1q= first quarter...abc aerolíneas, sa de cv * blvd. puerto aéreo s/n zona federal del aeropuerto...

ABC Aerolíneas, SA de CV * Blvd. Puerto Aéreo S/N Zona Federal del Aeropuerto Internacional “Benito Juárez”

(AICM) C.P. 15620 México, D.F.

FIRST QUARTER RESULTS 2017

KEY RESULTS

In the 1Q17 Interjet total revenues added $4,421.5 million pesos that

represented an increase of 14.8% over the income generated in the 1Q16.

In the 1Q17, operating income loss of $ 477.7 million pesos, with a negative

margin of 10.8%.

In 1Q17, EBITDAR decreased $ 573.3 million pesos compared to the same

period of 2016, reaching $ 530.6 million pesos with a margin of 12.0%, in

relation to total revenue.

INTERJET recorded a net loss of $ 596.6 million pesos in 1Q17, compared to a net income of $ 203.9 million pesos in the same period of 2016.

1Q= First quarter



Below is a summary of the selected consolidated and operating information, which is derived from the comparison of Interjet´s audited consolidated financial information for the first quarter of 2017 vs. 2016.



Market environment INTERJET operated during the 1Q17 in an environment defined by the following factors:

Depreciation of the average exchange rate. The closing exchange rate

for the quarter recorded a depreciation of the peso against the US dollar of



8.4% compared to the same period of 2016, going from $ 17.2509 pesos

per US dollar at 1Q16 to $ 18.7079 pesos per US dollar at 1Q17.

Increase in fuel prices in pesos. During the period January-March 2017

the average price of fuel per liter paid by INTERJET increased by 56.3%

compared to the same period in 2016, reaching an average price per liter of

$ 9.48 compared to $ 6.06 average per liter in 1Q16.

Slight economic growth. During the 2017 the Mexican economy showed a

slight recovery in the pace of economic growth. The General Indicator of

Economic Activity (IGAE) in 2017 grew 0.1% compared to the same period

of 2016.

Growth of passenger traffic in the domestic industry. According to

figures published by the DGAC, the passenger market for Mexican airlines

increased by 13.0% in the 1Q17 over the previous year. The volume of

passengers in the domestic market increased 11.6%, while the international

market grew 17.5%.

Revenue

In the 1Q17 INTERJET total revenue increased 14.8% from $ 3,850.8 million

pesos in the 1Q16 to $4,421.5 million pesos in the 1Q17. This increase was mainly

due to an increase in passenger revenue.



Passenger revenue increased 13.1% from $ 3,563.5 million pesos in the 1Q16 to

$4,030.2 million pesos in 1Q17, mainly due to a higher volume of passengers

transported, given the airline's international expansion; although the Holly and

Easter weeks in 2016 were in 1Q16, and this year, seasonality will be reflected in

the second quarter. In addition, this increase was partially offset by the negative

impact on the sales caused by the safety precautionary measure requested in the

guidance issued by the Russian Aeronautical Authority December 2016, in relation

to the line of aircraft SSJET100 worldwide.

The seats supply (ASK's) increased by 29.5% in the 1Q17 compared to the same

period of 2016, mainly due to the opening of new routes and an increase of

operations by the planned expansion of the Company through incorporating new

fleet.

Other income increased 36.2%, from $ 287.4 million pesos in the 1Q16 to $ 391.3

million pesos in the 1Q17, mainly due to higher income as a result of the recent

launch of the strategy of charging for ancillaries not included in the basic rate.

Operating expenses

Operating expenses increased 36.9%, from $3,580.0 million pesos in the 1Q16 to

$4,899.3 million pesos in the 1Q17. This increase was mainly due to a 56.3%

increase in fuel prices due to an increment in operations because of the

incorporation of aircrafts that caused higher expenses of: maintenance, airport

operating and landing fees, aircraft rent and expenses Inherent to the expansion of

operations, as well as the impact of the devaluation of the peso against the dollar.

At the end of 1Q17 the company operated 22 SSJ100, 45 A320's and 3 A321's.

The unit cost per ASK in pesos (CASK) increased 5.7% in relation to 1Q16, as a

result of higher expenses for additional operations, increase in fuel prices, a larger



fleet and international expansion, partially offset by the income generated through

the new routes. On the other hand, the CASK excluding fuel decreased 6.8% over

the same period of the previous year, as a result of the implementation of the

control of expenses program, and a greater supply of ASK's.

