Avianca Holdings Reports Operating Profit of $70.3 Million for the Third Quarter of 2014

BOGOTA, Colombia--()--Avianca Holdings S.A., (NYSE: AVH), (BVC:PFAVH), the following results pertain to the 3Q 2014, financial and operational information is provided in millions of US dollars unless stated otherwise. The following information is presented in accordance with International Financial Reporting Standards (IFRS). The reconciliation between IFRS and the financial information which is not in these accounting principles can be seen in the financial tables section of this report. Except when noted, all comparisons refer to third quarter 2013 (3Q 2013) numbers. Figures and operating metrics of Avianca Holdings S.A. (“Avianca”, “the Company”, “Issuer Entity” or “Issuer”) are presented on a consolidated basis.

AVIANCA HOLDINGS S.A.

Financial Highlights

(First 9 months ended September 30th)

  9M-13   9M-14
Revenues 3.4Bn 3.5Bn
EBITDAR 582.4 528.6
EBIT 270.2 170.1
Net Income 183.4 23.5
Net income* 170.7 82.1

*Excluding Special Items

  3Q-13   3Q-14
Revenues 1.18Bn 1.23Bn
EBITDAR 237.5 202.5
EBIT 132.2 70.3
Net Income 35.9 33.2
Net income* 99.1 37.7

*Excluding Special Items

Profitability

(First 9 months ended September 30th)

  9M-13   9M-14
EBITDAR % 17.1% 15.3%
EBIT % 7.9% 4.9%
Net income % 5.4% 0.7%
Net Income%* 5.0% 2.4%

*Excluding Special Items

  3Q-13   3Q-14
EBITDAR % 20.1% 16.5%
EBIT % 11.2% 5.7%
Net income % 3.0% 2.7%
Net Income%* 8.4% 3.1%

*Excluding Special Items

Operational Highlights

(First 9 months ended September 30th)

  9M-13   9M14
Passengers 18.3M 19.3M
ASKs 28.9Bn 30.5Bn
RPKs 23.3Bn 24.2Bn
Load Factor 80.4% 79.4%
RASK 11.8 11.4
CASK 10.8 10.8
  3Q-13   3Q-14
Passengers 6.4M 6.9M
ASKs 10.1Bn 10.7Bn
RPKs 8.3Bn 8.7Bn
Load Factor 82.0% 81.3%
RASK 11.7 11.5
CASK 10.4 10.8

Third Quarter 2014 Highlights

  • Avianca Holdings would have earned an adjusted net income of $37.7 million, excluding special items. Our adjusted net income margin came in at 3.1%. In the first nine months of the year, the Company earned an adjusted net income of $82.1 million, while the adjusted net income margin was 2.4 %.
  • Operating revenues1 amounted to $1.23 billion, up 3.9% over 3Q 2013, mainly due to a 4.4% increase in passenger revenues, driven by an increase of 7.5% in passengers carried. In line with our cargo capacity expansion and improved utilization, Cargo and other revenues1 increased by 1.0%. Operating revenues for the first nine months of 2014 totaled $3.5 billion, up 1.6% from the same period in 2013.
  • Cost per available seat kilometer (CASK)1 increased by 3.9% for the period. As such CASK ex-fuel1 reached 7.5 cents while cycles rose 11.3% for the quarter. CASK for the nine-month period of 2014 remained stable at 10.8 cents when compared with the same period of last year. These results are mainly driven by cost saving initiatives implemented throughout 2014.
  • EBITDAR for the 3Q of 2014 was $202.5 million dollars, while the EBITDAR margin reached 16.5%, showing an improvement of 210bps when compared to the margin of 2Q 2014. The EBITDAR for the first nine months of 2014 totaled $ 528.6 million, while the EBITDAR margin reached 15.3%.
  • Operating income (EBIT) totaled $70.3 million, as a result the operating margin for 3Q 2014 reached 5.7%, an increase of 130 basis points over the 2Q of 2014. The operating income (EBIT) for the nine-month period of 2014 was $170.1 million; as a result, the operating margin for the first nine months of 2014 was 4.9%.
  • Capacity, measured in ASKs (available seat kilometers), increased 6.1% during 3Q 2014, mostly due to the continued expansion in our domestic markets and the entry into operation of the Bogota London route. Furthermore, passenger traffic, measured in RPKs (revenue passenger kilometers), grew 5.3%, reaching a consolidated load factor of 81.3%. During the first nine months of 2014, capacity measured in ASKs, rose 5.3%, while passenger traffic, measured in RPKs, increased 4.0%.
  • In accordance with the fleet renovation and modernization plan, between July and September 2014, the company took delivery of two A321, two A320, two A319 aircraft all equipped with sharklets, and four ATR72 while phasing-out two ATR42. Consequently, Avianca Holdings S.A. and subsidiaries ended the quarter with a consolidated operating fleet of 165 aircraft.

