AEROMEXICO REPORTS 1Q16 RESULTS
th
Mexico City, April 25 , 2016 - Grupo Aeromexico S.A.B. de C.V. (“Aeromexico”) (BMV:
AEROMEX), today reported its unaudited consolidated results for the first quarter 2016.
KEY FINANCIAL HIGHLIGHTS FOR THE FIRST QUARTER 2016
 Grupo Aeromexico’s first quarter 2016 revenues reached $12.1 billion pesos, a 12.9% year onyear increase.
 Grupo Aeromexico reported an operating profit of $641 million pesos, a 24.6% year-on-year
increase. Operating margin reached 5.3%, a 0.5 percentage point improvement compared to the
th
same period of 2015. This represents the 24 consecutive quarter of positive EBIT results.
 During the quarter, EBITDAR reached $3.1 billion pesos, a 27.8% increase compared to the
prior year. EBITDAR margin amounted to 25.5%, a 3.0 percentage point increase compared to
the first quarter of 2015.
 Net income reached $161 million pesos with a 1.3% margin for the first quarter 2016.
 These financial results reflect the positive impact of reduced fuel prices and the negative impact
of Mexican peso depreciation against the US dollar.
 In the first quarter of 2016 cash flow generation remained strong with $1.0 billion pesos
incremental net cash flow generated from operating activities. Aeromexico’s cash position as of
st
March 31 2016 was $6.6 billion pesos.
 During the quarter, the Company added two aircraft to its fleet under operating lease
agreements: one Embraer-170 and one Embraer-190. Grupo Aeromexico’s operating fleet
comprised 126 aircraft, an increase of one aircraft compared to the fourth quarter of 2015.
Jonathan Wallden
SVP Financial Planning & Investor Relations
[email protected]
Ricardo Sánchez Baker
CFO
[email protected]
1Q2016 RESULTS
MANAGEMENT DISCUSSION AND ANALYSIS
All figures are expressed in millions of pesos unless otherwise indicated. Grupo Aeromexico’s
financial statements are prepared in accordance with International Financial Reporting Standards
(IFRS).
The International Accounting Standard 1 (IAS 1) "Presentation of Financial Statements" establishes
that in the Consolidated Statement of Comprehensive Income additional items, headings and
subtotals can be presented when they are relevant to understanding the financial performance of
the entity.
The following information provides an overview of selected consolidated financial and operating
results, comparing the Company’s unaudited consolidated financial statements for the first quarter
2016 with those of the first quarter 2015.
2
1Q2016 RESULTS
Three Months Ended March 31
st
Financial Highlights
2016
2015
Var 2016 vs 2015
Total Revenue (MXP million)
12,061
10,682
12.9%
EBITDAR (MXP million)*
3,077
2,408
27.8%
EBITDAR Margin* (% of Revenue)
25.5%
22.5%
3.0 PP
641
515
24.6%
5.3%
4.8%
0.5 PP
161
185
-12.6%
Net Margin (% of Revenue)
1.3%
1.7%
-0.4 PP
Earnings per share (pesos)
0.23
0.26
-11.5%
Operating Profit (MXP million)*
Operating Margin (% of Revenue)**
Net Profit (MXP million)
Operating Highlights
Total ASKs (millions)
10,386
9,505
9.3%
Total RPKs (millions)
7,917
7,343
7.8%
Load factor on scheduled flights (%)
76.3%
77.3%
-1.0 PP
Passengers ('000)
4,493
4,391
2.3%
On-Time departure performance within 15
minutes (%)
80.6%
83.6%
-3.0 PP
360,789
345,543
4.4%
Yield (pesos)***
1.398
1.339
4.5%
Total revenue / ASK (pesos)
1.161
1.124
3.3%
Passenger revenue / ASK (pesos)
1.049
1.015
3.3%
Total cost / ASK (pesos)
1.110
1.076
3.2%
Total cost / ASK (USD)
0.061
0.072
-14.7%
Total cost / ASK excluding fuel (pesos)
0.907
0.813
11.6%
Total cost / ASK excluding fuel (USD)
0.050
0.054
-7.7%
Total liters of fuel ('000)
Figures may not sum to total due to rounding.
