December 2016 Corporate Presentation B787 Dreamliner
Disclaimer The material that follows comprises information about Avianca Holdings S.A. (the Company ) and its subsidiaries, as of the date of the presentation. It has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities and should not be treated as giving legal, tax, investment or other advice to potential investors. The information presented or contained herein is in summary form and does not purport to be complete. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness, or completeness of this information. Neither the Company nor any of its affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation. The information presented or contained in this presentation is current as of the date hereof and is subject to change without notice, and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives makes any undertaking to update any such information subsequent to the date hereof. This presentation contains forward-looking statements, which are based upon the Company and/or its management s current expectations and projections about future events. When used in this presentation, the words believe, anticipate, intend, estimate, expect, should, may and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. Additionally, all information, other than historical facts included in this presentation is forward-looking information. Such statements and information are subject to a number of risks, uncertainties and assumptions. Forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated due to many factors. As for forward-looking statements that relate to future financial results and other projections, actual results may be different due to the inherent uncertainty of estimates, forecasts and projections. Because of these uncertainties, potential investors should not rely on these forward-looking statements. Neither the Company nor any of its affiliates, directors, officers, agents or employees, nor any of the shareholders or initial purchasers shall be liable, in any event, before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation or for any consequential, special or similar damages. Certain data in this presentation was obtained from various external sources, and neither the Company nor its affiliates, advisers or representatives has verified such data with independent sources. Accordingly, neither the Company nor any of its affiliates, advisers or representatives makes any representations as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. In addition to IFRS financials, this presentation includes certain non-ifrs financial measures, including Adjusted EBITDAR, which is commonly used in the airline industry to view operating results before depreciation, amortization and aircraft operating lease charges, as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other asset acquisitions. However, Adjusted EBITDAR should not be considered as an alternative measure to operating profit, as an indicator of operating performance, as an alternative to operating cash flows or as a measure of the Company s liquidity. Adjusted EBITDAR as calculated by the Company and as presented in this document may differ materially from similarly titled measures reported by other companies due to differences in the way these measures are calculated. Adjusted EBITDAR has important limitations as an analytical tool and should not be considered in isolation from, or as a substitute for an analysis of, the Company s operating results as reported under IFRS. The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or services of the Company or this proposed offering. 2
