Volaris Investor Day New York Stock Exchange September 13, 2017
Disclaimer The information ("Confidential Information") contained in this presentation is confidential and is provided by Controladora Vuela Compañía de Aviación, S.A.B. de C.V., (d/b/a Volaris, the "Company") confidentially to you solely for your reference and may not be retransmitted or distributed to any other persons for any purpose whatsoever. The Confidential Information is subject to change without notice, its accuracy is not guaranteed, it has not been independently verified and it may not contain all material information concerning the Company. Neither the Company, nor any of their respective directors makes any representation or warranty (express or implied) regarding, or assumes any responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information or opinions contained herein. None of the Company nor any of their respective directors, officers, employees, stockholders or affiliates nor any other person accepts any liability (in negligence, or otherwise) whatsoever for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. No reliance may be placed for any purposes whatsoever on the information set forth in this presentation or on its completeness. This presentation does not constitute or form part of any offer or invitation for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities, nor shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. Recipients of this presentation are not to construe the contents of this presentation as legal, tax or investment advice and should consult their own advisers in this regard. This presentation contains statements that constitute forward-looking statements which involve risks and uncertainties. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition, and future events and plans of the Company. These statements can be recognized by the use of words such as "expects," "plans," "will," "estimates," "projects," or words of similar meaning. Such forward-looking statements are not guarantees of future performance and actual results may differ significantly from those in the forward-looking statements as a result of various factors and assumptions. You are cautioned not to place undue reliance on these forward looking statements, which are based on the current view of the management of the Company on future events. The Company does not undertake to revise forward-looking statements to reflect future events or circumstances. 2
Agenda 09:30 am Enrique Beltranena, CEO 10:00 am Holger Blankenstein, CCO 10:50 am José Luis Suárez, COO 11:10 am Fernando Suárez, CFO 11:30 pm Q&A session 12:00 pm Event concludes Source: Volaris Mexico City International Airport (AICM)
Enrique Beltranena Chief Executive Officer
Since our last Investor Day in March 2016 we have reached several milestones Volaris Central America first flight Volaris entered the Mexican Bolsa IPC-30 Index First NEO operator in North America 2017 Air Transport World s value airline of the year Opening of 30 new routes and 9 new destinations One of the 15 most on-time airlines worldwide according to OAG (1) (1) Official Airline Guide Enrique Beltranena, CEO 5
16M customers, the largest ULCC in Latin America (1) Volaris at 30,000 feet: the largest ULCC in Latin America 168 routes and 68 destinations across 6 countries 67 aircraft with an average of 180 seats (2) 24.8 billion MXN (1.3 billion USD) of total revenue (3) 4.9 cents of CASM ex-fuel (3), one of the lowest in the world % 30% EBITDAR margin (3) (1) As of LTM August 2017; Source: DGAC (2) As of August 31, 2017 (3) As of LTM June 2017 Enrique Beltranena, CEO 6
The source of our success: a strong business model that produces a consistent and profitable growth Network (Routes end of period) Passengers (Thousands LTM Aug 2017) 168 16,088 28 6.0x 4.6x 3,505 2008 Aug 17 2008 LTM Aug 17 Total revenues (Total Operating Revenues M MXN) 24,837 % EBITDAR (LTM EBITDAR M MXN and EBITDAR margin - %) 30% 7,473 4,416 5.6x 17% 10.0x 747 2008 LTM Jun 17 2008 LTM Jun 2017 Enrique Beltranena, CEO 7
Volaris among the best-of-breed On board passengers CAGR (2012 to 2016) Non-ticket as % of total revenue (LTM June 2017) IndiGo Spirit Volaris Wizz Air Azul Air Asia Allegiant Ryanair Jetblue Aeromexico 8% 8% 11% 12% 14% 19% 18% 20% 20% 27% 1 st 1 st Largest ULCC in Latin America Spirit Allegiant Wizz Ryanair Volaris Aeromexico Azul Gol IndiGo Jet Blue On-time performance (July 2017) CASM ex-fuel, US cents (LTM June 2017) (1) 11% 10% 14% 14% 13% 27% 26% 42% 45% 48% 5 th 5 th Airline in non-ticket revenue Volaris Azul Gol IndiGo 81% 83% 87% 85% Wizz Air Ryanair AirAsia Volaris 3.8 4.0 4.4 4.9 4 th 4th Lowest CASM ex-fuel in airline industry Ryanair 80% Spirit 5.7 Wizz Air 80% IndiGo 5.9 Southwest 75% Allegiant 6.3 Spirit 74% Gol 7.1 Allegiant Aeromexico 67% 69% 13 th 13 th Most on-time airline of the world Aeromexico Jet Blue 7.7 8.1 (1) As of 2016 FY Note: non-usd data converted to USD using an average of period exchange rate Source: Airlines public information and OAG Enrique Beltranena, CEO 8
