AviancaTaca Holding S.A. Records Net Profit of COP$101.04 Billion in the Third Quarter of 2012, up 14.8% on the Same Period in 2011 Business Wire BOGOTÁ, Colombia -- November 16, 2012 AviancaTaca Holding S.A (BVC: PFAVTA) presents revenues for the third quarter of 2012. Financial and operational information is recorded in millions of Colombian pesos, except where indicated, and complies with the generally accepted accounting principles in Colombia (COLGAAP). The results shown are stated in Colombian pesos at the average exchange rate for each period. The average exchange rate had a revaluation of 0.22% in the third quarter of 2012, compared to the same period in 2011. AviancaTaca Holding S.A. (“AviancaTaca”, “the Company”, “the Issuing Authority” or “the Issuer”) corresponds to figures and operational references of the consolidated entity. 2012 Third Quarter Highlights *In the third quarter of 2012, AviancaTaca reported revenues of COP$1.98 trillion, a 3.5% increase in comparison to the same period in 2011. Excluding the one-time adjustment of expired tickets reported in the third quarter of 2011, operating income increased 8.1%. *Operating profit for the third quarter reached COP$209.22 billion, 12% below the same period for the previous year, mainly due to the increase in fuel costs. Excluding the one-time adjustment for expired tickets in the third quarter of 2011, operating profit for the third quarter of 2012 increased 21.1%. *Excluding the one-time adjustment for expired tickets in the previous year, EBITDAR for the third quarter of 2012 increased 12.0%. *Net profit for the third quarter of 2012 was COP$101.04 billion, 14.8% higher than the net profit recorded for the same period in 2011. *Capacity, measured in ASK (Available seats per kilometer), increased 10.3% in the third quarter as a result of the ongoing growth and consolidation strategy of the four (4) hubs (Bogotá, Lima, San Salvador and San José in Costa Rica). The Company opened five (5) new routes during this period, along with additional flights to existing routes in South America. *Passenger traffic measured in RPK (Revenue passenger kilometer) rose 9.1% in the third quarter, whereas the load factor reached 81.8% for the third quarter of 2012. *Cost per available seat kilometer, excluding fuel costs (CASK ex Fuel), decreased 6%. *In compliance with its fleet renovation and modernization plan, AviancaTaca added five (5) aircraft to its fleet in the third quarter: one (1) Airbus A330, two (2) Airbus A319 and two (2) Airbus A320, whereas one (1) Airbus A319 was retired from service. *During this third quarter, the Company announced that it will be adopting the Avianca brand name for the group's airlines starting in the first quarter of 2013. MANAGEMENT COMMENTS ON THE THIRD QUARTER 2012 RESULTS AviancaTaca’s third quarter 2012 financial results reflect the implementation of its integration, renovation and growth strategy, which began in early 2010. In line with the strategy, the Company incurred non-recurring costs during the third quarter which affected operating expenses and exceeded COP$11 billion. Consolidated revenue in the third quarter increased 3.5% over the same period in 2011. It should be noted that there was a positive adjustment of COP$81.61 billion in the third quarter of 2011, due to the extraordinary recognition of revenue from expired tickets in TACA. This adjustment for Avianca took place in the fourth quarter of 2011. The increase seen in the third quarter of 2012 is mainly due to the growth in ticket sales, which increased 1.4%. This increase was driven by: 1. A 13.6% increase in passenger traffic, going from 5.4 million in Q3 2011 to 6.2 million; and 2. A decrease in average ticket fares due to the marketing strategies for Ecuador and domestic routes in Colombia. AviancaTaca continued its market expansion strategy in Peru and Ecuador. The Company increased passenger numbers by 47.2% in Peru in comparison to the third quarter of 2011, whereas capacity has been streamlined in Ecuador, adjusting to new market conditions and increasing the market's connectivity with the four hubs operated by the Company. AviancaTaca opened the following routes in the third quarter of 2012: Bogotá-Yopal (14 flights per week), Salvador-Cali, Salvador-Guayaquil, Lima-Cali and Lima-Medellín. In turn, weekly frequency was increased on the following international routes: Bogotá-Madrid (+3), Lima-Santa Cruz (+4), Lima-Caracas (+3) and Bogotá-Lima (+1). Frequencies were increased on domestic routes, including Medellín-Cartagena (+28), Medellín-Cúcuta (+7), Bogotá-Medellín (+10), Medellín-Cali (+7) and Cali-Cartagena (+5). The consolidated operating costs and expenses for the third quarter of 2012 rose by 5.7%, reaching COP$1.77 trillion, mostly due to higher fuel costs. Isolating the increase in fuel costs, total operating costs and expenses only rose 3.7%, in line with Company's total revenue growth. This increase is primarily due to a 10.3% growth in operations measured in ASKs, the expansion programs (mainly in the domestic market in Peru) and non-recurring expenses for projects aimed at optimizing the Company's maintenance and operating expenses. Continuing with its fuel hedging policy, AviancaTaca hedged the equivalent of 30% of fuel consumption for the third quarter 2012. In addition, approximately 28% of estimated gallons to be used in the next 12 months were hedged as of September 30, 2012. AviancaTaca reported operating profits of COP$209.223 billion for the third quarter 2012. EBITDAR Calculation ^1 The EBITDA (earnings before interest, tax, depreciation and amortization) and EBITDAR (earnings before interest, tax, depreciation, amortization and airplane rental) indicators for AviancaTaca are stated below. Third Quarter 2012 COP$ millions Q3 2011 Q3 2012 Var % Operating Income 1,919,607 1,986,581 3.5% Operating Costs and Expenses 1,138,611 1,180,750 3.7% Fuel Costs 543,066 596,608 9.9% Operating Profit (EBIT) 237,930 209,223 -12.1% Depreciation and Amortization 88,519 68,514 -22.6% EBITDA 326,449 277,737 -14.9% EBITDA Margin 17.01% 13.98% -3.0% Airplane Rental 117,960 128,381 8.8% EBITDAR 444,409 406,118 -8.6% EBITDAR Margin 23.15% 20.44% -2.7% THIRD QUARTER CONSOLIDATED RESULTS Operating Income Operating income showed a 3.5% increase compared to the third quarter of 2011, reaching COP$1.98 trillion. Ticket Sales. Income in terms of ticket sales (PAX) was COP$1.7 trillion, an increase of 1.4% over the same quarter in 2011, excluding the one-time adjustment for expired tickets during the third quarter of 2011 of COP$81.6 billion. Eliminating this adjustments, ticket sales revenue rose 6.5% mainly due to a 13.6% rise in passenger traffic with the Company carrying more than 6.1 million passengers. Ticket sales accounted for almost 87% of total income for this period. Cargo & Mail Services. Income from cargo and mail services grew 21.1% mainly due to a 13.7% increase in the volume of tons transported. Cargo and mail services income represents 11% of total quarterly income. Related Activities. The 19.2% increase in related activities revenue is mainly due to an increase in revenues of the frequent flier program LifeMiles and higher leasing fees for property in the domestic terminal (Puente Aéreo) in Bogotá. Income in COP$ millions ^Q3 2011 ^Q3 2012 ^Var % OPERATING INCOME: 1,919,607 1,986,581 3.5 % Ticket Sales (PAX) 1,711,907 1,735,601 1.4 % Cargo & Mail Services 178,994 216,769 21.1 % Related Activities 28,706 34,211 19.2 % Income from ASK COP$ Q3 2011 Q3 2012 Var % TRASK 222 209 -6.2 % RASK 198 182 -8.1 % Cargo and Mail Services per ASK 21 23 9.8 % Operating Costs and Expenses Operating costs and expenses increased during the third quarter by 5.7% over the same period of the previous year. Such growth is due mainly to increases in the cost of fuel, employment costs due to strategic expansion in Peru, the change in the employee hiring policy in Colombia and an increase in aircraft equipment rental costs to support the Company’s growth strategy. By the end of the third quarter, operating costs and expenses were COP$1.77 trillion. COP$ million Q3 2011 Q3 2012 Var % Operating Costs and Expenses (Ex Fuel) 1,138,611 1,180,750 3.7% Fuel Costs 543,066 596,608 9.9^% Total 1,681,677 1,777,358 5.7% Salaries, Social Benefits and Other Benefits. In the third quarter of 2012, salary, social benefits and other benefits rose to COP$218.51 billion, representing an increase of 8% compared to Q3 2011. This increase is mainly due to hiring more staff to support the growth of operations and the change in the hiring policy used in Colombia, arising from changing indirect hires to direct staff. Rental of Aircraft and Other Equipment. The cost of renting aircraft and other equipment during the third quarter of 2012 increased 8.8% compared to