BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Joint Application of DELTA AIR LINES, INC. And AEROVÍAS DE MEXICO, S.A. DE C.V. Under 49 U.S.C. 41308 and 41309 for Approval of and Antitrust Immunity for Alliance Agreements Docket DOT-OST-2015-0070 APPLICATION OF CONCESIONARIA VUELA COMPAÑÍA DE AVIACIÓN, S.A.P.I. DE C.V. D/B/A VOLARIS FOR AN ALLOCATION OF SLOTS Communications with respect to this document should be sent to: Anita M. Mosner Jennifer M. Nowak Tristan R. Atwood Holland & Knight LLP 800 17 th Street, NW, Suite 1100 Washington, DC 20006 (202) 419-2604 anita.mosner@hklaw.com Counsel for Concesionaria Vuela Compañia de Aviación, S.A.P.I. de C.V. d/b/a Volaris January 23, 2017
TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY... 1 II. DISCUSSION... 2 A. 2017 Slot Requests... 6 1. JFK-MEX... 6 2. MEX-SAT... 8 3. MEX-IAD... 9 4. MEX-ORD... 11 5. MEX-LAX... 12 B. 2018 Slot Requests... 13 1. MEX-OAK... 13 2. MEX-DEN... 14 3. MEX-ONT and MEX-SJC... 15 4. JFK-CUN... 16 III. CONCLUSION... 17
BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Joint Application of DELTA AIR LINES, INC. And AEROVÍAS DE MEXICO, S.A. DE C.V. Docket DOT-OST-2015-0070 Under 49 U.S.C. 41308 and 41309 for Approval of and Antitrust Immunity for Alliance Agreements APPLICATION OF CONCESIONARIA VUELA COMPAÑÍA DE AVIACIÓN, S.A.P.I. DE C.V. D/B/A VOLARIS FOR AN ALLOCATION OF SLOTS I. INTRODUCTION AND SUMMARY By Order 2016-12-13, DOT granted the request of Delta Air Lines, Inc. ( Delta ) and Aerovías de Mexico, S.A. de C.V. ( Aeroméxico ) (together, the Applicants ), for approval of and antitrust immunity for their US-Mexico joint venture agreement, conditioning that approval upon the divestiture by the Applicants of slots at both Mexico City International Airport (MEX) and at New York s John F. Kennedy International Airport (JFK). 1 By Order 2017-1-6, the Department invited interested (and qualified) parties to apply for such remedy slots. Pursuant to that Order, Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V. d/b/a Volaris ( Volaris ) hereby submits this application for an allocation of slots at both MEX and JFK. Volaris is seeking five new slot pairs at MEX for 2017 and three slot pairs at MEX for 2018. Volaris seeks one new slot pair at JFK in 2017, and another in 2018. Following is a summary of its slot requests, listed by order of priority: 1 DOT Order 2016-12-13, ordering paragraph 5 at 32 (Dec. 14, 2016).
Application of Volaris Page 2 Phase 1-2017 MEX-JFK Daily, additional frequency in market MEX-SAT Daily, new route MEX-IAD Daily, new route MEX-ORD Daily, additional frequency in market MEX-LAX Daily, additional frequency in market JFK slot Daily, JFK-MEX, needed to operate MEX-JFK as proposed above Phase 2-2018 MEX-OAK Daily, needed to offer year round service MEX-DEN Daily, needed to offer year round service MEX-ONT (.5) new route MEX-SJC (.5) new route JFK slot Daily, for proposed new JFK-CUN service To the extent the Department does not grant all of its MEX slot requests in phase 1, Volaris would be willing to accept an allocation of such slots in phase 2. Please see Exhibit 1 for the spreadsheet that sets forth the required details concerning Volaris requested slots. II. DISCUSSION Volaris is grateful for the opportunity to apply for slots in this proceeding. As Mexico s fastest-growing airline and most successful ultra-low-cost carrier, Volaris looks forward to offering enhanced service to the United States from Mexico City, Mexico s largest and most important city. As a carrier which operates point-to-point service and which has a single aircraft type in its fleet, the Airbus A320 family, Volaris business model is quite different from that of the network carriers serving the US-Mexico City market. 2 Volaris has an extensive domestic network in Mexico, and serves Mexico City from other Mexican points to the extent its limited slot holdings at MEX allow. 3 Volaris business model is reliant upon and emphasizes the development and growth of point-to-point traffic in the markets it serves. Volaris prices its services to stimulate the 2 For an overview of Volaris unique business model and operations, see Exhibit 2. 3 See Exhibit 3 for a map of Volaris existing US-Mexico services.
Application of Volaris Page 3 local market, and has enjoyed considerable success in growing traffic as a result of its low fares. 4 In fact, Volaris is responsible for a large percentage of the growth experienced by the transborder markets in which it operates, despite having a fairly low percentage of seat share in many of those markets. 5 In its Instituting Order, the Department cited [e]nhancing the quality of competition, such as by offering additional frequencies in major markets or introducing the benefits of new business models as an important decisional criterion. 6 As Volaris will show below, it has a strong record of launching new ultra-low cost US-Mexico service, leveraging its efficient business model and low cost structure to offer extremely competitive fares in new US-Mexico markets. 7 Allowing Volaris to expand in the US-Mexico City market in a meaningful manner will offer important public benefits by stimulating new traffic and enhancing the quality of competition in a market that has largely been dominated by entrenched incumbents and legacy carriers. As a relatively young Ultra Low-Cost Carrier ( ULCC ) carrier, Volaris has a distinctive business model. Relying on direct internet sales, the company promotes its flights using webbased channels and social media, and does not distribute its product via GDS. While it has some travel agency relationships, those arrangements comprise only a small percentage of its sales. As will be explained below, Volaris unbundled pricing strategy uses low promotional prices and low base fares that enables its passengers to select and pay for a range of optional products and services for additional fees as way of creating excitement about a market and stimulating new demand. Indeed, Volaris prides itself on luring travelers away from buses, and converting surface passengers to airline passengers. As Volaris will show herein, this model has been quite successful. 4 For a comparison of Volaris and its competitors average fares, see Exhibit 4. 5 See Exhibit 5. 6 Order 2017-1-16 at 4, emphasis added. 7 See, e.g., Volaris discussion below of the JFK-MEX market for a comparison of its fares offered for sale in JFK-MEX versus those offered by the DL/AM combine.
Application of Volaris Page 4 While Volaris will be offering connecting services to Mexican points behind and beyond Mexico City, Volaris notes that it offers a large array of nonstop services to points in the US from other regional cities in Mexico. 8 In fact, other than IAD, which will be an entirely new station and market for Volaris, it has been Volaris success in markets such as Guadalajara International Airport (GDL) - Ontario International Airport (ONT) and GDL-JFK that has driven Volaris to seek to replicate these successes in Mexico City markets. Given the scarcity and difficulty of obtaining slots at MEX, Volaris believes emphasizing the carriage of connecting passengers on proposed Mexico City-US services is somewhat misplaced, especially if convenient nonstop services from these smaller Mexican cities to points in the US are available. While Volaris has displayed its available connections for each of its proposed routes, it notes that its forecasts for these routes do not account for connecting traffic. The success of these routes will turn on tapping into unmet demand in underserved or less-than-competitive local Mexico City-US markets, and does not turn on the carriage of traffic behind/beyond Mexico City. Volaris until now has lacked the access to MEX that it has needed to meet the needs of travelers in the local market. Volaris plans to use its allocated slots to grow this constrained and somewhat stagnant US-Mexico City market by offering low fares that will significantly stimulate passenger demand. Volaris has been a strong supporter of the new US-Mexico Air Service Agreement, 9 which entered into force in August of last year. As soon as the Mexican Government announced its decision to allow the Agreement to enter into force, Volaris applied to the Department for new and enhanced economic authority, so that it could continue to expand its presence in the US-Mexico transborder market. Volaris received its exemption authority on August 22, 2016, a mere day after the Agreement entered into effect. 10 As Volaris has explained during the course of this 8 See Exhibit 6 for a listing of Volaris current US-Mexico city-pairs. 9 Air Transport Agreement between the Government of the United States of America and the Government of the United Mexican States (Dec. 18, 2015). 10 Volaris filed its application on July 29, 2016 in Docket OST-2016-0135, received exemption authority on August 22, and obtained a new Foreign Air Carrier Permit on November 13, 2016. Order 2016-11-14.
