Controladora Vuela Compañía de Aviación, S.A.B. de C.V. Annual Report 2020

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FY2020 Annual Report · Controladora Vuela Compañía de Aviación, S.A.B. de C.V.

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I n t e g r a t e d A n n u a l R e p o r t

Ad a p t a t i o n , F l ex i b i l i t y a n d R e s i l i e n c e

Content

1. Volaris, the Lowest Cost Publicly Traded Airline

Initiatives in Times of COVID-19

in the Americas

Message from the President and Chief Executive Officer

2020 Highlights and Initiatives

About Volaris

Business Model

Volaris Corporate Sustainability Program

Corporate Governance

Volaris Culture

Volaris Family

Competitive Advantages

Lower Unit Costs

A Young and Efficient Fleet

Operational Efficiency

The You Decide Program and Ancillaries

Bus Switching Campaign

Route Network

Volaris Digital Strategy

2. Volaris Value Creation

Volaris Value Creation Model and our Contribution to the SDG

Stakeholder Engagement

Actions to Address COVID-19 Impacts
Promptly and Decisively

Work Flexibility and Home Office

Ultra-Low-Cost Model / Bus Switching Campaign

“With Volaris, Fly Sure” Campaign

Customer Service and Solution

Capacity Recovery

Avión Ayuda Volaris Program

Initiatives for the Benefit of Communities

3. Volaris Performance

2020 Financial and Operating Metrics Summary

2020 Results

Corporate Affairs

Supply Chain

Responsible Supply Chain Management Program

Environmental Protection and Climate Change Mitigation

#CielitoLimpio Comprehensive Environmental
Protection Policy

Ambassadors’ Relations, Practices and Wellbeing

Equal Opportunities and Non-Discrimination

Talent Attraction, Development and Retention

Occupational Health and Safety

Content

Human Rights and Community Relations

Human Rights Protection Program

Customer Wellfare, Privacy and Data Security

Aviation security and safety

Personal Data Privacy

4. Consolidated Financial Statements

5. Operating and Financial Review and Prospects

6. About this Report

Materiality Assessment

GRI and SASB Content Index

7. Contact

143

172

174

175

182

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

Content
Content

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Content

1.1.

Message from the President and Chief Executive Officer

1.2.

2020 Highlights and Initiatives

1.3.

About Volaris

1.4.

Competitive Advantages

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

1Content

GRI 201: 103-1, 103-2, 103-3
GRI 102-14, 102-15

1.1. Message from
the President and
Chief Executive
Officer

To our stakeholders:

From the outset, I would like to thank the entire Volaris Family for their hard work and
commitment over a year of enormous challenges. I also share the grief of those who have
lost their loved ones due to the pandemic. This company and its future depend on you, and
together we all will work to support our team members, our families and our customers
who have faced unimaginable loss and challenges during this past year.

2020 represented a scenario hardly imaginable. An affected global economy, numerous
cities in lockdown, border closures, trips to international and national destinations reduced
to a minimum. As a was the case across the globe, the air transportation industry in Mexico
suffered a strong impact.

Volaris responded decisively to this deep crisis. Faced with unprecedented challenges,
Volaris assessed the changing needs of its staff and customers. Although the process
was difficult at times, Volaris quickly adapted to the “new normal”, finding opportunities
to re-position itself and, at the same time, contribute actively to the economic recovery
of Mexico and the region.

We achieved this through dialogue with our Customers, for whom we developed new digi-
tal tools to better serve them and give them the confidence to be able to fly with us under
strict biosafety protocols, in accordance with the highest national and international stan-
dards. These were endorsed by the World Travel & Tourism Council (WTTC) “Safe Travels”
and by the governments of Mexico City and the state of Yucatan. We have been working

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

closely with our government and industry partners to support the
recovery of the tourism sector, which is so vital to our national
economy. We have also contributed in solidarity with the country
by transporting more than 45 tons of humanitarian aid, as well
as rescuers, medical personnel, organs and tissues for transplant
purposes and patients, through the Avión Ayuda Volaris program.

Even in the face of the health crisis and economic shocks caused
by the pandemic, Volaris proven to be resilient, emerging as the
leading airline in terms of market recovery in Mexico and the
Americas. It is an achievement in the eyes of all, that we take
pride on and that compels us to recognize our strengths. This
was possible due to numerous factors implemented around
our business model, including financial discipline, resilience
and adaptation to the new normal, understanding the needs
of our stakeholders, a corporate sustainability strategy and,
of course, the extraordinary work of the Volaris Family. Also,
thanks to the dialogue with our Ambassadors and the union,
we preserved all our jobs, a remarkable achievement that laid a
strong foundation for our newly-renewed business concession
to provide air transportation services for 20 more years.

The ultra-low-cost business model has proven to be the most
resilient to the global pandemic. Our priority now is to continue
to offer safe and reliable service while maintaining strong cost
discipline in order to deliver the lowest prices in the market and
increase total revenue per available seat mile.

In 2020 we launched thirteen new routes, five domestic and
eight international, diversified our point-to-point network, and
strengthened our presence at Mexico City International Airport.
Also, in the last quarter of the year, we recovered the profit-
ability of our business.

Volaris continued to offer low base fares during 2020. Although
the company’s total consolidated operating revenues decreased
36% compared to the previous year, we managed to offset them
through revenue from our ancillary services, reaching a record
figure of MX$ 659 per passenger, a 24% increase compared to
the previous year.

As we rebuild the sector, we adapt to the new reality that de-
mands a world that is more equal, fair and environmentally
responsible, starting from the premise that the viability of the
long-term business is closely linked to its sustainability. For this
purpose, we integrated our corporate sustainability strategy – in
line with the UN Sustainable Development Goals and the ESG
criteria– into our business model, so today we are one of the
five airlines in the Dow Jones Sustainability Index and the only
one to be part of the Mila-Pacific Alliance Index.

Through efficient fuel management, in 2020, the company
reduced emissions by 12.5% in terms of gCO2/RPK, compared
to 2015, equivalent to 35.8 million gallons in fuel savings and a
reduction of 247,278 tons of CO2 emissions.

We closed 2020 with 86 aircraft with an average age of 5.3
years, one of the youngest fleets in the Americas. Thirty-five
percent of them are Airbus A320 Family NEO aircraft, with the
most advanced technology to reduce fuel consumption and
sound footprint.

Today we have one of the most competitive fleet expansion
plans and engine agreements on the market, and we achieved
one of the fastest recoveries in capacity. We are also returning
to the ultra-low unit cost levels prior to the pandemic, capital-
ized the company through a primary follow-on equity offering
and ensured the job continuity of our Ambassadors.

With our industry leadership comes great responsibility, and
we are therefore working to ensure that our growth remains
sustainable. Our challenge is to reduce, by 2026, 23% of carbon
emissions in our operations, compared to 2015, to maintain and
retain talent, to generate new jobs, continue to evolve toward a
digital business and advance the democratization of the skies
at the lowest prices, to help revitalize and strengthen the econ-
omy of the markets where we operate.

Although we have survived a global crisis, we are mindful that
enormous challenges await us in the coming years. We are
heartened by the fact that in the face of the worst crisis in

Content

modern history, the Volaris DNA has proved the strength of a
world-class company to respond effectively to global challenges.

On behalf of the Board of Directors and myself, I want to sin-
cerely thank all Volaris Ambassadors, Customers, investors
and financial institutions, authorities, members of the industry,
suppliers and communities in which we operate for being part
of this success story.

Enrique J. Beltranena
President and Chief Executive Officer

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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this Report

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14.7

million reserved
passengers

destinations +50 under
the codeshare agreement
with Frontier

209

routes +117 under the
codeshare agreement
with Frontier

+6.5 million

followers in social media

Content

Ps. $22.16

billion Total Operating Income

Ps. $9.70billion

Ancillary Revenue

Net proceeds from a
subsequent IPO for
US $164.4 millon

80% of our ticket and

ancillary services’ sales were
through the volaris.com website
and our mobile app

1.2. 2020
Highlights
and Initiatives

1st

year in the Dow Jones
Sustainability MILA Pacific
Alliance Index

1st

public airline in the
American continent
to recover capacity
measured in available
seat miles (ASMs)

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

Content

aircraft; 35% of fleet
is Airbus A320neo Family

38% of our Customers used

mobile check-in; equal to saving
25.96 tons of paper

12.5%

reduction of g CO2/RPK
emissions vs. 2015

Negotiation of

171 Pratt & Whitney

GTF engines for NEO
aircraft

+144 tons of paper

saved; equal to saving 2,460
trees and +3.8 million liters of
water vs. 2019

2026 Goals:
vs. 2015
 -23% g CO2/RPK emissions
 -22% fuel consumption

35.8 million

gallons of fuel saved
vs. 2015

We renewed the ISO 9001 and
14001 Certifications in operating
areas and processes, as well as
in administrative activities in our
corporate offices (green offices)

33,274

certified carbon credits
purchased since 2015

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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this Report

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+45 tons of

humanitarian aid transported
through the Avión Ayuda
Volaris Program

4,846

Ambassadors in Mexico
and Central America

344

organs and tissues
transported for transplant
purposes since 2009

891 airplane tickets

donated to fulfill dreams
since 2015, in alliance with
Dr. Sonrisas foundation

42,931

training hours in 2020

Approximately,

76% of our

Ambassadors are
unionized

1st

airline with a biosafety
protocol, obtaining the “Safe
Travels” stamp from the WTTC,
the Tourist Safety stamp of
Mexico City and the Best Health
Practices Certificate from the
Government of Yucatan

11th

consecutive year as a Socially
Responsible Company (ESR), a
badge granted by CEMEFI

Content

42 strategic alliances to create

value in the communities where we
operated in 2020

Alliance with the Mexican Red Cross
to transport medical equipment and
volunteers to vulnerable communities
and mitigating health risks resulting
from the COVID-19 pandemic

7th

consecutive year as Top
Member in the implementation
of The Code-ECPAT

Alliance with the Sinibí Jípe association
for supporting Rarámuri women.
Purchasing hand-made face masks; thus
reactivating our operations and creating
value for the community

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

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Business Model

“

Volaris has proven to be a resilient airline
due to its business model, which has ad-
justed to the challenges and opportunities
brought by the COVID-19 pandemic. We
are one of the airlines with the lowest unit
costs in the world, allowing us to offer the
lowest prices in the Mexican market and,
thus, consolidate ourselves as the leading
airline in the country in terms of the num-
ber of transported passengers.”

Holger Blankenstein
Executive Vice President Airline
Commercial and Operations

Our disruptive, ultra-low-cost business model
helps us make air travel accessible for every-
one, so more people can travel well!

GRI 102-1, 102-5, 102-6

1.3. About
Volaris

Controladora Vuela Compañía de Aviación, S.A.B.
de C.V. (NYSE: VLRS and BMV: VOLAR), is an ul-
tra-low-cost carrier (ULCC), with point-to-point
operations, serving Mexico, the United States of
America and Central America. Volaris offers low
base fares to build its market, providing quality
service and extensive Customer choice. Since
beginning operations in March 2006, Volaris has
increased its routes from 5 to 209 and its fleet
from 4 to 86 aircraft. Volaris offers more than
337 daily flight segments on routes that connect
44 cities in Mexico and 25 cities in the United
States of America and Central America, with one
of the youngest fleets in the Americas. Volaris
targets passengers who are visiting friends and
relatives (VFR) and cost-conscious business and
leisure travelers both in Mexico and in selected
destinations in the United States of America and
Central America.

Content

Capacity
increase

More
ancillaries

Resilient ULCC
Business Model

Cost
reduction

Low base
fares

More
customers

Cost reduction
Low costs are the Volaris’ foun-
dation for building our market,
stimulating demand and main-
taining a high load factor.

Low base fares
We are committed to offering the
lowest base fares to our Custom-
ers while achieving a profitable
growth.

More customers
We strive to make air
travel accessible to
everyone, so more
people can travel well!
By offering low fares
that compete with
bus fares more peo-
ple choose air travel.

More ancillaries
We offer a wide array of ancil-
lary products to supplement our
Customers’ trips. This way, our
Customers only pay for what
they actually need and Volaris
increases its non-ticket revenue.

Capacity increase
We aim to expand and diversify
our network by increasing the
number of point-to-point routes,
focusing on our target Custom-
ers, i.e., the VFR segment.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

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GRI 102-12, 102-20
Volaris Corporate
Sustainability Program

“

At Volaris we strive to satisfy the present
needs of our Customers, planning the ideal
scenarios for future generations. By inte-
grating our Corporate Sustainability Pro-
gram to the Company’s business model we
focus on creating an appropriate environ-
ment so that ultra-low-cost aviation cre-
ates value for our stakeholders and remains
a growth engine for many years to come.
Our Program is aligned with the Environ-
mental, Social and Governance (ESG) crite-
ria and with the United Nations Sustainable
Development Goals (SDG)”.

José Alfonso Lozano
Corporate Affairs Director

We have focused our efforts on integrating our
Corporate Sustainability Program to our busi-
ness model and we have aligned our initiatives
and goals to the SDGs and ESG Principles. The
Program’s three approaches are: Economic and
Corporate Governance Focus, People Care Focus
and Planet Care Focus.

VOLARIS CORPORATE SUSTAINABILITY PROGRAM

Economic and Corporate
Governance Focus

A. Business Strategy – Ultra-Low-Cost

Business Model
 Cost reduction
 Low fares
 Stimulate demand
 You Decide Scheme
 Capacity increase
 Operational efficiency and reliability

People Care
Focus

A. Ambassadors’ Relations,
Practices and Wellbeing
 Volaris Culture
 Equal opportunities and non-discrimination
 Organizational development
 Corporate voluntary work
 Compensation and benefits
 Occupational health and safety

B. Corporate Governance

B. Human Rights and Community Relations

 Board of Directors and Committee Management
 Risk management and opportunity identification
 Volaris Code of Ethics and compliance
 Transparency and legality
 Information privacy and cybersecurity

C. Corporate Affairs

 Collaborating in public policy development
 Collaborating in the industry’s public decisions
 Strengthening corporate reputation

D. Supply Chain

 Supply chain responsible management

 Human Rights Protection Program
 Avión Ayuda Volaris Program

C. Customer Welfare

 Aviation security and safety
 Privacy and personal data protection
 Customer service and solutions

Planet Care Focus
#CielitoLimpio Comprehensive Environmental Protection Policy

A. Efficient Fuel Consumption
Management (Fuel Saving
Program)
 Fleet renewal
 Investing in the best technology
 Implementation of fuel-saving techniques

B. #CielitoLimpio Carbon

Emissions Offset Program

C. Eco-friendly Initiatives and
Efforts towards Biodiversity
 Recycling
 Paperless policy
 Reduction of electricity consumption
 Reforestation
 Ecological strategic alliances
 Environmental protection awareness campaigns

D. Regulatory Compliance

 Emissions’ reporting
 Hazardous waste management
 Environmental management –
Working Group Green Team

Content

Based on the four main topics of the Economic
and Corporate Governance Focus, we carry out
actions in order to:

 Reduce costs and optimize resources
 Ensure low fares to stimulate demand
 Maintain high standards of operational

efficiency

 Implement the best Corporate Governance

practices

 Work in a culture of ethics and legality,

implementing anticorruption and antibribery
practices, managing risks and crises, and
ensuring the protection of information and
transparency in all our processes

 Participate in the processes of public policy

creation

 Manage our supply chain responsibly

As part of our Planet Care Focus, we defined our
Comprehensive Environmental Protection Policy,
called #CielitoLimpio, which includes actions and
initiatives (environmental programs) aiming to
contribute to the planet’s protection, reducing
Volaris’ carbon footprint and guiding our opera-
tions towards a more eco-efficient management.
This Policy includes the following initiatives:

 Efficient fuel consumption management through
the Fuel Saving Program consisting of purchasing
a young fleet, investing in the best technology
and implementing other fuel-saving techniques,
such as reduction of on-board weight and flight
techniques, among others.

 The #CielitoLimpio Carbon Emissions Offset
Program, through which our Customers have
the option to offset part of the carbon footprint
produced by their flight. With these voluntary
contributions, we purchase carbon credits certi-
fied by the Mexican Carbon Platform.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

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Content

 Eco-friendly initiatives, such as paper saving and electricity
consumption reduction programs, recycling initiatives and removal
of plastic in our operations.

 Efforts for biodiversity, such as reforestation and environmental

awareness campaigns.

 Environmental regulation compliance, through emissions’ report-
ing, correct hazardous waste management, and certifications such
as ISO 14001 and 9001.

Finally, through our People Care Focus, we strengthen our com-
mitment to People, who are the core of any sustainable business
management, i.e., commitment to our Ambassadors, to the com-
munities where we operate and to our Customers.

 Ambassadors’ Relations, Practices and Wellbeing. We have
the best labor practices in place to guarantee strong and last-
ing labor relations that promote the wellbeing and personal
and professional development of our Ambassadors, through:

- Volaris Culture
- Equal opportunities and non-discrimination
- Organizational development
- Corporate volunteering
- Compensation and benefits
- Occupational health and safety

 Human Rights and Community Relations. We voluntarily as-
sume the commitment to create strategic partnerships and
implement programs to safeguard Human Rights and to pro-
tect people in vulnerable situations. The initiatives that allow
us to meet these goals are:

- Human Rights Protection Program
- Avión Ayuda Volaris Program

Thanks to our efforts and commitment to the best ESG
practices, Volaris became a member of the Dow Jones
Sustainability Index. We are one of the five airlines in-
cluded in this index globally, and the only one in the MILA
Pacific Alliance.

 Customer Welfare. As one of the essential factors in the Com-
pany’s sustained growth and business continuity, we continu-
ously strive to guarantee our Customers’ welfare, protect their
rights and provide the best travel experiences by providing:

- An aviation security and safety program
- Personal data protection protocols
- Plans, programs and continuous training to provide the

best customer service

For the 11th consecutive year and as a result of our best
practices that contribute to the wellbeing of all our stake-
holders, we were awarded the Socially Responsible Com-
pany (ESR) badge granted by the Mexican Center for
Philanthropy (CEMEFI).

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

GRI 102-18, 102-22, 102-23, 102-24, 102-25, 102-26, 102-27, 102-28, 102-33, 102-35, 102-36
Corporate Governance
The Volaris Board of Directors and senior man-
agement are committed to implementing in the
Company the highest Corporate Governance
standards. Since 2013 we have been listed on
the Mexican Stock Exchange (BMV) and the
New York Stock Exchange (NYSE). As a pub-
licly traded company, we adhere to the best
corporate governance practices in an effort to
manage the Company within a framework of
legality and transparency and to inform our
investors of the Company’s financial activities.

The Board of Directors is comprised of 14
proprietary directors and 4 alternate direc-
tors, 64% of whom —9 proprietary and 2
alternate directors— are independent.
Furthermore, 14% of the members of our
Board of Directors are women.

During 2020, the Board of Directors met five
times for ordinary meetings and on three occa-
sions approved unanimous resolutions passed by
all members without a meeting. During meetings,
the Board assessed and resolved a wide array
of relevant matters, i.e., approving the Compa-
ny’s consolidated financial results for fiscal year
2019 and quarterly results for fiscal year 2020;
taking note of risk and contingency reports and
information on operating, financial, and legal
matters; approving reports on Company’s man-
agement, including the report on strategic is-
sues; approving reports submitted by the Audit
and Corporate Governance Committee and the
Compensation and Nominations Committee;
approving operations and actions recommended
and deemed appropriate by the management
and the Committees; meeting attendance per-
centage was 100%.

Voting Rights (Dual Class Shares)
According to Mexican laws, all holders of Series A
and B shares of Volaris are entitled to one vote.*

Board of Directors and Committees
The Board of Directors of Volaris is elected by the
Annual Ordinary General Shareholders´ Meet-
ing. Company Bylaws provide that the Board
shall consist of no more than 21 directors, 25%
of whom must be independent, pursuant to the
Mexican Securities Market Law.

Our Board of Directors is comprised of qualified
members with a background and expertise in
aviation, business, marketing, finance, economics,
law and technology, besides meeting the legal
criteria for independence.

Pursuant to our Bylaws and the Mexican Secu-
rities Market Law, any shareholder or group of
shareholders representing 10% of Volaris’ out-
standing capital stock is entitled to appoint one
director.

Content

Proprietary Directors

Alternate Directors

Brian H. Franke
Chairman of the Board

Andrew Broderick
Alternate

William A. Franke
Director

Andrew Broderick
Alternate

Harry F. Krensky
Director

Marco Baldocchi Kriete
Director

Rodrigo Antonio Escobar Nottebohm
Alternate

Enrique Javier Beltranena Mejicano
Director

Alfonso González Migoya
Independent Director

Stanley L. Pace
Independent Director

William Dean Donovan
Independent Director

José Luis Fernández Fernández
Independent Director

José Carlos Silva Sánchez-Gavito
Alternate

Joaquín Alberto Palomo Déneke
Independent Director

José Carlos Silva Sánchez-Gavito
Alternate

John A. Slowik
Independent Director

José Carlos Silva Sánchez-Gavito
Alternate

Ricardo Maldonado Yañez
Independent Director

Eugenio Macouzet de León
Alternate

Guadalupe Phillips Margain
Independent Director

Mónica Aspe Bernal
Independent Director

Jaime Esteban Pous Fernández
Secretary Non-member

Under our Bylaws Board Directors must be elected annually. In April 2020, the Board increased the number of directors from 12 to 14 so that the average tenure of our current directors was 7.7 years.

* Holders of ADS and CPOs shall not be entitled to vote the underlying Series A shares. Mexican holders of Series A shares shall be entitled to vote their shares on all matters. Holders of Series B shares shall be entitled to vote their shares on all matters and will
have the specific voting rights described under “Shareholders’ Meetings.” Series A shares underlying the CPOs and CPOs underlying the ADS will be voted by the CPO trustee in the same manner as the majority of Series A shares votes cast at the relevant
Shareholders’ Meeting in all cases.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Proprietary directors

Brian H. Franke has been a member of our Board
of Directors since 2010 and Chairman of the Board
since April 2020. Currently, he is a principal specializ-
ing in aviation investments with Indigo Partners LLC,
a private equity firm based in the United States. Mr.
Franke has been a member of the board of directors
of Tiger Airways Holdings (Singapore) since 2008
and Tiger Airways Australia since May 2009. He is
also a member of the board of directors of Frontier,
JetSMART and APiJET, joining the latter in 2020. Pri-
or to that, Mr. Franke was vice president of Franke &
Company Inc., a boutique private equity firm focused
on small and medium enterprises investments. He
was also a director in marketing for Anderson Com-
pany, a U.S. real estate developer, from 1989 to 1992
and a marketing manager for United Brands Inc., a
U.S. distribution and licensing company for consumer
goods, from 1987 to 1989. Mr. Franke holds a Bachelor
of Science in Business from the University of Arizona
and a master’s degree in international management
from Thunderbird School of Global Management. He
also serves on the University of Arizona Foundation
Board and participates on its Investment Committee.
He is William A. Franke’s son.

* There is a direct line blood relationship (lineal consanguinity)
between Brian H. Franke and William A. Franke.

William A. Franke has been a member of our
Board of Directors since 2010. He is also a member
of the board of directors of Wizz Air Holdings Plc
(Hungary). He is currently the managing member of
Indigo Partners LLC (since 2002), a private equity
firm. Mr. Franke is chairman of the board of directors
of Frontier, JetSMART (Chile), Energet (Canada)
and APiJET (USA) and was the founding chairman
of Tiger Airways Holdings (Singapore), a member
of the board of directors of Spirit and the Chief Ex-
ecutive Officer / chairman of America West Airlines
from 1993 to 2001. He is also a member of the board
of directors of Falcon Acquisitions Group, Inc. Mr.
Franke has undergraduate and graduate degrees
from Stanford University. He also has an honorary
doctorate from Northern Arizona University awarded
in 2008. He is Brian H. Franke’s father.

Harry F. Krensky has been a member of our Board
of Directors since our founding. He is also a member
of the board of directors of Traxion, a transportation
company, of H+ (SISI), a hospital operator, and of
AMCO International, an education company. Mr. Kren-
sky is managing partner of the private equity firms
Discovery Americas and Discovery Air. Previously,
he was a founder of emerging market hedge fund
managers Discovery Capital Management and Atlas
Capital Management, and a founder of Deutsche
Bank’s emerging market hedge fund. He has been
an assistant professor in international business at the
NYU Stern Business School and was a member of
the Board of Trustees of Colby College. Mr. Krensky
has a Bachelor of Arts from Colby College, a mas-
ter’s degree from the London School of Economics
and Political Science and a Master of Business Ad-
ministration from the Columbia University Graduate
School of Business.

Marco Baldocchi Kriete has been a member of
our Board of Directors since April 2020 and interim
director from July 2019 to April 2020. Since 2010,
he served as an alternate director. He is the Chief
Executive Officer of Central American Comercial, S.A.
de C.V, a retail company in Latin America. He was a
founding member of Transactel Inc. He is currently a
member of the board of Aeromantenimiento (MRO
Holdings, Inc.). Past board experience includes One-
link Holdings, Avianca-Taca and Banco Agricola. Mr.
Baldocchi has a Bachelor of Arts from Vanderbilt
University and a Master of Business Administration
from the Kellogg School of Management.

Content

Enrique Javier Beltranena Mejicano has
been our Chief Executive Officer since March 2006
and a member of our Board of Directors since Sep-
tember 2016. He previously held several executive
positions at Grupo TACA, such as chief operating
officer, human resources and institutional relations
vice president, cargo vice president and commer-
cial director for Mexico and Central America. He
was also general director of Aviateca in Guatemala.
Mr. Beltranena started his career in the aerospace
industry in 1988. During the 1990s, he was respon-
sible for the commercial merger of Aviateca, Sahsa,
Nica, Lacsa and TACA Peru, consolidating them into
a single management entity called Grupo TACA.
While at Grupo TACA, Mr. Beltranena also led the
development of the single operating codeshare and
negotiated the open sky bilateral agreements en-
tered between each of the Central American coun-
tries and the United States. In 2001, as the chief
operating officer of Grupo TACA, Mr. Beltranena led
its complete reorganization. In 2017, Mr. Beltranena
participated in one of the largest joint negotiations
with Airbus for the purchase of single-aisle aircraft. In
2009, Mr. Beltranena was awarded with the Federico
Bloch Awards by the Latin American & Caribbean
Air Transport Association. In 2012, Mr. Beltranena
was named Entrepreneur of The Year Mexico after
being nominated for the EY Hall of Fame in Monaco
by Ernst & Young – Innovation. In 2011, he was also
nominated and named Entrepreneur of The Year
in Mexico by Ernst & Young – Mexico. He was also
awarded with the National Order of Merit by the
President of France.

Volaris, the Lowest Cost Publicly
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Alfonso González Migoya has been a member
of our Board of Directors since November 2014. He
served as our Chairman of the Board from November
2014 to April 2020. He is also a director at FEMSA,
Coca Cola FEMSA, Bolsa Mexicana de Valores and
Instituto Tecnológico de Estudios Superiores de
Monterrey (ITESM), among others. Previously, Mr.
González was chairman and chief executive officer
of Grupo Industrial Saltillo, chief executive officer
of Servicios Interpuerto Monterrey, held different
senior positions at Grupo ALFA and was executive
vice president and chief financial officer of Grupo
Financiero BBVA Bancomer. Mr. González holds a
Bachelor of Science in Electromechanical Engineer-
ing from ITESM and a Master of Business Adminis-
tration from Stanford University Graduate School
of Business.

Stanley L. Pace has been a member of our Board
of Directors since April 2017. He is a senior partner
and director at Bain & Company where he has served
as a member and chairman of most of the company’s
key governance boards. Mr. Pace was the founder
of the transformation and airline practices at Bain &
Company and has led many of the company’s largest
and most successful relationships and transforma-
tions. For a period of two years in the late 1990s,
Mr. Pace was the chief executive officer of ATA. At
that time, ATA was the largest charter airline in the
world. Mr. Pace received an undergraduate degree
in finance from the University of Utah, where he
graduated as valedictorian. He later received his
Master of Business Administration from Harvard
Business School, where he graduated with honors.

William Dean Donovanhas been a member of
our Board of Directors since 2010 (prior to April 2017,
he served as an alternate director). Mr. Donovan sits
on the board of Prophet Brand Strategy, a marketing
consultancy, and was a board member at the Metro-
politan Bank. In 2005, he co-founded Volaris along
with several other parties. Between 1989 and 2003,
Mr. Donovan worked with Bain & Company. He was
Managing Director of Bain Africa between 1999 and
2002 and head of Bain’s airline practice and auto
practice at various times. He is also a consultant for
Stellar Labs, a software company focused on fleet
optimization and revenue management in the private
aviation industry. Mr. Donovan co-founded Casino
Marketing Alliance, a provider of marketing and an-
alytics services to the casino industry. Mr. Donovan
has served as chief operating officer of Nimblefish
Technologies, a specialized micromarketing agen-
cy and as chief executive officer of SearchForce, a
paid search workflow management and optimization
platform. Mr. Donovan received his Bachelor of Arts
from the University of California Berkeley, where he
graduated Phi Beta Kappa and Summa Cum Laude,
and his Master of Business Administration from the
Wharton School at the University of Pennsylvania.

José Luis Fernández Fernández has been
one of our independent directors since 2012 serving
also as the Chairman of our Audit and Corporate
Governance Committee. He is also a member of the
audit committees of various companies, including
Grupo Televisa, S.A.B., Grupo Financiero Banamex
and Banco Nacional de México S.A., and an alternate
member of the board of Arca Continental, S.A.B.
de C.V. Mr. Fernández is a non-managing limited
partner at Chevez Ruiz Zamarripa. Mr. Fernández
has a degree in Public Accounting from Universi-
dad Iberoamericana and is certified by the Mexican
Institute of Public Accountants.

Joaquín Alberto Palomo Déneke has been
one of our directors since 2005 and serves also as
a member of our Audit and Corporate Governance
Committee. He is also a member of the board of
directors of Aeroman. Mr. Palomo has over two de-
cades of experience in the financial air transpor-
tation and commercial aerospace sectors, where
he created and implemented the first reorganiza-
tion of Grupo TACA. He also actively participated
in the planning, purchasing negotiation, closing,
organization and eventual merger of AVIATECA,
Tan/Sahsa, TACA de Honduras, Nica, Lacsa, Isleña
de Inversiones, La Costeña, Aeroperlas and Trans
American Airlines to form Grupo TACA. Mr. Palomo
negotiated the financing of more than $1 billion in
aircraft leases, sales and leasebacks. Mr. Palomo
has a Bachelor of Science degree in Agricultural
Economics from Texas A&M University.

Content

John A. Slowik has been one of our directors
since 2012 and serves also as a member of our Audit
and Corporate Governance Committee. He has over
three decades of experience in the air transportation
and commercial aerospace sectors as a banker at
Citi (and its predecessors) and Credit Suisse, where
he managed its America’s Airline Industry invest-
ment banking practice. His extensive experience
includes corporate and investment banking, where
his activities involved public and private capital
raising, structured debt issuance, aircraft leasing,
capital investment and mergers and acquisitions. Mr.
Slowik is also a member of the board of directors
of Fan Engine Securitization, Ltd. and Turbine USA
LLC, private commercial jet engine leasing compa-
nies operating out of Ireland and the United States,
respectively. He is also an alternate director of Rotor
Engine Securitization Ltd., a private commercial jet
engine leasing company operating out of Ireland.
Mr. Slowik is a board member and chairman of the
audit committee of Quintillion Subsea Holdings, LLC,
a privately held company operating a subsea fiber
optic cable system connecting Nome to Prudhoe
Bay, with four landing stations in between, and a
terrestrial fiber optic cable system connecting Prud-
hoe Bay to Fairbanks, Alaska. Mr. Slowik serves as a
senior advisor to volofin Capital Management Ltd.,
a specialty finance company focused on delivering
innovative financing solutions for the commercial
aviation market. Mr. Slowik has an undergraduate
degree in Mechanical Engineering from Marquette
University and a master’s degree in management
from the Kellogg School, Northwestern University.

Volaris, the Lowest Cost Publicly
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Ricardo Maldonado Yáñez has been one of
our independent directors since April 2018. He is a
partner at Mijares, Angoitia, Cortés y Fuentes, S.C.,
since 1999. Mr. Maldonado has 25 years of experi-
ence providing advice and counseling to Mexican
and foreign companies and clients on domestic and
cross-border merger and acquisition transactions,
joint ventures and strategic alliances. He also rep-
resents issuers and financial institutions in public
and private debt and equity offerings, and advises
clients on the negotiation, structuring and drafting
of commercial loans, on complex financings and on
infrastructure projects. Mr. Maldonado also focuses
part of his practice on corporate governance matters
advising family-owned and publicly listed compa-
nies. Mr. Maldonado serves as member and/or secre-
tary of the board of directors of several companies
including Grupo Televisa, Consorcio Arca, Grupo
Aeroportuario del Centro Norte (OMA) and ICA
Tenedora, S.A. de C.V. Mr. Maldonado received his
LLM from University of Chicago Law School, holds
a certificate on Corporate Law from the Instituto
Tecnológico Autónomo de México and holds a law
degree from the Universidad Nacional Autónoma de
México. He is a member of the National Association
of Corporate Directors (NCD) and of the Interna-
tional Corporate Governance Network (ICGN).

Content

Guadalupe Phillips Margain has been one of
our directors since April 2020. She is the Chief Exec-
utive Officer of Empresas ICA Tenedora, S.A. de C.V.
She previously worked at Grupo Televisa, where she
was Vice-president of Finance and Risk having also
held other positions. Ms. Phillips serves as member
of the board of directors of several companies in-
cluding Grupo Televisa, Grupo Financiero Banorte,
Innova, Grupo Axo and Grupo Aeroportuario del
Centro Norte (OMA). Ms. Phillips holds a Ph.D. and
a M.A.L.D. (Master of Arts in Law and Diplomacy)
from The Fletcher School of Law and Diplomacy,
Tufts University and holds a law degree from the
Instituto Tecnológico Autónomo de México.

Board of Directors’ Duties

Our Company is managed by the Board of Di-
rectors and the Chief Executive Officer. The
Board of Directors establishes the guidelines
and general strategy for conducting our busi-
ness and supervises compliance with these
standards.

Pursuant to the Mexican Securities Market Law
and our Bylaws, the duties of our Board of Di-
rectors include, among others, the following:

 approving our general strategy;
 monitoring our management and that of our

 the annual submission to our Ordinary Gen-
eral Shareholders’ Meeting of (i) the Chief Ex-
ecutive Officer´s report and (ii) the opinion of
the Board of Directors on the contents of the
such report;

 creating special committees and granting
them authority, provided that committees
shall not have the authority to take any action
which by law or under our Bylaws is expressly
reserved to our shareholders or our Board of
Directors;

 voting the shares we hold in our subsidiaries;

subsidiaries;

and

Mónica Aspe Bernal has been one of our direc-
tors since April 2020. She is the Chief Executive Offi-
cer of AT&T, Mexico. She was previously ambassador
to Mexico’s Permanent Delegation to the OECD. She
served as Vice-Minister of Communications of the
Ministry of Communications and Transportation. Ms.
Aspe holds a master’s degree in political science
from Columbia University and a degree on Political
Science from the Instituto Tecnológico Autónomo
de México.

 subject to the prior input from the Audit and
the Corporate Governance Committee, ap-
proving, on a case-by-case basis (i) transac-
tions with related parties, subject to certain
limited exceptions, (ii) the election of our
Chief Executive Officer, his compensation and
removal, and the policies for the appointment
and comprehensive compensation of other
executive officers, (iii) our guidelines for in-
ternal controls and internal audits, including
those for our subsidiaries (iv) our accounting
policies, (v) our financial statements and those
of our subsidiaries, (vi) unusual or non-recur-
ring transactions and any operations during
any fiscal year involving (a) the acquisition or
sale of assets with a value equal to or exceed-
ing 5% of our consolidated assets, or (b) the
granting of collaterals or guarantees or the
acceptance of liabilities with a value equal to
or exceeding 5% of our consolidated assets,
and (vii) the selection of the external auditors;
 calling Shareholders’ Meetings and taking ac-

tion based upon their resolutions;

 policies to be followed for the disclosure of in-

formation.

Our Bylaws provide that the meetings of our
Board of Directors are validly convened and held
if a majority of the members or their respective
alternates are present. Resolutions passed at
these meetings will be valid if they are approved
by a majority of the disinterested members of the
Board of Directors. The chairman of the Board
of Directors will not have a tie-breaking vote.

The members of our Board of Directors are
appointed annually by our Annual Ordinary
General Shareholders´ Meeting. All our direc-
tors remain in office for one year and may be
reelected.

Volaris, the Lowest Cost Publicly
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Committees

Our Board of Directors is supported by Committees approved by the Annual Ordinary General Shareholders’ Meeting. Committees analyze specific matters and issue recommendations
to the Board of Directors.

Content

Audit and Corporate Governance Committee

Compensation and Nominations Committee

Main duties:

 Supervising, evaluating and analyzing the external auditors and

their reports

 Analyzing and supervising the preparation of our financial state-
ments and recommending their approval to the Board of Directors
 Reporting to the Board of Directors on the status of our internal

controls, our internal audit and their adequacy

 Supervising related-party transactions and their execution accor-

ding to the applicable laws

 Requesting our executive officers or independent experts, as appro-

priate, to submit reports

 Submitting proposals to the Board of Directors relating to the appoint-
ment or removal of officers to or from the Company’s first two corporate
levels

 Proposing the creation and amendment of any incentive plan for Am-

bassadors

 Consulting with third-party experts in connection with any issues related
to compensation, organizational development, labor market studies and
other related matters

 Proposing compensation packages for officers within the first four cor-

porate levels

 Investigating and informing the Board of Directors of any irregula-

 Proposing to our Board of Directors the execution, amendment or ter-

rities encountered

 Calling shareholders’ meetings

mination of any collective bargaining agreements

 Assessing the performance of relevant executives and reporting it to the
Board of Directors and the Audit and Corporate Governance Committee

José Luis Fernández Fernández
Independent Chairman

Joaquín Alberto Palomo Déneke
John A. Slowik
Independent Directors

José Carlos Silva Sanchez-Gavito
Independent Alternate Director

Jaime Esteban Pous Fernández
Secretary Non-member

Marco Baldocchi Kriete
Chairman

Brian Franke
Harry F. Krensky
Enrique Javier Beltranena Mejicano
Directors

Rodrigo Antonio Escobar Nottebohm
Alternate Director

Ricardo Maldonado Yañez
Secretary Non-member

Volaris, the Lowest Cost Publicly
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Content

The Sustainability Committee consists of the fol-
lowing members: the President and Chief Exec-
utive Officer, the Corporate Affairs Director who
is responsible for managing Volaris’ Corporate
Sustainability Program and serves as Secretary.
The President and Chief Executive Officer re-
ports to the Board of Directors the most relevant
aspects of the Company’s sustainability efforts.

GRI 102-19, 102-20, 102-21, 102-26, 102-29, 102-31, 102-32
Committees of Senior Mangement

The Company has also the following Committees not regulated by the Mexican Securities Market Law.

Ethics Committee

Cybersecurity Committee

Sustainability Committee

As part of redefining the Volaris’ sustainability
strategy in 2020, we decided to create the Sus-
tainability Committee. This Committee meets
monthly and its main duties are:

 Ensuring the business’ sustainable development
 Integrating sustainability into our business strat-
egy by involving the Company’s senior manage-
ment in all matters related to ESG issues and
other business sustainability trends

 Making decisions that favor the Company’s
sustainability strategy and setting future goals.
Furthermore, we’re seeking to transform into
actions every one of the agreements reached by
this Committee thus achieving cross-sectional
sustainability in all areas of Volaris.

This Committee meets monthly, and its main
duties are:

This Committee meets monthly and its main
duties are:

 Ensuring compliance with the Volaris Code of
Ethics, solving conflicts through effective and
timely decisions

 Building an ethical culture in the Company
and periodically reviewing and updating best
practices and business conduct standards
 Ensuring that all reports sent through the
Whistle Blowing Line on malpractice, miscon-
duct or non-compliance with current stan-
dards and regulations are received and ad-
dressed

 Assessing disputes, conflicts, and misconduct

related to the Code of Ethics

 Proposing sanctions and action plans for cases

related to breaches of the Code of Ethics
 Reviewing the operating guidelines that guar-
antee compliance with the Code of Ethics
 Supervising the existence and implementa-
tion of a training plan on ethical culture for
all Ambassadors

The Ethics Committee consists of the following
members: the President and Chief Executive Of-
ficer, the Chief Legal Officer VP, the Customer
Sales and Service Director, the Human Resources
Director, the Internal Audit Director, the Comp-
troller and Compliance Director, the Operational
Safety Director, and the Organizational Devel-
opment Director.

 Observing and discussing global trends in cy-

bersecurity and data protection

 Analyzing the different historical threats and
the steps that have been taken to solve them
 Observing and discussing the cybersecurity and
data protection strategy that has been imple-
mented and any following evolutionary steps
 In coordination with the Internal Audit depart-
ment, providing certainty to the Audit and Cor-
porate Governance Committee regarding the
steps that have been taken on matters of cy-
bersecurity, data protection and the Company’s
cyber incident recovery capabilities

The Cybersecurity Committee consists of the
following members: the President and Chief
Executive Officer, the Executive Vice President
Airline Commercial and Operations, the Chief
Financial Officer SVP, the Chief Legal Officer
VP, the Comptroller and Corporate Compliance
Director, the Technology and Corporate Trans-
formation Senior Director, the Information Se-
curity and IT Internal Control Manager and the
IT Security Manager.

Volaris, the Lowest Cost Publicly
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Volaris Value
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Senior Management

The Board of Directors is responsible for managing
the appointment, compensation and removal of se-
nior mangement, in accordance with recommenda-
tions made by the Compensation and Nominations
Committee and the Audit and Corporate Governance
Committee.

As of April 30, 2021, 75% of our senior mangement
are men and 25% are women.

Activities of the Management Team

Our President and Chief Executive Officer, as well as other
members of our senior management are required to direct
their activities towards creating value for the Company,
making decisions that significantly transcend the admin-
istrative, financial, operating and legal situation of Volaris.

Senior management members duties include, mainly, (i)
complying with agreements reached at our shareholders’
meeting and those of our Board of Directors, (ii) submit-
ting the main strategies for the business for the approval
of the Board of Directors, (iii) submitting proposals for
our internal control system for the approval of the Audit
and Corporate Governance Committee, (iv) disclosing all
material information to the public, (v) complying with the
applicable laws related to share repurchases and subse-
quent purchases, (vi) initiating actions regarding liabilities
incurred by us, (vii) complying with applicable regula-
tions relating to payment of dividends, (viii) maintaining
adequate accounting and recordkeeping internal control
systems and mechanisms, and (ix) establishing internal
mechanisms and controls which will allow us to verify
that the actions and operations of the Company and legal
entities controlled by it have adhered to the applicable

regulations, as well as monitoring the results of those internal
mechanisms and controls and taking the necessary measures,
if any are required.

The relevant executives shall be responsible for any non-com-
pliance or failure to timely and diligently address all matters
related to their tenure, as provided in the applicable laws and
the Company’s by-laws.

Senior Management Compensation

Compensation at Volaris is mostly aimed at creating value for
its shareholders, its Customers and Ambassadors. Therefore,
the Company has a General Compensation Policy closely
linked and aligned with Volaris’ strategy, mission, vision and
conducts.

This Policy establishes the guidelines for defining and devel-
oping the compensation strategy at the Company’s different
levels, paying, initially, a suitable equitable compensation
according to the obligations, responsibilities, complexity
and contribution of each office to the results of Volaris and,
secondly, a competitive compensation, by participating in
several compensation surveys aimed at comparing our total
compensation levels versus market levels and, making sure
we implement the best practices that create value for our
Ambassadors and our shareholders.

The General Compensation Policy and other policies resulting
thereof are reviewed by the Compensation and Nominations
Committee and the Audit and Corporate Governance Com-
mittee, and based on their recommendation are ultimately
approved by the Board of Directors.

Additionally, to achieve a high level of performance-oriented
results, more than 50% of our executive’s total compensa-
tion is based on short and long-term variable compensation
plans, as measured by the most important key performance
indicators (KPIs) of our business, i.e., financial, operating and
commercial.