Avianca at a glance A leading airline in Latin America 100+ Destinations 5,700 Weekly Departures 3 Hubs: Bogota, San Salvador, and Lima 181 Aircraft 4 Average Jet Passenger Aircraft Age of 5.96Years 3,4 2014 2015 2016 CAGR 26 countries 1 Colombia Domestic 1 Intra Home Markets 2 Home Markets N. America 2 Home Markets S. America 2 A Star Alliance Member Passengers (mm) 26.2 28,3 29,5 6.1% ASKs (bn) 41.1 44,6 47,1 7.1% RPKs (bn) 32.6 35,4 38,2 8.2% Revenues (US$bn) $4.7 $4.4 $4.1-6.6% EBITDAR (US$mm) $787 $797 $879 5.7% EBITDAR Margin 16.7% 18.8% 21.5% - Source: Company, Aeronáutica Civil de Colombia, and internal data derived from Travelport Marketing Information Data Tapes ( MIDT ) 1 Based on passengers transported during the 12-month period ended December 31, 2016; 2 In 2014. According to internal information Avianca derives from MIDT, the Company believes they are the market leader in terms of passengers carried on international flights within the Andean region and Central America (home markets), and leader in terms of international air passengers carried from home markets to both North America and South America; 3 Includes Jet Operative Fleet only; 4 As of December 30, 2016 3
Avianca Holdings S.A. Strong Fundamentals 1 Leading Airline in High Potential Latin American Markets 2 Demonstrated Track Record of Business Combinations and Value Creation 3 Successful Operational Improvements Paving the Way for Profitable Growth 4 Diversified Sources of Revenue with Growing Non-Passenger Businesses 5 Near-Term Focus on Cash Flow Generation 4
SUCCESSFUL INTEGRATION 5
Avianca-Taca: an integration plan with significant profitable growth potential Avianca s successful strategy since the February 2010 combination Focus on organization and people A single management team was promptly appointed PMI project management drove synergy capture Complementary networks and fleet 2 overlapping routes pre merger; 40 new routes since 2010 Multi-hub system provides better geographic coverage is only the first part of a well-defined integration plan Phase 1: Commercial and Passenger Service Integration Focus on service and clear customer strategy Latin Excellence Target customer: Modern Latin Revenue Enhancing Initiatives Year Single Management Team EBIT Margin ~4.5*% Cost Reduction Initiatives Revenue Management Single Commercial Optimization Code Star Alliance Single Brand Single Web Page Single Loyalty Program Core Systems Migration Network & Commercial Integration 2010 2011 2012 2013 2014 2015 5.3% 6.6% 8.4% 6.2% 5.9% LifeMiles Maximization Ancillary Revenue 2016 7.2% Fleet Interchange ERP Single Operations Network/Fleet Intra Hub connectivity Management Optimization Airport Optimization Model MRO CEO 100% lower fuel benefits Cost Control Initiatives 5.3% * Singles sum of the EBIT contribution of both Avianca S.A. and GTH 6.6% 6 7,0% - 8,0% 8,7% - 9,2% Phase 2: Operational and Administrative Integration 6
FOOTPRINT In high growth Latin AmericanMarkets 7
Avianca s footprint connects Latin America with robust fundamentals to the world Comprehensive network in Latin America New destinations to the U.S. improve competitive position with other U.S. Carriers Strengthen Strategy to Europe From Bogota and Lima Convert Bogota into the Super HUB Increase banks during the Day Operate Morning and afternoon banks with wide body Evaluate New Destinations Toronto and Boston from BOG Europe (Frankfurt) Immigration to US from EDR+ Global Entry for COL, ECU and PE Create Alternative Banks San Salvador Hub Operate from CAM, Caribbean and MEX, and SAM Lima Hub Connect From the South to MIA, JFK, MEX and MAD Improve Connectivity From Ecuador To the central and western US through SAL (as an option LAX from BOG From Medellin, Cali To MEX, CAM, US Central and SFO through SAL From Medellin, Cali & Dom Col To Lax, US and rest of Europe Through BOG From BAQ /CTG To CAM, Caribbean, and US Mex Through SAL From PERU to CAM, US central and SFO through SAL Source: Company Information 8 8
Central America Avianca is a market leader in Latin American markets with strong passenger growth trends Market Share in Key Markets Passenger evolution (mm) Colombia Domestic 1 Others 5.5% 13.5% 18.2% 4.2% 1 0.9% 57.8% Colombia 1 Peru 2 34,9 3,1x 11,8 4,0x 11,0 23,1 4,1 2,9 2.0 8,1 2,1 16,6 7,5 9,1 2002 2016 2002 2015 Central America Ecuador Peru Domestic 2 12.3% 11.9% 4.5% Others 9.7% 3 61.6% 2010 market share: Avianca: 2.7% LAN: 70.3% 15,2 1,1x 16,7 12,8 14,1 2,4 2,6 2010 2014 3,2 1.9 1,3 2.2x 7,6 3,9 3,7 2002 2014 Domestic International Intra-home markets Home markets to N. America Home markets to S. America 48,4% 1 50,2% 1 66% 124% 137% Others 1.4% Source: Colombian Civil Aviation Authority, Peruvian Civil Aviation Authority, and Ecuadorian Civil Aviation Authority. Note: Market share based on number of passengers 1 9 As of December 2016; 2 As of July 2016 9
