Volaris (NYSE:VLRS) M&A Announcement Transcript

Summary of Conference Call on Proposed Formation of New Airline Group by Volaris and VIVA Industry and Companies Involved - Industry: Aviation, specifically the airline sector in Mexico - Companies: Volaris and VIVA Core Points and Arguments 1. Formation of New Airline Group: Volaris and VIVA are proposing to create a new airline group aimed at accelerating air travel expansion in Mexico and internationally, leveraging economies of scale [2][4] 2. Merger Structure: The merger will be a merger of equals, with shareholders of both companies owning 50% of the new entity, which will be publicly listed under a new ticker as Grupo Mas Vuelos [7][8] 3. Operational Independence: Both airlines will maintain their distinct brands and air operator certificates, ensuring operational continuity while benefiting from a stronger financial foundation [9][10] 4. Market Opportunity: The Mexican aviation sector is under-penetrated, with air trips per capita significantly lower than in comparable emerging economies, indicating substantial growth potential [12][13] 5. Job Creation: The establishment of new bases in underserved regions is expected to create direct and indirect jobs, with each new airplane estimated to create approximately 60 direct jobs [11] 6. Fleet and Cost Structure: The combined order book exceeds 200 aircraft, with a projected value of up to $14 billion. The merger is expected to enhance cost efficiencies, particularly in aircraft ownership costs, which currently represent 33%-35% of total costs [12][31] 7. Regulatory Process: The transaction is subject to regulatory approvals in Mexico, Colombia, and the U.S., and the companies are optimistic about the review process [23][53] 8. Financial Metrics: The pro forma leverage for the combined entity is projected at 2.7 times EV/EBITDA, with a focus on reducing aircraft ownership costs through improved capital allocation [25][17] 9. Synergies and Cost Savings: The merger is expected to unlock significant cost synergies, particularly in fleet negotiations and procurement, which will help lower operational costs and improve financial stability [17][55] 10. Community and Economic Impact: Increased connectivity is anticipated to support economic development, particularly in underserved regions, benefiting tourism and other key sectors [19][55] Other Important but Potentially Overlooked Content 1. Cultural Compatibility: The companies believe their similar operational cultures will facilitate the merger process and realization of synergies [54] 2. Focus on Demand-Driven Growth: Both airlines emphasize maintaining a low-cost, low-complexity operating model while expanding access to affordable air travel [48] 3. Long-Term Vision: The new airline group aims to redefine affordable air travel in Mexico, enhancing connectivity and value for passengers [20][21]