Fuel expenses on the 1Q17 increased by 99.5% from $735.1 million pesos in

1Q16 to $1,466.4 million pesos in the same period of 2017, mainly due to the

increase of 56.3% in the price per liter of fuel paid by the Company reaching an

average price per liter of $9.48 in the 1Q17 compared to $6.06 of 1Q16, mainly

due to the impact of the devaluation of the peso against the dollar and the increase

of operation specially in the international routes.

Maintenance expenses increased 12.4% from $415.5 million in 1Q16 to $467.0

million in 1Q17 as a result of higher services to our fleet, the increase of operations

for new routes, the increase in our fleet and the impact of the devaluation of the

peso against the dollar. The increase was partially offset by the reversal of excess

maintenance provisions.

The costs for Airport operating and landing fees increased 29.8% from $577.4

million pesos in the 1Q16 to $749.4 million pesos in the 1Q17 as a result of an

increase in the number of operations during the 1Q17 mainly in the international

market compared to the same period of 2016. Likewise, this item was negatively

impacted by the effect of the event of the directive issued by the Russian

Aeronautical Authority last December, as well as by the impact of the devaluation

of the peso against the dollar.

Expenses for wages, salaries and crew benefits increased 30.0%, from $317.2

million pesos in 1Q16 to $412.4 million in 1Q17, mainly due to the increase of

28.2% in number of crew employees, going from 1,359 in 1Q16 to 1,742 in the

same period of 2017, that included an increase in training and travel expenses, as

a result of the additional aircraft that were added in this period.



Selling and advertising expenses increased 6.3% from $332.7 million pesos in the

1Q16 to $353.5 million pesos in the 1Q17 as a result of an increase in advertising

to promote new routes and of higher bank fees due to the increase in sales.

The technology and administrative expenses increased 6.4% to $323.3 million

pesos in the 1Q16 to $344.1 million pesos in the 1Q17 as a result of the impact of

the devaluation of the peso against the dollar.

Aircraft and engine rents increased 32.3% from $515.8 million pesos in the 1Q16

to $682.1 million pesos in the 1Q17 reflecting the effect of the depreciation of the

peso against the dollar, considering that the aggregate of our rents is in dollars,

and the increase in the leased fleet.

Depreciation expenses increased 2.8% from $317.2 million pesos in the 1Q16 to

$326.2 million pesos in the 1Q17 as a result of an addition of 2 aircrafts to our

fleet.

EBITDAR

EBITDAR decreased 51.9% from $1,103.8 million pesos in the 1Q16 to $530.6

million pesos in the 1Q17. The EBITDAR margin reached 12.0% in the 1Q17

compared to the 28.7% regarding the same period of 2016.

Operating Income

In 1Q17, operating income went from a profit of $270.9 million pesos in 1Q16 to a

loss of $477.7 million pesos in 1Q17. This was mainly due to the increase in the

Company's revenues, which was exceeded due to the increase in operating

expenses, mainly due to the increase in the cost of fuel mentioned above.

Comprehensive financing cost



Comprehensive financing cost increased 73.7%, from a cost of $66.0 million pesos

in 1Q16 to a cost of $114.7 million in 1Q17, as a result of higher interest paid due

to the increase of dollar bank debts for the acquisition of flight equipment, partially

offset by favorable foreign exchange effects due to the depreciation of the peso

against the US dollar.

Net Income

INTERJET reflected a net loss of $596.6 million pesos in 1Q17, compared to a net

profit of $203.9 million pesos regarding the same period of 2016.

Comments to the statement of financial position and liquidity

As of March 31 2017, the Company had $1,368.1 million pesos in cash and cash

equivalents.

The net cash generated by operating activities in 1Q17 amounted $1,024.9 million

pesos.

Net cash used in investing activities mainly reflects payments for maintenance and

aircraft investments in accordance with the Company's business plan.

The net cash used in financing activities reflects higher bank loans for the

acquisition of aircraft and for working capital.