Increasing Load Factors are the result of Avianca s network flexibility and strong traffic numbers Region FY2016 ASK Growth FY2016 RPK Growth FY2016 Load Factor Domestic* Intra Home Markets 1 + 1.6% + 4.1% 79.4% + 5.6% + 3.2% 73.9% HM to North America 2 + 4.0% + 5.4% 82.6% HM to South America 3 + 6.9% + 10.2% 84.0% Central America & Caribbean 4 + 9.1% 7.7% + 9.9% 71.1% Home Markets to Europe + 13.6% + 16.5% 86.3% Total ASK Growth 5.9% RPK Growth 7.8% Load Factor 81.1% *Domestic Market: Colombia, Peru, Ecuador 1 Local Intra-Markets: Colombia, Peru, Ecuador, Salvador, Costa Rica, Guatemala; 2 From Local Markets to North América including México 3 From Colombia, Perú, Ecuador and Costa Rica to Bolivia, Chile, Argentina, Brazil,Uruguay and Venezuela, 4 Belize, Cuba Curazao, Republica Dominicana, Panamá, Costa Rica, Guatemala, Honduras, Nicaragua 10
MODERN Passenger FLEET
During 2016 we advanced in our fleet plan execution 4Q2016 Operating Fleet Status Aircraft Type Sep.2016 In Out Dec.2016 Airbus A320 Family 1 110 +2-2 110 ATR 72 15 - - 15 Cessna 208 11 +2-13 Boeing 787 9 +1-10 Embraer E190 10 - - 10 Airbus A330 9 - - 9 Airbus A330F 5 - - 5 Airbus A300F 4 +1-5 ATR 42 2 - - 2 Boeing 767F 2 - - 2 Total 177 +6-2 181 Capacity 100/194 pax 2 68 pax 12 pax 250 pax 96 Pax 252 pax 68 tons 40 tons 48 pax 53 tons Projected 2017 +6-3 184 Source: Company 1 A320 Family Seating Capacity: A318: 100pax, A319: 120pax, A320: 150pax, A321: 194pax. 12
and a renewed calendar of incorporations Future orders create footprint for higher profitability going forward Fleet Backlog 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total B-787 3 2-3 - - - - - - 8 A320s 5 - - - - - - - - - 5 A320neo - 2 5 8 20 23 20 20 20 18 136 Total 8 4 5 11 20 23 20 20 20 18 149 Fleet CAPEX financing: ~20% Equity and ~80% Debt: Multilateral facilities (ECAS&EXIM): 59% Sale & Lease Back: 41% Cost reductions A320 Neos: 15% less fuel consumption 1 Sharklets: Up to 3% cost savings 1 Long Term Fleet B787s: More fuel efficient than many similarly sized airplanes 2 Boeing 787 A320 Neo Improved range and network performance A320neos provide up to 500nm 1,3 of additional range Opportunity to upgage in congested markets ATR72 A330F Increased regional capacity ATR72s to replace Fokker 50s Increased cargo capacity A330Fs: 40% more cargo capacity vs. previous cargo fleet Source: Company, Airbus, and Boeing 1 Comparisons made against the original A320 family 2 According to Boeing 3 Nautical miles 13
2011 to2016
Increasing Load Factors are the result of robust traffic numbers ASKs millions RPKs millions +5.9% 47,145 +7.8% 38,233 44,513 35,478 +4.6% +10.0% 10,138 11,566 12,093 9,216 4Q2015 4Q2016 FY2015 FY2016 Yield - US 4Q2015 4Q2016 FY2015 FY2016 Load Factor 9.1 8.6 9.7 8.6 79.7% 83.8% 79.7% 81.1% 4Q2015 4Q2016 FY2015 FY2016 4Q2015 4Q2016 FY2015 FY2016 Source: Company information 15
FY 2016 results were also driven by a leaner cost structure Revenues 1 millions CASK 1 - US 1,032 +7.1% 1,105 4,251-4.0% 4,082 8.1 2.3% 8.3 9.0-10.7% 8.0 RASK 1 - US 4Q2015 4Q2016 FY2015 FY2016 8.9 9.1 9.5 8.7 CASK 1 - ex Fuel 4Q2015 4Q2016 FY2015 FY2016 6.3 6.5 6.7 6.4 EBITDAR 1 millions +11.9% 257.1 10.3% 797.5 879.5 EBIT 1 Margin +14bps 9.2% 9.1% +137bps 5.9% 7.2% 229.7 4Q2015 4Q2016 FY2015 FY2016 Margin 1 22.3% 23.3% 18.8% 21.5% EBIT 1 (Mlls) 4Q2015 4Q2016 FY2015 FY2016 93.9 102.1 249.2 295.4 Source: Company Information 1. When indicated the figures exclude the following one-time items: $9.9M: severance payments associated to new organizational structure; $4.8M: extraordinary projects; $4.2M: 2017 A330 lease extension cost assumed in 2016; $5.9M: LifeMiles accounting methodology revision. 12M and 4Q2015 figures exclude one-time expenses informed on previous earnings releases and cargo discount 16