*
This metric is not defined under IFRS but has been included for reference given its relevance to the Company’s performance. EBITDAR
is defined as earnings before interest, taxes, and depreciation, amortization, and rental costs.
**
Operating Income.
***
Estimated as passenger revenues divided by RPKs of itinerary flights.
3
1Q2016 RESULTS
Market Conditions
Grupo Aeromexico operated in an environment characterized by the following during the first
quarter:
 Exchange rate depreciation. Compared to the first quarter of 2016, the Mexican peso
depreciated an average of 20.9% relative to the U.S. dollar, from an average exchange rate of
$14.94 pesos to $18.06 pesos per dollar. By the end of the first quarter, the peso had
depreciated by 14.2% year-on-year relative to the dollar, from $15.26 pesos to $17.43 pesos per
dollar.
 Decrease in Mexican peso-denominated fuel prices. Due to lower dollar denominated fuel
prices, partially offset by depreciation of the Mexican Peso, Grupo Aeromexico’s first quarter
2016 fuel price denominated in pesos decreased by 19.2% year-on-year.
 Stable economic activity. The economic outlook for Mexico remained consistent with previous
1
quarters. In January 2016 General Economy Activity Indicator grew 2.9% .
 Increased passenger traffic in Mexican airline industry. Total air passenger traffic increased
at a rate of 11.5% in the Mexican market during the January-February 2016 period. Domestic
passenger traffic increased 13.2%, with international passenger traffic increasing 10.1%
2
compared to 2015 .
Revenues
First quarter 2016 revenues reached $12.1 billion pesos, a 12.9% increase compared to the same
period last year. This was primarily due to an increase in passenger revenues, higher cargo and
charter revenues, partially offset by a decline in other ancillary revenue. The Company´s capacity,
measured in Available Seat Kilometers (ASKs), increased by 9.3% in the first quarter of 2016.
Total ASKs increased by 9.3% during the first quarter of 2016, mainly driven by our upgauging
strategy that allows us to incorporate more cost efficient aircraft with a better customer experience.
International ASKs increased by 12.9% with respect to the first quarter of 2015, driven by the
substitution of B767s with B787-8s plus the addition of five additional 737-800s offset by a reduction
of four 737-700s compared to the first quarter of 2015. Domestic capacity increased by 2.5% due to
the addition of five Embraer-170s and one Embraer-190 compared to the first quarter of 2015,
partially offset by a reduction of six Embraer-145 aircraft. International ASKs accounted for 66.9% of
Grupo Aeromexico’s total ASKs, which represents a 2.2 percentage point increase compared to the
first quarter of 2015.
First quarter passenger revenues reached $10.7 billion pesos, a 13.5% increase, year-on-year.
Grupo Aeromexico transported 4 million 493 thousand passengers, a 2.3% increase compared to
the first quarter of 2015. The number of passengers on international routes increased by 9.6%,
while the number of passengers on domestic routes decreased by 1.1% compared to first quarter of
2015. First quarter 2016 passenger revenue on international flights represented 57.1% of total
passenger revenue, with domestic passenger revenues representing 42.9%.
First quarter cargo revenue increased by 16.0% year-on-year to $753 million pesos. The Mexican
air cargo market reported a 3% increase in the number of tons transported during the first two
months in this year compared to the same period in 2015.
Aeromexico’s first quarter 2016 charter flight revenues totaled $229 million pesos, a 1.5% increase
from the first quarter 2015.
1
2
IGAE. INEGI February 2016.
