Core Insights - Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (Volaris) released its 2023 Integrated Annual Report titled "Total Vision: Exploring New Perspectives" [1] Company Overview - Volaris is an ultra-low-cost carrier (ULCC) operating point-to-point services in Mexico, the United States, Central, and South America [3] - Since its inception in March 2006, Volaris has expanded its routes from 5 to over 214 and its fleet from 4 to 137 aircraft [3] - The company operates more than 495 daily flight segments connecting 44 cities in Mexico and 29 cities in the United States, Central, and South America [3] - Volaris targets cost-conscious business and leisure travelers, as well as passengers visiting friends and relatives [3] - The company has received the ESR Award for Social Corporate Responsibility for fifteen consecutive years [3]

Volaris reported a 7% decline in revenue in the second quarter, driven by a 17% decline in available seat miles (capacity, in other words). Yield (total revenue per available seat mile, or TRASM) improved 12%, but revenue still missed by about 3%. On the cost side, total costs per available seat mile (or CASM) rose 9% to $0.081, while CASM ex-fuel rose 11% to $0.053. This was better than expected, with the company under-spending in areas like marketing and maintenance (no need to market for grounded flights ...

Financial Data and Key Metrics Changes - The company recorded total operating revenues of $726 million, a decrease of only 7% year-over-year despite a 17% reduction in capacity [27][30] - Net income rose to $10 million, translating to earnings per ADS of $0.09, with cash flow from operating activities at $304 million [29][30] - EBIT increased by 29% to $66 million, with an EBIT margin of 9.1%, while EBITDAR reached $261 million, a 23% increase [54] Business Line Data and Key Metrics Changes - TRASM increased by 12% year-over-year to $0.0889, with a load factor of 85.5% compared to 84.6% a year ago [17] - Ancillary revenues comprised more than 50% of total revenues, with ancillary revenue per passenger rising 15% year-over-year to $53 [43] - The average number of aircraft grounded for engine inspections was 31 during the quarter, with two new A321neo aircraft received [32] Market Data and Key Metrics Changes - The company expects total revenue for the full year of 2024 to be close to 2023 levels, despite a double-digit reduction in capacity [17] - In the US market, increased capacity has bolstered consolidated unit revenue and profitability, with July load factors and fares showing solid improvement [19] - The company anticipates ongoing robust performance in the second half of the year, with bookings indicating trends slightly above expectations [20] Company Strategy and Development Direction - The company is committed to prudent and rational growth, prioritizing profitability as grounded aircraft return to service [13] - The strategy includes shifting ASMs into the cross-border market to maximize profitability, leveraging the unique capacity to convert bus passengers in Mexico [14][24] - The company aims to maintain a competitive advantage through cost control, with approximately 70% of costs being variable [41][54] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the recovery of engine availability and turnaround times, with a forecasted reduction in ASM guidance from a previous estimate [11][39] - The management highlighted the importance of maintaining a stable schedule and improving reliability, leading to fewer cancellations [21] - The company expects to gradually restore capacity while focusing on profitable growth, with no expectation to reach 2023 capacity levels next year [47][93] Other Important Information - The company ended the quarter with a liquidity position of $758 million, representing 23% of the last 12 months' total operating revenues [55] - Average economic fuel costs fell by 4.5% to $9.93 per gallon, while CASM ex-fuel was $0.0525, reflecting a 10.8% increase [56] - The company expects an ASM reduction of around 40% year-over-year for the full year of 2024 [58] Q&A Session Summary Question: Industry's ability to flex up capacity during peak demand periods - Management noted that domestic capacity is constrained in both low and high seasons, with a stable schedule implemented throughout the year [63] Question: Full year capacity expectations - Management confirmed that the capacity reduction is primarily due to the ability to acquire new spare engines, with expectations of 32 engines returning in the second half of the year [87] Question: Insights on servicing the Tulum airport - Operations at Tulum airport are still in the early stages, with flights expected to start later in the fourth quarter [109] Question: v.club membership performance - The v.club membership accounts for about 15% of sales, with a focus on building customer loyalty and repeat business [118] Question: Maintenance costs normalization - Management indicated that maintenance costs are expected to normalize, with timing being a key factor in quarterly fluctuations [122]

Second Quarter 2024 Highlights Net income of $10 million. Earnings per American Depositary Shares (ADS) of $9 cents. Total operating revenue of $726 million, a 7.2% decrease. Total revenue per available seat mile (TRASM) increased 12% to $8.89 cents. Available seat miles (ASMs) decreased by 17% to 8.2 billion. Total operating expenses of $660 million, representing 91% of total operating revenue. Total operating expenses per available seat mile (CASM) increased 9.1% to $8.08 cents. Average economic fuel cost ...

