THIRD QUARTER RESULTS 2017 KEY RESULTS In the 3Q17 Interjet total revenues added $5,835.1 million pesos that represented an increase of 22.0% over the revenue generated in the 3Q16. In the 3Q17, operating income of 290.2% from $ 98.6 million pesos in the 3T16 to $ 384.9 million pesos in the 3Q17, with margins of 2.1% y 6.6% respectively. In 3Q17, EBITDAR reflected an increase of 43.8% from $ 995.8 million pesos in the 3Q16, compared to $ 1,431.6 million pesos in the same period of 2017 with margins of 20.8% and 24.5% respectively. INTERJET recorded a net profit growth of 328.9% from $ 232.2 million pesos in the 3Q17, compared to $ 54.1 million pesos in the same period of 2016. 3Q= Third quarter
Below is a summary of the selected consolidated and operative information, which is derived from the comparison of Interjet s unaudited, internal, consolidated financial information for the third quarter of 2017 vs. 2016. SELECTED FINANCIAL AND OPERATING INFORMATION THIRD QUARTER ITEM 2017 2016 % OF VAR ASK'S (millon) 5,132 4,136 24.1% RPK'S (millon) 4,018 3,253 23.5% LOAD FACTOR 78.3% 78.7% (0.4) pp PASSENGERS (thousands) 3,254 2,882 12.9% TOTAL REVENUE (millions) 5,835 4,785 22.0% REVENUE PAX (millions) 5,286 4,390 20.4% YIELD (pesos) 1.452 1.471 (1.3%) RASK (pesos) 1.137 1.157 (1.7%) CASK (pesos) 1.062 1.133 (6.3%) CASK EXCLUDING FUEL (pesos) 0.778 0.850 (8.4%) EBITDAR (millions) 1,432 996 43.8% EBITDAR MARGIN (as % of total revenues) 24.5% 20.8% 3.7 pp OPERATING INCOME (millions) 385 99 290.2% OPERATING MARGIN (as % of total revenues) 6.6% 2.1% 4.5 pp NET INCOME (millions) 232 54 328.9% NET MARGIN (as % of total revenues) 4.0% 1.1% 2.9 pp PP: Porcentual Points
SELECTED FINANCIAL AND OPERATING INFORMATION NINE MONTHS ITEM 2017 2016 % OF VAR ASK (millon) 14,452 11,399 26.8% RPK (millon) 11,003 8,721 26.2% LOAD FACTOR 76.1% 76.5% (0.5) pp PASSENGERS (thousands) 9,119 8,023 13.7% TOTAL REVENUE (millions) 15,531 12,747 21.8% REVENUE PAX (millions) 13,900 11,662 19.2% YIELD (pesos) 1.411 1.462 (3.5%) RASK (pesos) 1.075 1.118 (3.9%) CASK (pesos) 1.069 1.072 (0.2%) CASK EXCLUDING FUEL (pesos) 0.774 0.819 (5.5%) EBITDAR (millions) 3,136 3,092 1.4% EBITDAR MARGIN (as % of total revenues) 20.2% 24.3% (4.1) pp OPERATING (LOSS) INCOME (millions) 76 531 (85.6%) OPERATING MARGIN (as % of total revenues) 0.5% 4.2% (3.7) pp NET (LOSS) INCOME (millions) (251) 320 (178.5%) NET MARGIN (as % of total revenues) (1.6%) 2.5% (4.1) pp PP: Porcentual Points NR: Non Representative
Market environment INTERJET operated during the 3Q17 in an environment defined by the following factors: Growth of passenger traffic in the domestic industry. According to figures published by the DGAC, (General Direction of Civil Aviation) the passenger market for Mexican airlines increased by 15.7% in the 2Q17 over the same period of the previous year. The volume of passengers in the domestic market increased 13.3%, while the international market volume grew 25.0%. Slight economic growth. During the 2017 the Mexican economy showed a recovery in the pace of economic growth. The General Indicator of Economic Activity (IGAE) in April, 2017 grew 2.8% compared to the same period of 2016. Increase in fuel prices in pesos. During the period April-June 2017 the weighted average price of fuel per liter paid by INTERJET increased by 16.4% when compared to the same period in 2016, reaching a weighted average price per liter of $ 8.09 compared to $ 6.95 weighted average per liter in 2Q16. Appreciation of the average exchange rate. The closing exchange rate for the quarter reflected a depreciation of the peso against the US dollar of 2.8% compared to the same period of 2016, going from $ 18.0817 pesos per US dollar at 2Q16 to $ 18.5864 pesos per US dollar at 2Q17. Seismic and climatological effects. Due to the damage caused by hurricanes Irma, Max and Maria, and the two earthquakes that affected 11 states in our country, Interjet was negatively impacted by having to cancel
