VIVA AEROBUS COMPANY PRESENTATION SEPTEMBER 2018 - investor cloud
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VIVA AEROBUS COMPANY PRESENTATION SEPTEMBER 2018
Disclaimer
“This presentation contains certain statements related to the comprehensive overview Grupo ● According to the “Ley del Mercado de Valores”, only securities registered in the “Registro
VivaAerobus, S.A. de C.V. “Viva" regarding its activities to the present day. Nacional de Valores” and containing prior authorization from the “Comisión Nacional Bancaria
y de Valores” may be a matter of public offering, even if by this date its procedure is still
● Theinformation included in this presentation is a summary of information regarding Viva ongoing.
which is not intended to cover all related information about Viva.
● Any public offering to be held in the United Mexican States shall comply with the
● The information contained in this presentation has not been included in order to provide requirements of the “Ley del Mercado de Valores”, which should include the submission of a
specific advice to investors. prospectus that contains, among other things, a description regarding Viva’s financial,
● Thestatements contained herein reflect the current views of Viva with respect to future administrative, economic, accounting and legal situation, in addition to relevant information
events and are subject to certain risks, uncertainties and assumptions. about Viva that can contribute to the proper decision-making process of a public investor.
● This presentation does not substitute the information that needs to be provided in the
● Many factors could cause future results, performance or achievements of Viva be different
from those expressed or implied by such forward looking statements, including among previous mentioned corresponding prospectus. This presentation does not constitute an
others, economic or political changes and global business conditions, changes in exchange offer nor an invitation or solicitation of an offer, to subscribe for or purchase any securities.
rates, the overall level of the industry, changes in housing demand, prices of raw materials,
● The contents of this presentation do not constitute any obligation by Viva.
etc.
● This presentation is exclusively for informational purposes.
● If one
or more of these risks occur, or should the underlying assumptions prove to be
incorrect, actual results may vary materially from those described herein as anticipated,
● Certain
financial ratios herein included may differ from those included in the final
believed, estimated or expected. .
prospectus and from the financial information disclosed periodically by Viva due to rounding
● Viva
does not pretend, nor assume any obligation to update the statements presented of numbers.”
below.
A decade of Low Costs and Attractive Fares
Viva Aerobus strategy of low costs and attractive fares have helped grow annual passengers carried by ~6x.
Successfully placed 1bn
Secured an order for 55 Successfully placed 1bn peso First non-stop
Guadalajara became the A320s, which was Latin international destination pesos Short Term Bonds
Senior Trust Bonds in Mexican
Launched operations in 2nd operating base America’s largest Airbus market from Mexico city to Las in Mexican market
Nov. 2006 with two ------- narrow-body aircraft ------- Vegas -------
aircraft with a base of Profitable in only 3rd year order to date Began services to Tijuana, taking ------- Announced the purchase
operations in Monterrey of operation despithe the ------- advantage of the new Cross New international route of 25 new Airbus
H1N1 Virus epidemic Opened the 4th operating Border Xpress (US/Mexico land from Guadalajara to Los A321neo which adds to
base in Cancun bridge) Angeles the order in 2013.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2 1.2m 1.5m 1.6m 2.4m 3.2m 3.8m 4.0m 4.2m 4.8m 6.4m 8.2m
5 7 8 10 15 17 19 19 21 21 24
Opened the 3rd operating Broke the 6 million Monterrey becomes the
Carried over 1 million Took delivery of first Airbus largest hub with 27 non-
base at Mexico City A320 aircraft, starting a passengers per year mark