Source: DGAC
4
1Q2016 RESULTS
First quarter 2016 other ancillary revenues totaled $370 million pesos, a 0.9% decrease compared
to first quarter of 2015. The company relaunched its cobrand credit card during the quarter with
Santander. This new product offers materially superior benefits to customers and will, across time,
drive enhanced returns for Aeromexico. The quarter was negatively impacted by one off interline
charges.
Revenue per ASK increased by 3.3% compared to first quarter 2015, reflecting increased demand
for travel on our state of the art 787s, combined with optimizing the attractiveness of our network
and enhancing our connecting proposition as Mexico’s full service network carrier.
Operating Expenses
First quarter 2016 operating expenses, including aircraft leases and depreciation and amortization,
totaled $11.4 billion pesos, a 12.3% year-on-year increase mainly due to the negative impact of the
depreciation of the peso on several U.S. dollar cost items and the increase in capacity.
First quarter consolidated unit cost (CASK) in Mexican pesos increased 3.2% year-on-year. CASK
in US dollars decreased by 14.7% year-on-year. First quarter 2016 dollar denominated CASK
excluding fuel decreased 7.7% year-on-year while CASK excluding fuel in peso terms increased by
11.6%, despite the negative impact coming from the 20.9% Mexican peso depreciation. This
reflects Grupo Aeromexico’s commitment to maintaining strict cost control.
First quarter fuel expenses reached $2.1 billion pesos, a 15.6% year-on-year decrease driven by
the 19.2% decrease in peso-denominated fuel prices per liter, partially offset by the 9.3% increase
in ASKs.
In order to mitigate the risk of fuel price increases, Grupo Aeromexico maintains a hedging policy
with call type and call spread options equivalent to 40%-60% of the Company’s estimated fuel
consumption for the next 12 months. Coverage levels start at US $2.06 per gallon, hedged up to US
$2.75 per gallon. The positive impact of this hedging policy has been reflected in Grupo
Aeromexico’s financial results, since the Company benefited from reductions in market prices of fuel
while maintaining the maximum loss of the hedging policy capped to the value of the premiums paid
for said options.
First quarter 2016 salaries and related expenses increased by 9.7%, year-on-year. This is related
primarily to company expansion which resulted in a 9.3% increase in ASKs and the negative impact
of exchange rate depreciation on crew travel and hotel expenses.
First quarter maintenance expenses increased 46.2% year-on-year, primarily due to exchange rate
depreciation, the increased operation and also as a result of the aircraft redelivery program
schedule, which in 2015 was weighted towards the back half of the year. 2016 has a reduced and
more balanced redelivery schedule.
Communications and traffic expenses increased by 25.3% year-on-year, due to the exchange rate
depreciation impact and the 9.3% increase in ASKs.
First quarter 2016 sales and administrative expenses increased 14.2% mainly driven by the 12.9%
growth in revenues and exchange rate depreciation.
Associated company income amounted to $101 million pesos during the first quarter of 2016.
First quarter aircraft leasing expenses totaled $1.7 billion, a 24.5% increase compared to first
quarter 2015, primarily due to the impact of more modern and larger aircraft joining the Aeromexico
fleet plus exchange rate depreciation.
First quarter depreciation and amortization totaled $738 million, a 39.5% increase compared to first
quarter 2015, again due to the impact of more modern and larger aircraft joining Aeromexico as well
as the company taking advantage of market conditions to purchase nine previously leased Embraer
5
1Q2016 RESULTS
145s and three previously leased B737-700s, reflecting the company’s strategy of moving to a more
balanced fleet of owned vs leased aircraft across time.
EBITDAR
3
First quarter 2016 EBITDAR reached $3.1 billion pesos, a 27.8% year-on-year increase. First
quarter EBITDAR margin reached 25.5%, a 3.0 percentage point year-on-year increase.
EBITDAR and EBITDAR Margin
(In millions of pesos and as a percentage of income)
Operating Income
First quarter 2016 operating income reached $641 million pesos, which compares favorably with the
$515 million pesos reported during the first quarter of 2015. First quarter operating margin reached
5.3%, a 0.5 percentage point year-on-year increase.