1When indicated cargo and other revenues are adjusted for net interline commission fees received and paid during the period, which for 3Q 2014 amounted to $10.1 million. When indicated the costs of sales and marketing increase by the same amount. The new ERP catalogue carries these amounts either as an incremental cost or as a lesser expense under sales and marketing depending on the net effect of the period.

CEO´s Comment

During the third quarter of 2014, Avianca continued to show significant progress in implementing the transitional strategy that we laid out earlier this year, moving ahead in our redeployment plan and increasing our international presence. Due to the structural changes that we implemented throughout the first nine months of this year, the basis of comparison of our results has changed. As a result, the indicators we have seen during second and third quarters are very positive thus demonstrating that our actions taken early in 2014 are paying off.

On the domestic front, our performance was quite strong in 3Q14, with RPK growth at 8.6% and a reporting a healthy load factor of 76.8%. Our ASKs were up 9.5%, as we continue to increase our capacity in line with the growth we have seen in domestic demand.

On the international side, we continued to focus on reaching new global markets. Apart from South America, we are pleased to report growth in every other market that we serve. Our ongoing efforts in Europe continue to pay off, with strong adoption of our Bogota to London route as evidenced by the 84% load factor generated in the third quarter. In line with the positive demand seen in Europe, this December we will increase our services to Barcelona from the four weekly flights that we currently operate to a daily service. In addition, we have also added another daily frequency to Cancun, reaching a total of two daily frequencies for this route in accordance with the 8.1% growth in our North American ASKs year-over-year.

We are also pleased to report solid growth within our cargo operation, which continues to show very strong results. Our traffic expressed in RTKs grew 27%, outperforming our ATK growth year-over-year, resulting in an improvement of 600 basis points in Load Factor when compared to 3Q 13. In addition, we have made further progress in positioning our cargo business for continued growth with the completion of the acquisition of a stake of Aerounion in Mexico and the new commercial agreement with Etihad, creating a stronger cargo operation which enables the company to improve its inbound cargo operation from Los Angeles via Mexico as well as enhancing connectivity to Europe.

During the third quarter of 2014, Avianca Holdings S.A. and its subsidiaries grew total operating revenues by 3.9% year-over-year, reaching $ 1.23 billion in the third quarter. In terms of our operating margin, we saw that our relocation efforts undertaken throughout the year gained traction as our EBITDAR margin recovered 210 basis points when compared to the 2Q 2014, reaching 16.5%. In line with our fleet renovation plan, Avianca incorporated two A321, two A320, two A319, and four ATR72 aircraft as we continue to align our capacity levels with the increased demand we have seen across our domestic and international markets.

As we look ahead to the fourth quarter, we see Avianca on the right path to sustainable, long term growth, both at home and abroad. Operating in a challenging environment over the last few quarters, we put our transitional strategy into motion early this year in order to make the necessary adjustments at the right time. We are now beginning to see the positive results from this decision and are in the best possible position to capture further momentum heading into 2015.

Sincerely,

Fabio Villegas Ramirez

Chief Executive Officer

Consolidated Financial and Operational

Highlights1

 

3Q-13

 

3Q-14

 

