Volaris* (NYSE: VLRS and BMV: VOLAR), the ultra-low-cost airline serving Mexico, the United States and Central America, today announces its financial results for the fourth quarter 2019.

The following financial information, unless otherwise indicated, is presented in accordance with the International Financial Reporting Standards (IFRS).

Fourth Quarter 2019 Highlights

• Total operating revenues were Ps.9,729 million for the fourth quarter, an increase of 23.0% year over year.
• Total ancillary revenues were Ps.3,195 million for the fourth quarter, an increase of 25.8% year over year. Total ancillary revenues per passenger for the fourth quarter reached Ps.557, an increase of 8.8% year over year. Total ancillary revenues represented 32.8% of total operating revenues for the fourth quarter 2019, increasing 0.7 percentage points with respect to the same period of last year.
• Total operating revenues per available seat mile (TRASM) were Ps.155.0 cents for the fourth quarter, an increase of 7.2% year over year.
• Operating expenses per available seat mile (CASM) were Ps.123.5 cents for the fourth quarter, a decrease of 5.3% year over year; with an average economic fuel cost per gallon of Ps.45.8 for the fourth quarter, a decrease of 6.8% year over year.
• Operating expenses per available seat mile excluding fuel, (CASM ex fuel) reached Ps.76.0 cents for the fourth quarter, a decrease of 2.1% year over year.
• Operating income was Ps.1,967 million for the fourth quarter, a significant increase compared with the operating income of Ps.776 million for the same period of last year. Operating margin for the fourth quarter was 20.2%, an improvement in margin of 10.4 percentage points year over year.
• Net income was Ps.1,287 million (Ps.1.27 per share / U.S.$0.68 per ADS), for a net margin of 13.2% for the fourth quarter.
• At the close of the fourth quarter, the Mexican peso appreciated 4.0% against the U.S. dollar with respect to the exchange rate at the close of the previous quarter (Ps.19.64 per U.S. dollar). The Company booked a foreign exchange gain of Ps.456 million derived from our U.S. dollar net monetary liability position, mainly as result of the adoption of IFRS16.
• During the fourth quarter of 2019, the net cash flow generated by operating activities were Ps.2,228 million. The net cash flow used in investing activities reached Ps.823 million. The net cash flow used in financing activities were Ps.960 million, which included Ps.1,713 million of aircraft rental payments. The negative net foreign exchange difference was Ps.275 million, thus having a net increase of cash and cash equivalents in the fourth quarter of Ps.170 million. As of December 31, 2019, cash and cash equivalents were Ps.7,980 million.

Stable Macroeconomics and Domestic Consumer Demand, with Peso Appreciation and Fuel Price Reduction

• Stable macroeconomics and domestic consumer demand:  The macroeconomic indicators in Mexico were stable, increasing during the months of October and November in same store sales^[1] 3.9% year over year. During the fourth quarter remittances^[2] increased 1.5% year over year, and the Mexican Consumer Confidence Balance Indicator (BCC)^[3] increased 2.0% year over year.
• Air traffic volume increase: The Mexican Federal Civil Aviation Agency reported an overall passenger volume growth for Mexican carriers during the fourth quarter of 2019 of 7.6% year over year. The domestic overall passenger volume increased 8.1%, while the international overall passenger volume increased 4.2%.
• Peso appreciation: The Mexican peso appreciated 2.8% against the U.S. dollar year over year, from an average exchange rate of Ps.19.83 per U.S. dollar in the fourth quarter of 2018 to Ps.19.28 per U.S. dollar during the fourth quarter of 2019. At the end of the fourth quarter of 2019, the Mexican peso appreciated 4.3% with respect to the exchange rate at the end of the same period of the last year. The Company booked a foreign exchange gain of Ps.456 million derived from our U.S. dollar net monetary liability position, mainly as result of the adoption of IFRS16.
• Fuel price reduction: The average economic fuel cost per gallon decreased 6.8% in the fourth quarter of 2019, year over year, reaching Ps.45.8 per gallon (U.S.$2.4).