[Annex - Financial Derivative Instruments](index=2&type=section&id=Annex%20-%20Financial%20Derivative%20Instruments) This annex details the company's policies, markets, valuation, liquidity, and quantitative information regarding its financial derivative instruments [Management's Discussion on Derivative Policies](index=2&type=section&id=Management's%20Discussion%20on%20Derivative%20Policies) Volaris uses derivatives solely for hedging financial risks, managed by a dedicated team under a conservative policy - Volaris uses derivatives solely for hedging financial risks (fuel price, foreign currency, interest rate), not for speculation[2](index=2&type=chunk)[5](index=5&type=chunk) - A Risk Management team and Hedging Policy, approved by Corporate Governance, are in place to manage these risks[3](index=3&type=chunk)[4](index=4&type=chunk) - As of the report date, Volaris does not hold fuel or foreign exchange derivative financial instruments, but maintains interest rate CAPs for Asset Backed Trust Notes[6](index=6&type=chunk) [Trading Markets and Eligible Counterparties](index=3&type=section&id=Trading%20Markets%20and%20Eligible%20Counterparties) The company conducts OTC derivative transactions with robust counterparties, using ISDA agreements to mitigate risk - Volaris operates only in OTC markets and uses ISDA agreements with financially strong counterparties to minimize risk[7](index=7&type=chunk)[8](index=8&type=chunk) ISDAs and Q2 2024 Activity | Metric | Value | | :--- | :--- | | ISDAs in place (June 30, 2024) | 8 | | Q2 2024 activity | None | [Valuation Techniques](index=3&type=section&id=Valuation%20Techniques) Derivatives are valued at fair value using financial institution data and internal models, classified as effective hedges - Derivatives are valued at fair value using financial institution valuations and internal methodologies, with Bloomberg as a primary data source[9](index=9&type=chunk) - All derivative financial instruments are considered effective and classified under hedge accounting assumptions in accordance with IFRS[10](index=10&type=chunk) [Liquidity Sources for Derivatives](index=3&type=section&id=Liquidity%20Sources%20for%20Derivatives) Volaris manages derivative liquidity by diversifying contracts with CSAs and maintaining internal resources - Derivative contracts are distributed among multiple counterparties with CSAs and varied maturities to optimize financial conditions and minimize margin calls[11](index=11&type=chunk) - Internal resources are available to meet derivative-related liquidity requirements if needed[11](index=11&type=chunk) [Changes in Risk Exposure and Contingencies](index=3&type=section&id=Changes%20in%20Risk%20Exposure%20and%20Contingencies) No significant changes in exposure to fuel price, exchange rate, or interest rate risks observed in Q2 2024 - No significant changes in exposure to fuel price, exchange rate, or interest rate risks were observed in Q2 2024[12](index=12&type=chunk) [Quantitative Information on Derivatives](index=3&type=section&id=Quantitative%20Information%20on%20Derivatives) All derivatives qualify for hedge accounting, fair value changes reflect only underlying asset price movements - All derivatives held qualify as hedge accounting, with fair value changes reflecting only underlying asset price movements[13](index=13&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=4&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's business, accounting policies, financial instruments, and other significant financial disclosures - Interim financial statements are prepared in accordance with IAS 34 and IFRS, using consistent accounting policies as annual statements[15](index=15&type=chunk)[174](index=174&type=chunk) - The functional and presentation currency for the Company and its main subsidiary (Concesionaria) is the US dollar[17](index=17&type=chunk)[176](index=176&type=chunk) [Description of the Business](index=22&type=section&id=Description%20of%20the%20Business) Volaris is an ultra-low-cost carrier operating in Mexico, the US, Central, and South America, with its concession extended - Volaris is an ultra-low-cost carrier operating