∆ Vs. 3Q-13

ASK's (mm)   10,067   10,683   6.1 %
RPK's (mm) 8,253 8,689 5.3 %
Total Passengers (in millions) 6,373 6,853 7.5 %
Load Factor 82.0 % 81.3 % -0.7 %
Departures 64,630 71,963 11.3 %
Block Hours 125,037 132,964 6.3 %
Stage length (km) 1,315 1,326 0.8 %
Fuel Consumption Gallons (000's)     105,293       110,736     5.2 %
Yield (cents) 12.0 11.9 -0.8 %
RASK (cents) 11.7 11.5 -2.1 %
PRASK (cents) 9.8 9.7 -1.6 %
CASK (cents) 1 10.4 10.8 3.9 %
CASK ex. Fuel (cents) 1 7.1 7.5 5.8 %
CASK Adjusted (cents) 1 10.4 10.8 3.9 %
CASK ex. Fuel Adjusted (cents) 1     7.1       7.5     5.8 %
Foreign exchange (average) COP/US$ $ 1,907.9 $ 1,909.6 0.1 %
Foreign exchange (end of period) COP/US$ $ 1,914.7 $ 2,028.5 5.9 %
WTI (average) per barrel $ 105.8 $ 97.8 -7.6 %
Jet Fuel Crack (average) per barrel $ 17.8 $ 19.6 10.2 %
US Gulf Coast ( Jet Fuel average) per barrel $ 123.6 $ 117.4 -5.1 %
Fuel price per Gallon (including hedge)   $ 3.21     $ 3.23     0.7 %
Operating Revenues ($M) 1 $ 1,182.0 $ 1,227.6 3.9 %
EBITDAR ($M) $ 237.5 $ 202.5 -14.8 %
EBITDAR Margin 20.1 % 16.5 % -3.6 %
EBITDA ($M) $ 174.1 $ 126.4 -27.4 %
EBITDA Margin 14.7 % 10.3 % -4.4 %
Operating Income ($M) $ 132.2 $ 70.3 -46.9 %
Operating Margin ($M) 11.2 % 5.7 % -5.5 %
Net Income ($M) $ 35.9 $ 33.2 -7.6 %
Net Income Margin 3.0 % 2.7 % -0.3 %
EBITDAR (Adjusted) ($M) $ 237.5 $ 202.5 -14.8 %
EBITDAR Margin (Adjusted) 20.1 % 16.5 % -3.6 %
EBITDA (Adjusted) ($M) $ 174.1 $ 126.4 -27.4 %
EBITDA Margin (Adjusted) 14.7 % 10.3 % -4.4 %
Operating Income ($M) (Adjusted) $ 132.2 $ 70.3 -46.9 %
Operating Margin (Adjusted) 11.2 % 5.7 % -5.5 %
Adjusted Net Income ($M) $ 99.1 $ 37.7 -61.9 %
Net Income Margin (Adjusted)     8.4 %     3.1 %   -5.3 %

(Adjusted: Excluding non-cash Fx charges, gain or loss on assets as well as derivative instruments and one-time expenses associated to the phasing out of aircraft)

MANAGEMENT COMMENTS ON 3Q 2014 RESULTS

Avianca Holdings reached an operating income (EBIT) of $70.3 million for 3Q 2014, while the net operating income (EBIT) margin came in at 5.7%. These results were mainly driven by the redeployed capacity (ASKs) as well as the strong demand observed in the Colombian domestic market and international routes to Europe. As a result the company was able to increase its passenger numbers by 7.5%, partially offset by a 0.8% yield decline given the capacity relocation efforts. Moreover our cargo business performance continued to yield strong results as the company was able to better use the available capacity of the renovated A330 cargo fleet. Thus, cargo and other revenues1 increased by 1%.

Operating revenues1 amounted to approximately $1.23 billion during 3Q 2014. This represents an increase of 3.9% over the same quarter in 2013. These results are primarily due to stronger passenger revenues related to an increase of 7.5% in passenger numbers and in the redemption of miles associated to ticket sales. Moreover Cargo and other1 revenues reached $193.9 million representing 15.8% of total revenues. Said results represent a 1% increase over the same period last year and were mainly driven by a 27.0% rise in RTKs. As a consequence the cargo Load Factor for the quarter increased 600 basis points reaching 65%. Operating revenues for the first nine months of 2014 totaled $3.5 billion. This represents an increase of 1.6% over the same period in 2013.

1When indicated cargo and other revenues are adjusted for net interline commission fees received and paid during the period, which for 3Q 2014 amounted to $10.1 million. When indicated the costs of sales and marketing increase by the same amount. The new ERP catalogue carries these amounts either as an incremental cost or as a lesser expense under sales and marketing depending on the net effect of the period.

