Volaris Reports Third Quarter 2019 Results: 17.9% Operating Margin, up 9.7 percentage points year over year

October 25, 2019

Mexico City, Mexico, October 24, 2019 – Volaris* (NYSE: VLRS and BMV: VOLAR), the ultra-low-cost airline serving Mexico, the United States and Central America, today announces its financial results for the third quarter 2019.

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

Third Quarter 2019 Highlights

  • Total operating revenues were Ps.9,502 million for the third quarter, an increase of 29.9% year over year.
  • Total ancillary revenues were Ps.3,030 million for the third quarter, an increase of 36.4% year over year. Total ancillary revenues per passenger for the third quarter reached Ps.539, an increase of 13.6% year over year. Total ancillary revenues represented 31.9% of total operating revenues for the third quarter 2019, increasing 1.5 percentage points with respect to the same period of last year.
  • Total operating revenues per available seat mile (TRASM) were Ps.150.3 cents for the third quarter, an increase of 11.4% year over year.
  • Operating expenses per available seat mile (CASM) were Ps.123.4 cents for the third quarter, a decrease of 0.3% year over year; with an average economic fuel cost per gallon of Ps.44.9 for the third quarter, an increase of 3.2% year over year.
  • Operating expenses excluding fuel, per available seat mile (CASM ex-fuel) reached Ps.77.5 cents for the third quarter, an increase of 2.9% year over year.
  • Operating income was Ps.1,703 million for the third quarter, a significant increase compared with the operating income of Ps.601 million for the same period of last year. Operating margin for the third quarter was 17.9%, an improvement in margin of 9.7 percentage points year over year.
  • Net income was Ps.713 million (Ps.0.70 per share / US$0.36 per ADS), for a net margin of 7.5% for the third quarter.
  • At the close of the third quarter, the Mexican peso depreciated 2.4% against the U.S. dollar with respect to the exchange rate at the close of the previous quarter (Ps.19.17 per US dollar). The Company booked a foreign exchange loss of Ps.173 million derived from our U.S. dollar net monetary liability position, as result of the adoption of IFRS16.
  • Net cash flows generated by operating activities were Ps.2,207 million. The net cash flows used in investing activities reached Ps.1,072 million. The net cash flows used in financing activities were Ps.1,606, which included Ps.1,657 million of aircraft rental payments. The positive net foreign exchange difference was Ps.156 million, with net cash used in the third quarter of Ps.314 million. As of September 30, 2019, cash and cash equivalents were Ps.7,810 million.

Stable Macroeconomics and Domestic Consumer Demand, with Peso Depreciation and Fuel Price Pressures

  • Stable macroeconomics and domestic consumer demand: The macroeconomic indicators in Mexico during the third quarter were stable, with same store sales[1] increasing 2.4% year over year; remittances[2] increased 15.7% year over year during July and August 2019; and the Mexican Consumer Confidence Balance Indicator (BCC) [3] increased 3.1% in the third quarter year over year.
  • Air traffic volume increase: The Mexican Federal Civil Aviation Agency reported an overall passenger volume growth for Mexican carriers of 8.4% year over year during July and August of 2019; the domestic overall passenger volume increased 7.3%, while the international overall passenger volume increased 1.7%.
  • Exchange rate volatility: The Mexican peso depreciated 2.3% year over year against the US dollar, from an average exchange rate of Ps.18.98 per US dollar in the third quarter of 2018 to Ps.19.42 per US dollar during the third quarter of 2019. At the end of the third quarter of 2019, the Mexican peso depreciated 4.4% with respect to the exchange rate at the end of the same period of the last year. The Company booked a foreign exchange loss of Ps.173 million derived from our US dollar net monetary liability position, resulting from the adoption of IFRS16.
  • Increased fuel prices: The average economic fuel cost per gallon increased 3.2% in the third quarter of 2019, year over year, reaching Ps.44.9 per gallon (US$2.3).

Passenger Traffic Stimulation, Further Ancillary Revenue Expansion, and Positive TRASM Growth

  • Passenger traffic stimulation: Volaris booked 5.6 million passengers in the third quarter of 2019, an increase of 20.1% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 19.3% year over year. System load factor during the third quarter increased 1.6 percentage points year over year, reaching 85.1%.
  • Positive TRASM growth: For the third quarter of 2019, TRASM increased 11.4% year over year. During the third quarter of 2019, the total capacity, in terms of ASMs, increased 16.9% year over year.
  • Total ancillary revenue growth: For the third quarter of 2019, total ancillary revenue increased 36.4% year over year. Total ancillary revenue per passenger for the third quarter of 2019 increased 13.6% year over year. The total ancillary revenue generation continues to grow with new and mature products, appealing to customers’ needs, representing 31.9% of total operating revenue of the third quarter, an increase of 1.5 percentage points year over year.
  • New routes: Volaris began operations in two new international routes from El Salvador, San Salvador to Mexico City and Guadalajara, Jalisco, respectively. Additionally, Volaris launched one domestic route from Tapachula, Chiapas to Tijuana, Baja California and one international route from Leon, Guanajuato to Fresno, California.