in Mexico, the US, Central, and South America[159](index=159&type=chunk)[160](index=160&type=chunk)[367](index=367&type=chunk) - Concesionaria's air transportation concession was extended for 20 years, effective May 9, 2020[161](index=161&type=chunk) - Volaris is dual-listed on NYSE (VLRS) and BMV (VOLAR) since September 2013[163](index=163&type=chunk) [Summary of Material Accounting Policies](index=4&type=section&id=Summary%20of%20Material%20Accounting%20Policies) This section details the key accounting policies for interim financial statements, adhering to IAS 34 and IFRS, with US dollar as functional currency - Interim financial statements are prepared in accordance with IAS 34 and IFRS, using consistent accounting policies as annual statements[15](index=15&type=chunk)[174](index=174&type=chunk) - The functional and presentation currency for the Company and its main subsidiary (Concesionaria) is the US dollar[17](index=17&type=chunk)[176](index=176&type=chunk) [Basis of Preparation](index=4&type=section&id=Basis%20of%20Preparation) Interim financial statements are prepared under IAS 34 and IFRS, using US dollar as functional currency and management estimates - Interim financial statements are prepared in accordance with IAS 34 and IFRS, using consistent accounting policies as annual statements[15](index=15&type=chunk)[174](index=174&type=chunk) - The functional and presentation currency for the Company and its main subsidiary (Concesionaria) is the US dollar[17](index=17&type=chunk)[176](index=176&type=chunk) - Financial statements are prepared under the historical-cost convention, with derivatives measured at fair value[19](index=19&type=chunk)[178](index=178&type=chunk) - Preparation requires management estimates and assumptions, which may lead to actual results differing from reported amounts[20](index=20&type=chunk)[179](index=179&type=chunk) [Basis of Consolidation](index=4&type=section&id=Basis%20of%20Consolidation) Consolidated financial statements include 100%-owned subsidiaries, defining control by power over investee and variable returns, with intercompany eliminations - Consolidated financial statements include the Company and its 100%-owned subsidiaries in Mexico, Costa Rica, Guatemala, and El Salvador[21](index=21&type=chunk)[22](index=22&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) - Control is defined by power over the investee, exposure to variable returns, and the ability to affect those returns[24](index=24&type=chunk)[183](index=183&type=chunk) - Intercompany balances and transactions are fully eliminated upon consolidation[25](index=25&type=chunk)[185](index=185&type=chunk) [Revenue Recognition](index=6&type=section&id=Revenue%20Recognition) Passenger and non-passenger revenues are recognized upon service provision or ticket expiration, with net revenue for agent-based services - Passenger revenues are recognized upon service provision or ticket expiration; non-passenger revenues upon service provision[27](index=27&type=chunk)[29](index=29&type=chunk)[32](index=32&type=chunk) - For partner airline segments and certain third-party services, Volaris acts as an agent, recognizing net revenue[31](index=31&type=chunk)[33](index=33&type=chunk) - Tickets are non-refundable, but cancellations attributable to the airline offer flight changes, refunds, or vouchers; revenue is recognized when vouchers are redeemed or expire[40](index=40&type=chunk) [Cash, Cash Equivalents and Restricted Cash](index=7&type=section&id=Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) Cash and cash equivalents are highly liquid investments with short maturities, while restricted cash is held for debt service reserves - Cash and cash equivalents are highly liquid investments with maturities of 90 days or less[43](index=43&type=chunk) - Restricted cash is specifically for debt service reserves and is not available for other uses[45](index=45&type=chunk)[274](index=274&type=chunk) [Short-Term Investments](index=8&type=section&id=Short-Term%20Investments) Short-term investments consist of fixed-term bank deposits with maturities ranging from 3 to 12 months - Short-term investments are fixed-term