The company added from its Bogota Hub on average sixteen weekly incremental frequencies on its high density routes such as Medellin, Cartagena, Cali and Barranquilla. Furthermore the company added one additional daily frequency from Bogota to Cancun and opened sales for three incremental weekly frequencies from Bogota to Barcelona. The latter reaching a daily service, and starting to operate in December of this year. Consequently passenger capacity expressed in ASKs increased 6.1% in 3Q 2014 over the same period in 2013, resulting in a 5.3% capacity (ASKs) increase for the first nine months of 2014.

Operating expenses1 for the third quarter of 2014 increased 10.2% amounting to $1.16 billion, which include a 5.9% increase in fuel costs related to a 5.2% rise in fuel consumption driven by a 6.3% growth in block hours, partially offset by a 5.1% decrease in jet fuel prices. Operating expenses1 were affected by a rise of $14.2 million in depreciation and amortization mainly due to an increase in Avianca´s fleet as well as a reduction in the useful life of the A320 aircraft family, implemented in December 2013 from 30 to 25 years. In addition maintenance and repairs increased by $27.4 million due to one-time charges related to the return conditions of the A330 fleet as the company prepares to take delivery of its brand new B787 Dreamliners. Aircraft rentals and other expenses rose by $12.7 million due to an increase in the size of the fleet passing from 154 aircraft in 3Q 2013 to 165 aircraft in 3Q 2014. Finally, Other Expenses1, 2 increased $33.2 million reaching $590.4 million for the 3Q of 2014. These results were mainly driven by an increase of $9.2 million in operating personnel, a rise of $5.9 million in air traffic expenses and a $4.9 million increase in passenger services. In aggregate Other Expenses1, 2 increased 6.0% and were primarily driven by an increase of 11.3% in cycles and a 7.5% increase in passenger numbers.

As part of the company’s on-going fuel hedging strategy, by the end of the 3Q 2014,143 million gallons were hedged. This represents approximately 32.7% of the total expected volume to be consumed over the next thirteen months. The average price of such hedges was negotiated at $ 2.83 / Gallon. Of the total hedged amount 74% was covered through heating oil and 26% through jet fuel derivatives. It is worthwhile mentioning that the hedging strategy from a cash risk perspective is currently outweighing options over swaps as the probability of an additional decline in oil prices has increased.

In accordance with the fleet renovation and modernization plan, between July and September 2014, the Company took delivery of ten new aircraft: two A321, two A320 and two A319 aircraft, all equipped with sharklets and four ATR72 turboprop aircraft, while phasing-out two ATR42. As a result, Avianca Holdings S.A. and subsidiaries ended the quarter with a consolidated operating fleet of 165 aircraft.

The company recorded other non-operating expenses of $27.8 million for the 3Q 2014, compared to $88.4 million for the same quarter of 2013. Non-operating expenses include interest expenses related to incremental aircraft debt, additional debt service related to the bond placement carried in the second quarter of 2014, that were partially offset by a principal payment of the A class COP Bonds issued by Avianca S.A in 2009, which totaled $39.3 million. In addition the Company registered a net profit related to the foreign exchange non-cash translation adjustments of $1.3 million compared to a net loss of $60.6 million for the same period of 2013.This effect is primarily due to a gain in foreign exchange translation adjustments, consisting of the net non-cash gain or loss from our monetary assets and liabilities denominated in Colombian pesos as well as our Venezuelan Bolivar denominated monetary assets subject to the USD exchange rate. During the first nine months of 2014, the company recorded other non-operating expenses of $133 million, compared to $51.7 million for the same period of 2013.

The company’s cash and cash equivalents and available for sale securities, ended the quarter at $656.0 million, which represent 14.1% of the last twelve month’s revenues. Including short term certificates and bank deposits, adjusted cash and cash equivalents and available for sale securities (other current assets) came in at $731.6 million, equivalent to about 15.7% of last twelve month revenues. Of such cash we continued to hold $290 million that have been requested to CENCOEX (previously CADIVI) and are pending repatriation.

As of September 30th, the company’s leverage position (Net Adjusted debt to EBITDAR3) ended at 5.2X. Furthermore the company’s total long term debt and total liabilities remained stable at $2.4 billion and $4.5 billion respectively.

1When indicated cargo and other revenues are adjusted for net interline commission fees received and paid during the period, which for 3Q 2014 amounted to $10.1 million. When indicated the costs of sales and marketing increase by the same amount. The new ERP catalogue carries these amounts either as an incremental cost or as a lesser expense under sales and marketing depending on the net effect of the period.

