Volaris reports third quarter 2020 results
The Company has recovered much of the capacity resulting from COVID-19 as measured by available seat miles (ASMs)
Volaris, the ultra-low-cost airline serving Mexico, the United States and Central America, today announces its financial results for the third quarter 2020.
The following financial information, unless otherwise indicated, is presented in accordance with the International Financial Reporting Standards (IFRS).
Third Quarter 2020 Highlights
During the third quarter 2020, Volaris continued to successfully navigate the uncertainties caused by the SARS-CoV-2 (COVID-19) pandemic. The Company has recovered much of the capacity resulting from COVID-19 as measured by available seat miles (ASMs), a result of its strong ultra-low-cost business model focused on the VFR (Visiting Friends and Relatives) and leisure segments in the domestic and US-transborder markets.
As the Company has been able to recover services and add new routes, management has remained focused on ensuring the well-being of its crews, personnel, and passengers. Volaris has carried more than 4.5 million passengers following its successful biosafety protocol implementation in April 2020. Volaris was recognized with the "Safe travels" stamp, by the World Travel and Tourism Council, as well as the certificates of biosecurity best practices by the governments of Yucatan and Mexico City.
The Company was able to ramp up service to 63% of prior year in July and expanded further to 79% of prior year in August. September is typically a low travel month so management cautiously increased capacity to 84% of prior year while focusing on increasing total revenue per available seat mile (TRASM). For the full period, Volaris operated 75% of ASMs compared to the same period in 2019. The domestic market led the capacity recovery, where Volaris operated 85% ASMs versus the same period in 2019. In the international market, Volaris operated 54% ASMs compared to the same period in 2019. Central American operations remained closed.
The main effects of the continuing recovery of demand and capacity at the end of the third quarter, are as follows:
Total operating revenues were Ps.4,724 million for the third quarter, a decrease of 50.3% year over year.
Total ancillary revenues were Ps.2,131 million for the third quarter, a decrease of 29.7% year over year. Total ancillary revenues per passenger for the third quarter reached Ps.614, an increase of 13.9% year over year. However, total ancillary revenues represented 45.1% of total operating revenues for the third quarter 2020, increasing 13.2 percentage points with respect to the same period of last year.
Total operating revenues per available seat mile (TRASM) were Ps.102.8 cents for the third quarter, a decrease of 31.6% year over year.
In the third quarter 2020, the Company recorded a one-time charge of Ps.746 million.
Operating expenses per available seat mile (CASM) were Ps.149.2 cents for the third quarter, an increase of 20.9% year over year; with an average economic fuel cost per gallon of Ps.40.2 for the third quarter, a decrease of 10.5% year over year. Excluding the one-time charge, CASM was Ps.133.5 cents.
Operating expenses per available seat mile excluding fuel, (CASM ex-fuel) were Ps.111.3 cents for the third quarter, an increase of 43.6% year over year; with an average exchange rate depreciation of the Mexican peso against the U.S. dollar of 13.9% year over year. Excluding the one-time charge, CASM ex-fuel was Ps.95.7 cents.
Operating loss was Ps.2,227 million for the third quarter, a significant decrease compared with the operating income of Ps.1,703 million for the same period of last year. Operating margin for the third quarter was negative 47.1%, a deterioration of 65.0 percentage points year over year. Excluding the one-time charge, operating loss was Ps.1,481 million, a negative operating margin of 31.4%.
Net loss was Ps.2,175 million (Ps.2.15 loss per share / U.S.$0.96 loss per ADS), a negative net margin of 46.0% for the third quarter. Excluding the one-time charge, net loss was Ps.1,429 million (Ps.1.41 loss per share / U.S.$0.63 loss per ADS), a negative net margin of 30.3%.
At the close of the third quarter, the Mexican peso appreciated 2.2% against the U.S. dollar (Ps.22.46 per U.S. dollar) with respect to the exchange rate at the close of the previous quarter (Ps.22.97 per U.S. dollar). The Company booked a net foreign exchange gain of Ps.186 million derived from our U.S. dollar net monetary liability position.
During the third quarter of 2020, the net cash flow used in operating activities was Ps.113 million. The net cash flow used in investing activities reached Ps.179 million. The net cash flow used in financing activities was Ps.1,357 million, which included Ps.1,724 million of aircraft rental payments. The negative net foreign exchange difference was Ps.163 million, thus leading to a net decrease of cash and cash equivalents in the third quarter of Ps.1,812 million. As of September 30, 2020, cash and cash equivalents were Ps.8,202 million.