Application of Volaris Page 5 proceeding, the Company has a limited foothold at MEX, and has faced significant roadblocks in expanding its presence there. 11 Volaris applauds the decision by DOT to permit both US and Mexican carriers to apply for remedy slots in this case, as allowing all US and Mexican low cost carriers to gain access to divested slots will provide needed competitive discipline and greatly expand the range of travel choices for consumers. Volaris began operations in 2006, commenced service to the US in 2009, and began operations from Mexico City to the US in 2011, with great success. Operating a single aircraft family type, Volaris focuses on maintaining a simple and cost-efficient operation. Volaris fleet has 69 aircraft, and has the lowest unit cost of any airline fleet in the Americas. 12 With its innovative You Decide unbundled cost model, and its young and fuel-efficient fleet, 13 Volaris provides an important low-cost alternative for travelers between the US and Mexico. Volaris has grown by serving a mixture of larger and smaller Mexican cities through its point-to-point model. Volaris serves the US from a variety of Mexican cities, including Mexico City, Guadalajara, Monterrey, Tijuana, Zacatecas, Oaxaca, Leon and Cancun. 14 Due in large part to its inability to access slots at MEX, Volaris offers only a limited amount of service to the United States from Mexico City, currently serving only seven US points from the capitol city. 15 Despite its limited service, Volaris operations in the MEX-US market are remarkably successful because it is able to operate more efficiently than its competitors. For example, in 2016, Volaris offered 179 seats per departure, while its competitors services to Mexico City averaged 139 seats per 11 See Answer of Volaris, Docket OST-2015-0070, at 2 (Nov. 18, 2016). 12 Based on cost per available seat miles (CASM) amongst publicly traded airlines in the Americas. See Exhibits 7-8. 13 Volaris aircraft average age is 4.5 years (Sep YTD 2016). See Exhibit 9. 14 See Exhibit 6 for the complete list. 15 After the new Agreement was signed, Volaris announced service from Mexico City to Miami, JFK and Houston. As Volaris noted elsewhere in this docket, Volaris was able to launch those services only by withdrawing some of its domestic service to Mexico City. See Reply of Volaris to Show Cause Order at 2-3 (Nov. 30, 2016).
Application of Volaris Page 6 departure a difference of 29%. 16 An award of slots to Volaris in this case will ensure that more passengers will have access to the important new US services made possible by this proceeding. Volaris has included at Exhibit 11 its forecast of load factors and annual passengers for the routes requested herein. Moreover, Volaris also has a proven track of success in launching new services and competing against established incumbents. When Volaris initiated service to Ontario, California from Guadalajara in 2014, Volaris started with only two frequencies per week, while Aeromexico was operating five or six flights weekly. Today, Volaris operates daily ONT-GDL service, while Aeromexico actually has reduced its services in the market. Volaris is seeking a limited number of new slots in this case five MEX slot pairs in phase 1 and three slot pairs in phase 2, along with a new JFK slot in each of 2017 and 2018 in order to strengthen its existing services, and to offer new services in either unserved markets, or markets that are in need of low-cost competition. Volaris hopes that the Department will recognize the significant and unique service benefits offered by Volaris to US and Mexican passengers, 17 and grant these requested slots. A. 2017 Slot Requests 1. JFK-MEX 18 As the Department noted in Order 2016-11-2, Delta and Aeroméxico have a dominant position in the JFK-MEX market, with a combined 81% share of the seats offered in therein. 19 This is a hub-to-hub operation for the alliance partners, and Delta and Aeromexico together have 16 See Exhibit 10. 17 Volaris notes that as a foreign air carrier, it lacks some of the databasesused by US carriers to build traffic forecasts. Moreover, and as explained above, because it has a point to point business model, its traffic forecasting methodologies may differ from those of more traditional carriers. 18 Volaris requests that it be allocated the requisite slots at JFK to operate this service. Volaris desired slot times for this service can be found in Exhibit 1. 19 DOT Order 2016-11-2, at 13-14 (Nov. 4, 2016). Jan-Apr 2017 numbers indicate that AM/DL have 83% of seats in the market. Source: MI-DIIO.
Application of Volaris Page 7 five daily roundtrip flights: two morning flights, two afternoon flights and one late night flight from each destination. Because of slot constraints at both MEX and JFK, and unless Volaris receives a remedy slot, Volaris will operate only a single daily frequency in the JFK-MEX market, and at sub-optimal times. 20 While Volaris attracts passengers who desire its low cost service, Volaris places at its highest priority the addition of a second daily frequency in the market at a time that will impose competitive discipline upon Delta and Aeroméxico, as well as appeal to both leisure and nonleisure travelers. 21 Additionally, the proposed MEX-JFK service will conveniently connect with four additional destinations in Mexico served by Volaris: Guadalajara, Merida, Mexicali and Tijuana. 22 As shown in the figure below, Volaris is offering average fares of $145 each way on the JFK-MEX route it will be launching in a few weeks. Also as shown below, Volaris competitors offer high average one-way fares for their services of $601 each way. 23 The chasm between the fare offer of Volaris and that of its competitors speaks volumes demonstrating the difference in the behavior of an aggressive new entrant versus that of an entrenched incumbent. Even with weak slot times, the public response to Volaris new JFK-MEX service has been robust. Based on historical trends, current bookings on this service show the route will achieve a load factor of at least 80% in just three months of sales. The only other non-alliance carrier serving the market is Interjet, which, like Volaris, controls a small portion of the market, and which offers an average one-way fare of $251 for its services. 24 Volaris is offering average fares that are less than a fourth of those charged by the Aeroméxico/Delta combine, a clear public benefit. 20 Volaris will launch its first daily service in the market on March 1, 2017, operating on the following schedule: Depart JFK 0146, arrive MEX 0526, depart MEX 1851, arrive JFK 0031. 21 For basic MEX-JFK forecast, competitive analysis and available connections, see Exhibit 12. 22 See Exhibit 12-B for connections. 23 Gross fares of current competitors (Aeromexico, Delta and Interjet) observed January 2017 for the upcoming three months, includes taxes, excludes non-ticket revenues. 24 Interjet is a relatively small player in the market with only 13% of the market share. Source: MI-DIIO.
Application of Volaris Page 8 Total seats% A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Aeromexico 28.8% 45.5% 33.4% 38.9% Interjet 27.9% 62.0% 16.1% 13.6% Delta 35.8% 48.2% 41.6% 43.8% Volaris 7.5% 0.0% 8.8% 3.7% Total 100.0% 100.0% 100.0% 100.0% Source: MI-DIIO. Weighted Average Price A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total All but Volaris 531 636 582 601 Volaris 138-152 145 Total 492 636 533 579 Source: Infare Knowledge, Jan-Apr 2017. 25 As noted earlier, Volaris makes very efficient use of its slots. Volaris is operating its A320 aircraft with 179 seats, forecasting a load factor of 82% in this route, which is wholly consistent with its track record on other US-Mexico routes. 26 Authorizing Volaris to operate a second daily frequency will enable Volaris to offer better market coverage and make fuller use of its JFK station. 27 Volaris notes that its existing JFK service, operated from Guadalajara, has been well received. Load factors for that route have averaged 83% 28 and Volaris has grown passenger traffic by 44% from 2015 to 2016. 29 2. MEX-SAT Volaris proposes to offer a single daily frequency on this route, using its 179-seat A320 aircraft, allowing Volaris to offer more capacity than the average 131 seats operated by the incumbents. 30 Volaris will offer an important competitive alternative to Aeroméxico and Interjet, 25 Quotes based on economy fare. 26 See Exhibit 12-A. 27 These efficiency benefits would be further enhanced if Volaris were to receive a slot for its proposed JFK-CUN service in year two, which would give Volaris four daily operations at the airport. 28 January-October 2016. 29 Jul-Dec 2015 to Jul-Dec 2016. 30 For basic MEX-SAT forecast, competitive analysis and available connections, see Exhibit 13.