Debt evolution and amortization Debt evolution US$MM Dec.14 Dec.15 Dec.16 Total Debt 3,172 3,473 3,274 Total debt by type (Dec,2016) Corporate Debt 12.8% Cash & Cash Equivalents* 650 486 381 Net Debt¹ 2,522 2,987 2,893 Bonds 19.5% Aircraft 67.8% Adjusted Net Debt² 4,617 5,210 5,094 Debt amortization schedule (US$MM) Aircraft Debt Bonds Corporate Debt 59 550 111 61 30 29 58 29 70 0 266 293 273 261 233 2017 2018 2019 2020 2021 1 Current Installments of Long Term Debt + Long Term Debt Cash* 2 Current Installments of Long Term Debt + Long Term Debt + (Aircraft Rentals 12M x 7) Cash* * Cash: Cash and cash equivalents + Restricted Cash + Available for sale securities + Short Term Certificates of bank deposits (Financial Statements -Note 8) + Long Term Restricted Cash (Financial Statements -Note 11) 17
Balance sheet ratios Cash 1 as percentage of revenue Capitalization ratio 2 16.8% 13.8% 12.6% 9.5% 73.7% 79.3% 78.9% 78.2% 2013 2014 2015 2016 Adjusted EBITDAR coverage ratio 3 2013 2014 2015 2016 Net Adjusted debt to adjusted EBITDAR 4 2,1x 1,8x 1,58x 1,73x 4,1x 5,9x 6.8x 6.0x 2013 2014 2015 2016 2013 2014 2015 2016 Source: Company Note: All financial information is in accordance with IFRS 1 Cash at end of period; 2 Capitalization ratio calculated as adjusted net debt (including capitalized leases at 7.0x) divided by equity value plus adjusted net debt; 3 Adjusted EBITDAR coverage ratio calculated as adjusted EBITDAR divided by the sum of aircraft leases and interest expense; 4 Calculated as net adjusted debt (including capitalized leases at 7.0x) divided by adjusted EBITDAR 18
DIVERSIFIED SOURCES OF REVENUE
Avianca Holdings: More Than an Airline Business Lines Business Overview Brands Key Highlights (2016) Passenger Transport Result of the combination of Avianca and Taca with complementary operations in Andean Region and Central America Extensive route network from hubs in $3,285mm passenger revenue 169 passenger aircraft (1) 28 countries reached Bogota, San Salvador and Lima Member of Star Alliance since 2012 5,700+ weekly departures Courier and Cargo Services 12 freighter aircraft complemented by passenger fleet bellies Deprisa is a leading express courier operation in Colombia with broad domestic and international product portfolio; UPS allied in Colombia Strong brand recognition and reputation in Colombia Courier 12 cargo aircraft (1) 2,346mm ATKs (2) 1,291mm RTKs (2) 38% 11% market Share Colombia Miami Loyalty Business One of the largest loyalty programs in Latin America Guaranteed exclusivity and seat availability from Avianca 7.0+ mm members (FY2016) 529+ active co-branded credit cards 314 commercial Partners Solid burn-to-earn ratio Freddie award winner 2013 2016 Aircraft maintenance, crew training and other airport services to other carriers Other Services Travel-related services to customers including all-inclusive vacation deals 2,700+ hours of flight simulators commercialized In-flight duty-free sales Source: Company Information (1) 5 Airbus 330F, 5 Airbus 300F and 2 Boeing 767F. (2) includes Domestic Colombian and Peru 120
Deprisa: Leading Express Courier Operation in Colombia Highlights 4Q2016 3.5K active B2B clients, in this segment revenues increased 3.8% vs. 4Q 15 With the help of a consulting firm, Deprisa started in 2016 an aggressive strategy in order to reach higher market shares (courier), capture short term savings and increase its productivity Deprisa has robust information systems that allow it to control its operation and connect with its clients Market Share FY 2016 Colombia* 43.1% 15.1% 14.6% 12.3% 6.9% 2016 2015 Others 7.5% 21 Source: Aeronautica Civil. Information as of December 2016
Avianca Cargo: Financial and Operational Results Revenues millions ATKs millions 511-2.9% +5.9% 2,346 496 2,215 +9.7% 127 140 +4.3% 583 608 4Q2015 4Q2016 FY2015 FY2016 RTKs - millions 4Q2015 4Q2016 FY2015 FY2016 Load Factor 1,265 +2.1% 1,291 58.7% 60.4% 57.1% 55.0% 342 +7.4% 367 4Q2015 4Q2016 FY2015 FY2016 4Q2015 4Q2016 FY2015 FY2016 Source: Company information. includes Domestic Colombian and Peru 22