2Other expenses include flight operations, ground operations, passenger services, air traffic, Sales and Marketing, General & Administrative and salaries, wages and benefits.

RELEVANT ITEMS

During the 3Q of 2014 the company successfully migrated to its new ERP (Enterprise resource planning) platform; Oracle. Since the integration between Avianca and Taca in 2010, the company had been managing separate accounting platforms and with this new implementation, Avianca Holdings takes an important step in harmonizing its accounting chart of accounts as well as enhancing its managerial tools. Nevertheless this change has affected the comparability of some of the account grouping throughout our cost structure without materially affecting our overall operating results and profitability indicators. Details regarding the most relevant changes in the accounting catalog can be found in APPENDIX A.

2015 – OUTLOOK

Avianca Holdings S.A., through its affiliated airlines, will continue to execute cost saving initiatives that are expected to be fully implemented by 2016. Moreover the company anticipates a robust development of the network as the redeployed capacity matures in 2015. As such the company reaffirms its profitability 2014 FY outlook and provides its guidance for 2015 as follows:

Outlook Summary

 

Full Year 2014

 

Full Year 2015

Total Passengers increase from 2014   6.0% - 7.0%   6.0% - 8.0%
Capacity (ASK'S) increase from 2014 5.0% - 6.0% 5.0% - 7.0%
Load Factor 77% - 79% 78% - 80%
EBIT Margin   5.0% - 7.0%   6.0% -8.0%

1When indicated cargo and other revenues are adjusted for net interline commission fees received and paid during the period, which for 3Q 2014 amounted to $10.1 million. When indicated the costs of sales and marketing increase by the same amount. The new ERP catalogue carries these amounts either as an incremental cost or as a lesser expense under sales and marketing depending on the net effect of the period.

2Other expenses include flight operations, ground operations, passenger services, air traffic, Sales and Marketing, General & Administrative and salaries, wages and benefits.

3Net Adjusted Debt to EBITDAR: (Current Portion of Long Term debt + Long Term Debt + (Annual Rents Expense x 7) – Cash*) / EBITDAR

*Cash: Cash and cash equivalents + Restricted Cash + Available for sale securities + Short Term Certificates of bank deposits + Long Term Restricted Cash

Analysis by ASKs

     
 
   

3Q-2013

 

3Q-2014

 

Var %

Operating revenue:
Passenger 9.84 9.68 -1.6%
Cargo and other1 2.33   2.23   -4.1%
Total operating revenues1 11.74   11.50   -2.1%
 
Operating expenses:
Flight operations 0.20 0.02 -88.7%
Aircraft fuel 3.35 3.35 0.0%
Ground operations 0.87 1.10 27.1%
Aircraft rentals 0.63 0.71 13.1%
Passenger services 0.37 0.40 7.3%
Maintenance and repairs 0.50 0.72 46.0%
Air traffic 0.44 0.70 58.4%
Sales and marketing1 1.22 1.35 10.9%
General, administrative, and other 0.78 (0.00) -100.2%
Salaries, wages and benefits 1.65 1.95 18.1%
Depreciation and amortization 0.42 0.53 26.1%
Total operating expense 10.43   10.74   3.0%
Operating income 1.31   0.66   -49.9%
         
Total CASK1 10.4   10.8   3.9%
CASK ex. Fuel1 7.1   7.5   5.8%
Total CASK Adjusted1 10.4   10.8   3.9%
CASK ex. Fuel Adjusted1 7.1   7.5   5.8%
         
Yield 12.00   11.90   -0.8%

EBITDAR Calculation excluding special items

   

3Q-13

 

3Q-14

 

Var %

Operating Revenues1   1,182.0   1,227.6  
Operating Expenses1 712.4 799.9
Aircraft Fuel   337.5   357.4    
Operating Income - EBIT   132.2   70.3   -46.9%
Margin 11.2% 5.7%
 
(+) Depreciation and amortization   41.9   56.1    
EBITDA   174.1   126.4   -27.4%
Margin 14.7% 10.3%
 
(+) Aircraft Rentals   63.4   76.1    
EBITDAR   237.5   202.5   -14.8%
Margin 20.1% 16.5%
 

1When indicated cargo and other revenues are adjusted for net interline commission fees received and paid during the period, which for 3Q 2014 amounted to $10.1 million. When indicated the costs of sales and marketing increase by the same amount. The new ERP catalogue carries these amounts either as an incremental cost or as a lesser expense under sales and marketing depending on the net effect of the period.