Content

Finally, total compensation as a concept includes not only salary com-
pensation but also benefits, provisions and emotional salary. The latter
understood as the Ambassador’s growth, development, working envi-
ronment and conditions and, overall, his/her experience at Volaris, all
together constituting the strongest bond between the Ambassador and
the Company.

Enrique Javier Beltranena Mejicano
President and Chief Executive Officer

Mr. Beltranena has been our Chief Executive Officer since March 2006
and a member of our Board of Directors since September 2016. He
previously held several executive positions at Grupo TACA, such as
chief operating officer, human resources and institutional relations vice
president, cargo vice president and commercial director for Mexico and
Central America. He was also general director of Aviateca in Guatema-
la. Mr. Beltranena started his career in the aerospace industry in 1988.
During the 1990s, he was responsible for the commercial merger of
Aviateca, Sahsa, Nica, Lacsa and TACA Peru, consolidating them into a
single management entity called Grupo TACA. While at Grupo TACA, Mr.
Beltranena also led the development of the single operating codeshare
and negotiated the open sky bilateral agreements entered between each
of the Central American countries and the United States. In 2001, as the
chief operating officer of Grupo TACA, Mr. Beltranena led its complete
reorganization. In 2017, Mr. Beltranena participated in one of the largest
joint negotiations with Airbus for the purchase of single-aisle aircraft.
In 2009, Mr. Beltranena was awarded with the Federico Bloch Awards
by the Latin American & Caribbean Air Transport Association. In 2012,
Mr. Beltranena was named Entrepreneur of The Year Mexico after being
nominated for the EY Hall of Fame in Monaco by Ernst & Young – Inno-
vation. In 2011, he was also nominated and named Entrepreneur of The
Year in Mexico by Ernst & Young – Mexico. He was also awarded with
the National Order of Merit by the President of France.

Volaris, the Lowest Cost Publicly
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Consolidated Financial
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Content

Holger Blankenstein
Executive Vice President Airline
Commercial and Operations

Jaime Esteban Pous
Fernández
Senior Vice President
and Chief Financial Officer

José Luis Suárez Durán
Senior Vice President
and Chief Operating Officer

Mr. Blankenstein has been our Executive Vice President Air-
line Commercial and Operations since November 2017. Prior
to his current position, starting on 2009, he was our Chief
Commercial Officer, leading the areas of sales, marketing,
planning, itineraries, revenue management and cargo and the
IT department. Blankenstein was part of the team that took
the Company public in 2013; he has been with the Company
since its inception in 2005, as one of the founding members
of the team he was involved both setting up and launching
the airline. Prior to that, from 2003 to 2005, he was Director
of Strategic Development at TACA International Airlines in El
Salvador, where he led many key projects such as the integrat-
ed airline systems migration, TACA’s maintenance business
growth strategy and the business plan for Volaris. He began
his career in 1998 as a consultant in the Munich office of Bain
& Company. Blankenstein transferred to the Sydney office in
2000. He was involved in financial services, automotive and
retail industries. Blankenstein earned an MBA from the Univer-
sity of Iowa and a graduate degree in business and economics
from Goethe University in Frankfurt, Germany.

Mr. Pous has been our Chief Financial Officer since March
2021. He previously served as our interim Chief Financial
Officer since June 2020 and as our Senior Vice President,
Chief Legal Officer and Corporate Affairs since November
2017. Prior thereto, he served as our Chief Legal Officer since
January 2016 and as our General Counsel since January 2013.
Additionally, he has served as secretary of our Board of Di-
rectors since 2018 and secretary of our Audit and Corporate
Governance Committee since 2013. Prior to joining us, he
worked at Grupo Televisa, where he had been legal direc-
tor from 1999 to 2012. Mr. Pous received his LLM from The
University of Texas at Austin, School of Law and holds a law
degree from the Instituto Tecnológico Autónomo de México.

Mr. Suárez has been our Chief Operating Officer since Novem-
ber 2017. He previously served as our Operating Executive
Officer since October 2015. He joined Volaris in early 2006
as sales director. In 2012, he held the position of Retail and
Customer Service Director, where he supervised airport ope-
rations, ramp management, flight attendants and customer
solutions. Prior to joining Volaris, Mr. Suárez Durán worked
for ten years at Sabre Holdings. Mr. Suárez Durán received
his master’s degree in science in Industrial Engineering and
master’s degree in business administration from the University
of Missouri, Columbia. He also holds a degree in Executive
Management from IPADE and a Bachelor of Science in In-
dustrial Engineering from the Universidad Iberoamericana.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

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Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Carolyn Prowse*
Vice President and Chief
Commercial Officer

Jimmy Zadigue
Internal Audit Director

Isela Cervantes Rodríguez
Interim Chief Legal Officer

Content

Mr. Zadigue has been our Internal Audit Director since Novem-
ber 2020. He previously served as our Internal Audit Director
from April 2011 to February 2019. Mr. Zadigue worked as the
internal audit director of Sempra Mexico (IEnova), as direc-
tor of operations, finance and administration at Swarovski
in Mexico and as director of finance and business control at
Bombardier North America. Mr. Zadigue is also a Chartered
Public Accountant in Canada. He holds a Bachelor of Business
Administration degree from HEC-Montreal and a Master of
Science degree in Accounting Sciences from the Université
du Québec.

Mrs. Cervantes has been our interim Chief Legal Officer since
March 2021 and is the deputy secretary of our Board of Di-
rectors. She joined Volaris in June 2007 and was previously
in charge of the legal corporate and securities compliance
department. She holds a Law Degree from Escuela Libre de
Derecho and received her LLM from Universidad Panamericana.

Carolyn Prowse has been our Chief Commercial Officer since
March 2019. Prior to joining Volaris, Ms. Prowse ran her own
business advising aviation clients in Europe, Africa, the In-
dian Ocean and the Middle East on a wide range of topics
including strategy, transformation and restructuring. Most
recently, she worked with easyJet on their five-year plan and
core strategic initiatives, and other clients include advisory
firms, hedge funds and both full service and low cost airlines
and their shareholders. From 2011 to 2013 she was Senior Vice
President, Corporate Strategy and Special Projects for Eti-
had Airways in Abu Dhabi, responsible for strategy, mergers
& acquisitions, the corporate program management office
and other key initiatives and special projects. Her career in
aviation also includes ten years with British Airways Plc in
London. Carolyn’s background also includes roles in invest-
ment banking (managing a global portfolio of private equity,
investment banking and strategic investments) and strategy
consulting with LEK Consulting. She has a bachelor’s degree
in chemistry from the University of Oxford.

* On April 29, 2021, our Board of Directors was informed that Ms. Prowse
has resigned from her position effective May 7, 2021. Holger Blankens-
tein, our Executive Vice President Airline Commercial and Operations,
will temporarily perform the functions of the Commercial Vice-Presiden-
cy while a replacement is appointed.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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this Report

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GRI 201: 103-1, 103-2, 103-3
GRI 102-11, 102-13, 102-15, 102-29, 102-30
Risks and Opportunities

Volaris is a Mexican airline listed on the Mexi-
can Stock Exchange (BMV) and the New York
Stock Exchange (NYSE). Risk management is
of vital importance as a tool for achieving the
Company’s objectives, for decision making, for
strengthening sustainable growth and for build-
ing confidence among our stakeholders in the
short, medium and long term.

Therefore, at Volaris we have implemented the
best international practices and systems for
risk management, such as COSO (reference
standard containing the main directives for the
implementation and management of a control
system), COSO ERM (integrated framework for
enterprise risk management), and COBIT (refer-
ence framework aimed at controlling and super-
vising information technology). These systems
help us identify and evaluate the Company’s
risks in a timely manner, define indicators for
monitoring purposes, and develop mitigation
plans to avoid impact on our operations.

These management systems include:

a) Control environment: a culture of control
environment is endorsed throughout the
Company, from our Board of Directors to
our commitment to each of the Company’s
Ambassadors as far as complying with our
values and ethical principles, governed by our
Code of Ethics and the applicable regulations.
b) Risk assessment: the risks and opportunities
to which Volaris is exposed are continuously
monitored through different communication

channels, such as interviews, surveys, ques-
tionnaires, among others, and assessed
based on their impact and probability level.
Additionally, these are prioritized by their
level of importance and their alignment with
the Company’s strategic objectives.

c) Control activities: control activities and/or
mitigation plans are defined and reviewed
jointly with every individual responsible for
each risk, establishing monitoring indicators,
which in turn are reviewed by the parties re-
sponsible as part of the self-certification pro-
cesses and follow-up of their daily activities.
d) Information and communication: efficient
determination of the information and esca-
lation channels, in order to have relevant and
quality information that supports the other
control components, with the purpose of
disseminating such information to the entire
Company.

e) Monitoring: continuous assessments are car-
ried out, which are integrated into the busi-
ness processes at the Company’s different
levels providing timely information. Indepen-
dent evaluations, performed periodically, may
vary in scope and frequency depending on
risk assessment, the effectiveness of ongoing
evaluations, and other senior management
considerations. Results are evaluated by com-
paring them against the criteria established
by regulators, other recognized bodies or
by the senior management, the Audit and
Corporate Governance Committee and the
Board of Directors; subsequently, deficiencies
are reported to senior management and the
Board of Directors, as appropriate.

The control framework allows for enterprise
risk management (ERM), internal control, and
fraud detection in compliance with regulators’
standards, such as the U.S. Securities and Ex-
change Commission (SEC), the Mexican Stock
Exchange (MSE), and the National Banking and
Securities Commission (CNBV).

The meetings of the Board of Directors include
the submission of the Risk and Contingency
Report (operating, financial and legal). Like-
wise, an Enterprise Risk Management (ERM)
Report is submitted to the Audit and Corporate
Governance Committee. The resolutions ad-
opted are submitted to the Board of Directors
for approval.

The President and Chief Executive Officer, as
well as the Vice President and Chief Financial
Officer are responsible for certifying the inter-
nal control system, which is submitted to the
Board of Directors for its approval with the prior
opinion of the Audit and Corporate Governance
Committee. In the most recent assessment of
our Internal Control on Financial Reporting, the
Company’s external auditors did not report any
material or significant deficiencies.

It must be mentioned that Volaris manages all
risks and opportunities that have an impact on
our operations in order to design mitigation
strategies, allowing our business to be sustain-
able in the future.

For more information, please see Form 20F on our Investor Relations website: http://ir.volaris.com/English/home/default.aspx

Content

Risks related to Mexico

 Certain political and social events in
Mexico, as well as changes in Mexican
federal government policies may have
an adverse effect on our business, op-
erating results, financial condition and
Annual Report.

 Adverse economic conditions in Mexico
may adversely affect our business, op-
erating results and financial condition.
If inflation rates increase, demand for
our services may decrease and our costs
may increase. In addition, currency fluc-
tuations or the devaluation and depre-
ciation of the peso, as well as events in
other countries, could adversely impact
the Mexican economy and hence our
business, our securities’ market value,
financial condition and operating results.
 Mexican antitrust legislation may affect

the fares charged to our Customers.
 Security in Mexico has adversely im-
pacted, and may continue to impact, the
Mexican economy, which could have a
negative effect on our business.

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Risks related to the airline industry

 We operate in an extremely competitive

industry.

 Our industry is heavily impacted by the

price and availability of fuel.

 Our inability to renew our concession or
its revocation by the Mexican government
would have a material adverse impact on us.
 Under Mexican law, our assets could be
taken or seized by the Mexican government
under certain circumstances.

 The industry is particularly sensitive to

changes in economic conditions.

 Our industry is heavily regulated and is
subject to increasingly rigorous environ-
mental regulations. Compliance with appli-
cable laws involves significant costs, and
regulations enacted in Mexico, the United
States and Central America may significant-
ly increase our costs in the future.

 Airlines are often affected by factors beyond
their control, including air traffic conges-
tion at airports, weather conditions, natural
disasters, health outbreaks, pandemics or
increased security measures, any of which
could harm our business, operating results
and financial condition.

 Certain airline consolidations and reorgani-
zations could adversely affect the industry.
 Since the airline industry is characterized
by high fixed costs and relatively elastic
revenue, airlines cannot quickly reduce their
costs to respond to shortfalls in expected
revenue.

 Terrorist attacks or war may cause crises in
the industry, which may alter travel behavior
or increase costs.

 Increases in insurance costs and/or signif-
icant reductions in coverage could harm
our business.

 Public health threats, such as the H1N1 flu
virus, the bird flu, Severe Acute Respiratory
Syndrome (SARS), the Zika virus, COVID-19
and other highly contagious diseases could
lead to suspension of domestic and interna-
tional flights and changes in travel behavior.
This could have a material adverse effect
on the airline industry, our reputation, the
price of our shares, our business, operating
results and financial condition.

For more information, please see Form 20F on our Investor Relations website: http://ir.volaris.com/English/home/default.aspx

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Content

Risks related to our business

 There is a possibility that we may not be
able to implement our growth strategy.
 We have a significant number of fixed obli-
gations that may impair our liquidity, thus
affecting our business, operating results
and financial condition.

 Our ultra-low-cost structure is one of our
main competitive advantages and many
factors could affect our ability to control
our costs.

 Our fuel hedging strategy may not reduce

our fuel costs.

 Inability to obtain lease or debt financ-
ing for additional aircraft may impair our
growth strategy.

 Our limited credit lines and loan facilities
make us highly dependent upon our oper-
ating cash flows.

 We are highly dependent on the Mexico
City, Tijuana, Guadalajara and Cancun
airports for a large part of our business.
 Our maintenance costs will increase as our

fleet ages.

 Our business could be harmed by a change
in the availability or cost of air transport
infrastructure and airport facilities.

 We are exposed to increases in landing
charges and airport restrictions, as well as
other airport access fees, and cannot be
assured access to adequate facilities and
landing rights necessary to achieve our
expansion plans.

 We rely on maintaining a high daily aircraft
utilization rate to implement our ultra-low-
cost structure, which makes us especially
vulnerable to flight delays or cancellations
and aircraft unavailability.

 Our reputation and business could be
adversely affected in the event of an emer-
gency, accident or similar incident involving
our aircraft.

 Failure to comply with covenants contained
in our aircraft or engine lease agreements,
or the occurrence of an event of default
thereunder, could have a negative impact
on our business, our financial condition and
operating results.

 The growth of our operations to the United
States of America is dependent on contin-
ued positive safety assessment in Mexico
and the Central American countries in
which we operate.

 We rely heavily on technology and auto-
mated systems to operate our business
and any failure or non-compliance by their
operators could affect our business.

 We rely on third-party service providers to
perform essential functions for our operations.
 Our processing, storage, use and disclosure
of personal data could lead to liability as a
result of government regulations.

 We depend on our non-ticket revenue to
remain profitable, and we may not be able
to maintain or increase our non-ticket reve-
nue base.

 Restrictions or increased taxes applicable
to fares or other charges applicable to
ancillary products and services paid by
Customers could harm our business, finan-
cial condition and operating results.

 Changes in how we or third parties are
permitted to operate at airports could have
a material adverse effect on our business.
 We rely on a number of exclusive suppliers
for our fuel, aircraft and engines. Any real
or perceived problem with the Airbus A320
Family aircraft or IAE and P&W engines
could adversely affect our operations.

 Cyber-attacks or other incidents involving
network or IT security, including breaches in
data privacy, could have an adverse effect
on our business.

 Inability to attract and retain qualified
Ambassadors or failure to maintain our
Company culture could harm our business.
 Increased labor costs, union disputes, Ambas-
sador strikes, and other labor-related disrup-
tions could adversely affect our operations.
 Our business, financial condition and oper-
ating results could have a negative material
impact if we lose the services of our key
Ambassadors.

 Our operating results could fluctuate.
 We don’t have a Control group.
 Volaris is a holding company and does not
have any material assets other than the
shares of its subsidiaries.

 Changes in accounting standards could

impact our reported earnings.

For more information, please see Form 20F on our Investor Relations website: http://ir.volaris.com/English/home/default.aspx

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

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GRI 201: 103-1, 103-2, 103-3
GRI 102-11, 102-15

Data Privacy and Cybersecurity

Cyber-attacks or other cyber-incidents involving
network or IT security may cause equipment
failures or disruptions to our operations. Our
inability to operate our networks as a result of
such events, even for a limited period of time,
may result in significant expenses or loss of
market share to other airlines. Cyber-attacks,
which include malware, computer viruses,
phishing, denial of service and other means of
disruption or unauthorized access to companies,
have increased in frequency, scope and potential
harm in recent years.

We take preventive response and electronic
threat recovery actions to reduce the risk of
cyber incidents and protect our information
technology and communications.

During 2020, we experienced security inci-
dents that did not have any negative financial
or reputational impact, as they were detected
and contained in a timely manner and with
the appropriate instruments.

Despite all our preventive measures, there
is always a risk that we may suffer a major
cyber-attack that we are unable to mitigate.
The costs associated with a major cyber-at-
tack could increase our costs on cybersecurity
measures, litigation, reputational damage, lost
revenue from business interruption and loss
of existing Customers and business partners.
We therefore have a cybersecurity insurance
and we constantly strengthen our protocols to
prevent the theft of valuable information, such
as financial data and confidential information,
and to protect the privacy of confidential data
of Customers and Ambassadors against network
or IT security breaches.

In response to such threats, global legislative
and regulatory focus on data privacy and cyber-
security has been reinforced, particularly with
respect to critical infrastructure providers,
including those in the transportation sector.
Consequently, we must comply with a growing
and fast-evolving set of legal requirements in
this area, including substantive cybersecurity
standards as well as requirements to notify
regulators and affected individuals in the event
of a data security incident.

The regulatory environment is increasingly
challenging and could pose important obliga-
tions and risks to our business, including signifi-
cantly greater compliance costs and substantial

penalties. Other countries and states, as well
as some of our commercial partners –such
as credit card companies– may issue similar
regulations in the future, so we develop sound
strategies and processes to prevent any attack
on information security.

In 2020, the efforts in cybersecurity were:

 Assurance of operational continuity in
the face of social distancing due to the
COVID-19 pandemic, through secure
virtual networks (VPN).

 Implementation of double authentication
factor to reduce the risk of unauthorized
use of access accounts to Microsoft 365
services.

 Risk mitigation associated with advanced
threat attacks on emerging collaboration
technologies, such as Microsoft Teams.

 Strengthening traffic monitoring

and analytics in the www.volaris.com
ecosystem to detect non-human traffic.

Content

 Development and implementation of

“playbooks” for frequent threats.

 Increased number of exercises related to
security assessments of the technological
environment (ethical hacking) and
validation of our information security
culture program or security awareness
(phishing test) effectiveness.

 The Cybersecurity Committee met twice.

Volaris, the Lowest Cost Publicly
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GRI 102-16, 102-17, 102-25, 412-2
TR-AL-520a.1
Volaris Code of Ethics

At Volaris, we have available a Code of Ethics
for all Ambassadors, suppliers and any third par-
ty with whom we do business. This document
establishes our core values, standards and the
Volaris Culture, all of which regulate our daily
actions and behaviors. The Code of Ethics ad-
dresses the following:

 Occupational health and safety
 Equal opportunities and non-discrimination
 Human Rights protection –including avoidance

of child and forced labor–

 Anticorruption practices
 Environmental protection
 Necessary elements to offer the best Customer

service

At Volaris, we have an ethical culture guiding
the actions of all our Ambassadors. Hence, all
labor relations and with third parties are ca-
rried out under a framework of legality, respect
for Human Rights and non-discrimination.

All Ambassadors must know and comply with the
provisions of the Code of Ethics. Therefore, from
their very first day of employment, Ambassadors
familiarize themselves with this document. Also,
Ambassadors are required to take an annual on-
line course to reinforce and update their knowl-
edge on the expected ethical conducts.

Volaris encourages free and healthy compe-
tition with all airlines in the industry.

During 2020, we reviewed our Code of Ethics.
We carried out working sessions with the Pres-
ident and Chief Executive Officer, the manage-
ment and our Ambassadors, to suggest amend-
ments and updates to the Code and to adjust
this instrument to the new requirements of our
stakeholders and to the latest trends that will be
driving our business profitability in the future.
Amendments were authorized by the Audit and
Corporate Governance Committee in 2020, and
by the Board of Directors in 2021.

In 2020,

The most relevant amendments to the Code of
Ethics were:

1. Updating the Letter of the President and Chief
Executive Officer, using a more inclusive lan-
guage and focused on the concept of person
and dignity.

2. Structural change, currently divided into:
a. culture, pillars and behaviors
b. principles
c. management of the Volaris Code of

Ethics

d. Policies related to the Code of Ethics
e. Letter of Adherence to the Code of

Ethics

3. Adding a section on “Principles” with stake-

holders.

4. Update of Volaris Mission.
5. Incorporation of the Responsible Supply

Chain Management program.

6. Incorporation of the Volaris Corporate Sus-

tainability Program.

7. Establishing the review and update criteria

applicable to the Code of Ethics.

8. Adding the training process to the Code for

Ambassadors.

9. Amendment to the departments that com-

prise the Ethics Committee.

Furthermore, the Code of Ethics establishes our
commitment to maintain free and responsible
market competition, prohibiting anti-compet-
itive and monopolistic practices at all times.
In addition, we comply with all the applicable
regulations that help our competitiveness and
profitability in the industry.

100%

our Ambassadors were certified
in our Code of Ethics.

Committed to continuous improvement, we
added and described in detail the concepts
of diversity, non-discrimination, child labor,
forced labor, conflict of interest, non-com-
plexity-simplification, harassment, labor-re-
lated abuse and money laundering.

Content

10. Updating of Volaris Ethics Line’s supplier.
11. Removal of exhibits and their subsequent
replacement by policies related to the Code.

Furthermore, we have internal policies that re-
inforce the Code of Ethics’ guidelines:

Immunity Policy which protects
people who report safety violations.

Conflict of Interest by
Relationship Policy, which defines
procedures to avoid and resolve
any conflicts of interest that may
arise.

Child-Grandparent Policy, which
allows all Ambassadors to hold
discussions with their supervisor’s
boss if they feel intimidated by
their immediate supervisor or if
the latter is violating the Code of
Ethics.

Ethics Line Policy,
which allows Ambassadors,
suppliers, and the union to report
any non-compliance or suspected
non-compliance with the Code
of Ethics, through established
communication channels.

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Anticorruption Practices

Together with the Code of Ethics and the previous policies that govern our daily behaviors, all
Volaris operations are aligned with the Anticorruption Compliance Policy and the Fraud Preven-
tion and Control Policy, which include compliance with all the applicable anticorruption laws, such
as the Foreign Corrupt Practices Act (FCPA). This has several objectives, like complying with our
responsibilities as a public company listed on the NYSE, ensuring transparent practices in line with
the legal framework, as well as avoiding any act of corruption, including fraud, bribery, extortion
and embezzlement. Some of the policies that help us achieve these goals are:

Anticorruption Compliance Policy and Fraud Prevention and Control Policy:
These policies are directed to managing and implementing actions related to
fraud, bribery, extortion, embezzlement, prohibition of facilitation payments,
and restricted donations to political parties.

Management of Gifts and Benefits from Suppliers and Third-Parties: this
policy establishes the guidelines for relationships with third parties, such
as suppliers or public officers, among others, preventing the exchange of
benefits for any preferential treatment or other activities that could lead to
a conflict of interest.

Management of Gifts and Benefits for Suppliers and Third Parties: this policy
establishes the guidelines for giving gifts to third parties, in order to create
proper commercial relations or to satisfy certain local traditions; these can-
not be of considerable value and must comply with the Law. Likewise, it is
prohibited to give gifts or benefits to suppliers or third parties in exchange
for practices related to bribery, illegal payments or improper fees.

Donations Policy: updated in 2020, this policy establishes the guidelines for giv-
ing, receiving, and managing donations to support social assistance institutions
and individuals, through the Company’s social responsibility programs, such as
the Avión Ayuda Volaris Program and donations with purpose.

In 2020, there were no corruption incidents, as
defined by the Anticorruption Compliance Policy
and the Fraud Prevention and Control Policy.

In 2020, we had 98% training
sessions on anticorruption
practices.

Ethics Line

During 2020 we celebrated the seven years of
implementation of the Volaris Ethics Line, a
set of communication tools managed by Ethics
Global, so that Ambassadors, suppliers and the
union can report or denounce any breach or
suspected non-compliance with the Company’s
Code of Ethics.

The procedure to report any breach to the
Code of Ethics starts by receiving the complaint
through any channel of the Whistle Blowing Line;
subsequently, attention, management and advice
are given and, if necessary, corrective and pre-
ventive measures are applied for future cases.

Once a report or complaint is received, an inves-
tigation is carried out and recommendations or
guidance are provided. Every month, a summary
of the cases reported, investigated and their
recommendations is shared with the members
of the Ethics Committee. Additionally, if a mem-
ber deems it appropriate, an Ethics Committee
meeting will be scheduled to discuss the cas-
es and the corresponding recommendations.
Moreover, the Audit and Corporate Governance
Committee is informed about these reports in
its ordinary meetings.

Communication channels:

Website
lineadeescuchavolaris.com

Email
reporte@lineadeescuchavolaris.com

Telephone
800 T Escucho (800-837-2824)

App ETHICSGLOBAL
Available for IOS and Android

Content

In 2020, 123 reports were received on the Volaris
Ethics Line, of which 80% were attended and
resolved, 20% are currently under investigation.
Three cases were related to fraud issues and
pertinent actions were taken; the rest, for the
most part, were related to work environment
topics and mishandling of assets. All reports
were reviewed and investigated by the corre-
sponding areas and action plans were imple-
mented to solve each one.

Benefits of the Volaris Ethics Line:

 Strengthening the culture of integrity and

ethics.

 Assuring the people who report of the

confidentiality of the process; reports are
managed by a third party.

 Ensuring proper and independent
management of all cases reported.

 Encouraging respect among Ambassadors

and people’s individual development.

 Promoting a sense of belonging within the

Volaris Family.

 Acting as a deterrent by reducing unethical

conducts.

 Detecting cases affecting the work

environment.

 Reducing staff turnover.
 Ensuring a workplace free of violence and

discrimination.

 Contributing to comply with the guidelines
of the Anticorruption Compliance Policy
and the Fraud Prevention and Control
Policy.

 Contributing to comply with the guidelines

of the Sarbanes Oxley Act.

 Minimizing the risks of bribery, fraud and

corruption.

 Preventing economic losses.
 Standardizing ethical practices in
organizations’ business units and
geographic locations.

 Automating information gathering for

analysis.

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Volaris Culture

With our person-centered Culture, we
transcend to continue offering the best
travel experiences.

Our organizational culture, which is person-cen-
tered, is composed of all the values and behav-
iors expected from our Ambassadors3. Therefore,
we have defined five pillars at Volaris for their
comprehensive development: health, family,
professional development, spirit and social
commitment.

During 2020, due to the COVID-19 pandemic, we
focused on the health pillar. Hence, we strive to
create value for Ambassadors through a strategy
that prioritizes their physical, mental and family
wellbeing.

 Physical wellbeing: 24-hour medical care, phys-
ical activation content through the “With you
at a distance” campaign, as well as COVID-19
detection tests for part of our administrative
staff who returned to the offices and reactivat-
ed operating Ambassadors.

Content

 Mental wellbeing: 116 “Sofa Talks”, weekly con-
tent and challenges for recreation, intellectual
and cultural stimulation, among other activities.

Volaris Culture

 Family wellbeing flexible hours and home-office
for Ambassadors with children in school and
those who care for senior adults or people in
vulnerable situations.

In 2020, we amended our Mission!
With the best people and at a low cost, we enable more people to travel well.

“

A person-centered culture allows Volaris to achie-

ve the results that keep us as the top airline in

Mexico in passenger transport. It is not only a theo-

retical philosophy, it is evident in every program,

forum, initiative and strategy, positively impacting

Ambassadors. It is a culture that must be expe-

Vision
Transcend by creating
and living the best
travel experiences.

Pillars
Safety, Customer
Service and
Sustained
Profitability

Behaviors
Credibility, Respect,
Fairness, Fellowship
and Pride.

rienced and renewed daily in our work centers

Even while socially distancing, we maintain our family spirit

and at a distance.”

Juliana Angarita
Organizational Development Director

Aiming to preserve closeness among Ambassadors and reactivate operations effi-
ciently, we implemented live communication forums with our senior management.
Officers informed our entire family about the situation at Volaris, the outlook and
reactivation plans.

Furthermore, we held 16 “Sofa Talks” to promote the physical, mental and family
wellbeing of all Ambassadors. Each forum, directed by experts from several fields,
were attended by 300 Ambassadors on average and dealt with topics such as stren-
gthening personal finances, family leadership, living together at home, emotions
workshop, nutrition advice, breast cancer and others.

3 By Ambassador(s) we refer to all the women and men employed by Volaris and any of its subsidiaries.

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GRI 402: 103-1, 103-2, 103-3
GRI 102-7, 102-8

Volaris Family

At Volaris, we are all a great family. We strive to create a work environment that ensures equal opportunities and
our Ambassadors’ physical and emotional integrity. We aim to promote a sense of pride and belonging, as we las
to attract and retain the best talent.

2,239

46%
Women

2,607

54%
Men

Central America
67

86%
Men

Central America
94

4,846

Ambassadors are part of
our family in Mexico and
Central America.

Ambassadors
breakdown by
gender and
country

Mexico
2,172

Mexico
2,513

Content

14%
Women

25%
Women

Gender diversity
in the Board
of Directors

Gender diversity
among Officers
and Managers

Ambassadors with disabilities: < 25%

Breakdown by age group:
< 30 years: 25-50% of our workforce
30-50 years: 50-75% of our workforce
> 50 years: <25% of our workforce

Women

Men

75%
Men

In addition, the percentage of women in key positions is:
34% in management positions
50% in junior management positions
31% in management positions with revenue-generating functions
2% in Science, Technology, Engineering and Mathematics (STEM)

related positions

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Turnover

2020 total
turnover rate

8.9%

vs 14.7% in 2019

2020 voluntary
turnover rate

3.5%

vs 12.1% in 2019

Turnover rate by gender

46%

Women

54%

Men

Content

Turnover rate by region

16%

14%

11%

In 2020 we retained our talent and reduced

the turnover rate compared to 2019, due to

the implementation of initiatives to ensure

our Ambassadors’ comprehensive wellbeing

in the face of the COVID-19 pandemic.

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Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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this Report

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In 2020,

14.7

million passengers
chose to travel with
Volaris.

We are the Mexican airline
with the largest number of
transported passengers.

of surveyed
Customers traveled
in an airplane for the
first time.

We are the Latin American
airline with the most routes to
the United States of America.

1.4. Competitive
Advantages

GRI 102-10
GRI 201: 103-1, 103-2, 103-3
Lower Unit Costs

We strive to decrease our cost structure by
offseting any challenging situations, by reduc-
ing fixed costs and maintaining a high-density
seating configuration and aircraft utilization.

This strategy, together with our ultra-low-cost
business model, have yielded exceptional results
for Volaris. We have stimulated demand and sat-
isfied our Customers’ needs and expectations;
in addition, we have successfully adjusted to the
current complicated situation resulting from the
global pandemic, and maintained our profitability.

Content

TR-AL-000.F
A Young and Efficient Fleet

We have one of the youngest and most
efficient fleets in the American conti-
nent; 86 aircraft with an average age of
5.3 years.

Each aircraft has 188 seats on average and 79%
are equiped with sharklets, aerodynamic devices
that reduce fuel consumption by approximate-
ly 4% and prevent around 18,000 tons of CO2
emissions.

In accordance with our ultra-low-cost strategy
and our commitment to become the greenest
airline in Mexico, we have steadily increased the
number of Airbus NEO aircraft, which burn less
fuel and offer competitive lease rates. Addition-
ally, these aircraft have eco-efficient engines and
sharklets; thereby reducing CO2 emissions and
fuel consumption, minimizing our environmental
footprint.

With the success of our strategies, we are the
publicly traded airline with the lowest costs in
the Americas.

We are a resilient airline; we achieved one
of the fastest recoveries worldwide per
available seat mile by taking advantage of
current market opportunities and adjusting
our operations.

As of December 2020, the Mexican airline
industry recovered 56%; Volaris accounts for
17% of this recovery.

In 2020, we acquired 7 new A320neo air-
craft; 35% of our fleet are NEO aircraft and
by 2023 it will be 58%

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Content

GRI 102-2, 102-6, 102-7
The You Decide Program and Ancillaries

One of our greatest competitive advantages is our You Decide program. This ticket price-disag-
gregation framework allows us to offer the lowest base fare –Fly Basic– and ancillary services
on a separate basis, so that our Customers only pay for what they need; hence, there is absolute
transparency about the base fares and optional services purchased by the Customer.

With the You Decide program, we were able
to make the benefits of air transport availa-
ble to more and more people.

As of the date of this report, we have the following fares:

Operational Efficiency

In line with our cost reduction strategy and ability
to adjust, we use several indicators to monitor
operational efficiency.

 Itinerary reliability
 On-time performance (departure)
 On-time performance (arrival)
 Maintenance reliability
 Baggage irregularities
 Booked passengers
 Available seat miles (ASMs)
 Load factor
 Consumed fuel gallons
 Ambassadors per aircraft at the end of

the period

 Average daily aircraft utilization (block hours)
 Average daily aircraft utilization (flown hours)
 Airports where we operate
 Passenger flight segments

c
i
s
a
B

1 personal item
(must fit underneath
the seat)

Lowest
fare

No checked
baggage

c
i
s
s
a
l
C

1 personal item
(must fit underneath
the seat)

s
u
P

1 carry-on
bag

1 personal item
(must fit underneath
the seat)

2 carry-on
bags

1 checked bag
(25 kg)

Priority
boarding

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Content

Furthermore, we have developed programs to strengthen ties with our frequent Customers and
offer them special fares and promotions, creating a loyalty relationship between them and the
Company. This will help us to maintain their preference in the future.

In 2020, we produced Ps. $9.70 billion in non-ticket revenue, approximately 39% of
our total revenue.

v. club

v. pass

Volaris-INVEX
Credit Card

This membership offers fares at a lower cost, and
the possibility to choose from among three dif-
ferent options: individual, group (owner plus six
passengers), and subscription (individual, with
monthly payments). The benefits are:

 Best prices on all flights
 Savings of at least Ps. $100.00 Mexican pesos

on each flight

 Exclusive promotions every Thursday

Members of v.pass have access to the best prices
on one-way or round-trip tickets once a month for
any of our domestic destinations. The benefits are:

During 2020, we continued strengthening our partnership
with Banco INVEX to offer even more benefits and oppor-
tunities for our Customers. Some of these benefits are:

 Fixed monthly payment
 Only taxes are paid (VAT and airport fees)
 Not subject to seasonal price variations
 Baggage at preferential rates
 Access to v.club fares

 Electronic credits earned on purchases made with the
INVEX credit card, which in turn can be used to pay
for flights

 Initial and anniversary bonuses deposited directly to

the electronic wallet

 3, 6, and 11 months of credit with no interest
 Additional baggage at no cost to the credit card

holder and companions

 15% discount on the purchase of products from the In

the Clouds on-board menu

395,940

members

23,600

members

294,000

members

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Due to the situation resulting from the COVID-19 pandemic, we created three additional products
to protect our Customers in all stages of their journey.

Content

Offering unlimited time and date changes during off
season, with no difference in fare.

This travel cancellation or interruption insurance provi-
des coverage in case of travel delays and air transpor-
tation for family member in case the beneficiary has
an accident.

Provides medical assistance, support in case of
accidental death and medical transport in emergencies.

YaVas

emerging business

This digital platform offers Customers the option to buy air travel
+ hotel + other travel-experience services at a lower price. We pro-
vide our Customers a wide range of destinations, the best hotels,
and excellent tourist packages at affordable prices in Mexico, the
United States of America, and Central America.

Our goal is to make aviation and tourism affordable for everyone,
contributing to the economic and social development of the com-
munities where we operate, enabling our Customers to have access
to air transportation and tourist services. Therefore, YaVas is alig-
ned with the 2020-2024 Tourism Sector Program of the Mexican
Government, which has four priority objectives: 1) guaranteeing a
social and respectful approach to Human Rights in the country’s
tourism activity; 2) fostering a well-balanced development of tou-
rist destinations in Mexico; 3) strengthening the diversification of
tourism markets at national and international levels; and 4) promo-
ting sustainable tourism in the national territory.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Bus Switching Campaign

In 2020, we were more committed than ever to make flying accessible for everyone. We
thus offered promotional fares at costs lower than bus fares on similar routes, aiming to
stimulate demand for air services among passengers who have traveled long distances in
buses.

GRI 102-2, 102-4, 102-6, 102-7, 102-10
Route Network

We have a diversified point-to-point route network. This structure improves our resilien-
ce to the challenges faced by the industry today, by allowing us to offer more travel and
connectivity options to our Customers visiting friends and relatives.

Content

In 2020, approximately 40% of Volaris’ Mexican capacity competed
only against bus companies.

209 routes operated

127

domestic

international

+117connecting

routes under the codeshare
agreement with Frontier

69 destinations
22

United States
of America

Central
America

Mexico

+50destinations

under the codeshare
agreement with Frontier

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

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35 36
45

60 48
65

58
53

24
54

55
41
62

64 29
61

+150Destinations

Flights to Mexico, USA and Central America
with get out of town prices!

Content

2020 Route Map

1. Charlotte
2. Chicago (Midway)
3. Chicago (O´Hare)
4. Dallas Fort Worth
5. Denver
6. Fresno
7. Houston
8. Las Vegas
9. Los Ángeles

18. Sacramento
19. San Antonio
20. San José, California
21. Seattle
22. Washington D.C.
23. Acapulco
24. Aguascalientes
25. Campeche
26. Cancún

35. Culiacán
36. Durango
37. Guadalajara
38. Hermosillo
39. Huatulco
40. La Paz
41. León
42. Loreto
43. Los Cabos

52. Puerto Escondido
53. Puerto Vallarta
54. Querétaro
55. San Luis Potosí
56. Tampico
57. Tapachula
58. Tepic
59. Tijuana
60. Torreón

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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10. Miami

11. Nueva York

12. Oakland

13. Orlando

14. Ontario

15. Phoenix

16. Portland

17. Reno

27. Chetumal

28. Chihuahua

29. Ciudad del Carmen

30. Ciudad de México

31. Ciudad Juárez

32. Ciudad Obregón

33. Colima

34. Cozumel

44. Los Mochis

45. Mazatlán

46. Mérida

47. Mexicali

48. Monterrey

49. Morelia

50. Oaxaca

51. Puebla

61. Tuxtla Gutiérrez

62. Uruapan

63. Veracruz

64. Villahermosa

65. Zacatecas

66. Zihuatanejo

67. Guatemala, Guatemala

68. San José, Costa Rica

69. San Salvador, El Salvador

+150DestinationsFlights to Mexico, USA and Central Americawith get out of town prices!1. Charlotte2. Chicago (Midway)3. Chicago (O´Hare)4. Dallas Fort Worth5. Denver6. Fresno7. Houston8. Las Vegas9. Los Angeles10. Miami11. New York12. Oakland13. Orlando14. Ontario15. Phoenix16. Portland17. Reno18. Sacramento19. San Antonio20. San Jose, California21. Seattle22. Washington D.C.23. Acapulco24. Aguascalientes25. Campeche26. Cancun27. Chetumal28. Chihuahua29. Ciudad del Carmen30. Mexico City31. Ciudad Juarez32. Ciudad Obregon33. Colima34. Cozumel35. Culiacan36. Durango37. Guadalajara38. Hermosillo39. Huatulco40. La Paz41. Leon42. Loreto43. Los Cabos44. Los Mochis45. Mazatlán46. Merida47. Mexicali48. Monterrey49. Morelia50. Oaxaca51. Puebla52. Puerto Escondido53. Puerto Vallarta54. Queretaro55. San Luis Potosi56. Tampico57. Tapachula58. Tepic59. Tijuana60. Torreón61. Tuxtla Gutierrez62. Uruapan63. Veracruz64. Villahermosa65. Zacatecas66. Zihuatanejo67. Guatemala, Guatemala68. San Jose, Costa Rica69. San Salvador, El Salvador211612181765321741931283832353637245456626355302352506164292527263446676869573951493366585365604844454043421310221198144715592041Content

GRI 102-6, 102-7
Codeshare Agreement with Frontier*

Since 2018, we began our codeshare operations with the U.S. airline
Frontier, which enables our Mexican passengers to visit new U.S. desti-
nations and American Customers to fly to new cities in Mexico.

Strong potential
for connectivity

20connecting airports

new destinations in
the United States of
America

+117

new connecting
roundtrip routes

* Due to the FAA downgrade of Mexico (from Category 1 to Category 2), Frontier has
removed its code from flights operated by Volaris, although customers still have the
option to purchase flights from Volaris and Frontier through our website.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Content

New CBX Services

Volaris Digital Strategy

80%

We established an alliance with the Cross
Border Xpress (CBX) bridge, which con-
nects the Tijuana International Airport with
San Diego, California.

At the beginning of 2020, we began operating
with this new station, which facilitates border
crossing to and from any of the routes we offer
at the Tijuana airport. Now, our Customers can
purchase the CBX service on our website in the
following two manners:

 As an ancillary product to the flight to or from

Tijuana.

 As a station, i.e., as part of the flight to and
from any of the 36 national routes we offer in
Tijuana.

With this alliance, we were able to reinfor-
ce the strategy of connecting our Custo-
mers in the VFR (Visiting Friends and Fa-
mily) segment on both sides of Mexico’s
northern border. In addition, we contribute
to the recovery of local economies.

Since Volaris was founded in 2006, innovation
and disruption have been part of the airline’s
DNA. The COVID-19 pandemic changed many
things in the world, including the way people
travel by plane and how goods and services
are purchased. At Volaris, we adapted quickly
and saw an opportunity in the crisis to accel-
erate crucial adjustments in our digital plat-
forms. During the pandemic, the first thing we
accomplished to fulfill our Customers’ needs
was the implementation of a self-service tool
to deal with the flights affected, thus allowing
the Customer to make automatic flight changes.
Another modification was the migration of our
reservation system, as well as the update of our
website volaris.com. We launched an ambitious
website with state-of-the-art technology, a proj-
ect developed with the advisory services of
Google, focused on a significant improvement
of the User Experience. We made a simple and
intuitive website for all our Customers, simpli-
fying flight searches, the buying process and
other self-services, such as Mobile Check-in or
flight changes.

With these actions, we reduced the website’s
loading time by 50%, going from 10 to 5 seconds
on average. Customer Service is one of the most
important pillars of our Company, we therefore
launched a new chatbot attending 80% of the
conversations through digital channels we have
with our Customers. We’re able to meet our
Customers’ needs in a more efficient way.

Volaris’ current digital strategy is based on three
pillars:

14%

 Being faster
 Better performance on mobile devices
 Providing a great User Experience

The Company’s next challenge is to continue
leading the reopening of the skies and reacti-
vating flights to and from destinations where
we operate and beyond. Our business model
and the discipline of all our Ambassadors place
Volaris in a favorable position to achieve what
we intend to do. During 2020, Volaris was a
clear example of resilience in overcoming this
turbulence. Today, we feel ready and completely
confident to push Mexico and tourism forward,
inviting our more than 6 million followers on
social media and those who do not follow us
yet, to take off together and continue on our
mission to enable more people to travel well.

Our mobile apps have reached 10 million
downloads since their launch.

2020
Sales distribution

Website and mobile app

Call center

Travel agents

Airport booths

80% of ticket and ancillary product sales
were through the website and mobile app.

In 2020, 80% of our Customers checked in
online, through our mobile app or website.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Content

Marketing and Customer Communication

At Volaris, we want more people to travel well.
Our Mission is reflected in all the marketing
campaigns we carry out. The success of our
promotions, Customer attraction and retention,
the sale of ancillary services and our brand’s
recognition depend largely on them. By meeting
our objectives, we ensured that more people
had access to the benefits of air transport and
we were able to consolidate sustained profit-
ability for the Company.

All the terms, conditions and relevant informa-
tion of our services can be consulted on our
website, at airports booths, on social networks
and by email.

During 2020, we conducted several campaigns
on our digital channels, social networks, televi-
sion and radio to position Volaris as the leading
airline in Mexico and to build trust and empathy
with Customers, contributing to the reactivation
of the economy and the airline industry and to
promote tourism.