passengers in the 1st year stop routes
of operations International Airport, the new period of cost -------
largest market in Mexico -------
reduction First NEO delivery
Second NEO delivery
Viva in a Nutshell
•Lowest cost per seat and adj. CASK of any publicly-traded airline in the Americas
Lowest cost carrier
1 in the Americas
•Ýoungest fleet in Mexico composed of 22 A320CEO y 5 A20NEOs
•Unique bus-to-air conversion market through a 300+ bus stations network in the country (~8% total sales)
•100% A320 fleet / Maximum Seat Density on A320s (186 Pax)
Simplicity and
2 flexibility
•Point-to-Point network, focus on high frequency routes, monopoly domestic routes and secondary routes
•Outsourcing non-core functions (ground handling, call center, heavy aircraft maintenance)
•High utilization (12.3 BH on 6.4 sectors per day per AC)
Maximizing
3 profitability
•Unbundling fare strategy
•Among the world’s best in ancillary revenue generation ~45% of total revenues
•Purchase agreement with Airbus for 80 new aircraft (15 A320CEOs; 24 A320NEOs y 41 A321NEOs); 60 NEOs backlog
4 Positioned for
sustained growth
•Established methodologies, processes and systems to execute business plan in the long-term
•30.0% sales CAGR (2007-2017); A320 NEOs backlog 2018-2022 ~22% YoY growth
•Led by a management team with an average of 25 years in the sector
5 Experienced
Management Team
•Part of IAMSA Corporation, Mexico’s leading multimodal transportation provider, offering point-to-point intermodal transportation solutions throughout key passenger hubs via bus, air and rail
•Ryanair expertise as a founder shareholder (2006-2016), leading pioneer of the ULCC model in the world
CASK: “Cost per Available Seat Kilometer” represents total operating expenses divided by Available Seat Kilometers (ASKs)
Source: Secretaria de Comunicaciones y Transportes.
Viva Aerobus at Glance
● 87 domestic routes
● 8 international routes
● 41 cities
● Interconnected with 300+ bus stations
Network multiplied 4x by additional ~100 cities served through
IAMSA bus strategic relationship
1H 2018 1H 2017 %
Passenger (thousands) 4,526 3,682 22.9%
ASKs (mm) 5,465 4,185 30.6%
RPKs (mm) 4,895 3,724 31.4%
Revenues (mm MXN) 4,198 3,118 34.6%
Revenue by Destination Ancillary Revenue
International
Revenue
4%
Ancillary Ticket
Revenue Revenue
Domestic 44% 58%
Revenue
96%
LTM June 2018
*Permanent International Routes: Guadalajara – Los Angeles, Mexico – Las Vegas, Monterrey – Houston, Mexico – New York
RPK: “Revenue Passenger Kilometer” represents the number of kilometers flown by revenue passengers
ASK: “Available Seat Kilometer” represents aircraft seating capacity multiplied by the number of kilometers the seats are flown
Exceptional Performance Since Launch
PASSENGERS Load Factor
(Millions) (Millions)
9.0
90%
70%
1.3
FY 2007 LTM June 2018 FY 2007 LTM June 2018
REVENUE EBITDAR
(MXN, Millions) (MXN, Millions)
8,657 2,952
733 116
FY 2007 LTM June 2018 FY 2007 LTM June 2018
1 Highly Attractive Mexican
Aviation Market
Compelling Growth Opportunity within the Aviation Sector
Population Pyramid Growing Middle Class(1)
2010 2050E 7% 8%
Mexico’s potential
growth 14% 17%
>100 is supported by one of 16% Growth
90 - 99 the largest and fastest 17%
80 - 89 growing populations in 30%
70 - 79 the region
60 - 69 36%
50 - 59
40 - 49
25%
30 - 39 Working Age
20 - 29 Population 26% 20%
10 - 19
0-9
1,500,000 500,000 500,000 1,500,000 1,500,000 500,000 500,000 1,500,000 2010 2025E
D/E D+ C C+ AB
Source: INEGI, Censo poblacional 2010 Source: World Bank, Reporte de desarrollo económico 2016
Latin Domestic Aviation Passenger Market Mexico is relatively underpenetrated
94mm 2.55
2.35
Domestic Trips per
Capita
42mm
32mm
0.70
15mm 16mm 15mm 0.45
6mm 0.33 0.34
Brazil México Colombia Argentina Chile Peru Venezuela México Peru Brasil Colombia Canada USA
Source: CAPA, Centre for aviation, reporte cierre dic 2017 Source: CAPA, Centre for aviation, reporte cierre dic 2017
1 Classes are segmented in the following way: D/E is the Lower-Low Class, D+ corresponds to the Upper-Low Class, C is the Lower-Middle Class, C+ is the Upper-Middle Class, and AB is comprised of the Upper-Class.