Relevant Event

As of January 6, 2017, the Shareholders' Meeting approved a capital increase in

the amount of $4,000.00 million pesos, which will be subscribed during the first



semester of 2017. Giving effect to this subscription in stockholders' equity as of

March 31 of 2017, the amount of stockholders' equity after the aforementioned

subscription will be $8,084.6 million pesos. The sources of this subscription will be

mainly applied to the reduction of financial borrowings. Below is a Proforma

summarized balance sheet, giving effect to this capital contribution:

1Q17 CAPITALIZATION1Q17

PROFORMA

4,529,950 4,529,950

29,289,116 29,289,116

33,819,066 33,819,066

14,702,253 -4,000,000 10,702,253

15,032,167 15,032,167

29,734,420 25,734,420

4,084,646 4,000,000 8,084,646

33,819,066 33,819,066

LONG-TERM LIABILITIES

TOTAL LIABILITIES

STOCKHOLDER'S EQUITY

Unaudited Summarized Condensed Consolidated Interim Statements of Financial Position as of

March 31 2017, giving effect to the increase in capital described above would be as follows:

CURRENT ASSETS

LONG TERM ASSETS

TOTAL ASSETS

CURRENT LIABILITIES

Investor Relations Contact: Raul Lopez/CFO/+52 (55) 91785512



March 31, 2017 December 31, 2016

(Audited)

Assets

Current assets:

Cash and cash equivalents $ 1,368,133 $ 1,390,741

Accounts receivable 2,023,534 1,057,816

Recoverable taxes, mainly income tax and value-added tax 418,983 267,954

Inventories 165,476 159,248

Prepaid expenses 553,824 511,231

Total current assets 4,529,950 3,386,990

Advance payments to purchase flight equipment 1,559,762 1,636,087

Flight equipment, leasehold improvements, and furniture and equipment -

Net 19,957,996 21,545,951

Prepaid maintenance 6,373,092 6,967,318

Deferred tax assets 38,110 57,930

Other assets - Net 185,925 180,425

Concession 43,797 43,797

Deposits on aircraft leases 1,130,434 1,220,649

Total $33,819,066 $35,039,147

Liabilities and stockholders’ equity

Current liabilities:

Notes payable to financial institutions $ 7,142,788 $ 6,912,395

Provision of maintenance and retirement conditions 774,895 857,747

Accounts payable 2,934,005 3,339,696

Other accounts payable and accrued expenses 1,656,618 907,420

Payable taxes other than income taxes 504,037 239,703

Air traffic liability 1,689,910 1,277,572

Total current liabilities 14,702,253 13,534,533

Notes payable to financial institutions 10,709,566 12,083,702

Long-term debt 1,716,965 1,896,501

Employee benefits and other deferred liabilities 11,423 11,423

Provision of maintenance and retirement conditions 2,594,213 2,871,588

Total liabilities 29,734,420 30,397,747

Stockholders’ equity:

Capital stock 900,000 900,000

Contributions for future capital increases 5 5

Translation effects of foreign operation 944,876 904,984

Retained earnings 2,197,261 2,796,975

Controlling interest 4,042,142 4,601,965

Noncontrolling interest 42,504 39,435

Total stockholders’ equity 4,084,646 4,641,400

Total $33,819,066 $35,039,147

ABC Aerolíneas, S.A. de C.V. and Subsidiaries

Unaudited Consolidated Statements of Financial Position

As of March 31, 2017 and December 31, 2016

(In thousands of Mexican pesos)



2017 2016

Operating revenues:

Passengers 4,030,222 3,563,462

Other 391,295 287,374

4,421,517 3,850,836

Operating expenses:

Aircraft fuel 1,466,366 735,113

Maintenance and return conditions 466,982 415,530

Airport operating and landing fees 749,435 577,361

Wages, salaries and benefits 412,429 317,172

Insurance and passenger service 98,085 45,781

Selling 353,548 332,741

Administrative and other 344,101 323,316

Flight equipment rentals 682,123 515,773

Depreciation and amortization 326,185 317,167

4,899,254 3,579,954

Gross Profit (477,737) 270,882

Comprehensive f inancing cost:

Interest income 10,817 8,220

Interest expense (268,576) (195,554)

Exchange gain-net 143,081 121,305

(114,678) (66,029)