LifeMiles Loyalty Program Highlights 4Q2016 4Q 16 revenues increased 7.7% vs 4Q15 529K active cobranded credit cards, an increase of 13.3% vs. 4Q 15 More than 7.0 million members, an increase of 8.5% vs. 4Q 15 314 commercial partners, +10.6% vs 4Q 15 New Commercial Partners Colombia Central America / North America South America Peru: Best Redemption Ability (Americas), Best Promotion and Up and Coming Program of the Year Source: Company information 23
2017
Avianca Holdings: Flight Plan 2017 Outlook 2016 2016 Outlook 2017 PAX 3.0% - 5.0% 4.2% 4.0% - 6.0% ASK 3.0% - 5.0% 5.9% 6.5% - 8.5% LF 78.0% - 80.0% 81.1% 80.0% - 82.0% EBIT 1% 5.5% - 7.5% 7.2% 6.0% - 8.0% Source: Company information. 25
26 In Summary As the Company successfully continues to optimize its cost structure and enhance profitability it has also: Increased Load Factors by +139 bps vs 2015 to 81.1% as traffic numbers grew 7.8% outpacing capacity growth Managed to diminish top line pressure as yield trends start to show recovery Achieved first year over year increase in Passenger Revenues (+4.5%) since 4Q2014 Improved profitability by more than +290 bps reaching an EBITDAR margin of 21.7% in FY2016 vs 18.8% in 2015, the highest margin in the last 3 years Reduction in total debt (USD -198.7 million) to 3.3 million in 2016 from 3.5 Billion in 2015 Improvement in leverage position (Net Adjusted Debt to EBITDAR) to 6.0x in 2016 from 6.8x on 2015
Thank You Contact Information: Investor Relations Office ir@avianca.com T: (57) 1 5877700 www.aviancaholdings.com
Reconciliation for Adjusted EBITDAR This presentation includes certain references to non-ifrs measures such as our Adjusted EBITDAR and Adjusted EBITDAR margin. Adjusted EBITDAR represents our consolidated net profit for the year plus the sum of income tax expense, depreciation, amortization and impairment, aircraft rentals and interest expense, minus interest income, minus derivative instruments, minus foreign exchange. Adjusted EBITDAR is presented as supplemental information, because we believe it is a useful indicator of our operating performance and is useful in comparing our operating performance with other companies in the airline industry. However, Adjusted EBITDAR should not be considered in isolation, as a substitute for net profit determined in accordance with IFRS or as a measure of a company s profitability. These supplemental financial measures are not prepared in accordance with IFRS or Colombian GAAP. Accordingly, you are cautioned not to place undue reliance on this information and should note that Adjusted EBITDAR and Adjusted EBITDAR margin, as calculated by us, may differ materially from similarly titled measures reported by other companies, including our competitors. Adjusted EBITDAR is commonly used in the airline industry to view operating results before depreciation, amortization and aircraft operating lease charges, as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other asset acquisitions. However, Adjusted EBITDAR should not be considered as an alternative measure to operating profit, as an indicator of operating performance, as an alternative to operating cash flows or as a measure of our liquidity. Adjusted EBITDAR as calculated by us and as presented in this presentation may differ materially from similarly titled measures reported by other companies due to differences in the way these measures are calculated. Adjusted EBITDAR has important limitations as an analytical tool and should not be considered in isolation from, or as a substitute for an analysis of, our operating results as reported under IFRS or Colombian GAAP. Some of the limitations are: Adjusted EBITDAR does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments; Adjusted EBITDAR does not reflect changes in, or cash requirements for, working capital needs; Adjusted EBITDAR does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on debt; Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDAR does not reflect any cash requirements for such replacements; Adjusted EBITDAR does not reflect expenses related to leases of flight equipment and other related expenses; and other companies may calculate Adjusted EBITDAR or similarly titled measures differently, limiting its usefulness as a comparative measure. 28