Airline Well Positioned to Benefit from Positive Transportation Outlook with Strong
Macro Trends
Domestic Air Passenger Growth / GDP Growth Domestic Air Passenger Growth
PAX growth well above GDP growth driven by ULCC travel Crecimiento adicional de pasajeros con incremento en ingresos
options
12.2 x
11.1 x
9.0 x 9.2 x 8.7 x
6.1x 6.4x
5.4x 5.1x 4.8x 6.2 x
3.4x 3.5x
0.0 x
2012 2013 2014 2015 2016 2017E 2018E 2012 2013 2014 2015 2016 2017 2018E
Air Passenger per Year in Mexico (millions)
Domestic International
96
90
80
73
67 46
61 45
57 39
52 36
34
29 31
27
45 50
37 42
28 30 33
25
2011 2012 2013 2014 2015 2016 2017 2018E
Source: DGAC, Dirección General de Aeronáutica Civil, INEGI.
Potential Bus-to-Air passenger growth is estimated on a total demand of aprox. 300mm
Mexico:
3bn bus passengers Favorable outlook presents opportunity to convert passengers from bus to
per year air
Strategic relationship with IAMSA provides VivaAerobus unique access to
300mm+ passengers currently in bus journeys over 400kms
Ability to target price sensitive customers, offering time and cost savings
Aprox. Transported 1.4mm first time flyers in 2017
72%
300mm*
667mm
46% travelling
25% distances >400kms
45mm
3%
Domestic Bus Passengers Potential Bus-to-Air Conversion Based on 2017 Mexican Domestic Passenger
Level of Ticket Purchased and Distance
Others First Class Econmy
Traveled
*Represents approximate numbers of bus journeys of more than 400kms
Source: Secretary of Communication and Transportation: Annual Statistics, 20172 Ultra-Low Cost Model
Viva Aerobus sets the Bar with the Lowest Costs
Cents, USD
• Note: CASK adjusted to 1,609 km
• Source: Airline Financial ReportsMexico’s Lowest Costs per Passenger (USD)
USD por pax Volaris Aeromexico Interjet Ryanair
ex-fuel 2017
Maintenance 2.2 4.6 11.6 8.7 1.2
Rents 10.2 19.6 19.3 12.7 0.7
Staff 5.6 9.1 31.3 7.7 6.1
Depreciation 1.8 1.8 10.7 5.2 4.8
Sales & Mkt* 10.5 21.0 40.6 30.0 17.6
Others 0.1 0.6 (0.1) - -
Total 2017 30.4 56.6 113.3 64.4 30.4
Total 2016 35.0 53.7 106.5 61.8 29.9
%> Viva +87% +273% +112% +0%
*Includes: sales & marketing,, route charges, airport & handling charges and other operational charges
Note: Ryanair is just to compare with the best in the industry
Source: Airline Financial ReportsLeading Aircraft Utilization among the ULCC’s
Aircraft Utilization, Block Hours, Sectors and Seats per Aircraft per Day
Blocks Hours per Aicraft per day Full year 2017
1,218 1,163
Seats per Aicraft per Day
Sectors per Aircraft day
815 1,018 1,012
941
838 818 6.5
581 670
891
6.5
591 784
4.7 703
4.1 5.3
13.0 4.5
Jet Blue Spirit Volaris Southwest Ryanair EasyJet Interjet
Source: Company ReportsLow Cost Operation
• No frills & simple terminals minimize use of expensive airport services
such as jet bridges, baggage screening, etc.
• Configured low cost facilities in airports such as Monterrey,
Guadalajara, Cancun, Mexico City, and Tijuana (2019E)
• Focused on getting the best airport incentive deal:
• Airport and passenger costs (e.g. landing fees and passenger
facility charge)
• Marketing campaigns funded by governments and airports to
promote routes
• Educating passengers to absorb part of traditional airline task:
boarding pass printing, baggage weight and size pre-check
• Outsource non-core functions such as heavy maintenance, ground
handling, call center, on call line maintenance, baggage screening
revision, aircraft cleaning services, etc.
