Avianca Holdings S.A. First Quarter 2013 Earnings Presentation May - - PowerPoint PPT Presentation

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First Quarter 2013 Earnings Presentation

May 23 2013

Avianca Holdings S.A.

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Avianca Holdings S.A.

Avianca Holdings S.A.

The present document consolidates information from Avianca Holdings SA and its subsidiaries including unaudited financial figures, operational managerial indicators, financial indicators and managerial projections of future performance, in line with Avianca Holdings SA and its subsidiaries business plan. References to future behaviors are indicative and do not constitute a guarantee of compliance by the Company, its shareholders or directors. Unaudited accounting and financial information and projections presented in this document are based on internal data and calculations made by the company, which may be subject to changes or adjustments. Any change in the current economic conditions, the aviation industry, fuel prices, international markets and external events, among others, may affect the ongoing business results and future projections. Avianca Holdings S.A. herein after Avianca Holdings and its subsidiaries warns investors and potential investors that future projections are not a guarantee of performance and that actual results may differ materially. Every investor or potential investor will be responsible for investment decisions taken or not taken as a result of his or her assessment of the information contained herein. Avianca Holdings S.A. is not responsible for any third parties content. Avianca Holdings may make changes and updates to the information contained herein. The information, tables and logos contained in this presentation may not be reproduced without the consent of Avianca Holdings SA

Avianca Holdings S.A.

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Avianca Holdings S.A.

Avianca Holdings S.A.

1Q 2013 Earnings Call

AGENDA

1.The Industry Gerardo Grajales 2.Transition to IFRS Milton Solano 3.Earnings Results 1Q 2013 Gerardo Grajales

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Avianca Holdings S.A.

Avianca Holdings S.A.

AGENDA

1.The Industry Gerardo Grajales 2.Transition to IFRS Milton Solano 3.Earnings Results 1Q 2013 Gerardo Grajales

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Avianca Holdings S.A.

Avianca Holdings S.A.

Environment

 Capacity worldwide, measured in ASK's, grew 2.3% during the first quarter of 2013 compared to the same period in 2012, while the load factor for the industry increase to 78.3%, up 1.5 pp compared to that obtained in 2012  During the first quarter of 2013, the number of passengers carried in Latin America grew 5.9% when compared to the same period in 2012. Capacity, measured in ASK’s, increased 5.4% while traffic measured in RPK´s increased 7.4%. As a result the load factor increased to 76.4% from 75.1% in the same period last year.  During the quarter, the global freight business experienced a slowdown in the tons shipped of

• 1.1%, however Latin America maintained a stable trend.

Industry Analysis 1Q 2012 vs. 1Q 2013

Sourcee: IATA, ALTA *End Of Period .

Fuel Prices

 Fuel prices decreased on average about 2.8% in the first quarter of 2013 compared to the same period in 2012.

Exchange Rate

 The Colombian peso experienced, during the first quarter of 2013, a depreciation of nearly 2.2%*

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Avianca Holdings S.A.

Avianca Holdings S.A.

AGENDA

1.The Industry Gerardo Grajales 2.Transition to IFRS Milton Solano 3.Earnings Results 1Q 2013 Gerardo Grajales

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Avianca Holdings S.A.

Avianca Holdings S.A.

Transition to IFRS

IFRS Effect on Avianca Holdings’ 1Q 2012 Net Income

Figures expressed in thousands of USD

34,890 (2) 8,115 7,544 6,008 4,422 1,814 (19,553) (45,953) 2,711

IFRS accounting has no impact on cash flows

(2,298) (63,208)

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Avianca Holdings S.A.

Avianca Holdings S.A.

Transition to IFRS

IFRS Effect on Avianca Holdings’ as of Dec 31st 2012 Shareholders Equity Position

Figures expressed in thousands of USD

1,184,067 747,644 71,186 24,896 17,621 (61,670) (71,654) (110,983) (303,961) (1,858) ,000 ,000 ,000 ,000 ,000 ,000 ,000 (282,581) (132,363)

IFRS accounting has no impact on cash flows

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Avianca Holdings S.A.

Avianca Holdings S.A.

