Controladora Vuela Compania de Aviacion, S.A.B. de C.V.

Good morning, everyone, and thank you for standing by. And welcome to Valerius' first quarter 2020 financial results conference call. All lines are in a listen-only mode. Following the company's prepared commentary, we will open the call for your questions and answers. Instructions on how to ask a question will be provided at that time. Please note that this event is being recorded. And at this point, I would now like to turn the call over to Ms. Maria Elena Rodriguez, Valerius' Corporate Finance and Investor Relations Director. Please go ahead, miss.

Good morning, everyone, and thank you for joining the call. With us today is our president and CEO, Enrique Beltranena, our airline executive vice president, Holger Blankenstein, and our vice president and CFO, Sonia Jerez. They will be discussing the company's first quarter 2020 results. Afterwards, we will move on to your questions. Please note that this call is for investors and analysts only. Any questions from the media will be taken on an individual basis. Before we begin, please let me remind everyone that this call may include forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are subject to several factors that could cause a company's actual results to differ maturely from expectations for reasons described in the company's filings with the U.S. Securities and Exchange Commission. Furthermore, Melaris undertakes no obligation to publicly update or revise Any forward-looking statements. It's now my pleasure to turn the call over to Volaris' President and CEO, Mr. Enrique Beltranena.

Thank you, María Elena. Good morning at this challenging time and thank you for joining us today. Let me begin by sharing my thoughts and best wishes with those who have been touched by this disconcerting virus. And by expressing my empathy, and close support to our ambassadors, our customers, investors, suppliers, and our communities during the current unparalleled global environment. We're certain that remaining responsive and united as a society will be better prepared to overcome this human and economic crisis while we will grow stronger together. As a socially responsible corporation, and a provider of essential services in the transportation sector, we have been guided by our three pillars since the company was founded. Safety being the first and foremost. The safety and health of our ambassadors, our customers, is our top priority. And so far, we can say that we have had some minor number of ambassadors that have been infected and they are all recovering and no casualties to report. During the declared state of emergency, we have been following and implementing protocols and guidelines issued by the International Aviation Transportation Agency and the health organizations. We have been working alongside with the Mexican Institute for Health and Social Protection , the Mexican Red Cross, the Private Sectoral Alliance for Disaster Resilience Societies , the Private Domestic Committee for Humanitarian Aid in National Emergencies, and Disasters Cadena and some other private organizations in order to support virus initiatives and cooperate with the health workers and with others who are in the front lines of combat facing this virus in Mexico and Central America. We have transported health and medical equipment from Mexico City to more than 15 destinations within the country. Our goal is to keep strengthening this type of alliances with the purpose of delivering some relief to the communities we serve. We are proud of our ambassadors and of their contribution at this moment and these challenging times. Now, I would like to explain how our business has evolved during an unprecedented challenge to the entire global aviation industry in the first quarter. We face two very different scenarios. For the months of January and February, both capacity measures by available seat miles and demand measured by revenue passenger miles increased versus the same period of last year. General revenue for January and February also improved compared to the previous year. The positive trend was sustained until the third week of March. When the traffic patterns started to decline as a result of the COVID-19 outbreak. On March 24th, the company announced a decrease in capacity measured by ASMs for the end of March and April of approximately 50% versus the original schedule level. On March 30th, the Mexican government declared a health emergency due to forced measure. Result, Volaris announced an additional capacity reduction for the month of April, which resulted in a decrease of 80% versus the originally scheduled capacity. On Tuesday, April the 21st, just at the beginning of this week, the Mexican government announced the beginning of phase three of the spread of the COVID-19, the most serious stage, and extended governmental restrictions to contain the pandemic until May 30, at least. As a result, Volaris will carry out a further capacity reduction for the month of May of approximately 90% versus the originally scheduled capacity. After a steady trajectory of seven quarters of continuous improvement delivering positive results, the company entered the state of emergency in its strongest shape, with an ultra-low cost structure, a solid balance sheet, A robust liquidity position, and most importantly, with a cohesive team of ambassadors throughout the entire company. I feel very proud about the team that I have and the work that they are doing, and I think we all can do it better through the future. Our cost structure is amongst the lowest in the world. The company achieved a cash mix fuel of 4.13 U.S. dollar cents for the first quarter of 2020. In terms of liquidity, we closed the first quarter with $453 million in unrestricted cash, which is mainly denominated in U.S. dollars. Our liquidity position has become essential to the company. Under our most stressed project scenario, our current liquidity position should endure a potential prolonged downturn. We have a solid balance sheet with only interest-bearing obligations in the short term. We have developed a diligent cash preservation program with a high level of scrutiny on payment terms and we have canceled or postponed non-operational expenditures, non-essential capex, tooling expenses, and instituted other company-wide cost-cutting measures. We have had a candid approach to our union and to all of our personnel who have been supported and have agreed to advance their regulatory and optional training, anticipate vacation days, and to accept substantial voluntarily leave of absences for periods of up to 90 days. Let me remind you that Volaris' labor contract includes a full flexibility schedule of crew members and a substantial amount of their pay scale is based on variable flight hours. On the administrative front, the wages have been reduced amongst the different organizational layers in a range which starts at an 80% at the C-suite level and goes down to 20% in the lower level of our organization structure. I have to say that it has been very painful for me to implement this kind of strategies but it is of the SS for the survival of the company. At the Board of Directors level, non-independent members have waived 100% of their annual compensation, while independent members have waived 40% of their annual compensation. We have reached out to most of our suppliers in order to obtain extended payment periods and even haircuts. We have been fortunate in receiving cooperation from most of our resources. Airport Groups, and other main business partners. In this regard, we are grateful to all who have been supportive of Volaris by successfully completing these comprehensive negotiations, and I will never forget their support. We have carried out a flexible and strategic operating plan to reduce capacity, but we have canceled and consolidated flights in order to defend profitability. We have managed to rapidly adapt our digital platforms and web services in order to satisfy our currently overwhelmed customer service channels. At Volaris, we have come together as a family with our shared culture and values, where our spirit of collaboration, connection, resilience, adaptability, and empathy have become fundamental. Now, I will touch on the company's financial and operating results for the first quarter of 2020. TRAS increased in the first quarter year-over-year 2% mainly driven by the total ancillary revenues which had an increase of 16% year-over-year. ASMs grew by 7% in the first quarter. The main source of growth was health capacity generated by better utilization of our existing assets during the first two months of the quarter. The number of passengers we carried in the first quarter grew by 6% year-over-year, with a healthy low factor. The first quarter of the year delivered an operating income of 308 million pesos, an operating margin of 4%, which is 3.5 percentage points higher than the first quarter of 2019. We already finished the first quarter with a positive operating cash flow generation of 2.8 billion pesos for the quarter. and I also already mentioned the balance at the end of the quarter. So while our first quarter demonstrates the strength of success of Volaris' ultra-low-cost carrier business model and its organization underpinning this performance, there should be no doubt that just like for every other passenger carrier in the world, the future environment for the industry and for Volaris is very uncertain and will most likely present a great challenge operationally and financially. Now, let me pass it over to our earlier Executive Vice President, Holger Blankenstein, to elaborate further on revenues and on the commercial strategy in the current environment.