#WeAreTogetherInThis

1st stage. Maintaining Customers informed
about affected flights, flight changes
on the website, flexibility options to re-
schedule trips, travel requirements and
restrictions.

2nd stage. Developing inspirational initia-
tives for those people who remained at
home and could not travel due to social
distancing as a result of the COVID-19
pandemic.

3rd stage. Communicating our efforts
for contributing to the communities
where we operate, such as the trans-
portation of humanitarian cargo and
medical personnel for several govern-
mental, non-governmental and private
institutions.

Closing wings

During April, we communicated our operations’ reduction through an empathetic and emo-
tional brand message, evidencing that we would continue flying for all those in need and
that we would soon reactivate our operations.

With Volaris, Fly Sure

We were the first Mexican airline to implement and communicate our biosecurity protocols.
In alliance with IATA and Airbus, we depicted airplanes as the safest means of transport
during the pandemic, earning trust from our Customers. Furthermore, we carried out dis-
ruptive events at bus facilities in key cities to attract new Customers and continue with our
bus switching strategy aimed at inviting more people to travel with us.

Through campaigns focused on low
fares, safety and flexibility, we restored
the Customers’ trust on air travel amid
the COVID-19 pandemic.

In 2002, we achieved a 40% passenger
share in the domestic market, which posi-
tions us as the leading airline in passenger
transport in Mexico.

Leading the reopening of the
skies to activate Mexico

When we reactivated operations, we focused on communicating our leadership in terms
of new routes, destinations, operations, transported Customers and biosecurity protocols,
consolidating ourselves as the best option to travel within the country and to the United
States of America.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Content
Content

Volaris
Value Creation

Content

2.1.

Volaris Value Creation Model and our Contribution to the SDG

2.2.

Stakeholder Engagement

2.3.

Initiatives in Times of COVID-19

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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2LA CREACIÓN DE VALOR DE VOLARISVolaris Value Creation Model

Value created for our stakeholders

Content

GRI 102-12, 102-21, 102-40, 102-42,
102-43, 102-44

2.1. Volaris
Value Creation
Model and our
Contribution to
the SDG

Economic and Corporate
Governance Focus

People
Care Focus

Business Strategy –
Ultra-Low-Cost Business Model

Ambassadors’ Relations, Practices
and Wellbeing

Corporate Governance

Corporate Affairs

Supply Chain

Human Rights and Community
Relations

Customer Welfare

The Volaris Value Creation Model brings togeth-
er the Corporate Sustainability Program and the
identification of our stakeholders, along with the
economic, social and environmental value that
we create for each of them. Through this model
we are able to maintain open communication
channels to listen to their expectations and im-
plement actions to meet their needs.

In addition, we have identified the Sustainable
Development Goals (SDG) most impacted by
our operations in order to contribute to their
goals and ensure the prosperity of present and
future generations. Throughout this report, we
describe how our initiatives and actions con-
tribute to each SDG.

Planet Care Focus

#CielitoLimpio Comprehensive Environmental Protection Policy

Efficient Fuel Consumption Management

#CielitoLimpio Carbon Emissions
Offset Program

Eco-friendly Initiatives and
Efforts toward Biodiversity

Regulatory Compliance

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v
n

 Accessibility and connectivity
 Low prices
 Security
 Travel experience
 Corporate reputation
 Pollution footprint offset
 Alignment with Sustainable Development Goals (SDGs)

 Volaris Family
 Equal opportunities and non-discrimination
 Competitive payment
 Sense of pride and belonging
 Safety and wellbeing
 Union relations
 Awareness of environmental protection
 Alignment with Sustainable Development Goals (SDGs)

 Reduction of pollution footprint
 Human Rights protection
 Positive impact in the Communities where we operate
 Awareness of environmental protection
 Strategic partnerships to achieve goals
 Corporate volunteering
 Encouraging tourism and economic development
 Alignment with Sustainable Development Goals (SDGs)

 Reliable customer
 Long-term relationships
 Sustainable Supply Chain
 Human Rights protection
 Reduction of pollution footprint
 Environmental protection
 Alignment with Sustainable Development Goals (SDGs)

 Short, medium and long-term business plan
 Return of investment
 Revenue generation
 Cost reduction
 Resources optimization
 Strict risk control
 Ethics and transparency
 Alignment with Sustainable Development Goals (SDGs)

/
s
e

i
t
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o
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A

y
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s
u
d
n

 Law enforcement
 Employment generation and economic development
 Collaboration and communication with
the government and its agencies
 Tax payment
 Obtainment and renewal of operational certifications
 Reduction and offseting of the pollution footprint
 Alignment with Sustainable Development Goals (SDGs)

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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LA CREACIÓN DE VALOR DE VOLARIS
Content

No poverty
Ending poverty in all its forms everywhere

1. Air transportation connectivity and accessibility
2. Promoting tourism and economic development in the

communities where we operate

3. Responsible Supply Chain Management Program
4. Direct and indirect employment creation
5. Formal employment
6. Diversity and Equal Employment Opportunities Policy
7. Fair wages, and benefits above the minimum

established by law

8.
9. Avión Ayuda Volaris Program

Carbon Emissions Offset Program

Good health and well-being
Ensure healthy lives and promote well-being
for all at all ages

1. Prohibiting tobacco use on board
2. Responsible Supply Chain Management Program
3. Social security and major medical expenses insurance for

Ambassadors and family

4. Biosecurity protocols in working spaces
5. Occupational health programs for Ambassadors and family
6. Avión Ayuda Volaris Program
7. Aviation Security and Safety
8. Addiction-free company
9. Comprehensive Environmental Protection Policy

Quality education
Ensure inclusive and equitable quality education and
promote lifelong learning opportunities for all

Decent work and economic growth
Promote sustained, inclusive and sustainable
economic growth, full and productive employment
and decent work for all

1. Partnerships with schools related to aviation professions
2. Programs for attracting young talent
3. Training programs

Gender equality
Achieve gender equality and empower women and girls

1. Corporate Governance structure
2. Volaris Code of Ethics
3. Volaris Ethics Committee and Whistle Blowing Line
4. Diversity and Equal Employment Opportunities Policy
5. Compensation Policy
6. Maternity, Paternity and Use of Breastfeeding

Rooms Policy

7. Home Office and Flex-time Policy
8. Talent attraction and promotion
9. Performance management
10. Recognition programs
11. Talent Review and Succession Planning
12. Career Paths
13. Leadership Development
14. Training programs
15. Fair wages, and benefits above the minimum

established by law

Carbon Emissions Offset Program

1. Corporate Governance structure
2. Corporate Affairs
3. Responsible Supply Chain Management Program
4.
5. Direct and indirect employment creation
6. Diversity and Equal Employment Opportunities Policy
7. Partnerships with schools related to aviation professions
8. Programs for attracting young talent
9. Performance management
10. Recognition Programs
11. Career and development plans
12. Training programs
13. Formal employment
14. Fair wages, and benefits surpassing the minimum

established by law

15. Occupational health and safety
16. Biosecurity protocols in working spaces
17. Relations with the union
18. Avión Ayuda Volaris Program

Industry, innovation and infrastructure
Build resilient infrastructure, promote inclusive and
sustainable industrialization and foster innovation

16. Agreements with day care centers
17. Occupational health and safety
18. Programs and partnerships for Human Rights protection
19. Responsible Supply Chain Management Program

1. Accessible air transportation
2. Corporate Affairs - public policy to influence airport

infrastructure processes

3. Investment in young fleet and new technology

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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LA CREACIÓN DE VALOR DE VOLARIS
Reducing inequalities
Reduce inequality within and among countries

Responsible consumption and production
Ensure sustainable consumption and
production patterns

Peace, justice and strong institutions
Promote peaceful and inclusive societies for sustainable
development, provide access to justice for all and build
effective, accountable and inclusive institutions at all levels

Content

1. Connectivity and accessibility of air transportation
2. Payment facilities through various channels and for

all income levels

3. Responsible Supply Chain Management Program
4. Volaris Code of Ethics
5. Volaris Ethics Committee and Whistle Blowing Line
6. Diversity and Equal Employment Opportunities Policy
7. Compensation Policy
8. Maternity, Paternity, and Use of Breastfeeding

Rooms Policy

9. Home Office and Flex-time Policy
10. Agreements with daycare centers
11. Direct and indirect employment creation
12. Formal employment
13. Performance management
14. Recognition Programs
15. Talent Review and Succession Planning
16. Career Paths
17. Leadership Development
18. Training programs
19. Fair wages, and benefits above the minimum

established by law

20. Relations with labor union
21. Occupational health and safety
22. Avión Ayuda Volaris Program
23. Programs and partnerships for Human Rights protection
24.

Carbon Emissions Offset Program

1. Corporate Governance structure
2. Responsible Supply Chain Management Program
3.

Comprehensive Environmental

Protection Policy

4. Programs and partnerships for Human Rights protection
5.

Integrated Annual Report

Climate action
Take urgent action to combat climate change
and its impacts

1. Corporate Affairs
2. Responsible Supply Chain Management Program
3. Home Office and Flex-time Policy
4. Corporate voluntary work activities focused on

environmental issues

Comprehensive Environmental

Protection Policy

1. Corporate Governance structure
2. Corporate Affairs
3. Information privacy and cybersecurity
4. Responsible Supply Chain Management Program
5. Diversity and Equal Employment Opportunities Policy
6. Corporate voluntary work activities
7. Avión Ayuda Volaris Program
8. Programs and partnerships for Human Rights protection

Partnerships for the goals
Strengthen the means of implementation and revitalize
the global partnership for sustainable development

1. Corporate Affairs
2. Strategic partnerships or the Company’s operation
3. Responsible Supply Chain Management Program
4. Strategic partnerships for the Corporate Voluntary Work
Program, Human Rights protection, the operation of the
Avión Ayuda Volaris Program, and the
Emissions Offset Program

Carbon

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with numerous institutions in the public and
private sectors, civil society organizations,
academia, and the industry, among others.

In 2021, we shall carry out our new materiality
assessment and dialogue with stakeholders, in
order to learn about their most pressing issues.
We decided to complete the analysis in the sec-
ond half of 2021 in order to obtain updated re-
sults on the new normal, reflecting the change
in habits and requirements resulting from the
COVID-19 pandemic.

The resilience of our business model was
strengthened by our stakeholders’ empathy
during the most critical moments for the Com-
pany. Thanks to their invaluable support, to-
day we are one of the airlines with the highest
capacity recovery worldwide and a leader in
Mexico in terms of passengers. Our Compa-
ny’s success reflects the contribution of each
Ambassador, Customer, investor, supplier and
authority who have accompanied us along the
way. We would not have been able to take off
in 2020 without them.

GRI 102-43-, 102-44

2.2.
Stakeholder
Engagement

During 2020, we strengthened communica-
tions with our stakeholders like never before
through a more open dialogue that allowed us
to create value even in the harshest months of
an unprecedented global crisis. Listening and
understanding the needs and concerns of our
main stakeholders provides us guidance to set
goals, redefine strategies and identify risks and
opportunities in order to run the business in a
sustainable manner in the future.

Since the start of the pandemic, we have main-
tained a proactive and transparent discourse
with all investors about the implementation of
the biosecurity protocol, capacity evolution,
competition and recovery. Since we were the
first airline to receive the Safe Travels seal from
the WTTC, as well as other biosecurity recog-
nitions, we were able to reinforce the group’s
confidence, as well as that of our Customers,
Ambassadors and authorities.

We were able to respond better and faster to
our passengers’ needs by focusing our efforts in
Customer service innovation. Strengthening our
channels such as the Volaris website, WhatsApp
and Chatbot Vane on Facebook revolutionized
the way we interact with them.

In addition, through monthly meetings via sev-
eral corporate communication channels led by
our management team, we held permanent di-
alogue with all our Ambassadors to follow up
on their work plans and address concerns relat-
ed to salaries and job stability. Every week, we
carried out “Sofa Talks” with experts in mental
health, emotional intelligence, nutrition, child
psychology and personal finances, providing

Ambassadors with tools to ensure their well-
being in the workplace and with their families.
These actions helped us maintain internal com-
munication open, creating value for our most
important pillar, the Volaris Family. Moreover,
in 2021, we will perform the first work environ-
ment survey to listen and understand the most
pressing issues for our Ambassadors and to
create even more value for them.

Similarly, 2020 revealed our suppliers as strate-
gic business partners. Through an honest and
direct dialogue, we reached agreements with
approximately 360 suppliers for implementing
savings and payment deferral plans, increasing
our cash flow and making it possible to extend
payment terms up to an additional 31 days.

Furthermore, we were in constant communi-
cation and coordination with industry associa-
tions, such as the International Air Transport As-
sociation (IATA) to develop collaborative plans,
protocols and strategies, as well as to obtain
data and projections, in order to reach a sus-
tainable worldwide reactivation of the industry.

Finally, we maintained constant communication
with authorities to develop initiatives for the
benefit of the entire value chain of the aviation
and tourism industries in Mexico, which has al-
lowed us to establish agreements that have con-
tributed to the recovery of both sectors. Also, by
activating our Avión Ayuda Volaris program, we
established a communication line with the com-
munities where we operate and where several
associations were first responders to the health
emergency. It should be mentioned that through
this program we created new strategic alliances

Volaris, the Lowest Cost Publicly
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LA CREACIÓN DE VALOR DE VOLARISStrategies for Stakeholder Engagement

Stakeholders

Key issues

Communication channels

Content

Results

Customers

Ambassadors

Community

Suppliers

Investors

 Low fares
 Quality service
 Security and biosecurity
 Customer experience and satisfaction
 Customer service
 Environmental impact
 Carbon offsetting mechanism
 Corporate sustainability strategy
 Connectivity

 Occupational health and safety
 Job security
 Experience and Ambassadors’ engagement
 Equal opportunities and non-discrimination
 Training and development
 Career and growth paths
 Corporate voluntary work
 Environmental impact
 Labor and family wellbeing
 Company’s profitability
 Corporate sustainability strategy

 Economic and social development of the communities and regions

where we operate

 Strategic partnerships to achieve goals
 Support for civil organizations
 Corporate voluntary work
 Donations
 Environmental impact
 Carbon offsetting mechanism
 Human Rights protection
 Corporate sustainability strategy
 Avión Ayuda Volaris

 Medium and long- term agreements
 Fair trade conditions
 Economic performance of the Company
 Human Rights protection
 Environmental impact
 Corporate sustainability strategy

 Economic performance of the Company
 Corporate Governance
 Risk Management
 Corporate Affairs
 Economic consequences due to environmental impact
 Corporate sustainability strategy

 Digital platform (website, app, and social media)
 Call Center
 Volaris sale points
 Airports
 On-board service and magazine
 Net Promoter Score (NPS)
 External communication/means of communication, marketing campaigns, and

corporate brand management strategies

 Integrated Annual Report

 Accessibility and connectivity (opening new routes)
 Low prices
 Security and biosecurity
 Confidence in going back to air travel
 More people using air transportation
 Travel experience
 Corporate reputation
 Opportunity to offset part of the pollution footprint
 Contribution to Sustainable Development Goals (SDG)

 Volaris Whistle Blowing Line
 Human resources team in main airports where we operate
 Institutional communication
 Surveys
 Periodic reports from the Executive Committee and management team
 Special messages from the President and Chief Executive Officer and

management team

 Labor union
 Integrated Annual Report

 Ethics cases reported to be investigated
 A great place to work (Volaris Family)
 Equal opportunities and non-discrimination practices
 Competitive compensation
 Sense of pride and belonging
 Biosecurity and wellbeing
 Union relations
 Awareness of environmental protection
 Contribution to Sustainable Development Goals (SDG)

 On-board magazine
 Biannual reports issued by foundations
 Integrated Annual Report
 Corporate voluntary work activities
 External communication/means of communication, marketing

campaigns and corporate brand management strategies

 Meetings and phone calls
 Institutional communication channels
 Informative circulars
 Annual evaluation
 Audits
 Integrated Annual Report

 Committees and Board of Directors meetings
 Annual Shareholders’ Meeting
 Financial reports
 Integrated Annual Report
 Relevant events broadcast
 Volaris website
 Media
 Volaris news letters
 Surveys, indexes and ratings

 Pollution footprint reduction
 Economic impact from tourism, VFR passengers and business travel
 Human Rights protection
 Positive impact on communities where we operate
 Awareness of environmental protection
 Strategic alliances to achieve goals
 Corporate voluntary work
 Contribution to Sustainable Development Goals (SDG)
 Sustainable reactivation of the airline industry and its value chain

 Reliable customer
 Long-term relationships
 Sustainable Supply Chain
 Human Rights protection
 Reduction of pollution footprint
 Environmental protection
 Contribution to Sustainable Development Goals (SDG)
 Contracts’ renegotiation

 Short, medium and long-term business plan
 Return on investment
 Income generation
 Cost reduction
 Resource optimization
 Strict risk control
 Ethics and transparency
 Contribution to Sustainable Development Goals (SDG)
 Sustainable reactivation of the airline industry

Authorities / Industry

 Regulatory compliance
 Contribution to the economic development of the countries where we operate
 Job creation
 Employee health and safety
 Environmental impact
 Reactivation of the airline industry and its value chain
 Corporate sustainability strategy
 Biosecurity protocols

 Direct communication with strategic partnerships
 Participation in chambers and discussion forums
 Events and conferences
 Meetings
 Lobbying
 Integrated Annual Report
 Media

 Regulatory compliance
 Employment creation and economic development
 Collaboration and communication with the government and its agencies
 Tax payment
 Obtaining and renewing operating certifications
 Reduction and offsetting of pollution footprint
 Contribution to Sustainable Development Goals (SDG)
 Sustainable reactivation of the airline industry

Volaris, the Lowest Cost Publicly
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GRI 201-1

2.3. Initiatives in
Times of COVID-19

Actions to Address
COVID-19 Impacts
Promptly and Decisively

The airline industry worldwide experienced un-
precedented hardships due to the COVID-19
pandemic. It is not yet possible to determine
the full loss and effects on the global industry,
or when the negative effects will abate.

However, at Volaris we managed to take off and,
by the end of 2020 –an unprecedented year for
the airline industry– we not only returned to
pre-pandemic operating levels, in the last quar-
ter we also recovered our business profitability.

In 2020, we began operations on thirteen new
routes, five domestic and eight international,
we diversified our point-to-point network and
reinforced our presence at the Mexico City In-
ternational Airport. All of this was possible as
a result of six main strategies:

1. Focus on our ultra-low-cost business model
2. Implementation of biosecurity protocols
3. Bus switching campaign
4. Development of a liquidity preservation

program

5. Acceleration of cost reduction strategies
6. Adoption of a conservative and flexible

growth plan

Additionally, through our Avión Ayuda Volaris
program and together with our strategic al-
lies, we continued to support the communities
where we operate during the health emergency,
generating social and economic value for all
those benefited.

Our ultra-low-cost business model creates a
virtuous cycle that begins with a relentless
focus on low costs as part of our organizational
culture. This has positioned us as the publicly
traded airline with the lowest costs in the Amer-
icas and among the main lowest cost carriers
globally.

In order to protect the wellbeing of our pas-
sengers, crew and ground personnel, we imple-
mented a new biosecurity and cleaning protocol
through which we regained the trust of our
VFR and pleasure Customers, especially bus
passengers, based on a point-to-point model
that enabled Volaris to achieve one the fastest
capacity recoveries in the world.

During the last years, we have prepared our
Company with the lowest cost structure pos-
sible, allowing us to offer very low rates –bus
level low–consequently producing a conversion
of bus passengers to airplane passengers.

We executed multiple actions to strengthen
liquidity, reduce costs and capture market op-
portunities. We implemented a strict liquidity
preservation program that included negotia-
tions with key lessors and suppliers that pro-
duced $266 million dollars in benefits for 2020.
We also postponed $200 million dollars in PDP
financing until 2023.

As part of the liquidity preservation program,
we negotiated cost reductions and credit exten-
sions with more than 360 suppliers, dropping
also non-essential expenses. During 2020, we
were able to successfully negotiate contracts
with our main suppliers, seeking to improve the

commercial conditions that would allow us to
continue operating, without breaching our con-
tractual commitments. Some of these contracts
are for the sale and maintenance of engines,
auxiliary power units, avionics and seats for our
Airbus A320neo Family aircraft that we pur-
chased in 2017. The Company signed an agree-
ment with Pratt and Whitney for the purchase
of 171 additional GTF engines, along with main-
tenance services in a long-term variable scheme
at competitive prices. These negotiations will
improve the existing contracts throughout the
useful life of these aircraft in an approximate
amount of $300 million dollars. All this, in
addition to the benefits that already apply to
our current fleet as part of the negotiations
with the same suppliers.

We also implemented licensing and online train-
ing programs to reduce costs. And we bene-
fitted from our labor contracts with variable
compensation schemes based on productivity.

Our flexible and strategic operating plan allowed
us to reduce capacity and cancel or consoli-
date flights to protect our profitability. Month
by month, we regain capacity with a focus on
growth flexibility and cash generation.

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Throughout the year and since the beginning of
the pandemic, some members of the manage-
ment team held monthly informative sessions to
notify the Ambassadors about the Company’s
operating and financial status, the outlook for
reactivation and the eventual return to our offices.

Finally, due to all the aforementioned initiatives,
we managed to preserve the almost 5,000 jobs
of the Company, contributing to the country’s
economic recovery, and creating value for our
Ambassadors and their families.

We closely monitor capacity reductions from
competitor for potential opportunities, testing
new ancillary products, and launching specific
promotions to stimulate air travel. Therefore,
we were able to open new destinations and
increase our operations at this airport.

Additionally, we decreased scheduled capacity
to protect our profitability. Likewise, we strength-
ened our relationships with Customers, updating
our website and maintaining close communi-
cation through social media and Volaris email.

In December 2020, we closed an upsized prima-
ry follow-on equity offering of 134 million CPOs,
in the form of ADSs, priced at 11.25 dollars per
ADS in the United States of America and other
countries outside of Mexico, pursuant to our
Shelf Registration Statement filed with the SEC.
In connection with the offering, the underwriters
exercised their option to purchase up to 20.1
million additional CPOs in the form of ADSs,
completing a total offering of 154.1 million CPOs
in the form of ADSs; we obtained approximately
$164.4 million dollars in net proceeds for cor-
porate purposes.

Volaris closed the year 2020 with the stron-
gest financial balance of the Mexican airlines,
with cash and cash equivalents of $506 million
dollars, mainly in U.S. dollars. The net debt to
EBITDA leverage ratio closed the fourth quarter
at 8.7 times, reflecting a healthy balance sheet
in comparison with the industry standard in the
2020 scenario. Volaris financial debt is used
solely to invest in the business’ growth.

In 2020, when the COVID-19 pandemic
began, we started operations in thirteen
new routes, five domestic and eight inter-
national ones.

Work Flexibility
and Home Office

During the beginning of the COVID-19 pandemic,
we implemented the home office policy for all
administrative Ambassadors, in order to preser-
ve their health and safety. To make this new way
of working more efficient, we employed digital
tools, such as enabling digital platforms for all
Ambassadors.

The beginning of remote work officially began
on March 31st and, as operations started to reac-
tivate, it was also necessary to implement several
support areas so that certain Ambassadors re-
turned in a tiered scheme and by groups to the
corporate offices.

However, as a special case, people vulnerable be-
cause of chronic diseases or age, and those who
were caring for senior citizens, children, or with
particular situations had the flexibility to work
remotely indefinitely.

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Ultra-Low-Cost Model /
Bus Switching Campaign

At Volaris, we maintain our focus on VFR
(Customers Visiting Friends and Relatives),
people who seek low prices, and on small and
medium enterprise segments. These segments
have shown the greatest demand for air travel in
Mexico as the industry recovers from COVID-19.

programs. Our current and potential competi-
tors include traditional network airlines, low-cost
carriers, regional airlines and new airlines. We
usually compete in markets served by legacy
carriers and other low-cost carriers, and, to
a lesser extent, regional airlines. Some of our
current or future competitors may have greater
liquidity and access to capital and may serve
more routes than Volaris.

As of December 31, 2020, Volaris was the
national market leader in number of trans-
ported passengers.

In the current competitive environment, Volaris
has taken advantage of market opportunities,
consolidating our leadership in market share
measured in number of passengers among Mexi-
can airlines. During 2020, Volaris transported
more than 14.7 million passengers. In addition, we
achieved one of the fastest recoveries globally,
in terms of available seat miles, as a result of our
resilient ultra-low-cost business model, focused
on the segments of Customers who visit friends
and family and leisure travelers in Mexico and
the cross-border markets of the United States
of America.

We are aware that the airline industry is highly
competitive. In 2020, it was highly impacted by
the pandemic. The main competitive factors in
the airline industry are fare pricing, total price,
flight schedules, aircraft type, passenger ameni-
ties and related services, number of routes served
from a city, Customer service, safety reputation,
code-sharing relationships and frequent flier

As of December 2020, our domestic mar-
ket share went up 9 percentage points to
40% and our international market share
rose 6 percentage points to 14%, compa-
red to the same period in 2019.

Our principal competitors for the domestic
market are Grupo Aeroméxico, Interjet and
VivaAerobus; the latter two are low-cost carriers
in Mexico. In 2020, the Mexican low-cost carri-
ers (including Volaris) combined had 71.5% of
the domestic market based on passenger flight
segments. In 2020, our domestic market share
was 38.3%, which placed us as leaders, according
to the AFAC. On June 30, 2020, Grupo Aeroméxi-
co, our largest competitor by domestic and inter-
national market share in 2019, announced that it
was filing for Chapter 11 bankruptcy protection
in the United States of America. According to its
public filings with the CNBV, Grupo Aeroméxico
has maintained regular operations during the
restructuring process but has received court
approval to return at least 19 aircraft to lessors,
which would reduce its fleet size by around 15%.
On the other hand, Interjet, our second largest
competitor by international market share in

2019, has been unable to resume international
flights since it suspended routes in March 2020
and has not operated any domestic flights since
December 2020.

Our major competitive advantages are our low
base fares and our focus on VFR travelers, leisure
travelers and cost-conscious businesspeople.
These low base fares are possible due to our
low CASM, which at Ps. $141.3 cents (U.S. $6.60
cents) was the lowest CASM in Latin Ameri-
ca in 2020, compared to Avianca (U.S. $26.11
cents), Azul (U.S. $10.75 cents), Copa (U.S. $17.29
cents), Gol (U.S. $8.78 cents), Grupo Aeroméx-
ico (U.S. $17.98 cents) and LATAM (U.S. $17.33
cents). Additionally, we have lower costs than
our publicly traded market competitors in the
United States of America, including Alaska Air
(U.S. $14.33 cents), Frontier (U.S. $9.53 cents),
Spirit (U.S. $8.36 cents), American (U.S. $19.39
cents), Delta (U.S. $22.01 cents), Jet Blue (U.S.
$14.29 cents), Southwest Airlines (U.S. $12.44
cents) and United (U.S. $17.68 cents).

Furthermore, we face domestic competition
from long-distance bus companies. Hence, we
set some of our promotional fares at prices lower
than bus fares for similar routes in order to stimu-
late demand for air travel among passengers who
have been regular bus passengers in the past.
We believe a small shift in bus passengers to air
travel would dramatically increase the number
of airline passengers and bring the air travel per
capita figures in Mexico closer to those of other
countries in the Americas.

Volaris, the Lowest Cost Publicly
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LA CREACIÓN DE VALOR DE VOLARIS“With Volaris, Fly Sure”
Campaign

“

I am extremely proud and grateful with the
Volaris Family and all the Ambassadors who
work daily so that more Customers travel
safely with our biosecurity protocol. This
standard has been recognized by several
bodies, such as the World Travel and Tour-
ism Council, SimpliFlying, the Government
of Mexico City and the Government of Yu-
catán. With our campaign “With Volaris, Fly
Sure” we have regained the trust of millions
of passengers who travel with Volaris. We
are very happy to welcome you back on our
flights, making sure you travel well!”

Enrique J. Beltranena
President and Chief Executive Officer

Due to the unexpected arrival of the health crisis
due to COVID-19, during the year, we adjusted our
operations and developed measures to protect
the health of all our Customers and Ambassadors.
We performed based on our ultra-low-cost strat-
egy and the support of a great team that worked
passionately to continue creating value for Volaris,
for our stakeholders and for Mexico.

Since the beginning of the COVID-19 pandemic,
we strictly followed all the recommendations of
the World Health Organization (WHO) to ensure
safety at all our flights’ stages.

Likewise, the air in the aircraft cabin is complete-
ly renewed every three minutes with HEPA filter
technology, which capture up to 99.9% of viruses
and bacteria, and each aircraft is thoroughly san-

itized with industrial-grade disinfectants once a
day, in addition to undergoing periodic cleaning
and routine disinfection on each flight.

Content

We developed a biosecurity protocol to
continue offering the best travel experi-
ences safely throughout all the flight stag-
es. This protocol is aligned with the recom-
mendations issued by the International Air
Transport Association (IATA), the Europe-
an Aviation Safety Agency (EASA) and the
World Health Organization (WHO).

As part of our biosecurity protocol, we imple-
mented all the necessary security measures:
strengthening touchless check-in –we ask all
Customers to acquire their boarding pass and
ancillary services electronically– taking tempera-
ture, mandatory use of face masks, applying
antibacterial gel, sanitizing mats at the entrance
of counters and aircraft , indications for social
distancing, request of health form, safety kit
such as masks, face masks and gloves for Am-
bassadors, continuous disinfection of our work
areas and aircraft, as well as orderly boarding
and disembarking processes.

We trained all Ambassadors in the pro-
tocol’s security measures to handle any
emergency.

We participated in the launch of the
health and safety standard “APEX (Air-
line Passenger Experience Association)
Health Safety, powered by SimpliFly-
ing” and due to the biosecurity proto-
col that we implemented, we obtained
the Platinum level certification.

We obtained the Global Security
Seal (Safe Travels Stamp) granted by
the World Travel and Tourism Coun-
cil (WTTC), thus contributing to the
responsible and safe reactivation of
tourism.

We were the first airline in Mexico to
receive the Tourism Security Stamp
from Mexico City due to the quality
and safety of our operations.

We received the Certificate of Best
Sanitary Practices from the state of
Yucatan, which endorses the proto-
cols and sanitary measures that we
implemented and reinforces the stra-
tegic alliance between Yucatan and
Volaris, reaffirming our commitment
to reactivate tourism and the Mexi-
can economy.

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Furthermore, we implemented the “With Volaris,
Fly Sure” marketing campaign, focused on com-
municating to Customers specific actions for
their protection. The three pillars that respond
to the new normal are:

Security, through a
reinforced protocol

Flexibility, offering adjustments
and changes at no additional
charge

Discounts and low fares
in our routes

“

At Volaris, we are prepared to offer our Cus-
tomers what they need to get on the plane
again. We are committed to providing them
all the operating safety and sanitary security
measures, recognized by national and interna-
tional organizations, so that they travel peace-
fully and without setbacks, in the context in
which we currently live. Today, more than ever,
our main objective is to offer security and trust
to our Customers and Ambassadors.”

José Luis Suárez,
Senior Vice President and Chief Operating Officer

Customer Service and Solution

“

Our priority is the health and safety of our
Customers and Ambassadors; therefore,
we strive to simplify their travel plans, so
that, when operations are completely re-
activated, we are able to provide the best
attention, taking off together once more.”

Enrique J. Beltranena
President and Chief Executive Officer

We are aware that the industry and times are
constantly changing and that innovation is a
key element to offer our Customers a distin-
guishing element at all stages of their travel.
Consequently, the team responsible for digital
products and technology did extensive research
to identify best practices in online development
and experience, even obtaining the advice from
a team of technical experts from Google.

Thus, in 2020 we launched a new website to
substantially improve the User Experience,
making it simpler, more intuitive and Custom-
er-friendly, facilitating flight searches, and
self-service for processes like check-in, flight
changes and ticket purchases.

Due to the sanitary crisis and subsequent closed
borders, we were forced to cancel flights. To
minimize the impact on our Customers and
to meet their expectations, we implement the

flight guarantee, which allows Customers to
quickly and automatically select the option that
best suits their needs. In case of cancellations,
a notice is automatically sent via email to the
affected Customer, and different alternatives
are presented.

Electronic credit.
Offers the refund of
the purchase plus
an additional 25% in
electronic credits to
be redeemed later.

Flight change
at no charge.

Full refund.

In addition, we continued improving the tools
to provide solutions for our Customers with a
professional and straightforward service. This
year we strengthened our Contact Center to
automate Customer service processes and pro-
vide faster solutions. Customers can select the
Contact Center’s channel of their choice.

 Social Media. Through our social networks –
Facebook, Twitter or Instagram– Customers
can solve general questions related to ser-
vices, products, destinations and promotions
with an estimated response time of four to
six hours.

 Facebook Messenger and WhatsApp. We
provide immediate personalized attention
through the chatbot or an agent in just four
hours for Customers who have any questions
about their flight.

 Contact Form. Option for Customers who need
to clarify or follow up any particular case.
 Call center. Channel for Customers who wish
to buy a flight and cannot do so through any
digital channels.

We use the Net Promoter Score (NPS) to
measure loyalty, satisfaction and the pro-
bability that our Customers may recom-
mend Volaris, enabling us to discover areas
for improvement at the Customer contact
points* in order to improve their experien-
ce. In 2020, we obtained a 30.5% rating vs
28.9% in 2019.

* Customer contact points are: 1. Purchase processes; 2. Documentation; 3. Boarding process; 4. Flight experience and 5. Baggage claim.

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LA CREACIÓN DE VALOR DE VOLARISCapacity Recovery

During 2020, capacity in terms of passenger transportation of airlines worldwide significantly
decreased in the second quarter of the year, due to the COVID-19 pandemic. The Mexican
air transportation market was no exception. The four main commercial airlines in the country
suffered a sharp contraction in the number of transported passengers in the months of April
and May.

However, due to our ultra-low-cost business model and our performance during the sanitary
crisis and confinement, at Volaris we were able to increase and recover passenger transport
capacity as of June 2020.

For the fourth quarter of the year, the number of passengers we transported significantly
surpassed the competition, as can be seen below.

Content

2020 passengers

1,814,474

1,642,515

1,647,867

1,488,152

1,315,599

980,414

1,178,801

1,276,890

881,600

1,036,082

822,187

704,638

Passengers

1,552,373

1,465,319

1,299,533

1,101,695

1,142,301

897,109

633,196

697,340

665,331

513,022

506,404

586,367

418,350

1,102,449

998,369

916,188

863,224

858,931

803,614

181,731

167,181

147,267
89,915
25,068

131,279
90,419
14,835

238,297

201,937

24,942

38,811

38,737

41,547

33,425

17,545

4,039

January

February

March

April

May

June

July

August

September

October

November

December

*Notes:

Figures obtained from the AFAC for Volaris (do not include passengers flying within Central America and from Central America to the United States of America) and competing airlines. We have made slight modifications to the data, which is
presented for informational purposes only.

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Content

Avión Ayuda Volaris Program

“

Faced with the health emergency derived from COVID-19, at Volaris we activated our
Avión Ayuda Volaris program. Through this program, we seek to create value for the
communities where we operate; in coordination with partner institutions, in our airplanes
we transport humanitarian aid, health personnel, volunteers, among others. We aim to
facilitate care for people affected by the disease, as well as to ensure that the pandemic’s
first responders have the necessary resources to continue such amazing work.”

Enrique Beltranena,
President and Chief Executive Officer

+45

tons of
humanitarian
aid transported
through the
Avión Ayuda
Volaris program

strategic alliances
with governmental
institutions, private
companies and NGOs

344

organs and tissues
transported for
transplant purposes
since 2009

+500 migrants who were in Mexico and could not return to Costa Rica, their
native country, due to the health contingency derived from COVID-19 and the
closure of borders, returned home safely thanks to our Reuniendo Familias
program, in coordination with the immigration and consular authorities of
both countries.

“

During 2020, the alliance of the Mexican Red Cross with Volaris was essential to provide
an effective response to the health emergency caused by COVID-19. Volaris helped us
transport more than 20 tons of humanitarian aid and volunteers to different states of
Mexico. Undoubtedly, the collaboration between both organizations has allowed us to
create more value for the communities we support.”

Lic. Fernando Suinaga,
Mexican Red Cross National President

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LA CREACIÓN DE VALOR DE VOLARISOur Avión Ayuda Volaris program is one of the ini-
tiatives that creates the greatest value for society
in the communities where we operate. Through
our operations and the largest route network in
Mexico, we transport by air, safely and efficiently,
humanitarian aid, organs and tissues for transplant
purposes, medical personnel, volunteers, patients,
and people who are in some vulnerability situation
due to: natural disasters emergencies, human-
itarian / migratory crises, health emergencies,
emergencies and medical treatments, as well as
to fulfill dreams.

The pillars that comprise the Avión Ayuda Volaris
program are:

Pillar 1
Support in natural disaster
emergencies / civil protection

Pillar 2
Organ and tissue transportation
for transplant purposes

Pillar 3
Support in emergencies and
medical treatments

Pillar 4
Support in health crises

Pillar 5
Dream fulfillment

Pillar 6
Reuniendo Familias program

During the COVID-19 pandemic, airlines world-
wide played a very significant role in the timely
and efficient air transportation of humanitarian
aid. According to United Nations statements,
border closures and flight cancellations affect
the availability of basic products and medicines
throughout countries. Hence, coordinated ef-
forts between the public, private and civil so-
ciety sectors for the transportation and distri-
bution of these products are essential.

Commercial airlines have the greatest imme-
diate capacity range. Global air connectivity
allows humanitarian aid to quickly reach emer-
gency locations. Similarly, after a health emer-
gency, natural disaster or otherwise, airlines help
reactivate the tourism industry in affected areas
by transporting tourists from all over the world.

During 2020, we activated our Avión Ayuda
Volaris program to transport volunteers, health
personnel and humanitarian aid, such as bios-
ecurity material, aimed at making sure that
COVID-19 first responders had the necessary
supplies to continue helping those in need.

Through 42 strategic partnerships created with
governmental institutions, private companies
and NGOs, we transported more than 45 tons
of cargo for humanitarian purposes and granted
more than 135 airplane tickets to more than 25
cities in the country.

Content

2020 Strategic Partnerships

Governmental institutions
 Secretaría de Relaciones Exteriores

de México

 Instituto Mexicano del Seguro Social (IMSS)
 Fundación IMSS
 Instituto de Seguridad y Servicios Sociales
de los Trabajadores del Estado (ISSSTE)
 Centro Nacional de Trasplantes (CENATRA)
 Secretaría de Salud de Baja California
 Secretaría de Turismo del Estado de Yucatán
 Secretaría de Turismo del Estado de

Quintana Roo

 Secretaría de Turismo del Estado de Baja

California Sur

 Secretaría de Turismo del Estado de Oaxaca
 Secretaría de Turismo del Estado de Guerrero
 Gobierno Municipal de León, Guanajuato
 Gobierno Municipal de La Paz, BCS
 Gobierno Municipal de Los Cabos, BCS
 Gobierno Municipal de Mérida, Yucatán
 Gobierno del Municipio de Puerto Vallarta,

Jalisco

 Consulates of Costa Rica and Mexico

Non-Governmental Organizations
 Cruz Roja Mexicana
 Fundación Mexicana para la Salud, A.C.

(FUNSALUD)

 The Code- ECPAT
 Airlink
 CADENA A.C.
 FUCAM, A.C.
 Sinibí Jípe
 Arise MX
 Causa en común A.C.
 Aviation Sans Frontières
 ADRA Internacional
 World Vision Humanitarian Aid
 Desértica A.C.
 Fundación CIE (#TogetherWithTablets)
 Fundación ALMA
 Rescate Animal, A.C.
 Fundación Dr. Sonrisas
 Amigos de Sian Ka’an

Private Companies
 Grupo Herdez
 Bonafont
 Head & Shoulders
 AXA Seguros
 Universal NBC
 Cross Border Xpress (CBX)
 Airbus Foundation

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Content

Moreover, through the coordinated efforts between the National Transplant Center and our suc-
cessful protocol, we continued transporting organs and tissues for transplant purposes to different
states of Mexico. In 2020, we transported 26 organs and tissues, a patient who received a cornea,
and 12 doctors to deliver organs. For 11 years we have transported more than 344 organs and tis-
sues that have saved the lives of hundreds of people in our country.

In addition, through our Reuniendo Familias program and in coordination with the immigration
and consular authorities of both countries, we achieved that more than 500 migrants who were
in Mexico and could not return to Costa Rica, their native country, due to the health contingency
derived from COVID-19 and the closure of borders, returned home safely.

Some of the initiatives we carried out during 2020 were:

 We transported more than 20 tons of

humanitarian aid from the Mexican Red
Cross to over 15 states in the country.
Besides, we joined forces with the Airbus
Foundation and Aviation Sans Frontières
to transport, from Toulouse, France, more
than 1.5 tons of medical supplies for the
Mexican Red Cross.

 We supported the IMSS for the

transportation of mechanical ventilators
for patients with COVID-19 from Mexico
City to Hermosillo, Sonora.

 We transported medical supplies for the
Secretaría de Salud in Baja California,
for the protection of the state’s medical
personnel.

 We joined efforts with the Secretaría
de Salud in Baja California and the
Secretaría de Economía Sustentable y
Turismo to transport assisted ventilation
equipment and medicines from Mexico
City to Tijuana.

 We supported the ISSSTE by

transporting 1.5 tons of medical supplies
for hospitals in Monterrey.

 In collaboration with the Fundación

Mexicana para la Salud (FUNSALUD),
we transported intubation, bronchoscopy
and protection coverings to the cities
of Merida and Cancun for COVID-19
patients.

 We transported recycled plastic masks
that Bonafont made in Guadalajara for
their donation to public hospitals of the
Secretaría de Salud in Baja California
and Mexico City.

 We transported 3.5 tons of humanitarian
aid, in coordination with ARISE MX and
AXA Seguros, for the IMSS-Bienestar
clinics in the cities of Tijuana, Tuxtla
Gutierrez, Tapachula, Monterrey and
Oaxaca.

 Together with Grupo Herdez and the
Secretaría de Turismo del Estado de
Yucatán, we transported 3 tons of
humanitarian aid for those affected by
the hurricanes.

 In coordination with the organizations

CADENA and A.C. and Airlink, we
transported volunteers and humanitarian
aid to attend to the sanitary crisis
and to support communities affected
by hurricanes DELTA, ETA, ZETA and
Genevieve.

 In collaboration with the FUCAM A.C.

association, we transported a patient and
her doctor to undergo breast surgery.

 With the World Vision Humanitarian Aid
organization, we transported more than
a ton of health kits for those affected by
the floods in Tabasco.

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Initiatives for the Benefit of Communities

Rarámuri face masks initiative

One of the most significant consequences for the aero-
nautical industry caused by the COVID-19 pandemic
was the lack of trust that Customers experienced in
the face of possible infections, making it challenging
to reactivate tourism. At Volaris, as a company com-
mitted to creating value for Mexico, we developed a
project to restore trust and guarantee the security of
the Customers’ health, reactivate our operations and
simultaneously, create economic value and provide
empowerment to vulnerable groups of indigenous
communities.

We took into account the recommendation issued by
the World Health Organization, IATA and the Mexican

health authorities regarding the use of face masks –
mandatory since May– in airports and on-board aircraft
as the main protective measure against the spread of
COVID-19 in air travel.

Considering these factors, we partnered with the Sinibí
Jípe association, which aims to create opportunities
for the wellbeing and comprehensive development
of the Rarámuri community women in the Sierra Tar-
ahumara, who create clothing and crafts preserving
traditional patterns and colors. Thus, we bought face
masks handcrafted by these women, which impacted
the airline’s reactivation, improving, at the same time,
the situation of the Rarámuri community.

“

Working together with Volaris in 2020 has been
one of the greatest challenges we have had at Si-
nibí Jípe. Volaris has a very creative team that put
our inventiveness to the test and pushed us to over-
come our barriers. From the bottom of our hearts,
we thank them for considering us for this beautiful
project.”

Luisa Fernanda Martínez Ortega,
Sinibí Jípe Director

We gifted face masks made by Rarámuri women to
our Customers when boarding their flight. Thus, we
were able to protect our Customers’ health, com-
municate a solidarity, care and empathy message
with the community and create revenue for these
women.