bank deposits maturing in 3-12 months[46](index=46&type=chunk) [Financial Instruments Initial Recognition and Subsequent Measurement](index=8&type=section&id=Financial%20Instruments%20Initial%20Recognition%20and%20Subsequent%20Measurement) Financial assets are classified and measured per IFRS 9 at fair value, while liabilities are at amortized cost, with specific derecognition criteria - Financial assets are classified and measured per IFRS 9, based on cash flows and business model, and initially recognized at fair value[48](index=48&type=chunk)[49](index=49&type=chunk) - Financial liabilities are initially recognized at fair value and subsequently measured at amortized cost for loans and payables[56](index=56&type=chunk)[57](index=57&type=chunk)[58](index=58&type=chunk) - A financial asset is derecognized when rights to cash flows expire or are transferred, and risks/rewards or control are substantially transferred[50](index=50&type=chunk) - Financial liabilities are derecognized when obligations are discharged, cancelled, or expire, or if terms are substantially modified[61](index=61&type=chunk) [Other Accounts Receivable](index=10&type=section&id=Other%20Accounts%20Receivable) Receivables primarily from credit card processors are non-interest bearing, short-term, and valued at cost less allowances

volaris + Conclusion: Volaris Remains Undervalued Volaris Revenues Grow As Company Manages Capacity | --- | --- | --- | --- | --- | --- | --- | |--------------------------------|-------|------------|----------------------|------------|------------------------|-------| | -10 \nTotal Operating Revenues | | TRASM | trate \nCASM ex fuel | | EBIT | | | USD $768M | | USD 9.34c | USD 5.16c | | USD $104M | | | 11 | | | | | | | | EBITDAR | | Net Income | Liquidity | 22% of LTM | Net Debt / LTM EBITDAR | | | USD $235 ...

Passengers: The total number of passengers booked on all flight segments. Media Contact Israel Álvarez / ialvarez@gcya.net MEXICO CITY, July 08, 2024 (GLOBE NEWSWIRE) -- Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE: VLRS and BMV: VOLAR) ("Volaris" or "the Company"), the ultra-low-cost carrier (ULCC) serving Mexico, the United States, Central, and South America, reports its June 2024 preliminary traffic results. The information included in this report has not been audited and does not provid ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT O ...

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS) Q1 2024 Results Conference Call April 23, 2024 11:00 AM ET Company Participants Ricardo Martinez - Investor Relations Director Enrique Javier Beltranena Mejicano - President and Chief Executive Officer Holger Blankenstein - Executive Vice President, Airline Commercial and Operations Jaime Esteban Pous Fernandez - Chief Financial Officer Conference Call Participants Duane Pfennigwerth - Evercore ISI Stephen Trent - Citi Michael Linenberg - D ...

[Earnings Release & Q1 2024 Highlights](index=51&type=section&id=Earnings%20Release%20%26%20Q1%202024%20Highlights) Volaris achieved a net income of $33 million in Q1 2024, a significant turnaround from a $71 million loss, driven by revenue growth and improved TRASM despite capacity reductions [Q1 2024 Financial & Operating Performance](index=51&type=section&id=Q1%202024%20Financial%20%26%20Operating%20Performance) Volaris achieved a net income of **$33 million** in Q1 2024, a significant turnaround from a **$71 million** net loss, driven by a **5.1%** increase in total operating revenues to **$768 million** and a **21.3%** surge in TRASM, despite a **13.4%** capacity reduction Q1 2024 Key Financial & Operating Highlights (vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | **Total Operating Revenue** | $768 million | $731 million | +5.1% | | **Net Income (Loss)** | $33 million | ($71 million) | N/A | | **Earnings per ADS** | $0.29 | ($0.62) | N/A | | **TRASM (cents)** | 9.34 | 7.71 | +21.3% | | **ASMs (millions)** | 8,217 | 9,488 | -13.4% | | **CASM (cents)** | 8.08 | 8.03 | +0.6% | | **CASM ex-fuel (cents)** | 5.16 | 4.65 | +11.0% | | **EBITDAR** | $235 million | $123 million | +91.1% | | **EBITDAR Margin** | 30.6% | 16.8% | +13.7 pp | - Ancillary revenue per passenger increased by **35%** to **$57**, representing **51%** of total operating revenue, up from **47%** in the prior year[339](index=339&type=chunk) - The decrease in capacity (ASMs) was primarily due to aircraft groundings resulting from accelerated Pratt & Whitney engine inspections[338](index=338&type=chunk)[342](index=342&type=chunk) - Total operating expenses decreased by **12.9%** to **$664 million**, largely driven by a **25.2%** reduction in fuel expense[340](index=340&type=chunk)[367](index=367&type=chunk) [Balance Sheet and Liquidity](index=54&type=section&id=Balance%20Sheet%20and%20Liquidity) Volaris maintained a solid liquidity position with **$768 million** in cash and equivalents, representing **23%** of LTM operating revenue, while improving its net debt-to-LTM EBITDAR ratio to **3.1x** from **3.8x** Key Balance Sheet and Liquidity Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Total Cash & Equivalents** | $768 million | - | | **Financial Debt** | $642 million | - | | **Total Lease Liabilities** | $3,021 million | - | | **Net Debt-to-LTM EBITDAR** | 3.1x | 3.8x | - Net cash flow provided by operating activities was **$245 million** for the quarter[346](index=346&type=chunk)[372](index=372&type=chunk) [Fleet Update](index=55&type=section&id=Fleet%20Update) Volaris expanded its fleet to **134 aircraft** by Q1 2024, an increase of **14** year-over-year, with **59%** being NEO models and an average age of **5.9 years** Fleet Composition as of March 31, 2024 | Aircraft Type | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | A319 | 3 | 3 | 0 | | A320 | 42 | 40 | +2 | | A321 | 10 | 10 | 0 | | A320neo | 51 | 50 | +1 | | A321neo | 28 | 17 | +11 | | **Total Aircraft** | **134** | **120** | **+14** | - During the first quarter, Volaris added **five aircraft**: two A320ceo and three A321neo models[353](index=353&type=chunk) [2024 Guidance](index=54&type=section&id=2024%20Guidance) Volaris anticipates continued capacity constraints for Q2 and full year 2024, with full-year ASM capacity expected to decrease by **16-18%** year-over-year, while projecting a robust EBITDAR margin of **32-34%** including Pratt & Whitney compensation Q2 2024 Guidance | Metric | Q2 2024 Guidance | Q2 2023 Actual | | :--- | :--- | :--- | | **ASM Growth (YoY)** | ~ -18% | +18.1% | | **TRASM** | $9.1 to $9.2 cents | $7.92 cents | | **CASM ex fuel** | $5.5 to $5.6 cents | $4.82 cents | | **EBITDAR Margin** | 31% to 33% | 27.1% | Full Year 2024 Guidance | Metric | 2024 Guidance | 2023 Actual | | :--- | :--- | :--- | | **ASM Growth (YoY)** | -16% to -18% | +10.2% | | **EBITDAR Margin** | 32% to 34% | 25.2% | | **CAPEX** | ~$400 million | $252 million | - The guidance includes compensation Volaris expects to receive from Pratt & Whitney for grounded aircraft resulting from GTF engine removals[351](index=351&type=chunk) [Consolidated Financial Statements](index=59&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements reflect a shift to **$33 million** net income from a **$71 million** loss, with total assets of **$5.38 billion** and strong operating cash flow of **$245 million** for the quarter [Consolidated Statement of Operations](index=59&type=section&id=Consolidated%20Statement%20of%20Operations) The Consolidated Statement of Operations shows a significant improvement, moving from a **$31 million** operating loss in Q1 2023 to a **$104 million** operating income in Q1 2024, culminating in a **$33 million** net income Q1 2024 vs Q1 2023 Statement of Operations (in millions USD) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Total operating revenues** | **768** | **731** | | Total operating expenses | 664 | 762 | | **Operating income (loss)** | **104** | **(31)** | | Comprehensive financing result | (57) | (65) | | Income (loss) before income tax | 47 | (96) | | Income tax (expense) benefit | (14) | 25 | | **Net income (loss)** | **33** | **(71)** | [Consolidated Statement of Financial Position](index=61&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) The Consolidated Statement of Financial Position shows total assets increased to **$5.381 billion** as of March 31, 