the same period in 2011. The growth is explained by the incorporation of six (6) aircraft that were added under operating leases over the last 12 months and two of which replaced Company-owned airplanes that were removed from service. Insurance. In the third quarter of 2012 insurance expense reached COP$10.19 billion, representing a 4.1% decline over the same period the previous year. This is a result of better rates mainly in the aircraft insurance policy. Airport and Other Facilities. During the third quarter of 2012, the category of airport and other facilities rose to COP$176.16 billion, an increase of 6.6% over the same period in 2011. This is due to the increase in passenger traffic and cycles of 13.6% and 9.8%, respectively. Fuel. The fuel costs for the period rose to COP$596.61 billion, an increase of 9.9% over the third quarter in 2011. This is explained by a 13.2% increase in the number of gallons consumed as a result of expanded operations and a 2.6% decrease in the underlying unit price. Aircraft and Airport Equipment Maintenance. For the third quarter of 2012, the cost of maintaining aircraft and airport equipment declined 5.2% to COP$78.36 billion. This decrease is due to insurance recoveries and reserves. Depreciation, Amortization and Reserves. For the third quarter of 2012, the cost of depreciation, amortization and reserves showed a 22.6% drop compared to the same quarter in the previous year, corresponding to the change of methodology used for estimating engine maintenance costs. Passenger Services. Passenger service costs for Q3 2012 rose to COP$64.22 billion, an 8.4% increase over the same quarter in 2011. This increase is explained mainly by the 13.6% growth in passenger traffic as well as the purchase of on board service equipment and charter flight servicing. Fees, General Services and Miscellaneous. The fees, general services and miscellaneous items contracted by the Company reached COP$79.58 billion, a 0.7% decrease against the same period in 2011. The drop is explained by lower expenditure on aircraft engineer inspection fees and consulting services in comparison to the third quarter 2011. Sales Expenses. Sales expenses increased to COP$247.35 billion in Q3 2012, up 4.2% over the same quarter in 2011. This is due to higher Amadeus fees and a change in the Avianca contracting model. Administrative Expenses. Administrative expenses totaled COP$109.49 billion in the third quarter of 2012, an increase of 15.8% over the same period in 2011. This increase is mainly due to higher expenses for general insurance, taxes and professional fees, the reclassification of the tourism tax (1% of agency fees starting in 2012) and higher non-recurring extraordinary expenses for projects such as the standardization of terms and conditions in aircraft financing contracts, an assessment report of the regional fleet and the project to consolidate and optimize the Operations and Maintenance departments. Despite the extraordinary expenses, the increase in fuel costs and higher staff count to cover the Company's increased business, total unit costs fell 4.2% over the period. OPERATION COSTS PER ASK COP$ Q3 2011 Q3 2012 Var % Fuel 62.9 62.7 -0.4% Salaries, Social Benefits and Other Benefits 23.5 23.0 -2.1% Airport and Other Facilities 19.1 18.5 -3.3% Aircraft and Other Equipment Rental 13.7 13.5 -1.3% Depreciation, Amortization and Reserves 10.3 7.2 -29.8% Fees, General Services and Miscellaneous 9.3 8.4 -9.9% Aircraft and Airport Equipment Maintenance 9.6 8.2 -14.0% Passenger Services 6.9 6.7 -1.8% Insurance 1.2 1.1 -13.1% Sales 27.5 26.0 -5.5% Administration 11.0 11.5 5.0% Total CASK 194.8 186.7 -4.2% Total CASK Ex Fuel 131.9 124.0 -6.0% 2012 THIRD QUARTER OPERATING STATISTICS OPERATIONAL STATISTICS Q3 2011 Q3 2012 Var % ASK 8,630,920 9,518,975 10.3% RPK 7,141,112 7,790,12 9.1% Cycles 58,234 63,951 9.8% Block Hours 109,903 120,089 9.3% Total Passengers 5,420,473 6,159,330 13.6% Load Factor 82.74% 81.84% -1.1% Average Exchange Rate 1,793.49 1,797.36 0.2% In summary, third quarter 2012 earnings are in line with Company forecast for the period and represent an improvement in terms of profitability and efficiency in comparison to the third quarter of 2011, where a one-time adjustment related to expired tickets was recorded in TACA earnings resulting in a positive impact on profits for the quarter. A pro-forma summary without that adjustment is