Total Unit Cost Reduction, Despite Peso Depreciation and Fuel Price Pressures

  • CASM and CASM ex-fuel for the third quarter of 2019 reached Ps.123.4 (US$6.4 cents) and Ps.77.5 cents (US$4.0), respectively. This represented a decrease of 0.3% and an increase of 2.9%, respectively, year over year; mainly driven by cost control discipline and the average exchange rate depreciation of 2.3%.

Young and Fuel-efficient Fleet

  • During the third quarter of 2019, the Company incorporated two aircraft (A320 neo) to its fleet. As of September 30, 2019, Volaris’ fleet was composed of 80 aircraft (8 A319s, 57 A320s and 15 A321s), with an average age of 4.9 years. At the end of the third quarter of 2019, Volaris’ fleet had an average of 186 seats, 76% of which were in sharklet-equipped aircraft, and 24% were NEO.

Solid Balance Sheet and Good Liquidity

  • Net cash flows generated by operating activities were Ps.2,207 million. The net cash flows used in investing activities reached Ps.1,072 million. The net cash flows used in financing activities were Ps.1,606 million, which included Ps.1,657 million of aircraft rental payments. The positive net foreign exchange difference was Ps.156 million, while the net cash used in the third quarter was Ps.314 million. As of September 30, 2019, cash and cash equivalents were Ps.7,810 million, representing 23.7% of last twelve months of the operating revenue. Volaris registered a negative net debt (or a positive net cash position) of Ps.3,533 million (excluding lease liability recognized under the IFRS16 adoption) and total equity of Ps.4,144 million.

Transition to IFRS 16

  • The Company adopted IFRS 16 as of January 1, 2019, using the full retrospective method. The cumulative effect of adopting IFRS 16 has been recognized as an adjustment to the opening balance as of January 1, 2017 as an increase in assets and liabilities and an adjustment in the retained earnings. The full disclosure and the estimated unaudited figures of this initial adoption are included in the Company´s 2018 annual report.
  • This quarterly earnings release includes supplemental information for comparable purposes, with recast, estimated unaudited 2018 figures with the IFRS 16 adoption effects. These figures were derived from unaudited financial statements included in the quarterly reports on Form 6-K reported during the year ended as of December 31, 2018.
  • Starting on March 25, 2019, the Company established a hedge on its USD denominated revenues, through a non-derivative financial instrument, using the lease liabilities denominated in USD as a hedge instrument. This hedging relationship is designated as a cash flow hedge of forecasted revenues to mitigate the volatility of the foreign exchange variation arising from the revaluation of its lease liabilities. During 2019, the impacts of this hedge for the third quarter and year to date were Ps.29 million and Ps.40 million, respectively; which has been presented as part of the total operating revenue.
  • Additionally, on the same date, the Company established a hedge on a portion of its forecasted fuel expense, through a non-derivative financial instrument, using as hedge instrument a portion of its USD denominated monetary assets. This hedging relationship is designated as a cash flow hedge of forecasted fuel expense to mitigate the volatility of the foreign exchange variation arising from the revaluation of this portion of USD denominated monetary asset. During 2019, the impacts of this hedge for the third quarter and year to date were Ps.26 million and Ps.40 million, respectively; which has been presented as part of the total fuel expense.

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:

Presenters for the Company:

Date:

Mr. Enrique Beltranena, President & CEO

Mr. Holger Blankenstein, Airline EVP

Ms. Sonia Jerez Burdeus, VP & CFO

Friday, October 25, 2019

Time:

10:00 am U.S. EDT (9:00 am Mexico City Time)

United States dial in (toll free):

1-877-830-2576

Mexico dial in (toll free):

001-800-514-6145

Brazil dial in (toll free):

0-800-891-6744

International dial in:

+ 1-785-424-1726

Participant passcode:

VOLARIS (8652747)

Webcast will be available at:

https://services.choruscall.com/links/vlrs191025tLO3gSxu.html

About Volaris:

*Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (“Volaris” or the “Company”) (NYSE: VLRS and BMV: VOLAR), is an ultra-low-cost carrier, with point-to-point operations, serving Mexico, the United States and Central America. Volaris offers low base fares to build its market, providing quality service and extensive customer choice. Since the beginning of operations in March 2006, Volaris has increased its routes from five to more than 191 and its fleet from four to 81 aircraft. Volaris offers more than 388 daily flight segments on routes that connect 40 cities in Mexico and 25 cities in the United States and Central America with the youngest fleet in Mexico. Volaris targets passengers who are visiting friends and relatives, cost-conscious business and leisure travelers in Mexico, the United States and Central America. Volaris has received the ESR Award for Social Corporate Responsibility for ten consecutive years. For more information, please visit: www.volaris.com.