IFRS regulations do not define the “Operating Income” metric. However, this indicator has been
included in Aeromexico’s financial results due to its relevance in analyzing the Company’s operating
performance.
Operating Income and Operating Margin
(In millions of pesos and as percentage of revenue)
3
EBITDAR: earnings before interest, taxes, depreciation, amortization, and rental costs.
6
1Q2016 RESULTS
Net Income
Grupo Aeromexico reported a $161 million peso net profit for the first quarter of 2016 with a margin
of 1.3%.
During the quarter the company registered a positive foreign exchange impact of $59 million pesos
as the U.S. dollar strengthened against the Mexican peso. This was due to the fact that the
Company uses the U.S. dollar as its functional currency, while the Mexican peso is used for
registration and reporting.
During the quarter, Aeromexico realized a $3 million peso mark to market loss in its fuel hedging
position.
7
1Q2016 RESULTS
Comments to the Consolidated Statements of Financial Position and Cash
Flow
During 2016, cash flow generation remained strong with $1.0 billion pesos incremental net cash
flow generated from operating activities. In the same period, net cash flow used for investing
activities amounted to $0.4 billion pesos.
Cash flow summary (figures in millions of pesos)
DESCRIPCIÓN
1Q16
Cash and cash equivalents at the beginning of
period
6,203
Net cash flow from operating activities
1,028
Net cash flow from investing activities
(371)
Net cash flow from financing activities
(194)
Increase in cash and cash equivalents
463
Effect of exchange rate changes on cash and
cash equivalents
(62)
Net increase in cash and cash equivalents
401
Cash and cash equivalents at the end of period
6,604
st
Aeromexico’s cash position, including short term investments as of March 31 2015, was $6.6
billion pesos. This brings Aeromexico’s cash to revenue (for the last twelve months) ratio to 13.7%.
Majority stockholders’ equity was $11.1 billion pesos at the end of March 2016.
st
As of March 31 2016, Grupo Aeromexico had a total of 730,850,093 common shares outstanding,
including 19,762,019 shares repurchased by the company as part of its share repurchase program.
The Company also has a total of 239,598,549 treasury shares outstanding.
8
1Q2016 RESULTS
Fleet
Grupo Aeromexico added two aircraft under operating lease agreements to its fleet during the first
quarter of 2016: one Embraer-170 and one Embraer-190. Grupo Aeromexico’s operating fleet
comprised 126 aircraft.
st
As at March 31 2015, the average age of Grupo Aeromexico’s operating fleet was 8.2 years.
Operating Fleet
Fleet
1Q2016
4Q2015
1Q2015
B-777
4
4
4
B-787
9
9
7
B-767
0
0
3
B-737-700
19
19
23
B-737-800
31
31
26
Aeromexico
63
63
63
ERJ-145
17
18
23
E-170/175
15
14
10
E-190
31
30
30
Aeromexico
Connect
63
62
63
Grupo Aeromexico
126
125
126
9
1Q2016 RESULTS
CONFERENCE CALL DETAILS
 DATE
th
 SPEAKERS
April 26 , 2016.