Application of Volaris Page 9 each of which offer two roundtrip flights in this market. 31 The market currently is dominated by Interjet, which holds 73% of available seats, as displayed in the table below. Volaris is proposing to offer a promotional fare of $99 in this market for three to six months, 32 which is significantly below the average fare of $173 offered by its competitors, as shown below. Moreover, Volaris will offer convenient connecting service to six important Mexican cities: Culiacán, Mexicali, Monterrey, Cancún, Guadalajara and Merida. 33 Total seats% A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Aeromexico 0.0% 42.3% 0.0% 26.7% Interjet 0.0% 57.7% 100.0% 73.3% Total 0.0% 100.0% 100.0% 100.0% Source: MI-DIIO. Weighted Average Price A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Other carriers - 173 172 173 Source: Infare Knowledge, Jan-Apr 2017. San Antonio, a thriving city with close business and cultural ties to Mexico, is a natural choice for the introduction for low-cost service to Mexico City. 34 Volaris currently serves San Antonio from GDL, offering low average fares, and enjoying robust load factors. Volaris increased its total number of passengers on the route by 14% from 2015 to 2016, with a load factor of 74% in 2016, and 81% during the high season (May-July 2016). Volaris currently has a 62% of the SAT-GDL market, transporting 33,000 passengers in November 2016 YTD. The success Volaris has experienced in the San Antonio market thus far augurs well for a successful launch of SAT- MEX service. 3. MEX-IAD 31 Aeroméxico s second flight daily flight will be launched in April 2017. 32 See Exhibit 13-A. 33 See Exhibit 13-B. 34 See Exhibit 13-A.
Application of Volaris Page 10 Despite the fact that this route connects two extremely important national capitals, the Washington Dulles International Airport (IAD) - Mexico City market is largely under-served, receiving service on a nonstop basis by only United and Aeroméxico. United offers a single daily service in the market, and Aeroméxico serves the market five times per week. Volaris proposes to offer a new daily nonstop service in this market, adding an important low cost competitive alternative in a market dominated by two legacy airlines. 35 Total seats% A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Aeromexico 100.0% 0.0% 36.3% 36.1% United Airlines 0.0% 100.0% 63.7% 63.9% Total 100.0% 100.0% 100.0% 100.0% Source: MI-DIIO. Weighted Average Price A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Other carriers 268.00 326 275 290 Source: Infare Knowledge, Jan-Apr 2017. Although there are two carriers serving this market, the level of competition between Aeroméxico and United in this route is limited: United Airlines flight departs from MEX in the morning, while Aeroméxico s flight departs eight or nine hours later, in the early evening. The carriers largely match each other in price. Volaris is proposing to launch service with a gamechanging low fare, which will offer valuable competition in an important but otherwise static and stagnant market. 36 Volaris connecting service to Tijuana and Cancun also provides additional options for travel to two popular tourist destinations. 37 35 For basic MEX-IAD forecast, competitive analysis and available connections, see Exhibit 14. 36 See Exhibit 14-A. 37 See Exhibit 14-B.
Application of Volaris Page 11 Furthermore, Volaris would use the requested slot in a more efficient manner compared with its competitors, by operating with A320 aircraft with 179 seats, whereas its competitors offer a mere 143 seats per departure. Volaris forecasts an annual load factor of 80%. 4. MEX-ORD Volaris proposes to add an additional daily frequency at Chicago O Hare International Airport (ORD), which also is served by Aeroméxico, United and Interjet. 38 As the only ultra- low cost carrier serving the market, Volaris operates a single daily frequency versus the three frequencies operated by Aeroméxico, and the two frequencies operated by Interjet. United also operates one daily frequency; however, its service will increase as of February 2017. Total seats% A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Aeromexico 59.2% 17.1% 60.3% 34.9% Interjet 40.8% 24.6% 30.0% 28.8% United Airlines 0.0% 27.4% 9.7% 18.3% Volaris 0.0% 30.9% 0.0% 18.0% Total 100% 100% 100% 100% Source: MI-DIIO. Weighted Average Price A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total All but Volaris 219 226 235 227 Volaris - 136-136 Total 219 197 235 210 Source: Infare Knowledge, Jan-Apr 2017. Other than Volaris, the airlines serving in this route charge an average fare of $227 each way, which is significantly higher than Volaris ultra-low $136 average fare. Given the fact that Volaris operates its existing service at an annual average load factor of 87%, Volaris is highly confident that its second daily service, timed to offer a meaningful competitive alternative to United, Aeromexico and Interjet, will enjoy similar success. If Volaris receives a slot for this service, it expects to carry approximately 113,000 passengers in its first year of operations. In 38 For basic MEX-ORD forecast, competitive analysis and available connections, see Exhibit 15.
Application of Volaris Page 12 addition, as shown in Exhibit 15-B, Volaris ORD service will conveniently connect to 11 of Volaris current nonstop cities at MEX, as well as offer a convenient one-stop connection to Guatemala City. 5. MEX-LAX Volaris operates two daily frequencies on the Mexico City Los Angeles route, and is seeking to offer a third daily frequency, in order to more effectively compete against Interjet, American Airlines, Aeroméxico, and United Airlines. 39 Legacy carriers hold 66% of the available seats, and Aeromexico dominates the market operating six daily frequencies, charging an average one way fare of $252, which is more than twice the $122 average fare offered by Volaris. The other carriers serving the market have a combined average fare of $224. Authorizing Volaris to offer additional service will enable LAX-MEX passengers to enjoy ultra-low fare throughout the day, and impose significant competitive discipline upon the incumbent carriers. Total seats% A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Aeromexico 32.1% 53.9% 54.6% 48.7% Interjet 32.0% 8.5% 13.5% 15.8% United Airlines 0.0% 18.4% 0.0% 8.5% American Airlines 17.2% 9.2% 0.0% 8.5% Volaris 18.8% 10.0% 31.9% 18.6% Total 100.0% 100.0% 100.0% 100.0% Source: MI-DIIO. Volaris has enjoyed a 197% increase in passengers since it launched this route in July 2011. 40 With an annual average load factor of 84%, this route is already a success for Volaris. Furthermore, Volaris notes that in addition to benefiting local LAX-MEX passengers, Volaris new service would offer convenient one-stop accesss to Mexicali, Guadalajara and Cancún. 39 For basic MEX-LAX forecast, competitive analysis and available connections, see Exhibit 16. 40 Jul-Dec 2016 vs. Jul-Dec 2011.
Application of Volaris Page 13 All but Volaris 194 228 245 224 Volaris 121 125 121 122 Total 180 218 206 205 Source: Infare. Knowledge, Jan-Apr 2017. B. 2018 Slot Requests 1. MEX-OAK Volaris currently serves the MEX-Oakland International Airport (OAK) market on a seasonal basis, and has enjoyed considerable success on the route. The MEX-OAK route is served on a nonstop basis exclusively by Volaris which has grown its traffic in the market by 34% over the last year. Volaris operates the route with an annual load factor of 86% and expects the same success with the conversion to year-round service. Volaris projects that it may carry more than 112,000 annual passengers per slot with the daily service requested herein. Volaris has sought the slots at Mexico City that would be required to convert this to a yearround service, but has been unsuccessful. While Volaris will, in accordance with the requirement in Order 2017-1-6, attempt again to secure the slots required to sustain this service by other means, it must emphasize that the service it offers (albeit on a limited basis) has created an entirely new option in a market that otherwise lacks nonstop access to Mexico City. Volaris is the only carrier serving this city pair on a nonstop basis, offering average low fares of $178 each way. 41 If granted authority to convert this route into year-round service, Volaris would offer a promotional fare of $99 for three to six months. Weighted Average Price A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Moreover, Volaris proposed OAK service would ensure passengers have year-round low fare connecting service to nine of Volaris domestic markets, as seen in Exhibit 17-B. 41 For basic MEX-OAK forecast, competitive analysis and available connections, see Exhibit 17.
