3q 2013 passenger business highlights...
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Corporate Presentation B787 Dreamliner
December 2016
Disclaimer
The material that follows comprises information about Avianca Holdings S.A. (the “Company”) and its subsidiaries, as of the date of the presentation. It has been prepared solely for
informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities and should not be treated as giving legal, tax, investment or other advice to potential
investors. The information presented or contained herein is in summary form and does not purport to be complete.
No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness, or completeness of this information. Neither the Company
nor any of its affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation. The
information presented or contained in this presentation is current as of the date hereof and is subject to change without notice, and its accuracy is not guaranteed. Neither the Company nor
any of its affiliates, advisers or representatives makes any undertaking to update any such information subsequent to the date hereof.
This presentation contains forward-looking statements, which are based upon the Company and/or its management’s current expectations and projections about future events. When used in
this presentation, the words “believe,” “anticipate,” “intend,” “estimate,” “expect,” “should,” “may” and similar expressions, or the negative of such words and expressions, are intended to
identify forward-looking statements, although not all forward-looking statements contain such words or expressions. Additionally, all information, other than historical facts included in this
presentation is forward-looking information. Such statements and information are subject to a number of risks, uncertainties and assumptions. Forward-looking statements are not guarantees
of future performance and actual results may differ materially from those anticipated due to many factors. As for forward-looking statements that relate to future financial results and other
projections, actual results may be different due to the inherent uncertainty of estimates, forecasts and projections. Because of these uncertainties, potential investors should not rely on these
forward-looking statements. Neither the Company nor any of its affiliates, directors, officers, agents or employees, nor any of the shareholders or initial purchasers shall be liable, in any
event, before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation or
for any consequential, special or similar damages.
Certain data in this presentation was obtained from various external sources, and neither the Company nor its affiliates, advisers or representatives has verified such data with independent
sources. Accordingly, neither the Company nor any of its affiliates, advisers or representatives makes any representations as to the accuracy or completeness of that data, and such data
involves risks and uncertainties and is subject to change based on various factors.
In addition to IFRS financials, this presentation includes certain non-IFRS financial measures, including Adjusted EBITDAR, which is commonly used in the airline industry to view operating
results before depreciation, amortization and aircraft operating lease charges, as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and
other asset acquisitions. However, Adjusted EBITDAR should not be considered as an alternative measure to operating profit, as an indicator of operating performance, as an alternative to
operating cash flows or as a measure of the Company’s liquidity. Adjusted EBITDAR as calculated by the Company and as presented in this document may differ materially from similarly titled
measures reported by other companies due to differences in the way these measures are calculated. Adjusted EBITDAR has important limitations as an analytical tool and should not be
considered in isolation from, or as a substitute for an analysis of, the Company’s operating results as reported under IFRS.
The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or
services of the Company or this proposed offering.
2
Avianca at a glance
A leading airline in Latin America
1
Colombia Domestic1
Intra Home Markets2
Home Markets – N. America2
Home Markets – S. America2
A Star Alliance Member