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 Securities and Exchange Commission filings. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date of this release. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable law. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

Investor Relations Contact:

Maria Elena Rodríguez & Andrea González / Investor Relations / ir@volaris.com / +52 55 5261 6444

Media Contact:

Gabriela Fernández / volaris@gcya.net / +52 55 5246 0100

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Financial and Operating Indicators

Unaudited

Three months ended September 30, 2019

Three months ended September 30, 2019

Three months ended September 30, 2018

Variance

(In Mexican pesos, except otherwise indicated)

(US Dollars)*

(%)

Total operating revenues (millions)

484

9,502

7,316

29.9%

Total operating expenses (millions)

397

7,799

6,715

16.1%

EBIT (millions)

87

1,703

601

>100%

EBIT margin

17.9%

17.9%

8.2%

9.7 pp

Depreciation and amortization

69

1,363

1,162

17.3%

Aircraft and engine rent expense

12

226

214

5.5%

Net income (millions)

36

713

1,105

(35.5%)

Net income margin

7.5%

7.5%

15.1%

(7.6) pp

Income per share:

Basic (pesos)

0.04

0.70

1.09

(35.5%)

Diluted (pesos)

0.04

0.70

1.09

(35.5%)

Income per ADS:

Basic (pesos)

0.36

7.05

10.92

(35.5%)

Diluted (pesos)

0.36

7.05

10.92

(35.5%)

Weighted average shares outstanding:

Basic

-

1,011,876,677

1,011,876,677

0.0%

Diluted

-

1,011,876,677

1,011,876,677

0.0%

Available seat miles (ASMs) (millions) (1)

-

6,341

5,422

16.9%

Domestic

 -

4,328

3,752

15.3%

International

 -

2,014

1,670

20.6%

Revenue passenger miles (RPMs) (millions) (1)

-

5,398

4,526

19.3%

Domestic

 -

3,785

3,230

17.2%

International

 -

1,613

1,295

24.5%

Load factor (2)

-

85.1%

83.5%

1.6 pp

Domestic

 -

87.5%

86.1%

1.4 pp

International

 -

80.1%

77.6%

2.5 pp

Total operating revenue per ASM (TRASM) (cents) (1) (5)

7.7

150.3

134.9

11.4%

Total ancillary revenue per passenger (4) (5)

27.4

539

474

13.6%

Total operating revenue per passenger (5)

86.4

1,696

1,563

8.5%

Operating expenses per ASM (CASM) (cents) (1) (5)

6.3

123.4

123.8

(0.3%)

Operating expenses per ASM (CASM) (US cents) (3) (5)

-

6.4

6.5

(2.6%)

CASM ex fuel (cents) (1) (5)

3.9

77.5

75.3

2.9%

CASM ex fuel (US cents) (3) (5)

-

4.0

4.0

0.6%

Booked passengers (thousands) (1)

-

5,620

4,680

20.1%

Departures (1)

-

35,777

30,391

17.7%

Block hours (1)

-

90,323

82,977

8.9%

Fuel gallons consumed (millions)

-

64.9

60.5

7.2%

Average economic fuel cost per gallon (5)

2.3

44.9

43.5

3.2%

Aircraft at end of period

-

80

73

9.6%

Average aircraft utilization (block hours)

-

13.2

13.1

0.6%

Average exchange rate

-

19.42

18.98

2.3%

End of period exchange rate

-

19.64

18.81

4.4%

*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

(1) Includes schedule and charter (3) Dollar amounts were converted at average exchange rate of each period

(2) Includes schedule (4) Includes “Other passenger revenues” and “Non-passenger revenues”

(5) Excludes non-derivatives financial instruments

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Financial and Operating Indicators

Unaudited

Nine months ended September 30, 2019

Nine months ended September 30, 2019

Nine months ended September 30, 2018

Variance

(In Mexican pesos, except otherwise indicated)

(US Dollars)*

(%)

Total operating revenues (millions)

1,274

25,023

19,396

29.0%

Total operating expenses (millions)

1,153

22,635

19,503

16.1%

EBIT (millions)

122

2,388

(106)

NA

EBIT margin

9.5%

9.5%

(0.5%)

10.0 pp

Depreciation and amortization

203

3,990

3,368

18.5%

Aircraft and engine rent expense

39

769

636

20.9%

Net income (loss) (millions)

69

1,352

(200)

NA

Net income (loss) margin

5.4%

5.4%

(1.0%)

6.4 pp

Income (loss) per share:

Basic (pesos)

0.07

1.34

(0.20)

NA

Diluted (pesos)

0.07

1.34

(0.20)

NA

Income (loss) per ADS:

Basic (pesos)

0.68

13.36

(1.97)

NA

Diluted (pesos)

0.68

13.36

(1.97)

NA

Weighted average shares outstanding:

Basic

-

1,011,876,677

1,011,876,677

0.0%

Diluted

-

1,011,876,677

1,011,876,677

0.0%

Available seat miles (ASMs) (millions) (1)

-

18,199

15,538

17.1%

Domestic

 -

12,549

10,687

17.4%

International

 -

5,650

4,851

16.5%

Revenue passenger miles (RPMs) (millions) (1)

-

15,511

13,017

19.2%

Domestic

 -

10,983

9,227

19.0%

International

 -

4,528

3,790

19.5%

Load factor (2)

-

85.3%

83.8%

1.5 pp

Domestic

 -

87.5%

86.3%

1.2 pp

International

 -

80.2%

78.2%

2.0 pp

Total operating revenue per ASM (TRASM) (cents) (1) (5)

7.0

137.7

124.8

10.3%

Total ancillary revenue per passenger (4) (5)

26.7

524

467

12.0%

Total operating revenue per passenger (5)

78.6

1,544

1,444

6.9%

Operating expenses per ASM (CASM) (cents) (1) (5)

6.3

124.6

125.5

(0.7%)

Operating expenses per ASM (CASM) (US cents) (3) (5)

-

6.5

6.6

(1.8%)

CASM ex fuel (cents) (1) (5)

3.9

76.8

78.9

(2.6%)

CASM ex fuel (US cents) (3) (5)

-

4.0

4.1

(3.7%)

Booked passengers (thousands) (1)

-

16,237

13,434

20.9%

Departures (1)

-

102,823

87,076

18.1%

Block hours (1)

-

260,858

237,485

9.8%

Fuel gallons consumed (millions)

-

186.6

168.7

10.6%

Average economic fuel cost per gallon (5)

2.4

46.6

43.0

8.4%

Aircraft at end of period

-

80

73

9.6%

Average aircraft utilization (block hours)

-

13.0

13.4

(3.0%)

Average exchange rate

-

19.26

19.04

1.1%

End of period exchange rate

-

19.64

18.81

4.4%

*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

(1) Includes schedule and charter (3) Dollar amounts were converted at average exchange rate of each period

(2) Includes schedule (4) Includes “Other passenger revenues” and “Non-passenger revenues”

(5) Excludes non-derivatives financial instruments

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Operations

Unaudited

Three months ended September 30, 2019

Three months

ended September 30, 2019

Three months ended September 30, 2018

Variance

(In millions of Mexican pesos)

(US Dollars) *

 (%)

Operating revenues:

Passenger revenues

472

9,271

7,137

29.9%

 Fare revenues

331

6,501

5,096

27.6%

 Other passenger revenues (1)

141

2,770

2,042

35.7%

Non-passenger revenues

13

260

179

45.2%

 Other non-passenger revenues (1)

11

208

124

68.1%

 Cargo

3

51

55

(6.6%)

 Non-derivatives financial instruments

(1)

(29)

-

NA

Total operating revenues

484

9,502

7,316

29.9%

Other operating income

(7)

(141)

(243)

(42.1%)

Total fuel expense, net (2)

147

2,884

2,631

9.6%

Depreciation and amortization

69

1,363

1,162

17.3%

Landing, take-off and navigation expenses

66

1,304

1,148

13.6%

Salaries and benefits

46

909

834

9.0%

Maintenance expenses

21

406

389

4.2%

Sales, marketing and distribution expenses

21

417

340

22.8%

Aircraft and engine rent expense

12

226

214

5.5%

Other operating expenses

22

432

240

79.7%

Operating expenses

397

7,799

6,715

16.1%

Operating income

87

1,703

601

>100%

Finance income

4

79

37

>100%

Finance cost

(30)

(591)

(487)

21.3%

Exchange (loss) gain, net

(9)

(173)

1,396

NA

Comprehensive financing result

(35)

(684)

946

NA

Income before income tax

52

1,019

1,547

(34.2%)

Income tax expense

(16)

(306)

(442)

(30.9%)

Net income

36

713

1,105

(35.5%)

* Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

(1) 3Q 2018 figures include a reclassification from “Other non-passenger revenues” to “Other passenger revenues” of Ps.80 million, as result of the IFRS 15 adoption

(2) 3Q 2019 figures include a benefit from non-derivatives financial instruments by an amount of Ps.26 million

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Operations

Unaudited

Nine months ended September 30, 2019

Nine months

ended September 30, 2019

Nine months ended September 30, 2018

Variance

(In millions of Mexican pesos)

(US Dollars) *

 (%)

Operating revenues:

Passenger revenues

1,237

24,286

18,737

29.6%

 Fare revenues

843

16,562

13,118

26.3%

 Other passenger revenues (1)

393

7,724

5,619

37.4%

Non-passenger revenues

40

778

659

17.9%

 Other non-passenger revenues (1)

31

613

503

21.8%

 Cargo

8

165

156

5.5%

 Non-derivatives financial instruments

(2)

(40)