09:00 AM ET
08:00 AM Mexico City Time & Central
Time
 DIAL-IN
Toll Free US
1 – 866-320-0174
NUMBERS
Toll International 1-785-424-1631
10
Andrés Conesa Labastida
CEO
Ricardo Sánchez Baker
CFO
1Q2016 RESULTS
Analyst Coverage
Bank
Analyst
E-mail
Actinver
Ramón Ortiz Reyes
[email protected]
Barclays
Gilberto Garcia
[email protected]
Bradesco
Victor Mizusaki
[email protected]
Deutsche Bank
Michael Linenberg
[email protected]
GBM
Bernardo Velez
[email protected]
Itaú BBA
Renato Salomone
[email protected]
Morgan Stanley
Josh Milberg
[email protected]
Vector
Marco Montañez
[email protected]
11
1Q2016 RESULTS
Consolidated Statement of Comprehensive Income
Three Months Ended on March 31st
Millions of pesos
2016
%
2015
%
VAR
Revenues
12,061
100.0%
10,682
100.0%
12.9%
Domestic Passengers
International Passengers
Air Cargo
Charter Flights
Other Income
4,596
6,112
753
229
370
38.1%
50.7%
6.2%
1.9%
3.1%
4,349
5,084
649
226
373
40.7%
47.6%
6.1%
2.1%
3.5%
5.7%
20.2%
16.0%
1.5%
-0.9%
Operating Costs
Salaries and Related Costs
Aircraft Fuel
Maintenance
Aircraft, Communication and Traffic Services
Passenger Services
Selling and Administrative Expenses
Travel Agent Commissions
7,799
2,609
2,107
997
1,785
301
903
383
64.7%
21.6%
17.5%
8.3%
14.8%
2.5%
7.5%
3.2%
7,235
2,378
2,497
682
1,425
253
781
327
67.7%
22.3%
23.4%
6.4%
13.3%
2.4%
7.3%
3.1%
7.8%
9.7%
-15.6%
46.2%
25.3%
19.1%
15.6%
17.3%
Effects from Associated Companies
(101)
-0.8%
(69)
-0.6%
47.0%
Total Operating Expenses
8,984
74.5%
8,274
77.5%
8.6%
EBITDAR
Aircraft Leasing
EBITDA
Depreciation & Amortization
Total Expenses
3,077
1,698
1,379
738
11,420
25.5%
14.1%
11.4%
6.1%
94.7%
2,408
1,364
1,044
529
10,167
22.5%
12.8%
9.8%
5.0%
95.2%
27.8%
24.5%
32.2%
39.5%
12.3%
Operating Profit (loss) Before Financial Expenses
642
5.3%
515
4.8%
24.6%
Financial Income and Losses
Exchange Rate Impact
Derivate Fair Market Value
Financial Net Cost
Income Before Taxes
Taxes
Net Income
482
(59)
3
426
215
54
161
4.0%
-0.5%
0.0%
3.5%
1.8%
0.4%
1.3%
423
(216)
44
251
264
79
185
4.0%
-2.0%
0.4%
2.4%
2.5%
0.7%
1.7%
14.0%
-72.7%
-92.6%
69.8%
-18.4%
-31.9%
-12.6%
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1Q2016 RESULTS
Consolidated Statement of Financial Position
ITEMS
Assets
Cash and Equivalents
Financial Assets
Derivable Financial Instruments
Accounts Receivable Net
Related Parties
Prepaid Expenses
Inventories Net
Total Current Assets
Net Fixed Assets
Others
Total Assets
Liabilities
Current Liabilities
Financial
Operating
Total Current Liabilities
Long Term
Financial
Operating
Total Long Term
Total Liabilities
Non Controlling Interest
Controlling Interest
Total Stockholder´s equity
Total Liabilities and Shareholders
As of March
31st
As of
December
31st
2016
2015
$
%
5,638
966
9
3,942
227
1,254
1,248
13,284
23,494
14,912
51,690
5,054
1,149
11
3,529
204
1,159
1,237
12,343
23,545
13,996
49,884
584
-183
-2
413
23
95
11
941
-51
916
1,806
11.6
(15.9)
(18.2)
11.7
11.3
8.2
0.9
7.6
(0.2)
6.5
3.6
5,864
15,772
21,636
4,401
15,019
19,420
1,463
753
2,216
33.2
5.0
11.4
15,212
3,751
18,963
40,599
3
11,088
11,091
51,690
16,029
3,661
19,690
39,110
3
10,771
10,774
49,884
-817
90
-727
1,489
0
317
317
1,806
(5.1)
2.5
(3.7)
3.8
0.0
2.9
2.9
3.6
13
VAR