Application of Volaris Page 14 Although Oakland and San Francisco are occasionally described as one and the same market, Volaris notes that Oakland is a large city in its own right. 42 Further, on MEX-SFO, Volaris operates just one daily frequency. This is compared with United and Aeromexico( each of which operate two daily round trips), which have a combined market share of 84.6%. United s average fare of $351 is more than double Volaris average price of $156. If Volaris commenced yearround MEX-OAK service in addition to its MEX-SFO service, it would be able to exert greater competitive pressure upon the legacy carriers operating MEX-SFO. In addition to having a significant business community, Oakland also is home to a thriving Mexican-American community. 2. MEX-DEN Volaris is an established player in the Mexico City Denver market, serving the market on a seasonal basis from Guadalajara, Monterrey and Chihuahua, and from Mexico City. The only other carriers serving the Denver-Mexico City market are two entrenched legacy carriers, United and Aeroméxico. Aeroméxico operates 4 weekly frequencies and Volaris, which is currently serving the market daily on a seasonal basis, is proposing to offer a year-round daily nonstop service, adding an important service enhancement, and the only low cost competitive option in this market. 43 Volaris opened this route in November 2012 with only one weekly frequency. In the intervening years, Volaris traffic has grown steadily, increasing its passenger numbers by 14% between 2015 and 2016. Volaris fare offered in the market is $241, while the average of the other competitors is $371 1.5 times higher. 44 42 As of the 2010 U.S. Census, Oakland had a population of 390,000, with over 25% of its population comprised of Hispanic residents. 43 For basic MEX-DEN forecast, competitive analysis and available connections, see Exhibit 18. 44 Gross fares observed on January 2017 for the upcoming three months; includes taxes, excludes nonticket revenues. Source: MI-DIIO, Infare Knowledge.
Application of Volaris Page 15 Total seats% A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Aeromexico 0.0% 52.6% 0.0% 48.9% United Airlines 0.0% 7.7% 100.0% 14.3% Volaris 0.0% 39.7% 0.0% 36.8% Total 0.0% 100.0% 100.0% 100.0% Source: MI-DIIO. Weighted Average Price A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total All but Volaris 0 379 313 371 Volaris 0 241 0 241 Total 0 323 313 322 Source: Infare Knowledge, Jan-Apr 2017. Volaris would use the requested slot in a more efficient way than its competitors the current average seats per departure is 138, while Volaris would operate the route with a 179-seat A320 aircraft. This route is already a success for Volaris, with an annual load factor of 82%. Volaris expects to maintain the same load factor with the requested slot. Additionally, Volaris proposed DEN service would conveniently offer passengers yearround low fare connecting service to four of Volaris domestic markets: Guadalajara, Cancún, Mexicali and Tijuana. 45 3. MEX-ONT and MEX-SJC Volaris proposes to split its third phase 2 slot between Ontario and San Jose, California, two US cities that currently lack nonstop service to Mexico City. Volaris would operate to ONT 3 days per week, 46 and to Norman Y. Mineta San Jose International Airport (SJC) four days per week. 47 Moreover, as seen in Exhibit 19-B, the Ontario service would conveniently connect with 12 Volaris domestic markets. 48 45 See Exhibit 18-B. 46 For basic MEX-ONT forecast, competitive analysis and available connections, see Exhibit 19. 47 For basic MEX-SJC forecast, competitive analysis available connections, see Exhibit 20. 48 There are nine connections from SJC, but these would only be one way.
Application of Volaris Page 16 While Volaris is aware of the Department s stated preference for daily service in these markets, Volaris notes that many US-Mexico markets are served on a less-than-daily basis. Indeed, Aeromexico operates IAD-MEX five days/week, even though it is a critical capitol-tocapitol market. While Volaris hopes that each of these markets will eventually receive daily service, these are developmental routes for which the introduction of a less-than-daily service option would be appropriate. Volaris forecasts a load factor of 83% on MEX-ONT and 85% on MEX-SJC. Volaris notes that Ontario, heart of California s Inland Empire, serves as home to a large Mexican-American population and currently lacks nonstop service to MEX. Volaris operates successful nonstop service to Ontario from Guadalajara, with an average load factor of 83%. San Jose also is home to a large Mexican-American population, but currently does not have nonstop service to MEX. Volaris anticipates that its new services will be welcomed by leisure, business and VFR travelers, who will be attracted by Volaris low fares and the offer of a convenient alternative to SFO. As noted above, service from SFO is associated with high average fares, due to the dominance of two legacy carriers. Volaris currently serves SJC from Guadalajara with an 85% load factor, and has enjoyed steady traffic growth on the route. 4. JFK-CUN JFK-Cancún is the largest US-Mexico route. During the January- April 2017, the route will be served is by five competitors: Interjet, American Airlines, Aeromexico, JetBlue and Delta; with the legacy carriers holding 65% of the total seats available. Volaris proposes to offer five-times weekly service between JFK and Cancun.49 Volaris notes that while there are many carriers serving this route, low cost carriers have only a limited presence in the market. On average, the carriers serving this market have two daily frequencies with an average fare of $351, while Volaris plans to offer a promotional fare of $99. 49 For basic JFK-CUN forecast, competitive analysis and available connections, see Exhibit 21.
Application of Volaris Page 17 A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Aeromexico 0.0% 9.6% 14.4% 10.2% American Airlines 0.0% 21.9% 14.2% 16.7% Delta 0.0% 48.5% 35.2% 38.5% Interjet 50.6% 0.0% 16.3% 11.3% Jetblue 49.4% 20.0% 20.0% 23.2% Total 100.0% 100.0% 100.0% 100.0% Source: MI-DIIO Total seats% Weighted Average Price A: Late Night & Early Morning (23-07) B: Morning & Noon (07-15) C: Afternoon & Evening (15-23) Total Other carriers 251 360 369 351 Source: Infare Knowledge, Jan-Apr 2017. Volaris projects an annual load factor of 80% operating in an A320 with 179 seats. Volaris projects that it would carry more than 104,000 annual passengers per slot. Furthermore, Volaris could connect passengers to four cities from Mexico City: Guadalajara, Merida, Mexicali and Tijuana. 50 III. CONCLUSION Since its initial entry into the US-Mexico market in 2009, Volaris has steadily sought to expand its presence, offering an ultra-low cost service option to a market that has been dominated by large legacy carriers. While Volaris has made large strides in serving the US from regional markets in Mexico, its ability to penetrate the US-Mexico City market has been hampered by its status as a new entrant. Volaris has a limited share of slots at Mexico City (approximately 8%). By authorizing Volaris limited slot request in this case, the Department will enable Volaris to offer a meaningful competitive alternative to the Delta/Aeromexico duopoly in several key US-Mexico City markets, and benefit travelers on both sides of the border. Accordingly, Volaris requests that the Department allocate to it five pairs of slots at MEX and one pair of slots at JFK in Phase 1, 50 See Exhibit 21-B.