Source: Company Management and Company filings3 Profitable Model
Low Fares + Ancillary RevenueViva Aerobus: Total Average Fare of $50 USD and Base Fare of $28 USD …
… lowest fare between it’s peers
Ancillary
Base Fare
Fuente: Informes financieros de aerolíneasMexico’s Lowest Fares per Passenger (USD) Poner los datos H2 2018
Montse Ortega
Total Rev. Change vs Base Fare Change vs
USD 2017 % > Viva % > Viva
per Pax 2016 per Pax 2016
$50 -5.2% $28 -9.7%
Volaris $80 -4.6% +62% $57 -9.7% +105%
Interjet $91 +5.4% +84% $82 +3.8% +193%
Grupo AM $157 +7.4% +218% $134 +2.9% +379%
Avg Competitor
$110 +121% $91 +226%
Ryanair* $61 -2.3% +24% $44 -5.0% +59%
*Ryanair is just to compare with the best in the industry
Note: Total Revenue per passenger includes Base Fare + Ancillaries
Source: Airline Financial ReportsAmongst the world´s best in Ancillary Revenue
Global
USA
México
Source: Airline Financial Reports4 Competitive Advantages
Viva Aerobus Is the Easy Choice for Bus Travelers
Unique distribution system in Mexico tapping bus consumers in over 300 bus stations and connecting those passengers to airports.
Bus Terminal With Shuttle from Airport Shuttle from Bus Station Co-Branded Bus Station
Viva Aerobus Sales to Bus Station to Airport Operated by IAMSA
Unique Strategic Relationship Main Benefits of “Viaja Facil”
Access to 260 million IAMSA customers Reduce cultural/purchasing barriers by selling in location where bus
customers purchase
Only airline with ability to sell to bus travelers in over 300 bus stations in Mexico
Recommendation from bus sales agents
Multi-Modal offering of bus and air travel adds 100 additional destinations
50% price discount on ground portion of multi-modal journey
Access to market knowledge of Mexico’s largest bus group with 80 years of experience
Lower total trip cost reduced with Viva Aerobus shuttles to and from
IAMSA sourced more than half a million passengers for Viva Aerobus in 2017 airportViva Aerobus offers lower fares than other airlines and comparable bus service while
saving the bus traveler many hours per trip.
Viva Aerobus vs. the Competition
Ciudad de Mexico – Cancun – Juarez – Tampico –
Monterrey Ciudad de Mexico Ciudad de Mexico Villahermosa
(MXN) (MXN) (MXN) (MXN)
In average, Viva is 22% lower In average, Viva is 35% 38% lower 10% lower
lower $2,491
$1,967
Lower Base Fares
than Local
$1,589 $2,049
Competitors
$1,214
$1,205 $1,619 $1,218
$1,387 $1,029
$978 $999 $928
$1,229
Much Faster than Air Ground Air Ground Air Ground Air Ground
Ground 1:30hr 11:09hr 2:20hr 27:50hr 3:20hr 24:00hr 1:20hr 16:40hr
Transportation
2 Largest routes in Mexico;
represent 17.2% of total traffic*
*Based on LTM as of June 30, 2018.
Based on lowest fare quoted on August 09 2018 for travel on or before September 09 2018.Low Distribution and Payment Costs
Ticket Sales by Booking Channel/Payment Method Highlights of Low Cost Booking Channels
Jan-Jun 2018
Website Desktop & Mobile – Lowest distribution cost and ease of use for tech
Groups y Charters 4.30% savvy smartphone and tablet users
Viva Tiendas & Airports 4.90% Debit Card 13.20%
5.30%
IAMSA – Low cost, direct access to bus travelers through 300 bus stations
IAMSA
5.90% OTAs – Newest channel started in April 2015
Call Center
Other channels – Specific partnerships targeted at package travel market,
14.40% Cash 25.20%
OTAs* & Agencies groups and other segments.