2024, with total liabilities at **$5.104 billion** and total equity at **$277 million** Statement of Financial Position (in millions USD) | Category | As of Mar 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | **Total current assets** | **1,277** | **1,248** | | **Total non-current assets** | **4,104** | **3,898** | | **Total assets** | **5,381** | **5,146** | | Total short-term liabilities | 1,744 | 1,621 | | Total long-term liabilities | 3,360 | 3,282 | | **Total liabilities** | **5,104** | **4,903** | | **Total equity** | **277** | **243** | | **Total liabilities and equity** | **5,381** | **5,146** | [Consolidated Statement of Cash Flows](index=62&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) The Consolidated Statement of Cash Flows indicates net cash flow from operating activities increased to **$245 million** in Q1 2024, despite a net decrease in overall cash of **$23 million** for the quarter Q1 2024 vs Q1 2023 Cash Flow Summary (in millions USD) | Flow | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash flow from operating activities | 245 | 208 | | Net cash flow used in investing activities | (97) | (109) | | Net cash flow used in financing activities | (171) | (110) | | **Decrease in cash** | **(23)** | **(11)** | [Financial Risk Management & Derivative Instruments](index=2&type=section&id=Financial%20Risk%20Management%20%26%20Derivative%20Instruments) Volaris manages market risks from fuel prices, foreign currency, and interest rates using derivative instruments solely for hedging, while maintaining strong liquidity and low credit risk [Derivative Financial Instrument Policies](index=2&type=section&id=Derivative%20Financial%20Instrument%20Policies) Volaris employs derivative financial instruments strictly for hedging purposes to mitigate operational financial risks, prohibiting speculative use, and aims to apply hedge accounting treatment under IFRS, overseen by a dedicated Risk Management team - The company's policy is to use derivative financial instruments solely to mitigate risks and not for speculative or trading purposes[2](index=2&type=chunk) - A dedicated Risk Management team identifies, evaluates, and designs strategies to mitigate financial risks, governed by a Hedging Policy approved through Corporate Governance[3](index=3&type=chunk)[4](index=4&type=chunk) - The company's objective is to apply hedge accounting treatment to all derivative financial instruments, which are considered effective as of the report date[5](index=5&type=chunk)[10](index=10&type=chunk) [Market Risk Management](index=2&type=section&id=Market%20Risk%20Management) Volaris faces market risks from jet fuel price volatility, foreign currency fluctuations, and interest rates, with fuel accounting for **36%** of Q1 2024 operating expenses and interest rate CAPs used to manage floating-rate debt - Volaris is exposed to fuel price risk, as fuel accounted for **36%** of operating expenses in Q1 2024; as of the report date, the company did not have any fuel derivative instruments[6](index=6&type=chunk)[201](index=201&type=chunk) - The company's main foreign currency risk relates to its operations denominated in Mexican pesos; as of March 31, 2024, Volaris had a net liability position of **$129.1 million** in Mexican Pesos[6](index=6&type=chunk)[208](index=208&type=chunk) - To mitigate interest rate risk on its floating-rate debt (CEBURs), the company holds interest rate CAPs with TIIE 28 as the underlying, with a notional amount of **$174.9 million** and a fair value of **$1.4 million** as of March 31, 2024[6](index=6&type=chunk)[224](index=224&type=chunk) [Liquidity and Credit Risk](index=3&type=section&id=Liquidity%20and%20Credit%20Risk) Volaris manages liquidity risk by aligning investments with obligations and diversifying funding, with total contractual financial liabilities of approximately **$3.96 billion**, while credit risk is considered minimal due to high-rated counterparties - The company manages liquidity by distributing exposure among various counterparties and using different instruments and maturities to minimize potential margin calls[11](index=11&type=chunk) - Credit risk is considered