Volaris has a strong position to compete in the Mexican market Mexican airline market Leading ULCC in Mexico and Latin America Youngest and most efficient fleet in Mexico Highest seat density Highest fleet utilization Average seats per aircraft and fleet age (June 2017) Volaris market share (LTM June 2017) (1) #3 21% #4 13% 27% #1 36% Fleet utilization (LTM June 2017) 180 119 136 180 12.8 12.2 8.8 10.7 Volaris Aeromexico(2) Interjet Viva Volaris Aeromexico Interjet Viva 4.5 years 7.4 years 6.1 years 4.7 years (1) Passenger market penetration among Mexican carriers (domestic and international) (2) Aeromexico mainline (excludes wide-body fleet) and Aeromexico Connect Note: Estimated figures Source: Airlines public information, Airfleets, DGAC and MI-DIIO Enrique Beltranena, CEO 9
Volaris 1H 2017 growth was briefly slowed due to geopolitical and macro issues Foreign exchange rate (USD-MEX) Average economic fuel price per gallon (USD) +13% +3% +48% +12% 20.39 1.82 1.56 1.74 18.02 18.05 18.6 1.23 1Q 2016 1Q 2017 2Q 2016 2Q 2017 1Q 2016 1Q 2017 2Q 2016 2Q 2017 The first half of 2017 brought some challenges to Volaris Geopolitical (US elections, travel bans and warnings, immigration policy, DACA and NAFTA debates) Depreciation of the Mexican Peso Increase in jet fuel price Slot regime constraints in Mexico City These factors had an impact mostly on international traffic Enrique Beltranena, CEO 10
Softer demand required us to manage capacity Lower fleet utilization (hours per day) 13.2 12.5 12.9 12.7 Volaris flexible network, fleet and operation allow us to quickly respond to market challenges 1 st Quarter 2 nd Quarter 2016 2017 Resulted in lower ASM growth projections for 2017 No new aircraft deliveries in 1H 2017 and 3 re-deliveries Utilization adjustment 15% to 17% 15% 13% to 14% Capacity management New routes and frequencies revision Itinerary adjustment Domestic vs International growth mix calibration Beginning of the year Currently Enrique Beltranena, CEO 11
The Mexican economy s performance and outlook remains resilient (Unemployment rate %) (Consumer confidence index 2010=100) GDP growth (% y-o-y) (1) Unemployment and consumer confidence 2.3% 1.8% 2.2% 2.1% 2.2% 2.1% 1.6% 4.5% 120 0.8% 4.0% 105 3.5% 90-1.4% 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E Mexico USA Latin America and Caribbean 3.0% 1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 Unemployment rate Consumer confidence 75 Mexican economic activity index (2) (index 2010=100) US remittances to Mexico (% y-o-y) 119 120 13% 119 10% 117 117 118 6% 5% 7% 5% 1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017 (1) World Bank Global Economics Prospects June 2017 (2) IGAE (Indicador Global de la Actividad Económica) Source: World Bank, INEGI and Banxico Enrique Beltranena, CEO 12
Favorable demographics and under-penetrated markets should improve Volaris long-term growth Young and growing middle class, ripe for bus switching Middle class as a % of total population Mexican demographic composition by age 7% 8% 14% 17% 17% +17pp 30% +100 80 60 Male 2030 estimate Female +100 80 60 35% 25% 40 20 40 20 26% 20% 0 10 5 0 5 10 2010 2025E Million inhabitants D/E D+ C C+ AB 0-19 years 20-64 years 65+ years In terms of air trips per capita, Mexico has important growth opportunities 0 2016 air trips per capita (domestic and international) 2.55 More than 50M potential potential passengers 0.91 0.66 0.47 0.45 0.70 to 0.90 0.70 to 0.90 0.42 0.34 0.19 0.07 (2) United States Chile Colombia Peru Brazil Mexico Argentina Central America Paraguay (1) Classes are defined by the following monthly family income: AB<MXN $98,500, C+MXN $40,600- $98,499, C MXN $13,500- $40,599, D+ MXN $7,880 $13,499, D MXN $3,130- $7,879 and E <MXN $3,129 (2) Includes Belize, Costa Rica, El Salvador, Guatemala and Honduras Source: DGAC, MI-DIIO, ALTA, World Bank and CAPA Centre for Aviation Enrique Beltranena, CEO 13
Volaris has several opportunities to grow revenues, reduce costs and deliver financial performance $ Revenue initiatives for growth Maintain industry cost leadership Solid financial profile Network expansion Volaris Central America New VFR niche routes Strategic leisure destinations Bus switching Revenue growth Stimulate demand through low fares Maximize ancillary revenue Improve digital channels Fleet profile Up-gauge (A320/A321 NEO) Increase seat density High utilization Aircraft ownership Direct sales channels and customer service Digital apps Enhance website Automation and self-service Other cost initiatives Organization effectiveness Strategic sourcing Economies of scale Sustained profitability and value creation EBITDAR margin of 30% (1) Adj. pre-tax ROIC of 15% (1) Strong balance sheet Unrestricted cash position: USD 334 million (2) 24% of LTM revenues (2) Healthy working capital Disciplined financial leverage (1) As of LTM June 30, 2017 (2) As of June 30, 2017 Enrique Beltranena, CEO 14