Profit before income taxes (592,415) 204,853

Income taxes expense 4,231 946

Consolidated net profit (596,646) 203,907

ABC Aerolineas, S.A. de C.V. and Subsidiaries

Unaudited Consolidated Statements of Profit or Loss

For the three months ended March 31, 2017 and 2016


Three months ended March 31



Capital

Stock

Contributions

for future

capital

increases

Cumulative

translation

adjustments

Retained

earnings

Non controlling

interestsTotal

Balances as of December 31, 2014 $900,000 $5 $101,012 $2,127,472 $20,021 $3,148,510

Comprehensive Income:

Cumulative translation adjustments of foreign

operations - - 174,207 - - 174,207

Consolidated Net income for the year - - - 400,976 10,917 411,893

- - $174,207 $400,976 $10,917 $586,100




operations - - $629,765 - - $629,765

Consolidated Net income for the year - - - 268,528 8,497 277,025

- - 629,765 268,528 8,497 906,790




operations - - 39,892 - - 39,892

Consolidated Net income for the year - - - (599,715) 3,069 (596,646)

- - 39,892 (599,715) 3,069 (556,754)

Balances as of March 31, 2017 $900,000 $5 $944,876 $2,197,261 $42,504 $4,084,646

ABC Aerolineas, S.A. de C.V. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

For the years ended December 31, 2016 and March 31,2017




March 31, 2017 March 31, 2016

Cash flows from operating activities:

Net profit for the year (596,646) 203,904

Adjustments for:

Income tax expense recognized in net income 19,820 (32)

Depreciation and amortization for non-current assets 326,185 317,167

Provision of maintenance and retirement conditions (360,227) (38,848)

Interest expense 268,576 195,554

Unrealized foreign exchange gain 1,422,398 15,644

Movements in working capital:

(Increase) decrease in accounts receivables (965,718) (533,487)

(Increase) decrease recoverable taxes, mainly income tax and value-added tax (151,029) 8,761

(Increase) decrease in inventories (6,228) 52,543

(Increase ) decrease in prepaid expenses (42,593) (231,812)

(Increase ) decrease in deposits on aircraft leases 90,215 (50,159)

Increase (decrease) in accounts payables (405,691) 10,995

Increase (decrease) in other accounts payable and accrued expenses 749,148 309,732

Increase (decrease) in income taxes paid 264,334 14,735

Increase (decrease) in air traffic liability 412,338 111,508

Increase (decrease) in employee benefits (2,797)

Net cash generated by operating activities 1,024,932 383,408

Cash flows from Investing activities:

Flight equipment, adapatations, leasehold improvements,

and furniture and equipment (120,736) (423,000)

Advance payments to purchase aircraft 76,325 (16,100)

Other assets (5,500) (7,800)

Prepaid maintenance 594,226 (124,700)

Net cash used in investing activities 544,315 (571,600)

Cash flows from financing activities:

Loans received (1,323,279) (18,029)

Interest paid (268,576) (195,554)

Net cash generated by financing activities (1,591,855) (213,583)

Effects from exchange rate changes 0 0

Net decrease in cash and cash equivalents (22,608) (401,823)

Cash and cash equivalents at the beginning of the year 1,390,741 2,020,209

Cash and cash equivalents at end of the year 1,368,133 1,618,386

ABC Aerolíneas, S.A. de C.V. and Subsidiaries

Unaudited Consolidated Statements of Cash Flows


For the three months ended March 31, 2017 and 2016



Glossary

ASK

Means, (available seat kilometer).

Represents the total number of seats flown by an airline multiplied by the number of kilometers

flown.

RPK

Means, (revenue passenger kilometer)

Represents the number of kilometers flown by paying customers.

Load Factor

It means the total seats filled airplane seats average.

It is determined by dividing the total RPK's between ASK's.

YIELD

It means performance indicator of pesos per kilometer.

YIELD POR RPK

It is determined by dividing passenger revenues divided by RPK's.

RASK

Means, (Revenues per Available Seat Kilometer)

It is determined dividing the TOTAL INCOMES between ASK's.

CASK

Means (Cost of Available Seat Kilometer)

Unitary average cost calculated by dividing total operating expenses by ASKs

CASK excluding fuel

It is determined by dividing total expenses, less fuel consumption, including ASK's.

1q= first quarter...abc aerolíneas, sa de cv * blvd. puerto aéreo s/n zona federal del aeropuerto...

Documents