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LA CREACIÓN DE VALOR DE VOLARIS52% increase in interactions

of Volaris biosecurity content; 17
more percentage points vs our
competitors

Achievements

1,500%

growth of Sinibí Jípe’s exposure
on social media

200%

increase of average orders per
month of Sinibí Jípe

We created jobs for more Rarámuri
women; from 4 women working,
now 20 produce face masks to meet
demand

The campaign produced an
advertising return on investment of
Ps. $849,762 for Sinibí Jípe

This partnership increased a positive
attitude towards Volaris

Market share measured in on-board passengers
increased 52% in June

Content

“

This approach with Sinibí Jípe is very signifi-
cant for Volaris, since it allows us to provide
our Customers with a fundamental protec-
tive piece during the health contingency, as
well as to collaborate with the development
of a community facing exceptional challen-
ges in our country.”

Holger Blankenstein,
Executive Vice President Airline
Commercial and Operations

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LA CREACIÓN DE VALOR DE VOLARISContent

#TogetherWithTablets

The #TogetherWithTablets initiative was cre-
ated by young Mexican students aiming to re-
unite patients hospitalized for COVID-19 with
their families through video calls. Through
tablet donations, patients can spend a nice
time talking with their families, which im-
proves their attitude and keeps them close
to their loved ones.

We donated 50 tablets, normally used by
our pilots, to the #TogetherWithTablets ini-
tiative through the CIE Foundation, which
contributed to reunite more than 1,250
families separated by the COVID-19 pan-
demic at the Centro Banamex, INER and
the Instituto Nacional de Ciencias Médicas
y Nutrición Salvador Zubirán.

“Volaris is proud of its mission to contribute

to the economic development and wellbe-
ing of the communities where it operates in
Mexico. Since the health contingency be-
gan, we have created alliances with public
institutions, NGOs, and private companies
to transport humanitarian aid to more than
25 cities throughout the country. Today, we
are extremely satisfied with this donation
within the framework of our Reuniendo
Familias program, a fundamental aspect
of the Company’s sustainability strategy.”

Enrique Beltranena,
President and Chief Executive Officer

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LA CREACIÓN DE VALOR DE VOLARISContent
Content

Volaris
Performance

Content

3.1.

2020 Financial and Operating Metrics Summary

3.2.

2020 Results

3.3.

Corporate Affairs

3.4.

Supply Chain

3.5.

Environmental Protection and Climate Change Mitigation

3.6.

Ambassadors’ Relations, Practices and Wellbeing

3.7.

Human Rights and Community Relations

3.8.

Customer Wellfare, Privacy and Data Security

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3GRI 201-1
TR-AL-000.A, TR-AL-000.B,
TR-AL-000.C, TR-AL-000.E

3.1. 2020 Financial
and Operating
Metrics Summary

*Peso amounts were converted to U.S. dollars at end-of-period

exchange rate for convenience purposes only.

(1) Includes schedule and charter
(2) Includes schedule
(3) Excludes non-derivative financial instruments

Audited*
(In thousand of Mexican pesos, except otherwise indicated)

2020 (U.S. dollars)*

2020

2019

Variance (%)

Content

Total operating revenue (thousands)

Total operating expenses (thousands)

(Loss) operating income (thousands)

Depreciation and amortization

Depreciation of assets by right of use

Aircraft and engine rent expense

Net (loss) income (thousands)

(Loss) earnings per share:

Basic (pesos)

Diluted (pesos)

(Loss) earnings per ADS:

Basic (pesos)

Diluted (pesos)

Weighted average shares outstanding:

Basic

Diluted

Available seat miles (ASMs) (thousands) (1)

Revenue passenger miles (RPMs) (millions) (1)

Load factor (2)

Total operating revenue per ASM (TRASM) (cents) (1) (3)

Passenger revenue per ASM (RASM) (cents) (1) (3)

Operating expenses per ASM (CASM) (cents) (1) (3)

CASM ex fuel (cents) (1)

Booked passengers (thousands) (1)

Departures (1)

Block hours (1)

Fuel gallons consumed (millions)

Average economic fuel cost per gallon (3)

Aircraft at end of period

Average aircraft utilization (block hours)

Average exchange rate

End of period exchange rate

1,110,828

1,273,927

(163,099)

45,038

253,098

92,500

(215,242)

(0.21)

(2.11)

6.2

3.5

7.1

5.1

2.0

22,159,591

25,413,187

(3,253,596)

898,445

5,048,976

1,845,254

(4,293,791)

(4.20)

(42.03)

34,752,672

30,397,249

4,355,423

675,514

4,702,971

961,657

2,639,063

2.61

26.08

1,021,560,557

1,011,876,677

1,021,560,557

1,011,876,677

18,274,946

14,596,745

24,498,893

21,032,364

79.9%

123.5

70.4

141.3

102.7

14,712

97,819

248,952

176.6

39.9

11.30

21.50

19.95

85.9%

142.2

94.4

124.3

76.6

21,975

138,084

350,572

251.8

46.4

12.94

19.26

18.85

(36.2%)

(16.4%)

n/a

33.0%

7.4%

91.9%

n/a

1.0%

(25.4%)

(30.6%)

(6.0) pp

(13.1%)

(25.4%)

13.7%

34.1%

(33.1%)

(29.2%)

(29.0%)

(29.8%)

(14.0%)

4.9%

(12.7%)

11.6%

5.9%

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GRI 201-1

3.2. 2020
Results

Aircraft

2016

2017

2018

2019

2020

Available seat miles
(ASMs, millons)

Booked passengers
(Thousands)

2016

2017

2018

2019

16,692

18,861

21,010

24,499

2016

2017

2018

2019

14,998

16,427

18,396

21,975

2020

18,275

2020

14,712

Revenue passenger miles
(RPMs, millons)

Total ancillary revenue
per booked passenger
(MXN)

Total operating revenue
per available seat mile
(TRASM, MXN cents)

Operating cost per available seat mile
(CASM*, U.S. cents)

2016

2017

2018

2019

14,322

15,917

17,748

21,032

2020

14,597

2016

2017

2018

2019

2020

*Peso amounts were converted to U.S. dollars at end of period exchange rate.

382

426

479

532

2016

2017

2018

2019

140.9

131.4

130.0

142.2

659

2020

123.4

2016

2017

2018

2019

2020

6.67

6.95

6.63

6.45

6.58

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GRI 102-13

3.3. Corporate
Affairs

Aviation is one of the most regulated sectors
in the world. Airlines are constantly faced with
a variety of standards and modifications set by
government authorities or regulatory agencies
to make the industry abide by global operational
standards and best practices. In addition, the
airline industry is part of a wide-ranging Value
Chain, that creates benefits for the stakeholders
involved.

Therefore, Volaris considers that political, geo-
political and social risks and opportunities are a
priority, since the strict regulatory requirements
may imply high adverse costs for the Company
in the short, medium and long terms.

Volaris carries out its operations under a conces-
sion and permits granted by the Mexican state

and other regulatory agencies in the destinations
where we operate, so our influence on these stake-
holders’ decision-making is essential for the sus-
tained profitability of the ultra-low-cost aviation
industry and, specially, of Volaris in coming years.

Through the Volaris’ Corporate Affairs Depart-
ment, we develop and implement strategies to
contribute to the decision-making processes of
stakeholders, to manage the impact of political
and social risks and opportunities, and to man-
age Volaris’ corporate reputation. However, by
adhering to anticorruption and transparency
regulations, the Company does not make any
type of economic or other contribution to polit-
ical campaigns, political organizations, lobbying
organizations, industry organizations for the
purpose of intervening in public policy, or to
any other organization of this nature.

We achieve all this through three pillars:

1. Helping to build public policy

Volaris is subject to regulations or changes in
public policy in the countries where we operate.
Hence, we strive to influence decision-making
processes regarding regulations that directly or
indirectly impact the industry in general, and
Volaris in particular, by:

 Developing strategic relationships: we de-
veloped an agenda to approach and com-
municate with key players for Volaris, in or-
der to represent the Company’s interests in
their decision-making process. This agenda
considers the issues that interest the various
stakeholders. The players that most influence
the processes of Volaris Corporate Affairs are
governments, society and its organizations
(Ambassadors, Customers and communities);
and the airline industry. Maintaining these
relationships allows Volaris to be a company
with a high capacity to influence the commu-
nities where it operates, thereby enabling us
to successfully adapt to new regulations, at
both local and federal levels.

 Approaching key players: approaching key
players, such as regulators, public policy
makers, and government authorities is a pri-
ority for the Company’s future sustainability.
This approach allows us to define and include
in the public agenda the issues that are im-
portant for Volaris. Approach and negotia-
tion activities with government agencies are
carried out within the law and are regulated
in our compliance policies, such as the Vo-
laris Code of Ethics and the Anticorruption
Compliance Policy and the Fraud Prevention
and Control Policy, which include compli-
ance with the Foreign Corrupt Practices Act
(FCPA), through which we promote these

relationships’ transparency and honesty, as
well as their execution with the best anticor-
ruption practices.

2. Influencing decisions in the

aviation industry

Volaris recognizes the importance of being part
of the industry’s decision-making process to pro-
vide continuity to the air transportation business,
by representing the interests of all airline stake-
holders. Consequently, Volaris is a member of
IATA (International Air Transport Association),
an international association that aims to repre-
sent, lead and serve the airline industry, through
policy making on relevant issues to the sector.
In addition, IATA promotes understanding of
air transportation among decision makers, and
awareness of the benefits that aviation brings to
national and global economies. It also produces
significant information for the industry and pro-
motes best practices among its members world-
wide. Volaris is a member of this association due
to its leadership with stakeholders and its goals
linked to Volaris’ priorities, such as air transpor-
tation efficiency, the environment, security and
protection of airline operations, involvement with
government agencies, and other similar priorities.

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3. Strengthening corporate

reputation

The strengthening of Volaris’ corporate repu-
tation is based on our actions’ transparency to
approach and communicate with our stakehold-
ers, aligning our Customers’ interests and setting
ourselves apart from our competitors. The im-
portance of the proper implementation of cor-
porate communication actions is that they allow
Volaris to approach and influence stakeholders
more effectively, since a good corporate reputa-
tion provides confidence and certainty to these
groups. Besides, an effective brand-positioning
strategy strengthens and contributes to the im-
plementation of the Company’s long-term vision.

Moreover, a good reputation contributes to a
more effective mitigation of the impact from
the crises the Company may face in the short,
medium and long term.

In 2020, the most challenging year for the air-
line industry due to the COVID-19 pandemic,
we positioned ourselves as one of the airlines
with the highest recovery in terms of passenger
transport worldwide. One of the actions that
we carried out to achieve this and to contribute

to the recovery of the domestic tourism and
aviation sectors, was maintaining a constant
approach, communication and coordination with
government authorities, regulators and industry
members. Through this approach strategy, we
developed the pertinent actions to mitigate neg-
ative impacts related to the pandemic effects.
Some of these actions were:

 Collaboration with government authorities for
the creation and certification of our biosecu-
rity protocols (Tourist Safety stamp of Mexico
City, Best Sanitary Practices Certificate from
the Government of Yucatan).

 Collaboration with government authorities and
industry regulators to provide them with infor-
mation and updates on the industry’s condi-
tion in the context of the COVID-19 pandemic
for decision-making.

 Collaboration with government authorities
for the development of contingency plans in
government offices, in order to speed up the
preparation of procedures.

 We worked together with consumer protection
authorities to ensure the best travel experi-
ences for our Customers in the context of the
COVID-19 pandemic and the new normal.

Content

 We actively collaborated with the airline in-
dustry to work with government authorities
and our suppliers in support and remediation
plans for the Mexican airline industry due to
the effects of the pandemic.

 We supported several federal and local gov-
ernment authorities, NGOs and other private
companies to transport humanitarian aid to
more than 25 states of Mexico, through our
Avión Ayuda Volaris program.

In addition, we collaborated with the industry
and government authorities in the project to
redefine Mexican airspace, as well as in the air-
port infrastructure needs in Mexico.

 Communication and coordination with local
governments to contribute to tourism, through
a collaboration tour with governors of Mex-
ico’s different states and discounts on plane
tickets to stimulate the demand for travel in
the country. With this initiative, we supported
different stakeholders in the industry value
chain, such as government authorities, state
governments, hotels, restaurant owners, tour-
ism operators, among others.

 Together with industry organizations, we
worked with the Mexican congress to inform
law makers about the situation in the airline
industry and tourism in the context of the
COVID-19 pandemic.

 We collaborated with immigration authorities
and consulates to support the transportation
of migrants affected by the border closure
in the context of the COVID-19 pandemic in
different destinations where we operate.

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GRI 102-9

3.4. Supply
Chain

“

At Volaris, we are committed to the sustainable re-
activation of the airline industry, creating value for all
stakeholders. This is why we establish sound relation-
ships with the suppliers that comprise the Company’s
value chain, mutually committing to act according to
ethical principles, within the legal framework and ac-
cording to the business’ sustainable development.”

Mauricio Horcasitas
Acquisitions Director

1,907suppliers in 2020.

Responsible Supply Chain
Management Program

We strive to be a trustworthy customer and to build solid
and lasting relationships with our supply chain, promoting
their business development and ensuring the supply of the
goods and services we need as an ultra-low-cost airline to
satisfy our stakeholders’ demands. We seek to transcend
commercial relationships with our suppliers, creating re-
lationships of trust, transparency and respect that allow
us both to grow and strengthen economic, ethical, social
and environmental aspects, in order to comply with the
law and create value for society and the communities
where we operate.

In 2019, we detected the importance of having a Respon-
sible Supply Chain Management Program and, as part of
our 2020 Sustainability Strategy, we committed to imple-
ment this Program.

Therefore, we developed the Responsible Supply Chain
Management Model, including all the aspects that are
part of our virtuous circle, together with our suppliers, to
strengthen our sustainable commitment.

The 2020 pandemic tested our resilience and adaptability in
all operations. One of our greatest challenges was respond-
ing to new requests and government changes in a timely
manner; as well as ensuring our permanence in the market
and increasing sales, guaranteeing that all our Customers
travel safely. Hence, it is essential not only to strengthen
commercial relationships with suppliers, but to include them
in our culture and our commitment to Customers.

The Model’s main goal is to strengthen relationships
and raise awareness among our suppliers on the im-
portance of assuming a real commitment regarding
ESG issues (environmental, social and governance)
to create competitive value to support society.

Content

Procurement
Política de
Policy with ESG
Compras con
Criteria
criterios ESG

Estrategia de
Procurement
Compras con
strategy with
factores ESG
ESG topics

Programa de
Recognition and
reconocimiento
Loyalty Program
y lealtad

Training on
Capacitación en
sustainability
Sustentabilidad
for procurement
al Equipo
team
de Compras
Volaris

Desarrollo de
Supplier
Proveedores
development
(planes correctivos,
(corrective plans,
capacitación...)
training)

Sistema de
monitoreo

Monitoring
system

MODELO DE GESTIÓN
Volaris Responsible
RESPONSABLE DE LA
Supply Chain
CADENA DE VALOR VOLARIS
Management Model

Supplier
Mapeo de
mapping
proveedores

Gestión de
Risk
Riesgos
management

Supplier
Evaluación en
sustainability
Sustentabilidad
assessment
a Proveedores

Clauses on
Claúsulas en
sustainability
materia de
and Human
Sustentabilidad
Rights
y protección de
protection
los DDHH en
in certain
contratos
contracts

Integration
Integración
of ESG
de Factores
criteria to
ESG en la
suppliers’
selección y
selection and
retención de
retention
Proveedores

Pledge to
Firma de
comply with
compromiso
the Volaris
de la Política
Supplier
de Ética de
Ethics Policy
Proveedores
Volaris

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Our procurement strategy has five priorities:

1. Reduce cost and optimize

2. Manage responsible the supply

3. Adopt the best transparency

4. Develop a resilient team

resources, as well as
maintain the highest
operational efficiency
standards.

We developed the
Volaris Supplier Ethics
Policy, which defines
ESG criteria the supplier
must observe.

chain.

mechanisms in all
procurement operations.

and supply chain.

We created the
Responsible Supply
Chain Management
Model.

Carry out a complete
supplier mapping,
as well as a risk
management exercise
to channel the Model’s
efforts according to
their risk rating.

Content

5. Implement the Responsible
Supply Chain Management
Program based on international
standards and indicators.

Apply the
Procurement
Policy with ESG
criteria.

In order to achieve
these priorities, in
2020 we started the
Project’s 1st Phase,
which included:

We developed
the sustainability
assessment for
suppliers.

•

We
established
sustainability
clauses that will be
included in certain
supplier contracts.

Apply sustainability
assessment to
selected suppliers,
according to the
risk management
exercise.

Additionally, we
defined key ESG
goals for the 2nd
Phase, which will be
executed in 2021.

Train our
Volaris
procurement
team on the
importance of
sustainability
throughout the
supply chain.

We defined sustainability criteria which will
be included in the Procurement Policy.

Include sustainability clauses in certain
contracts and purchase orders.

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Content

Comprehensive Environmental

3.5. Environmental
Protection and
Climate Change
Mitigation

As Mexico’s largest airline in transported passen-
gers, Volaris understands its great responsibility
when conducting operations. In addition, due to
the great challenges we have faced due to the
COVID-19 pandemic, we are more committed
than ever to the sustainable reactivation of the
airline industry. Therefore, we ratify our commit-
ment to protect the environment and mitigate
climate change by implementing more and better
strategies and goals to offset our operations’ en-
vironmental footprint and meet our commitment
to become the “greenest airline in Mexico.”

A few years ago, the aviation sector agreed to
establish strategies to reduce CO2 emissions for
the coming years and thus, contribute to the
industry’s sustainable growth and development.
In 2016, the United Nations International Civil
Aviation Organization (ICAO) established the
Carbon Offsetting and Reduction Scheme for
International Aviation (CORSIA) to enable the
industry’s shared objective on carbon-neutral
growth. Similarly, the IATA set a target to reduce
net CO2 emissions in half by 2050, using 2005
emissions as the baseline.

Protection Policy

Mexico was one of the countries that committed
to implementing measures that mitigate green-
house gas emissions during the COP21 in Paris,
France. Therefore, regulations were established
in the country for this purpose, such as the Gen-
eral Law on Climate Change, which came into
effect in 2012 and establishes the creation of
several public policy instruments. Among these
instruments is the National Emissions Registry
(RENE), which compiles information on emis-
sions from the country’s different productive
sectors, and through which companies exceed-
ing 25,000 t CO2e (tons of CO2 equivalent) must
report their direct and indirect greenhouse gas
emissions.

The Planet Care Focus, which is one of the pil-
lars of our Corporate Sustainability Program,
establishes the actions that we plan to imple-
ment to comply with domestic and international
environmental agreements, mitigate the effects
of climate change, and to contribute to the Sus-
tainable Development Goals. By meeting these
goals, we will be able to reduce the negative
impact on the environment created by the avia-
tion industry, thereby guaranteeing the benefits
of air transportation for future generations.

Efficient fuel
consumption
management (Fuel
Saving Program)

#CielitoLimpio Carbon
Emissions Offset Program

Environmental
initiatives and efforts
for biodiversity

Regulatory
compliance

Fleet renewal

Other
fuel-saving
techniques

Investment
in the best
technology

Onboard weight
reduction
initiatives

Paper saving
and recycling

Waste
management

Reduction
in electricity
consumption

Emissions’
reporting

Hazardous waste
management

Strategic
partnerships
for the
environment

Working Group
Green Team
– ISO 9001
and 14001
Certifications

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We are committed to promoting a culture
where quality, operational safety, emergen-
cy response, aviation security, occupational
health and safety and environmental protec-
tion are essential operating priorities.

vehicles driving during a year, more than 880
hectares of preserved forest and more than 351
million pounds of charcoal burned.*

We invest in technology to ensure efficient
fuel consumption.

Airbus
A320neo
Aircraft

We increased the number of Airbus NEO aircraft, which have eco-efficient
engines and sharklets. They reduce annual fuel consumption by over 15%,
as well as CO2 emissions by 5,000 tons and NOx gases by 50% per aircraft.
Furthermore, they decrease sound footprint by 75%, compared with pre-
vious units.

Content

Fleet renewal and investment
in the best technology
We have one of the youngest and most efficient
fleets in the American continent; 86 aircraft
with an average age of 5.3 years. In addition,
we invest in environmental efficiency state-of-
the-art technology. Each aircraft has 188 seats
on average and 79% are fitted with sharklets.

In accordance with our ultra-low-cost strategy
and our commitment to become the greenest
airline in Mexico, we have steadily increased
the number of Airbus A320neo Family aircraft.
In 2020, we acquired seven to our fleet.

Volaris was the first NEO aircraft operator
in North America.

GRI 302: 103-1, 103-2, 103-3
GRI 302-1, 302-3, 302-4, 302-5, 305-5, 305-4, 305-5
TR-AL-110a.2, TR-AL-110a.3
Efficient fuel consumption
management (Fuel Saving
Program)

Volaris closely monitors fuel consumption, not
only because of its economic impact, but also
because it is through efficient fuel consumption
that CO2 emissions can be reduced.

In accordance with the goals for environmental
protection issued by ICAO, our sustainability
strategy considers that six out of ten aircraft
will be eco-efficient by 2023. Moreover, this
strategy places us as one one of the five airlines
with the youngest fleet in North America, due
to the changes in the technology of our aircraft.

Through efficient fuel consumption management
with the Fuel Saving Program, the Company
has reduced emissions (gCO2/RPK) by 12.5%,
compared to 2015, which is equivalent to 35.8
million gallons of fuel saved and a reduction of
247,278 tons of CO2 emissions. These savings
are equivalent to over 69 thousand passenger

Pratt & Whitney
GTF engines

During 2020, we closed a purchase
contract with Pratt & Whitney for 171
Geared Turbofan (GTF) engines for
the Airbus A320neo Family aircraft
that we will receive between 2023
and 2028. With this acquisition, we
will further reduce fuel consumption,
CO2 and NOx emissions, as well as
the sound footprint. We will also in-
crease the range of each aircraft to
approximately six hours.

With this purchase, we are among
the three most cost-efficient airlines
worldwide.

*Equivalences obtained from: https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

GTF Microsite: https://pwgtf.com/
PW1100G-JM Brochure: https://pwgtf.com/wp-content/uploads/2018/07/PW_GTF_PW1100G_JM.pdf
P&W’s GTF Website: https://www.pw.utc.com/products-and-services/products/commercial-engines/Pratt-and-Whitney-GTF-Engine/

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Sharklets

Sharklets are aerodynamic devices that re-
duce fuel consumption by approximately
4% and prevent around 18,000 tons of CO2
emissions.

79% of our

aircraft have sharklets.

The new Pratt & Whitney
GTF engines

Reduce NOx
emissions by

50%
footprint by 75%

Sound

Content

Achievements
and Goals

NEO fleet

2019:

28% of our fleet was NEO

2020:

35% of our fleet is NEO

2023:

58% of our fleet will be NEO

CO2 emissions
2019:

-13.5%
gCO2/RPK emissions
in 2019 vs 2015*
Reduction of 383,280 tons of
CO2 emissions in 2019 vs 2015*

2026:

-23%
gCO2/RPK emissions
in 2026 vs 2015*

Fuel savings
2019:
-11.6% fuel consumption
(gal/ASM) in 2019 vs 2015
33 million gallons of fuel saved
in 2019 vs 2015

2020:
-16.9% fuel consumption
(gal/ASM) in 2020 vs 2015
35.8 million gallons of fuel saved
in 2020 vs 2015

2026:
-22% fuel consumption
(gal/ASM) in 2026 vs 2015
126 million gallons of fuel saved
in 2026 vs 2015

2020:

-12.5%
gCO2/RPK emissions
in 2020 vs 2015*
Reduction of 247,278 tons of
CO2 emissions in 2020 vs 2015*

Reduction of 1,333,400 tons of
CO2 emissions in 2026 vs 2015*

*We use 2015 as a baseline, since this year we began to replace our fleet with the Airbus A320neo and A321neo Family aircraft.

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“

Consistent with the goals set by the organizations of the airline industry for climate change
mitigation, at Volaris, we are more committed than ever to defining ambitious goals for
the reduction of CO2 emissions and the adoption of best practices to reduce the environ-
mental footprint of our operations.”

In the coming years, Volaris plans to increase its investment in order to implement models that analyze
human behavior and other systems that provide real-time recommendations to optimize navigation.

Optimization also occurs in air navigation, as Volaris has managed to reduce our routes’ navigation
miles by 2.5% in 2020, equivalent to 18 nautical miles on each flight.

José Luis Suárez,
Senior Vice President and Chief Operating Officer

Onboard weight reduction initiatives
We seek to reduce the weight onboard the aircraft, aiming to make operations even more efficient
and reducing the environmental footprint.

Other fuel-saving techniques
Furthermore, we apply several fuel saving techniques, such as:

Thus, during 2020, we restructured the management and offer of onboard services: we reduced the
products with the least sales, we modified the onboard trolleys to reduce their weight and we acquired
new, lighter ones. Likewise, our aircraft have no entertainment systems or kitchens.

Content

Reduced use of Auxiliary
Power Unit (APU)

In 2020, we used aircraft APU for 43.4
minutes per operation, -11.8% compared to
49.24 minutes per operation in 2019, saving
the burning of 718,500 gallons of fuel.

Route optimization

In 2020, through smart models such as
Storkjet’s Fuel Pro, which allow us to mon-
itor each consumption parameter, and
other systems that allow us to plot more
optimal routes, we reduced navigation
miles by 1.2% per flight on Volaris’ most
important routes; with these shorter routes
we saved 1.76 million gallons of fuel.

We acquired 140 new onboard lightweight trolleys, which reduced greenhouse gas emissions.
In 2020, we saved 1,048,181 ton CO2 vs 766,520 ton CO2 in 2019.

Also, in order to reduce onboard weight even further, we signed a contract with premium seat manu-
facturer Recaro to supply the seats for 80 new aircraft on order and scheduled for delivery between
September 2023 and 2028. These seats weigh 30% less, which will result in fuel savings of nearly
32,000 gallons per year.

Additional fuel reduction

In 2020, through more efficient flight plans and with a holistic measure of the necessary
fuel, flight dispatchers and pilots at Volaris reduced the unnecessary fuel load by 400 kg
per flight, which saved us transporting 39 thousand deadweight tons, while maintaining
the same safety standards, that would have represented a fuel consumption of 718,500
gallons during the year.

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Carbon Emissions
Offset Program

Volaris is the first Mexican airline to cre-
ate a partnership with the Mexican Car-
bon Platform (MéxiCO2), which is certified
by the United Nations, for the purchase of
carbon credits.

We invite all of our Customers to purchase the
#CielitoLimpio ancillary product and offset part
of the environmental footprint caused by their
flights. Customers interested in contributing to
the environment can buy the #CielitoLimpio
product when purchasing their ticket on the
website www.volaris.com or in the Volaris app.
This contribution is completely voluntary and
the footprint can be offset by contributing 22
pesos on short routes, 32 on intermediate routes
and 42 on longer ones.

The environmental projects that we support
through the procurement of carbon credits cre-
ate employment and technology implementa-
tion in areas with low economic development,
contribute to the inclusion of vulnerable groups
and promote a culture of environmental protec-
tion in the communities where they are devel-
oped. In addition, they ensure the viability of the
aeronautical industry and the Volaris business
in the future.

promotes the city’s sustainable development
by generating electricity with renewable fuel,
while minimizing the harmful effects of waste.
Additionally, it avoids the emission of 100,000
tons of CO2 per year, which is equivalent to the
environmental impact of 20,000 cars and the
electricity used by 3,000 households.

In 2020, we purchased 807 certified carbon
credits (tCO2), thus offsetting 100% of 26 flights
for the Mexico-Guadalajara route, and neutral-
izing the carbon footprint of 2,989 Customers.

Since 2015, we have purchased
33,274 certified carbon credits
(TCO2), offsetting 100% of
797 round trip on the
Mexico-Guadalajara route,

neutralizing the carbon footprint
of 123,189 Customers.

We use an internal tool to calculate the number of compensat-
ed flights and the carbon footprint of “x” number of Customers
who flew the route during the year, considering the tons of CO2
per Customer to fly the route, the total number of flights on the
route during the year, the total of Customers who flew on the
route during the year and the total of certified carbon credits
purchased during the year.

One of these is the project of biogas recovery,
burning and use in Leon, Guanajuato. This project

For more information about how to offset the carbon footprint
of flights, visit: https://cms.volaris.com/es/informacion-util/
servicios-opcionales/cielito-limpio/

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GRI 301, 304, 306: 103-1, 103-2, 103-3
GRI 301-2, 306-4
Environmental initiatives
and Efforts Directed to
Biodiversity

The #CielitoLimpio Comprehensive Envi-
ronmental Protection Policy is cross-sec-
tional in many areas of the Company.

At Volaris, we are committed to contributing to
the planet’s protection by reducing waste ge-
neration and ensuring its proper management.
Some of the initiatives that we have implemented
in the Company to fulfill this commitment are:

1. Saving paper through mobile check in,

our Paperless Policy, as well as efforts to
reduce the use of paper and plastics in our
marketing campaigns

2. Paper recycling
3. Waste management in our corporate

offices

4. Onboard service
5. Reduction in electricity consumption
6. Strategic partnerships for the environment

1. Paper saving

Mobile Check-in
Aiming to reduce waste in our operations, we
carry out campaigns encouraging Customers
to use mobile check-in every time they fly with
us. With this initiative, in addition to making
the registration process more efficient, we re-
duce paper consumption, since our Customers
do not print their boarding passes.

During 2020, 38% of our Customers
check-in via a mobile device, equal to
25.96 ton of paper saved.

Paperless Policy

In 2019, the Paperless Policy was implemented in
our corporate offices with the goal of reducing
paper and printing consumption. This policy
establishes that only Ambassadors that need
to print obligatorily, due to their functions, will
have printing permits. Thereby, we seek to re-
duce paper consumption in the office, ink use
and energy of printers, as well as to contribute
to the environment’s protection.

a. Paper consumption in corporate

offices

2018

2019

2020

5,760 kg

2,592 kg

1,152 kg

b. Marketing and market development

2. Paper recycling

95% of the contracts for the Company’s mar-
keting strategy are digital services like screens,
among others, in order avoid printing materi-
al for advertising campaigns. In addition, we
seek that all advertising materials –banners,
flyers, tents, inflatables, posters, among oth-
ers– are increasingly environmentally friendly.
We migrated to electronic media and used
recyclable materials in physical advertising.

In addition, starting in April 2020, we chan-
ged our onboard magazine to digital format
in order to comply with our biosecurity pro-
tocols and contribute to the environment’s
protection. With this initiative, we saved
103.68 tons of paper.

+144 tons

saved trees

Every month, we collect confidential and/or
sensitive paper from different offices to be
weighed and destroyed safely, for which we
have a supplier. The supplier collects this paper
and takes care of its proper destruction.

During 2020, we ensured proper
destruction and recycling of:

2,600 kg of paper
=

44.2
saved trees

+68
thousand liters
of water saved

*During 2020, paper consumption decreased not only

due to the initiatives implemented, but also because of
the reduction in operations as a result of confinement
caused by the pandemic.

2,460
saved trees

+3.8 million
liters of water saved

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3. Waste management

At our headquarters, we have waste sepa-
ration cans for proper waste management.
During 2020, we promoted changing their
identifiers, so that the Ambassadors could
separate their waste correctly. Likewise, we
carried out internal communication cam-
paigns to raise awareness among administra-
tive staff about the correct waste separation
processes.

We have the 2021 objective of executing the
waste separation and recycling management
program, where we will seek a supplier to
collect waste and ensure its recycling. Thus,
we will begin training the cleaning staff, who
will have an important role in the proper han-
dling of waste to deliver it to the supplier.
Proper waste management and cleaning will
consist of:

 Removing caps and labels from PET (plastics)
and wash them, so they are completely clean.
 Removing corks from cans, crush them and
wash them, so they are completely clean.
 Paper that does not have confidential Com-
pany information will be stacked and deliv-
ered to the supplier.

 Cardboard will be cleaned, stacked and de-

livered to the supplier.

2021 additional goals:
 The supplier will provide training for Am-
bassadors, which will include how to recycle
at home and thus, increase this initiative’s
scope.

 Regular training for Volaris cleaning and
maintenance staff on waste management.
 Performing an activity where the money
collected from recycling waste is donated
for environmental activities, such as refor-
estation or social projects that create value
for the community.

By 2022, we will seek to expand this program
to offices located in the International Airport
of Mexico City, Tijuana, Cancun, Monterrey
and Culiacan.

4. Onboard service

We strive to operate with products that are
increasingly friendly to the environment in our
onboard services. Consequently, we changed
100% of the coffee cup lids and forks that
we use in onboard service from plastic to
biodegradable materials, and currently all our
coffee mixers are made of wood, reducing
plastic waste.

2021 goal: changing 100% of
plastic cups to biodegradable materials.

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5. Reduction in electricity consumption

6. Strategic partnerships for the environment

Due to the COVID-19 pandemic, most of the
year our Ambassadors worked from home to
protect their health. As a result, in 2020 there
was a significant reduction in electricity con-
sumption in our corporate offices.

For several years, we have worked with asso-
ciations that perform actions toward biodi-
versity. Specifically, we work with the orga-
nization Amigos de Sian Ka’an to strengthen
the biodiversity project in the Sian Ka’an Bio-
sphere Reserve in Quintana Roo, through the
donation of plane tickets.

352,422 kWh

Electricity consumption in
corporate offices;
37% reduction vs 2019.

Despite the fact that in 2020 we were unable
to carry out voluntary work activities with
Amigos de Sian Ka’an due to the COVID-19
pandemic, we maintained this alliance and
will seek to reactivate it during 2021, in order
to create environmental and social value in
the communities where we operate.

Through our relationships with airport suppliers
and a joint investment of $5 million dollars in
land energy generators.

7 plane tickets donated to Amigos de
Sian Ka’an, which were used for meetings,
researchers’ transport and fieldwork related
with this project.

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GRI 305, 307: 103-1, 103-2, 103-3
GRI 305-1, 305-2, 305-4, 305-5
TR-AL-110a.1
Regulatory Compliance

Emission reporting
Greenhouse gas emissions (GHG) are the avia-
tion sector’s main environmental impact; there-
fore, we focus our efforts on mitigating the en-
vironmental footprint.

A few years ago, the aviation sector agreed to
establish strategies to reduce CO2 emissions for
the coming years and thus, contribute to the
industry’s sustainable growth and development.

In 2016, the International Civil Aviation Orga-
nization (ICAO) established the Carbon Offset
and Reduction Plan for International Aviation
(CORSIA), with the aim of achieving carbon neu-
tral growth in international aviation emissions
from 2020 ( scope 1). Likewise, IATA established
three objectives to reduce carbon emissions: 1)
improve fuel use efficiency by 1.5% on an an-
nual average, from 2009 to 2020. 2) stabilize
emissions with neutral growth from 2020, and
3) reduce net CO2 emissions in half by 2050,
using 2005 emissions as a base.

In 2020, we successfully completed the first inter-
national emissions verification under CORSIA. We
present the 2019 international emissions report to
the Federal Civil Aviation Agency (AFAC). In the
coming years, with the recovery of the industry,
we will be attentive to the emission requirements
to be offset under the CORSIA scheme.

The impact on the air sector due to the COVID-19
pandemic led to a significant reduction in emis-
sions,thus, the industry requested ICAO to modify
the 2019-2020 baseline established for CORSIA
and consider only the year 2019, in order to mit-
igate the economic impact.

Likewise, to comply with the General Law on
Climate Change, of Mexico, we report national
emissions (scope 1) resulting from our opera-
tion and emissions from other sources (scope 2)
through the National Emissions Registry (RENE),
which gathers information on GHG emissions
from several productive sectors in Mexico.

Along with the aeronautic sector, we have
developed strategies to reduce CO2 emis-
sions and we report them under CORSIA
and RENE guidelines.

12.5% reduction in gCO2/RPK

emissions vs 2015, which is equivalent to
35.8 million gallons of fuel saved and a re-
duction of 247,278 tons of CO2 emissions.
These savings are equivalent to more than
69 thousand passenger vehicles circulating
during a year, more than 880 hectares of
preserved forest and more than 351 million
pounds of charcoal burned.*

Volaris México Y4
National emissions (RENE) 20195
Scope 1
1,718,212.10 ton CO2

Scope 2
335.09 ton CO2

Volaris Costa Rica Q6
National emissions 2020
Scope 1
9 ton CO2

International emissions (CORSIA) 2020
Scope 1
377,750 ton CO2

International emissions 2020
Scope 1
20,666 ton CO2

5 In 2020, we presented the National Emissions Registry Report (RENE) before the Environment and Natural Resources Ministry (SEMARNAT), in which we reported our operations’ results for 2019.
* Equivalences obtained from: https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

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Participate in
reviewing the results
of environmental
programs, as well
as proposing
improvements for
their implementation.

Identify and
evaluate
significant
environmental
aspects.

The Team’s
main goals are:

Content

Define environmental
objectives, goals, and
programs that allow
us to comply with the
Comprehensive Policy.

Monitor the
degree of
progress or
performance of
monitoring and
measurement
programs.

Find the necessary resources for
environmental programs that contribute to
improve environmental conditions.

We continuously maintain and improve the Integrated Aviation Management System
(IAMS). Therefore, in 2020, we renewed our ISO 9001/14001 certifications (which
are valid until December 2023), and:

 We contributed to comply with applicable regulations, standards (IOSA/ISO)
and those established by Volaris in manuals and complementary documents.
 We showed our Volaris culture where quality and continuous improvement is a

priority in our operations.

 We showed our environmental protection culture by managing our waste and

emissions.

Working Group Green Team – ISO 9001
and 14001 Certifications

In 2014, we obtained the ISO 9001 and 14001
Certifications for the first time for some of
our operational areas thanks to the creation
of the Working Group Green Team. This team
is responsible for monitoring and supervis-
ing the maintenance and improvement of all
systems certified under ISO 9001 and 14001,
and for promoting a culture of quality and
environmental care.

This multidisciplinary group is coordinated
by the Operations Engineering area and inte-
grated by the areas of Dispatch, Crisis Man-
agement, Fuel, Industrial Safety, Corporate
Affairs, Flight Operations, Cargo Operations,
Flight Operations Engineering, Procedures and
Standards Engineering, Real Estate Planning
and Crew Control.

GRI 306-3, 306-5
Hazardous waste management

Besides the RENE emissions report, we disclose
hazardous waste management in our operations.
In 2019, we ensured the proper disposal of 40
tons of hazardous waste –that had been created
from aircraft maintenance and medical service
activities– with Ministry of Environment and Nat-
ural Resources’ (SEMARNAT) authorized suppli-
ers.6 Of these, 34 tons were incinerated, 4 tons
were co-processed and 2 tons were confined.

We obtained the 2019 Tijuana and Mexico
Annual Operation Certificate for Hazard-
ous Waste, as they are categorized as a
large generators of hazardous waste.

6 In 2020, we presented the National Emissions Registry Report (RENE) before the Environment and Natural Resources Ministry (SEMARNAT), in which we reported our operations’ results for 2019.

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ISO 9001/14001 Certifications Scope

Comprehensive Policy

Due to the excellent management of the car-
go operations, crew planning and operations
engineering processes, in 2020 we renewed
the scope of the ISO9001/14001 certifications,
after being evaluated for the third time by the
surveillance audit in charge of the Mexican
Society of Standardization and Certification
(NORMEX).

 We renewed the certification of the Inte-
grated Management System according to
ISO 9001:2015 for the processes of the
Operations Control Center (OCC) and the
Crisis Management Department, as well as
the administrative procedures of the flight
attendant organization and the fuel saving
program.

 We complied with the ISO 14001:2015 stan-
dard in the processes of the fuel saving
program and administrative activities at
Volaris corporate offices.

 We maintained the certification’s scope
in the processes of Cargo Operations,
Crew Planning and Operations Engineer-
ing processes, in compliance with the ISO
9001:2015 standard.

As an air transportation carrier, Volaris senior
management maintains its commitment with all
Customers and stakeholders to comply with all
applicable regulations to the aviation industry,
as well as standards adopted and/or established
by the Company, which are an essential priority
to guarantee: quality, operational safety, aviation
security, Ambassador health promotion, and the
prevention of environmental pollution.

Volaris is responsible for achieving a culture
where quality, operational safety, emergency
response, aviation safety, occupational health
and safety and environmental protection are
fundamental operational priorities; as well for
as providing the necessary resources to achieve
compliance with this policy and promote con-
tinuous improvement.

At Volaris, we accept errors as a human con-
dition, but under no circumstances we accept
negligence. Consequently, we have an immunity
policy in place described in our Operational
Safety Manual.

The regulatory policy for the Working
Group Green Team is the IAMS (Integrated
Aviation Management System) or Compre-
hensive Policy.

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3.6. Ambassadors’
Relations,
Practices and
Wellbeing

Women on Boards 2020 and Women Corporate Di-
rectors recognized us as one of the Mexican publicly
traded companies with the highest percentage of in-
dependent female directors on the Board of Directors.

We have mechanisms to ensure equal opportunities and
prevent any type of discrimination in all our processes and
operations, such as:

Equal Opportunities
and Non-Discrimination

At Volaris, we are aware that inclusion and diversity in the avia-
tion industry are key factors for the sector’s recovery and sus-
tainable development. Therefore, we continued to implement
initiatives and made efforts in support of equal opportunities
and non-discrimination, promoting inclusive and violence-free
workspaces, where the professional and professional growth
of all Ambassadors is ensured.

26% of
women in
management
positions

87% of
women in
operative
positions

1 female
pilot for
every 2
aircraft

7 Source: https://airlines.iata.org/analysis/diversity-crucial-to-the-industry-restart

Person-centered Organizational
Culture

Code of Ethics and Whistle
Blowing Line to report non-
compliances

Diversity and Equal Opportunities
Policy

Compensation Policy to ensure
equitable compensation between
women and men

Maternity, Paternity and Use of
Breastfeeding Rooms Policy
and agreements with daycare
centers

“

During these 15 years, at Volaris I have seen a remarkable amount
of support for women in all areas. I am very proud to witness how
more and more women are working in places where they were not
before. In hindsight, it is impressive how things have changed in
favor of our development. When I started my professional career,
there were very few women in key positions, now this is more com-
mon and fills me with pride and happiness.”

Marta Maldonado,
Captain

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Compensation for Volaris Ambassadors

Compensation at Volaris is primarily aimed at creating value for
its shareholders, its Customers and Ambassadors. Hence, we
have a General Compensation Policy closely linked and aligned
with the Volaris’ strategy, mission, vision and behaviors.

This Policy establishes the guidelines to define and develop
the compensation strategy at the Company’s different levels,
providing, initially, equitable compensation, without any type
of discrimination, according to the obligations, responsibilities,
complexity and contribution of each position to the organiza-
tion’s results. Subsequently, it ensures a competitive compen-
sation through participation in several salary surveys, with the
aim of comparing our total compensation levels against the
market and, thus, making sure we implement the best practices
that create value for our Ambassadors and our shareholders.

The General Compensation Policy and related policies are re-
viewed by the Compensation and Nominations Committee, as
well as by the Audit and Corporate Practices Committee and
ultimately approved by the Board of Directors, based on their
recommendation.

Total compensation as a concept includes not only salary com-
pensation, but also benefits, provisions and emotional salary,
the latter understood as the growth, development, working
environment and conditions and, overall, the Ambassador’s
experience at Volaris, which together constitute the strongest
bond between the Ambassador and the Company.

Our salary and benefits plan is competitive and exceeds the
minimum required by law. The position with the lowest com-

Ps. $3,453 billion invested in salaries and

benefits for Ambassadors in 2020.

pensation in Volaris is 165% above the minimum salary and
the ratio of total monthly compensation of women vs men is
as follows8:

Level

Executive level

Management level

Non-management level

Pilots

Flight Attendants

Maintenance

Airports

Women’s
average
base salary
244,439

Men’s
average
base salary
246,416

102,450

33,427

51,336

16,705

18,143

8,470

111,014

33,975

63,336

16,914

20,578

8,479

Ratio

0.99

0.92

0.98

0.81

0.99

0.88

1.00

*Figures in Mexican pesos.
*Only the base salary is considered, benefits and variable compensation are not
included.

