Avianca Holdings S.A. 2Q 2013 Earnings Results Disclaimer This - - PowerPoint PPT Presentation

Avianca Holdings S.A. 2Q 2013 Earnings Results

Disclaimer

This presentation contains certain forward-looking statements. Such forward-looking statements involve a certain degree of risk and uncertainty with respect to the Company’s business, financial results, trends, strategy and projections, and are based on assumptions, data or methods which, although considered reasonable by the Company, may turn out to be incorrect, or may not be possible to realize. The Company gives no assurance that expectations disclosed in this presentation will be

• confirmed. Prospective investors are cautioned that any such forward-looking statements are not

guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements, due to a variety of factors. The Company specifically disclaims any obligation to update any forward-looking statements, which speak

• nly for the date they are made.

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2013 Industry Highlights

Environment

 Capacity worldwide, measured in ASK's, grew 3.9% during the first half of 2013 when compared to the same period in 2012, while traffic (RPK’s) increased 4.8%. As a result, load factor for the industry increased to 79.0%, up 0.8 pp when compared to the same period in 2012  During the first half of 2013 international air travel traffic (RPK’s) in Latin America grew well above the global pace at 8.7%, supported from strong business travel demand  During the first semester of 2013, the number of passengers carried in Latin America grew 6.7% when compared to the same period in 2012. Capacity, measured in ASK’s, increased 5.5% while traffic measured in RPK´s increased 7.0%. As a result the load factor increased to 76.2% from 75.1% in the same period last year  During the first half of 2013, the global freight business experienced a stabilization in the number of tons shipped of 0.1%, while Latin America maintained a stable growth trend of 1.6%.

Fuel Prices

 Fuel prices decreased on average 4.6% in the first half of 2013 while for the second quarter of this year prices decreased 6.5% over the same period in 2012

Exchange Rate

 The Colombian peso experienced, during the first half of 2013, a depreciation of nearly 9.1%. For the second quarter of this year the peso depreciated 5.3% over the same period in 2012

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Source: ALTA & IATA

Operating revenues reached USD $ 1.1 billion, an increase of approximately 7.6% over the same period of 2012 Operating income (EBIT) for 2Q 2013 was USD $ 35.3 million, an increase of USD$ 23.1 million over the same period of last year. Consequently operating margin increased to 3.2%, up from 1.2% in 2Q 2012 EBITDAR came in at USD $ 144.1 million, a 30.8% increase over the same period

• f last year. EBITDAR Margin for the quarter rose to 13.0% increasing 2.3 pp over

the same period of 2012 The cost per available seat kilometer excluding fuel costs (CASK ex Fuel) decreased 0.5% versus the same period of 2012 Capacity measured in ASK’s increased 8.7%, while passenger traffic measured in RPK’s rose 9.3%, outpacing Latin America and worldwide traffic growth . As a result, the load factor for the quarter increased to 78.2% from 77.7% in the previous year Passengers carried reached 5.9 million, increasing 9.6% over the same period of 2012.

In the second quarter of 2013 AVIANCA HOLDINGS reached a Net income of USD$ 70.3 million

     

2Q 2013 Results Highlights

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Source: Company information

(USD$ Millions) 2Q 2012 2Q 2013 % Var 2Q 2013 % VAR 2Q 2013 (Ex-Items)* 1H 2012 1H 2013 % VAR 1H 2013 % VAR 1H 2013 (Ex-Items)*

Total Operating Revenues 1,027.0 1,105.1 7.6% 7.6% 2,078.7 2,223.1 6.9% 6.9% Passenger 856.3 906.0 5.8% 5.8% 1,738.0 1,843.6 6.1% 6.1% Cargo and other 170.8 199.1 16.6% 16.6% 340.7 379.6 11.4% 11.4% Total operating expenses 1,014.9 1,069.9 5.4% 4.7% 1,984.9 2,085.1 5.1% 4.2% Expenses Excluding Fuel 700.7 757.5 8.1% 7.1% 1,345.0 1,432.9 6.5% 5.3% Aircraft fuel 314.2 312.4

• 0.6%
• 0.6%

639.9 652.2 1.9% 1.9% EBIT 12.2 35.3 +100% +100% 93.9 138.0 47.0% 74.2% EBIT Margin 1.2% 3.2% +2 pp +2.64 pp 4.5% 6.2% +1.69 pp +2.45 pp Net Income