Passenger Traffic Stimulation, Further Ancillary Revenue Expansion, and Positive TRASM Growth

• Passenger traffic stimulation: Volaris booked 5.7 million passengers in the fourth quarter of 2019, an increase of 15.6% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 16.7% year over year. System load factor during the fourth quarter increased 1.1 percentage points year over year, reaching 87.6%.
• Total ancillary revenue growth: For the fourth quarter of 2019, total ancillary revenue increased 25.8% year over year. Total ancillary revenue per passenger in the fourth quarter of 2019 increased 8.8% year over year. The total ancillary revenue generation continues to grow with new and mature products, appealing to customers' needs, representing 32.8% of total operating revenue of the fourth quarter, an increase of 0.7 percentage points year over year.
• Positive TRASM growth: For the fourth quarter of 2019, TRASM increased 7.2% year over year. During the fourth quarter of 2019, the total capacity, in terms of ASMs, increased 15.1% year over year.
• New routes: During the fourth quarter of 2019, Volaris began operations in four new domestic routes and one new international route. In the domestic market:1) Monterrey, Nuevo Leon to Oaxaca, Oaxaca; 2) Monterrey, Nuevo Leonto Los Cabos, Baja California; 3) Tijuana, Baja California to Tapachula, Chiapas; and 4) Mazatlan, Sinaloa to Monterrey, Nuevo Leon. On the international market: Leon, Guanajuato to Fresno, California. Additionally, Volaris launched for sale five international routes: 1) Leon, Guanajuato to Dallas Texas; 2) Leon, Guanajuato to Las Vegas, Nevada; 3) Leon Guanajuato to Chicago, Illinois; 4) Zacatecas, Zacatecas to Dallas, Texas; and 5) Cancun, Quintana Roo to Los Angeles California.

Total Unit Cost Reduction, with Peso Appreciation and Fuel Price Reduction

• CASM and CASM ex fuel in the fourth quarter of 2019 reached Ps.123.5 (U.S.$6.40 cents) and Ps.76.0 cents(U.S.$3.94), respectively. This represented a decrease of 5.3% and 2.1%, respectively, year over year; mainly driven by cost control discipline, the average exchange rate appreciation of the Mexican peso against the U.S. dollar of 2.8%, and the average economic fuel cost per gallon decreased 6.8%.

Young and Fuel-Efficient Consumption Fleet

• During the fourth quarter of 2019, the Company incorporated two aircraft (one A320 neo and one A321 neo) to its fleet. As of December 31, 2019, Volaris' fleet was composed of 82 aircraft (8 A319s, 58 A320s and 16 A321s), with an average age of 5.0 years. At the end of the fourth quarter of 2019, Volaris' fleet had an average of 186 seats per aircraft, 77% of our aircraft were sharklet-equipped, and 28% were NEO.

Solid Balance Sheet and Good Liquidity

• During the fourth quarter of 2019, the net cash flow generated by operating activities were Ps.2,228 million. The net cash flow used in investing activities reached Ps.823 million. The net cash flow used in financing activities were Ps.960 million, which included Ps.1,713 million of aircraft rental payments. The negative net foreign exchange difference was Ps.275 million, thus having a net increase of cash and cash equivalents in the fourth quarter of Ps.170 million. As of December 31, 2019, cash and cash equivalents were Ps.7,980 million, representing 23.0% of last twelve months of the operating revenue. Volaris registered a negative net debt (or a positive net cash position) of Ps.3,004 million (excluding lease liability recognized under the IFRS16 adoption) and total equity of Ps.5,450 million.

Transition to IFRS 16

• The Company adopted IFRS 16 as of January 1, 2019, using the full retrospective method. The cumulative effect of adopting IFRS 16 has been recognized as an adjustment to the opening balance as of January 1, 2017 as an increase in assets and liabilities and an adjustment in the retained earnings.
  The unaudited figures of this adoption are presented as follows:

Consolidated Statements of Financial Position

• This quarterly earnings release includes supplemental information for comparable purposes, with the recast and unaudited adjusted 2018 figures, including the IFRS 16 adoption effects describe above. These figures were derived from unaudited financial statements included in the quarterly reports on Form 6-K reported during the year ended as of December 31, 2018.
• Starting on March 25^th and during 2019, the Company established hedges on its USD denominated revenues, through a non-derivative financial instrument, using the lease liabilities denominated in USD as a hedge instrument. These hedging's relationships were designated as a cash flow hedge of forecasted revenues to mitigate the volatility of the foreign exchange variation arising from the revaluation of its lease liabilities. During 2019, the impacts of these hedges for the fourth quarter and year to date were Ps.33 million and Ps.73 million, respectively, which has been presented as part of the total operating revenue.
• Additionally, also starting on March 25^th and during 2019, the Company established hedges on a portion of its forecasted fuel expense, through a non-derivative financial instrument, using as a hedge instrument a portion of its USD denominated monetary assets. These hedging's relationships were designated as a cash flow hedge of forecasted fuel expense to mitigate the volatility of the foreign exchange variation arising from the revaluation of this portion of USD denominated monetary asset. During 2019, the impacts of these hedges for the fourth quarter and year to date were Ps.17 million and Ps.57 million, respectively, which has been presented as part of the total fuel expense.