AGENDA

1.The Industry Gerardo Grajales 2.Transition to IFRS Milton Solano 3.Earnings Results 1Q 2013 Gerardo Grajales

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Avianca Holdings S.A.

Avianca Holdings S.A. Operating revenues reached USD $ 1.11 billion, an increase of nearly 6.0%

• ver the same period of 2012

Operating income (EBIT) for 1Q 2013 came in at USD $ 108.1 million, a 31% increase over the same period of last year. Consequently operating margin increased to 9.7%, up from 7.8% in 1Q 2012. EBITDAR came in at USD $ 205.2 million, a 14.2% increase over the same period of last year. EBITDAR Margin for the quarter rose to 18.3% increasing 4.3 pp over the same period of 2012 The cost per available seat kilometer excluding fuel costs (CASK ex Fuel) decreased 1.85% versus the same period of 2012 Capacity measured in ASK’s increased 5.4%, while passenger traffic measured in RPK’s rose 7.8%. As a result, the load factor for the quarter increased to 80.8% from 79.0% in the previous year. Passengers carried reached nearly 6.0 million, increasing 8.9% over the same period of 2012.

1Q 2013 Earnings Results Highlights

In the first quarter of 2013 AVIANCA HOLDINGS reported a Net income of USD$ 75.3 million

     

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Avianca Holdings S.A.

Avianca Holdings S.A.

(USD$ Millions) Q1 2012 Q1 2013 % Var Q1 2013 % VAR Q1 2013 (Ex-Items)* Total Operating Revenues 1,056.9 1,118.8 5.9% 5.9% Passenger 882.7 940.3 6.5% 6.5% Cargo and other 174.2 178.5 2.5% 2.5% Total operating expense 974.5 1,010.7 3.7% 2.7% Expenses Excluding Fuel 648.8 670.9 3.4% 1.8% Aircraft fuel 325.7 339.8 4.3% 4.3% EBIT 82.4 108.1 31.1% 48.5% EBIT Margin 7.8% 9.7% 1.9 pp 2.8 pp Net Income

• 0.0

75.3 +100% 63.4% Net Margin 0.00% 6.73% 6.7 pp 2.3 pp EBITDAR 179.6 205.2 14.2% 20.9% EBITDAR Margin 17.0% 18.3% 1.3 pp 2.3 pp

1Q 2013 Earnings Results Summary

 AVIANCATACA operating revenues increased by 5.9%  Leveraged by a strong growth (8.9%) in passenger numbers, mail and tons carried  Ex-Items: Excluding 2012 and 2013 special items associated to fuel hedging M2M instruments and foreign exchange non operating expenses, net income rose 63.4%  Total Operating Revenues grew 5,9% while Total Operating expenses grew 3.7%. Excluding one time items Total operating expenses grew only 2.7%

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

*

• Ex-Items: Excluding Gain/Loss on sale of property and equipment as well as fuel hedging and foreign exchange non operating expenses

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Avianca Holdings S.A.

Avianca Holdings S.A.

0,00 0,00 0,00 0,00 0,00 0,00 Operating Revenue 2012 Passengers Cargo & Others Operating Revenue 2013

+5.9%

1Q 2013 Operating income highlights

Figures expressed in millions of USD

1,118.8 1,056.9

1Q 2013 Earnings Results

57.6 4.3

Total Operating Revenue increased by USD $61.9. Million

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Avianca Holdings S.A.

Avianca Holdings S.A.

0,00 0,00 0,00 0,00 0,00 Total Costs 2012 Q1 2012 Gain on Asste Sales Total Costs 2012* Fuel Ground Ops G&A Wages Air Traffic Rentals Others D&A Sales Manto Total Costs 2013 Q1 2013 Loss on Asste Sales Total Costs 2013*

1Q 2013 Total Costs Highlights

Numbers expressed in million of USD$ Excluding special items total costs increased in USD $26.1 Million

• Ex-Items: Excluding Gain/Loss on sale of property and equipment
• Others Include: Flight Operations & Passenger Services

1Q 2013 Earnings Results

974.5

+2.7%

1,009.2 983.2 6.8 6.3 4.5

• 2.1
• 2.3
• 8.1

1,010.7 -1.5 8.6 14.2 2.8 2.0 2.0

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Avianca Holdings S.A.