Due in part to these efforts, we have been able to attract and
retain the best talent and reduce our turnover rates significantly.

In addition, we strive for the Volaris Family’s work compensation
to allow our Ambassadors to improve their quality of life, produce
social mobility and ensure their wellbeing and that of their families.

Salaries and benefits:

 Major medical expense insurance for Ambassadors and

immediate family*

 Life insurance for natural or accidental death
 Long-term and performance bonus
 Short-term incentive plan
 Vacation payment
 Electronic food coupons for unionized Ambassadors
 Vehicle allocation plan for vice presidents and directors
 Preventive medical check-up plan
 Retention and attraction bonus
 More vacation days than those established by Law
 More Christmas bonus than that established by Law
 Training programs
 Development and growth programs for Ambassadors
 December Overnight Program for Crew Members9
 Maternity and paternity leave,10 use of breastfeeding
rooms, special breastfeeding hours and agreements
with daycare centers

 Administrative or unionized passes11
 Home office and flexible schedule scheme for

administrative Ambassadors

“

During 2020, we preserved the almost 5,000 jobs created by Volaris in order to contribute to the recovery of our business and tou-
rism. This allows us to have the necessary human resources for our accelerated growth plans. Thank you to the entire Volaris Family
for their continued support and commitment during these difficult times.”

Martín González,
Human Resources Director

8 This information corresponds to operations in Mexico, which is equivalent to 97% of Ambassadors who are part of the group of companies that comprise Volaris.
9 On December 24 and 31, crew members have the right to travel with a companion on the designated flight where they will spend the night
10 In 2020, 84 women and 42 men used this benefit; 72 women and 42 men returned to their jobs at the end of their leave and 58 women and 41 men were still in their jobs after one year.
11 Airline tickets that do not have a temporality restriction or taxes payment.
*All Ambassadors have the right to insurance for the holder, spouse and children under 25 years of age. Traffic agents A and B only have insurance for the holder.

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GRI 102-41
TR-AL-310a.1
Freedom of Association and Collective Bargaining

At Volaris, we respect the right to freedom of association and collective bargaining, so we continuously
work with union representation to improve Ambassadors’ wellbeing.

Specifically, our achievements in labor matters were:

Ambassadors’ union is the Union of Workers in the Aeronautical Industry, Similar and Related of
the Mexican Republic (STIAS).

Maintain employment and
preserve jobs.

Reactivate crew operations by
returning to operations in a new
normal.

2020 Unionized Ambassadors

Content

3,937

Unionized
Ambassadors

76%

353

Maintenance
personnel

Land
operators

907

Pilots

764

Airport personnel

1,824

Flight Attendants

In 2020, we coordinated efforts with the STIAS to continue operating during the COVID-19 pandemic,
since air transportation is considered an essential activity, prioritizing Ambassadors’ life and health.

Execute leave agreements with
reduced salary for up to 90 days.

Reactivate the 5x2 workdays in the
maintenance area for returning to
operations in a new normal.

5x2 workdays refer to 2 days of rest for every 5 worked in a
week.

Suspend the collection of union
dues for a period of 12 months
to support our Ambassadors
economy.

Provide the STIAS with all the
documentation and facilities required
by Law to execute the legitimation of
the collective bargaining agreement,
in March 2021.

“

I am sincerely grateful with the union representing our Ambassadors, for its support and willingness to collaborate in the business’ reactivation during these uncertain times we expe-
rienced derived from the COVID-19 pandemic. The wellbeing of the Volaris Family is invaluable. Together, we will continue to make flying accessible for everyone and to offer the best
travel experiences.”

Enrique J. Beltranena,
President and Chief Executive Officer

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Regarding the actions we carried out due to the COVID-19 pandemic, we informed and coordinated with the
STIAS the Ambassador division so they could return to the working centers. Likewise, together with the medical
service and the Volaris industrial security area, we sought to prevent disease infections among our Ambassadors.
The most important actions were:

We have the Federal Government
approval for the self-assessment
of the health security protocol in
all our working centers.

We made available to the Ambassadors
gel alcohol (70°) and cleaning products for
the working areas at different points of the
facilities.

Training and activation of the
biosecurity protocol in all our
flights and operations to ensure
a safe flight; no Ambassador
or Customer has been infected
during our service.

Periodic sanitation program in all
working centers.

Management and delivery of
personal protective equipment
(face masks, safety glasses and
gloves), according to each job
position.

Facilities’ adjustments (signs,
social distancing markings,
allocation of entrances and exits,
as well as distribution of spaces).

Participation in daily meetings
with the management team.

Design and implementation of the COVID-19
online course, which was taught through the
Volaris Corporate University, with the aim of
complying with the biosecurity protocol and,
through which, we imparted the actions to
prevent and avoid COVID-19 infection chains.
We used the courses’ content from the
IMSS educational platform (CLIMSS). 4,873
Ambassadors participated in the course
lasting approximately one hour.

Implementation of a sanitary filter for the
identification of possible cases and their
timely isolation.

Direct communication with Ambassadors
who reported COVID-19 symptoms, or who
were positive for the disease, providing
timely follow-up to each case.

Preparation of the new normal manual,
which specifies the rules, healthy
coexistence guidelines, as well as
infographics allusive to COVID-19, according
to each position.

Talent Attraction, Development and Retention

“

2020 was a very challenging year for everyone, especially for an industry like
ours that was strongly affected worldwide. The key was to be agile, proactive
and focus our efforts on supporting and being close to our Ambassadors. With
no incremental cost, the best talent and great leadership, we were able to quic-
kly create and implement valuable initiatives to maintain our Ambassadors’
professional development, increasing the time invested in development and
leadership by 169% vs 2019.”

Stephanie Amor
Talent Management and Leadership Development Manager

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Volaris Competency Model and Talent Cycle

Content

Volaris Competency Model

Volaris Talent Cycle

The Volaris Competency Model is a set of daily behaviors that Volaris expects from all
Ambassadors. This Model was developed based on Volaris’ profile and needs to achieve suc-
cess and ensure the leadership development of Ambassadors. Together, the Model serves as
a framework for standardizing the goals of the Volaris Talent Cycle.

On the other hand, the Volaris Talent Cycle is the set of development stages that Ambassadors
must go through during their time in the Company; and includes 7 phases:

Corporate
voluntary work

Talent attraction and
promotion

Training

Leadership
development

Volaris
Talent
Cycle

Career paths

Performance
and recognition
management

Talent review and
succession planning

Each of the seven phases that make up this Cycle have different processes, initiatives and
programs, which are explained throughout this Report.

Learning agility

Result orientation

Decision making

Business vision

Resilience

Teamwork

Emotional intelligence

Interpersonal skills

Assertive communication

Growth and development

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Talent
Cycle

Talent Attraction
and Promotion

We strive to attract and retain the most competent and pro-
fessional Ambassadors, with the precise abilities and skill set
for the position; thus, we provide the best travel experiences
and increase the Company’s profitability.

Closure

Alignment

Process
to attract
administrative
talent

Evaluations

Interviews

Young Talent Attraction

At Volaris, we are committed with the professional development
of our Ambassadors, creating unique and challenging career ex-
periences. Through the Development Galaxy program, we attract
and develop future Volaris leaders. Through this program we offer
students, recent graduates or professionals with a few years of
experience, the opportunity to work on high-impact projects for
the Company and, thus, provide them with the tools and plat-
forms to develop and boost their career and consolidate their
professional and personal success. The programs we continued
during 2020 were:

Novas. Program for college students
Through this program, which lasts one to two years, we
attract and develop college students in administrative and
operating areas (Aeronautical Engineering). In addition, they
have the opportunity to participate in the talent seedbed
for future vacancies.

26 interns

+ 30% VS 2019

12
women

14
men

Satellites trainee program
Designed to attract and develop Volaris future leaders.
It involves three rotations in different areas according to
unique profiles and career interests, in which they can
meet and learn from Volaris leaders, challenging their
capabilities, unlocking their full potential and accelerating
their professional development.

We closed the 2nd generation of trainees; two out of the
three were hired.

Despite the complex year in the industry globally, we
retained 9 trainees.

Content

Internal Opportunities System (SOI)

Through this program we aim to offer the best internal
development that encourages productivity, improves the
quality of the service that we provide our Customers,
and favors the creation of excellent travel experiences.
The SOI program allows Ambassadors to apply for open
positions, thus increasing their growth and development
opportunities.

During 2020,

92
promotions

2020 New hires

538

positions filled

45
women

47
men

234
women

304
men

307

Crew members

139
women

168
men

119 Airport

personnel

48
women

71
men

112

Administrative
positions

47
women

65
men

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Performance management components

Performance management process

Content

Talent
Cycle

Performance
Management
and Recognition

“

The definition and measurement of busi-
ness goals, aligned with Volaris’ strategy
and sustainability, allows us, as Ambassa-
dors, to challenge ourselves and improve
our performance, while growing and pro-
gressing professionally.”

Lucrecia Monsalvo.
Senior Manager Compensations
and Organizational Effectiveness

We are convinced that, in order to provide
the best travel experiences, we must have the
best talent, which includes aligning our short,
medium and long-term objectives with the
Company’s business and sustainability strate-
gy. Therefore, we have a performance review
process that measures and assesses essential
components to ensure that the Volaris Family
is in the best conditions to meet their goals.

Business outcome
(what)

Results are
achieved by living
our values (how)

n
o
i
t
a
s
r
e
v
n
o
c

a
u
n
n
a
b
r
o
y
l
r
e
t
r
a
u
Q

s
r
e
d
a
e

+
s
r
o
d
a
s
s
a
b
m
A

Definition
of goals and
objectives

Description
of strengths
and areas for
improvement

Annual average
grade

In 2020, 95% of the eligible administrative Ambassadors
set up goals and completed performance reviews with their
leaders, allowed us to stay focused on the Company’s stra-
tegic objectives.

Our review process measures and analyzes performance consis-
tently and transparently, which helps us identify and recognize
those Ambassadors with exemplary achievements.

Every quarter, all Ambassador and their leaders hold a conversa-
tion and define their objectives and goals. During such meetings,
Ambassadors receive feedback on their performance, strengths
and achievements, areas for improvement, and if necessary, both
parties discuss actions to help achieve better results.

Feedback

Actions for
achieving
results

Tangible
benefits for
outstanding
Ambassadors

In addition, every two years we carry out a 360° performance assessment,
which includes the perception of the area leader, direct reports, peers and
internal Customers. This assessment makes it possible to identify strengths
and improvement areas to create individual development plans. In 2021,
we will carry out the assessment from leaders to the senior management.

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Performance

Alignment with the strategy
We are all going in the same
direction.

Measuring improvement
We evaluate, compare and
improve.

Clear objectives
I am clear on what to focus on and
how this contributes to Volaris’
success.

Development on the way
We enjoy the journey and learn
and grow along the way.

Impeccable execution
I ensure the quality and warmth of
my activities. I always stick to the
Talent Cycle

Unbiased assessments
We follow the same evaluation
standards; we have performance
measurements that allow us to be
consistent and transparent.

Productivity and efficiency
We achieve results by finding more
efficient ways to reach them.

Success and sustainability
We guarantee the present and
future success of Volaris by
achieving results.

At Volaris, we use People Analytics* for the following practices:
 Measure Ambassadors’ performance.
 Strategic planning of our workforce
 Identification of workforce skills gaps
 Identification of notice risks to improve retention
 Organizational Effectiveness Analysis

* People Analytics is a data-based research method whose aim is to study all the processes, functions, challenges and opportu-
nities of the people who are part of a company.

Recognition Programs

At Volaris, we promote a culture of recognition because we
believe that the great actions performed daily in our different
working centers should not go unnoticed. Recognizing them
increases worker satisfaction and motivates the implemen-
tation of best practices.

With this aim and to guarantee our Ambassadors’ progress
and comprehensive growth, we have developed a series
of tools that ensure the recognition and satisfaction of the
Volaris Family, depending on their performance and contri-
bution to Volaris.

In 2020,

1,007 recognized
Ambassadors

43%
women

57%
men

234 Ambassadors
Ambassador of the
Month, for meeting
operating metrics.

102
Ambassadors .
ULTRA OPS
AWARDS “Recognition of
service and performance
in dispatch, operational
logistics and Operations
Control Center”

Content

671 Ambassadors

in the corporate
recognition programs

RECOGNITION
“Because our
Culture lives
through your
actions.”

SERVICE STARS
“Creating
extraordinary
stories together.”

TRANSCENDING
“The sum of our
efforts makes us
fly higher.”

Golden Planes
We created a remote awards gala to recognize tho-
se Ambassadors who showed the greatest com-
mitment, resilience and who gave the extra mile to
maintain the ongoing pace of operations during the
pandemic.

180 recognized
Ambassadors

51%
women

49%
men

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Talent
Cycle

Talent Review and
Succession Planning

Talent
Cycle

Career Paths

Content

We seek the development and retention of our key Ambassadors to have the most
prepared talent in the short, medium and long-term, thus ensuring the achievement of
Volaris’ objectives and sustainability through organic growth.

We believe in the development and growth of our internal talent to give continuity to
the mapping and succession benches. Therefore, we carry out the talent review exercise,
where Ambassadors are classified into different groups. Through this process we are
able to identify specific development and improvement actions for each group and we
ensure proper accompaniment and growth for our future leaders, as well as protecting
key talent. In this review, we identify:

Talent category for
each Ambassador

Development
needs

Key Ambassadors
to be considered
in succession
benches for
critical positions

Our talent review process takes place every two years. During 2020, we continued con-
solidating individual development plans derived from Talent Review, considering internal
and external development efforts such as: coaching, mentoring, shadowing, functional
/ technical and soft skills training.

This program is focused on operating Ambassadors to show them the different alter-
natives they have for growth during their professional career at Volaris.

career paths
career paths

Your career, your development
This program offers the necessary information and tools to guide our
Ambassadors in defining the professional goals they wish to achieve.

6 areas of the
Operating Vice
Presidency

+225
operating
positions
considered

+1,156
connections within
area and among
unions

+4,300
Ambassadors
benefitted with
the platform

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Talent
Cycle

Leadership
Development

We continued internally with our develop-
ment strategies and strive to protect key
talent, in spite of the challenges brought by
the pandemic.

At Volaris, we believe in developing our talent,
ensuring that we have leaders prepared to face
daily challenges, ensuring business continuity.
In 2020, due to the challenges brought by the
COVID-19 pandemic, the performance of our
leading Ambassadors was essential to guide the
work of the rest of their teams. Therefore, during
the year, we carried out a wide array of programs
to accompany our leaders in this process.

Since we were one of the industries most af-
fected by COVID-19, we focused on creating
development and accompaniment initiatives
with no costs to raise awareness about the role
and impact of Ambassadors and provide man-
agement tools for the new reality, as well as to
continue achieving goals and having humane
leaders who protect their teams.

Accompaniment Program for New Leaders. We
are aware that transitions are key moments in
the people’s development and in the Company
success. This program focuses on accompa-
nying and developing new leaders –whether
they just joined or had a another position within
Volaris– to ensure that the learning curve for
the new position is reduced and that the team
dynamics are adequate.

Leadership Webinars. Due to the extraordinary
circumstances we faced during the year, we de-
veloped and implemented two webinars for all
leaders, striving to raise awareness about the
role and impact that each one has on their teams
and at Volaris, as well as to provide them with
management tools for the new reality of the job.

In 2020,

44 Ambassadors

participated

43%
women

57%
men

“Effective remote and humane
leadership” Webinar

29%
Operative

71%
Administrative

246

leaders and higher
positions participated

738 hours

Individual Leader Accompaniment and Devel-
opment Programs. Aimed at those leaders with
over six months in their position, focusing ef-
forts through individual sessions of leadership
development, coaching, team coaching, shad-
owing and mentoring, among others.

“Personal Leadership” webinar

In 2020,

172 Ambassadors

participated

43%
Operative

102

leaders and higher
positions participated

35%
women

65%
men

57%
Administrative

153 hours

36%
women

64%
men

55%
women

45%
men

Content

Connection Fridays. We implemented this pro-
gram that offers a personal connection space
with a humane and completely confidential ap-
proach for Ambassadors. Through individual
sessions and with an internal coach, we provide
advice and tools to support them in several sit-
uations they may be experiencing and, thus,
are able to calibrate their route in personal and
professional matters.

In 2020,

116 Ambassadors

participated

56%
women

44%
men

+89
individual
coaching
hours

“

The COVID-19 pandemic allowed us to re-
assess our Ambassadors’ priorities and
needs. Our efforts to create wellbeing for
the Volaris Family, such as accompaniment
initiatives, talks on physical and mental
health, as well as humanized and remote
leadership tools, among others, allowed us
to create value for our teams. 2020 taught
us that, to restore our flight, we must pro-
tect and prioritize our Ambassadors.”

Juliana Angarita,
Organizational Development Director

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To reach most of the Volaris Family and pro-
vide specific tools for the development needs of
each population, we will have two administrative
Academies, one for Ambassadors who occupy
leadership positions and other aimed at individ-
ual contributors, with an administrative profile.

The Leadership Academy app will work by send-
ing an email to Ambassadors once a month,
which will include the activity plan to complete,
since there are activities and one-hour live ses-
sions within the app to reinforce the monthly
topics. In other words, each month a Leadership
competence is reinforced and information on
Ways of Working and/or Culture is shared.

Academy Division (Engagement):

 Leaders: the competencies that must be com-
pleted in the Academy are included into their
KPI’s, which are obtained from the 360° as-
sessment, i.e., they are asked to carry out the
abilities identified as areas for improvement
and they encouraged to complete the other
modules.

 Individual contributors: by completing the dif-
ferent modules that are in the Academy, they
obtain badges, which they can exchange for
a wide array of courses at the end of the year.

Leadership Academy for Administrative
Personnel

To supplement our leaders’ development, by
early 2021, we aim to launch the app of the Lead-
ership Academy for Administrators. It will be
distributed through the web and app, since they
are more practical and accessible means for our
Ambassadors.

This app seeks to develop Ambassadors through
our three training pillars: Culture, Leadership and
Ways of Working, in order to provide them with
the necessary tools for their ongoing training.
The three training pillars are focused on:

 Culture: strengthening of our values among
Ambassadors, so that they continue to be living
agents of our culture.

 Leadership: development of our leadership
competencies, in order to strengthen the Vo-
laris profile of our leaders and individual con-
tributors.

 Ways of Working: tools and ways of working

that make us unique at Volaris.

The Leadership Academy will be focused on
developing Ambassadors’ competencies and
abilities based on the 70, 20, 10 methodology,
which centers on having different types of ac-
tivities that help develop each competence in a
comprehensive manner; i.e.:

 70: activities that produce experiences, evoking

learning in practice.

 20: feedback activities, that is, learning through

others.

 10: individual study activities, providing the nec-
essary concepts and information for the devel-
opment of each competence.

Content

Leadership Academy Components:

We have the goal of launching the Flight At-
tendant and Pilot Academy, and to relaunch
it in airports during 2021.

App and website: here are all the
activities to complete every month
under the 70, 20, 10 methodology
regarding each of our training
pillars.

Leadership Thursdays: 60-90 minutes
live sessions which reinforce monthly
topics; thus, we have a hybrid system
where users can complete the
activities in the app when they can
(24/7), as well as sessions where they
may ask and delve into key themes
with experts.

The Academy responds:
communication channel for
Ambassadors to answer questions
related to Leadership, Culture and
Ways of Working.

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Talent
Cycle

Training

Aviation is one of the most specialized industries. Therefore, it is necessary to constantly train and
update our Ambassadors so they perform their functions with the best preparation, professionalism,
innovation and alignment with the sector’s best practices.

We strive to constantly improve the skills, knowledge and competencies of the Volaris Family to en-
sure our business’ sustainability in the future.

The training courses we offer involve a variety of topics and are taught in face-to-face modalities and
on E-learning platforms. The training is divided into four areas:

Volaris Corporate
University. Virtual
space with access
to mandatory online
courses to certifications
and comply with audits.

Non-regulated
technical training.
Specialized courses
for technical areas
Ambassadors that aim
to reinforce skills.

Training

Regulated technical
training. Specialized
mandatory courses
for technical areas
Ambassadors;
regulated by the
aeronautical authorities.

Leadership Academy.
Leadership training
program for Ambassadors
in charge of a team.

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2020 Regulated technical training

2020 Volaris Virtual Corporate University

Regulated courses

Pilots

Flight
Attendants

Maintenance

Dispatch

TOTAL

Courses offered
(face-to-face / remote)

171
(62/109)

125
(40/85)

101
(55/46)

56
(12/44)

453
(169/284)

Training hours
(face-to-face / remote)

2,537
(832/1,705)

4,250
(1,776/2,474)

2,555
(859/1,696)

1,214
(394/820)

10,556
(3,861/6,695)

Participants
(face-to-face / remote)

2,053
(655/1,398)

2,118
(609/1,509)

1,052
(596/456)

772
(204/568)

5,995
(2,064/3,931)

Men

Women

1,936

117

542

1,576

1,034

657

115

4,169

1,826

2020 Non-regulated technical training

PCV 2019: Key Control Policies
SMS: Safety Management System
(Type A, B, C*)

SMS: Safety Management System
(Type D external*)

COEV: Volaris Code of Ethics
ECPAT: End Child Prostitution, Child
Pornography and Trafficking of
Children for Sexual Purposes
FCPA: Foreign Corrupt Practices Act
PDP: Personal Data Protection

Non-regulated courses

Pilots

Flight
Attendants

Maintenance

Airports and
Dispatch

TOTAL

Total

Courses offered

Training hours

Participants

Men

Women

275

644

622

190

121

1,192

389

379

874

10,233

7,148

5,181

1,967

980

11,890

8,302

6,205

2,097

* Some Ambassadors take more than one course during the year.

2020Information security: Operative

COVID-19, implications and hygiene
measures

Emergency brigades

Teams

Total

Trained
Ambassadors

% that
completed
the course

2020 Mandatory courses

Women

Men

Training
hours

716

94%

291

425

4,400

100%

1,979

2,421

2,031

99%

995

1,036

4,760

100%

2,192

2,568

3,637

98%

1,901

1,736

612

4,724

20,880

98%

230

2,171

9,759

382

2,553

11,121

Non-mandatory courses
4,127

94%

4,873

250

241

9,491

98%

93%

65%

1,889

2,238

2,233

2,640

168

142

4,303

5,188

477

3,300

1,523

2,777

2,728

408

3,149

14,362

2,064

2,843

238

145

5,288

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*The SMS course is targeted at four populations: A: Vice Presidents and Operational Directors; B: specialists and operational

analysts; C: Pilots and Flight attendants; and D: suppliers.

Content

Courses offered in the Leadership Academy in 2020

Course

Population

Participants

Courses

Hours Women

Men

Leadership Academy
Airport managers

Leadership Academy
Leads and Volaris
Coordinators

Leadership Academy
Leads Outsourcing

Leadership Course to be
Promoted to Captain

Airports

Copilots

Training capsules for OCC OCC

Total

* Some Ambassadors take more than one course during the year.

325

194

464

835

148

177

Regulated
technical training
(mandatory)

Non-regulated
technical training
(non-mandatory)

Organizational
Development
Training mandatory

Organizational
Development
Training non-
mandatory

Courses

Training hours

Participants

453

10,556

980

11,890

14,362

6,123

5,996
W: 1,826 30.5%
M: 4,169 69.5%

8,302
W: 2,097 25.25%
M: 6,205 74.75%

20,880
W: 9,759 46.73%
M: 11,121 53.27%

9,816
W: 4,451 45.35%
M: 5,365 54.65%

+5 hours on average

of mandatory training per
Ambassador

4 hours on average of

non-mandatory training per
Ambassador

Investment per Ambassador in
mandatory training:

Investment per Ambassador
in non-mandatory training:

PS. $19,550

PS. $222

42,931

trainning hours

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Talent
Cycle

Corporate
Voluntary Work

The strategy of our #VoluntariosVolaris
program is to reinforce the sense of belong-
ing and pride in the Volaris Family, in addi-
tion to benefiting the communities where
we operate.

The #VoluntariosVolaris strategy is based on the
achievement of four specific objectives aligned
with the Company’s contribution to the United
Nations Sustainable Development Goals. There-
fore, we focus our efforts on specific actions
that positively impact the communities where
we operate.

1. Offset the environmental footprint from

our operation.
Through several initiatives, such as refor-
estations, beach cleaning and partner-
ships with associations like Amigos de
Sian Ka’an, we support the improvement
of ecosystems.

2. Support the wellbeing of children with
chronic and degenerative illnesses.
We make the most of our infrastructure
to promote health and help the most vul-
nerable population. Our volunteers par-
ticipate in recreational activities with the
children, visit hospitals to play and donate
toys on special occasions, and support
their families by providing food and sup-
port while they wait at the clinics.

3. Contribute to the education of

4. Contribute to gender equality.

In 2021, through strategic alliances with
NGOs that work for gender equality,
non-discrimination and the eradication of
violence against women, we will support
women in vulnerable situations, in order
to contribute to reducing inequalities and
driving the SDG 5.

members from the foundations with
which we collaborate.
Our volunteer Ambassadors impart courses,
conferences and workshops for our allies. In
addition, pilots and flight attendants give talks
to high school students on how to achieve a
successful career in aviation. Currently, we are
developing a strategy to provide a series of
trainings and educational courses for girls and
boys in vulnerable situations, young people
with low access to education and professionals
ready to graduate. Likewise, we seek that our
leaders can participate in mentoring sessions
with owners of small tourism businesses in the
country’s southern region to help them acquire
new technical and professional skills that will
be useful in their business.

Content

During 2020, we focused on creating partner-
ships with new foundations and strengthening
our existing ties in order to diversify the support
we provide and thus, reach a greater number of
populations and increase the activities we carry
out, contributing to the wellbeing of more and
more people.

Due to the pandemic situation we experienced
in 2020, voluntary work activities were affected.
However, we were able to get 47 Volaris vol-
unteers to dedicate their time and resources to
four initiatives:

 3 volunteers helped fulfill the dream of the boy
Anderson Daniel Ortega Lima to see an airplane
and live the pre-flight experience of a pilot.
 10 volunteers were part of the Dream Train for
children of the Marina Guirola orphanage in
Guatemala.

 19 volunteers helped fulfill dreams in Mexico

through flights, together with Dr. Sonrisas.

 15 volunteers delivered 700 toys to 700 girls
and boys from the Instituto Nacional de Pedi-
atría as part of a campaign with Dr. Sonrisas, in
which we organized a toy drive within Volaris.

Plans for 2021:
 Developing strategic alliances for 2021 in order
to diversify support and meet the 2021 Goals.

During 2020, the total monetary value that Vo-
laris spent on philanthropic contributions by
category was as follows:

Monetary donations: Ps. $95,200.00
Time; Ambassadors volunteering work during
paid working hours: Ps. $21,808.00
In-kind donations: Ps. $1,903,323.28

Initiative from before the COVID-19 pandemic.

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Occupational Health and Safety

At Volaris, we have an occupational health
management system aimed at maintaining
safe workspaces so all Ambassadors can
enjoy physical and mental wellbeing.

1,200 COVID-19

tests applied

Industrial Safety and Civil Protection
We strive to guarantee safe working spaces and ensure our Ambassadors’ wellbeing, as well as to
comply with official occupational health and safety regulations and laws. We have 45 safety and
hygiene brigades, responsible for making periodic visits to our facilities and verify compliance with
all applicable standards. In addition, we collaborate with the National Coordination for Civil Protec-
tion and with aeronautical authorities to create synergies in these topics.

During the year, we carried out the following safety actions:

The health management system includes pro-
grams such as health campaigns and fairs, vac-
cination, cancer prevention, health and safety
training –especially for pilots and flight atten-
dants, who have the greatest health risks due
to their activities–, hygiene advice, medical
evaluations to the personnel of the operational
area and accident investigation (along with the
industrial safety area).

This year, due to the COVID-19 pandemic, we
were unable to carry out most of the face-
to-face health programs. Hence, we focused
on providing training and support specifical-
ly for this disease, through the identification
and follow-up of cases, as well as training in
preventive measures, spread containment and
support to vulnerable groups

2,790 vaccines against

Influenza applied

147work risks identified

503 monthly fire

extinguisher assessments

127 quarterly reviews

to electricity installations

85 biannual smoke

detector assessments

Due to the COVID-19 pandemic,
we imparted the first virtual
course to the emergency
brigade nationwide, training 263
brigade members in first aid,
firefighting, evacuation, search,
and rescue. In addition, we
programed two live events, one
on first aid at home to support
Ambassadors in the new home
office modality and a discussion
about myths and realities about
COVID-19.

We provided support for 883 confirmed
COVID-19 cases, 750 suspected and 904
suspicious or confirmed contact cases.

1,422 Ambassadors

seen for several illnesses

To commemorate the September 19th earthquake, we held a live event alluding
to the self-protection that Ambassadors should have in their homes, reaching
more than 250 of their families.

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Work Accidents and Risks

Regulatory Compliance

At Volaris, we monitor all operations and work-
spaces to avoid possible incidents, accidents
and raise awareness among our Ambassadors
regarding their work areas.

In 2020, we had no deaths from work
accidents nor any serious work accidents.

Work incident investigation process
1. Accident investigation. The accident / incident
investigation form is used to gather informa-
tion to identify any event and determine cor-
rective measures.

2. Measures to be implemented. Once the in-
vestigation is completed, the corresponding
area is informed and preventive measures are
implemented.

Monitoring process for work accidents
1. Inspection and monitoring of occupational

accidents by Human Resources.

2. Accident mitigation efforts through the com-
pletion and delivery of the ST-7 form to the
IMSS.

3. Accident assessment when the information is
received and channeled to the occupational
health and industrial safety departments for
follow-up purposes.

At Volaris, we abide by the Mexican Official Stan-
dards of the STPS to determine the necessary
safety, health and work environment conditions
for our Ambassadors, as well as the mechanisms
that offer an immediate response when a risk is
detected.

NOM-030-STPS-2009, Preventive Services of
Health and Safety at Work. By complying with
the requirements from this standard, we identify
dangerous physical conditions that constitute
risks; physical, chemical, and biological agents
capable of altering the environmental conditions
of the workplace and causing harm to Ambassa-
dors’ health; latent risks and regulatory require-
ments in these matters.

NOM-035-STPS-2018, Psychosocial Risk Factors
in the Workplace. This standard, which came into
effect in 2019, establishes the elements to iden-
tify, analyze and prevent psychosocial risk fac-
tors, which are defined as those that can cause
non-organic anxiety disorders of the sleep-wake
cycle and serious and adaptive stress. In order
to comply with its requirements, during 2002:

 We identified 70 Ambassadors who experi-
enced traumas and channeled them for further
medical treatment.édico.

 We identified psychosocial risk factors and eval-
uated the environment of the entire Company
based on five categories defined by the stan-
dard: work environment, factors specific to the
activity, leadership and relationships at work,
working time management and organizational
environment. The result of this assessment was
low risk; however, we will develop and imple-
ment action plans for each category.

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GRI 410, 412: 103-, 103-2, 103-3
GRI 410-1, 412-1, 412-2, 412-3

3.7. Human Rights
and Community
Relations

Human Rights Protection
Program

“

For Volaris, the alliance with The Code-EC-
PAT is fundamental in the context for the
protection of the rights of girls, boys and
adolescents in Mexico. Together with this
organization we strive to have a positive
impact on the industry in order to maintain
a responsible VFR market with society and
within the legal framework, which allows
the consolidation of sustainable and viable
tourism in the long term, always from an
ethical and social perspective, focused on
the communities where we operate.”

Enrique J. Beltranena,
President and Chief Executive Officer

The Code-ECPAT

2020 was not an easy year due the health crisis
caused by COVID-19, particularly for girls, boys
and teenagers. According to numerous interna-
tional reports, the pandemic made this group
more vulnerable than before to human rights
abuses, especially due to violence at home.

We continued our efforts in alliance with
The Code-ECPAT International12 and the
membership as Top Member for the 7th
consecutive year, in order to prevent pros-
titution, pornography and trafficking of
girls, boys and adolescents for sexual pur-
poses in the context of travel and tourism.

In 2020, we aimed to reinforce Ambassador
training on the implementation of the protocol
that we have developed with The Code-ECPAT
and the National Migration Institute to detect
possible cases of rights’ violations of our under-
age Customers. In addition, we seek to strength-
en their accountability regarding the protection
of children and adolescents who travel with Vo-
laris, following international recommendations,
such as those of the United Nations Children’s
Fund (UNICEF).

Furthermore, we encouraged our Ambassadors’
commitment to apply the ECPAT Code through
a recognition program. This program involves
recognizing the Ambassadors who have activat-
ed the protocol and who have collaborated with
the authorities, so that possible cases of minor
trafficking on our flights can be discovered.

In spite of the adverse conditions due to the
COVID-19 pandemic, we trained through re-
mote courses 438 new Ambassadors. Ad-
ditionally, we reinforced training for 3,637
Ambassadors, through E-learning courses.

We acknowledge our responsibility to contribute
to the development of an ethical market, within
the legal framework, as well as a sustainable tour-
ism. Hence, we are committed to establishing a
zero-tolerance policy in the Volaris value chain
against commercial sexual exploitation of girls,
boys and adolescents in travel and tourism.

We included the ECPAT clause in rate agree-
ments executed with YaVas hotels; we achie-
ved approximately 95 agreements.

The ECPAT clause that we include in hotel rate
agreements, contracts for tourist services’ provi-
sion and land transportation of YaVas establishes
that the supplier or commercial partner must
comply with the guidelines of The Code and pro-
mote a responsible tourism. If YaVas becomes
aware of possible practices of rights’ violation
of girls, boys and adolescents by the provider,
the agreement may be terminated.

12 EECPAT: End Child Prostitution, Child Pornography and Trafficking of Children for Sexual Purposes.

Content

At Volaris, we activate this protocol during flight
operations in the event that a situation is de-
tected that violates or could violate the rights
of girls, boys and adolescents.

In 2021, we will include this clause in agreements
and contracts with other business partners in
the Volaris tourism sector, in order to expand
our contribution to the development of sustain-
able tourism.

Volaris is the first airline in Mexico and in
Latin America, and the second worldwide,
to implement The Code.

National Immigration Institute

In coordination with the National Immigration In-
stitute of Mexico, we implemented a protocol for
the Identity Validation of Unaccompanied Minors,
to preserve their safety when travelling unaccom-
panied, especially in the context of the migratory
phenomenon experienced in Mexico and in other
countries throughout the region.

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3.8. Customer
Welfare,
Privacy and
Data Security

GRI 419: 103-1, 103-2, 103-3
TR-AL-540a.1, TR-AL-540a.2
At Volaris, we are aware that the most important
issue for our Customers is their safety. Therefore,
one of our priorities is to maintain an optimal
safety standard in all stages of our operations,
in order to continue generating value for our
passengers. We have two pillars to guarantee
their safety: Aviation Security and Safety (op-
erational safety).

Aviation Security

Aviation Security guarantees the transportation
of our Customers free of any illicit interference.

During 2020, we faced the challenge of estab-
lishing remote training protocols and submitting
them for approval to the different authorities in
Mexico, the United States of America and Central
America. We were able to develop protocols for
remote instruction endorsed by the authorities
and begin training under this modality.

We constantly train all Ambassadors
and personnel who provides us with
services on security measures, such as:

 Terrorism and illegal interference of

bomb threats

 Kidnapping threats
 Contingencies or emergencies

We also address topics such as:

 Domestic and international Human

Rights

 Customer treatment
 Baggage and Customer check
 Security events report and

confidentiality of sensitive security
information

We trained

6,734

persons on operational
security topics

4,288
Ambassadors

2,446
suppliers

In response to the sanitary crisis, we stan-
dardized aviation security processes to allow
the interaction of security personnel with
Customers and Ambassadors in a more effi-
cient way, always complying with our biose-
curity protocol.

As a result of the rigorous protocols defined
in the Operational Safety Management Sys-
tem, we mitigated 100% of the operational
safety risks identified that affect the aviation
industry.

We were recognized for the 14th consecutive
year as an Addiction-Free Company.

Safety (operational safety)

Safety (operational safety) guarantees the safe-
ty of our Customers in all operations, including
methods that allow us to identify, anticipate and
mitigate the causes of aviation accidents.

At Volaris, we strive to provide our Customers
with welfare and safety at all stages of the flight.
We have a Safety Management System (SMS),
which complies with the SMS regulatory frame-
work from the ICAO, IATA and national and inter-
national regulations, through which we identify
hazards and safety risks to prevent and mitigate
their occurrence. We have defined several safety
performance indicators. These are periodically
reviewed, both at the corporate and local levels,
by the Operational Safety Review Board and the
Volaris Operational Safety Committee. The indi-
cators are classified into high impact indicators
and low impact ones, so we can assess efficiently
if our goals meet the operational safety stan-
dards. In addition, we continuously follow-up
on their performance to identify any safety risks
and guarantee their mitigation.

In 2020, our operational safety department main-
ly focused on the prevention and mitigation of
different risks identified from the situations of the
COVID-19 pandemic, such as reduced operations,
as well as their reactivation. We continued with
thorough follow-up and monitoring to unstable
approaches, events that could induce loss of
control in-flight and runway excursions, as well
as human errors and injuries in the cabin.

In 2020, the harmonized accident rate
(per million sectors) was zero.

Mitigation actions for the main risks
identified by the SMS

The performance of operational safety at Volaris
is defined in terms of achieving the safety goals
associated with its Safety Performance Indica-
tors. These indicators are reviewed periodically,
both at a corporate and local level by the Safety
Review Board (SRB) and Volaris Safety Commit-
tee. In 2020, Volaris, through its internal Safety
Department, focused mainly in proactively and
predictively preventing and monitoring the fol-
lowing cases:

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 Unstable approaches,
Loss of control in flight (LOC-I)
 Runway safety (RS) –including runway excur-

sion, hard landing and undershoot–
 Controlled Flight into Terrain (CFIT)

Other in-flight areas not necessarily confined to
the cockpit were also considered, such as:

 Accidental deployment of evacuation slides

(typically caused by human error)

 Cabin injuries (turbulence is regarded as the
leading cause of injuries onboard aircraft in
non-fatal accidents)

Volaris has defined a series of safety high-con-
sequence indicators and low-consequence indi-
cators, which are an effective method for eval-
uating if safety objectives and goals reflect the
standards defined by the Company. Monitoring
these indicators allows us to focus our attention
on the performance of the Company’s safe-
ty in terms of identifying and mitigating risks,
in addition to ensuring regulatory compliance
and the highest industry standards in terms of
operational safety.

Each indicator is monitored monthly, it is estab-
lished based on the measured performance as
an average of the last 36 months and a realistic
and challenging goal is defined. Through this
target, it is possible to measure any standard
deviation indices in order to adopt relevant
countermeasures depending on the appropriate
alert level (there are 3 alert levels, depending
on the deviation).

Key management tools for risk mitigation

 Flight Data Analysis: Volaris has a Flight Data
Analysis program (FDA), that allows us to com-
pare actual flight parameters against standard
operating procedures (SOPs). This critical safe-
ty program is a key element of our SMS and is
crucial for identifying where safety may have
been breached or for improvement. It therefore
provides very useful information to mitigate
risk and prevent future case recurrences.

 Operational Safety Line Operation Audits
(LOSA): this program involves a structured
system that allows auditing nontechnical skills
during routine flight deck responsibilities. When
threats and human errors are detected, these
are then recorded and used for implementing
countermeasures to minimize risks in the future.

 Operational safety culture survey: Volaris has
implemented operational safety culture sur-
veys in line with the objectives, procedures
and policies of the Operational Safety Man-
agement System, through which it is possi-
ble to measure the operational safety culture
through of the Ambassadors’ perception in
the following areas:
- General perception of operational safety in

the Company

- Involvement of the areas with operational

safety

- Distribution of operational safety information
- Ambassadors’ initiative on operational safety
- Trainings and procedures
- Reporting culture of deficiencies and hazards
- Action against incidents and accidents

The Safety Culture Survey consists of 25
questions with a 5-point scale of agreement
and disagreement. Complete disagreement
is coded with number 1, while the rest of the
options remain correlative until the number
5, which marks absolute agreement with a
phrase. Based on the above, a weighting of
the results is carried out at a general level to
obtain the conclusions at the Company level
and later they are analyzed at the local level to
identify areas for improvement and implement
corrective actions.

 SMS Report and Audit Control: the Aviation
Quality Database (AQD), currently named Rolls-
Royce SMS solution, is a comprehensive and
integrated tool that supports the need for op-
erational safety reporting and quality assurance.

It allows users to report any situation where
safety margins have or could be breached, as
well as serving as a platform to record internal
and external quality / safety audits. Through
this database, corrective and preventive ac-
tions can be taken to further mitigate risk.

We comply with all regulation and have adopt-
ed several certifications that meet the highest
operational safety standards, under Article 17 of
the Civil Aviation Law, which states that airlines
must implement the necessary measures to en-
sure maximum safety of their operations, and
therefore, their Customers and crews. These are:

 Mexican Official Standard NOM-064-SCT3-2012,
which established the specifications that the
Operational Safety Management System must
meet (since2015).

 Policy Letter CP AV-01/20, which establishes
the guidelines to be followed by concession-
aires, permit holders and air and airport opera-
tors, to reactivate their operations derived from
the health contingency caused by COVID-19
(2020)

 Volaris Mexico IOSA Certification. In 2021 we
will renew the IOSA Certification, which is IATA
system that assesses operational management,
control systems and the Operational Safety
Management System of airline carriers.

 Volaris Costa Rica IOSA Certification. In 2021, we
will renew this Certification to ratify that our op-
erational safety standards are among the highest
in the industry.

 SMS Certification. In 2020, Volaris renewed
its Safety Management System certification,
which guarantees the implementation of reac-
tive, proactive and predictive methods of hazard
identification to avoid aviation accidents. This
certification requires the approval of the AFAC
(Federal Civil Aviation Agency) in Mexico.

 WEFA. Wireless Extension for Aircraft Condition
Monitoring System. In 2020, Volaris increased its
3G wireless flight data transmission technology
to 53 aircraft. With this, we ensure a more effi-
cient performance monitoring of pilots, which
makes the predictive hazard identification sys-
tem of the Safety Management System more
effective and efficient.

We are part of the Flight Safety Founda-
tion, an association that seeks the partici-
pation of several businesses in the industry
in order to anticipate, analyze and identify
operational safety problems to implement
the best practices.

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Volaris Value
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GRI 419: 103-1, 103-2, 103-3
Personal Data Privacy

At Volaris, we strive to provide the best travel experience in every way, so it is essential to protect
the Customers’ rights, including their right to privacy and protection of their personal data. Thus, we
are able to maintain their trust and loyalty, increase our good reputation and avoid any sanction that
could affect Volaris.

 Strengthen technological security controls to protect personal data from threats.
 Update our privacy notices.
 Improve our internal policies for the protection of personal data to strengthen action rules for

those in charge of personal data.

Content

We constantly review all updates of the applicable official provisions on the matter. Additionally,
we carry out numerous analyzes of our tools and technological advances, in order to reinforce and
modernize our internal processes and policies. This allows us to effectively respond to requests
from Customers regarding their rights of access, rectification, cancellation and opposition, appli-
cable by the regulation.

Furthermore, annually we train all Ambassadors on information security, cybersecurity and person-
al data protection issues, we publish cybersecurity and information protection communications,
we impart specialized talks to the personal data protection department and we carry out internal
simulations of phishing at least twice a year, to strengthen preventive controls to protect identities
and detect cyber-attacks.

We have security measures in place to safeguard our Customers’ information and to comply with
existing national regulations. Currently, we adhere to the Federal Law on Protection of Personal Data
Held by Private Parties (LFPDP) of Mexico, the General Data Protection Regulation (GDPR) of the
European Union and the California Consumer Privacy Law (CCPA), that became effective in July 2011,
May 2018, and January 2020, respectively. The LFPDP, the GDPR and the CCPA enforce security and
privacy requirements for personal data abroad. Additionally, we have several corporate policies, such as:

 General Policy for the Protection of Personal Data
 Attention to Holders’ Rights Policy
 Policies of Blocking and Cancellation of Personal Data
 Personal Data Violation Policies
 Information Classification Policy

During 2020, we carried out numerous actions to consolidate and strengthen the personal data
protection processes. Some are:

 Identify, analyze and prioritize risks based on emerging threats in home office schemes, including

an analysis of third parties that provide services to Volaris.