• 44.8

70.3 +100% +100%

• 45.7

147.5 +100% +100% Net Margin

• 4.4%

6.4% +10.7 pp +9.8 pp

• 2.20%

6.64% +8.83 pp +8.83 pp EBITDAR 110.2 144.1 30.8% 38.2% 289.8 344.9 19.0% 25.7% EBITDAR Margin 10.7% 13.0% +2.3 pp +2.9 pp 13.9% 15.5% +1.57 pp +2.33 pp  Avianca Holdings consolidated operating revenues increased by 7.6%, leveraged by a strong growth 9.6% in passengers carried  Total Operating Revenues grew 7.6% while Total Operating expenses grew 5.4%. Excluding special items Total Operating expenses increased only 4.7%  Operating profit grew by USD$ 23 million over the same period of 2012, while operating margin increased by 2.2 pp reaching 6.2%  Net income for the second quarter of 2012 includes a foreign exchange loss of USD$ 27.3 million and net income for the same period in 2013 includes a profit of USD$ 71.2 million profit

EBIT = Operating Income, EBITDAR = earnings before interest, tax, depreciation, amortization and aircraft rentals

*

• Ex-Items: Excluding Gain/Loss on sale of property and equipment

Source: Company information

2Q 2013 Earnings Results Summary

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1,014.8 1,066.9 1,018.7 1,069.9 3.80 16.11 8.03 6.78 6.10 6.03 4.74 3.49 0.75

• 1.87
• 1.89

2.93

Total Costs Highlights

(Numbers expressed in million of USD$)

Excluding special items total costs increased in USD $48.3 Million

• *Ex-Items: Excluding Gain/Loss on sale of property and equipment
• Others Include: Air Traffic & Flight Operation

2Q 2013 Earnings Results

+4.7%

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Source: Company information

41.70 69.49 37.90 72.42

• 3.80

49.70 28.30 1.89 1.87 16.10 8.00 6.78 6.09 6.03 3.49 0.75 2.93

EBITDA Highlights

(Numbers expressed in million of USD$)

Excluding special items EBITDA increased in USD$ 34.5 Million

+91.3%

2Q 2013 Earnings Results

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Source: Company information

* Cash and Cash equivalents under IFRS standards expressed in USD$ Millions

2Q 2013 Cash Balance

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 En el 4T 2012 se tuvieron los siguientes movimientos de caja:  Adicionalmente, la compañía a Septiembre de 2012 contaba con: * Cash US$MM Cash/Revenue LTM US$MM

Concepto US$ Millones

Generación de caja operativa 128.8 Pago de Pensiones (8.5) Pago de Intereses (18.1) Pago de PDP's (40.1) Pago de deuda (56.1) Otros (39.6)

Total (33.6) Concepto US$ Millones

Depósitos para compra de flota 266.5 Depósito para mantenimiento aeronaves 151.4 Depósito para arrendamiento aeronaves 106.2

Total 524.1

 AVH Cash Position highlights the following variations for the 2nd Q13:  AVH has made the following cash deposits:

511 466 425 630 13.4% 10.9% 9.8% 14.3%

2011 2012 1Q-2013 2Q-2013

Deposits US$ Millions

PDP's 359.5 Maintenance Reserves 161.5 Security Deposits for Operating Leases 37.1

Total 558.1

Variations US$ Millions Net Financing Activities 295 Operating Cash Flow 81 Asset Sales 13 Interests (17) Others (19) PDP's (32) Dividend Payments (37) Debt Payments (79) Total 205

Source: Company information

During the second quarter of 2013 realized hedge losses summed up to USD$ 1.0 million, which accounted for 27% of the gallons hedged. Hedged 164 million gallons, approximately 31% of the expected volume to be consumed

• ver the next 12 months

The average hedge price per gallon stands at USD$ 2.92 / gallon

Source: Company information

2Q 2013 Fuel Hedging Strategy

33% 31% 25% 17% 1% 1% 14% 15% 17% 14%

0% 10% 20% 30% 40% 50%

3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014

FUEL HEDGE (% Consumption)