some flights and offer protection to passengers, cancelling charges to passengers for changes in dates and rates. However, the Company has always been very committed to society, rejoining the humanitarian work coordinated with Federal and State authorities, offering free air transportation to rescuers as well as the free of charge transportation cargo for collected aid from and to several places. Revenue In the 3Q17 INTERJET total revenue increased 22.0% from $ 4,784.7 million pesos in the 3Q16 to $5,835.1 million pesos in the 3Q17. This increase was mainly due to an increase in passenger revenue. Passenger revenue increased 20.4% from $ 4,389.7 million pesos in the 3Q16 to $5,286.3 million pesos in 3Q17, mainly due to a higher volume of transported passengers, given the airline's international expansion and to the results of the strategy of charging for ancillaries not included in the basic fair, such revenue was partially impacted in a negative way due to the natural disasters mentioned above. The seats supply (ASK's) increased by 24.1% in the 3Q17 compared to the same period of 2016, mainly due to the opening of new routes and to an increase of operations by the planned expansion of the Company through in the addition of new fleet. Other income increased 39.0%, from $ 395.0 million pesos in the 3Q16 to $ 548.9 million pesos in the 3Q17, mainly due to higher income as a result of the strategy of charging for ancillaries not included in the basic rate, increase in cargo operations and advertising on board. This increase also reflected $ 8.7 million pesos of net income (before taxes) from the sale of the 7 aircraft discussed below. Operating expenses Operating expenses increased 16.3% from $ 4,686.0 million pesos in the 3Q16 to $5,450.2 million pesos in the 3Q17. This increase was mainly due to an increase in
operations because of the addition of aircrafts that caused higher expenses of: maintenance, airport operating and landing fees, aircraft rent (10 aircrafts, 3 are net additions due to aforementioned growth and 7 associated to the transaction of Sale & Leaseback discussed on later) and expenses inherent to the expansion of operations. At the end of the 3Q17 the company operated 22 SSJ100, 50 A320's and 4 A321's. The unit cost per ASK in pesos (CASK) decreased 6.3% in relation to 3Q16, the CASK excluding fuel decreased 8.4% regarding the same period of the previous year, as a result of the implementation of the control of expenses program, and the savings in costs and expenses due to a lower average exchange rate of the dollar, when comparing the corresponding period against the respective one. Fuel expenses on the 3Q17 increased by 24.4% from $1,169.5 million pesos in 3Q16 to $1,454.9 million pesos in the same period of 2017, mainly due to the increase of 9.8% in the weighted average price per liter of fuel paid by the Company, reaching an weighted average price per liter of $8.36 in the 3Q17 compared to $7.61 of 3Q16, and for the increase of operations, particularly in the international routes with higher flying range, partially offset by achieved savings due to a lower exchange rate of the dollar, compared to the same period of the previous year. Maintenance expenses increased 0.6% from $731.7 million in 3Q16 to $736.5 million in 3Q17 as a result of the positive effect of the control of expenses program and the savings due to a lower exchange rate of the dollar, compared to the same period of the previous year. The costs of Airport operating and landing fees increased 10.3% from $745.0 million pesos in the 3Q16 to $821.5 million pesos in the 3Q17 as a result of an increase in the number of operations during the 3Q17 mainly in the international market compared to the same period of 2016. Expenses for wages, salaries and crew benefits increased 23.0%, from $379.1 million pesos in 3Q16 to $466.1 million in 3Q17, mainly due to the increase of 28.0% in number of crew employees, going from 1,488 in 3Q16 to 1,905 in the