Holger Blankenstein Chief Commercial Officer
Volaris business model is well poised to sustain strong growth Capacity increase More ancillaries + Solid and Resilient ULCC business model driving high and profitable growth More price sensitive customers Ultra low operating costs Clean low base fares Holger Blankenstein, CCO 16
Volaris growth is based on four key drivers Strong growth 1 2 3 4 Stimulate demand through low fares Build a diverse and defensible network Capitalize on ancillary opportunities Exploit digital efforts Holger Blankenstein, CCO 17
Strong growth 1 2 3 4 Stimulate demand through low fares Build a diverse and defensible network Capitalize on ancillary opportunities Exploit digital efforts Holger Blankenstein, CCO 18
Volaris offers super low base fares to stimulate demand and compete with buses More passengers fly with Volaris due to low fares even lower than buses (1) Volaris fares ($ USD) 120 Volaris passengers (M) 16 Market Buses Culiacan - Tijuana $49 $67 Guadalajara - Hermosillo $48 $60 100 80 60 12 8 4 Guadalajara - Tijuana $59 $99 Mexico - Tijuana $65 $112 Bajio - Tijuana $65 $90 Cancun - Mexico $49 $59 Durango - Tijuana $62 $102 Guadalajara - Monterrey $37 $50 Mexico - Monterrey $38 $56 40 2009 2010 2011 2012 2013 2014 2015 2016 Average Fare Transported passengers (1) Bus fares as of March 2017; USD at an average exchange rate of MXN $20.4 1Q 17 (2) Survey made by Briyam in February 2017 Holger Blankenstein, CCO 0 8% of our customers are 1st time flyers 22% considered the bus before booking on Volaris (2) 19
Volaris proven success: domestic and international markets stimulated due to the Volaris Effect Domestic: Ciudad Juarez - Tijuana International: Chihuahua - Denver EXAMPLES Route average fare (USD) O&D passengers (thousands) Route average fare (USD) O&D passengers (thousands) 250 200 October 2013 Volaris non stop service begins 5 4 500 400 July 2014 Volaris non stop service begins 15 12 150 3 300 9 100 2 200 6 50 1 100 3 0 January 2012 June 2017 0 0 January 2012 June 2017 0 Average fare Passengers Note: O&D stands for Origin & Destination passengers; 12-month rolling sum Source: Airports data based on IATA BSP via MI-DIIO Holger Blankenstein, CCO 20
We are now bringing the Volaris Effect to Central America Volaris has the lowest fares in Central America (1) (USD) Volaris is the first ULCC in the region Volaris fares are at least 59 114 4x lower 2x lower 124 128 257 We started operations to Central America in 2015, Guatemala in June and then Costa Rica, in September In December 2016, we opened a new AOC (Volaris Costa Rica) with our first flight San Jose Guatemala In August 2017, we had 11 routes in Central America covering 5 countries: Costa Rica El Salvador Guatemala Mexico Nicaragua Since June 2015, we have carried more than 340K passengers in all Central America Volaris Avianca Latam Aeromexico Copa Future plans: Central America to USA expansion (2) (1) Network average fares from airlines reports 2Q 2017 (2) Subject to market conditions and regulatory approvals Source: Airlines public information Holger Blankenstein, CCO 21
Volaris ongoing bus switching programs contribute to the airlines penetration and traffic stimulation There is a long way to go to gain share from the buses (1) Volaris commercial activities to achieve bus switching Airline passenger CAGR 11.5% Airline passenger CAGR 10.5% Airline passenger CAGR 4.8% Education Trial First Sale Mass media campaigns & digital capabilities Tickets giveaway #NoMoreBus Strong conversion rate ULCC model Attracting 1 st time flyers Hell vs. Heaven social media campaign Special anti-bus fares Geofencing inside bus terminals Get rid of the bus campaign in Central America Brazil (2003) Brazil (2014) Bus trips per capta Mexico (2003) Mexico (2012) Mexico (2016) Air trips per capita Potential unexplored Mexican bus routes Since 2016, over 50M total targeted audience (1) UBS analysis related to LATAM transportation Source: UBS Holger Blankenstein, CCO 22
Low fares will continue to stimulate demand in line with high growth emerging markets Significant growth opportunities in Mexico and Central America Annual trips per capita (1) 2.5 2.5 More than 50M incremental passengers 0.8 0.9 0.7 to 0.9 0.7 to 0.9 0.6 0.7 0.4 0.5 0.5 0.5 0.4 0.4 0.3 0.3 0.2 0.2 0.1 0.1 United States Chile Colombia Peru Brazil Mexico Argentina Central America 2015 2016 Market potential (2) Paraguay (1) Domestic (2) Includes Belize, Costa Rica, El Salvador, Guatemala and Nicaragua (3) Range based on South American countries above Mexico Source: World Bank Holger Blankenstein, CCO 23
Strong growth 1 Stimulate demand through low fares 2 3 4 Build a diverse and defensible network Capitalize on ancillary opportunities Exploit digital efforts Holger Blankenstein, CCO 24