Exhibits
Exhibit 1 Volaris Slot Allocation Request Phase Rank Carrier Origin Dest Effective Date Days Operated Departure Time (local time) Arrival Time (local time) Arrival Day Aircraft Type Seats on Aircraft Forecasted PPD Min/Max Ground Time Existing Nonstops in Market RON Minimum level of Required? service 1 1 of 5 Y4 MEX JFK 07/14/2017 1234567 8:30 14:10 Null A-320 179 147 75/100 7 No minus 90 minutes 1 1 of 5 Y4 JFK MEX 07/14/2017 1234567 15:30 19:10 Null A-320 179 147 75/100 7 No minus 90 minutes 1 2 of 5 Y4 MEX SAT 07/14/2017 1234567 12:00 14:05 Null A-320 179 138 75/100 0 No minus 90 minutes 1 2 of 5 Y4 SAT MEX 07/14/2017 1234567 15:20 17:20 Null A-320 179 138 75/100 0 No minus 90 minutes 1 3 of 5 Y4 MEX IAD 08/14/2017 1234567 11:00 16:46 Null A-320 179 143 75/100 0 No plus 90 minutes 1 3 of 5 Y4 IAD MEX 08/14/2017 1234567 18:05 21:51 Null A-320 179 143 75/100 0 No plus 90 minutes 1 4 of 5 Y4 MEX ORD 07/14/2017 1234567 19:05 23:20 Null A-320 179 155 75/100 7 No minus 90 minutes 1 4 of 5 Y4 ORD MEX 07/14/2017 1234567 0:35 4:55 Null A-320 179 155 75/100 7 No minus 90 minutes 1 5 of 5 Y4 MEX LAX 07/14/2017 1234567 10:00 12:13 Null A-320 179 150 75/100 14 No plus 90 minutes 1 5 of 5 Y4 LAX MEX 07/14/2017 1234567 13:30 19:25 Null A-320 179 150 75/100 14 No plus 90 minutes 2 1 of 4 Y4 MEX OAK 03/25/2018 1234567 18:50 21:21 Null A-320 179 154 75/100 7 (only seasonal) No minus 90 minutes 2 1 of 4 Y4 OAK MEX 03/25/2018 1234567 22:36 5:05 1 A-320 179 154 75/100 7 (only seasonal) No minus 90 minutes 2 2 of 4 Y4 MEX DEN 03/25/2018 1234567 10:05 12:41 Null A-320 179 147 75/100 7 (only seasonal) No minus 90 minutes 2 2 of 4 Y4 DEN MEX 03/25/2018 1234567 14:01 18:40 Null A-320 179 147 75/100 7 (only seasonal) No minus 90 minutes 2 3 of 4 Y4 MEX ONT 03/25/2018.2.4.6. 21:00 22:55 Null A-320 179 64 75/100 0 No plus 90 minutes 2 3 of 4 Y4 ONT MEX 03/25/2018..3.5.7 1:00 6:55 Null A-320 179 64 75/100 0 No plus 90 minutes 2 4 of 4 Y4 MEX SJC 03/25/2018 1.3.5.7 11:00 13:39 Null A-320 179 87 75/100 0 No plus 90 minutes 2 4 of 4 Y4 SJC MEX 03/25/2018 1.3.5.7 15:00 21:39 Null A-320 179 87 75/100 0 No plus 90 minutes 2 1 of 2 Y4 CUN JFK 03/25/2018 1..4567 17:40 23:00 Null A-320 179 105 75/100 0 No plus 90 minutes 2 1 of 2 Y4 JFK CUN 03/25/2018 1..4567 7:00 10:00 Null A-320 179 105 75/100 0 No plus 90 minutes
Exhibit 2 Overview of Volaris Business Model and Operations
Exhibit 2 1 of 7 Volaris: snapshot at 30,000 feet Serving 68 destinations throughout Mexico (40), USA (25) and Central America (3) 2008 2015 Sep YTD 2016 2008-2015 CAGR Unit cost (CASM ex-fuel; 5.5 4.9 4.9-1.6% cents, USD) (1) Passenger demand (RPMs, bn) Aircraft (End of period) Routes (End of period) Passengers (mm) Operating revenue (bn, MXN) Adj. EBITDAR (bn. MXN) Adj. ROIC (pretax) 3.2 11.6 10.6 +20.2% 21 56 65 +15.0% 42 148 159 +19.7% 3.5 12.0 11.0 +19.2% 4.4 18.2 17.0 +22.5% 0.7 6.5 6.7 +37.5% 11% 22% 21% +11 pp. (1) Converted to USD at an average annual exchange rate Source: Company data San Jose Fresno Los Angeles Seattle Portland Reno Sacramento San Francisco/Oakland Tijuana Mexicali Las Vegas Ontario Hermosillo Phoenix Los Mochis Torreon Culiacan La Paz Los Cabos Mazatlan Aguascalientes Guadalajara Puerto Vallarta Leon Uruapan Morelia Volaris destinations Denver Cd. Juarez Austin Chihuahua Cd. Obregon Dallas Chicago Houston San Antonio Monterrey Durango Tampico Zacatecas San Luis Merida Cancun Queretaro Chetumal Mex.City Veracruz Toluca Puebla Villahermosa Acapulco Oaxaca Tuxtla Huatulco Guatemala Tapachula El Salvador Orlando New York Fort Lauderdale/ Miami San Juan, PR San Jose, CR
Exhibit 2 2 of 7 Volaris is the most important ULCC in LATAM 162 68 40 Routes Destinations Domestic 28 69 International (USA & CAM) Aircraft 27% Domestic market share* *November YTD 2016 Note: The number of routes is all routes on sale; including routes of Volaris Costa Rica; Volaris data as of December 31 st, 2016; Source: DGAC-SCT
Exhibit 2 3 of 7 Volaris has improved Mexican air connectivity; around 20 routes are opened every year 162 routes (103 Domestic & 59 International) serving 68 destinations throughout Mexico (40), USA (25) and Central America (3) MKE Volaris has been the pioneer in 75 of its 162 routes International routes 38 routes: Durango-Chicago Midway, Guadalajara-Portland, Guadalajara-Seattle, Leon-Chicago Midway, Los Angeles- Uruapan, Guadalajara-Milwaukee, Chihuahua-Denver, Guadalajara-Reno, etc. Mainly from Guadalajara; strong commitment in the US market expansion Domestic routes 37 routes: Aguascalientes-Tijuana, León- Tijuana, Guadalajara-Mérida, Morelia- Tijuana, Tijuana-Uruapan, etc. Mainly from the west of the country Note: The number of routes is all routes on sale; including routes of Volaris Costa Rica; As of December 31 st, 2016
Exhibit 2 4 of 7 Volaris is in first position in several relevant metrics in the airline industry; excelling as an ultra-low cost carrier Highest supply in terms of domestic ASMs Highest demand in terms of domestic RPMs Most routes in the domestic market (103) Most US destinations from Mexico (25) Highest ROIC among Mexican carriers (21%, September YTD) Market capitalization (USD, $1,479M*) *As of December 28 th, 2016 Source: Company data; MI-DIIO; DGAC
Exhibit 2 5 of 7 Domestic market share Volaris has a growing share of both domestic and international markets, 27.5% and 24.6% International market share Note: On board passengers; Others include Aeromar, Magnicharters, TAR and Aéreo Calafia Source: DGAC 8
Exhibit 2 6 of 7 A look at Volaris in coming years +100 Mexico, New routes until 2020 USA, Central and South America +45 Ultra Aircraft until 2020 competitive fares #NoMásCamión
Exhibit 2 7 of 7 Volaris fares in the MEX-US market have decreased by 32%, fueling industry-leading growth grown faster than the market MEX MARKET -32% Source: DGAC; Company data
Exhibit 3 Volaris operates 51 routes to the US serving 25 US airports Volaris current US Network Seattle Portland Milwaukee Chicago O Hare Sacramento Reno Denver Chicago Midway New York Oakland San Francisco San Jose Fresno Las Vegas Ontario Los Angeles Tijuana Phoenix Dallas- Forth Worth Austin San Antonio Chihuahua Houston Orlando Durango Monterrey Miami Culiacan Zacatecas Guanajuato Guadalajara Cancun Uruapan Morelia Mexico City San Juan Note: MEXMIA & GDLMIA to start as of February 2017; IAHMEX, JFKMEX & GDLMKE to start as of March 2017
Exhibit 4 Volaris has amongst the lowest base fares in the Americas Average base fare (3Q YTD, USD) 300 250 244 223 200 150 131 121 116 182 158 147 187 176 100 50 70 81 34 58 0 Latin American carriers US LCCs US Legacy Note: Non-USD data converted to USD at an average exchange rate; base fare excludes non-ticket revenues and taxes; only one way fares Source: Airlines public information