Source: Company, Aeronáutica Civil de Colombia, and internal data derived from Travelport Marketing Information Data Tapes (“MIDT”) 1 Based on passengers transported during the 12-month period ended December 31, 2016; 2 In 2014. According to internal information Avianca derives from MIDT, the Company believes they are the market leader in terms of passengers carried on international flights within the Andean region and Central America (home markets), and leader in terms of international air passengers carried from home markets to both North America and South America; 3 Includes Jet Operative Fleet only; 4 As of December 30, 2016
26 countries
100+ Destinations
Average Jet Passenger Aircraft Age of 5.96Years 3,4
5,700 Weekly Departures
3 Hubs:Bogota, San Salvador, and Lima
181 Aircraft 4
2014 2015 2016 CAGR
Passengers (mm) 26.2 28,3 29,5 6.1%
ASKs (bn) 41.1 44,6 47,1 7.1%
RPKs (bn) 32.6 35,4 38,2 8.2%
Revenues (US$bn) $4.7 $4.4 $4.1 -6.6%
EBITDAR (US$mm) $787 $797 $879 5.7%
EBITDAR Margin 16.7% 18.8% 21.5% -
3
4
Avianca Holdings S.A. Strong Fundamentals
Leading Airline in High Potential Latin American Markets1
Demonstrated Track Record of Business Combinations and Value Creation2
Successful Operational Improvements Paving the Way for Profitable Growth3
Diversified Sources of Revenue with Growing Non-Passenger Businesses4
5Near-Term Focus on Cash Flow Generation
5
SUCCESSFUL INTEGRATION
Avianca-Taca: an integration plan with significant profitable growth potential
Avianca’s successful strategy since the February 2010 combination…
… is only the first part of a well-defined integration plan
Focus on organizationand people
• A single management team was
promptly appointed
• PMI project management drove
synergy capture
Complementary networksand fleet
• 2 overlapping routes pre merger; 40
new routes since 2010
• Multi-hub system provides better
geographic coverage
Focus on service and clear customer strategy
• “Latin Excellence”
• Target customer: “Modern Latin”
Phase 1: Commercial and Passenger Service Integration
6
7,0% -8,0%
8,7% -9,2%
6.6%5.3%
2010 2011 2012 2013 2014 2015
Single Brand
Core Systems Migration
Star Alliance Single Web Page
Single Commercial Code
Revenue Management Optimization
Ancillary Revenue
LifeMiles Maximization
Single Loyalty Program
Single Management Team
Single Operations Management
Fleet Interchange
Airport Optimization Model MRO
Network & Commercial Integration
EBIT Margin
Year
5.3% 6.6% 6.2%
Phase 2: Operational and Administrative Integration
ERP
Intra Hub connectivity
8.4% 5.9%
6
Cost Control Initiatives
Network/Fleet Optimization
CEO
~4.5*%
* Singles sum of the EBIT contribution of both Avianca S.A. and GTH
100% lower fuel benefits
Revenue Enhancing Initiatives
Cost Reduction Initiatives
2016
7.2%
7
FOOTPRINTIn high growthLatin AmericanMarkets
88
• San Salvador Hub
Operate from CAM, Caribbean and MEX, and SAM
• Lima Hub
Connect From the South to MIA, JFK, MEX and MAD
• Increase banks during the Day
Operate Morning and afternoon banks with wide body
• Evaluate New Destinations
Toronto and Boston from BOG
Europe (Frankfurt)
• Immigration to US from EDR+ Global Entry for COL, ECU and PE
Comprehensive network in Latin America Convert Bogota into the “Super” HUB
Create Alternative Banks
Improve Connectivity
Source: Company Information
Avianca’s footprint connects Latin America with robust fundamentals to the world
New destinations to the U.S. improve competitive position with other U.S. Carriers
Strengthen Strategy to Europe From Bogota and Lima
• From Ecuador
To the central and western US through SAL (as an option LAX from BOG
• From Medellin, Cali
To MEX, CAM, US Central and SFO through SAL
• From Medellin, Cali & Dom Col
To Lax, US and rest of Europe Through BOG
• From BAQ /CTG
To CAM, Caribbean, and US Mex Through SAL
• From PERU
to CAM, US central and SFO through SAL
9
61.6%
11.9%
12.3%
4.5%
Others
9.7%
3,2
7,6
1,3
3,7 1.9
3,9
2002 2014
Colo
mbia
Dom
estic
1
4,1
16,6
2,1
9,1 2.0
7,5
2002 2015
11,0
34,9
8,1
23,1 2,9
11,8
2002 2016
Avianca is a market leader in Latin American markets with strong passenger growth trends
Source: Colombian Civil Aviation Authority, Peruvian Civil Aviation Authority, and Ecuadorian Civil Aviation Authority.Note: Market share based on number of passengers1 As of December 2016; 2 As of July 2016
Market Share in Key Markets
50,2%
Others
1.4%
48,4%1
Passenger evolution (mm)
Colombia1 Peru2
15,2 16,7
2,4 2,6
12,8 14,1
2010 2014
EcuadorCentral America