Volaris continues to diversify its network Network enhancement: more frequencies and more routes to new destinations Last investor day (1) Routes August 2017 Volaris March 2016 to August 2017 new routes (2) 138 168 Stations 59 68 Daily take-offs 271 297 Diverse and defensible network International Domestic Volaris Costa Rica 168 routes serving 68 destinations throughout Mexico, USA and Central America (1) March 15 th, 2016 (2) Only operated routes Holger Blankenstein, CCO 25
Volaris has a strong and solid network with efficient operations Low frequencies, maximum footprint (Frequencies per route per day) with a better asset utilization (Cycles per day) and more revenue opportunities every day (Seats offered per day, thousands) 1.0 4.7 51.6 0.8 + = 4.4 24.7 2012 LTM Jun 2017 2012 LTM Jun 2017 Utilization (hrs./day): 12.4 12.6 Holger Blankenstein, CCO 2012 LTM Jun 2017 26
We have built a defensible network with little concentration and overlap with other carriers Low concentration Volaris ASM diversification (1) Focus on exclusive routes and higher costs competitors (2) Diverse geography (3) Other 10% Top 10 routes 36% 3 or more competitors 40% Legacy 50% Cancun 5% Tijuana 20% 2 competitors 14% Hybrid 29% Mexico City 32% Other routes 64% 1 competitor 23% LCC 21% Exclusive 23% Guadalajara 33% Expansion beyond mainstream routes (1) Total Volaris- ASMs as of June 2017 LTM (2) Split per route based on competitors type (3) Other includes MTY, other Mexican Airports and Central America Source: MI-DIIO 23% of our ASMs are exclusive Holger Blankenstein, CCO Strong presence in diverse Mexican cities 27
We have a proven track record in developing new markets 64 16% 37 36% 16 32% 69% 57% 48% 103 18% 34% 48% 128 17% 33% 50% 151 17% 32% 51% 2011 2012 2013 2014 2015 2016 VFR Leisure Other 16 75% Cumulative new routes by segment (2011 to 2016) Cumulative new routes by market (2011 to 2016) 37 54% 46% 64 38% 63% 103 25% 128 39% 65% 61% 151 41% 59% 2011 2012 2013 2014 2015 2016 Domestic International Volaris has built untapped niche markets, pioneered 58 routes (1) Examples of domestic routes: Aguascalientes Cancun Guadalajara Merida Tijuana Uruapan Examples of international routes: Guadalajara Portland Uruapan Los Angeles Chihuahua Denver Focusing on connecting visiting friends and families and building leisure markets (1) Routes opened by Volaris without competition in that time Note: Others stands for business routes Holger Blankenstein, CCO 28
Volaris has significant untapped opportunities throughout the Americas Sizeable growth opportunity for Volaris Volaris growth opportunities (2) More than 200 new routes opportunities Canada ULCC penetration (seat share in selected markets) (1) USA ULCC Legacy / Hybrid 58% 77% Mexico Caribbean 86% 90% 95% 98% Central America 42% 23% 14% 10% 5% More than 75 routes South America Mexico - Domestic Europe Mexico - USA Central America - USA USA Domestic CAM intra and South America 50 to 75 routes Less than 50 routes (1) 2017 FY (2) Minimum stage length of 170 miles to 200 miles; figures calculated as of August 2017 Note: European ULCC are Ryanair, EasyJet and Wizz Air, US domestic ULCC are Spirit and Frontier; CAM stands for Central America Holger Blankenstein, CCO 29
Strong growth 1 2 Stimulate demand through low fares Build a diverse and defensible network 3 4 Capitalize on ancillary opportunities Exploit digital efforts Holger Blankenstein, CCO 30
Increasing non-ticket revenue allows us to reduce fares further and stimulate demand Non-ticket revenues account for 29% of Volaris operating revenues (1) Non-ticket revenue per passenger (MXN, 1Q 2012 to 2Q 2017) 450 400 350 CAGR 2012-2016 = 17% 300 250 200 150 1Q 2012 2Q 2017 Absolute non-ticket revenue (MXN) $312M Growth: 5.5x $1,730M (1) 2Q 2017 Holger Blankenstein, CCO 31
More than 13% increase in non-ticket revenues per passenger comes from new ancillary products More products Dynamic pricing Better presence Product results Incremental non-ticket per passenger by product (2016 to 2017, Index Jan 2016 = 100) 12.0 Product & Services Non ticket revenue: 1st bag charge on international flights Air bundles Standby tickets for distressed inventory Express check-in 113.8 Commissioned based revenues: Standalone hotels, cars, activities, cruises and transfers Other insurance (departure protection, weather insurance, etc.) 0.4 1.4 Discount programs: Discount club as a monthly subscription option 100.0 Jan-16 Commision based Forms of payments Non-ticket Aug-17 Forms of Payment: Multi-currency processor Deferred payment plans Holger Blankenstein, CCO 32
More captive demand of customers translates into a sustainable competitive advantage More products Dynamic pricing Better presence Identified & Anonymous Registered members 9M visits to volaris.com per month v.club members (discounts club) 3M registered users v.pass members (subscription service) (1) +500k discount club members +180K cardholders Credit card holders (1) Beta version Holger Blankenstein, CCO 33