Avianca Holdings S.A.

0,00 0,00 0,00 0,00 0,00 0,00 EBITDA 2012 1Q 2012 Gain on Asste Sales EBITDA 2012* PAX Other Revenues Manto Sales Fuel Ground Ops G&A Wages Air Traffic Rentals Others EBITDA 2013* 1Q 2013 Loss on Asste Sales EBITDA 2013

1Q 2013 EBITDA Highlights

Numbers expressed in million of USD$ Excluding special items total costs increased in USD$ 33.7 Million

1Q 2013 Earnings Results

+31.5%

115.7 - 8.7 107.1 57.6 4.3 2.3 8.1

• 14.1
• 6.8

140.7 1.5 139.3

• 6.3
• 4.5
• 2.1
• 2.0
• 2.8
• Ex-Items: Excluding Gain/Loss on sale of property and equipment
• Others Include: Flight Operations & Passenger Services

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Avianca Holdings S.A.

Avianca Holdings S.A.

1Q 2013 Cash Balance

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

 En el 4T 2012 se tuvieron los siguientes movimientos de caja:  Adicionalmente, la compañía a Septiembre de 2012 contaba con:

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 1ST Q13:  AVH has made the following cash deposits: Deposits US$ M PDP's 272.7 Maintenance Reserves 155.3 Security Deposits for Operating Leases 32.6 Total 460.6 Variations US$ Operating Cash Flow 112 Debt Payments (50) PDP´s (44) Exchange difference (18) CAPEX (17) Interest (17) Others (15) Delivery Payments (6) Total (55) * Cash US$MM Cash/Revenue LTM US$MM

511 480 425 13.4% 11.2% 9.8%

2011 2012 1Q-2013

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Avianca Holdings S.A.

Avianca Holdings S.A.

13% 11% 9% 8% 6% 15% 13% 14% 17% 4%

Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014

FUEL HEDGE (% Consumption)

H.O SWAP H.O CALL OPT H.O COLLAR OPT

28% 24% 23% 25% 10%

1Q 2013 Fuel Hedging strategy

During the first quarter of 2013 realized hedge losses summed up to USD$ 2.5 million, which accounted for 34% of the gallons hedged for the quarter. Hedged about 104 million gallons, approximately 25% of the volume to be consumed over the next 12 months The average hedge price per gallon stands at USD$ 2.92 / gallon

Fuel hedge as of March 31 2013

INSTRUMENT 2Q -13 3Q -13 4Q -13 1Q -14 2Q -14 H.O SWAP (USD) 2.90 2.89 2.91 2.92 2.91 H.O CALL OPT (USD) 2.93 2.93 3.01 2.98 2.89 * Hedge in Heating Oil

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Avianca Holdings S.A.

Avianca Holdings S.A.

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

1Q 2012 1Q 2013

7.8%

1Q 2013 Passenger Business Highlights

5.4%

Yield (USD$)* RASK (USD$)

• 1.2%

0.48%

CASK - Exfuel (USD$)

• 1.8%

79.0% 80.8% 9,351 8,876 7,559 7,012 12.6 12.4 11.9 12.0 7.31 7.17 1.8 pp

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

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Avianca Holdings S.A.

Avianca Holdings S.A.

• 0.94%

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

Taca Regional routes Destinations HUBS Complementary Focus Cities Map Conventions

South America North America Europe (Spain)

Diversified capacity growth

Total ASK

Growth

5.4%

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

Intra Home Markets Domestic CAM & CAR

• 2.13%

+6.7% +5.3% 15.7% 9.8%

HM: Home Markets COL, PER, ECU, BEL, CR, SAL, GUA, HON, NIC; NAM: North América; SAM: South América; DOM: Domestic; CAM: Central América; ESP: Spain; CAR: Caribbean

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Avianca Holdings S.A.

Avianca Holdings S.A.