166%
Intra-home markets
124%
Home marketsto N. America
137%
Home marketsto S. America
Peru
Dom
estic
2Centr
al Am
eri
ca
3,1x4,0x
2.2x
1,1x
Domestic International
9
57.8%
18.2%
13.5%
Others
5.5%4.2%
0.9%
1
32010 market share:
Avianca: 2.7%
LAN: 70.3%
+ 4.0%
+ 13.6% + 16.5% 86.3%
+ 7.7%
+ 5.4%
+ 9.9%
82.6%
71.1%
+ 1.6% + 4.1% 79.4%
+ 5.6% + 3.2% 73.9%
+ 6.9% 84.0%+ 10.2%
Central America & Caribbean4
HM to North America2
Home Markets to Europe
Domestic*
Intra Home Markets1
HM to South America3
Increasing Load Factors are the result of Avianca’snetwork flexibility and strong traffic numbers
Total
FY2016 ASK Growth
FY2016 RPK Growth
FY2016Load Factor
Region
ASK Growth 5.9%
RPK Growth 7.8%
Load Factor81.1%
+ 9.1%
*Domestic Market: Colombia, Peru, Ecuador 1 Local Intra-Markets: Colombia, Peru, Ecuador, Salvador, Costa Rica, Guatemala; 2 From Local Markets to North América including México 3 From Colombia, Perú, Ecuador and Costa Rica to Bolivia, Chile, Argentina, Brazil ,Uruguay and Venezuela, 4 Belize, Cuba Curazao, Republica Dominicana, Panamá, Costa Rica, Guatemala, Honduras, Nicaragua
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MODERN
FLEETPassenger
Aircraft Type Sep.2016 In Out Dec.2016
Airbus A320 Family1 110 +2 -2 110
ATR – 72 15 - - 15
Cessna 208 11 +2 - 13
Boeing 787 9 +1 - 10
Embraer E190 10 - - 10
Airbus A330 9 - - 9
Airbus A330F 5 - - 5
Airbus A300F 4 +1 - 5
ATR – 42 2 - - 2
Boeing 767F 2 - - 2
Total 177 +6 -2 181
Projected 2017 +6 -3 184
During 2016 we advanced in our fleet plan execution
4Q2016 Operating Fleet Status Capacity
100/194 pax2
68 pax
12 pax
250 pax
96 Pax
252 pax
68 tons
40 tons
48 pax
53 tons
Source: Company 1 A320 Family Seating Capacity: A318: 100pax, A319: 120pax, A320: 150pax, A321: 194pax. 12
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Total
B-787 3 2 - 3 - - - - - - 8
A320s 5 - - - - - - - - - 5
A320neo - 2 5 8 20 23 20 20 20 18 136
Total 8 4 5 11 20 23 20 20 20 18 149
… and a renewed calendar of incorporations
Source: Company, Airbus, and Boeing1 Comparisons made against the original A320 family2 According to Boeing3 Nautical miles
Fleet CAPEX financing:
• ~20% Equity and ~80% Debt:
– Multilateral facilities (ECAS&EXIM): 59%
– Sale & Lease Back: 41%
Future orders create footprint for higher profitability going forward
Cost reductions
• A320 Neos: 15% less fuel consumption1
• Sharklets: Up to 3% cost savings1
• B787s: More fuel efficient than many similarly sized
airplanes2
Improved range and network performance
• A320neos provide up to 500nm1,3 of additional range
• Opportunity to upgage in congested markets
Increased regional capacity
• ATR72s to replace Fokker 50s
Increased cargo capacity• A330Fs: 40% more cargo capacity vs. previous cargo
fleet
A320 Neo
A330FATR72
Boeing 787
13
Long Term Fleet
Fleet Backlog
2011 to2016
11,566 12,093
44,513
47,145
4Q2015 4Q2016 FY2015 FY2016
9.1
8.6
9.7
8.6
4Q2015 4Q2016 FY2015 FY2016
9,216
10,138
35,478
38,233
4Q2015 4Q2016 FY2015 FY2016
Increasing Load Factors are the result of robust traffic numbers
Source: Company information
ASKs – millions RPKs – millions
Yield - US¢ Load Factor
+4.6%+10.0%
79.7% 83.8%
79.7% 81.1%
4Q2015 4Q2016 FY2015 FY2016
+7.8%+5.9%
15
1,032 1,105
4,251
4,082
4Q2015 4Q2016 FY2015 FY2016RASK1-US¢
8.9 9.1 9.5 8.7
229.7
257.1
797.5
879.5
4Q2015 4Q2016 FY2015 FY2016
8.18.3
9.0
8.0
4Q2015 4Q2016 FY2015 FY2016
FY 2016 results were also driven by a leaner cost structure
Revenues1 – millions CASK1 - US¢
EBITDAR1 – millions EBIT1 Margin
+7.1%
9.1% 9.2%
5.9%
7.2%
4Q2015 4Q2016 FY2015 FY2016
-10.7%-4.0%
+11.9%
+14bps
CASK1-ex Fuel
6.3 6.5 6.7 6.4
Margin1 22.3% 23.3% 18.8% 21.5% EBIT1
(Mlls) 93.9 102.1 249.2 295.4
10.3%
+137bps
16
Source: Company Information1. When indicated the figures exclude the following one-time items: $9.9M: severance payments associated to new organizational structure; $4.8M: extraordinary projects; $4.2M: 2017 A330 lease extension cost assumed in 2016; $5.9M: LifeMiles accounting methodology revision. 12M and 4Q2015 figures exclude one-time expenses informed on previous earnings releases and cargo discount
2.3%
Aircraft
67.8%
Bonds
19.5%
Corporate
Debt
12.8%
Debt evolution and amortization
Debt evolution
Debt amortization schedule (US$MM)