 Establish strategies to strengthen existing controls or implement additional controls that mitigate

the identified risks of personal data.

 Strengthen internal processes regarding personal data to standardize activities that involve the
processing of personal data to achieve an adequate level of protection with those in charge of
personal data.

 Increase awareness and training campaigns on the protection of personal data and cybersecurity

with Company’s Ambassadors and managers.

During 2020, we had no cases related to losses, leaks or violations of the privacy of
Customers’ personal data.

Volaris, the Lowest Cost Publicly
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Content

CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN, S.A.B. DE C.V. AND SUBSIDIARIES
(d.b.a. VOLARIS)

Consolidated financial
statements

Years ended december 31, 2020, 2019 and 2018
with independent auditor’s report

Contents:
97

Independent auditor’s report
Audited consolidated financial statements:

99
100
101
102
103
104

Consolidated statements of financial position
Consolidated statements of operations
Consolidated statements of comprehensive income
Consolidated statements of changes in equity
Consolidated statements of cash flows
Notes to consolidated financial statements

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4Consolidated Financial StatementsReport of
Independent
Registered Public
Accounting Firm

Content

based on our audits. We are a public accounting firm registered with the PCAOB

as a result it does not benefit the Company. The amounts accrued are considered

and are required to be independent with respect to the Company in accordance

variable payments under IFRS 16 and recognized in profit or loss based on the air-

with the ethical requirements that are relevant to our audit of the consolidated

craft utilization over the period starting upon the completion of the major mainte-

financial statements in Mexico according to the “Codigo de Etica Profesional del

nance event occurring prior to aircraft and engines lease return.

Instituto Mexicano de Contadores Publicos” (“IMCP Code”), and the U.S. federal

securities laws and the applicable rules and regulations of the Securities and

The maintenance provision covers the cost to fulfill return condition that must be

Exchange Commission and the PCAOB.

satisfied at the expiration of the related leases primarily related to airframe, engine

overhaul and limited life parts using certain assumptions including the projected

We conducted our audits in accordance with the standards of the PCAOB. Those

usage of the aircraft and the expected costs of maintenance tasks to be performed

standards require that we plan and perform the audit to obtain reasonable assurance

at the return of the lease. The maintenance return condition provision for aircraft

about whether the financial statements are free of material misstatement, whether

and engines also considers deposits paid to the lessor considered as supplemental

due to error or fraud. Our audits included performing procedures to assess the risks

rental. At December 31, 2020, the Company’s provision for return condition of

of material misstatement of the financial statements, whether due to error or fraud,

leased aircraft and engines amounted Ps.2,504,484.

and performing procedures that respond to those risks. Such procedures included

examining, on a test basis, evidence regarding the amounts and disclosures in the

Auditing management’s lease return condition provision was complex as it is based

financial statements. Our audits also included evaluating the accounting principles

on management’s judgement in estimating the amount and timing of the costs and

used and significant estimates made by management, as well as evaluating the

the discount rate to be used, therefore we have determined this to be a critical

To the Shareholders and the Board of Directors of

overall presentation of the financial statements. We believe that our audits provide

audit matter.

Controladora Vuela Compañía de Aviación, S.A.B. de C.V.

a reasonable basis for our opinion.

Critical Audit Matters
The critical audit matters communicated below are matters arising from the current

We obtained an understanding and evaluated the design and operating effecti-

veness of the Company’s internal controls over the return condition provision for

How We Addressed the Matter in Our Audit

Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position

period audit of the financial statements that were communicated or required to be

leased aircraft and engines. We tested controls over management´s review of the

communicated to the audit committee and that: (1) relate to accounts or disclo-

return cost, the discount rate calculation, timing of recognition, the significant

of Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and subsidiaries (the

sures that are material to the financial statements and (2) involved our especially

assumptions and the data inputs used in the calculation.

Company) as of December 31, 2020 and 2019, the related consolidated statements

challenging, subjective or complex judgments. The communication of critical audit

of operations, comprehensive income, changes in equity and cash flows for each

matters does not alter in any way our opinion on the consolidated financial sta-

To test the provision for return condition, our procedures included, among others,

of the three years in the period ended December 31, 2020, and the related notes

tements, taken as a whole, and we are not, by communicating the critical audit

reviewing the accuracy and completeness of the lease agreements and under-

(collectively referred to as the “consolidated financial statements”). In our opinion,

matters below, providing separate opinions on the critical audit matters or on the

lying data, assessing the methodology applied in the calculation of the provision

the consolidated financial statements present fairly, in all material respects, the

accounts or disclosures to which they relate.

consolidated financial position of the Company at December 31, 2020 and 2019,

and the consolidated results of its operations and its cash flows for each of the

Lease return condition provision

three years in the period ended December 31, 2020, in conformity with International

and testing the period in which the event or condition that triggers the payments

occurs and critical assumptions, as the projected costs of maintenance for which we

compared to historical trends and actual costs incurred in connection with aircraft

returned to the lessor or maintenance costs paid at lease return as specified in the

Financial Reporting Standards as issued by the International Accounting Standards

Description of the Matter

lease agreements.

Board.

As described in Note 1 p) to the consolidated financial statements, the Company’s

lease agreements require that the underlying aircraft and engines be returned to

Additionally, we involved our valuation specialists to assist in the evaluation of the

We also have audited, in accordance with the standards of the Public Company

lessors either in a specific condition or to make a payment in lieu of performance of

discount rate used by the Company.

Accounting Oversight Board (United States) (PCAOB), the Company's internal

the maintenance and repair activities necessary to meet these conditions.

control over financial reporting as of December 31, 2020, based on criteria esta-

Impairment of long-lived assets

blished in Internal Control-Integrated Framework issued by the Committee of

The Company performed an assessment of the return condition provision for leased

Sponsoring Organizations of the Treadway Commission (2013 framework) and our

aircraft and engines, which required management to estimate the cost of those

Description of the Matter

report dated April 29, 2021 expressed an unqualified opinión thereon.

maintenance obligations to be included in connection with aircraft and engines

As discussed in Note 2iv to the consolidated financial statements, the Company

Basis for Opinion
These financial statements are the responsibility of the Company's management.

lease return.

assesses at each reporting date whether there is objective evidence that a long-

lived asset or its cash-generating unit (CGU) may be impaired. If any such indication

The Company accounts for the lease return condition provision in accordance with

exists, or when annual impairment testing for an asset is required, the Company esti-

Our responsibility is to express an opinión on the Company’s financial statements

IFRS 16 because the maintenance event is performed at the end of the lease and

mates the asset’s or CGU’s recoverable amount. The Company records impairment

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Consolidated Financial StatementsContent

charges when events and circumstances indicate that the assets may be impaired

paid for which a maintenance event is not expected to be performed during the

or when the carrying amount of a long-lived asset or related cash generating unit

term of the aircraft lease, then such deposits are considered as not recoverable by

exceeds its recoverable amount, which is the higher of (i) its fair value less cost to sell

the Company since will be kept by the lessor to cover future maintenance costs.

and (ii) its value in use. In 2020 the Company performed a quantitative impairment

test and estimated the recoverable amount of the CGU by calculating the CGU value

Maintenance deposits are recorded as recoverable to the extent qualifying mainte-

in use. As a result of this analysis, the Company determined the recoverable amount

nance costs are expected to be incurred during the lease term. Any excess is recog-

was in excess of the CGU book value and, therefore, no impairment was recorded.

nized as additional lease expense in the consolidated statements of operations as

Auditing management’s long-lived asset impairment test was complex and highly

supplemental rental.

judgmental due to the significant estimation required to determine the value in

Auditing management’s aircraft and engines maintenance deposits was complex as

use. In particular, the value in use estimate was sensitive to significant assumptions,

it is based on significant management’s judgements and assumptions; for example,

such as changes in the discount rate and revenue growth rate, which are affected

in estimating the recoverability of these deposits, the estimated time between the

by expectations about the impact on future market and economic conditions on the

maintenance events, the costs of future maintenance and the number of flight hours

Company, therefore we have determined this to be a critical audit matter.

the aircraft is estimated to be flown before it is returned to the lessor, among others,

therefore we have determined this to be a critical audit matter.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating

How We Addressed the Matter in Our Audit

effectiveness of controls over the Company’s impairment review process, including

We obtained an understanding, evaluated the design and tested the operating effec-

controls over management’s review of the significant assumptions described above.

tiveness of controls over the process of aircraft and engines maintenance deposits,

including controls over management’s review of the significant assumptions des-

To test the impairment analysis our audit procedures included, evaluating the

cribed above and the data inputs used by management in the determination of the

Company’s methodology, assumptions and completeness and accuracy of the

recoverability of maintenance deposits for aircraft and engines.

data used. We compared the discount rate and revenue growth rate significant

assumptions used to current industry and economic trends. We also involved our

To test the recoverability of the maintenance deposits, we performed audit proce-

valuation specialists to assist in the evaluation of the Company’s methodology, sig-

dures that included, among others, inspecting the lease agreements and testing

nificant assumptions including the discount rate and performed sensitivity analysis

the analysis of the estimates prepared by management to determine the recove-

to evaluate the effect in the recoverable amount of the CGU that would result from

rability of the maintenance deposits. We tested the recognition of the unrecove-

changes in the underlying assumptions.

Aircraft maintenance deposits paid to lessors

Description of the Matter

rable amounts as part of supplemental rental by assessing the estimation of the

major maintenance costs expected to be incurred by comparing them to historical

amounts and/or costs of aircraft and engines maintenance specified in agreements

with vendors; we also evaluated the usage projections applied to determine the

timing of the maintenance by comparing them with the Company’s scheduled flight

Certain of the Company’s lease agreements require the payment of maintenance

plans and the term of the lease agreement.

deposits to lessors during the lease term for the underlying aircraft and engines

leased. The Company has booked aircraft maintenance deposits to lessors of

Ps.7,920,934 as of December 31, 2020. Related disclosure is included in Note 11 of

the consolidated financial statements.

Most of the Company’s lease agreements require the Company to pay maintenance

deposits to aircraft and engines lessors to be held as collateral in advance of the

Company’s performance of the related major maintenance activities. These lease

agreements provide that maintenance deposits are reimbursable to the Company

Mancera, S.C.

A member practice of

Ernst & Young Global Limited

upon completion of the maintenance event in an amount equal to the lesser of (i)

We have served as the Company’s auditor since 2005.

the amount of the maintenance deposits held by the lessor associated with the

specific maintenance event, or (ii) the qualifying costs of the specific maintenance

event. The Company considers as supplemental rental those maintenance deposits

Mexico City, Mexico

April 29, 2021

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Consolidated Financial Statements

CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN,

S.A.B. DE C.V. AND SUBSIDIARIES

(d.b.a. VOLARIS)

Consolidated Statements
of Financial Position

(In thousands of Mexican pesos)

Content

(Thousands of
U.S. dollars*)
2020

At December 31,

2020

2019

(Thousands of
U.S. dollars*)
2020

At December 31,

2020

2019

Assets

Current assets:

Cash and cash equivalents (Note 6)

US$

506,468

Ps.

10,103,385

Ps.

7,979,972

Liabilities and equity

Current liabilities:

Unearned transportation revenue (Note 1d)

US$

293,298

Ps.

5,850,917

Ps.

3,679,926

Accounts receivable:

Related parties (Note 7)

Other accounts receivable, net (Note 8)

Recoverable value added tax and others

Recoverable income tax

Inventories (Note 9)

Prepaid expenses and other current assets (Note 10)

Financial instruments (Notes 3 and 5)

Guarantee deposits (Note 11)

Total current assets

Non–current assets:

Rotable spare parts, furniture and equipment, net (Note 12)

Right–of–use assets (Note 14)

Intangible assets, net (Note 13)

Financial instruments (Notes 3 and 5)

Deferred income taxes (Note 19)

Guarantee deposits (Note 11)

Other assets

Other long–term assets

Total non–current assets

721,968

14,402,310

12,117,239

600,327

Non–current liabilities:

3,641

28,104

46,242

23,643

13,984

42,631

57,245

72,629

560,640

922,458

471,652

278,959

850,425

206

1,141,956

364,994

1,720,223

9,603

156,830

422,320

5,975

16,294

7,281,157

34,316,217

191,562

326

3,128,555

8,424,738

119,202

325,046

23,442

923,000

938,532

435,360

301,908

781,131

133,567

7,385,334

34,128,766

167,397

2,695

1,542,536

7,644,421

165,546

Suppliers

Related parties (Note 7)

Accrued liabilities (Note 15a)

Lease liabilities (Note 14)

Other taxes and fees payable (Note 1q)

Income taxes payable

Financial instruments (Notes 3 and 5)

Financial debt (Note 5)

Other liabilities (Note 15c)

Total current liabilities

Financial debt (Note 5)

Accrued liabilities (Note 15b)

Lease liabilities (Note 14)

Other liabilities (Note 15c)

Employee benefits (Note 16)

Deferred income taxes (Note 19)

Total non–current liabilities

Total liabilities

Equity (Note 18):

Capital stock

Treasury shares

Contributions for future capital increases

2,696,255

53,786,803

51,177,888

Additional paid–in capital

Retained (losses) earnings

Accumulated other comprehensive (loss) income

Total equity

141,193

Legal reserve

112,275

6,266

118,118

325,038

112,096

201

484

78,144

5,074

2,239,736

124,993

2,356,287

6,484,092

2,236,161

4,005

9,657

1,558,884

101,218

1,050,994

20,965,950

190,276

3,343

1,887,163

133,727

2,538

10,014

2,227,061

3,278,055

171,761

(11,216)

–

14,596

236,618

(193,265)

(78,326)

140,168

3,795,749

66,698

37,646,450

2,667,683

50,627

199,771

44,426,978

65,392,928

3,426,406

(223,744)

291,178

4,720,221

(3,855,379)

(1,562,498)

2,796,185

1,597,099

58,554

2,531,861

4,720,505

2,102,455

140,609

–

2,086,017

407,190

17,324,216

2,889,952

90,796

35,796,540

1,469,595

38,206

156,139

40,441,228

57,765,444

2,973,559

(169,714)

291,178

1,880,007

438,412

116,240

5,529,683

Total assets

US$

3,418,223

Ps.

68,189,113

Ps.

63,295,127

Total liabilities and equity

US$

3,418,223

Ps.

68,189,113

Ps.

63,295,127

* Convenience translation to U.S. dollars (Ps.19.9487) – Note 1y.
The accompanying notes are an integral part of these consolidated financial statements.

Volaris, the Lowest Cost Publicly
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Consolidated Financial Statements

CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN,

S.A.B. DE C.V. AND SUBSIDIARIES

(d.b.a. VOLARIS)

Consolidated Statements
of Operations

(In thousands of Mexican pesos, except for earnings
per share expressed in Mexican pesos)

Content

100

(Thousands of U.S.
dollars*, except for
earnings per share)
2020

For the years ended December 31,

2020

2019

2018

(Thousands of U.S.
dollars*, except for
earnings per share)
2020

For the years ended December 31,

2020

2019

2018

Operating revenues (Notes 1d and 24):

Passenger revenues:

Fare revenues

Other passenger revenues

Non– passenger revenues

Other non–passenger revenues (Note 1d)

Cargo

US$

645,314

Ps.

12,873,174

Ps. 23,129,991 Ps. 18,487,858

Aircraft and engine variable lease expenses

431,777

8,613,398

10,569,208

7,892,497

Other operating expenses (Note 20)

1,077,091

21,486,572

33,699,199

26,380,355

Depreciation and amortization (Notes 12 and 13)

Maintenance expenses

Sales, marketing and distribution expenses

58,536

92,278

92,500

58,011

45,038

1,167,720

1,840,819

1,845,254

1,157,240

898,445

Operating (loss) income

(163,099)

(3,253,596)

4,355,423

1,488,431

1,497,989

1,447,637

1,501,203

961,657

956,010

1,112,927

1,059,098

675,514

500,641

534,797

Non–derivatives financial instruments

(20,614)

(411,222)

(72,949)

44,231

10,120

882,360

201,881

897,586

228,836

697,357

227,438

–

Finance income (Note 21)

Finance cost (Note 21)

5,089

101,511

207,799

152,603

(151,313)

(3,018,484)

(2,269,829)

(1,876,312)

Foreign exchange gain (loss), net

23,591

470,594

1,440,501

(103,790)

Other operating income (Note 20)

(36,611)

(730,333)

(327,208)

(621,973)

Income tax benefit (expense) (Note 19)

70,490

1,406,184

(1,094,831)

349,820

(Loss) income before income tax

(285,732)

(5,699,975)

3,733,894

(1,292,702)

1,110,828

22,159,591

34,752,672

27,305,150

6,640,820

11,626,069

10,134,982

Net (loss) income

US$

(215,242) Ps. (4,293,791) Ps. 2,639,063 Ps.

(942,882)

Fuel expense, net

Landing, take–off and navigation expenses

Depreciation of right of use assets (Note 14)

332,895

205,069

253,098

4,090,864

5,108,489

4,573,319

5,048,976

4,702,971

4,043,691

(Loss) earnings per share basic:

Salaries and benefits

173,113

3,453,382

3,600,762

3,125,393

(Loss) earnings per share diluted:

* Convenience translation to U.S. dollars (Ps.19.9487) – Note 1y.
The accompanying notes are an integral part of these consolidated financial statements.

US$

(0.211) Ps.

(4.203) Ps.

2.608 Ps.

(0.932)

(0.211) Ps.

(4.203) Ps.

2.608 Ps.

(0.932)

Volaris, the Lowest Cost Publicly
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Content

101

CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN,

S.A.B. DE C.V. AND SUBSIDIARIES

(d.b.a. VOLARIS)

Consolidated Statements
of Comprehensive Income

(In thousands of Mexican pesos)

Net (loss) income for the year

Other comprehensive (loss) income:

Other comprehensive (loss) income to be

reclassified to profit or loss in subsequent periods:

Net (loss) gain on cash flow hedges (Note 22)

Income tax effect (Note 19)

Exchange differences on translation of foreign operations

Other comprehensive (loss) income not to be

reclassified to profit or loss in subsequent periods:

Remeasurement (loss) gain of employee benefits (Note 16)

Income tax effect (Note 19)

Other comprehensive (loss) income for the year, net of tax

Total comprehensive (loss) income for the year, net of tax

* Convenience translation to U.S. dollars (Ps.19.9487) – Note 1y.
The accompanying notes are an integral part of these consolidated financial statements.

(Thousands of
U.S. dollars*)
2020

For the years ended December 31,

2020

2019

2018

US$

(215,242)

Ps.

(4,293,791)

Ps.

2,639,063

Ps.

(942,882)

(87,609)

(1,747,686)

2,348

1,202

(133)

46,835

23,970

(2,651)

794

US$

(84,152)

(299,394)

Ps.

(1,678,738)

(5,972,529)

Ps.

263,495

(74,820)

8,045

(10,192)

3,058

189,586

2,828,649

Ps.

(283,691)

85,107

22,156

5,989

(1,797)

(172,236)

(1,115,118)

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CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN,

S.A.B. DE C.V. AND SUBSIDIARIES

(d.b.a. VOLARIS)

Consolidated Statements
of Changes in Equity

For the years ended December 31, 2020, 2019 and 2018
(In thousands of Mexican pesos)

Balance as of December 31, 2017

Treasury shares

Exercise of stock options (Note 17)

Long–term incentive plan cost (Note 17)

Net loss for the period

IFRS 16 adoption

Other comprehensive loss items

Total comprehensive loss

Balance as of December 31, 2018

Treasury shares

Exercise of stock options (Note 17)

Long–term incentive plan cost (Note 17)

Net income for the period

Other comprehensive income items

Total comprehensive income

Balance as of December 31, 2019

Capital stock increase (Note 18)

Treasury shares

Long–term incentive plan cost (Note 17)

Net loss for the period

Other comprehensive income loss items

Total comprehensive loss

Balance as of December 31, 2020

Convenience translation to U.S. dollars 19.9487) – Note 1y.
The accompanying notes are an integral part of these consolidated financial statements.

Content

102

Capital stock

Treasury Shares

Contributions
for future
capital increases

Legal reserve

Additional
paid–in
capital

Retained (losses)
earnings

Other
comprehensive
(loss) income

Total equity

Ps.

2,973,559

Ps.

(85,034)

Ps.

–

2,973,559

–

2,973,559

452,847

–

(57,320)

10,648

9,045

–

(122,661)

(75,375)

14,773

13,549

–

(169,714)

–

(94,564)

40,534

–

Ps.

3,426,406

US$

171,761

Ps.

US$

(223,744)

Ps.

(11,216)

US$

–

Ps.

291,178

Ps.

1,804,528

Ps.

(1,257,769)

Ps.

98,890

Ps.

3,825,353

–

291,178

–

291,178

–

41,590

–

(9,045)

–

1,837,073

56,483

–

(13,549)

–

1,880,007

2,819,985

60,763

(40,534)

–

(682,500)

(260,382)

–

(942,882)

(2,200,651)

–

2,639,063

–

2,639,063

438,412

–

(4,293,791)

–

(4,293,791)

–

(172,236)

(73,346)

–

189,586

116,240

–

(1,678,738)

(15,730)

10,648

–

(682,500)

(260,382)

(172,236)

(1,115,118)

2,705,153

(18,892)

14,773

–

2,639,063

189,586

2,828,649

5,529,683

3,272,832

(33,801)

–

(4,293,791)

(1,678,738)

(5,972,529)

Ps.

US$

291,178

Ps.

4,720,221

Ps.

(3,855,379)

Ps.

(1,562,498)

Ps.

2,796,185

14,596

US$

236,618

US$

(193,265)

US$

(78,326)

US$

140,168

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Consolidated Financial Statements

CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN,

S.A.B. DE C.V. AND SUBSIDIARIES

(d.b.a. VOLARIS)

Consolidated Statements
of Cash Flows

(In thousands of Mexican pesos)

Content

103

(Thousands of
U.S. dollars*)
2020

For the years ended December 31,

2020

2019

2018

(Thousands of
U.S. dollars*)
2020

For the years ended December 31,

2020

2019

2018

Operating activities

(Loss) income before income tax

US$

(285,732) Ps. (5,699,975) Ps. 3,733,894 Ps. (1,292,702)

Other taxes and fees payable

Unearned transportation revenue

Financial instruments

Other liabilities

298,136

5,947,421

5,378,485

4,544,332

Interest received

Income tax paid

685

(5,089)

13,664

(101,511)

40,393

10,621

Net cash flows provided by operating activities

(207,799)

(152,603)

128,406

2,561,526

2,265,242

1,876,312

Investing activities

Net gain on disposal of rotable spare parts, furniture and

equipment and gain on sale of aircraft (Note 20)

(35,487)

(707,918)

(275,805)

(606,812)

Employee benefits (Note 16)

555

11,079

10,086

6,401

Net cash flows used in investing activities

Acquisitions of intangible assets (Note 13)

Pre–delivery payments reimbursements

Proceeds from disposals of rotable spare parts,

furniture and equipment

(28,753)

65,496

347

(573,591)

(1,722,985)

171,874

1,306,557

6,930

67,629

3,306

(455,009)

–

Acquisitions of rotable spare parts, furniture and

equipment (Note 12)

(169,263)

(3,376,576)

(3,483,368)

(2,743,155)

in working capital

140,476

2,802,321

9,314,069

4,102,640

(533)

2,445

(10,633)

48,772

(10,634)

32,257

(12,693)

12,919

Financing activities

Net proceeds from public offering (Note 18)

164,062

3,272,832

25,603

(31,422)

Payments of principal portion of lease liabilities (Note 14)

Proceeds from exercised stock options (Note 17)

Treasury shares purchase

Interest paid

Other finance interest paid

Payments of financial debt

Proceeds from financial debt

864

39,754

(1,103)

1,150

3,670

2,843

17,252

793,045

(22,010)

22,949

73,220

56,717

(367,603)

(425,410)

(4,637)

(369,860)

(10,789)

(70,036)

(1,397,131)

(1,168,537)

44,726

(28,131)

892,232

(561,229)

518,189

352,475

1,711

19,168

(2,421)

(6,001)

(11,228)

232,019

14,022

540,471

Net cash flows used in financing activities

(152,432)

(3,040,840)

(5,238,840)

(5,946,059)

Increase (decrease) in cash and cash equivalents

Net foreign exchange differences on cash balance

Cash and cash equivalents at beginning of year

62,706

43,737

400,025

1,250,848

872,565

7,979,972

2,391,462

(1,058,747)

(274,432)

(29,190)

5,862,942

6,950,879

Cash and cash equivalents at end of year

US$

506,468

Ps.

10,103,385

Ps.

7,979,972 Ps. 5,862,942

* Convenience translation to U.S. dollars (19.9487) – Note 1y.
The accompanying notes are an integral part of these consolidated financial statements.

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Non–cash adjustment to reconcile (loss) income before

income tax to net cash flows from operating activities:

Depreciation and amortization (including right–of–use–assets)

(Notes 12, 13 and 14)

Allowance for credit losses (Note 8)

Finance income (Note 21)

Finance cost (Note 21)

Net foreign exchange differences

Financial instruments (Notes 3 and 4)

Amortized Cost (CEBUR)

Aircraft and engine lease extension benefit and other

benefits from service agreements

Management incentive and long–term incentive plans

Cash flows from operating activities before changes

Changes in operating assets and liabilities:

Related parties

Other accounts receivable

Recoverable and prepaid taxes

Inventories

Prepaid expenses

Other assets

Guarantee deposits

Suppliers

Accrued liabilities

8,260

108,829

(63,759)

38,661

226,204

5,089

(12,759)

218,534

164,777

2,170,991

(1,271,904)

771,229

4,512,459

101,511

(254,525)

119,700

1,241,410

(18,943)

191,099

9,396,766

207,799

(94,922)

558,174

145,207

807,644

(38,875)

6,331,109

152,602

(207,004)

4,359,445

9,509,643

6,276,707

(6,252)

85,737

86,382

(3,396)

(124,724)

1,710,338

(77,325)

704,852

(71,007)

668,365

1,723,205

976,500

756,402

(67,757)

(1,879,341)

(1,389,395)

–

(4,740)

(14,007)

(612)

(306,314)

(107,285)

116,464

–

(94,564)

(279,423)

(12,214)

–

14,773

(75,375)

(217,018)

(60,824)

–

10,648

(57,320)

(175,170)

(28,567)

(6,110,569)

(6,499,802)

(5,710,907)

(2,140,194)

2,323,292

(1,181,726)

(1,193,589)

2,781,132

1,208,846

Consolidated Financial Statements

CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN,

S.A.B. DE C.V. AND SUBSIDIARIES

(d.b.a. VOLARIS)

Notes to Consolidated
Financial Statements

For the years ended December 31, 2020, 2019 and 2018

(In thousands of Mexican pesos and thousands of U.S. dollars, except when indicated otherwise)

Content

104

1. Description of the business and summary of significant accounting policies

and mail, in scheduled and non-scheduled flights for an initial period of five years. On December 1, 2016, Volaris Costa Rica

started operations.

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (“Controladora” or the “Company”) was incorporated in Mexico in

accordance with Mexican Corporate laws on October 27, 2005.

The accompanying consolidated financial statements and notes were approved by the Company´s Board of Directors and by

the Shareholders on April 26, 2021. These consolidated financial statements were also approved for issuance in the Company´s

Controladora is domiciled in Mexico City at Av. Antonio Dovali Jaime No. 70, 13th Floor, Tower B, Colonia Zedec Santa Fe,

annual report on Form 20-F by the Company´s President and Chief Executive Officer, Enrique Beltranena, and the Senior

Mexico City.

Vice-president and Chief Financial Officer, Jaime E. Pous, on April 29, 2021 and subsequent events were considered through

The Company, through its subsidiary Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V. (“Concesionaria”), has a

concession to provide air transportation services for passengers, cargo and mail throughout Mexico and abroad.

that date (Note 25).

a) Relevant events

Upsized Offering of ADSs

Concesionaria’s concession was granted by the Mexican federal government through the Mexican Communications and

On December 11, 2020, Controladora Vuela Compañía de Aviación, S.A.B. de C.V announced the closing of an upsized primary

Transportation Ministry (Secretaría de Comunicaciones y Transportes) on May 9, 2005 initially for a period of five years and

follow-on equity offering in which the Company offered 134,000,000 of its Ordinary Participation Certificates (Certificados de

was extended on February 17, 2010 for an additional period of ten years. On February 24, 2020, Concesionaria’s concession

Participación Ordinarios), or CPOs, in the form of American Depositary Shares, or ADSs, at a price to the public of USD11.25

was extended for a 20-year term starting on May 9, 2020.

per ADS in the United States and other countries outside of Mexico, pursuant to the Company’s shelf registration statement

filed with the Securities and Exchange Commission (the “SEC”). In connection with the offering, the underwriters exercised

Concesionaria made its first commercial flight as a low-cost airline on March 13, 2006. The Company operates under the trade

their option to purchase up to 20,100,000 additional CPOs in the form of ADSs. Each ADS represents 10 CPOs and each CPO

name of “Volaris”. On June 11, 2013, Controladora Vuela Compañía de Aviación, S.A.P.I. de C.V. changed its corporate name to

represents a financial interest in one Series A share of common stock of the Company (Note 18).

Controladora Vuela Compañía de Aviación, S.A.B. de C.V.

Covid-19 commentary

On September 23, 2013, the Company completed its dual listing Initial Public Offering (“IPO”) on the New York Stock

The ongoing outbreak of COVID-19 was first reported on December 31, 2019 in Wuhan, Hubei Province, China. From Wuhan, the

Exchange (“NYSE”) and on the Mexican Stock Exchange (Bolsa Mexicana de Valores, or “BMV”), and on September 18, 2013

disease spread rapidly to other parts of China as well as other countries, including Mexico and the United States.

its shares started trading under the ticker symbol “VLRS” and “VOLAR”, respectively.

On November 16, 2015, certain shareholders of the Company completed a secondary follow-on equity offering on the NYSE.

took various measures in order to prepare the country for a mass contagion, including declaring a national health emergency,

asking the public to stay home, closing schools and imposing restrictions on non-essential activities in the public, private and

On November 10, 2016, the Company, through its subsidiary Vuela Aviación, S.A. (“Volaris Costa Rica”), obtained from the

social sectors. As a result of the national health emergency and health security measures imposed by the Mexican government

Costa Rican civil aviation authorities an air operator certificate to provide air transportation services for passengers, cargo

in the spring of 2020, the Company´s capacity as measured by available seat miles (“ASMs”) was reduced. In April and May of

The first case of COVID-19 in Mexico was confirmed on February 28, 2020. In the following weeks, the Mexican government

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2020, the Company´s capacity as measured by ASMs was reduced by up to 80% and 90%, respectively, and remained reduced

will further decrease demand for air travel, which could continue to materially and negatively affect our business, results of

from June to November of 2020. Additionally, the Company suspended service on certain routes. Costa Rica, Guatemala and

operations and financial condition.

El Salvador imposed operational and migratory restrictions that made it impossible to operate international passenger flights

to those countries. A gradual opening of the economy and easing of lockdown measures in Mexico and the other countries in

Issuance asset backed trust notes

which the Company operates led to a recovery in the ASMs and route operation during the second half of the year, with the

On June 20, 2019, the Company, through its subsidiary Concesionaria, issued 15,000,000 asset backed trust notes (certificados

Company´s capacity returning to over 100% of 2019 levels for the month of December.

bursátiles fiduciarios; the “ Trust Notes ”), under the ticker symbol VOLARCB 19 for the amount of Ps.1.5 billion Mexican pesos

The Company has taken actions to preserve liquidity and sustain its operations during the period, establishing vendor and

Concesionaria in the first issuance under a program approved by the Mexican National Banking and Securities Commission

supplier’s payment deferral, reducing management’s compensations and other salaries and deferring capital expenditures and

(Comisión Nacional Bancaria y de Valores) for an amount of up to Ps.3.0 billion Mexican pesos. The Trust Notes are backed by

by CIBanco, S.A., Institución de Banca Multiple, acting as Trustee under the Irrevocable Trust number CIB/3249 created by

certain other measures.

Liquidity and cash

future receivables under agreements entered into with credit card processors with respect to funds received from the sale of

airplane tickets and ancillaries denominated in Mexican pesos, through credit cards VISA and Mastercard, via the Company’s

website, mobile app and travel agencies. The Trust Notes were listed on the Mexican Stock Exchange, have a maturity of five

The Company implemented a strict liquidity preservation program, which resulted in approximately U.S. $200 million of

years and will pay an interest rate of TIIE 28 plus 175 basis points (Note 5b).

savings as of December 31, 2020 through items such as cost reductions and deferral agreements with suppliers. In addition,

the Company negotiated cost reductions with more than 360 suppliers and cut non-essential expenses. The Company also

Shares conversion

implemented online training and leave of absence programs in order to reduce costs. As of December 31, 2020, our cash and

On February 16, 2018, one of the Company´s shareholders concluded the conversion of 45,968,598 Series B Shares for the

cash equivalents were Ps.10,103,385.

equivalent number of Series A Shares. This conversion has no impact either on the total number of outstanding shares nor on

Fleet plan

The new contractual fleet plan with Airbus allows to the Company to maintain a “cautiously” sized fleet, that will remain at

b) Basis of preparation

approximately 85 aircraft, net of new deliveries and redeliveries, until 2023.

Statement of compliance

the earnings-per-share calculation.

Customers and employees

These consolidated financial statements comprise the financial statements of the Company and its subsidiaries at December 31,

2020 and 2019 and for each of the three years ended December 31, 2020, and were prepared in accordance with International

Additionally, the Company launched a new biosecurity and cleaning protocol and are communicating proactively with all staff,

Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

especially with crews and airport staff, regarding health and COVID-19 developments.

Commercial and network growth opportunities.

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary

economic environment in which the entity operates (“functional currency”). The presentation currency of the Company’s

The Company is closely monitoring capacity reductions from competitors for possible opportunities, testing new ancillary

consolidated financial statements is the Mexican peso, which is used also for compliance with its legal and tax obligations. All

products and running targeted promotions to test potential stimulation of air travel.

values in the consolidated financial statements are rounded to the nearest thousand (Ps.000), except when otherwise indicated.

The Company remained focused on price sensitive visiting friends and relatives, leisure and small and medium sized enterprises

The Company has consistently applied its accounting policies to all periods presented in these consolidated financial statements

segments, which continued to show the strongest demand for air travel in Mexico as the market recovers from COVID-19. As

and provide comparative information in respect of the previous period.

of December 31, 2020, Volaris was positioned as the domestic market leader in 2020.

Basis of measurement and presentation

In addition, the Company considered the impact of Covid-19 in preparing their financial statements.

The accompanying consolidated financial statements have been prepared under the historical-cost convention, except for

derivative financial instruments that are measured at fair value and investments in marketable securities measured at fair value

Since the Company business and the airline industry have experienced material adverse impacts due to the COVID-19 pandemic,

through profit and loss (“FVTPL”).

the Company cannot offer any assurance that these impacts will not intensify to the extent that COVID-19 persists throughout

Mexico. Further, additional government COVID-19 response measures remain unknown and depend on future developments

The preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and

with respect to COVID-19, including the scope and duration of the pandemic, which are highly fluid, uncertain and cannot be

assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results

predicted. It is not yet possible to determine when the adverse effects of COVID-19 will abate and the extent to which they

could differ from those estimates.

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106

c) Basis of consolidation

The accompanying consolidated financial statements comprise the financial statements of the Company and its subsidiaries.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent

At December 31, 2020 and 2019, for accounting purposes the companies included in the consolidated financial statements are

accounting policies.

as follows:

Name

Principal Activities

Country

% Equity interest

2020

2019

Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee

and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee

if, and only if, the Company has:

Concesionaria

Vuela Aviación, S.A.

Vuela, S.A. (“Vuela”)*

Vuela El Salvador, S.A. de C.V.*

Air transportation services for passengers,
cargo and mail throughout Mexico and abroad

Air transportation services for passengers,
cargo and mail in Costa Rica and abroad

Air transportation services for passengers,
cargo and mail in Guatemala and abroad

Air transportation services for passengers,
cargo and mail in El Salvador and abroad

Mexico

100%

(i) Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).

Costa Rica

100%

(iii) The ability to use its power over the investee to affect its returns.

(ii) Exposure, or rights, to variable returns from its involvement with the investee.

Guatemala

100%

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant

facts and circumstances in assessing whether it has power over an investee, including:

El Salvador

100%

Comercializadora Volaris, S.A. de C.V.

Merchandising of services

Mexico

100%

Servicios Earhart, S.A.*

Recruitment and payroll

Guatemala

100%

(i) The contractual arrangement with the other vote holders of the investee.

(ii) Rights arising from other contractual arrangements.

(iii) The Company’s voting rights and potential voting rights.

Servicios Corporativos Volaris, S.A. de C.V.
(“Servicios Corporativos”)

Servicios Administrativos Volaris, S.A. de C.V.
(“Servicios Administrativos”)

Comercializadora V Frecuenta, S.A. de C.V.
(“Loyalty Program”) **

Recruitment and payroll

Mexico

100%

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to

Recruitment and payroll

Mexico

100%

subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary

acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains

Loyalty Program

Mexico

100%

control until the date the Company ceases to control the subsidiary.

one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the

Viajes Vuela, S.A. de C.V. (“Viajes Vuela”)

Travel agency

Mexico

100%

All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated

Deutsche Bank México, S.A., Trust 1710

Pre-delivery payments financing (Note 5)

Mexico

100%

in full on consolidation.

Deutsche Bank México, S.A., Trust 1711

Pre-delivery payments financing (Note 5)

Mexico

100%

Irrevocable Administrative Trust number
F/307750 “Administrative Trust”

Irrevocable Administrative Trust number
F/745291 “Administrative Trust”

Irrevocable Administrative Trust number CIB/3081
“Administrative Trust”

Share administration trust (Note 17)

Mexico

100%

Share administration trust (Note 17)

Mexico

100%

Share administration trust (Note 17)

Mexico

100%

recognized in profit or loss.

d) Revenue recognition

Passenger revenues

On consolidation, the assets and liabilities of foreign operations are translated into Mexican pesos at the rate of exchange

prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates

of the transactions. The exchange differences arising on translation for consolidation are recognized in other comprehensive

income (“OCI”). On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is

Irrevocable Administrative Trust number CIB/3249
“Administrative Trust”

Asset backed securities trustor & administrator
(Note 5)

Mexico

100%

non-refundable ticket expires at the date of the scheduled travel.

Revenues from the air transportation of passengers are recognized at the earlier of when the service is provided or when the

*The Companies have not started operations yet in Guatemala and El Salvador.
**The Company has not started operations yet

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Ticket sales for future flights are initially recognized as contract liabilities under the caption “unearned transportation revenue”

Code-share agreement

and, once the transportation service is provided by the Company or when the non-refundable ticket expires at the date of the

On January 16, 2018, the Company and Frontier Airlines (herein after Frontier) entered into a code-share operations agreement,

scheduled travel, the earned revenue is recognized as passenger ticket revenues and the unearned transportation revenue is

which started operations in September 2018.

reduced by the same amount. All the Company’s tickets are non-refundable and are subject to change upon a payment of a

fee. Additionally, the Company does not operate a frequent flier program.

Through this alliance, the Company´s customers gain access to additional cities in the U.S. beyond the current available destinations

The most significant passenger revenue includes revenues generated from: (i) fare revenue and (ii) other passenger revenues.

gain first-time access to new destinations in Mexico through Volaris presence in Mexican airports. Tickets from Frontier can be

as the Company’s customers are able to buy a ticket throughout any of Frontier’s actual destinations; and Frontier customers

Other passenger services include but are not limited to fees charged for excess baggage, bookings through the call center

purchased directly from the Volaris’ website.

or third-party agencies, advanced seat selection, itinerary changes and charters. They are recognized as revenue when the

obligation of passenger transportation service is provided by the Company or when the non-refundable ticket expires at the

Other considerations analyzed as part of revenue from contracts with customers

date of the scheduled travel.

All revenues offered by the Company including sales of tickets for future flights, other passenger related services and non-pass-

enger revenue must be paid through a full cash settlement. The payment of the transaction price is equal to the cash settlement

The Company also classifies as other passenger revenue “V Club” and other similar services, which are recognized as revenue

from the client at the sales time (using different payment options like credit or debit cards, paying through a third party or

over time when the service is provided, as a modification of the tickets sold to V Club members.

directly at the counter in cash). There is little or no judgment to determine the point in time of the revenue recognition, and

the amount of it. Even if mainly all the sales of services are initially recognized as contract liabilities, there is no financing

Tickets sold by other airlines where the Company provides the transportation are recognized as passenger revenue when the

component in these transactions.

service is provided.

The Company sells certain tickets with connecting flights with one or more segments operated by its other airline partner.

by the financial institutions for processing electronic transactions (Note 10). The Company does not incur any additional costs

The cost to obtain a contract is represented by the commissions paid to the travel agencies and the bank commissions charged

For segments operated by its other airline partners, the Company has determined that it is acting as an agent on behalf of

to obtain and fulfill a contract that is eligible for capitalization.

the other airlines as they are responsible for their portion of the contract (i.e. transportation of the passenger). The Company,

as the agent, recognizes revenue within Other operating revenue at the time of the travel for the net amount retained by the

Trade receivables are mainly with financial institutions due to transactions with credit and debit cards, and therefore they are

Company for any segments flown by other airlines.

non-interest bearing and are mainly on terms of 24 to 48 hours. The Company has the right of collection at the beginning of

the contracts and there are no discounts, payment incentives, bonuses, or other variable considerations subsequent to the

Non-passenger revenues

purchase that could modify the amount of the transaction price.

The most significant non-passenger revenues include revenues generated from: (i) revenues from other non-passenger services

described below and (ii) cargo services.

The Company´s tickets are non-refundable. However, if the Company cancels a flight for causes attributable to the airline,

including as a result of the COVID-19 pandemic, then the passenger is entitled to either move their flight at no cost, receive

Revenues from other non-passenger services mainly include but are not limited to commissions charged to third parties for

a refund or a voucher. No revenue is recognized until either the voucher is redeemed, and the associate flight occurs, or the

the sale of hotel reservations, trip insurance, rental cars and advertising spaces to third parties. They are recognized as revenue

voucher expires. When vouchers issued exceed the amount of the original amount paid by the passenger the excess is recorded

at the time the service is provided.

as reduction of the operating revenues. All of the Company´s revenues related to future services are rendered through an

The Company also evaluated the principal versus agent considerations as it relates to certain non-air travel services arrangements

approximate period of 12 months.

with third party providers. No changes were identified under this analysis as the Company is agent for those services provided

As of December 31, 2020, the Company recorded an amount of Ps.1,720,939 related to vouchers to be redeemed by passengers,

by third parties.

which were presented as part of the unearned transportation revenues.

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2020

2019

Ps.

3,679,926

Ps.

2,438,516

23,657,563

34,940,609

(21,486,572)

(33,699,199)

Ps.

5,850,917

Ps.

3,679,926

Breakdown of revenues:

Transactions from unearned transportation revenues.

As of December 31, 2020, 2019 and 2018, the revenues from customers of contracts is described as follows:

Revenue recognition as of December 31, 2020

Domestic

International

Domestic

International

At the flight time

At the sale

Total

Revenues

January 1,

Deferred

Recognized in revenue during the year

December 31,

Revenue recognition as of December 31, 2019

Domestic

International

Domestic

International

At the flight time

At the sale

Passenger Revenues

Fare Revenues

Other Passenger Revenues

Non-Passenger Revenues

Other Non-Passenger revenues

Cargo

Total

Non-derivative financial instruments

Passenger Revenues

Fare Revenues

Other Passenger Revenues

Non-Passenger Revenues

Other Non-Passenger revenues

Cargo

Total

Non-derivative financial instruments

Passenger Revenues

Fare Revenues

Other Passenger Revenues

Non-Passenger Revenues

Other Non-Passenger revenues

Cargo

Total

Ps. 8,455,647

Ps.

4,417,527 Ps.

– Ps.