Exhibit 5-A Volaris has driven traffic growth in the US-MEX markets it serves MEX MARKET Seat share - Only transborder Volaris' routes (2015) 60% 53.1 40 DENMEX MEXOAK FLLMEX LASMEX MEXORD MEXSAN MCOMEX MEXSFO Note: Non public data available for full year 2016 Source: MI-DIIO 20 0 Aeromexico 19.4 Volaris 13.0 United 10.6 American Airlines* 2.4 Alaska 1.6 JetBlue
Exhibit 5-B LAX-MEX In its top four MEX transborder markets, Volaris has been a major driver of growth Total Market Pax MEX-ORD LAS-MEX MCO-MEX Note: Non public data available for full year 2016 Source: MI-DIIO
Exhibit 6 Volaris operates 51 routes to the US; 10 are from Mexico City MEX Volaris current transborder routes Other stations DENMEX IAHMEX* JFKMEX* LASMEX LAXMEX MCOMEX MEXMIA* MEXOAK MEXORD MEXSFO AGULAX DFWGDL GDLMIA* GDLSFO AUSGDL DGOLAX GDLMKE* GDLSJC BJXLAX DGOMDW GDLOAK GDLSMF BJXMDW FATGDL GDLONT LAXMLM BJXOAK GDLIAH GDLORD LAXUPN CULPHX GDLJFK GDLPDX LAXZCL CUNSJU GDLLAS GDLPHX MDWMLM CUUDEN GDLLAX GDLRNO MDWZCL DENGDL GDLMCO GDLSAT MLMOAK DENMTY GDLMDW GDLSEA MTYORD OAKTIJ *MEXMIA & GDLMIA to start as of February 2017; IAHMEX, JFKMEX & GDLMKE to start as of March 2017
Exhibit 7 Volaris continues to focus on cost reduction, achieving a best-in-class unit cost structure 6.4 1.7 4.7 13.1 2.6 10.5 2.4 2.1 8.1 7.8 2.2 7.2 2.6 2.4 6.1 6.3 Long-term unit cost advantage CASM and CASM ex-fuel (Sep YTD 2016, USD cents) (1) 10.5 10.0 9.4 In line with best-in-class ULCCs 8.8 8.6 11.2 2.4 8.7 9.8 1.9 7.8 7.8 2.0 7.3 1.7 5.8 5.6 12.5 2.0 10.5 10.3 1.9 8.4 Cost reduction drivers Economies of scale - Dilute fixed costs - High seat density Young and fuel-efficient fleet - Sharklet rollout - Average age of 4.5 years - Low fuel burn Productive network - Point-to-point and no connections complexity High aircraft utilization - On average 12.9 block hours a day during Sep YTD 2016 Latin American carriers US LCCs US Legacy (1) Non-USD data converted to USD at an average exchange rate Source: Company data, airlines public information
Exhibit 8 Volaris cost structure enables it to offer very low base fares Volaris TRASM is below most competitors CASM (1) TRASM and CASM (Sep YTD 2016, USD cents) (2) Volaris resilient ULCC model 12.5 13.1 7.6 7.3 7.8 8.6 8.8 9.4 9.8 10.0 10.3 10.5 11.2 TRASM CASM CASM CASM CASM CASM CASM CASM CASM CASM CASM CASM CASM (1) Based on CASM and TRASM among the publicly-traded airlines (2) Non-USD data converted to USD at an average exchange rate Source: Company data, airlines public information
Exhibit 9 Volaris cost structure enables it to offer very low base fares High Density Configuration Young, fuel-efficient fleet Average age (September 2016) 12.0 Volaris A320 179 seats per aircraft Aeromexico 737-800 160 seats per aircraft 8.9 8.3 6.4 6.2 4.5 Interjet A320 150 seats per aircraft Alaska 737-800 163 seats per aircraft Delta A320/737-800 160 seats per aircraft High daily utilization Block hours per day (September YTD 2016) 12.9 12.2 10.7 10.7 9.0 8.8 8.1 Southwest 737-700 137 seats per aircraft JetBlue A320 162 seats per aircraft Note: Volaris A320neo with 186 seats; Fleet average age calculation of Mexican Carriers excludes small players; Volaris LF Sept YTD 2016= RPMs/ASMs Source: Volaris, airlines public information, DGAC, Airbus, Airfleets, MI-DIIO
Exhibit 10 Volaris uses its limited MEX slots more efficiently than other carriers however is not the carrier with more share of slots Mexico City to US 100% 80 60 Share of Slots (%) 5.9% 14.6% 36.2% 2.3% Average: 139 (excl. Volaris) Volaris extra seats vs. competitor +19% +20% +25% +25% +27% 40 8.8% 3.3% +35% 20 0 11.9% 15.8% 1.0% Share of slots +38% +>100% Source: MI DIIO
Exhibit 11-A Volaris will carry nearly 1 million passengers with its requested allocation of new slots Routes and frequencies requested in Mexico City Phase Route Days operated Annual Flights Annual Seats Load Factor Annual Passengers Phase Route Days operated Annual Flights Annual Seats Load Factor Annual Passengers 1 JFKMEX 1234567 730 130,670 82% 107,308 2 MEXOAK 1234567 730 130,670 86% 112,093 1 MEXSAT 1234567 730 130,670 77% 100,616 2 DENMEX 1234567 730 130,670 82% 107,570 1 IADMEX 1234567 730 130,760 80% 104,536 2 MEXONT.2.4.6 314 56,206 83% 46,634 1 MEXORD 1234567 730 130,670 87% 113,149 2 MEXSJC 1.3.5.7 418 74,822 85% 63,318 1 MEXLAX 1234567 730 130,670 84% 109,744 2 CUNJFK 1..4567 730 93,438 80% 76,619 Total Phase 1 3,650 653,350 82% 535,352 Total Phase 2 2,714 485,806 84% 406,234
Exhibit 11-B Forecast methodology Frequencies Volaris chose the frequencies through the following criteria: JFKMEX: Volaris started sales recently in Oct 16 and with current bookings, believes that it will easily get to 80% or higher LF, which demonstrates that the market is responding to Volaris business model even when Volaris operates in a non-premium time. Accordingly, Volaris believes additional service is needed and will be successful. ORD, LAX, OAK and DEN: Are all well-known markets for Volaris with extremely high demand. All load factors are above 82%, with routes served by high density aircraft. IAD and SAT: These markets represent some of the largest cities in the U.S. without ultra-low cost service; numbers show that the market has either stagnated or remained flat. Volaris believes that its ULCC service will be well received with a daily frequency. ONT and SJC: Volaris is an expert in generating demand on un-served routes, being the pioneer in 75 of its 162 routes. Both markets are currently successfully served from GDL and Volaris believes that they will be better served with less-than-daily service at the start. Load factors Volaris estimated load factors based in its current route performance: ORD, LAX, DEN and OAK: Since all four routes are already being operated, Volaris assumes that it will achieve comparable load factors with the requested frequencies. Volaris believes this is a conservative estimate, as its product will improve through additional service. JFK, ONT and SJC: All three markets are already operated from GDL. Volaris expects to reach at least the same load factor as its GDL service in 2016. Again, Volaris believes this is a conservative approach, as Mexico City is a much larger metropolitan area than Guadalajara IAD: Since this will be a new destination, Volaris believes that it will reach a load factor of the same level as its current 2016 MEX - transborder routes SAT and CUNJFK: For these markets, Volaris expects that it will reach at least the same load factor as the current LF in the market.