1 Current Installments of Long Term Debt + Long Term Debt – Cash* 2 Current Installments of Long Term Debt + Long Term Debt + (Aircraft Rentals 12M x 7) – Cash** Cash: Cash and cash equivalents + Restricted Cash + Available for sale securities + Short Term Certificates of bank deposits (Financial Statements -Note 8) + Long Term Restricted Cash (Financial Statements -Note 11)
Total debt by type (Dec,2016)
US$MM Dec.14 Dec.15 Dec.16
Total Debt 3,172 3,473 3,274
Cash & Cash Equivalents* 650 486 381
Net Debt¹ 2,522 2,987 2,893
Adjusted Net Debt² 4,617 5,210 5,094
266 293 273 261 233
30 29 29
550
0
111 61 58
59
70
2017 2018 2019 2020 2021
Aircraft Debt Bonds Corporate Debt
17
Balance sheet ratios
Capitalization ratio2
Net Adjusted debt to adjusted EBITDAR4
Cash1 as percentage of revenue
Adjusted EBITDAR – coverage ratio3
16.8%
13.8% 12.6%
9.5%
2013 2014 2015 2016
73.7%
79.3% 78.9% 78.2%
2013 2014 2015 2016
2,1x1,8x
1,58x1,73x
2013 2014 2015 2016
4,1x
5,9x
6.8x6.0x
2013 2014 2015 2016
Source: Company Note: All financial information is in accordance with IFRS 1 Cash at end of period; 2 Capitalization ratio calculated as adjusted net debt (including capitalized leases at 7.0x) divided by equity value plus adjusted net debt; 3 Adjusted EBITDAR coverage ratio calculated as adjusted EBITDAR divided by the sum of aircraft leases and interest expense; 4 Calculated as net adjusted debt (including capitalized leases at 7.0x) divided by adjusted EBITDAR
18
DIVERSIFIED SOURCESOF
REVENUE
Avianca Holdings: More Than an Airline
Source: Company Information(1) 5 Airbus 330F, 5 Airbus 300F and 2 Boeing 767F.(2) includes Domestic Colombian and Peru
Business Lines
PassengerTransport
Loyalty Business
Other Services
Courier and Cargo
Services
Business Overview Brands Key Highlights (2016)
■ Result of the combination of Avianca and
Taca with complementary operations in
Andean Region and Central America
■ Extensive route network from hubs in
Bogota, San Salvador and Lima
■ Member of Star Alliance since 2012
■ Aircraft maintenance, crew training and
other airport services to other carriers
■ Travel-related services to customers
including all-inclusive vacation deals
■ In-flight duty-free sales
■ 12 freighter aircraft complemented by passenger
fleet bellies
■ Deprisa is a leading express courier operation in
Colombia with broad domestic and international
product portfolio; UPS allied in Colombia
■ Strong brand recognition and reputation in
Colombia
■ One of the largest loyalty programs in Latin
America
■ Guaranteed exclusivity and seat availability
from Avianca
■ Solid burn-to-earn ratio
■ $3,285mm passenger revenue
■ 169 passenger aircraft(1)
■ 28 countries reached
■ 5,700+ weekly departures
■ 2,700+ hours of flight
simulators commercialized
■ 12 cargo aircraft(1)
■ 2,346mm ATKs(2)
■ 1,291mm RTKs(2)
■ 38% | 11% market Share
Colombia | Miami
■ 7.0+ mm members (FY2016)
■ 529+ active co-branded credit
cards
■ 314 commercial Partners
■ Freddie award winner 2013 –
2016
Courier
120
Deprisa: Leading Express Courier Operation in Colombia
21
• 3.5K active B2B clients, in this segment revenues increased 3.8% vs. 4Q’15
• With the help of a consulting firm, Deprisa started in 2016 an aggressive strategy in order to reach higher market shares (courier), capture short term savings and increase its productivity
• Deprisa has robust information systems that allow it to control its operation and connect with its clients
Highlights 4Q2016
Source: Aeronautica Civil. Information as of December 2016
Market Share FY 2016
Colombia*
15.1%
2016 2015
12.3%
6.9%
7.5%
14.6%
43.1%
Others
127
140
511
496
4Q2015 4Q2016 FY2015 FY2016
342367
1,265 1,291
4Q2015 4Q2016 FY2015 FY2016
+7.4%
+2.1%
583608
2,215
2,346
4Q2015 4Q2016 FY2015 FY2016
Avianca Cargo: Financial and Operational Results
Source: Company information. includes Domestic Colombian and Peru
Revenues – millions ATKs – millions
RTKs - millions Load Factor
+9.7% +4.3%
58.7% 60.4%
57.1% 55.0%
4Q2015 4Q2016 FY2015 FY2016
+5.9%-2.9%
22
LifeMiles Loyalty Program
23
• 4Q’16 revenues increased 7.7% vs 4Q15
• 529K active cobranded credit cards, an increase of 13.3% vs. 4Q’15
• More than 7.0 million members, an increase of 8.5% vs. 4Q’15
• 314 commercial partners, +10.6% vs 4Q’15
Highlights 4Q2016
New Commercial Partners
Peru:
Central America /North America South America
Source: Company information
Colombia“Best Redemption
Ability (Americas)“, “Best Promotion”
and “Up and ComingProgram of the Year”
2017
Avianca Holdings: Flight Plan 2017
ASK
LF
PAX
2016
4.2%
5.9%
81.1%
7.2%
Source: Company information.