low as receivables are primarily from major credit card companies, and derivative counterparties have high credit ratings[231](index=231&type=chunk)[233](index=233&type=chunk) Contractual Principal Payments on Financial Liabilities (March 31, 2024) | Liability Type | Within one year | One to five years | Total | | :--- | :--- | :--- | :--- | | **Interest-bearing borrowings** | $251,616 USD | $383,947 USD | $635,563 USD | | **Lease liabilities** | $375,110 USD | $2,646,115 USD | $3,021,225 USD | | **Return obligation** | $11,655 USD | $289,136 USD | $300,791 USD | | **Total** | **$638,381 USD** | **$3,319,198 USD** | **$3,957,579 USD** | [Fair Value Measurements](index=33&type=section&id=Fair%20Value%20Measurements) Volaris's derivative financial instruments, primarily interest rate caps, are the only financial assets measured at fair value on a recurring basis, categorized as Level 2 in the fair value hierarchy with a fair value of **$1.4 million** as of March 31, 2024 - All derivative financial instruments are categorized within Level 2 of the fair value hierarchy, using significant observable inputs for valuation[243](index=243&type=chunk)[244](index=244&type=chunk) Fair Value of Financial Instruments (March 31, 2024) | Instrument | Carrying Amount | Fair Value | | :--- | :--- | :--- | | **Assets** | | | | Derivative financial Instruments | $1,413 USD | $1,413 USD | | **Liabilities** | | | | Financial debt | ($635,563) USD | ($656,996) USD | [Notes to Condensed Consolidated Financial Statements](index=4&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the basis of preparation, key accounting policies, and specific financial statement components including debt, leases, equity, commitments, related party transactions, and segment information [Basis of Preparation and Key Accounting Policies](index=4&type=section&id=Basis%20of%20Preparation%20and%20Key%20Accounting%20Policies) The unaudited condensed consolidated interim financial statements are prepared under IAS 34, using the U.S. dollar, with key policies covering passenger revenue recognition, major maintenance capitalization, and IFRS 16 lease accounting - The financial statements are prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting[14](index=14&type=chunk) - Passenger revenue is recognized when the air transportation service is provided or when a non-refundable ticket expires; sales for future flights are held as 'unearned transportation revenue'[25](index=25&type=chunk)[26](index=26&type=chunk) - Major maintenance costs are capitalized as leasehold improvements and amortized over the shorter of the period to the next major maintenance event or the remaining lease term[80](index=80&type=chunk) - The company applies IFRS 16 for leases, recognizing right-of-use assets and lease liabilities for nearly all lease contracts, except for short-term and low-value assets[120](index=120&type=chunk) [Financial Debt](index=35&type=section&id=Financial%20Debt) As of March 31, 2024, Volaris's total financial debt amounted to **$641.5 million**, comprising Asset Backed Trust Notes (CEBURs), pre-delivery payment facilities, and engine acquisition financing agreements Breakdown of Financial Debt (March 31, 2024) | Debt Instrument | Amount (in millions USD) | | :--- | :--- | | Asset backed trust notes (CEBURs) | 174.9 | | Pre-delivery payments facilities | 310.6 | | Engine acquisition financing | 150.1 | | Other (costs, interest) | 6.0 | | **Total Financial Debt (Gross)** | **641.5** | - The company has three tranches of Asset Backed Trust Notes (CEBURs) backed by future credit card receivables, with maturities in **2024**, **2026**, and **2028**[257](index=257&type=chunk)[259](index=259&type=chunk)[263](index=263&type=chunk) - Several financing agreements for engine acquisitions in **2023** were classified as failed sale and leaseback transactions and are therefore accounted for as financial debt[130](index=130&type=chunk)[271](index=271&type=chunk) [Leases](index=44&type=section&id=Leases) Leases are central to Volaris's business, with **$2.46 billion** in right-of-use assets and **$3.02 billion** in lease liabilities as of March 31, 