Highlights of Low Cost Payment Channels
The payment channels reflect the dynamics of the Mexican consumer. Viva
Aerobus collects a large percentage of its payments in cash
Convenience store provides convenient and low cost cash acceptance with over
Web y Viva App 65.30% 61.60% 16,000 locations across Mexico
Credit Card
Cash payments can also be sent through one of Mexico’s largest retail banks,
with more than 1,600 branches
All commissions are transferred to the passenger through the booking fee
Credit cards are accepted but come with a booking fee. Credit card charge backs
are less than industry standard
Booking Channel Payment Method
*OTA: “Online Travel Agencies” Expedia, Travel Fusion, Despegar, etc.
Note: Ticket sales and payments options represent sales during the 6 months ended June 2018.Viva Aerobus has consistently gained market share in recent years
Annual Volume per Airline – Domestic Market
(Millions Segment Passengers)
Growth
Source: DGACStrong network growth focused on different markets
Growth in Seat Production 2017 vs. 2018
+17,0%
9.4% 10.814
866
2.8%
1.1% 262
3.7%
102
9.246 339
2017 Mature Routes 2016 Routes 2017 Routes 2018 2018
+
Charter
Source: Intern Analysis.Managing Fleet Transition Effectively
Highlights
In 2013 we signed a 55 A320 order book with Airbus (with an additional 40 optionality)
In 2018, we exercised previously contracted options with Airbus to buy 25 new A321neo aircrafts.
Additionally, we performed the conversion of 16 A320neo units of our original order for A321neo units.
With this, we consolidated our total purchase order in 80 aircraft: 15 A320ceo, 24 A320neo and 41 A321neo.
Projected Fleet Units(1)
737-300s Used A320s New A320s A321s Total
69
54 53
47 37
41 16
35 10 23
31 6
19 21 21 24
5 8 16 25 34 34 37 38 32
14 30
14 6
7 7 8 6 1 1
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(1):Delivery Dates established on Airbus Purchase Agreement | Projected information may be subject to change for factors beyond our control.5 Strong Financial Position
Leaders in growth of passengers vs their main competitors…
Domestic Total
At 30 Jun 2018 Volaris Interjet Grupo Aeroméxico
Total Fleet 26 (8%) 70 (22%) 84 (27%) 133 (43%)
•72 Boeing
•8 A319 (144 ) •22 SSJ100 ( 93 ) −17 Wide-Body ( 258 )
Detail − 55 Narrow-Body ( 140 )
•26 A320 (184 ) •50 A320 (176 ) •50 A320 ( 150 )
(Average seats) •12 A321 (220 ) •12 A321 ( 192 )
•61 Embraer
− 13 E-170 ( 76 )
− 48 E-190 ( 99 )
Interjet and Grupo AM report only passengers transported
Source: DGAC; Financial reports of each airline…achieved through the lowest costs & competitive fares…
Cost per Available Seat Revenue per Available Seat EBIDTDAR & Operating
Kilometer - Adjusted Kilometer - Adjusted Margin
CASK and TRASK adjusted to 1,609 kms (Viva:1,074 kms; Volaris 1,580 kms; Interjet 1,140 kms; Grupo AM 1,411 kms);
Source: Financial reports of each airline…while delivering the best margins on a highly competitive industry.
Operating Profit Profit Before Taxes
6
Jan-June 2018, MXN / Operating Margin Jan-June 2018, MXN / PBT Margin
5
4
Serie 1
3
Serie 2
Serie 3
2
1
0
Categoría 1 Categoría 2 Categoría 3 Categoría 4
Source: Financial reports of each airlineSolid Balance Sheet
Cash Adjusted Net Leverage Net Debt
At June 30th 2018, MXN At June 30th 2018 At June 30th 2018, MXN
MXN / Source: Financial reports of each airline
Adjusted Net Leverage = [Net Debt + (Capitalized Income x 7)] / EBITDAR; Net Debt = Total Debt - CashViva´s Virtuous Cycle
Lowest
Increased Cost Lowest
Sales / Economies Structure Prices
of Scale
More Freq´s Customers Needs: Attracting
New Routes • Low Fares More
• On Time Customers
• + Destinations + Frequencies
• Easy to fly
Good
Higher Load Factors
Customer
“Network Effects”
Experience
Repeating
CustomersThank you
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