EBIT1 %
25
Outlook 2017
4.0% - 6.0%
6.5% - 8.5%
80.0% - 82.0%
6.0% - 8.0%
Outlook 2016
3.0% - 5.0%
3.0% - 5.0%
78.0% - 80.0%
5.5% - 7.5%
In Summary
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As the Company successfully continues to optimize its coststructure and enhance profitability it has also:
Reduction in total debt (USD -198.7 million) to 3.3 million in 2016from 3.5 Billion in 2015
Improvement in leverage position (Net Adjusted Debt to EBITDAR)to 6.0x in 2016 from 6.8x on 2015
Achieved first year over year increase in Passenger Revenues(+4.5%) since 4Q2014
Managed to diminish top line pressure as yield trends start toshow recovery
Improved profitability by more than +290 bps reaching an EBITDARmargin of 21.7% in FY2016 vs 18.8% in 2015, the highest margin inthe last 3 years
Increased Load Factors by +139 bps vs 2015 to 81.1% as trafficnumbers grew 7.8% outpacing capacity growth
Thank YouContact Information:
Investor Relations [email protected] T: (57) 1 – 5877700 www.aviancaholdings.com
Reconciliation for Adjusted EBITDAR
This presentation includes certain references to non-IFRS measures such as our Adjusted EBITDAR and Adjusted EBITDAR margin. Adjusted
EBITDAR represents our consolidated net profit for the year plus the sum of income tax expense, depreciation, amortization and impairment,
aircraft rentals and interest expense, minus interest income, minus derivative instruments, minus foreign exchange. Adjusted EBITDAR is
presented as supplemental information, because we believe it is a useful indicator of our operating performance and is useful in comparing our
operating performance with other companies in the airline industry. However, Adjusted EBITDAR should not be considered in isolation, as a
substitute for net profit determined in accordance with IFRS or as a measure of a company’s profitability. These supplemental financial measures
are not prepared in accordance with IFRS or Colombian GAAP. Accordingly, you are cautioned not to place undue reliance on this information and
should note that Adjusted EBITDAR and Adjusted EBITDAR margin, as calculated by us, may differ materially from similarly titled measures
reported by other companies, including our competitors.
Adjusted EBITDAR is commonly used in the airline industry to view operating results before depreciation, amortization and aircraft operating lease
charges, as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other asset
acquisitions. However, Adjusted EBITDAR should not be considered as an alternative measure to operating profit, as an indicator of operating
performance, as an alternative to operating cash flows or as a measure of our liquidity. Adjusted EBITDAR as calculated by us and as presented in
this presentation may differ materially from similarly titled measures reported by other companies due to differences in the way these measures
are calculated. Adjusted EBITDAR has important limitations as an analytical tool and should not be considered in isolation from, or as a substitute
for an analysis of, our operating results as reported under IFRS or Colombian GAAP. Some of the limitations are:
• Adjusted EBITDAR does not reflect cash expenditures or future requirements for capital expenditures or contractual commitments;
• Adjusted EBITDAR does not reflect changes in, or cash requirements for, working capital needs;
• Adjusted EBITDAR does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on debt;
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the
future, and Adjusted EBITDAR does not reflect any cash requirements for such replacements;
• Adjusted EBITDAR does not reflect expenses related to leases of flight equipment and other related expenses; and
• other companies may calculate Adjusted EBITDAR or similarly titled measures differently, limiting its usefulness as a comparative measure.
28