same period of 2017, which include an increase in training and travel expenses, as a result of the additional aircraft that were added in this period. Selling and advertising expenses remained without change for $446.0 million pesos in the two compared periods as a result of the positive effect of the control expenses program effect which was at the same time offset by the increase in advertising to promote new routes and by higher bank fees due to the increase in sales. The Technology and administrative expenses increased 46.7% from $261.6 million pesos in the 3Q16 to $383.6 million pesos in the 3Q17 as a result of an increase in operations and a higher expense related to IT. Aircraft and engine rents increased 36.5% from $546.8 million pesos in the 3Q16 to $746.5 million pesos in the 3Q17, reflecting the increase in the leased fleet (10 aircrafts, 3 additions due to added growth and 7 related to the transaction of Sale & Leaseback discussed on later), this increase was partially offset by the positive effect of savings due to a lower average exchange rate of the dollar, taking into account that the aggregate of our rents, is in dollars. Depreciation expenses decreased 14.3% from $350.4 million pesos in the 3Q16 to $300.2 million pesos in the 3Q17 as a result of the sale of the 7 aircrafts mentioned later on. EBITDAR EBITDAR increased 43.8% from $995.8 million pesos in the 3Q16 to $1,431.6 million pesos in the 3Q17. The EBITDAR margin reached 24.5% in the 3Q17 compared to the 20.8% regarding the same period of 2016. Operating Income In 3Q17, operating income increased 290.2% from $98.6 million pesos in 3Q16 to $384.9 million pesos in 3Q17 with a margin of 6.6% and 2.1% respectively. This
was mainly due to the increase in the Company's revenues, partially offset by increases in costs and expenses mentioned above. Comprehensive financing cost Comprehensive financing cost increased 148.2%, from a cost of $50.2 million pesos in 3Q16 to a cost of $124.6 million in 3Q17, as a result of higher interest expenses and a lower exchange profit. Net Income INTERJET reflected a net profit of $232.2 million pesos with a margin of 4.0% in 3Q17, compared to a net profit of $61.6 million pesos with a margin of 1.1% in the same period of 2016. Comments to the statement of financial position and liquidity As of September 30 2017, the Company had $1,409.8 million pesos in cash and cash equivalents. The net cash generated by operating activities in 3Q17 amounted $1,160.0 million pesos. Net cash used in investing activities mainly reflects the sale of the 7 aircrafts mentioned later on. The net cash used in financing activities reflects both, the payment of short-term debt and the capitalization made recently, mentioned below. Relevant events Sale & leaseback of 7 aircrafts
In 3Q17, the company monetized 7 aircrafts. These Airbus aircrafts model A320 owned by Interjet were sold to a lessor, which leased them back to the company. This transaction, after having prepaid debt associated with the engines of these 7 aircrafts for US $ 47.0 million, generated resources for the Company in excess of US $ 90.0 million, between cash received and deposits in guarantee related to this transaction. Capitalization The capitalization announced during 1Q17 was completed in August 2017 for an amount of $ 3,067.0 million pesos. The resources of this capitalization were used entirely to the payment of short-term financing. After this capitalization and the "Sale & Lease Back" transaction, the Company's leverage ratio (Debt / Equity) was 2x at the end of September 2017. Investor Relations Contact: Raul Lopez/CFO/+52 (55) 91785512