12,873,174

6,920,141

15,375,788

1,536,206

5,953,733

124,450

32,601

8,613,398

21,486,572

The performance obligations related to contract liability are recognized over the following 12 months and are related to the

scheduled flights and other passenger services purchased by the client in advance.

875,610

196,349

6,750

5,532

–

882,360

201,881

e) Cash and cash equivalents

Ps.

16,447,747

Ps.

5,966,015 Ps.

124,450 Ps.

32,601 Ps. 22,570,813

(411,222)

Ps. 22,159,591

Total

Revenues

Cash and cash equivalents are represented by bank deposits and highly liquid investments with maturities of 90 days or less at

the original purchase date. For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist

of cash and short-term investments as defined above.

The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel

and other services. These credit card processing agreements doesn’t have significant cash reserve requirements.

Ps.

15,833,878

Ps.

7,296,113 Ps.

– Ps.

– Ps. 23,129,991

A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument

f) Financial instruments -initial recognition and subsequent measurement

7,531,725

23,365,603

2,865,555

10,161,668

119,466

52,462

10,569,208

33,699,199

for another entity.

888,353

221,375

9,233

7,461

–

897,586

228,836

Ps. 24,475,331

Ps.

10,178,362 Ps.

119,466 Ps.

52,462 Ps. 34,825,621

i) Financial assets

Initial recognition

(72,949)

Ps. 34,752,672

Total

Revenues

Classification of financial assets and initial recognition

The Company determines the classification and measurement of financial assets, in accordance with the categories in IFRS 9,

which are based on both: the characteristics of the contractual cash flows of these assets and the business model objective

for holding them.

Financial assets include those carried at FVTPL, whose objective to hold them is for trading purposes (short-term investments),

or at amortized cost, for accounts receivables held to collect the contractual cash flows, which are characterized by solely

Ps.

12,336,095

Ps.

6,151,763 Ps.

– Ps.

– Ps. 18,487,858

payments of principal and interest (“SPPI”). Derivative financial instruments are also considered financial assets when these

5,182,572

17,518,667

2,598,375

8,750,138

68,264

43,286

7,892,497

26,380,355

685,219

221,324

12,138

6,114

–

697,357

227,438

Ps.

18,425,210

Ps. 8,768,390 Ps.

68,264 Ps.

43,286 Ps. 27,305,150

represent contractual rights to receive cash or another financial asset. All the Company’s financial assets are initially recognized

at fair value, including derivative financial instruments.

Subsequent measurement

The subsequent measurement of financial assets depends on their initial classification, as is described below:

Revenue recognition as of December 31, 2018

Domestic

International

Domestic

International

At the flight time

At the sale

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1. Financial assets at FVTPL which include financial assets held for trading.

iii) Financial liabilities

2. Financial assets at amortized cost, whose characteristics meet the SPPI criterion and were originated to be held to collect

principal and interest in accordance with the Company’s business model.

3. Financial assets at fair value through OCI with recycling of cumulative gains and losses.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized

when:

a) The rights to receive cash flows from the asset have expired;

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, loans and borrowings, accounts payables

to suppliers, unearned transportation revenue, other accounts payable and financial instruments.

All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly

attributable transaction costs.

Subsequent measurement

b) The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received

cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i) the Company

The measurement of financial liabilities depends on their classification as described below:

has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained

Financial liabilities at amortized cost

substantially all the risks and rewards of the asset, but has transferred control of the asset; or

Accounts payable, are subsequently measured at amortized cost and do not bear interest or result in gains and losses due to

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement,

their short-term nature.

it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained

Loans and borrowings are the category most relevant to the Company. After initial recognition at fair value (consideration

substantially all the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of

received), interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains

the Company’s continuing involvement in the asset.

and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured

on a basis that reflects the rights and obligations that the Company has retained.

ii) Impairment of financial assets

The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial

assets is impaired. An impairment exists if one or more events has occurred since the initial recognition of an asset (an incurred

‘loss event’), that has an impact on the estimated future cash flows of the financial asset or the group of financial assets that

can be reliably estimated.

Amortized cost is calculated by taking into account any discount or premium on issuance and fees or costs that are an integral

part of the EIR. The EIR amortization is included as finance costs in the consolidated statements of operations. This amortized

cost category generally applies to interest-bearing loans and borrowings (Note 5).

Financial liabilities at FVTPL

Financial liabilities at FVTPL include financial liabilities under the fair value option, which are classified as held for trading, if

they are acquired for the purpose of selling them in the near future. This category includes derivative financial instruments that

are not designated as hedging instruments in hedge relationships as defined by IFRS 9. During the years ended December 31,

2020 and 2019 the Company has not designated any financial liability as at FVTPL.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial

Derecognition

difficulty, default or delinquency in receivable, the probability that they will enter bankruptcy or other financial reorganization

and observable data indicating that there is a measurable decrease in the estimated cash flows, such as changes in arrears or

economic conditions that correlate with defaults.

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of

an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original

Further disclosures related to impairment of financial assets are also provided in Note 8.

liability and the recognition of a new liability.

For trade receivables, the Company applies a simplified approach in calculating expected credit losses (ECLs). Therefore,

The difference in the respective carrying amounts is recognized in the consolidated statements of operations.

the Company does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each

reporting date.

Offsetting of financial instruments

Financial assets and financial liabilities are offset, and the net amount is reported in the consolidated statement of financial

Based on this evaluation, allowances are taken into account for the expected losses of these receivables. For the years ended

December 31, 2020 y 2019 the Company recorded expected credit losses on accounts receivable of Ps.13,664 and Ps.40,393,

respectively (Note 8).

position if there is:

(i) A currently enforceable legal right to offset the recognized amounts, and

(ii) An intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

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g) Other accounts receivable

the foreign currency changes at each reported period. The Company makes certain assumptions at the inception of the lease

Other accounts receivables are due primarily from major credit card processors associated with the sales of tickets and are

and at each consolidated statement of financial position date to determine the recoverability of maintenance deposits. These

stated at cost less allowances made for credit losses, which approximates fair value given their short-term nature.

assumptions are based on various factors such as the estimated time between the maintenance events, the date the aircraft

is due to be returned to the lessor, and the number of flight hours the aircraft and engines is estimated to be utilized before it

Inventories

is returned to the lessor.

Inventories consist primarily of flight equipment expendable parts, materials and supplies, and are initially recorded at acquisition

cost. Inventories are carried at the lower of cost and their net realization value. The cost is determined on the basis of the

Some other aircraft lease agreements do not require the obligation to pay maintenance deposits to lessors in advance in order

method of specific identification and expensed when used in operations.

to ensure major maintenance activities, so the Company does not record guarantee deposits regarding these aircraft. However,

Intangible assets

certain of these lease agreements include the obligation to make a maintenance adjustment payment to the lessors at the end

of the lease period. These maintenance adjustments cover maintenance events that are not expected to be made before the

Cost related to the purchase or development of computer software that is separable from an item of related hardware is

termination of the lease; for such agreements the Company accrues a liability related to the amount of the costs to be incurred

capitalized separately measured at cost and amortized over the period in which it will generate benefits not exceeding five

at the lease term, since no maintenance deposits had been made, Note 15c). The portion of prepaid maintenance deposits that

years on a straight-line basis. The Company annually reviews the estimated useful lives and salvage values of intangible assets

is deemed unlikely to be recovered and accruals in lien of maintenance deposits, are recorded as a variable lease payment and

and any changes are accounted for prospectively.

is presented as supplemental rent in the consolidated statements of operations. For the years ended December 31, 2020, 2019

The Company records impairment charges on intangible assets used in operations when events and circumstances indicate that

the assets or related cash generating unit may be impaired and the carrying amount of a long-lived asset or cash generating

During the year ended December 31, 2020, 2019 and 2018, the Company added seven, seven and ten new net leases aircraft

unit exceeds its recoverable amount, which is the higher of (i) its fair value less cost to sell, and (ii) its value in use.

to its fleet, respectively (Note 14).

and 2018, the Company expensed as supplemental rent Ps.421,030, Ps.295,720 and Ps.299,601, respectively.

The value in use calculation is based on a discounted cash flow model, using our projections of operating results for the near

During the year ended December 31, 2020, the Company did not extend the lease term of aircraft and engines agreements.

future. The recoverable amount of long-lived assets is sensitive to the uncertainties inherent in the preparation of projections

During the years ended December 31, 2019 and 2018, the Company extended the lease term of one and two aircraft agreements,

and the discount rate used in the calculation. For the years ended December 31, 2020 and 2019, the Company did not record

respectively. Additionally, the Company extended the lease term of one spare engine in 2019 and two spare engines in 2018. The

any impairment loss in the value of its intangible assets.

maintenance event for which the maintenance deposits were previously expensed was scheduled to occur after the original lease

j) Guarantee deposits

Guarantee deposits consist primarily of aircraft maintenance deposits paid to lessors, deposits for rent of flight equipment and

term and as such the supplemental rental payments were expensed. However, when the leases were amended the maintenance

deposits amounts became probable of recovery due to the longer lease term and as such they are being recognized as an asset.

other guarantee deposits. Aircraft and engine deposits are held by lessors in U.S. dollars and are presented as current assets

The effect of these lease extensions was recognized as a lease incentive reducing the right of use asset (Note 14).

and non-current assets, based on the recovery dates of each deposit established in the related agreements (Note 11).

k) Aircraft and engine maintenance

Aircraft maintenance deposits paid to lessors

The Company is required to conduct various levels of aircraft maintenance. Maintenance requirements depend on the type of

Most of the Company’s lease agreements require the Company to pay maintenance deposits to aircraft lessors to be held as

aircraft, age and the route network over which it operates.

collateral in advance of the Company’s performance of major maintenance activities. These lease agreements provide that

maintenance deposits are reimbursable to the Company upon completion of the maintenance event in an amount equal to the

Fleet maintenance requirements may involve short cycle engineering checks, for example, component checks, monthly checks,

lesser of (i) the amount of the maintenance deposits held by the lessor associated with the specific maintenance event, or (ii)

annual airframe checks and periodic major maintenance and engine checks.

the qualifying costs related to the specific maintenance event.

Substantially all these maintenance deposits are calculated based on a utilization measure of the leased aircrafts and engines,

maintenance, (ii) major maintenance and (iii) component service.

such as flight hours or cycles, and are used solely to collateralize the lessor for maintenance time run off the aircraft and engines

until the completion of the maintenance of the aircraft and engines.

(i) Routine maintenance requirements consist of scheduled maintenance checks on the Company’s aircraft, including pre-flight,

daily, weekly and overnight checks, any diagnostics and routine repairs and any unscheduled tasks performed as required. These

Maintenance deposits expected to be recovered from lessors are reflected as guarantee deposits in the accompanying conso-

type of maintenance events are currently serviced by Company mechanics and are primarily completed at the main airports

lidated statement of financial position. These deposits are recorded as a monetary asset and are revaluated in order to record

that the Company currently serves.

Aircraft maintenance and repair consists of routine and non-routine works, divided into three general categories: (i) routine

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Consolidated Financial StatementsAll other maintenance activities are sub-contracted to qualified maintenance business partner, repair and overhaul organizations.

Pre-delivery payments refer to prepayments made to aircraft and engine manufacturers during the manufacturing stage of

Routine maintenance also includes scheduled tasks that can take from seven to 14 days to accomplish and typically are required

the aircraft. The borrowing costs related to the acquisition or construction of a qualifying asset are capitalized as part of the

approximately every 22 months. All routine maintenance costs are expensed as incurred.

cost of that asset.

(ii) Major maintenance consists of a series of more complex tasks that can take up to six weeks to accomplish and typically are

During the years ended December 31, 2020, 2019 and 2018, the Company capitalized borrowing costs which amounted to

required approximately every five to six years.

Ps.384,038, Ps.456,313 and Ps.357,920, respectively (Note 21). The rate used to determine the amount of borrowing cost was

3.58%, 5.10% and 4.41%, for the years ended December 31, 2020, 2019 and 2018, respectively.

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Major maintenance is accounted for under the deferral method, whereby the cost of major maintenance and major overhaul

and repair is capitalized (leasehold improvements to flight equipment) and amortized over the shorter of the period to the next

Depreciation rates are as follows:

major maintenance event or the remaining contractual lease term. The next major maintenance event is estimated based on

assumptions including estimated usage. The United States Federal Aviation Administration (“FAA”) and the Mexican Federal Civil

Aviation Agency (Agencia Federal de Aviación Civil) mandate maintenance intervals and average removal times as suggested

by the manufacturer.

These assumptions may change based on changes in the utilization of aircraft, changes in government regulations and sug-

gested manufacturer maintenance intervals. In addition, these assumptions can be affected by unplanned incidents that could

damage an airframe, engine, or major component to a level that would require a heavy maintenance event prior to a scheduled

Flight equipment

Constructions and improvements

Computer equipment

Workshop tools

Electric power equipment

Communications equipment

Workshop machinery and equipment

maintenance event. To the extent the planned usage increases, the estimated life would decrease before the next maintenance

Motorized transport equipment platform

event, resulting in additional expense over a shorter period.

During the years ended December 31, 2020 and 2019, the Company capitalized major maintenance events as part of leasehold

improvements to flight equipment for an amount of Ps.646,219 and Ps.659,082, respectively. For the years ended December 31,

2020 and 2019, the amortization of major maintenance leasehold improvement costs was Ps.652,091 and Ps.450,371, respectively.

The amortization of deferred maintenance costs is recorded as part of depreciation and amortization in the consolidated

statements of operations.

Service carts on board

Office furniture and equipment

Leasehold improvements to flight equipment

Annual depreciation rate

4.0-16.7%

Remaining contractual lease term

25%

33.3%

10%

25%

20%

10%

The shorter of: (i) remaining contractual lease

term, or (ii) the next major maintenance event

The Company reviews annually the useful lives of these assets and any changes are accounted for prospectively.

The Company identified one Cash Generating Unit (CGU), which includes the entire aircraft fleet and flight equipment. The

Company assesses, at each reporting date, whether there is an objective evidence that rotable spare parts, furniture and

(iii) The Company has a power-by-the hour agreement for component services, which guarantees the availability of aircraft

equipment and right of use asset are impaired in the CGU. The Company records impairment charges on rotable spare parts,

parts for the Company’s fleet when they are required. It also provides aircraft parts that are included in the redelivery conditions

furniture and equipment and right of use assets used in operations when events and circumstances indicate that the assets

of the contract (hard time) without constituting an additional cost at the time of redelivery. The monthly maintenance cost

may be impaired or when the carrying amount of a long-lived asset or related cash generating unit exceeds its recoverable

associated with this agreement is recognized as incurred in the consolidated statements of operations.

amount, which is the higher of (i) its fair value less cost to sell and (ii) its value in use.

The Company has an engine flight hour agreement (component repair agreement), that guarantees a cost per overhaul,

The value in use calculation is based on a discounted cash flow model, using projections of operating results for the near future.

provides miscellaneous engines coverage, caps the cost of foreign objects damage events, ensures there is protection from

The recoverable amount of long-lived assets is sensitive to the uncertainties inherent in the preparation of projections and the

annual escalations, and grants an annual credit for scrapped components. The cost associated with the miscellaneous engines’

discount rate used in the calculation.

coverage is recorded monthly as incurred in the consolidated statements of operations.

l) Rotable spare parts, furniture and equipment, net

Rotable spare parts, furniture and equipment, are recorded at cost and are depreciated to estimated residual values over their

estimated useful lives using the straight-line method.

During 2020, the Company performed its annual impairment test. The recoverable amount of the CGU was determined based

on a value in use calculation using cash flow projections from financial budgets approved by senior management, covering a

five-year period. The projected cash flows have been updated to reflect the future operating cashflows. It was concluded that

the carrying amount of the CGU did not exceed the value in use. Consequently, for the years ended December 31, 2020, 2019

and 2018, there were no impairment charges recorded in respect of the Company’s cash generating unit.

Aircraft spare engines have significant components with different useful lives; therefore, they are accounted for as separate

items (major components) of spare engine parts (Note 12e).

For the years ended December 31, 2020, there was no impairment charges recorded in respect of the Company’s cash generating

unit despite of the consequence of decreased operations as a result of Covid-19.

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m) Foreign currency transactions and exchange differences

discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is

The Company’s consolidated financial statements are presented in Mexican peso, which is the reporting and functional currency

used, the increase in the provision due to the passage of time is recognized as a finance cost.

of the parent Company. For each subsidiary, the Company determines the functional currency and items included in the financial

statements of each entity are measured using the currency of the primary economic environment in which the entity operates

o) Employee benefits

(“the functional currency”).

i) Personnel vacations

The Company and its subsidiaries in Mexico and Central America recognize a reserve for the costs of paid absences, such as

The financial statements of foreign subsidiaries prepared under IFRS and denominated in their respective local currencies, are

vacation time, based on the accrual method.

translated into the functional currency as follows:

ii) Termination benefits

 Transactions in foreign currencies are translated into the respective functional currencies at the exchange rates at the dates

The Company recognizes a liability and expense for termination benefits at the earlier of the following dates:

of the transactions.

 All monetary assets and liabilities were translated at the exchange rate at the consolidated statement of financial position

a) When it can no longer withdraw the offer of those benefits; and

date.

b) When it recognizes costs for a restructuring that is within the scope of IAS 37, Provisions, Contingent Liabilities and Contingent

 All non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange

Assets, and involves the payment of termination benefits.

rates at the dates of the initial transactions.

 Equity accounts are translated at the prevailing exchange rate at the time the capital contributions were made and the

The Company is demonstrably committed to a termination when, and only when, it has a detailed formal plan for the termination

profits were generated.

 Revenues, costs and expenses are translated at the average exchange rate during the applicable period.

and is without realistic possibility of withdrawal.

Any differences resulting from the currency translation are recognized in the consolidated statements of operations and the OCI.

For the year ended December 31, 2020, 2019 and 2018, the exchange rates of local currencies translated to functional currencies

are as follows:

For the years ended December 31, 2020 and 2019, no termination benefits provision has been recognized.

iii) Seniority premiums

In accordance with Mexican Labor Law, the Company provides seniority premium benefits to the employees which rendered

services to its Mexican subsidiaries under certain circumstances. These benefits consist of a one-time payment equivalent to 12

days’ wages for each year of service (at the employee’s most recent salary, but not to exceed twice the legal minimum wage),

Country

Local
currency

Functional
currency

Average exchange
rate for 2020

Exchange rate
as of 2020

Average exchange
rate for 2019

Exchange rate
as of 2019

Average exchange
rate for 2018

Exchange rate
as of 2018

vesting of their seniority premium benefit.

Exchange rates of local currencies translated to functional currencies

payable to all employees with 15 or more years of service, as well as to certain employees terminated involuntarily prior to the

Costa Rica

Colon

U.S. dollar

¢. 588.4240 ¢. 615.7800 ¢. 590.9574 ¢. 573.4400 ¢. 580.8534 ¢. 609.6100

Obligations relating to seniority premiums other than those arising from restructurings, are recognized based upon actuarial

Guatemala

Quetzal

U.S. dollar

7.7292 Q.

7.8095 Q.

7.7066 Q.

7.6988 Q.

7.5337 Q.

7.7440

calculations and are determined using the projected unit credit method.

El Salvador

U.S Dollar

U.S. dollar

21.4961 $.

19.9487 $.

19.2618 $.

18.8452 $.

– $.

–

The latest actuarial computation was prepared as of December 31, 2020. Remeasurement gains and losses are recognized

in full in the period in which they occur in OCI. Such remeasurement gains and losses are not reclassified to profit or loss in

The exchange rates used to translate the above amounts to Mexican pesos at December 31, 2020, 2019 and 2018, were Ps.19.9487,

subsequent periods.

Ps.18.8452 and Ps.19.6829, respectively, per U.S. dollar.

Foreign currency differences arising on translation into the presentation currency are recognized in OCI. Exchange differences

on government bonds, less the fair value of plan assets out of which the obligations are to be settled.

on translation of foreign entities for the year ended December 31, 2020, 2019 and 2018, were Ps.23,970, Ps.8,045 and Ps.22,156,

The defined benefit asset or liability comprises the present value of the defined benefit obligation using a discount rate based

respectively.

n) Liabilities and provisions

For entities in Costa Rica, Guatemala and El Salvador there is no obligation to pay seniority premium, these countries have

Post- Employee Benefits.

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is

iv) Incentives

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

The Company has a quarterly incentive plan for certain personnel whereby cash bonuses are awarded for meeting certain

estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are

performance targets. These incentives are payable shortly after the end of each quarter and are accounted for as a short-term

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benefit under IAS 19, Employee Benefits. A provision is recognized based on the estimated amount of the incentive payment.

b) Management incentive plan (“MIP”)

During the years ended December 31, 2020, 2019 and 2018 the Company expensed Ps.25,918, Ps.62,825 and Ps.67,680, respectively,

– MIP I

as quarterly incentive bonuses, recorded under the caption salaries and benefits.

Certain key employees of the Company receive additional benefits through a share purchase plan, which has been classified

as an equity-settled share-based payment. The equity-settled compensation cost is recognized in the consolidated statement

The Company has a short-term benefit plan for certain key personnel whereby cash bonuses are awarded when certain Company’s

of operations under the caption of salaries and benefits, over the requisite service period (Note 17). The total cost of this

performance targets are met. These incentives are payable shortly after the end of each year and also are accounted for as a

plan has been totally recognized during the required service period.

short-term benefit under IAS 19. A provision is recognized based on the estimated amount of the incentive payment. During

the years ended December 31, 2020, 2019 and 2018 the Company recorded an expense for an amount of Ps.0, Ps.80,634 and

– MIP II

Ps.50,000, respectively, under the caption salaries and benefits.

On February 19, 2016, the Board of Directors of the Company authorized an extension to the MIP for certain key employees,

this plan was named MIP II. In accordance with this plan, the Company granted SARs to key employees, which entitle them

v) Long-term incentive plan (“LTIP”) and long-term retention plan (LTRP)

to a cash payment after a service period. The amount of the cash payment is determined based on the increase in the share

The Company has adopted a Long-term incentive plan (“LTIP”). This plan consists of a share purchase plan (equity-settled) and

price of the Company between the grant date and the time of exercise. The liability for the SARs is measured initially and

a share appreciation rights “SARs” plan (cash settled), and therefore accounted under IFRS 2 “Shared based payments”. This

at the end of each reporting period until settled at the fair value of the SARs, taking into account the terms and conditions

incentive plan has been granting annual extensions in the same terms from the original granted in 2014.

on which the SARs were granted. The compensation cost is recognized in the consolidated statement of operations under

During 2020, 2019 and 2018, the Company approved a new long-term retention plan (“LTRP”), which consisted in a purchase

plan (equity-settled). This plan does not include cash compensations granted through appreciation rights on the Company’s

During the years ended December 31, 2020, 2019 and 2018, the Company recorded an expense (benefit) for Ps.107,204,

shares. The retention plans granted in previous periods will continue in full force and effect until their respective due dates and

Ps.37,760 and Ps.(5,052), respectively, related to MIP II into the consolidated statement of operations.

the cash compensation derived from them will be settled according to the conditions established in each plan.

the caption of salaries and benefits, over the requisite service period (Note 17).

vi) Share-based payments

a) LTIP

– Share purchase plan (equity-settled)

c) Board of Directors Incentive Plan (BoDIP)

Certain members of the Board of Directors of the Company receive additional benefits through a share-based plan, which has

been classified as an equity-settled share-based payment and therefore accounted under IFRS 2 “Shared based payments”.

In April 2018, the Board of Directors of the Company authorized a Board of Directors Incentive Plan “BoDIP”, for the benefit

Certain key employees of the Company receive additional benefits through a share purchase plan denominated in Restricted

of certain board members. The BoDIP grants options to acquire shares of the Company or CPOs during a four year period

Stock Units (“RSUs”), which has been classified as an equity-settled share-based payment. The cost of the equity-settled

with an exercise price share at Ps.16.12, which was determined on the grant date. Under this plan, no service or performance

share purchase plan is measured at grant date, taking into account the terms and conditions on which the share options

conditions are required to the board members for exercise the option to acquire shares, and therefore, they have the right

were granted. The equity-settled compensation cost is recognized in the consolidated statement of operations under the

to request the delivery of those shares at the time they pay for them.

caption of salaries and benefits, over the requisite service period (Note 17).

vii) Employee profit sharing

During the years ended December 31, 2020, 2019 and 2018, the Company expensed Ps.75,040, Ps.49,659 and Ps.19,980,

The Mexican Income Tax Law (“MITL”), establishes that the base for computing current year employee profit sharing shall be

respectively, related to RSUs granted under the LTIP and LTRP. The expenses were recorded under the caption salaries and

the taxpayer’s taxable income of the year for income tax purposes, including certain adjustments established in the Income Tax

benefits.

– SARs plan (cash settled)

Law, at the rate of 10%. For the years ended December 2020, 2019 and 2018, the employee profit sharing is Ps.13,458, Ps.22,134

and Ps.14,106, respectively, and is presented as an expense in the consolidated statements of operations. Subsidiaries in Central

America do not have such profit-sharing benefit, as it is not required by local regulation.

The Company granted SARs to key employees, which entitle them to a cash payment after a service period. The amount of

the cash payment is determined based on the increase in the share price of the Company between the grant date and the

p) Leases

time of exercise. The liability for the SARs is measured, initially and at the end of each reporting period until settled, at the

The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right

fair value of the SARs, taking into account the terms and conditions on which the SARs were granted. The compensation

to control the use of an identified asset for a period of time in exchange for consideration.

cost is recognized in the consolidated statement of operations under the caption of salaries and benefits, over the requisite

service period (Note 17). During the years ended December 31, 2020, 2019 and 2018, the Company recorded an expense

The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases

(benefit) expense for Ps.(1,901), Ps.2,964 and Ps.(186), respectively, related to the SARs included in the LTIP. These amounts

of low-value assets. The Company recognizes lease liabilities to make lease payments and right-of-use assets representing the

were recorded under the caption salaries and benefits.

right to use the underlying assets.

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i) Right-of-use assets

iv) Return obligations

The Company recognize right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at

The aircraft lease agreements of the Company also require that the aircraft and engines be returned to lessors under specific

cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The

conditions of maintenance. The costs of return, which in no case are related to scheduled major maintenance, are estimated and

cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, an estimate of costs

recognized ratably as a provision from the time it becomes likely such costs will be incurred and can be estimated reliably. These

to be incurred by the Company in dismantling and removing the underlying asset to the condition required by the terms and

return costs are recognized on a straight-line basis as a component of variable lease expenses and the provision is included

conditions of the lease, and lease payments made at or before the commencement date less any lease incentives received.

as part of other liabilities, through the remaining lease term. The Company estimates the provision related to airframe, engine

overhaul and limited life parts using certain assumptions including the projected usage of the aircraft and the expected costs

Components of the right-of-use assets are depreciated on a straight-line basis over the shorter of the remining lease term and

of maintenance tasks to be performed. For the years ended December 31, 2020, 2019 and 2018, the Company expensed as

the estimated useful lives of the assets, as follows:

variable rent of Ps.1,428,179, Ps.680,964 and Ps.659,106, respectively.

Aircraft and engines

Spare engines

Buildings leases

Maintenance component

up to 18 years

up to 14 years

one to ten years

up to eight years

ii) Lease Liabilities

q) Other taxes and fees payable

The Company is required to collect certain taxes and fees from customers on behalf of government agencies and airports

and to remit these to the applicable governmental entity or airport on a periodic basis. These taxes and fees include federal

transportation taxes, federal security charges, airport passenger facility charges, and foreign arrival and departure fees. These

charges are collected from customers at the time they purchase their tickets but are not included in passenger revenue. The

Company records a liability upon collection from the customer and discharges the liability when payments are remitted to the

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease

applicable governmental entity or airport.

payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable,

variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event

or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement

date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of

lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying

r) Income taxes

Current income tax

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or

paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively

enacted, at the reporting date. Current income tax relating to items recognized directly in equity is recognized in equity. Mana-

gement periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations

are subject to interpretation and establishes provisions where appropriate.

amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments

Deferred tax

or a change in the assessment of an option to purchase the underlying asset.

The short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term.

During the years ended December 31, 2020, 2019 and 2018, there were no impairment charges recorded in respect of the

Company right-of-use asset.

iii) Sale and leaseback

The Company enters into sale and leaseback agreements whereby an aircraft or engine is sold to a lessor upon delivery and

the lessor agrees to lease such aircraft or engine back to the Company.

The Company measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and

their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences, except, in respect of taxable temporary differences

associated with investments in subsidiaries when the timing of the reversal of the temporary differences can be controlled and

it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, the carry-forward of unused tax credits and any

available tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary

differences, and the carry-forward of unused tax credits and available tax losses can be utilized, except, in respect of deductible

temporary differences associated with investments in subsidiaries deferred tax assets are recognized only to the extent that

it is probable that the temporary differences will reverse in the foreseeable future and taxable profits will be available against

the asset that relates to the right of use retained by the seller-lessee. Accordingly, the Company recognizes in the Statement

which the temporary differences can be utilized.

of Operations only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. The rest of the

gain is amortized over the lease term.

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The Company considers the following criteria in assessing the probability that taxable profit will be available against which

Under the cash flow hedge (CFH) accounting model, the effective portion of the hedging instrument’s changes in fair value is

the unused tax losses or unused tax credits can be utilized: (a) whether the entity has sufficient taxable temporary differences

recognized in OCI, while the ineffective portion is recognized in current year earnings in the statement of profit or loss. The

relating to the same taxation authority and the same taxable entity, which will result in taxable amounts against which the

cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative

unused tax losses or unused tax credits can be utilized before they expire; (b) whether it is probable that the Company will

change in fair value of the hedged item. During the years ended December 31, 2019 and 2018, there was no ineffectiveness with

have taxable profits before the unused tax losses or unused tax credits expire; (c) whether the unused tax losses result from

respect to derivative financial instruments. The amounts recognized in OCI are transferred to earnings in the period in which

identifiable causes which are unlikely to recur; and (d) whether tax planning opportunities are available to the Company that

the hedged transaction affects earnings. During the year ended December 31, 2020, the Company recorded the ineffective

will create taxable profit in the period in which the unused tax losses or unused tax credits can be utilized.

portion of Ps.448.6 million with respect to derivative financial instruments.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer

The realized gain or loss of derivative financial instruments and non-derivative financial instruments that qualify as CFH are

probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized

recorded in the same caption of the hedged item in the consolidated statement of operations.

deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that

future taxable profits will allow the deferred tax asset to be recovered.

Accounting for the time value of options

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized

to be initially recognized at fair value. Subsequent measurement for options purchased and designated as CFH requires that the

or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

option’s changes in fair value be segregated into its intrinsic value (which will be considered the hedging instrument’s effective

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are

considered as a cost of hedging (recognized in OCI in a separate component of equity) and accounted for in income when the

recognized in correlation to the underlying transaction in OCI.

hedged items also are recognized in income.

portion in OCI) and its correspondent changes in extrinsic value (time value and volatility). The extrinsic value changes will be

The Company accounts for the time value of options in accordance with IFRS 9, which requires all derivative financial instruments

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against

t) Financial instruments – Disclosures

current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

IFRS 7 requires a three-level hierarchy for fair value measurement disclosures and requires entities to provide additional

disclosures about the relative reliability of fair value measurements (Notes 4 and 5).

The charge for income taxes incurred is computed based on tax laws approved in Mexico, Costa Rica, Guatemala and El Salvador

at the date of the consolidated statement of financial position.

u) Treasury shares

s) Derivative and non-derivative financial instruments and hedge accounting

gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of treasury shares. Any difference between

The Company mitigates certain financial risks, such as volatility in the price of jet fuel, adverse changes in interest rates and

the carrying amount and the consideration received, if reissued, is recognized in additional paid in capital. Share-based payment

exchange rate fluctuations, through a risk management program that includes the use of derivative financial instruments and

options exercised during the reporting period are settled with treasury shares (Note 17).

The Company’s equity instruments that are reacquired (treasury shares), are recognized at cost and deducted from equity. No

non-derivative financial instrument.

v) Operating segments

In accordance with IFRS 9, derivative financial instruments and non-derivative financial instruments are recognized in the

Management of Controladora monitors the Company as a single business unit that provides air transportation and related

consolidated statement of financial position at fair value. At inception of a hedge relationship, the Company formally designates

services, accordingly it has only one operating segment.

and documents the hedge relationship to which it wishes to apply hedge accounting, as well as the risk management objective

and strategy for undertaking the hedge. The documentation includes the hedging strategy and objective, identification of the

The Company has two geographic areas identified as domestic (Mexico) and international (United States of America and Central

hedging instrument, the hedged item or transaction, the nature of the risks being hedged and how the entity will assess the

America) Note 24.

effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair

value or cash flows attributable to the hedged risk(s).

w) Current versus non-current classification

Only if such hedges are expected to be effective in achieving offsetting changes in fair value or cash flows of the hedge item(s)

classification. An asset is current when it is: (i) expected to be realized or intended to be sold or consumed in normal operating

and are assessed on an ongoing basis to determine that they have been effective throughout the financial reporting periods

cycle, (ii) expected to be realized within twelve months after the reporting period, or, (iii) cash or cash equivalent unless restricted

for which they were designated, hedge accounting treatment can be used.

from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are

The Company presents assets and liabilities in the consolidated statement of financial position based on current/non-current

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classified as non-current. A liability is current when: (i) it is expected to be settled in normal operating cycle, (ii) it is due to be

Amendments to IFRS 16 Covid-19 Related Rent Concessions

settled within twelve months after the reporting period, or, (iii) there is no unconditional right to defer the settlement of the

On 28 May 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases The amendments provide

liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current. Deferred

relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct con-

tax assets and liabilities are classified as noncurrent assets and liabilities.

sequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent

x) Impact of new International Financial Reporting Standards

New and amended standards and interpretations already effective

concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments

resulting from the Covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change

were not a lease modification. This amendment had impact on the consolidated financial statements of the Company (Note 14).

The Company applied for the first-time certain standards and amendments, which are effective for annual periods beginning

on or after January 1, 2020. The Company has not early adopted any other standard interpretation or amendment that has

Amendments to IFRS 9 Prepayment Features with Negative Compensation

been issued but is not yet effective.

The nature and the effect of these changes are disclosed below:

Amendments to IFRS 3: Definition of a Business

Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income,

provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’

(the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments

to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of an event or circumstance that causes the early

termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination

The amendment to IFRS 3 Business Combinations clarifies that to be considered a business, an integrated set of activities and

of the contract.

assets must include, at a minimum, an input and a substantive process that, together, significantly contribute to the ability to

create output. Furthermore, it clarifies that a business can exist without including all of the inputs and processes needed to

create outputs. These amendments did not have an impact on consolidated financial statements of the Company.

Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform

The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs,

which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is

affected if the reform gives rise to uncertainty about the timing and/or amount of benchmark-based cash flows of the hedged

item or the hedging instrument. These amendments had no impact on the consolidated financial statements of the Company.

Amendments to IAS 1 and IAS 8 Definition of Material

The amendments provide a new definition of material that states, “information is material if omitting, misstating or obscuring

it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on

the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments

clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other

information, in the context of the financial statements. A misstatement of information is material if it could reasonably be

expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial

statements of, nor is there expected to be any future impact to the Company.

Conceptual Framework for Financial Reporting issued on March 29, 2018

These amendments had no impact on the consolidated financial statements of the Company.

y) Convenience translation

U.S. dollar amounts at December 31, 2020 shown in the consolidated financial statements have been included solely for the

convenience of the reader and are translated from Mexican pesos, using an exchange rate of Ps.19.9487 per U.S. dollar, as

reported by the Mexican Central Bank (Banco de México) as the rate for the payment of obligations denominated in foreign

currency payable in Mexico in effect on December 31, 2020. Such translation should not be construed as a representation

that the peso amounts have been or could be converted into U.S. dollars at this or any other rate. The referred information

in U.S. dollars is solely for information purposes and does not represent that the amounts are in accordance with IFRS or the

equivalent in U.S. dollars in which the transactions were conducted or in which the amounts presented in Mexican pesos can

be translated or realized.

2. Significant accounting judgments, estimates and assumptions

The preparation of these financial statements requires management to make estimates, assumptions and judgments that affect

the reported amount of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities

at the date of the Company’s consolidated financial statements. Note 1 to the Company’s consolidated financial statements

provides a detailed discussion of the significant accounting policies. Certain of the Company’s accounting policies reflect

significant judgments, assumptions or estimates about matters that are both inherently uncertain and material to the Company’s

The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements

in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers

financial position or results of operations.

develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand

Actual results could differ from these estimates. Revisions to accounting estimates are recognized in the period in which the

and interpret the standards. This will affect those entities which developed their accounting policies based on the Conceptual

estimate is revised. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying

Framework. The revised Conceptual Framework includes some new concepts, updated definitions and recognition criteria for

amounts of assets and liabilities within the next financial year are discussed below.

assets and liabilities and clarifies some important concepts. These amendments had no impact on the consolidated financial

statements of the Company.

For Leases significant accounting judgments, estimates and assumptions refer to Note 1p (iv).

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i) LTIP, LTRP and MIP (equity settled)

iii) Fair value measurement of financial instruments

The Company measures the cost of its equity-settled transactions at fair value at the date the equity benefits are conditionally

Where the fair value of financial assets and financial liabilities recorded in the consolidated statements of financial position

granted to employees. The cost of equity-settled transactions is recognized in earnings, together with a corresponding increase

cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows

in treasury shares, over the period in which the performance and/or service conditions are fulfilled. For grants that vest on

model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree

meeting performance conditions, compensation cost is recognized when it becomes probable that the performance condition

of judgment is required in establishing fair values.

will be met. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date

reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments

The judgments include considerations of inputs such as liquidity risk, credit risk and expected volatility. Changes in assumptions

that will ultimately vest.

about these factors could affect the reported fair value of financial instruments (Note 4).

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity

iv) Impairment of long-lived assets

instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires de-

The Company assesses whether there are indicators of impairment for long-lived assets and right of use assets, annually and

termining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate

at other times when such indicators exist in the related CGU. Impairment exists when the carrying amount of a long-lived asset

also requires determining the most appropriate inputs to the valuation model, including the expected life of the share option,

or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less cost to sell and its value-in-use.

volatility and dividend yield, and making assumptions about them. The assumptions and models used for estimating fair value

for share-based payment transactions are disclosed in (Note 17).

In making these determinations, the Company uses certain assumptions, including, but not limited to estimated, undiscounted

SARs plan (cash settled)

The cost of the SARs plan is measured initially at fair value at the grant date, further details of which are given in (Note 17).

future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization,

length of service the asset will be used in the Company’s operations, excluding additions and extensions.

This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is

The Company's assumptions about future conditions important to its assessment of potential impairment of its long-lived assets,

remeasured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognized

including the impact of the COVID-19 pandemic to its business, are subject to uncertainty, and the Company will continue to

in salaries and benefits expense together with the grant date fair value. As with the equity settled awards described above, the

monitor these conditions in future periods as new information becomes available, and will updated its analyses accordingly.

valuation of cash settled award also requires using similar inputs, as appropriate.

ii) Deferred taxes

The Company has assessed whether any impairment of its long-lived assets existed and has determined that no charges were

deemed necessary under applicable accounting standards as of December 31, 2020.

Deferred tax assets are recognized for all available tax losses to the extent that it is probable that taxable profit will be available

against which the losses can be utilized. Management’s judgment is required to determine the amount of deferred tax assets

v) Allowance for expected credit loss

that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning

An allowance for expected credit loss on accounts receivables is established in accordance with the information mentioned in

opportunities to advance taxable profit before expiration of available tax losses.

Note 1f) ii).

Tax losses relate to operations of the Company on a stand-alone basis, in conformity with current Tax Law and may be carried

vi) Leases - Estimating the incremental borrowing rate

forward against taxable income generated in the succeeding years at each country and may not be used to offset taxable

The Company cannot readily determine the interest rate implicit in its leases, therefore, it uses its incremental borrowing rate

income elsewhere in the Company’s consolidated group (Note 19).

(IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar

term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar

During the years ended December 31, 2020, 2019 and 2018, the Company used Ps.0, Ps.214,460 and Ps.154,353, respectively,

economic environment. The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no

of the available tax loss carry-forwards.

observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be

adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency).

The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make

certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).

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3. Financial instruments and risk management

For the year ended December 31, 2020, the Company recognized an unwind of the Zero cost collar of Ps.42,644 which was

recognized as part of finance cost.

Financial risk management

The Company’s activities are exposed to different financial risks stemmed from exogenous variables which are not under their

In accordance with IFRS 9 the Company separates the intrinsic value from the extrinsic value of an option contract; as such,

control but whose effects might be potentially adverse such as: (i) market risk, (ii) credit risk, and (iii) liquidity risk.

the change in the intrinsic value can be designated as hedge accounting. Because extrinsic value (time and volatility values)

of the Asian call options is related to a “transaction related hedged item”, it is required to be segregated and accounted for as

The Company’s global risk management program is focused on uncertainty in the financial markets and tries to minimize the

a cost of hedging in OCI and accrued as a separate component of stockholders’ equity until the related hedged item matures

potential adverse effects on net earnings and working capital requirements. The Company uses derivative financial instruments

and therefore impacts profit and loss.

to hedge part of such risks. The Company does not enter into derivatives for trading or speculative purposes. The sources

of these financial risks exposures are included in both “on balance sheet” exposures, such as recognized financial assets and

The underlying (US Gulf Coast Jet Fuel 54) of the options held by the Company is a consumption asset (energy commodity),

liabilities, as well as in “off-balance sheet” contractual agreements and on highly expected forecasted transactions. These on

which is not in the Company’s inventory. Instead, it is directly consumed by the Company’s fleet at different airport terminals.

and off-balance sheet exposures, depending on their profiles, do represent potential cash flow variability exposure, in terms

Therefore, although a non-financial asset is involved, its initial recognition does not generate a book adjustment in the Company’s

of receiving less inflows or facing the need to meet outflows which are higher than expected, therefore increase the working

inventories.

capital requirements.

Since adverse movements erode the value of recognized financial assets and liabilities, as well some other off-balance sheet

recognized in the same period or periods in which the hedged item is expected to be allocated to profit and loss. Furthermore,

financial exposures, there is a need for value preservation, by transforming the profiles of these fair value exposures. The

the Company hedges its forecasted jet fuel consumption month after month, which is congruent with the maturity date of the

Rather, it is initially accounted for in the Company’s OCI and a reclassification adjustment is made from OCI to profit and loss and

Company has a Finance and Risk Management department, which identifies and measures financial risk exposures, in order to

monthly serial Asian call options and Zero-Cost Collars.

design strategies to mitigate or transform the profile of certain risk exposures, which are taken up to the corporate governance

level for approval.

Market risk

a) Jet fuel price risk

The Company has a hedging policy in place to stablish guidelines to hedge fuel consumption; nevertheless, with COVID-19

outbreak, capacity was considerably reduced, thereby, ineffectiveness arose in the hedging relationship.

As of December 31, 2020 and 2019, the fair value of the outstanding US Gulf Coast Jet Fuel Asian call options was Ps.206

and Ps.0, respectively. As of December 31, 2020 and 2019 the Zero-Cost Collars outstanding balance was of Ps.(9,657) and

Since the contractual agreements with jet fuel suppliers include reference to jet fuel index, the Company is exposed to fuel

Ps.133,567, respectively and are presented as part of the financial assets and financial liabilities in the consolidated statement

price risk which might have an impact on the forecasted consumption volumes. The Company’s jet fuel risk management

of financial position. (See Note 4).

policy aims to provide the Company with protection against increases in jet fuel prices. In an effort to achieve the aforesaid,

the risk management policy allows the use of derivative financial instruments available on over the counter (“OTC”) markets

During the year ended December 31, 2020, the intrinsic value of the Asian call options recycled to the fuel cost was an expense

with approved counterparties and within approved limits. Aircraft jet fuel consumed in the years ended December 31, 2020,

of Ps.33,627 (Ps.20,646 which was recognized in the fuel cost and an expense of Ps.12,981 in finance cost).

2019 and 2018 represented 28%, 38% and 38%, of the Company’s operating expenses, respectively. The foreign currency risk is

disclosed within subsection b) in this note.