-

NA

Total operating revenues

1,274

25,023

19,396

29.0%

Other operating income

(13)

(264)

(475)

(44.4%)

Total fuel expense, net (2)

441

8,654

7,250

19.4%

Depreciation and amortization

203

3,990

3,368

18.5%

Landing, take-off and navigation expenses

190

3,725

3,422

8.9%

Salaries and benefits

135

2,648

2,330

13.6%

Maintenance expenses

57

1,128

1,111

1.5%

Sales, marketing and distribution expenses

53

1,038

1,079

(3.8%)

Aircraft and engine rent expense

39

769

636

20.9%

Other operating expenses

48

948

781

21.3%

Operating expenses

1,153

22,635

19,503

16.1%

Operating income (loss)

122

2,388

(106)

NA

Finance income

8

153

108

41.1%

Finance cost

(81)

(1,594)

(1,325)

20.3%

Exchange gain, net

50

985

1,034

(4.7%)

Comprehensive financing result

(23)

(457)

(183)

>100%

Income (loss) before income tax

98

1,931

(290)

NA

Income tax (expense) benefit

(30)

(579)

90

NA

Net income (loss)

69

1,352

(200)

NA

* Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

(1)  September YTD 2018 figures include a reclassification from “Other non-passenger revenues” to “Other passenger revenues” of Ps.217 million, as result of the IFRS 15 adoption

(2) September YTD 2019 figures include a benefit from non-derivatives financial instruments by an amount of Ps.40 million

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Reconciliation of total ancillary revenue per passenger

The following table shows quarterly additional detail about the components of total ancillary revenue:

Unaudited

Three months ended September 30, 2019

(US Dollars)*

Three months ended September 30, 2019

Three months ended September 30, 2018

Variance

(%)

(In millions of Mexican pesos)

Other passenger revenues (1)

141

2,770

2,042

35.7%

Non-passenger revenues (1)

13

260

179

45.2%

Total ancillary revenues

154

3,030

2,221

36.4%

Booked passengers (thousands)

-

5,620

4,680

20.1%

Total ancillary revenue per passenger

27.4

539

474

13.6%

* Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

(1) 3Q 2018 figures include a reclassification from “Other non-passenger revenues” to “Other passenger revenues” of Ps.80 million, as result of the IFRS 15 adoption

The following table shows the September YTD additional detail about the components of total ancillary revenue:

Unaudited

Nine months ended September 30, 2019

(US Dollars)*

Nine months ended September 30, 2019

Nine months ended September 30, 2018

Variance

(%)

(In millions of Mexican pesos)

Other passenger revenues (1)

393

7,724

5,619

37.4%

Non-passenger revenues (1)

40

778

659

17.9%

Total ancillary revenues

433

8,502

6,278

35.4%

Booked passengers (thousands)

-

16,237

13,434

20.9%

Total ancillary revenue per passenger

26.7

524

467

12.0%

* Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

(1) September YTD 2018 figures include a reclassification from “Other non-passenger revenues” to “Other passenger revenues” of Ps.217 million, as result of the IFRS 15 adoption

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Financial Position

(In millions of Mexican pesos)

September 30, 2019 Unaudited

September 30, 2019 Unaudited

December 31, 2018

(US Dollars)*

Assets

Cash and cash equivalents

398

7,810

5,863

Accounts receivable

115

2,266

1,467

Inventories

15

294

297

Prepaid expenses and other current assets

28

557

443

Financial instruments

2

32

62

Guarantee deposits

40

781

791

Total current assets

598

11,739

8,923

Rotable spare parts, furniture and equipment, net

347

6,816

5,782

Right of use assets

1,679

32,965

31,986

Intangible assets, net

8

162

179

Financial instruments

-

4

-

Deferred income taxes

156

3,064

2,864

Guarantee deposits

349

6,852

6,337

Other assets

6

127

155

Other accounts receivable

6

123

74

Total non-current assets

2,552

50,115

47,378

Total assets

3,150

61,854

56,301

Liabilities

Unearned transportation revenue

184

3,614

2,439

Accounts payable

50

980

1,103

Accrued liabilities

146

2,858

2,318

Lease liabilities

240

4,712

4,970

Other taxes and fees payable

121

2,373

1,932

Income taxes payable

-

1

4

Financial instruments

-

-

123

Financial debt

87

1,709

1,212

Other liabilities

16

316

26

Total short-term liabilities

843

16,563

14,127

Financial debt

131

2,568

2,311

Accrued liabilities

7

138

137

Lease liabilities

1,839

36,119

34,586

Other liabilities

20

398

328

Employee benefits

1

22

18

Deferred income taxes

97

1,902

1,096

Total long-term liabilities

2,095

41,147

38,476

Total liabilities

2,939

57,710

52,603

Equity

Capital stock

151

2,974

2,974

Treasury shares

(7)

(141)

(123)