Exhibit 12 MEX-JFK
Exhibit 12-A JFKMEX A second well-timed, low fare frequency would complement Volaris service offering Volaris with 12.5% of total freq 4.1x lower Requested slot 1 (Expected) *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues, market average fare excluding Volaris; **Other carriers excludes Volaris Note: LF of the route=pax/seats Nov 16 LTM; Seat per dep= Seat/Dep 2016 FY; GDLJFK started in July 2015 Source: Volaris data; DGAC; MI-DIIO; Infare; OANDA
Exhibit 12-B JFKMEX will connect with four domestic destinations: Tijuana, Mexicali, Guadalajara and Merida Connections for requested Mexico City routes New York JFKMEX Tijuana Mexicali Guadalajara Merida Mexico City
Exhibit 12-C JFKMEX will connect 4 routes Connections for requested Mexico City routes JFKMEX ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA- TION ARR 2 FLIGHT2 GDL Y4 733 23:55 01:25 MEX 08:30 JFK 14:10 Y4 1858 MID Y4 757 23:26 01:31 MXL Y4 751 00:47 06:07 TIJ Y4 810 00:25 06:02 ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA- TION ARR 2 FLIGHT2 JFK Y4 1859 15:30 19:10 MEX 21:53 GDL 23:20 Y4 744 21:02 MID 23:01 Y4 754 22:49 MXL 00:18 Y4 752 23:55 TIJ 01:35 Y4 823 22:10 TIJ 23:50 Y4 819
Exhibit 13 MEX-SAT
Exhibit 13-A MEXSAT One daily ULCC frequency would satisfy unmet demand Volaris with 25.0% of total freq 1.7x lower (Requested slot) (Expected) *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues, market average fare excluding Volaris; **Other carriers excludes Volaris Note: LF of the route=pax/seats Nov 16 LTM; Seat per dep= Seat/Dep 2016 FY; GDLSAT started in December 2013 Source: Volaris data; DGAC; MI-DIIO; Infare; OANDA
Exhibit 13-B MEXSAT will connect with Monterrey, Mexicali, Culiacan, Guadalajara, Merida and Cancun Connections for requested Mexico City routes Mexicali MEXSAT San Antonio Culiacan Monterrey Merida Cancun Guadalajara Mexico City
Exhibit 13-C 1 of 2 MEXSAT will connect 6 routes Connections for requested Mexico City routes ORIG FLIGHT DEP ARR CONNEC- TION DEPT DEST ARR 2 FLIGHT2 CUL Y4 793 07:09 10:11 MEX 12:00 SAT 14:04 Y4 1914 MEXSAT CUN Y4 723 05:00 07:33 CUU Y4 725 06:57 10:10 GDL Y4 737 06:29 07:59 GDL Y4 731 08:07 09:37 MID Y4 759 08:24 10:29 MTY Y4 181 06:29 08:06 MTY Y4 1185 07:00 08:37 MTY Y4 183 08:13 09:50 MXL Y4 751 00:47 06:07
Exhibit 13-C 2 of 2 MEXSAT will connect 6 routes Connections in requested routes in Mexico City MEXSAT ORIG FLIGHT DEP ARR CONNEC -TION DEPT DEST ARR 2 FLIGHT2 SAT Y4 1915 15:20 17:17 MEX 19:09 CUL 20:25 Y4 790 21:45 CUN 00:10 Y4 710 20:22 CUN 22:47 Y4 722 21:53 GDL 23:20 Y4 744 21:02 MID 23:01 Y4 754 19:30 MTY 21:13 Y4 1184 22:49 MXL 00:18 Y4 752
Exhibit 14 MEX-IAD
Exhibit 14-A IADMEX New low fare competition will stimulate demand on the route Volaris with 33.0% of total freq 2.9x lower (Requested slot) (Expected) *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues, market average fare excluding Volaris; **Other carriers excludes Volaris Note: LF of the route=pax/seats Nov 16 LTM; Seat per dep= Seat/Dep 2016 FY Source: Volaris data; DGAC; MI-DIIO; Infare; OANDA
Exhibit 14-B IADMEX will connect with Cancun and Tijuana Connections for requested Mexico City routes Washington IADMEX Tijuana Cancun Mexico City
Exhibit 14-C IADMEX will connect 2 routes Connections for requested Mexico City routes IADMEX ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA- TION TIJ Y4 810 00:25 06:02 MEX 11:00 IAD 16:46 TIJ Y4 822 02:05 07:42 MEX CUN Y4 723 05:00 07:33 MEX ARR 2 FLIGHT Y4 1988 ORIG FLIGHT IAD Y4 1989 DEP ARR CONNEC- TION DEPT DESTINA -TION ARR 2 FLIGHT 18:05 21:51 MEX 05:30 TIJ 07:10 Y4 815 05:40 CUN 08:05 Y4 714 23:55 TIJ 01:35 Y4 823
Exhibit 15 MEX-ORD
Exhibit 15-A MEXORD - A second low fare frequency will accommodate unmet demand Volaris with 14.2% of total freq 1.7x lower Requested slot 1 (Expected) *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues, market average fare excluding Volaris; **Other carriers excludes Volaris Note: LF of the route=pax/seats Nov 16 LTM; Seat per dep= Seat/Dep 2016 FY Source: Volaris data; DGAC; MI-DIIO; Infare; OANDA
Exhibit 15-B MEXORD will connect with 11 domestic destinations Connections for requested Mexico City routes Chicago O'Hare MEXORD Los Mochis Monterrey La Paz San Jose del Cabo Mazatlan Guadalajara Cancun Mexico City Oaxaca Tuxtla Guatemala Tapachula
Exhibit 15-C 1 of 2 MEXORD will connect 11 routes Connections for requested Mexico City routes ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA -TION ARR 2 FLIGHT2 CUN Y4 709 08:40 11:13 MEX 19:05 ORD 23:20 Y4 934 CUN Y4 701 10:18 12:51 CUN Y4 709 11:00 13:33 CUN Y4 713 15:00 17:33 GDL Y4 739 10:46 12:16 GDL Y4 735 13:35 15:05 GDL Y4 745 16:13 17:43 GUA Y4 709 11:00 14:05 LAP Y4 771 13:29 17:00 LMM Y4 767 12:35 15:49 MEXORD MTY Y4 1181 13:15 14:52 MZT Y4 799 12:00 14:50 OAX Y4 765 13:21 14:45 SJD Y4 783 12:25 15:45 TAP Y4 1797 11:30 13:25 TGZ Y4 811 09:13 11:10
Exhibit 15-C 2 of 2 MEXORD will connect 11 routes Connections in requested routes in Mexico City ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA- TION ARR 2 FLIGHT2 MEXORD ORD Y4 935 00:35 04:55 MEX 07:18 CUN 09:43 Y4 716 08:20 CUN 10:45 Y4 700 12:00 CUN 14:25 Y4 712 08:39 GDL 10:06 Y4 736 08:20 GUA 09:20 Y4 708 11:44 LAP 13:04 Y4 770 10:48 LMM 12:10 Y4 766 08:41 MTY 10:24 Y4 182 11:00 MTY 12:43 Y4 1180 10:48 MZT 11:33 Y4 798 11:45 OAX 12:56 Y4 764 10:46 SJD 11:59 Y4 612 09:00 TAP 10:55 Y4 1796 07:00 TGZ 08:43 Y4 772 08:00 TIJ 09:40 Y4 1815 11:09 TIJ 12:49 Y4 817 10:17 VSA 11:52 Y4 768
Exhibit 16 MEX-LAX
Exhibit 16-A LAXMEX An additional frequency with the lowest fare in the market Volaris with 15.4% of total freq 1.8x lower 2 Requested slot (Expected) *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues, market average fare excluding Volaris; **Other carriers excludes Volaris Note: LF of the route=pax/seats Nov 16 LTM; Seat per dep= Seat/Dep 2016 FY Source: Volaris data; DGAC; MI-DIIO; Infare; OANDA
Exhibit 16-B LAXMEX will connect with Mexicali, Guadalajara and Cancun Connections for requested Mexico City routes LAXMEX Los Angeles Mexicali Cancun Guadalajara Mexico City
