CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN, S.A.B. DE C.V. The following financial information, unless otherwise indicated, is presented in accordance with the International Financial Reporting Standards (IFRS).
Third Quarter 2020 Highlights
During the third quarter 2020, Volaris continued to successfully navigate the uncertainties caused by the SARS-CoV-2 (COVID-19) pandemic. The Company has recovered much of the capacity resulting from COVID-19 as measured by available seat miles (ASMs), a result of its strong ultra-low-cost business model focused on the VFR (Visiting Friends and Relatives) and leisure segments in the domestic and US-transborder markets.
As the Company has been able to recover services and add new routes, management has remained focused on ensuring the well-being of its crews, personnel, and passengers. Volaris has carried more than 4.5 million passengers following its successful biosafety protocol implementation in
The Company was able to ramp up service to 63% of prior year in July and expanded further to 79% of prior year in August. September is typically a low travel month so management cautiously increased capacity to 84% of prior year while focusing on increasing total revenue per available seat mile (TRASM). For the full period, Volaris operated 75% of ASMs compared to the same period in 2019. The domestic market led the capacity recovery, where Volaris operated 85% ASMs versus the same period in 2019. In the international market, Volaris operated 54% ASMs compared to the same period in 2019. Central American operations remained closed.
The main effects of the continuing recovery of demand and capacity at the end of the third quarter, are as follows:
Total operating revenues were Ps.4,724 million for the third quarter, a decrease of 50.3% year over year.
Total ancillary revenues were Ps.2,131 million for the third quarter, a decrease of 29.7% year over year. Total ancillary revenues per passenger for the third quarter reached Ps.614, an increase of 13.9% year over year. However, total ancillary revenues represented 45.1% of total operating revenues for the third quarter 2020, increasing 13.2 percentage points with respect to the same period of last year.
Total operating revenues per available seat mile (TRASM) were Ps.102.8 cents for the third quarter, a decrease of 31.6% year over year.
In the third quarter 2020, the Company recorded a one-time charge of Ps.746 million.
Operating expenses per available seat mile (CASM) were Ps.149.2 cents for the third quarter, an increase of 20.9% year over year; with an average economic fuel cost per gallon of Ps.40.2 for the third quarter, a decrease of 10.5% year over year. Excluding the one-time charge, CASM was Ps.133.5 cents.
Operating expenses per available seat mile excluding fuel, (CASM ex-fuel) were Ps.111.3 cents for the third quarter, an increase of 43.6% year over year; with an average exchange rate depreciation of the Mexican peso against the
Operating loss was Ps.2,227 million for the third quarter, a significant decrease compared with the operating income of Ps.1,703 million for the same period of last year. Operating margin for the third quarter was negative 47.1%, a deterioration of 65.0 percentage points year over year. Excluding the one-time charge, operating loss was Ps.1,481 million, a negative operating margin of 31.4%.
Net loss was Ps.2,175 million (Ps.2.15 loss per share / U.S.
At the close of the third quarter, the Mexican peso appreciated 2.2% against the
During the third quarter of 2020, the net cash flow used in operating activities was Ps.113 million. The net cash flow used in investing activities reached Ps.179 million. The net cash flow used in financing activities was Ps.1,357 million, which included Ps.1,724 million of aircraft rental payments. The negative net foreign exchange difference was Ps.163 million, thus leading to a net decrease of cash and cash equivalents in the third quarter of Ps.1,812 million. As of
Fuel Price reduction and Peso Depreciation
Fuel price reduction: The average economic fuel cost per gallon decreased 10.5% in the third quarter of 2020, year over year, reaching Ps.40.2 per gallon (U.S.
Peso depreciation: The Mexican peso depreciated 13.9% against the
Passenger Traffic Contraction, Ancillary Revenue Reduction, and TRASM decrease
Passenger traffic contraction: Volaris had 3.4 million passengers booked in the third quarter of 2020, a decrease of 38.3% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) decreased 35.2% year over year. System load factor during the third quarter decreased 11.7 percentage points year over year to a level of 73.4%.
Total ancillary revenue reduction: For the third quarter of 2020, total ancillary revenue decreased 29.7% year over year. However, total ancillary revenue per passenger in the third quarter of 2020 increased 13.9% year over year. The total ancillary revenue generation continues to grow with new and mature products, appealing to customers' needs, representing 45.1% of total operating revenue of the third quarter, an increase of 13.2 percentage points year over year.
TRASM decrease: For the third quarter of 2020, TRASM decreased 31.6% year over year. During the third quarter of 2020, the total capacity, measured by ASMs, decreased 24.9% year over year.
Total Unit Cost Increase and Peso Depreciation
CASM and CASM ex fuel in the third quarter of 2020 reached Ps.149.2 (U.S.
Young and Fuel-Efficient Fleet
During the third quarter of 2020, the Company returned one A320 aircraft and incorporated three new A320 NEO aircraft to its fleet. As of
Liquidity Preservation Plan with a Net Cash Flow Generated by Operating Activities
Since the COVID-19 pandemic started, the Company's main objective has been to preserve its liquidity position. Specifically, for the third quarter, our liquidity preservation plan brought
During the third quarter of 2020, the net cash flow used in operating activities was Ps.113 million. The net cash flow used in investing activities was Ps.179 million. The net cash flow used in financing activities was Ps.1,357 million, which included Ps.1,724 million of aircraft rental payments. The negative net foreign exchange difference was Ps.163 million. As a result, there was a net decrease of cash and cash equivalents in the third quarter of Ps.1,812 million. As of
Non-Derivative Financial Instruments
During 2019, the Company established hedges on its
Additionally, during 2019, the Company established hedges on a portion of its forecasted fuel expense, through a non-derivative financial instrument, using as a hedge instrument a portion of its
For the hedging relationships described, the effective portion of the hedging instrument's change in fair value is recognized in Other Comprehensive Income or OCI. The accounting records corresponding to the recycling of the OCI are made in accordance with IFRS 9. Under this Standard, the portion recorded in OCI is recognized in the results in the same period in which the expected hedging for cash flows affect the result of the period. As of
Investors are urged to carefully read the Company's periodic reports filed with or provided to the
Conference Call/Webcast Details:
Presenters for the Company:
Date:
Mr.
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VOLARIS
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About Volaris:
*Controladora Vuela Compania de Aviacion,
Forward-looking Statements:
Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations, beliefs or projections concerning future events and financial trends affecting the financial condition of our business. When used in this release, the words 'expects,' 'intends,' 'estimates,' 'predicts,' 'plans,' 'anticipates,' 'indicates,' 'believes,' 'forecast,' 'guidance,' 'potential,' 'outlook,' 'may,' 'continue,' 'will,' 'should,' 'seeks,' 'targets' and similar expressions are intended to identify forward-looking statements. Similarly, statements that describe the Company's objectives, plans or goals, or actions the Company may take in the future, are forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding the delivery schedule of aircraft on order, announced new service routes and customer savings programs. 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. Forward-looking statements are subject to a number of factors that could cause the Company's actual results to differ materially from the Company's expectations, including the competitive environment in the airline industry; the Company's ability to keep costs low; changes in fuel costs; the impact of worldwide economic conditions on customer travel behavior; the Company's ability to generate non-ticket revenues; and government regulation. Additional information concerning these, and other factors is contained in the Company's
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