Volaris reports second quarter 2020 results

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Volaris reports second quarter 2020 results
Mon July 27, 2020

Total operating revenues were Ps.1,526 million for the second quarter, a decrease of 81.7% year over year


Volaris, the ultra-low-cost airline serving Mexico, the United States and Central America, today announces its financial results for the second quarter 2020.
The following financial information, unless otherwise indicated, is presented in accordance with the International Financial Reporting Standards (IFRS).

Second Quarter 2020 Highlights
During the second quarter 2020, the Company carefully managed its capacity, measured by available seat miles (ASMs), in response to the decline in demand for air travel due to the virus SARS-CoV-2 (COVID-19).
In April, 2020 the Company announced that pursuant to a decree published in the Official Gazette of the Federation, the Government of the United Mexican States, acting through the General Health Council (Consejo de Salubridad General ("GHC")) declared a health emergency due to force majeure, as a result of the disease pandemic caused by the COVID-19, which would be in effect until new notification (the "Declaration of Emergency").
The Declaration of Emergency and the health security measures announced by the GHC, such as the suspension of non-essential activities in the public, private and social sector, as well as the call to the population to comply with stay at home, impacted the demand for passenger air transportation.
The second quarter of 2020 was characterized by three very different months: in April and May, the fall in demand required significant capacity cuts. In April, Volaris operated 18% ASMs vs the same period in 2019 and in May this fell still further to 12%. This trend was reversed in June, when Volaris operated 41% ASMs compared to those operated in the same period in 2019. This was a ramp-up of more than 234% compared to May 2020, taking advantage of the early signs of recovery particularly in the domestic market and the ramp-up was significantly faster than our domestic competitors. The domestic market held up better than the international markets and Central America remained closed altogether.
For the ramp-up in June and further into the third quarter, Volaris has taken a breadth over depth approach to network recovery, focusing on marginal contribution of flights. By end of June 2020 service re-started in 49% of domestic routes and 22% of US markets, albeit both at a lower frequency vs. 2019.

The main effects of the reductions and the gradual recovery of demand and capacity at the end of the second quarter, are described as follows:

  • Total operating revenues were Ps.1,526 million for the second quarter, a decrease of 81.7% year over year.
  • Total ancillary revenues were Ps.711 million for the second quarter, a decrease of 75.5% year over year. Total ancillary revenues per passenger for the second quarter reached Ps.644, an increase of 25.2% year over year. Total ancillary revenues represented 46.6% of total operating revenues for the second quarter 2020, increasing 11.7 percentage points with respect to the same period of last year.
  • Total operating revenues per available seat mile (TRASM) were Ps.108.9 cents for the second quarter, a decrease of 19.7% year over year.
  • Operating expenses per available seat mile (CASM) were Ps.274.4 cents for the second quarter, an increase of more than 100% year over year; with an average economic fuel cost per gallon of Ps.43.8 for the second quarter, a decrease of 10.4% year over year.
  • Operating expenses per available seat mile excluding fuel, (CASM ex fuel) reached Ps.234.3 cents for the second quarter, an increase of more than 100% year over year; with an average exchange rate depreciation of the Mexican peso against the U.S. dollar of 22.2% year over year.
  • Operating loss was Ps.2,347 million for the second quarter, a significant decrease compared with the operating income of Ps.659 million for the same period of last year. Operating margin for the second quarter was (153.8%), a deterioration of (161.7) percentage points year over year.
  • Net loss was Ps.1,644 million (Ps.1.62 loss per share / U.S.$0.71 loss per ADS), giving a negative net margin of (107.7%) for the second quarter.
  • At the close of the second quarter, the Mexican peso appreciated 2.3% against the U.S. dollar (Ps.22.97 per U.S. dollar) with respect to the exchange rate at the close of the previous quarter (Ps.23.51 per U.S. dollar). The Company booked a net foreign exchange gain of Ps.1,109 million derived from our U.S. dollar net monetary liability position.
  • During the second quarter of 2020, the net cash flow generated by operating activities was Ps.584 million. The net cash flow generated by investing activities reached Ps.71 million. The net cash flow used in financing activities was Ps.1,179 million, which included Ps.806 million of aircraft rental payments. The negative net foreign exchange difference was Ps.120 million, thus leading to a net decrease of cash and cash equivalents in the second quarter of Ps.644 million. As of June 30, 2020, cash and cash equivalents were Ps.10,013 million.
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