Dynamic pricing as a driving force for growth More products Dynamic pricing Better presence Baggage contribution per passenger (% vs. 2014) Seats contribution per passenger (% vs. 2014) 125% 132% 131% 140% 114% 117% 100% 100% 2014 2015 2016 2017 YTD 2014 2015 2016 2017 YTD Pricing on multiple variables: season, route, customer, time before purchase, type of market, time of purchase and type of flight Note: Excludes the first checked baggage Holger Blankenstein, CCO 34
We continue to capitalize on every moment of the customer journey More products Dynamic pricing Better presence Research & Booking Post Booking Counter Gate In Flight Post & return flight Personalization Customized offering for individual customer segments Credit card pre-approval online with immediate use (2018) Personalized ancillary offering and pricing depending on customer profile Optimization Continuous re-optimization based on product conversions Constant A/B testing Increase conversion on multiple payment services Penetration Expand commissionable product portfolio on mobile channels (Cross Border Xpress, VIP lounge, parking, cars, etc.) Chatbot on Facebook messenger as a new distribution channel Sell online real estate in emails & web as advertising spaces Holger Blankenstein, CCO 35
Spirit Allegiant Wizz Ryanair Volaris Aeromexico Azul Gol IndiGo Jet Blue Southwest (2) Moving forward, key ancillary opportunities ahead Non-ticket benchmark Non-ticket revenue as a % of total revenues (LTM Jun 2017) (1) 48% 45% 42% Opportunities (examples) Non-ticket revenue: 1st bag charge on Mexico domestic flights with preferential fares 27% 26% 14% 14% 13% 11% 10% 9% Commission revenues: Increase leisure customers segments share of wallet Improve packaging platforms and offering Discount programs Launch new subscription products to increase recurrence of specific target segments 21 52 50 33 16 16 14 12 7 17 12 Ancillary revenue per passenger by airline (USD): (1) Volaris 1H 2017 includes cargo (2) As of 2016 full year Source: Airlines public information Holger Blankenstein, CCO 36
Strong growth 1 2 3 4 Stimulate demand through low fares Build a diverse and defensible network Capitalize on ancillary opportunities Exploit digital efforts Holger Blankenstein, CCO 37
Data analytics: increasing marketing effectiveness by better predicting customer behaviors Analytics UX (user experience) Web & Mobile Mailing segmentation Conversational commerce Previous benchmark email campaigns Advanced analytics Targeted content New campaign results Open Rate: 29-37% Open Rate: 27% Click Through Rate: 2% Use of advanced segmentation methods (e.g. Recency Frequency Monetary Model) +2-10pp Click Through Rate: 3-6% +1-4pp Source: Google Analytics Holger Blankenstein, CCO 38
User experience improvements in all digital touchpoints has increased conversion rates Analytics UX (user experience) Web & Mobile Conversational commerce Before In Jan 17, 65% completed the payment Now In Aug 17, 70% completed the payment Payment step +5pp conversion Old Combos (until Feb 17): MXN $12 per pax New Combos (since Mar 17): MXN $18 per pax Combos redesign +$6 MXN per pax Note: Total funnel conversion (since search of a flight to booking of 8% in Aug 17 Holger Blankenstein, CCO 39
Mobile first user experiences to monetize the growing share of mobile visits to our digital touchpoints Analytics UX (user experience) Web & Mobile Conversational commerce What are we looking to improve with this strategy? Mobile first designed user experiences are growing mobile sales and servicing Increase funnel conversion and ancillary sales per passenger, by redesigning booking flow Home page Confirmation page Flights (preferential fare) Reduce bounce rate and increase engagement, by redesigning the homepage Additional services Passengers Holger Blankenstein, CCO 40
Mobile first approach has yielded significant results in sales and servicing Analytics UX (user experience) Web & Mobile Conversational commerce John Volaris Jr. Mobile channels visits Mobile transactions 50% 50% 56% 86% 70% 44% 14% 30% 2016 2017 Desktop Mobile 2016 2017 Desktop Mobile Mobile channels visits (thousands) 856 App check-in (% of total) 16% XXXXXX 514 3% Mobile check-in available in all airports where we operate 2016 2017 2016 2017 Note: App only (IOS and Android) Holger Blankenstein, CCO 41
Conversational commerce reduces cost through automated customer interactions Analytics UX (user experience) Web & Mobile Chat tools Live web chat >400K conversation since launch in February Sales conversion: 23%-28% Facebook Messenger chatbot Advanced Q&A, booking and check-in through an automated chatbot In beta. full launch in late September 2017 Conversational commerce Chatbot in Facebook Messenger Intelligent response 24/7 Intelligent response Automated high quality responses for 70K-80K questions asked by volaris.com customers per month Response rate between 83% to 97% Live web chat Social media customer service Conversational tool Solve customers issues immediately through social media 107K interactions in the first 2 weeks since launch 8K were customer issues, 6K were solved immediately Holger Blankenstein, CCO 42