ABC Aerolíneas, S.A. de C.V. and Subsidiaries Consolidated Statements of Financial Position As of September 30, 2017 and December 31, 2016 (In thousands of Mexican pesos) September 30, 2017 December 31, 2016 (Audited) Assets Current assets: Cash and cash equivalents $1,409,754 $1,390,741 Accounts receivable 2,252,518 1,057,816 Recoverable taxes, mainly income tax and value-added tax 390,236 267,954 Inventories 195,052 159,248 Prepaid expenses 383,218 511,231 Total current assets 4,630,778 3,386,990 Advance payments to purchase flight equipment 1,566,376 1,636,087 Flight equipment, leasehold improvements, and furniture and equipment - Net 16,030,614 21,545,951 Prepaid maintenance 6,762,192 6,967,318 Deferred tax assets 39,276 57,930 Other assets - Net 185,654 180,425 Concession 43,797 43,797 Deposits on aircraft leases 1,443,603 1,220,649 Total $30,702,290 $35,039,147 Liabilities and stockholders equity Current liabilities: Notes payable to financial institutions $4,192,137 $6,912,395 Provision of maintenance and retirement conditions 685,625 857,747 Accounts payable 3,238,460 3,339,696 Other accounts payable and accrued expenses 1,823,318 907,421 Payable taxes other than income taxes 664,501 239,703 Air traffic liability 1,289,188 1,277,572 Total current liabilities 11,893,229 13,534,534 Notes payable to financial institutions 7,949,507 12,083,702 Long-term debt 1,570,034 1,896,501 Employee benefits and other deferred liabilities 11,423 11,423 Provision of maintenance and retirement conditions 2,355,356 2,871,588 Total liabilities 23,779,549 30,397,748 Stockholders equity: Capital stock 3,967,446 900,000 Contributions for future capital increases 5 5 Translation effects of foreign operations 369,759 904,984 Retained earnings 2,546,739 2,796,975 Controlling interest 6,883,949 4,601,964 Non controlling interest 38,792 39,435 Total stockholders equity 6,922,741 4,641,399 Total $30,702,290 $35,039,147
ABC Aerolíneas, S.A. de C.V. and Subsidiaries Unaudited Consolidated Statements of Profit or Loss For the three and nine months ended September 30, 2017 and 2016 (In thousands of Mexican pesos) Three months ended September 30 Nine months ended September 30 2017 2016 2017 2016 Operating revenues: Passengers $5,286,257 $4,389,690 $13,900,237 $11,661,828 Other 548,881 394,975 1,630,774 1,085,459 5,835,138 4,784,665 15,531,011 12,747,287 Operating expenses: Aircraft fuel 1,454,904 1,169,515 4,270,915 2,883,283 Maintenance and return conditions 736,464 731,742 1,852,441 1,760,038 Airport operating and landing fees 821,498 745,016 2,400,533 1,860,541 Wages, salaries and benefits 466,147 379,112 1,327,979 1,031,874 Insurance and passenger service 94,906 55,840 283,843 154,099 Selling 446,014 446,016 1,230,118 1,130,316 Administrative and other 383,613 261,582 1,029,074 835,220 Flight equipment rentals 746,457 546,799 2,100,106 1,576,078 Depreciation and amortization 300,239 350,402 959,814 985,061 5,450,242 4,686,024 15,454,823 12,216,510 Operating Profit 384,896 98,641 76188 530,777 Comprehensive financing cost: Interest income 16,236 9,586 39,948 26,780 Interest expense - 253,943-229,436-753255 - 626,324 Exchange gain-net 113,125 169,646 426,274 385,596-124,582-50,204-287033 - 213,948 Profit (loss) before income taxes 260,314 48,437-210,844 316,829 Income taxes expense 28,146-5,700 40,035-2,850 Consolidated net profit (loss) $ 232,168 $ 54,137 -$ 250,879 $ 319,679