Contributions for future capital increases

-

-

 -

Legal reserve

15

291

291

Additional paid-in capital

92

1,815

1,837

Retained earnings

7

143

(1,208)

Accumulated other comprehensive losses (1)

(48)

(938)

(73)

Total equity

211

4,144

3,698

Total liabilities and equity

3,150

61,854

56,301

Total shares outstanding fully diluted

1,011,876,677

1,011,876,677

* Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

(1) As of September 30, 2019, the figures include a negative foreign exchange effect of Ps.934 million related to non-derivatives financial instruments

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Cash Flows – Cash Flow Data Summary

Unaudited

Three months

ended September 30, 2019

Three months

 ended September 30, 2019

Three months ended September 30, 2018

(In millions of Mexican pesos)

(US Dollars)*

Net cash flow generated by operating activities

112

2,207

1,263

Net cash flow (used in) generated by investing activities

(55)

(1,072)

20

Net cash flow used in financing activities**

(82)

(1,606)

(1,646)

Decrease in cash and cash equivalents

(24)

(470)

(363)

Net foreign exchange differences

8

156

(327)

Cash and cash equivalents at beginning of period

414

8,124

6,771

Cash and cash equivalents at end of period

398

7,810

6,082

* Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

**Includes aircraft rental payments of Ps.1,657 million and Ps.1,399 million for the three months ended period September 30, 2019 and 2018, respectively

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Cash Flows – Cash Flow Data Summary

Unaudited

Nine months

ended September 30, 2019

Nine months ended September 30, 2019

Nine months ended September 30, 2018

(In millions of Mexican pesos)

(US Dollars)*

Net cash flow generated by operating activities

380

7,465

4,580

Net cash flow used in investing activities

(65)

(1,280)

(641)

Net cash flow used in financing activities**

(216)

(4,239)

(1) (4,502)

Increase (decrease) in cash and cash equivalents

99

1,946

(563)

Net foreign exchange differences

-

-

(306)

Cash and cash equivalents at beginning of period

299

5,863

6,951

Cash and cash equivalents at end of period

398

7,810

6,082

* Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

**Includes aircraft rental payments of Ps.4,787 million and Ps.4,116 million for the nine months ended period September 30, 2019 and 2018, respectively

(1) Includes inflows of Ps.1,500 million related to the issuance of 15,000,000 asset backed trust notes (certificados bursátiles fiduciarios)

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

The following table shows estimated and adjusted balances after the adoption of IFRS 16 "Leases", on the quarterly statements of operations for each quarter of 2018. These recast amounts were derived from unaudited financial statements included in the quarterly reports on Form 6-K during the year ended December 31, 2018.

Unaudited

(In millions of Mexican pesos)

Three months ended March 31, 2018

Three months ended June 30, 2018

Three months ended September 30, 2018

Three months ended December 31, 2018

Full Year 2018

Operating revenues:

 Passenger revenues

5,610

5,990

7,138

7,643

26,381

Fare revenues

3,886

4,137

5,096

5,370

18,488

Other passenger revenues (1)

1,724

1,853

2,042

2,273

7,892

 Non-passenger revenues

240

240

179

265

924

Other non-passenger revenues (1)

192

187

124

194

697

Cargo

49

53

55

71

227

Total operating revenues

5,850

6,230

7,317

7,908

27,305

Other operating income

(1)

(231)

(243)

(147)

(622)

Fuel

2,175

2,445

2,631

2,885

10,135

Landing, take-off and navigation expenses

1,124

1,149

1,149

1,157

4,579

Depreciation and amortization

1,071

1,136

1,162

1,256

4,625

Salaries and benefits

746

750

834

795

3,125

Sales, marketing and distribution expenses

357

382

340

422

1,501

Maintenance expenses

346

376

388

387

1,499

Aircraft and engine rent expense

317

105

215

55

692

Other operating expenses

258

283

239

277

1,058

Operating expenses

6,395

6,395

6,715

7,087

26,592

Operating (loss) income

(545)

(165)

602

821

713

Operating margin

(9.3%)

(2.6%)

8.2%

10.4%

2.6%

Finance income

34

37

37

45

153

Finance cost

(395)

(439)

(487)

(478)

(1,798)

Exchange gain (loss), net

1,564

(1,926)

1,395

(1,137)

(106)

Comprehensive financing result

1,202

(2,328)

945

(1,570)

(1,751)

Income (loss) before income tax

658

(2,493)

1,547

(749)

(1,038)

Income tax (expense) benefit

(196)

728

(442)

187

277

Net income (loss)

461

(1,765)

1,105

(562)

(761)

Earnings (loss) per share:

Basic (pesos)

0.46

(1.74)

1.09

(0.56)

(0.75)

Diluted (pesos)

0.46

(1.74)

1.09

(0.56)

(0.75)

Earnings (loss) per ADS:

Basic (pesos)

4.56

(17.44)

10.92

(5.55)

(7.52)

Diluted (pesos)

4.56

(17.44)

10.92

(5.55)

(7.52)

(1) The annual figures of 2018 include a reclassification from “Other non-passenger revenues” to “Other passenger revenues” of Ps.271 million, as result of the IFRS 15 adoption

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

The following table shows quarterly estimated adjustments made due to the adoption of IFRS 16 "Leases", on the statements of operations for 2018.