shown below. COP$ million Q3 2011 Q3 2012 Var % Operating Income 1,837,986 1,986,581 8.1% Operating Costs and Expenses 1,138,611 1,200,750 5.5% Fuel Costs 543,066 596,608 9.9% Operating Profit (EBIT) 156,309 189,223 21.1% Depreciation and Amortization 88,519 88,514 0.0% EBITDA 244,828 277,737 13.4% EBITDA Margin 13.32% 13.98% 0.7% Airplane Rental 117,960 128,381 8.8% EBITDAR 362,788 406,118 11.9% EBITDAR Margin 19.74% 20.44% 0.7% FOURTH QUARTER 2012 OUTLOOK For the fourth quarter of 2012, AviancaTaca Holding through its subsidiary companies will seek: *To continue with the market development strategy for domestic operations in Ecuador and Peru; to further strengthen market presence within South America and traffic between South and North America; and to maintain its domestic market share in Colombia; *To continue its fleet renovation and standardization plan in order to satisfy client needs and improve operating costs; and *To further improve operations and reduce operating costs in order to mitigate the negative effect of a possible increase in international oil prices. As a result of the above, AviancaTaca Holdings reaffirms its forecast: Financial and Operational Forecast FY 2012 vs FY 2011 PAX 10% - 14% ASK 8% - 12% LOAD FACTOR 77% - 79% % EBIT 6% - 8% 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 the plans, current projects, estimates, forecasts and therefore should not be overestimated. Statements regarding future expectations involve certain risks and uncertainties. AviancaTaca Holding S.A. warns that a significant number of factors may cause the current 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. September 30, September 2011 30, Variation % 2012 OPERATING INCOME Ticket Sales (PAX) 1,711,907 1,735,601 23,694 1.4% Cargo & Mail Services 178,994 216,769 37,775 21.1% Related Activities 28,706 34,211 5,505 19.2% 1,919,607 1,986,581 66,974 3.5% OPERATING COSTS AND EXPENSES: OPERATING COSTS: Fuel 543,066 596,608 53,542 9.9% Salaries, Social Benefits and Other 202,406 218,509 16,103 8.0% Benefits Airport and Other 165,185 176,155 10,970 6.6% Facilities Aircraft and Other 117,960 128,381 10,421 8.8% Equipment Rental Depreciation, Amortization and 88,519 68,514 (20,005) -22.6% Reserves Fees, General Services 80,120 79,582 (538) -0.7% and Miscellaneous Aircraft and Airport 82,649 78,363 (4,286) -5.2% Equipment Maintenance Passenger Services 59,267 64,216 4,949 8.4% Insurance 10,629 10,190 (439) -4.1% Total Operating Costs 1,349,801 1,420,518 70,717 5.2% GROSS PROFIT 569,806 566,063 (3,743) -0.7% OPERATING EXPENSES: Sales 237,351 247,353 10,002 4.2% Administration 94,525 109,487 14,962 15.8% Total Operating 331,876 356,840 24,964 7.5% Expenses Operating Profit 237,930 209,223 (28,707) -12.1% RETIREMENT PENSIONS 21,266 5,710 (15,556) -73.1% Operating Profit after 216,664 203,513 (13,151) -6.1% Retirement Pensions NON-OPERATING INCOME: Profit from Trades, (31,197) 16,085 47,282 -151.6% Recoveries and Other Financial – Interest 10,292 5,016 (5,276) -51.3% and Other Finance – Exchange (28,345) (11,974) 16,371 -57.8% differential – Net Total Non-Operating (49,250) 9,127 58,377 -118.5% Income NON-OPERATING EXPENSES: Finance – Interest and 72,393 81,906 9,513 13.1% Commissions Asset tax 2,887 2,888 1.0 0.0% Total Non-Operating 75,280 84,794 9,514 12.6% Expenses Pre-tax Profit and 92,134 127,846 35,712 38.8% Minority Interest TAXES: Current and Other 2,987 26,762 23,775 795.9% Deferred 773 (657) (1,430) -185.0% Income Tax 3,760 26,105 22,345 594.3% Loss before minority 88,374 101,741 13,367 15.1% interest MINORITY INTEREST (330) (705) (375) 113.6% Net Income for the $ 88,044 $ 101,036 $ 12,992 14.8% period ^1 EDBITDAR and EDITDA are not accounting metrics and are not to be considered separately in place of the Net Profit calculated in accordance with existing accounting standards. Additionally, due to the specifics of each Company, these calculations are not entirely comparable to similar calculations made by other companies. Contact: AviancaTaca Holding S.A. Communications and Corporate Affairs Gilma Usuga Tel: (57+1) - 587 77 00 Ext. 2246 email@example.com firstname.lastname@example.org or Claudia Arenas Tel: (50+2) 2279-5700 - (502) 2279-5600 email@example.com
AviancaTaca Holding S.A. Records Net Profit of COP$101.04 Billion in the Third Quarter of 2012, up 14.8% on the Same Period in
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