ABC Aerolineas, S.A. de C.V. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity For the periods ended September 30, 2017 and December 31,2016 (In thousands of Mexican pesos) Capital Stock Contributions for future capital increases Cumulative translation adjustments Retained earnings Non controlling interests Total Balances as of December 31, 2015 $ 900,000 $ 5 $ 275,219 $ 258,447 $ 30,938 $ 3,734,609 Comprehensive Income: Cumulative translation adjustments of foreign operations - - 629,765 - - 629,765 Consolidated Net income for the year - - - 268,528 8,497 277,025 - - 629,765 268,528 8,497 906,790 Balances as of December 31, 2016 900,000 5 904,984 2,796,975 39,435 4,641,399 Increase in capital stock 3,067,446 3,067,446 Comprehensive Income: Cumulative translation adjustments of foreign operations (loss) - - -535,225 - - -535,225 Consolidated Net result (loss) profit for the perio - - - -250,236-643 -250,879 0 0-535,225-250,236-643 -786,104 Balances as of September 30, 2017 $ 3,967,446 $ 5 $ 369,759 $ 2,546,739 $ 38,792 $ 6,922,741
ABC Aerolíneas, S.A. de C.V. and Subsidiaries Unaudited Consolidated Statements of Cash Flows For the nine months ended September 30, 2017 and 2016 (In thousands of Mexican pesos) Nine months ended Nine months ended September 30, 2017 September 30, 2016 Cash flows from operating activities: Net result (loss) profit for the period (250,879) 16,118 Adjustments for: Income tax expense recognized in net result 13,306 - Depreciation and amortization for non-current assets 959,814 985,061 Provision of maintenance and retirement conditions (193,108) 705,173 Other income (8,674) - Interest expense 730,015 626,324 Unrealized foreign exchange loss (gain) 100,783 (957,087) Changes in working capital: (Increase) decrease in accounts receivables (1,194,702) (629,395) (Increase) decrease recoverable taxes, mainly income tax and value-added tax (122,282) (8,100) (Increase) decrease in inventories (35,804) 97,723 Decrease (Increase) in prepaid expenses 128,013 (7,985) (Increase) Decrease in deposits on aircraft leases (222,954) (460,488) (Decrease) Increase in accounts payables (101,236) 85,397 Increase (decrease) in other accounts payable and accrued expenses 921,245 619,465 Increase (decrease) in income taxes paid 424,798 144,844 Increase (decrease) in air traffic liability 11,616 388,964 Increase (decrease) in employee benefits - (6,024) Net cash generated by operating activities 1,159,951 1,599,990 Cash flows from Investing activities: Flight equipment, adapatations, leasehold improvements, and furniture and equipment 1,585,341 (1,435,745) Advance payments to purchase aircraft (110,253) - Other assets (5,229) (70,835) Prepaid maintenance (290,120) (19,333) Net cash generated in investing activities 1,179,739 (1,525,913) Cash flows from financing activities: Loans (paid) received - net (4,634,868) 508,699 Increase in capital stock 3,067,446 Interest paid (753,255) (626,324) Net cash (used) by financing activities (2,320,677) (117,625) Effects from exchange rate changes - - Net increase (decrease) in cash and cash equivalents 19,013 (43,548) Cash and cash equivalents at the beginning of the year 1,390,741 2,014,379 Cash and cash equivalents at end of the year $1,409,754 $1,970,831
Glossary ASK Means, (available seat kilometer). Represents the total number of seats flown by an airline multiplied by the number of kilometers flown. RPK Means, (revenue passenger kilometer) Represents the number of kilometers flown by paying customers. Load Factor It means the total seats filled, airplane seats average. It is determined by dividing the total RPK's between ASK's. YIELD It means performance indicator of pesos per kilometer. YIELD PER RPK It is determined by dividing passenger revenues by RPK's. RASK Means, (Revenues per Available Seat Kilometer) It is determined by dividing the TOTAL REVENUE between ASK's. CASK Means (Cost of Available Seat Kilometer) Unitary average cost is calculated by dividing total operating expenses by ASKs CASK excluding fuel It is determined by dividing total expenses, less fuel consumption expense, by ASK's.