Non IFRS financial measure reconciliation

Reconciliation of Net Income excluding Special Items

 

In US$ Millions

 

3Q-13

 

3Q-14

 

Var %

   
Net Income as Reported $   35.9   $   33.2   -7.6   %
Special items (adjustments):
(-) Gain on sale of property and equipment $ 0.8 $ (6.5 )
(-) Derivative Instruments $ (3.3 ) $ 0.7
(-) Foreign exchange gain (loss)   $   (60.6   )   $   1.3        
Net Income Adjusted $ 99.1 $ 37.7 -61.9 %
 

Reconciliation of Operating Cost per ASK excluding special items

 

In US$ cents

 

3Q-13

 

3Q-14

 

Var %

Total CASK as reported 10.4 10.7 3.0 %
Aircraft Fuel 3.4 3.3
Total CASK excluding Fuel as reported 7.1 7.4 4.5 %
Gain on sale of property and equipment       0.01           (0.06   )    
Total CASK excluding Fuel and special items 7.1 7.3 3.5 %
As reported

EBITDAR Calculation excluding special items

 

In US$ Millions

 

3Q-13

 

3Q-14

 

Var %

Operating Revenues1 1,182.0 1,227.6
Operating Expenses1 712.4 799.9
Aircraft Fuel       337.5           357.4        
Operating Income as reported       132.2           70.3       -46.9   %
(-) Gain on sale of property and equipment       0.8           (6.5   )    
Operating Income adjusted       131.4           76.7       -41.6   %
 
(+) Depreciation and amortization       41.9           56.1        
EBITDA Adjusted       173.4           132.9       -23.4   %
Margin 14.7 % 10.9 %
 
(+) Aircraft Rentals       63.4           76.1        
EBITDAR Adjusted       236.8           208.9       -11.7   %
Margin 20.0 % 17.2 %

1When indicated cargo and other revenues are adjusted for net interline commission fees received and paid during the period, which for 3Q 2014 amounted to $10.1 million. When indicated the costs of sales and marketing increase by the same amount. The new ERP catalogue carries these amounts either as an incremental cost or as a lesser expense under sales and marketing depending on the net effect of the period.

Interim Condensed Consolidated Statement of Comprehensive Income for the nine month period ended September 30th 2013 and 2014 (Unaudited in USD)

  For the nine months ended
September 30,
2014       2013
(Unaudited)
 
Operating revenue:
Passenger 2,883,334 2,833,691
Cargo and other 577,365 571,464
Total operating revenue 3,460,699 3,405,155
 
Operating expenses:
Flight operations 40,929 60,720
Aircraft fuel 1,029,617 989,629
Ground operations 292,888 254,279
Aircraft rentals 216,256 203,913
Passenger services 116,593 105,903
Maintenance and repairs 191,261 153,158
Air traffic 161,553 133,336
Sales and marketing 438,230 432,333
General, administrative and other 110,469 191,350
Salaries, wages and benefits 550,535 502,043
Depreciation and amortization 142,289 108,279
Total operating expenses 3,290,620 3,134,943
Operating profit 170,079 270,212
Interest expense (90,752) (75,917)
Interest income 11,334 9,140
Derivative instruments 4,541 (9,191)
Foreign exchange (58,099) 24,241
Profit before income tax 37,103 218,485
 
Income tax expense- current (11,477) (23,490)
Income tax expense- deferred (2,132) (11,614)
Total income tax expense (13,609) (35,104)
   
Net profit for the period 23,494 183,381

Interim Condensed Consolidated Statement of Financial Position (Unaudited in USD)

  As of   As of
September 30, December 31,
2014 2013
(Unaudited) (Audited)
Assets
Current assets:
Cash and cash equivalents 653,988 735,577
Restricted cash 3,590 23,538
Available for sale securities 1,349
Accounts receivable, net of provision for doubtful accounts 323,075 276,963
Accounts receivable from related parties 35,884 26,425
Expendable spare parts and supplies, net of provision for obsolescence 62,663 53,158
Prepaid expenses 54,903 46,745
Assets held for sale 15,621 7,448
Deposits and other assets 163,354 125,334
Total current assets 1,314,427 1,295,188
Non-current assets:
Available-for-sale securities 299 14,878
Deposits and other assets 208,988 189,176
Accounts receivable, net of provision for doubtful accounts 50,782 32,441
Intangible assets 375,102 363,103
Deferred tax assets 54,993 50,893
Property and equipment, net 3,645,494 3,233,358
Total non-current assets 4,335,658 3,883,849
Total assets 5,650,085 5,179,037
 