2024, covering **133 leased aircraft** and **20 spare engines**, with lease extensions due to engine inspections Lease-Related Balances (in millions USD) | Account | As of Mar 31, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | **Right-of-use assets** | 2,463 | 2,338 | | **Lease liabilities** | 3,021 | 2,891 | - As of Q1 2024, the fleet comprised **133 leased aircraft** and **20 spare engines**[300](index=300&type=chunk)[301](index=301&type=chunk) - In response to preventive accelerated inspections of GTF engines, the company extended lease agreements for **nine A320CEO aircraft** for up to **6 additional years**[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk) [Equity and Earnings Per Share (EPS)](index=47&type=section&id=Equity%20and%20Earnings%20Per%20Share%20%28EPS%29) As of March 31, 2024, Volaris's total equity was **$277 million** with **1.151 billion** shares outstanding, resulting in basic and diluted EPS of **$0.029** for Q1 2024, a significant improvement from a **($0.062)** loss per share in Q1 2023 Q1 Earnings Per Share Calculation | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Net earnings (loss) (millions)** | $33.2 | ($70.9) | | **Weighted avg. shares (basic, thousands)** | 1,151,451 | 1,152,524 | | **Basic EPS** | **$0.029** | **($0.062)** | | **Weighted avg. shares (diluted, thousands)** | 1,165,977 | 1,165,049 | | **Diluted EPS** | **$0.029** | **($0.061)** | - As of March 31, 2024, the company had **1,151,450,983 shares** outstanding after accounting for treasury shares[312](index=312&type=chunk) - In November 2023, all **57.5 million** outstanding Series B shares were converted into Series A shares[314](index=314&type=chunk) [Commitments and Contingencies](index=49&type=section&id=Commitments%20and%20Contingencies) Volaris has substantial future commitments, including **$6.5 billion** for aircraft purchases through **2028** and beyond, with **$1.27 billion** in estimated sale and leaseback proceeds committed, alongside **$32.3 million** in potential contingent liabilities Aircraft Purchase Commitments (in thousands USD) | Period | Commitment Expenditures | | :--- | :--- | | 2024 | $226,157 | | 2025 | $711,112 | | 2026 | $1,408,871 | | 2027 | $1,123,329 | | 2028 and thereafter | $3,065,774 | | **Total** | **$6,535,243** | - The company has commitments to execute sale and leaseback transactions with estimated proceeds of **$1.274 billion** over the next three years to finance aircraft acquisitions[323](index=323&type=chunk) - As of March 31, 2024, the company faced possible contingencies amounting to **$32.3 million** related to legal, labor, and other contribution matters[327](index=327&type=chunk) [Related Party Transactions](index=40&type=section&id=Related%20Party%20Transactions) Volaris conducts business with several related parties due to shared board members or investors, with key Q1 2024 transactions including **$2.2 million** for airport services with OMA and **$4.7 million** for aircraft maintenance with MRO Commercial Key Related Party Transactions (Q1 2024 Expenses) | Related Party | Type of Transaction | Amount (in thousands USD) | | :--- | :--- | :--- | | **MRO Commercial, S.A.** | Aircraft maintenance | $4,652 | | **Grupo Aeroportuario del Centro Norte (OMA)** | Airport services | $2,242 | | **A&P International Services (AISG)** | Aircraft maintenance | $730 | - Key related parties include Frontier Airlines, OMA, and MRO Commercial, primarily due to shared board members and common investors like Indigo Partners[279](index=279&type=chunk)[281](index=281&type=chunk)[285](index=285&type=chunk) [Segment Information](index=50&type=section&id=Segment%20Information) Volaris reports revenues across two geographic segments: Domestic (Mexico) and International, with Domestic revenue at **$484.4 million** (**63%** of total) and International at **$283.4 million** (**37%**) for Q1 2024 Operating Revenues by Geographic Segment (Q1 2024 vs Q1 2023) | Segment | Q1 2024 (USD millions) | Q1 2023 (USD millions) | | :--- | :--- | :--- | | **Domestic (Mexico)** | 484.4 | 466.6 | | **International** | 283.4 | 264.5 | | **Total operating revenues** | **767.8** | **731.1** |