |
(353) |
314 |
|
Net foreign exchange differences |
(1) |
(9) |
(11) |
|
Cash and cash equivalents at beginning of period |
188 |
2,451 |
822 |
|
Cash and cash equivalents at end of period |
160 |
2,088 |
1,126 |
|
*Peso amounts were converted to US dollars at the rate of Ps.13.0323 for convenience purposes only. |
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