Exhibit 16-C LAXMEX will connect 3 routes Connections for requested Mexico City routes LAXMEX ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA -TION ARR 2 FLIGHT2 LAX Y4 1889 13:30 19:25 MEX 21:45 CUN 00:10 Y4 710 21:53 GDL 23:20 Y4 744 22:49 MXL 00:18 Y4 752 ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA -TION ARR 2 FLIGHT2 CUN Y4 723 05:00 07:33 MEX 10:00 LAX 12:13 Y4 1888 GDL Y4 737 06:29 07:59 MEX MXL Y4 751 00:47 06:07 MEX
Exhibit 17 MEX-OAK
Exhibit 17-A MEXOAK Current seasonal service to be converted to year-round service Volaris MEXOAK (2016 FY) 100 100% 80 86 60 40 20 0 Market Share Load Factor Daily freq: 0.2 *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues Note: LF=Pax/Seats; Seats per dep=seats/dep 2016 FY Source: Volaris data
Exhibit 17-B MEXOAK will connect with 9 domestic destinations Connections for requested Mexico City routes Oakland MEXOAK Los Mochis Monterrey La Paz San Jose del Cabo Mazatlan Cancun Guadalajara Mexico City Oaxaca Tapachula
Exhibit 17-C 1 of 2 MEXOAK will connect 9 routes Connections for requested Mexico City routes ORIG FLIGHT DEP ARR CONNEC -TION DEPT DEST ARR 2 FLIGHT2 CUN Y4 709 08:40 11:13 MEX 18:11 OAK 20:52 Y4 2004 MEXOAK CUN Y4 701 10:18 12:51 CUN Y4 709 11:00 13:33 GDL Y4 739 10:46 12:16 GDL Y4 735 13:35 15:05 LAP Y4 771 13:29 17:00 LMM Y4 767 12:35 15:49 MTY Y4 1181 13:15 14:52 MZT Y4 799 12:00 14:50 OAX Y4 765 13:21 14:45 TAP Y4 1797 11:30 13:25
Exhibit 17-C 2 of 2 MEXOAK will connect 9 routes Connections for requested Mexico City routes ORIG FLIGHT DEP ARR CONNEC -TION DEPT DEST ARR 2 FLIGHT2 OAK Y4 2005 23:40 06:09 MEX 08:20 CUN 10:45 Y4 700 MEXOAK 12:00 CUN 14:25 Y4 712 14:02 CUN 16:27 Y4 704 08:39 GDL 10:06 Y4 736 12:56 GDL 14:23 Y4 738 11:44 LAP 13:04 Y4 770 10:48 LMM 12:10 Y4 766 08:41 MTY 10:24 Y4 182 11:00 MTY 12:43 Y4 1180 10:48 MZT 11:33 Y4 798 11:45 OAX 12:56 Y4 764 09:00 TAP 10:55 Y4 1796
Exhibit 18 MEX-DEN
Exhibit 18-A DENMEX Current seasonal service to be expanded to year-round service Volaris currently with daily seasonal service, requesting to convert it into regular 1.5x lower (Requested slot) (Expected) *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues, market average fare excluding Volaris; **Other carriers excludes Volaris Note: LF of the route=pax/seats Nov 16 LTM; Seat per dep= Seat/Dep 2016 FY Source: Volaris data; DGAC; MI-DIIO; Infare; OANDA
Exhibit 18-B DENMEX will connect Mexicali, Tijuana, Guadalajara and Cancun Connections for requested Mexico City routes Denver DENMEX Tijuana Mexicali Cancun Guadalajara Mexico City
Exhibit 18-C DENMEX will connect 4 routes Connections for requested Mexico City routes DENMEX ORIG FLIGHT DEP ARR CONNEC- TION DEPT DEST ARR 2 FLIGHT2 CUN Y4 723 05:00 07:33 MEX 10:05 DEN 12:46 Y4 982 GDL Y4 737 06:29 07:59 MXL Y4 751 00:47 06:07 TIJ Y4 810 00:25 06:02 TIJ Y4 822 02:05 07:42 TIJ Y4 822 02:05 07:42 TIJ Y4 814 20:35 02:12 ORIG FLIGHT DEP ARR CONNECT ING STATION DEPT DEST ARR 2 FLIGHT2 DEN Y4 983 14:01 18:40 MEX 21:45 CUN 00:10 Y4 710 20:22 CUN 22:47 Y4 722 21:53 GDL 23:20 Y4 744 22:49 MXL 00:18 Y4 752 23:55 TIJ 01:35 Y4 823 22:10 TIJ 23:50 Y4 819
Exhibit 19 MEX-ONT
Exhibit 19-A MEXONT A new route with three weekly frequencies would stimulate demand Current operations in GDLONT *One way Note: LF=Pax/Seats; Pax per dep=pax/dep Source: Volaris data
Exhibit 19-B MEXONT will connect with 12 domestic destinations Connections for requested Mexico City routes MEXONT Ontario Los Mochis Monterrey La Paz Mazatlan San Jose del Cabo Puerta Vallarta Guadalajara Merida Cancun Mexico City Oaxaca Tapachula Huatulco
Exhibit 19-C 1 of 2 MEXONT will connect 12 routes Connections for requested Mexico City routes ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTINA -TION ARR 2 FLIGHT2 CUN Y4 709 11:00 13:33 MEX 21:00 ONT 22:55 Y4 1984 MEXONT CUN Y4 713 15:00 17:33 CUN Y4 717 17:02 19:35 GDL Y4 735 13:35 15:05 GDL Y4 745 16:13 17:43 HUX Y4 779 15:39 17:13 HUX Y4 5789 16:54 18:28 LAP Y4 771 13:29 17:00 MID Y4 755 17:13 19:18 MTY Y4 1181 13:15 14:52 MTY Y4 187 17:33 19:10 MZT Y4 799 12:00 14:50 OAX Y4 765 13:21 14:45 SJD Y4 783 12:25 15:45 TAP Y4 1797 11:30 13:25
Exhibit 19-C 2 of 2 MEXONT will connect 12 routes Connections for requested Mexico City routes ORIG FLIGHT DEP ARR CONNEC- TION DEPT DESTIN A-TION ARR 2 FLIGHT2 ONT Y4 1985 01:00 06:55 MEX 12:00 CUN 14:25 Y4 712 14:02 CUN 16:27 Y4 704 14:15 CUN 16:40 Y4 708 08:39 GDL 10:06 Y4 736 12:56 GDL 14:23 Y4 738 13:54 HUX 15:14 Y4 778 11:44 LAP 13:04 Y4 770 10:48 LMM 12:10 Y4 766 14:51 MID 16:50 Y4 758 08:41 MTY 10:24 Y4 182 11:00 MTY 12:43 Y4 1180 10:48 MZT 11:33 Y4 798 11:45 OAX 12:56 Y4 764 14:44 PVR 16:21 Y4 784 10:46 SJD 11:59 Y4 612 09:00 TAP 10:55 Y4 1796 MEXONT
Exhibit 20 MEX-SJC
Exhibit 20-A MEXSJC New route with four weekly frequencies would complement existing service Current operations in GDLONT Note: LF=Pax/Seats (2016 FY); Seats per dep=seats/dep 2016 FY Source: Volaris data;
Exhibit 20-B MEXSJC will connect only one way with 8 domestic destinations Connections for requested Mexico City routes (one way) San Jose MEXSJC Tijuana Mexicali Chihuahua Hermosillo Monterrey Culiacan Guadalajara Merida Cancun Mexico City
Exhibit 20-C MEXSJC will connect 8 routes one way Connections for requested Mexico City routes (one way) ORIG FLIGHT DEP ARR CONNEC -TION DEPT DEST ARR 2 FLIGHT2 CUN Y4 723 05:00 07:33 MEX 11:00 SJC 13:39 Y4 1990 MEXSJC GDL Y4 737 06:29 07:59 GDL Y4 731 08:07 09:37 MTY Y4 181 06:29 08:06 MTY Y4 1185 07:00 08:37 MTY Y4 183 08:13 09:50 MXL Y4 751 00:47 06:07 ORIG FLIGHT DEP ARR CONNEC -TION DEPT DEST ARR 2 FLIGHT2 SJC Y4 1991 15:00 21:39 MEX 05:25 CUL 06:41 Y4 792 05:00 CUU 06:20 Y4 724 05:08 HMO 05:54 Y4 760 23:55 TIJ 01:35 Y4 823 05:30 TIJ 07:10 Y4 815
Exhibit 21 CUN-JFK
Exhibit 21-A CUNJFK five weekly low-fare frequencies will enhance market competition 1.7x lower Volaris with 11.1% of total freq (Requested slot) (Expected) *One-way average gross fare observed from Jan 12th to Apr 12th 2017 including taxes and excluding non-ticket revenues, market average fare excluding Volaris; **Other carriers excludes Volaris Note: LF of the route=pax/seats Nov 16 LTM; Seat per dep= Seat/Dep 2016 FY Source: Volaris data; DGAC; MI-DIIO; Infare; OANDA
Exhibit 21-B CUNJFK will connect with Monterrey and Mexico City Connections for requested Mexico City routes New York CUNJFK Monterrey Cancun Mexico City 64