H.O SWAP H.O CALL OPT

46% 43% 31% 1% 1% 47%

INSTRUMENT 3Q -13 4Q -13 1Q -14 2Q -14 3Q -14 4Q -14 H.O SWAP (USD) 2,887 2,909 2,921 2,892 2,799 2,790 H.O CALL OPT (USD) 2,933 3,010 2,981 2,854 * Hedge in Heating Oil

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Capacity (ASK’s millions) Traffic RPK’s (millions) Load Factor

2Q 2012 2Q 2013

9.3% 8.7%

Yield (USD$)* RASK (USD$)

• 3.2%
• 1.0%

CASK - Exfuel (USD$)

• 0,5%

77.7% 78.2% 9,506 8,748 7,435 6,801 12.6 12.2 11.7 11.6 8.01 7.97 0.5 pp

Capacity (ASK’s millions) Traffic (RPK’s millions) Load Factor Yield (USD$) TRASK (USD$) CASK* - Exfuel (USD$)

2Q 2013 Passenger Business Highlights

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QoQ Total CASK decreased 3.0% *Accounting Cask includes all business segments (Passenger, Cargo & Other)

Source: Company information

+22.8% +4.4%

International Network Domestic Network Colombia – Peru - Ecuador Regional Network Central America

3 HUBS  Bogota  San Salvador  Lima 3 Complementary

Focus Cities

 San Jose  Quito  Guayaquil

Avianca routes Destinations HUBS Complementary Focus Cities Map Conventions

Guayaquil Pereira Armenia Ibague Bucaraman ga La Paz Santa Cruz de la Sierra Waspan Puerto Cabezas Blue Field Corn Island San Carlos San Juan del Norte La Fortuna/Arenal Bonanza Sluna Rosita Tamarindo Tambor Quepos/Manuel Antonio Bahía Draka Palmar Sur Puerto Jimenez Golfito

Taca Regional routes Destinations HUBS Complementary Focus Cities Map Conventions

South America North America Europe (Spain)

Total ASK

Growth

8.7%

Map Conventions Avianca,Taca, Aerogal routes Destinations HUBS Complementary Focus Cities Map Conventions

Intra Home Markets Domestic CAM & CAR

+1.05% +0.41% 18.7% 17.8%

Diversified Capacity Growth

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Source: Company information

+14.9% +13.5% +18.3% +8.85%

International Network Domestic Network Colombia – Peru - Ecuador Regional Network Central America

3 HUBS  Bogota  San Salvador  Lima 3 Complementary

Focus Cities

 San Jose  Quito  Guayaquil

Avianca routes Destinations HUBS Complementary Focus Cities Map Conventions

Guayaquil Pereira Armenia Ibague Bucaraman ga La Paz Santa Cruz de la Sierra Waspan Puerto Cabezas Blue Field Corn Island San Carlos San Juan del Norte La Fortuna/Arenal Bonanza Sluna Rosita Tamarindo Tambor Quepos/Manuel Antonio Bahía Draka Palmar Sur Puerto Jimenez Golfito

Taca Regional routes Destinations HUBS Complementary Focus Cities Map Conventions

South America North America Europe (Spain)

Total RPK

Growth

9.3%

Map Conventions Avianca,Taca, Aerogal routes Destinations HUBS Complementary Focus Cities Map Conventions

Intra Home Markets Domestic CAM & CAR

+2.8% +7.8%

Diversified Traffic Growth

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Source: Company information

71.5%

International Network Domestic Network Colombia – Peru - Ecuador Regional Network Central America

3 HUBS  Bogota  San Salvador  Lima 3 Complementary

Focus Cities

 San Jose  Quito  Guayaquil

Avianca routes Destinations HUBS Complementary Focus Cities Map Conventions

Guayaquil Pereira Armenia Ibague Bucaraman ga La Paz Santa Cruz de la Sierra Waspan Puerto Cabezas Blue Field Corn Island San Carlos San Juan del Norte La Fortuna/Arenal Bonanza Sluna Rosita Tamarindo Tambor Quepos/Manuel Antonio Bahía Draka Palmar Sur Puerto Jimenez Golfito

Taca Regional routes Destinations HUBS Complementary Focus Cities Map Conventions

South America North America Europe (Spain)

Total LF

Growth

78.2%

Map Conventions Avianca,Taca, Aerogal routes Destinations HUBS Complementary Focus Cities Map Conventions