José Luis Suárez Chief Operating Officer
Running an operation focused on efficiency and cost reduction Maintenance reliability Schedule completion 99.5% 99.7% 99.4% +0.1pp 99.2% +0.5pp 2016 1H 2017 2016 June 2017 Fuel burn (Gallons burned per 1,000 ASM) Self check-in 11.8-4% 11.3 78% +7pp 85% 2016 1H 2017 2016 1H 2017 José Luis Suárez, COO 44
Volaris Azul Gol IndiGo Wizz Air Ryanair Southwest Volaris focus on reliability is reflected in our on-time performance index Spirit Allegiant Aeromexico Air Asia Jetblue Volaris is one of the most punctual airlines of the world On-time performance OTP (July 2017) 87% 85% 83% 81% 80% 80% 75% 74% 69% 67% 65% 63% More efficient itinerary design - Block-time adjustment - Maintenance reschedule New approach on supply chain management - Service level agreement Initiatives to ensure the ontime departure of our first flight of the day Focus on customer satisfaction and reliability Source: OAG flightview José Luis Suárez, COO 45
Volaris has a strong backlog to support our fleet up-gauge and cost per seat reduction Contractual fleet obligations (number of aircraft) (1) 56 69 10 20 28 5 10 10 16 15 15 18 15 12 15 6 2015 2016 2017E 2018E A319 A320 A320 w/sharklets A320neo w/sharklets A321 w/sharklets A321neo w/sharklets 178 73 7 28 Average seats per aircraft 181 77 13 28 187 A321 up-gauge - 230 seats (up-gauge) - ~10% CASM dilution (2) A320 NEO - 6 extra seats per aircraft to 186 - Combined fuel consumption reduction by approx. 15-16% per seat (2) - 12.3% (or 400 nm) range improvement 168 2015 2016 2017E 2018E Note: NEO stands for the Airbus new engine option; CEO stands for the Airbus current engine option (1) Net fleet after additions and returns (2) Source: Airbus José Luis Suárez, COO 46
Improving our customer delivery and airport ancillary sales Former airport visual standard New airport visual standard Source: Volaris Volaris check-in modules AICM International New customer service standard Redesign airport modules to simulate a bus station Changes in the customer service staff Focus on mobile check-in and app use Source: Volaris Volaris new check-in modules AICM International Focus on ancillary sales New training approach More emphasis on product sales during check-in and boarding steps Ancillary vending machine José Luis Suárez, COO 47
Our diversified network allows us to work around the infrastructural gaps to grow consistently Volaris focus has been expanding operations beyond Mexico City Tijuana: 32 destinations Cross-border express facility 92 daily operations Maintenance facilities Guadalajara: 48 destinations Privileged geographic position for international traffic 26 international routes 94 daily operations Cancun: 20 destinations Main leisure destination 48 daily operations Maintenance base Note: As of August 2017 José Luis Suárez, COO 48
The new Mexico City Airport will be key in our long-term growth strategy Source: NAICM New Mexico City Airport Project New Mexico City Airport (2025) Volaris at Mexico City Airport (2025) 70 million passengers 410 thousand operations per year 3 simultaneous runways 164 aircraft gates Less restrictive slot regime allows for important operations growth Access to new markets and direct routes Enables significant passenger volume growth Maintenance facility improvement Source: Grupo Aeroportuario de la Ciudad de Mexico José Luis Suárez, COO 49
Volaris operations are certificated with the most important seals in the airline industry IATA Operational Safety Audit (IOSA) System IATA Safety Audit for Ground Operations (ISAGO) ISO 9001:2008 and 14001:2004 José Luis Suárez, COO 50
Fernando Suárez Chief Financial Officer
Thanks for the recognition! Institutional Investor 2017 Latin America Executive Team Awards Transportation Small-cap 1 st Best CEO 1 st Enrique Beltranena Best Website ir.volaris.com 2 nd Best CFO (1) 2 nd Fernando Suárez Best Analyst Day 3 rd Best IR Team 3 rd Best IR Program Note: In total, 445 investors and 238 sell-side and buy-side analysts voted across 16 sectors, www.institutionalinvestor.com (1) By sell-side analysts Enrique Beltranena, CEO 52
Volaris has demonstrated high revenue growth and financial performance Operating revenues CAGR (2012 to 2016) 25% 20% 20% 19% 15% 11% 8% 8% 7% 5% 5% 4% Azul Wizz Air IndiGo Volaris Spirit Allegiant Aeromexico Ryanair Jet Blue Gol Southwest AirAsia Adjusted EBITDAR margin (LTM June 2017) 35% 34% 33% 32% 30% 30% 29% 29% 25% 24% 24% 20% Wizz IndiGo Ryanair Air Asia Volaris Spirit Azul Allegiant Jet Blue Aeromexico Southwest Gol Non-USD data converted to USD using an average of period exchange rate Source: Airlines public information Fernando Suárez, CFO 53