Liabilities and equity
Current liabilities:
Current portion of long-term debt 338,487 314,165
Accounts payable 399,425 509,129
Accounts payable to related parties 6,554 7,553
Accrued expenses 242,882 134,938
Provisions for legal claims 18,533 14,984
Provisions for return conditions 46,256 33,033
Employee benefits 49,656 52,392
Air traffic liability 627,571 564,605
Other liabilities 56,619 27,432
Total current liabilities 1,785,983 1,658,231
 
 
 
 
Non-current liabilities:
Long-term debt 2,370,029 1,951,330
Accounts payable 3,516 2,735
Provisions for return conditions 79,867 56,065
Employee benefits 228,349 276,284
Deferred tax liabilities 7,321 7,940
Other liabilities non-current 13,591 11,706
Total non-current liabilities 2,702,673 2,306,060
Total liabilities 4,488,656 3,964,291
Equity:
Common stock 83,225 83,225
41,398 41,398
Additional paid-in capital on common stock 236,342 236,342
Additional paid-in capital on preferred stock 467,498 467,498
Retained earnings 298,594 351,102
Revaluation and other reserves 28,857 28,857
Total equity attributable to the Company 1,155,914 1,208,422
Non-controlling interest 5,515 6,324
Total equity 1,161,429 1,214,746
Total liabilities and equity 5,650,085 5,179,037

Notes with regard to the statement of future expectations

This report contains statements of future expectations.

These may include words such as “expect”, “estimate”, “anticipate” “forecast”, “plan”, “believe” and similar expressions. These statements and the statements regarding the Company’s beliefs and expectations do not represent historical facts and are based on current plans, projections, estimates, forecasts and therefore you should not place undue reliance on them. Statements regarding future expectations involve certain risks and uncertainties. Forward-looking statements involve inherent known and unknown risks, uncertainties and other factors, many of which are outside of the Company’s control and difficult to predict. Avianca Holdings S.A. warns that a significant number of factors may cause the actual results to be materially different from those contained in any statement with regard to future expectations. Statements of this kind refer only to the date on which they are made, and the Company does not take responsibility for publicly updating any of them due to the occurrence of future or other events.

GLOSSARY OF OPERATING PERFORMANCE TERMS

This report contains terms relating to operating performance that are commonly used in the airline industry and are defined as follows:

“Aircraft utilization” represents the average number of block hours operated per day per aircraft for an aircraft fleet.

“Available seat kilometers,” or ASKs, represents aircraft seating capacity multiplied by the number of kilometers the seats are flown.

“Available ton kilometers,” or ATKs, represents cargo ton capacity multiplied by the number of kilometers the cargo is flown.

“Block hours” refers to the elapsed time between an aircraft leaving an airport gate and arriving at an airport gate.

“CASK excluding fuel” represents operating expenses other than fuel divided by available seat kilometers (ASKs).

“Code share alliance” refers to our code share agreements with other airlines with whom we have business arrangements to share the same flight. A seat can be purchased on one airline but is actually operated by a cooperating airline under a different flight number or code. The term “code” refers to the identifier used in flight schedules, generally the two-character IATA airline designator code and flight number. Code share alliances allow greater access to cities through a given airline’s network without having to offer extra flights, and makes connections simpler by allowing single bookings across multiple planes.

“Cost per available seat kilometer,” or CASK, represents operating expenses divided by available seat kilometers (ASKs).

“Load factor” represents the percentage of aircraft seating capacity that is actually utilized and is calculated by dividing revenue passenger kilometers by available seat kilometers (ASKs).

“Operating revenue per available seat kilometer,” or RASK, represents operating revenue divided by available seat kilometers (ASKs).

“Revenue passenger kilometers,” or RPKs, represent the number of kilometers flown by revenue passengers.

“Revenue passengers” represents the total number of paying passengers (which do not include passengers redeeming LifeMiles (previously known as AviancaPlus or Distancia) frequent flyer miles or other travel awards) flown on all flight segments (with each connecting segment being considered a separate flight segment).