2.947.338 877.551 802.762 527.233 309.107 191.374 117.950 116.039 103.531 Domestic Colombia 11.17% North America 4.62% Between Home Markets 5.24% South America 8.15% Domestic Peru 29.06% Domestic Ecuador -44.85% Europe 9.96% CAM 6.82% CAR 12.92%

HM: Home Markets COL, PER, ECU, BEL, CR, SAL, GUA, HON, NIC; NAM: North América; SAM: South América; DOM: Domestic; CAM: Central América; ESP: Spain; CAR: Caribbean

+ 8.9%

Diversified Passenger Growth

Passengers by Region

1Q 2013 Vs 1Q 2012 Pax Growth

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Avianca Holdings S.A.

Avianca Holdings S.A.

56.00% 12.00% 32.00% 55.00% 15.00% 20.80%

Colombia Perú Ecuador

 Sustained leadership in the Colombian Domestic Market with a 55% market share as of March 31 2013  The market penetration strategy in Peru has generated a significant market share growth for Avianca Holdings in this market, with an increase of 3.3 pp with respect to that of the first quarter of 2012

Source: Colombia: Aerocivil. Perú ,Ecuador : MIDT Colombia , Peru & Ecuador: Information as of March 31st 2013

Domestic Market Share by Country 1Q 2012 1Q 2013

A market Leader in the Andean Region and Central America

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Avianca Holdings S.A.

Avianca Holdings S.A.

71,00% 30,00% 41,90% 28,00% 69,00% 27,00% 42,00% 31,00% Home Markets Home Markets to NAM Home Markets to SAM Home Markets to Spain

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

Note: Home Markets include: Col, Per, Ecu, Bel, CR, SAL, GUA, HON, NIC; NAM: North América; SAM: South America.

1Q 2012 1Q 2013

A market Leader in the Andean Region and Central America

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Avianca Holdings S.A.

Avianca Holdings S.A.

219,455 233,808

1Q 2013 Cargo Business Highlights

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

1Q 2012 1Q 2013

6.9% 9.3%

219,455 233,808

225,097 246,093 66.3% 62.3% 4.1pp 1.07 1,01

• 5.4%

57,808 61,833

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

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Avianca Holdings S.A.

Avianca Holdings S.A.

1Q 2013 Highlights

 Increased more than 40 frequencies on the following routes:  BAQ – BOG (+7); BOG – MDE(+7); BOG – CTG(+7)  BOG – SMR (+7); BOG – MTR(+7); BOG – GYE(+4)  CLO – GYE (+2); SAL – UIO(+3); GYE – SAL(+2)  CLO – SAL (+2); CUN – SAL(+1); IAD – SAL (+1)  JFK – SAL (+1); CUZ – LIM(+15); AQP – LIM(+6)  During the first quarter the Company inaugurated its new VIP lounge in Eldorado International Airport in Bogotá that offers:  2000 square meters  Capacity to serve 670 travelers  In Line with the fleet renewal plan, the company continues to incorporate new aircraft:  1 A330F  1 A330  2 A320 (One of which one is equipped with sharklets) FLEET NETWORK MILESTONES

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Avianca Holdings S.A.

Avianca Holdings S.A.

Subsequent Events

NETWORK OPTIMIZATION INTERNATIONAL BOND ISSUANCE  On May 10 2013, The Company successfully placed a USD 300 million bond offering in the international capital markets.  The Company´s sound performance captured investors’ attention which resulted in an order book exceeding USD 2.3 billion or equivalent to an oversubscription nearly 8 times the offering.  The proceeds of the seven-year bond offering with an 8.375% coupon will be primarily allocated to fleet financing and other general corporate purposes  On May 2013 the Company decided to restructure its network in Central America on its Costa Rica Hub  The company maintained its direct flights between San Jose and:  Caracas, Mexico, Miami, Guatemala, Tegucigalpa, San Pedro Sula, Managua, Panama El Salvador, Bogotá and Lima.  The company will now connect through its El Salvador and Bogota hubs the following frequencies previously served form Costa Rica:  Los Angeles, New York, Havana, Quito and Guayaquil

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Avianca Holdings S.A.

Avianca Holdings S.A.

Outlook 2013

ASK

8% - 10% 11 - 13% 77% - 79%

EBIT %

6.5% - 7.5%

LF PAX

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

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Thank You

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Avianca Holdings S.A.

Avianca Holdings S.A.