We have one of the lowest unit cost in the world, with room to improve Long-term unit cost advantage CASM ex-fuel (LTM June 2017, US cents) 3.8 4.0 Continued cost reduction opportunities through fleet up-gauge and ownership 4.4 4.9 5.7 5.9 6.3 7.1 7.7 8.1 8.9 9.9 Wizz Air Ryanair AirAsia Volaris Spirit IndiGo Allegiant Gol Aeromexico Jet Blue Southwest Azul 0.8x 0.8x 0.9x 1.2x 1.2x 1.3x 1.4x 1.6x 1.7x 1.8x 2.0x Non-USD data converted to USD using an average of period exchange rate Source: Airlines public information Fernando Suárez, CFO 54
Our balance sheet is strong and resilient Asset composition USD 1,109 M Cash and cash equivalents 30% Liabilities and Equity composition USD 1,109 M Acc. payable 4% Unearned transportation 17% Financial debt 10% Guarantee deposits 35% Other 25% PP&E and other 35% Equity 43% On-balance sheet net cash position of USD 218 M Fernando Suárez, CFO 55
Ample liquidity and disciplined leverage, with fleet requirements fully financed Liquidity-cash and equivalents as a % of LTM Op. Revenues 24% Our financial position supports our long-term growth plans 15% 12% 10% 9% 7% 7% 5% Fully financed pre-delivery payments and committed financing for 2017-19 sale-leasebacks Volaris Aeromexico Latam Copa Gol Avianca Azul Interjet Adj. net debt/ebitdar (LTM June 2017) 8.9x 5.1x 5.2x 5.3x 5.5x 5.6x 5.7x 2.8x Expected 2017 net CAPEX (USD 120 M to USD 140 M): PDPs: from USD 60 to 65 million, net of PDP reimbursements Major maintenance: USD 50 to 60 million Other: from USD 10 to 15 million Copa Aeromexico Volaris Azul Latam Gol Avianca Interjet Note: Non-USD figures converted to USD at June 2017 end of the period spot exchange rate $17.8973 for convenience purposes only Source: Airlines public information Fernando Suárez, CFO 56
We continue to develop a FX natural hedge position and maintain a net asset-dollarized balance sheet USD denominated revenue and costs (LTM June 2017) Balance sheet - foreign exchange position ( June 2017) MXN 30% MXN 36% MXN 68% MXN 76% USD collections 41% USD and USD linked 70% USD 64% USD 32% USD 24% Operating Revenues Operating Expenses Assets Liabilities Network diversification increases USD revenues USD net monetary asset position of USD 556M Fernando Suárez, CFO 57
Fuel price protection provides cost certainty and visibility 58% 58% % hedged of estimated jet fuel consumption in the quarter 50% 50% 45% 35% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Average price per gallon (USD): $ 1.44 $ 1.40 $ 1.63 $ 1.74 $ 1.78 $ 1.85 Note: Asian call options Fernando Suárez, CFO 58
Focused on ROIC LTM adjusted pre-tax ROIC (1) 22% 20% 14% 15% 2014 2015 2016 LTM Jun 2017 Committed to continue increasing shareholder value (1) Adjusted to rents Fernando Suárez, COO 59
Appendix
Consolidated statements of operations summary MXN millions unless otherwise stated (3) 2014A 2015A 2016A 2016A (1) 2Q 2017 2Q 2017 (2) (USD millions) (USD millions) % of total operating revenues Passenger 11,303 14,130 17,790 861 4,252 238 71.1 Non-ticket 2,733 4,049 5,722 277 1,730 97 28.9 Total operating revenues 14,037 18,180 23,512 1,138 5,982 334 100 Other operating income (22) (193) (497) (24) (10) (1) (0.2) Fuel 5,364 4,721 5,741 278 1,694 95 28.3 Aircraft and engine rent expenses 2,535 3,525 5,590 271 1,378 77 23.0 Landing, take off and navigation expenses 2,066 2,595 3,272 158 1,006 56 16.8 Salaries and benefits 1,577 1,903 2,420 117 717 40 12.0 Sales, marketing and distribution expenses 817 1,089 1,413 68 387 22 6.5 Maintenance expenses 665 875 1,344 65 362 20 6.1 Other operating expenses 490 698 952 46 271 15 4.5 Depreciation and amortization 343 457 537 26 139 8 2.3 Total operating expenses 13,833 15,669 20,773 1,005 5,943 332 99.3 6 EBIT 204 2,510 2,740 133 39 2 0.7 Operating margin (%) 1.5 13.8 11.7 11.7 0.6 0.6 Finance income 23 47 103 5 21 1 0.4 Finance cost (32) (22) (35) (2) (22) (1) (0.4) Exchange gain (loss), net 449 967 2,170 105 (558) (31) (9.3) Income tax (expense) benefit (39) (1,038) (1,457) (71) - - - Net income (loss) 605 2,464 3,519 170 (520) (29) (9.3) Net margin (%) 4.3 13.6 15.0 15.0 8.7 8.7 Adjusted EBITDAR 3,081 6,492 8,866 429 1,556 87 26.0 Adj. EBITDAR margin (%) 22.0 35.7 37.7 37.7 26.0 26.0 EPS Basic and Diluted (Pesos) 0.60 2.43 3.48 0.17 (0.51) (0.03) EPADS Basic and Diluted (Pesos) 5.98 24.35 34.78 1.68 (5.14) (0.29) (1) Full year 2016 figures converted to USD at December end of the period spot exchange rate $20.6640 for convenience purposes only (2) 2Q 2017 figures converted to USD at June end of the period spot exchange rate $17.8973 for convenience purposes only (3) Audited financial information 2014A 2016A Apendix 61