Intra Home Markets Domestic CAM & CAR

82.8% 76.0% 87.5% 75.3% 68.7%

Network optimization

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Source: Company information

3.027.120 847.760 510.760 485.937 468.297 294.626 165.744 131.188

Domestic Colombia 14,7% North America 3,91% CAM/CAR 5,86% South America 6,02% Intra Home Markets 13,08% Domestic Peru 23,68% Domestic Ecuador -34,38% Europe 20,41%

+ 9.6%

2Q 2012 Vs 2Q 2013 Pax Growth

Diversified Passenger Growth

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Source: Company information

60,21% 12,90% 29,88% 55,48% 15,12%* 20,81% Colombia Peru Ecuador

 Sustained leadership in the Colombian Domestic Market with a 55.48% market share as of June 30th 2013  During the first semester of 2013 the Colombian domestic market grew by more than 25% in number of passengers

Domestic Market Share by Country 2Q 2012 2Q 2013

A market leader in the Andean Region and Central America

*Data as of March 30th 2013

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Source: Company information

Internacional Markets Share by Region

The integration of Avianca Holdings route network has consolidated the company's leadership and passenger traffic between its home markets, generating significant connectivity in the Americas. This has enabled:  An increase in passenger traffic in domestic markets  Enhanced service from our home markets to international destinations  To efficiently occupy the capacity incorporated in the different markets  Offer a wider choice of possibilities to connect two destinations in the region

2Q 2012 2Q 2013

A market leader in the Andean Region and Central America

68,75% 28,09% 44,48% 29,48% 68,22% 27,40% 43,14% 30,83% Home Markets Home Markets to NAM Home Markets to SAM Home Markets to Spain

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Source: Company information

 As the company implements its cargo fleet renovation plan it will reorganize and optimize its current cargo

• network. As the company does not do segment reporting; it is assumed that due to the increase in capacity

the CATK has been reduced during the first half of 2013

2Q Cargo Business Highlights

Capacity (ATK’s Thousands) Shipped Tons Load Factor Average Fare (USD$)

1Q 2012 1Q 2013

6.9% 10.9% 237,756 263,785 67.9% 63.8% 4.1pp 1.10 0,98

• 11.6%

60,365 66,330

Capacity (ATK´s Thousands) Tons Shipped Load Factor Average Fare ($USD)

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Source: Company information

2Q 2013 Highlights

 Increased frequencies from and to the Bogota hub as part of the network optimization plan on the following routes:

• 1F BOGSMR

7F BOGRCH

• 14F BOGCTG

6F BGAMDE

• 7F BAQBOG

4F BOGMAD

• 14F BOGCLO

3F BOGPUJ

• 10F BOGMDE

1F BOGHAV

• 4F BOGCUC

3F BOGGYE

 Implemented the second frequency to Madrid (Spain) from the Bogota Hub.  During the second quarter of 2012 the company launched its single commercial brand: Avianca  Avianca S.A was recognized by Skytrax as the airline with the best onboard and airport service in South America  LifeMiles was chosen as the Frequent Flyer Program with the Best Redemption Ability in the Americas, by one of the most recognized awards in the industry: the Freddie Awards.  In Line with the fleet renewal plan, the company continues to incorporate new aircraft to its operation:  2 A320 equipped with sharklets  During the second quarter the company took delivery of the first ATR 72 FLEET NETWORK MILESTONES

Source: Company information

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In Summary

• During the second quarter the company has continued with

its leadership and consolidation strategy in Latin America

• The company continues to expand its passenger network,

while outperforming the growth in traffic in Latin America and worldwide

• The cost reducing initiatives implemented so far have resulted

into relevant margin expansion :

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• Operating income increasing by USD$ 23.1 million over the same

quarter of last year and USD$ 138.0 million over the first semester of 2012

• Operating margin of 3.2%, up from 1.2% in 2Q 2012 and increasing

to 6.2% in the first half 2013 over the same period last year

• EBITDAR Margin of 13.0% (+2.3 pp) and 15.5% (+1.6pp) in the

first quarter and in the first half of 2013 over the same period of 2012 respectively

Source: Company information

Outlook 2013

ASK

8% - 10% 10 - 12% 77% - 79%

EBIT %

6.5% - 7.5%

LF PAX

The results obtained on this second quarter are in line with the Companies full-year 2013 outlook

Source: Company information

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Thank You

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