Unaudited

Full Year 2018 (Reported)

Three months ended March 31, 2018

Three months ended June 30, 2018

Three months ended September 30, 2018

Three months ended December 31, 2018

Full Year 2018

(In millions of Mexican pesos)

Operating revenues:

 Passenger revenues

26,381

-

-

-

-

26,381

Fare revenues

18,488

-

-

-

-

18,488

Other passenger revenues (1)

7,892

-

-

-

-

7,892

 Non-passenger revenues

924

-

-

-

-

924

Other non-passenger revenues (1)

227

-

-

-

-

227

Cargo

697

-

-

-

-

697

Total operating revenues

27,305

-

-

-

-

27,305

Other operating income

(622)

-

-

-

-

(622)

Fuel

10,135

-

-

-

-

10,135

Aircraft and engine rent expense

6,315

(1,278)

(1,400)

(1,378)

(1,567)

692

Landing, take-off and navigation expenses

4,583

(1)

(1)

(1)

(1)

4,579

Salaries and benefits

3,125

-

-

-

-

3,125

Maintenance expenses

1,518

(4)

(5)

(5)

(5)

1,499

Sales, marketing and distribution expenses

1,501

-

-

-

-

1,501

Other operating expenses

1,130

(17)

(18)

(18)

(19)

1,058

Depreciation and amortization

501

939

1,012

1,047

1,126

4,625

Operating expenses

28,186

(361)

(412)

(355)

(466)

26,592

Operating (loss) income

(881)

361

412

355

466

713

Operating margin

(3.2%)

2.6%

Finance income

153

-

-

-

-

153

Finance cost

(120)

(361)

(408)

(423)

(486)

(1,798)

Exchange (loss) gain, net

(72)

2,255

(2,581)

1,814

(1,521)

(106)

Comprehensive financing result

(40)

1,894

(2,989)

1,391

(2,007)

(1,751)

(Loss) income before income tax

(921)

2,255

(2,577)

1,746

(1,541)

(1,038)

Income tax benefit (expense)

238

(676)

775

(523)

463

277

Net (loss) income

(683)

1,579

(1,802)

1,223

(1,078)

(761)

Basic (loss) earnings per share

(0.67)

1.56

(1.78)

1.21

(1.07)

(0.75)

Diluted (loss) earnings per share

(0.67)

1.56

(1.78)

1.21

(1.07)

(0.75)

(1) The annual figures of 2018 include a reclassification from “Other non-passenger revenues” to “Other passenger revenues” of Ps.271 million, as result of the IFRS 15 adoption

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

The following table shows unaudited balances before the adoption of IFRS 16 "Leases", on the quarterly statements of operations for each quarter of 2018.

Unaudited

(In millions of Mexican pesos)

Three months ended March 31, 2018

(Reported)

Three months ended June 30, 2018

(Reported)

Three months ended September 30, 2018

(Reported)

Three months ended December 31, 2018

(Reported)

Full Year 2018

(Reported)

Operating revenues:

 Passenger revenues

5,610

5,990

7,138

7,643

26,381

Fare revenues

3,886

4,137

5,096

5,370

18,489

Other passenger revenues (1)

1,724

1,853

2,042

2,273

7,892

 Non-passenger revenues

240

240

179

265

924

Other non-passenger revenues (1)

192

187

124

194

697

Cargo

49

53

55

71

227

Total operating revenues

5,850

6,230

7,316

7,909

27,305

Other operating income

(1)

(231)

(243)

(147)

(622)

Fuel

2,175

2,445

2,631

2,885

10,135

Aircraft and engine rent expense

1,596

1,504

1,593

1,622

6,315

Landing, take-off and navigation expenses

1,125

1,150

1,150

1,158

4,583

Salaries and benefits

746

750

834

795

3,125

Sales, marketing and distribution expenses

357

382

340

422

1,501

Maintenance expenses

351

381

393

392

1,518

Other operating expenses

274

301

257

297

1,130

Depreciation and amortization

132

124

115

130

501

Operating expenses

6,757

6,805

7,070

7,554

28,186

Operating (loss) income

(906)

(575)

246

355

(881)

Operating margin

(15.5%)

(9.2%)

3.4%

4.5%

(3.2%)

Finance income

34

37

37

45

153

Finance cost

(34)

(31)

(64)

8

(120)

Exchange (loss) gain, net

(691)

653

(419)

384

(73)

Comprehensive financing result

(691)

660

(446)

437

(40)

(Loss) income before income tax

(1,597)

85

(200)

792

(921)

Income tax benefit (expense)