Consolidated statements of financial position summary MXN millions unless otherwise stated (5) 2014A 2015A (6) 2016A 2016A (1) 2Q 2017 2Q 2017 (7) (USD millions) (USD millions) Cash and cash equivalents 2,265 5,157 7,071 342 5,981 334 Current guarantee deposits 545 873 1,167 56 1,097 61 Other current assets 879 1,193 3,313 160 2,826 158 Total current assets 3,689 7,224 11,551 559 9,904 553 Rotable spare parts, furniture and equipment, net 2,223 2,550 2,525 122 3,117 174 Non-current guarantee deposits 3,541 4,693 6,560 317 5,891 329 Other non-current assets 452 765 1,146 55 939 52 Total assets 9,905 15,232 21,782 1,054 19,851 1,109 Unearned transportation revenue 1,421 1,957 2,154 104 3,296 184 Short-term financial debt 823 1,371 1,051 51 1,281 72 Other short-term liabilities 2,524 3,745 4,683 227 4,414 247 Total short-term liabilities 4,768 7,073 7,888 382 8,991 502 Long-term financial debt 425 220 943 46 784 44 Other long-term liabilities 242 1,113 2,157 104 1,479 83 Total liabilities 5,435 8,407 10,988 532 11,253 629 Total equity 4,470 6,825 10,794 522 8,598 480 Total liabilities and equity 9,905 15,232 21,782 1,054 19,851 1,109 Net debt (2) (1,017) (3,566) (5,077) (246) (3,916) (219) Adjusted debt (3) 18,990 26,268 41,125 1,990 45,146 2,522 Adjusted net debt (4) 16,725 21,111 34,053 1,648 39,165 2,188 (1) Full year 2016 figures converted to USD at December end of the period spot exchange rate $20.6640 for convenience purposes only (2) Net debt = financial debt - cash and cash equivalents (3) Adjusted debt = (LTM aircraft rent expense x 7) + financial debt (4) Adjusted net debt = adjusted debt - cash and cash equivalents (5) Audited financial information 2014A 2016A (6) Certain amounts related to prepaid income tax and guarantee deposits, presented in the consolidated statement of financial position have been reclassified in 2015A, in order to be comparative with the classification between current and non-current assets presented during 2016A (7) 2Q 2017 figures converted to USD at June end of the period spot exchange rate $17.8973 respectively, for convenience purposes only Apendix 62
Consolidated statements of cash flows summary MXN millions unless otherwise stated (3) 2014A 2015A 2016A 2016A (1) 2Q 2017 2Q 2017 (2) (USD millions) (USD millions) Cash flow from operating activities Income (loss) before income tax 644 3,502 4,977 241 (520) (29) Depreciation and amortization 343 457 537 26 139 8 Guarantee deposits (695) (1,165) (1,957) (95) 210 12 Unearned transportation revenue 27 536 196 10 309 17 Changes in working capital and provisions 14 (261) (2,773) (134) (353) (20) Net cash flows (used in) provided by operating activities 334 3,070 979 47 (215) (12) Cash flow from investing activities Acquisitions of rotable spare parts, furniture, equipment and intangible assets (1,603) (1,456) (2,259) (109) (502) (28) Pre-delivery payments reimbursements 396 670 1,733 84 - - Proceeds from disposals of rotable spare parts, furniture and equipment 22 185 498 24 - - Net cash flows (used in) provided by investing activities (1,185) (601) (28) (1) (502) (28) Cash flow from financing activities Treasury shares purchase (7) - (17) (1) - - Proceeds from exercised stock options - 23 20 1 - - Interest paid (23) (42) (39) (2) (24) (1) Other finance costs (11) (40) (138) (7) - - Payments of financial debt (400) (801) (1,531) (74) (206) (12) Proceeds from financial debt 966 925 1,716 83 321 18 Net cash flows provided by financing activities 525 65 11 1 91 5 (Decrease) increase in cash and cash equivalents (326) 2,533 962 47 (625) (35) Net foreign exchange differences 141 359 952 46 (232) (13) Cash and cash equivalents at beginning of period 2,451 2,265 5,157 250 6,839 382 Cash and cash equivalents at end of period 2,265 5,157 7,071 342 5,981 334 (1) Full year 2016 figures converted to USD at December end of the period spot exchange rate $20.6640 for convenience purposes only (2) 2Q 2017 figures converted to USD at June end of the period spot exchange rate $17.8973 for convenience purposes only (3) Audited financial information 2014A 2016A Apendix 63
Adj. EBITDA and Adj. EBITDAR reconciliation MXN millions unless otherwise stated (3) 2014A 2015A 2016A 2016A (1) 2Q 2017 2Q 2017 (2) (USD millions) (USD millions) Net income (loss) 605 2,464 3,519 170 (520) (29) Plus (minus): Finance costs 32 22 35 2 22 1 Finance income (23) (47) (103) (5) (21) (1) (Benefit)/provision for income taxes 39 1,038 1,457 71 - - Depreciation and amortization 343 457 537 26 139 8 EBITDA 995 3,934 5,446 264 (380) (21) Exchange (gain) loss, net (449) (967) (2,170) (105) 558 31 Adjusted EBITDA 547 2,967 3,276 159 178 10 Aircraft and engine rent expense 2,535 3,525 5,590 271 1,378 77 Adjusted EBITDAR 3,081 6,492 8,866 429 1,556 87 (1) Full year 2016 figures converted to USD at December end of the period spot exchange rate $20.6640 for convenience purposes only (2) 2Q 2017 figures converted to USD at June end of the period spot exchange rate $17.8973 for convenience purposes only (3) Audited financial information 2014A 2016A Apendix 64
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