“Revenue ton kilometers,” or RTKs, represents the total cargo tonnage uplifted multiplied by the number of kilometers the cargo is flown.

“Technical dispatch reliability” represents the percentage of scheduled flights that are not delayed at departure more than 15 minutes or cancelled, in each case due to technical problems.

“Yield” represents the average amount one passenger pays to fly one kilometer, or passenger revenue divided by revenue passenger kilometers (RPKs).

APPENDIX A4

Line Item

 

Description

 

Relocated

amounts in

thousands

Cargo and

other revenue

  Previously, net Interline Commissions (IC) fees related to code share were credited under Other revenue. Under the new ERP cost structure IC were reallocated to Sales and marketing in an amount of $ 10,1M   (10,100)

Flight

operations

  Formerly, pilots, crew costs and ground staff travel and other expenses, were recorded under Flight operations. The new accounting per function, reallocates to Salaries, wages and benefits (mainly) and to Passenger services, and General and administrative.   (16,878)

Ground

operations

 

Courier services costs associated to the Deprisa business unit were reallocated to Sales and marketing and Maintenance and repairs

  4,800

Maintenance

and repairs

  Transportation of parts, buildings and rentals, electric energy service, ground equipment maintenance, previously reported under Ground operations were reallocated with the new ERP structure to Maintenance and repairs.

Buildings costs and rentals, electric energy service, ground equipment maintenance, previously reported under General and administrative are now allocated to Maintenance and repairs.

  9,988

Air traffic

  Frequent flyer attention, security services, buildings costs, VIP lounge supplies, interrupted flight expenses, office supplies, stationary, electric services, allocated to Air traffic from General and administrative.

Ground equipment maintenance was reallocated to Ground Operations under the new ERP cost structure.

  12,625

Sales and

marketing

  Previously, Interline Commissions (IC) related to code share were credited under Sales and marketing. Under the new ERP structure IC were reallocated to Other revenue in an amount of $ 10,1M.   (10,100)

Salaries,

Wages and

benefits

  Reallocation of employee benefits to Salaries, wages and benefits, costs previously reported within General and administrative expenses. Certain staff travel and other expenses, were recorded under Flight operations and under the ERP structure are accounted under Salaries and wages   26,986

General

Administrative

  Under the new ERP accounting systems a majority of the aforementioned Expenses were taken out from this account and allocated to the specific function.

4None of these items are material values and do not affect in any way the profitability of the Company

ERP ACCOUNTING CATALOGUE

Flying

Operations

  Expenses incurred directly in the in-flight operation of aircraft and expenses attaching to the holding of aircraft and aircraft operational personnel in readiness for assignment to an in-flight status.

Maintenance

  Expenses, both direct and indirect, incurred in the repair of flight equipment as may be required to meet operating and safety standards; in inspecting or checking flight equipment in accordance with prescribed operational standards; and in polishing or cleaning flight equipment when such polishing or cleaning is not an incidental routine in connection with the normal productive use of such equipment.

Passenger

Services

  Expenses chargeable directly to activities contributing to the comfort, safety and convenience of passengers while in flight.

Ground Operations

  Expenses incurred on the ground incident to the protection and control of the in-flight movement of aircraft; scheduling or preparing aircraft operational crews for flight assignment; landing and parking aircraft; visual inspection, routine checking, servicing and fueling of aircraft; and other expenses incurred on the ground incident to readying for arrival and takeoff of aircraft.

Air Traffic

  Expenses related to the operation of airport traffic offices; expenses incurred in boarding and boarding preparation. Costs incurred in handling and protecting all non-passenger traffic while in flight.

Sales and

marketing

  Expenses incurred in promoting the air carrier; and expenses incident to: documenting sales, controlling and arranging or confirming aircraft space for traffic sold. Expenses incurred in direct sales solicitation and selling of aircraft space; and expenses incurred in developing tariffs and schedules for publication.

General and

Administrative

  Expenses of a general corporate nature and expenses incurred in performing activities which contribute to more than a single operating function such as general financial accounting activities, purchasing activities, representation at law, and other general operational administration, which are not directly applicable to a particular function.

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Contacts

Avianca Holdings S.A.
Andres Ruiz, (57 +1) 587 77 00 ext. 2474
Investor Relations Officer
ir@avianca.com

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