479

(47)

81

(276)

238

Net (loss) income

(1,118)

38

(119)

516

(683)

(Loss) earnings per share:

Basic (pesos)

(1.10)

0.04

(0.12)

0.51

(0.67)

Diluted (pesos)

(1.10)

0.04

(0.12)

0.51

(0.67)

(Loss) earnings per ADS:

Basic (pesos)

(11.05)

0.38

(1.18)

5.10

(6.75)

Diluted (pesos)

(11.05)

0.38

(1.18)

5.10

(6.75)

(1) The annual figures of 2018 include a reclassification from “Other non-passenger revenues” to “Other passenger revenues” of Ps.271 million, as result of the IFRS 15 adoption

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Financial Position

The following table shows estimated annual adjustments made due to the adoption of IFRS 16 “Leases”, on the Consolidated Statement of Financial Position as of December 31, 2018.

Unaudited

(In millions of Mexican pesos)

December 31, 2018

(Reported)

IFRS 16

Adjustments

December 31, 2018

Assets

Cash and cash equivalents

5,863

-

5,863

Accounts receivable

1,467

-

1,467

Inventories

297

-

297

Prepaid expenses and other current assets

710

(267)

443

Financial instruments

62

-

62

Guarantee deposits

791

-

791

Total current assets

9,190

(267)

8,923

Rotable spare parts, furniture and equipment, net

5,782

-

5,782

Right of use assets

-

31,986

31,986

Intangible assets, net

179

-

179

Deferred income taxes

593

2,271

2,864

Guarantee deposits

6,337

-

6,337

Other assets

155

-

155

Other accounts receivable

74

-

74

Total non-current assets

13,121

34,257

47,378

Total assets

22,311

33,990

56,301

Liabilities

Unearned transportation revenue

2,439

-

2,439

Accounts payable

1,103

-

1,103

Accrued liabilities

2,318

-

2,318

Lease liabilities

-

4,970

4,970

Other taxes and fees payable

1,932

-

1,932

Income taxes payable

4

-

4

Financial instruments

123

-

123

Financial debt

1,212

-

1,212

Other liabilities

118

(92)

26

Total short-term liabilities

9,249

4,878

14,127

Financial debt

2,311

-

2,311

Accrued liabilities

137

-

137

Lease liabilities

-

34,586

34,586

Other liabilities

328

-

328

Employee benefits

18

-

18

Deferred income taxes

1,096

-

1,096

Total long-term liabilities

3,890

34,586

38,476

Total liabilities

13,139

39,464

52,603

Equity

Capital stock

2,974

-

2,974

Treasury shares

(123)

-

(123)

Contributions for future capital increases

-

-

 -

Legal reserve

291

-

291

Additional paid-in capital

1,837

-

1,837

Retained earnings

4,266

(5,474)

(1,208)

Accumulated other comprehensive losses

(73)

-

(73)

Total equity

9,172

(5,474)

3,698

Total liabilities and equity

22,311

33,990

56,301

Total shares outstanding fully diluted

1,011,876,677

1,011,876,677

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries

Consolidated Statement of Cash Flows – Cash Flow Data Summary

The following table shows third quarter estimated adjustments made due to the adoption of IFRS 16 “Leases”, on the Consolidated Statement of Cash Flow for the three months ended September 30, 2018.

Unaudited

Adjustments

Three months ended September 30, 2018

(In millions of Mexican pesos)

Three months ended September 30, 2018

(Reported)

Net cash flow (used in) generated by operating activities

(136)

1,399

1,263

Net cash flow generated by investing activities

20

-

20

Net cash flow used in financing activities

(247)

(1,399)

(1,646)

Decrease in cash and cash equivalents

(363)

-

(363)

Net foreign exchange differences

(327)

-

(327)

Cash and cash equivalents at beginning of period

6,771

-

6,771

Cash and cash equivalents at end of period

6,082

-

6,082

The following table shows the YTD September 2018 estimated adjustments made due to the adoption of IFRS 16 “Leases”, on the Consolidated Statement of Cash Flow for the nine months ended September 30, 2018.

Unaudited

Adjustments

Nine months ended September 30, 2018

(In millions of Mexican pesos)

Nine months ended September 30, 2018

(Reported)

Net cash flow generated by operating activities

464

4,116

4,580

Net cash flow used in investing activities

(641)

-

(641)

Net cash flow used in financing activities

(386)

(4,116)

(4,502)

Decrease in cash and cash equivalents

(563)

-

(563)

Net foreign exchange differences

(306)

-

(306)

Cash and cash equivalents at beginning of period

6,951

-

6,951

Cash and cash equivalents at end of period

6,082

-

6,082

[1] Source: Asociación Nacional de Tiendas de Autoservicio y Departamentales, A. C. (ANTAD)

[2] Source: Banco de México (BANXICO)

[3] Source: Instituto Nacional de Estadística y Geografía (INEGI)