Accounting Principle

Item COLGAAP IFRS Exchange impact

• n Traslation (no

cash impact) Under COLGAAP the Company uses the Colombian Peso as its functional currency. Under IFRS the functional currency is the US Dollar which is the currency of the primary economic environment in which the entity

• perates.

Pension Liability Under COLGAAP and in accordance with local regulations, certain benefit plans are not accrued in its full amount. Under IFRS all pension benefit plans are recognized as liabilities (Medical, Scholarship, Travel Tickets, Labor Code Pension Plan, Severance and Seniority) based on actuarial reports under a prescribed methodology. Revaluations and Fixed Assets Under COLGAAP, the Company recorded revaluations of property and equipment. Under IFRS revaluations of property and equipment are reversed. In addition, fixed assets have been valued at its historical cost and in the Company’s functional currency and thus depreciation estimates were revised. Capitalization of Borrowing Costs Under COLGAAP, all borrowing costs related to “Predelivery payments”(PDP´s) are expensed as incurred. Under IFRS, borrowing costs related to qualifying assets are capitalized until the asset is ready for its intended use.

Transition to IFRS Main effects on the Financial Statements

IFRS accounting has no impact on cash flows

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Avianca Holdings S.A.

Avianca Holdings S.A.

Accounting Principle

Item COLGAAP IFRS

Deferred Income Tax Under COLGAAP, deferred income tax is recorded solely for temporary differences in the Income Statement. Under IFRS, deferred income tax is recorded for all temporary differences in the Statement

• f Financial Position.

In addition, a deferred tax asset or liability is recognized for differences between COLGAAP and IFRS. Frequent flyer program Under COLGAAP, the estimated incremental cost of providing free redemption credits is accrued when award levels are achieved. Under IFRS, a liability at fair value is deferred at the time the ticket is sold. Revenue is reconized when the Company has fulfilled its obligations of transporting the passenger with credit rewards. Under IFRS, miles redemption revenue is anticipated based on management’s estimate

• f the forecasted redemptions.

Transition to IFRS Main effects on the Financial Statements

IFRS accounting has no impact on cash flows

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Avianca Holdings S.A.

Avianca Holdings S.A.

Accounting Principle

Item COLGAAP IFRS

Maintenance Under COLGAAP, major maintenance cost of

• wned fleet is capitalized and amortized until

the next maintenance event. Maintenance of leased aircraft is recognized as a provision cost initiating at the time of delivery and ended once repair is performed. Under IFRS, major maintenance cost of all the fleet is capitalized and treated as a separate

• component. Additionally, a provision is

recognized for return conditions in accordance with terms established on its

• perating lease contracts.

Under certain lease contracts, an expense is recognized for the excess paid as maintenance reserves and the cost of the

• verhaul.

Business Combinations Under COLGAAP, accounting for business combinations requires that the purchase price be allocated to the acquired assets and liabilities assumed on the basis of their book value. The difference between the purchase price, without including acquisition costs, is recognized as goodwill and is amortized over a period of 20 years. Under IFRS, goodwill is evaluated at year end to determine whether there are indications

• f impairment.

Transition to IFRS Main effects on the Financial Statements

IFRS accounting has no impact on cash flows

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Avianca Holdings S.A.

Avianca Holdings S.A.

Appendix 1 1Q 2013 Operational Statistics

Avianca Holdings S.A. Jan - Mar 2013 Jan - Mar 2012 VAR% Pax Totales (Miles) 5.993 5.501 8,9% Doméstico 3.448 3.115 10,7% Internacional 2.545 2.386 6,7% Ciclos Totales 63.418 60.449 4,9% Doméstico 37.615 35.482 6,0% Internacional 25.803 24.967 3,3% BH Totales 117.767 114.938 2,5% Doméstico 40.706 40.198 1,3% Internacional 77.061 74.740 3,1% ASK Totales (Millones) 9.351 8.876 5,4% Doméstico 1.940 1.677 15,7% Internacional 7.412 7.200 2,9% RPK Totales (Millones) 7.559 7.012 7,8% Doméstico 1.513 1.334 13,4% Internacional 6.047 5.678 6,5% Load Factor Total 80,8% 79,0% 2,3% Load Factor Doméstico 78,0% 79,6%

• 2,0%

Load Factor Internacional 81,6% 78,9% 3,4%