During the year ended December 31, 2019, the intrinsic value of the Asian call options recycled to the fuel cost was an expense

of Ps.61,069.

During the year ended December 31, 2020 and 2019, the Company entered into US Gulf Coast Jet fuel 54 Asian call options

designated to hedge 23,967 and 13,492 thousand gallons respectively. Such hedges represented a portion of the projected

During the year ended December 31, 2018, the intrinsic value of the Asian call options recycled to the fuel cost was a benefit

consumption for the 2Q 2020, 3Q 2020 & 1Q 2021 and for the 4Q 2019, respectively. Additionally, during the same period, the

of Ps.402,493.

Company entered into US Gulf Coast Jet Fuel 54 Asian Zero-Cost collar options designated to hedge 81,646 thousand gallons

and 70,136 thousand gallons, respectively. Such hedges represent a portion of the projected consumption for the 2Q 2020, 2H

During the year ended December 31, 2020, the intrinsic value of the Zero-Cost Collars recycled to the fuel cost was an expense

2020 & 2Q 2021 and the year 2020, respectively.

of Ps.1,271,462. (Ps.835,884 which was recognized in the fuel cost and an expense of Ps.435,578 in finance cost) and for the

year ended December 2019 and 2018 the intrinsic value of the Zero-Cost Collars recycled to the fuel cost was an expense of

Furthermore, the Company restructured part of its hedging portfolio by unwinding put legs on two Zero-Cost Collars

Ps.9,477. As of December 31, 2018, the Company did not have intrinsic value recycled to the fuel cost as settlements started

instruments with maturity dates of June & July to reduce crude market exposure, in line with capacity adjustments due to

taking place on 2019.

COVID-19 outbreak.

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Consolidated Financial StatementsThe cost of hedging derived from the extrinsic value changes of the jet fuel hedged position as of December 31, 2020 recognized

The following table illustrates the sensitivity of US Gulf Coast Jet Fuel 54 Zero Cost Collars to a reasonably possible change in

in other comprehensive income totals Ps.21,650. The (benefit) cost of hedging in December 2019 and 2018 totals (Ps.133,567)

fuel prices, with all other variables held constant, on the caption of accumulated other comprehensive income.

and Ps.134,096, and will be recycled to the fuel cost during 2021, as these options expire on a monthly basis and the jet fuel

is consumed.

The calculations were made considering a parallel movement of +/-5% in the spot price of the US Gulf Coast Jet 54 as of

The following table includes the notional amounts and strike prices of the derivative financial instruments outstanding as of

the end of the year:

December 31, 2020:

Content

119

Position as of December 31, 2020
Jet fuel Asian call and Zero-Cost
collars option contracts maturities

1 Half 2021

2 Half 2021

2021 Total

Sensitivity of position as of December 31, 2020

effect on equity (U.S. dollars)

US Gulf Coast Jet Fuel 54

spot level

+5%

–5%

+0.16M

–0.16M

Jet fuel risk Asian Calls

Notional volume in gallons (thousands)*

Strike price agreed rate per gallon (U.S. dollars) **

US$

Approximate percentage of hedge (of expected consumption value)

Jet fuel risk Zero-Cost collars

Notional volume in gallons (thousands)*

7,280

1.90

7,556

Strike price agreed rate per gallon (U.S. dollars) **

US$

1.23/1.93

US$

Approximate percentage of hedge (of expected consumption value)

All-in

Approximate percentage of hedge (of expected consumption value)

12%

–

–%

–

–%

* US Gulf Coast Jet 54 as underlying asset
** Weighted average

US$

7,280

1.90

7,556

Please note this sensitivity was calculated with the net position delta of the portfolio, as change on the underlying price is

small enough to be a good proxy.

US$

1.23/1.93

b) Foreign currency risk

Though the Mexican peso is the functional currency of the Company, a significant portion of its operating expenses are

denominated in U.S. dollar; thus, Volaris relies on sustained U.S. dollar cash flows coming from operations in the United States

of America and Central America to support part of its commitments in such currency, however there’s still a mismatch.

Position as of December 31, 2019
Jet fuel Zero-Cost Collar
collars option contracts maturities

1 Half 2020

2 Half 2020

2020 Total

Foreign currency risk arises from possible unfavorable movements in the exchange rate which could have a negative impact in

the Company’s cash flows. To mitigate this risk, the Company may use foreign exchange derivative financial instruments and

non-derivative financial instruments.

While most of the Company’s revenue is generated in Mexican pesos, 27% of its revenues came from operations in the United

States of America and Central America for the year ended at December 31, 2020, (29% at December 31, 2019 and 32% at

December 31, 2018) and U.S. dollar denominated collections accounted for 44%, 43% and 38%, of the Company’s total collections

Jet fuel risk Zero-Cost collars

Notional volume in gallons (thousands)*

34,480

22,164

56,644

in 2020, 2019 and 2018, respectively.

Strike price agreed rate per gallon (U.S. dollars)**

US$

1.63/1.82

US$

1.65/1.81

US$

1.64/1.82

Approximate percentage of hedge (of expected consumption value)

All-in

Approximate percentage of hedge (of expected consumption value)

25%

15%

20%

Company’s expenditures, particularly those related to aircraft leasing and acquisition, are denominated in U.S. dollar. In addition,

although jet fuel for those flights originated in Mexico are paid in Mexican pesos, the price formula is impacted by the Mexican

peso /U.S. dollar exchange rate.

* US Gulf Coast Jet 54 as underlying asset
** Weighted average

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The Company’s foreign exchange on and off-balance sheet exposure as of December 31, 2020 and 2019 is as set forth below:

excluding the assets and liabilities associated with non-derivative financial instruments. The Company’s exposure to foreign

currency changes for all other currencies is not material.

Content

120

Assets:

Cash and cash equivalents

Other accounts receivable, net

Guarantee deposits

Derivative financial instruments

Total assets

Liabilities:

Financial debt (Note 5)

Lease liabilities

Suppliers

Other taxes and fees payable

Derivative financial instruments

Total liabilities

Net foreign currency position

Thousands of U.S. dollars

2020

2019

US$

495,612

US$

373,099

39,997

479,566

US$

1,015,185

23,620

437,499

7,088

841,306

2020

2019

Change in
USD rate

Effect on profit
before tax

+5%

–5%

+5%

–5%

Ps.

(253,763)

253,763

Ps.

(155,593)

155,593

US$

183,806

US$

176,927

The movement in the pre-tax effect is a result of a change in the fair value of assets and liabilities denominated in US dollars,

2,334,153

174,553

16,105

484

2,263,849

76,471

22,486

–

2,709,101

2,539,733

US$ (1,693,916)

US$ (1,698,427)

where the functional currency of the entity is a currency other than US dollars.

i) Hedging relationships designating non-derivative financial instruments as hedging instruments for Foreign Exchange (FX) risk

Regarding the foreign currency risk effective since January 1st, 2019, the Company implemented two hedging strategies

associated to forecasted FX exposures, by using non-derivatives financial assets and liabilities denominated in a non-functional

currency (the USD in this case) as hedging instruments.

At April 29, 2021, date of issuance of these financial statements, the exchange rate was Ps.19.9785 per U.S. dollar.

In the first FX hedging strategy, the Company designated a hedge to mitigate the variability in FX fluctuation denominated in

USD associated to forecasted revenues by using a portion of USD denominated financial liabilities associated to a portfolio of

In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the

leasing liabilities up until the terms of the remaining leasing arrangements. The lease liability amount designated as a hedging

derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is

item during 2019 was USD$2.1 billion.

the date on which the Company initially recognizes the non-monetary asset or non-monetary liability arising from the advance

consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each

The outstanding USD balance designated under this hedging strategy as of December 31, 2020 and 2019 amount to US$1.5

payment or receipt of advance consideration.

billion and USD$1.7 billion respectively, represented by recognized leasing liabilities, which have been designated as hedging

instruments tagged to USD denominated forecasted revenues over the remaining lease term.

As of December 31, 2020, the Company did not enter foreign exchange rate derivatives financial instruments. As of December 31,

2019, the Company did not enter foreign exchange rate derivatives financial instruments. All the Company’s remaining position

The second FX strategy consists on designating a hedging relationship by using a portion of USD denominated non-derivative

in FX plain vanilla forwards matured throughout the first quarter of 2019 (January).

financial assets as hedging instruments, to mitigate the FX variability (MXN/USD) contractually included as a component

in the purchase of a portion of future Jet Fuel consumption. For this strategy designated in 2019, a portion of the Jet Fuel

During the year ended December 31, 2018, the Company entered into foreign currency forward contracts in U.S. dollars to hedge

consumption over the two following years has been designated as hedged item; while the hedging instrument is represented

approximately, 20% of its future 12 and 6 months of aircraft rental expenses. A portion of the Company’s foreign currency

by USD denominated recognized assets, including guaranteed deposits and cash and cash equivalents equivalent to USD$410

forwards position matured throughout the fourth quarter of 2018 (November & December). As of December 31, 2018, the

million, which represent a portion of the financial assets denominated in USD.

unrealized gains of Ps.14,241, respectively relating to the foreign currency forward contracts is included in OCI.

The outstanding USD balance designated under this hedging strategy as of December 31, 2020 and 2019 amount to US$60.5

For the years ended December 31, 2019 and 2018, the net gains (loss) on the foreign currency forward contracts were Ps.4,199

million and USD$166.7 million respectively, which does represent a portion of the recognized financial assets.

and Ps.52,516, respectively, which were recognized as part of rental expense in the consolidated statements of operations.

Foreign currency sensitivity

Since the hedged items on for both hedging strategies are targeted at mitigating the cash flow variability of highly expected

forecasted transactions, these are represented by multiple hedging relationships which do follow the Cash Flow Hedge

The following tables demonstrate the sensitivity to a reasonably possible change in USD exchange rates, with all other variables

Accounting Model.

held constant. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities

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The effective portion of the hedging instrument’s changes in fair value, are taken to the hedge reserve within the OCI, presented

d) Liquidity risk

as a separate caption within the Company’s Stakeholders Equity, which is in accordance with IFRS 9 criteria.

Liquidity risk represents the risk that the Company has insufficient funds to meet its obligations. Because of the cyclical nature

of the business, the operations, and its investment and financing needs related to the acquisition of new aircraft and renewal

The amounts recorded in OCI are recycled to profit and loss on a time basis as corresponding USD denominated Income and/

of its fleet, the Company requires liquid funds to meet its obligations.

or Jet Fuel consumptions do also impact the Company’s operating margin and are presented as adjustments to both operating

income and expense, with respect to each FX hedging strategy in a timely matter, as USD denominated income and jet fuel

The Company attempts to manage its cash and cash equivalents and its financial assets, relating the term of investments with

consumption are recognized within operating earnings, hence reflecting a portion of both operating income and expenses

those of its obligations. Its policy is that the average term of its investments may not exceed the average term of its obligations.

amounts, net of both FX Hedging activities.

This cash and cash equivalents position is invested in highly liquid short-term instruments through financial entities.

During the year ended December 31, 2020, the Company determined that a portion of its non-derivative financial instruments

The Company has future obligations related to maturities of bank borrowings, lease liabilities and derivative contracts. The

designated as hedge accounting were no longer effective, since the jet fuel consumption was lower than anticipated as a result

Company’s off-balance sheet exposure represents the future obligations related to aircraft purchase contracts. The Company

of the adverse effect of COVID-19. The impact of this adjustment in 2020 was a benefit of Ps.111 million in the Company´s net

concluded that it has a low concentration of risk since it has access to alternate sources of funding. The table below presents the

loss for the period. This amount was reclassified from other comprehensive income to comprehensive financial result. Further,

Company’s contractual principal payments required on its financial liabilities and the derivative financial instruments fair value:

Ps.94 million were also reclassified from other comprehensive income to operating expenses during 2020 as a result of the

completion of a forecasted transaction designated in a hedge relationship.

c) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows will fluctuate because of changes in market interest rates.

Interest-bearing borrowings:

December 31, 2020

Within one year

One to five years

Total

The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt

Pre-delivery payments facilities (Note 5)

Ps.

1,096,543

Ps.

2,554,069

Ps.

3,650,612

obligations and flight equipment lease agreements with floating interest rates.

The Company’s results are affected by fluctuations in certain benchmark market interest rates due to the impact that such

changes may have on operational lease payments indexed to the London Inter Bank Offered Rate (“LIBOR”).

The Company uses derivative financial instruments to reduce its exposure to fluctuations in market interest rates and accounts

for these instruments as an accounting hedge.

In most cases, when a derivative can be tailored within the terms and it perfectly matches cash flows of a leasing agreement,

it may be designated as a CFH and the effective portion of fair value variations are recorded in equity until the date the cash

flow of the hedged lease payment is recognized in the consolidated statements of operations.

Short-term working capital facilities (Note 5)

Asset backed trust note (Note 5)

Derivative financial instruments:

200,000

250,000

–

1,250,000

200,000

1,500,000

Jet fuel Asian Zero-Cost collars options contracts

9,657

–

9,657

Lease liabilities:

Aircraft, engines, land and buildings leases

Aircraft and engine lease return obligation

Total

6,484,092

86,801

37,646,450

2,417,683

44,130,542

2,504,484

Ps.

8,127,093

Ps. 43,868,202

Ps. 51,995,295

December 31, 2019

Within one year

One to five years

Total

The Irrevocable Trust number CIB/3249, whose trustor is the Company, entered a cap to mitigate the risk due to interest rate

Interest-bearing borrowings:

increases on the CEBUR coupon payments. The floating rate coupons reference to TIIE 28 are limited under the cap to 10% on

Pre-delivery payments facilities (Note 5)

Ps.

1,855,956

Ps.

1,452,553

Ps. 3,308,509

the reference rate for the life of the CEBUR and have the same amortization schedule. Thus, the cash flows of the CEBUR are

Short-term working capital facilities (Note 5)

perfectly matched by the hedging instrument.

The cap start date was July 19, 2019, and the maturity date is June 20, 2024; consisting of 59 caplets with the same specifications

as the CEBUR coupons for reference rate determination, coupon term, and fair value.

At December 31, 2020 and December 31, 2019, the Company’s outstanding hedging contracts in the form of interest rate caps

with notional amount of Ps.1.5 billion had fair values of Ps.326 and Ps.2,695, respectively, recorded in assets.

During the years ended December 31, 2018, the Company did not have any outstanding interest rate derivatives.

Asset backed trust note (Note 5)

Lease liabilities:

Aircraft, engines, land and buildings leases

Aircraft and engine lease return obligation

Total

200,000

–

1,500,000

4,720,505

383,093

35,796,540

1,469,595

200,000

1,500,000

40,517,045

1,852,688

Ps.

7,159,554

Ps. 40,218,688

Ps. 47,378,242

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e) Credit risk

i) In the principal market for the asset or liability, or

Credit risk is the risk that any counterparty will not meet its obligations under a financial instrument or customer contract,

(ii) In the absence of a principal market, in the most advantageous market for the asset or liability.

leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily for trade receivables)

and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and

The principal or the most advantageous market must be accessible to the Company.

other financial instruments including derivatives.

Financial instruments that expose the Company to credit risk involve mainly cash equivalents and accounts receivable. Credit

the asset or liability, assuming that market participants act in their economic best interest.

risk on cash equivalents relate to amounts invested with major financial institutions.

Credit risk on accounts receivable relates primarily to amounts receivable from the major international credit card companies. The

using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest

The assessment of a non-financial asset’s fair value considers the market participant’s ability to generate economic benefits by

The fair value of an asset or a liability is assessed using the course of thought which market participants would use when pricing

Company has a high receivable turnover; hence management believes credit risk is minimal due to the nature of its businesses,

and best use.

which have a large portion of their sales settled in credit cards.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high

to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available

credit-ratings assigned by international credit-rating agencies.

Some of the outstanding derivative financial instruments expose the Company to credit loss in the event of nonperformance

value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

by the counterparties to the agreements. However, the Company does not expect any of its counterparties to fail to meet their

obligations. The amount of such credit exposure is generally the unrealized gain, if any, in such contracts.

Level 1 – Quoted (unadjusted) prices in active markets for identical assets or liabilities.

To manage credit risk, the Company selects counterparties based on credit assessments, limits overall exposure to any single

indirectly observable.

counterparty and monitors the market position with each counterparty. The Company does not purchase or hold derivative

Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or

financial instruments for trading purposes. At December 31, 2020, the Company concluded that its credit risk related to its

outstanding derivative financial instruments is low, since it has no significant concentration with any single counterparty and it

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether

only enters into derivative financial instruments with banks with high credit-rating assigned by international credit-rating agencies.

transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair

significant to the fair value measurement as a whole) at the end of each reporting period.

g) Capital management

Management believes that the resources available to the Company are enough for its present requirements and will be sufficient

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature,

to meet its anticipated requirements for capital expenditures and other cash requirements for the 2020 fiscal year.

characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

The primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios to support its

Set out below, is a comparison by class of the carrying amounts and fair values of the Company’s financial instruments, other

business and maximize the shareholder’s value. No changes were made in the objectives, policies or processes for managing

than those for which carrying amounts are reasonable approximations of fair values:

capital during the years ended December 31, 2020 and 2019. The Company is not subject to any externally imposed capital

requirement, other than the legal reserve (Note 18).

4. Fair value measurements

The only financial assets and liabilities measured at fair value after initial recognition are the derivative financial instruments. Fair

value is the price that would be received from sale of an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to

sell the asset or transfer the liability takes place either:

Carrying amount

Fair value

2020

2019

2020

2019

Assets

Derivative financial instruments

Ps.

532

Ps.

136,262

Ps.

532

Ps.

136,262

Liabilities

Financial debt

(5,350,612)

(5,008,509)

(5,527,332)

(5,194,316)

Derivative financial instruments

(9,657)

–

(9,657)

–

Total

Ps.

(5,359,737)

Ps.

(4,872,247)

Ps.

(5,536,457)

Ps.

(5,058,054)

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The following table summarizes the fair value measurements at December 31, 2020:

The following table summarizes the (loss) gain from derivatives financial instruments recognized in the consolidated statements

of operations for the years ended December 31, 2020, 2019 and 2018:

Fair value measurement

Quoted prices
in active markets
Level 1

Significant
observable inputs
Level 2

Significant
unobservable inputs
Level 3

Total

Assets

Derivatives financial instruments:

Jet fuel Asian call options contracts*

Ps.

Interest rate Caps

Liabilities

Derivatives financial instruments:

Jet fuel Asian Zero-Cost collars options contracts*

Liabilities for which fair values are disclosed:

Interest-bearing loans and borrowings**

Net

Ps.

–

Ps.

206

326

(9,657)

(5,527,332)

Ps.

(5,536,457)

Ps.

–

Ps.

206

326

(9,657)

(5,527,332)

Ps.

(5,536,457)

* Jet fuel forwards levels and LIBOR curve.
** LIBOR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt.
There were no transfers between level 1 and level 2 during the period.

Instrument

Financial statements line

2020

2019

2018

Jet fuel Asian call options contracts

Jet fuel Zero-Cost collars contracts

Jet fuel Asian call options contracts

Jet fuel Zero-Cost collars contracts

Fuel

Finance cost

Foreign currency forward

Aircraft and engine

Interest rate cap

Total

rent expenses

Finance cost

Ps.

(20,646)

Ps.

(61,069)

Ps.

402,493

(835,884)

(12,981)

(435,578)

–

(1,468)

(9,477)

–

4,199

(1,282)

–

52,516

–

Ps.

(1,306,557)

Ps.

(67,629)

Ps.

455,009

The following table summarizes the net gain (loss) on CFH before taxes recognized in the consolidated statements of compre-

hensive income for the years ended December 31, 2020, 2019 and 2018:

Consolidated statements of other comprehensive (loss) income

The following table summarizes the fair value measurements at December 31, 2019:

Instrument

Financial statements line

2020

2019

2018

Fair value measurement

Quoted prices
in active markets
Level 1

Significant
observable inputs
Level 2

Significant
unobservable inputs
Level 3

Total

Assets

Derivatives financial instruments:

Jet fuel Zero-Cost collar options contracts*

Ps.

Interest rate Caps

Liabilities for which fair values are disclosed:

Interest-bearing loans and borrowings**

Net

Ps.

–

Ps.

133,567

Ps.

2,695

(5,194,316)

Ps.

(5,058,054)

Ps.

–

Ps.

133,567

2,695

(5,194,316)

Ps.

(5,058,054)

Jet fuel Asian call options contracts

Jet fuel Zero cost collars

Foreign currency contracts

Interest rate cap

Non derivative financial instruments

Total

OCI

Ps.

(11,993)

Ps.

11,148

Ps.

(174,984)

(143,224)

256,515

–

(900)

(1,591,569)

(14,241)

(4,023)

14,096

(122,948)

14,241

–

Ps.

(1,747,686)

Ps.

263,495

Ps.

(283,691)

The exchange rates used to translate the above amounts to Mexican pesos at December 31, 2020, 2019 and 2018 were Ps.19.9487,

Ps.18.8452 and Ps.19.6829, respectively, per U.S. dollar.

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5. Financial assets and liabilities

(ii) The following table provides a summary of the Company’s scheduled principal payments of financial debt and accrued

interest at December 31, 2020:

At December 31, 2020 and 2019, the Company’s financial assets are represented by cash and cash equivalents, trade and other

accounts receivable, accounts receivable with carrying amounts that approximate their fair value.

a) Financial assets

Derivative financial instruments designated as cash flow

hedges (effective portion recognized within OCI)

Jet fuel Asian call options

Jet fuel Zero-Cost collars

Interest rate cap

Total financial assets

Presented on the consolidated statements of financial position as follows:

Current

Non-current

b) Financial debt

2020

2019

Ps.

206

Ps.

–

326

532

133,567

2,695

Ps.

136,262

206

326

Ps.

133,567

2,695

Ps.

Santander/Bancomext

CEBUR

Banco Sabadell

Total

2021

2022

2023

2024

Total

1,112,629

252,605

200,872

2,554,069

–

Ps.

3,666,698

500,000

250,000

–

1,502,605

200,872

1,566,106

3,054,069

500,000

250,000

Ps.

5,370,175

(iii) Since 2011, the Company has financed the pre-delivery payments with Santander/Bancomext for the acquisition of its

aircraft through a revolving financing facility.

The “Santander/Bancomext” loan agreement provides for certain covenants, including limits to the ability to, among others:

Incur debt above a specified debt basket unless certain financial ratios are met.

ii) Create liens.

iii) Merge with or acquire any other entity without the previous authorization of the Banks.

iv) Dispose of certain assets.

v) Declare and pay dividends or make any distribution on the Company’s share capital unless certain financial ratios are met.

(i) At December 31, 2020 and 2019, the Company’s short-term and long-term debt consists of the following:

Revolving line of credit with Banco Santander México, S.A., Institución de Banca

Múltiple, Grupo Financiero Santander (“Santander”) and Banco Nacional de Comercio

Exterior, S.N.C. (“Bancomext”), in U.S. dollars, to finance pre-delivery payments,

maturing on October 31, 2022, bearing annual interest rate at the three-month LIBOR

2020

2019

At December 31, 2020, the Company was not in compliance with the financial ratio, therefore, the Company requested a waiver

to the banks. The company received a waiver dated October 23, 2020, for the covenant regarding the financial ratio for the PDP

financing facility that included the third and fourth quarter of 2020 and the first and second quarter of 2021. The waiver was

provided by both banks, Santander and Bancomext. At December 31, 2019, the Company was in compliance with the covenants

under the above-mentioned loan agreement.

plus a spread of 260 basis points.

Ps.

3,650,612

Ps. 3,308,509

II. The Company issued in the Mexico market Asset backed trust notes (“CEBUR”), in

Mexican pesos, maturing on June 20th, 2024 bearing annual interest rate at TIIE 28

For purposes of financing the pre-delivery payments, Mexican trusts were created whereby, the Company assigned its rights

and obligations under the Airbus Purchase Agreement with Airbus S.A.S. (“Airbus”), including its obligation to make pre-deli-

very payments to the Mexican trusts, and the Company guaranteed the obligations of the Mexican trusts under the financing

days plus 175 basis points.

1,500,000

1,459,871

agreement (CI Banco, S.A. (previously Deutsche Bank México, S.A. Trust 1710 and 1711)).

III. In December 2019, the Company entered into a short-term working capital facility

with Banco Sabadell S.A., Institución de Banca Multiple (“Sabadell”) in Mexican

pesos, bearing annual interest rate at TIIE 28 days plus a 300 basis points.

200,000

(15,542)

19,563

5,354,633

1,558,884

(22,472)

30,061

4,975,969

2,086,017

At December 31, 2020, the Company has available credit lines totaling Ps.9,256,978 of which Ps.6,851,338 were related to financial

debt (Ps.1,500,726 were undrawn) and Ps.2,405,640 were related to letters of credit (Ps.214,012 were undrawn). At December

31, 2019, the Company has available credit lines totaling Ps.9,005,008, of which Ps.6,649,358 were related to financial debt

(Ps.1,640,849 were undrawn) and Ps.2,355,650 were related to letters of credit (Ps.86,066 were undrawn).

On June 20, 2019, the Company, through its subsidiary Concesionaria issued 15,000,000 asset backed trust notes under the

Ps.

3,795,749

Ps.

2,889,952

ticket VOLARCB 19 for the amount of Ps.1.5 billion Mexican pesos through the Irrevocable Trust number CIB/3249 created by

Concesionaria. The issuance amount is part of a program approved by the Mexican National Banking and Securities Commission

(Comisión Nacional Bancaria y de Valores) for an amount of up to Ps.3.0 billion Mexican pesos.

IV. Amortized transaction costs

V. Accrued interest and other financial cost

Less: Short-term maturities

Long-term

TIIE: Mexican interbank rate

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The notes have a five year maturity annual reductions of Ps.250,000, Ps.500,000, Ps.500,000 and Ps.250,000 in 2021, 2022,

2023 and 2024, respectively, with a floating one-month coupon rate referenced to TIIE 28 plus with a 175 basis point spread.

The notes start amortizing at the end of the second year.

Current interest-bearing

January 1,
2019

Net cash
Flows

Accrued
Interest

Foreign
exchange
movement

Current vs
non-current
reclassification

Other

December 31,
2019

The asset backed trust notes structure operate on specific rules and provide a DSCR “Debt Service Coverage Ratio” which is

loans and borrowings

Ps.

1,212,259 Ps. (633,609) Ps.

13,698 Ps.

(41,173) Ps. 1,534,842 Ps.

– Ps. 2,086,017

computed by comparing the Mexican Peso collections over the previous six months to the next 6 months of debt service. In

Non-current interest - bearing

general, not retention of funds exists if the ratio exceeds 2.5 times. Amortization on the asset backed trust notes begins in July

loans and borrowings

2,310,939

2,273,143

–

(122,466) (1,534,842)

(36,822)

2,889,952

of 2021. In addition, early amortization applies if:

i) An event of retention is not cover in a period of 90 consecutive days.

Total liabilities from

financing activities

Ps. 3,523,198 Ps. 1,639,534 Ps.

13,698 Ps. (163,639) Ps.

– Ps. (36,822) Ps. 4,975,969

ii) The debt service reserve account of any series maintains on deposit an amount less than the required balance of the debt

service reserve account for a period that includes two or more consecutive payment methods.

c) Other financial liabilities

iii) Insolvency event of Concesionaria.

In December 2019, the Company entered into a short-term working capital facility with Banco Sabadell S.A., Institución de

Banca Multiple (“Sabadell”) in Mexican pesos, bearing annual interest rate at TIIE 28 days plus a 300 basis points. The “Sabadell”

working capital facility has the following covenant:

Derivative financial instruments designated as CFH (effective portion recognized within OCI):

Zero-Cost Collar options

Total financial liabilities

i) Joint obligor (Concesionaria) must represent 85% of EBITDA of the holding

Presented on the consolidated statements of financial position as follows:

During the years ended on December 31, 2020 and 2019, we were in compliance with the covenants under the terms and

conditions of the asset backed trusted notes and short-term working capital facilities.

Changes in liabilities arising from financing activities

At December 31, 2020 and 2019, the changes in liabilities from financing activities from the Company are summarized in the

following table:

Current interest-bearing

January 1,
2020

Net cash
Flows

Accrued
Interest

Foreign
exchange
movement

Current vs
non-current
reclassification

Other

December 31,
2020

loans and borrowings

Ps. 2,086,017 Ps. (1,231,695) Ps. (10,498) Ps.

(32,491) Ps. 747,551 Ps.

– Ps. 1,558,884

Non-current interest - bearing

loans and borrowings

2,889,952

1,374,678

–

231,612

(747,551)

47,058

3,795,749

Total liabilities from

financing activities

Ps. 4,975,969 Ps.

142,983 Ps. (10,498) Ps.

199,121 Ps.

– Ps. 47,058 Ps. 5,354,633

Current

Non-current

6. Cash and cash equivalents

An analysis of this caption is as follows:

Cash in banks

Short-term investments

Cash on hand

Restricted funds held in trust related to debt service reserves

Total cash and cash equivalents

2020

2019

Ps.

9,657

–

Ps.

–

2020

2019

Ps.

6,907,295

Ps.

4,612,927

3,068,618

36,432

91,040

3,231,125

44,880

91,040

Ps.

10,103,385

Ps.

7,979,972

As of December 31, 2020 and 2019, the Company recorded a portion of advance ticket sales by an amount of Ps.91,040 and

Ps.91,040, respectively, as a restricted fund (Note 1e). The restricted funds held in Trust are used to constitute the debt service

reserves and cannot be used for purposes other than those established in the contract of the Trust.

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7. Related parties

Frontier started having transactions with the Company in September 2018. As of December 31, 2020 and 2019, there have been

no guarantees provided or received for any related party receivables or payables. For the years ended December 31, 2020 and

a) An analysis of balances due from/to related parties at December 31, 2020 and 2019 is provided below.

2019, no provision for expected credit losses had been recognized.

All companies are considered affiliates, since the Company’s primary shareholders or directors are also direct or indirect

c) Servprot

shareholders of the related parties:

Servprot S.A. de C.V. (“Servprot”) is a related party because Enrique Beltranena, the Company’s President and Chief Executive

Officer, and Rodolfo Montemayor, who served as an alternate member of our board of directors until April 19, 2018, are share-

Type of transaction

Country of origin

2020

2019

Terms

holders of such company. Servprot provides security services for Mr. Beltranena and his family, as well as for Mr. Montemayor.

Due from:

Frontier Airlines Inc. (“Frontier”)

Code-share

USA

Ps.

72,629

Ps.

23,442

30 days

23,442

As of December 31, 2020 and 2019 Servprot did not have net balance under this agreement. During the years ended December

31, 2020, 2019 and 2018 the Company expensed Ps.3,464, Ps.3,120 and Ps.2,804, respectively for this concept.

Due to:

d) Aeroman

Grupo Aeroportuario del Centro Norte (“OMA”) Airport Services

Mexico

Ps.

80,681

Ps.

–

30 days

Aeromantenimiento, S.A. (“Aeroman”)

Aircraft and engine

Mexico/

Chevez, Ruiz, Zamarripa y Cía., S.C.

Professional fees

Mijares, Angoitia, Cortés y Fuentes, S.C.

Professional fees

Frontier Airlines Inc. (“Frontier”)

Code-share

Mexico

USA

One Link, S.A. de C.V. (“One Link”)

Call center fees

El Salvador

maintenance

El Salvador

39,284

4,823

166

–

1,474

30 days

–

30 days

996

30 days

16,246

30 days

39,838

30 days

Ps.

124,993

Ps.

58,554

Aeroman is a related party, because Marco Baldocchi a member of the board of the Company’s board of directors is an alternate

director of Aeroman. The Company entered into an aircraft repair and maintenance service agreement with Aeroman on January

1, 2017. This agreement provides that the Company must use Aeroman, exclusively for aircraft repair and maintenance services,

subject to availability. Under this agreement, Aeroman provides inspection, maintenance, repair and overhaul services for aircraft.

The Company makes payments under this agreement depending on the services performed. This agreement is for a 5-year

term. As of December 31, 2020 and 2019, the balances due under the agreement with Aeroman were Ps.39,284 and Ps.1,474,

respectively. The Company incurred expenses in aircraft, engine maintenance and technical support under this agreement of

Ps.243,063, Ps.207,439 and Ps.346,522 for the years ended December 31, 2020, 2019 and 2018, respectively.

b) During the years ended December 31, 2020, 2019 and 2018, the Company had the following transactions with related parties:

Related party transactions

Country of origin

2020

2019

2018

e) Human Capital International

Human Capital International HCI, S.A. de C.V. (“Human Capital International”), was a related party until April 19, 2018, because

Rodolfo Montemayor Garza, a former member of the Company’s board of directors, is founder and chairman of the board

of directors of Human Capital International. Human Capital International provided the Company with services regarding the

selection and hiring of executives. As of December 31, 2018, Human Capital International did not have net balance under this

agreement. For the year ended December 31, 2018, the Company recognized an expense under this agreement of Ps.324.

Revenues:

Transactions with affiliates

Frontier Airlines Inc

Code-share

Expenses:

Transactions with affiliates

Aeromantenimiento, S.A.

Technical support

Onelink, S.A. de C.V.

Call center fees

Grupo Aeroportuario del Centro Norte

Airport services

Mijares, Angoitia, Cortés y Fuentes, S.C.

Professional fees

Chevez, Ruiz, Zamarripa y Cía, S.C.

Professional fees

Servprot, S.A. de C.V.

Security services

Human Capital International HCI, S.A. de C.V.

Professional fees

Aircraft and engine maintenance

Mexico/El Salvador

Ps. 239,118

Ps. 201,624

Ps. 341,726

USA

Ps. 148,964

Ps. 208,968 Ps.

8,358

f) OneLink

Onelink, S.A. de C.V. (“Onelink”) was a related party until December 31, 2017, because Marco Baldocchi, a member of the board,

was a director of Onelink. As of October 24, 2019 and until June 30,2020 Onelink, Holdings, S.A. (“Onelink Holdings”) and its

subsidiary Onelink were related parties, because Mr. Rodrigo Antonio Escobar Nottebohm, a former alternate board member

Mexico/El Salvador

3,945

5,815

4,796

of Onelink Holdings, became an alternate Director of the Company. Pursuant to this agreement, Onelink received calls from the

customers to book flights and provides customers with information about fares, schedules and availability.

Mexico/El Salvador

73,167

37,026

32,193

–

As of December 31, 2020 and 2019, the account payable under this agreement was Ps.0 and Ps.39,838, respectively. For the

years ended December 31, 2020, 2019 and 2018, Company recognized an expense under this agreement of Ps.73,167, Ps.37,026

5,582

1,321

1,672

4,823

–

3,464

3,120

2,804

–

324

and Ps.0, respectively.

g) Mijares, Angoitia, Cortés y Fuentes

Mijares, Angoitia, Cortés y Fuentes, S.C. (“MACF”) is a related party because Ricardo Maldonado Yañez and Eugenio Macouzet de

León, member and alternate member, respectively, of the board of the Company since April 2018, are partners of the Company. As

of December 31, 2020 and 2019, MACF, the balance due under the agreement was Ps.166 and Ps.996, respectively. For the years

ended December 31, 2020, 2019 and 2018, the Company expensed Ps.5,582, Ps.1,321 and Ps.1,672, respectively, for this concept.

Mexico

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8. Other accounts receivable, net

Frontier is a related party because Mr. William A. Franke and Brian H. Franke are members of the board of the Company and

Frontier as well as Indigo Partners have significant investments in both Companies. As of December 31, 2020 and 2019, the

An analysis of other accounts receivable at December 31, 2020 and 2019, is detailed below:

Content

127

account receivable under this agreement was Ps.72,629 and Ps.23,442, respectively. Additionally, as of December 31, 2020 and

2019, the account payable under this agreement was Ps.39 and Ps.16,246, respectively. For the year ended December 31, 2020,

2019 and 2018 the Company recognized revenue under this agreement of Ps.148,964, Ps.208,968 and Ps.8,358, respectively.

i) Grupo Aeroportuario del Centro Norte (OMA)

In April 22, 2020, Grupo Aeroportuario del Centro Norte (OMA) became a related party because Mrs. Guadalupe Phillips

Margain is an independent member of the board of directors the Company and OMA. Mr. Ricardo Maldonado Yañez is also an

independent member of the board of directors the Company and OMA. As of December 31, 2020, the account payable under

this agreement was Ps.80,681. For the year ended December 31, 2020, the Company expensed Ps.32,193 for this concept.

j) Chevez, Ruiz, Zamarripa y Cia, S.C. (Chevez)

Chevez, Ruiz, Zamarripa y Cia, S.C. (Chevez) is a related party because Mr. José Luis Fernández Fernández is an independent

member of the Board of Directors, as well as the chairman of the Audit and Corporate Governance Committee of the Company

and non-managing partner of Chevez. Chevez provides tax advisory services to us. As of December 31, 2020, the balances due

to Chevez under the tax advisory services provided to the Company were Ps.4,823. For the year ended December 31, 2020,

the Company expensed Ps.4,823 for this concept.

k) Directors and officers

Current:

Credit cards

Benefits from suppliers

Other accounts receivable

Other points of sales

Cargo clients

Employees

Travel agencies and insurance commissions

Marketing services receivable

Airport services

Affinity credit card

Settlement receivable

Insurance claims

Allowance for credit losses

During the year ended December 31, 2020, 2019 and 2018, the chairman and the independent members of the Company’s board

of directors received an aggregate compensation of approximately Ps.5,762, Ps.8,085 and Ps.7,178, respectively, and the rest

of the directors received a compensation of Ps.3,692, Ps.4,367 and Ps.5,217, respectively.

Accounts receivable have the following aging:

2020

2019

Ps.

231,260

Ps.

389,634

105,947

87,204

67,315

45,201

36,287

16,099

4,020

–

593,348

(32,708)

26,989

189,904

102,002

46,600

29,681

76,975

7,024

42,894

49,040

2,422

143

963,308

(40,308)

Ps.

560,640

Ps.

923,000

During the years ended December 31, 2020, 2019 and 2018, all the Company’s senior managers received an aggregate compen-

sation of short and long-term benefits of Ps.253,681, Ps.237,846 and Ps.180,001, respectively, these amounts were recognized

in salaries and benefits in the consolidated statement of operations.

For the years ended December 31, 2020, 2019 and 2018 the cost of the share-based payments transactions (MIP and LTIP) were

Ps.75,040, Ps.49,659 and Ps.19,980, respectively. The cost (benefit) of the cash-settled payments transactions MIP II and SARs

were Ps.105,303, Ps.40,724 and Ps.(5,238), respectively (Note 17).

The Company has a short-term benefit plan for certain personnel whereby cash bonuses are awarded for meeting certain

Company’s performance target. During the years ended December 31, 2020, 2019 and 2018, the Company recorded a provision

in the amount of Ps.0, Ps.80,634 and Ps.50,000, respectively.

Days

0 – 30

31 – 60

61 – 90

91 – 120

2020

Impaired

2020

Not impaired

Total

2020

2019

Impaired

2019

Not impaired

Total

2019

Ps.

4,090

Ps.

486,001

Ps.

490,091

Ps.

5,804

Ps.

722,651

Ps.

728,455

–

28,618

13,872

6,081

54,686

13,872

6,081

83,304

–

34,504

64,983

19,274

116,092

64,983

19,274

150,596

Ps.

32,708

Ps.

560,640

Ps.

593,348

Ps.

40,308

Ps.

923,000

Ps.

963,308

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2020

2019

Ps.

829,918

–

279,390

Ps.

576,505

23,584

9,064

1,141,956

7,641,544

741,871

41,323

8,424,738

–

23,822

600,327

7,047,360

557,530

39,531

7,644,421

Ps.

9,566,694

Ps.

8,244,748

The movement in the allowance for credit losses from January 1, 2018 to December 31, 2020 is as follows:

11. Guarantee deposits

Balance as of January 1st, 2018

Write-offs

Increase in allowance

Balance as of December 31, 2018

Write-offs

Increase in allowance

Balance as of December 31, 2019

Write-offs

Increase in allowance

Balance as of December 31, 2020

9. Inventories

Ps.

(17,809)

17,126

(10,621)

(11,304)

11,389

(40,393)

(40,308)

21,264

(13,664)

Ps.

(32,708)

An analysis of this caption on December 31, 2020 and 2019 is as follows:

Current asset:

Credit letters deposits

Aircraft maintenance deposits paid to lessors (Note 1j)

Deposits for rental of flight equipment

Other guarantee deposits

Non-current asset:

Aircraft maintenance deposits paid to lessors (Note 1j)

Deposits for rental of flight equipment

Other guarantee deposits

An analysis of inventories on December 31, 2020 and 2019 is as follows:

Spare parts and accessories of flight equipment

Miscellaneous supplies

2020

2019

Ps.

271,454

Ps.

294,390

7,505

7,518

Ps.

278,959

Ps.

301,908

The inventory items are consumed during or used mainly in delivery of in-flight services and for maintenance services by the

Leasehold improvements

Company and are valued at the lower of cost or replacement value. During the years ended as of December 31, 2020, 2019

and 2018, the amount of consumption of inventories, recorded as an operating expense as part of maintenance expense was

Ps.234,691, Ps.284,687 and Ps.290,206, respectively.

10. Prepaid expenses and other current assets

An analysis of prepaid expenses and other current assets at December 31, 2020 and 2019 is as follows:

Flight credits

Advances to suppliers

Sales commission to travel agencies (Note 1d)

Other prepaid expenses

Prepaid insurance

Advances to components suppliers

Ps.

389,927

Ps.

–

163,044

151,342

81,803

64,309

–

283,340

84,239

115,054

88,941

209,557

Ps.

850,425

Ps.

781,131

2020

2019

Workshop machinery and equipment

20,574

12. Rotable spare parts, furniture and equipment, net

Gross value
At December 31,

Accumulated depreciation
At December 31,

Net carrying value
At December 31,

2020

2019

2020

2019

2020

2019

to flight equipment

Ps. 5,092,049 Ps. 4,220,672 Ps. (3,354,166) Ps. (2,679,884) Ps.

1,737,883 Ps.

1,540,788

Pre-delivery payments*

Flight equipment

Construction and improvements

in process

Constructions and improvements

Computer equipment

Workshop tools

Electric power equipment

Communications equipment

4,920,126

1,689,473

53,545

175,407

49,945

27,727

20,448

14,803

Motorized transport equipment

platform

Service carts on board

Office furniture and equipment

Allowance for obsolescence

15,247

9,216

67,035

(3,000)

4,507,770

–

4,920,126

4,507,770

1,287,102

(1,223,560)

(553,852)

465,913

733,250

474,240

172,460

47,566

26,875

20,412

14,099

16,301

15,026

7,675

70,709

(3,000)

–

(148,391)

(42,126)

(24,398)

(12,773)

(9,038)

(7,641)

(7,924)

(6,112)

–

(131,510)

(34,495)

(22,023)

(11,400)

(8,322)

(6,092)

(5,392)

(5,554)

(35,309)

(34,049)

53,545

27,016

7,819

3,329

7,675

5,765

12,933

7,323

3,104

31,726

–

(3,000)

474,240

40,950

13,071

4,852

9,012

5,777

10,209

9,634

2,121

36,660

(3,000)

Total

Ps.

12,152,595 Ps.

10,877,907 Ps. (4,871,438) Ps. (3,492,573) Ps.

7,281,157 Ps. 7,385,334

* During the years ended December 31, 2020, 2019 and 2018, the Company capitalized borrowing costs of Ps.384,038, Ps.456,313 and
Ps.357,920, respectively. The amount of this line is net of disposals of capitalized borrowing costs related to sale and leaseback transac-
tions of Ps.401,862, Ps.328,571 and Ps.242,678, respectively.

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Flight
equipment

Constructions and
improvements

Computer
equipment

Office
furniture and
equipment

Electric
power
equipment

Workshop
Tools

Motorized
transport
equipment
platform

Communications
equipment

Workshop
machinery
and
equipment

Service
carts on board

Allowance for
obsolescence

Pre-delivery
payments

Construction and
improvements
in process

Leasehold
improvements to
flight equipment

Total

Net book amount as of December 31, 2018

Ps.

664,322 Ps.

15,235 Ps.

16,547

Ps.

38,306

Ps.

5,122 Ps.

3,369 Ps.

446

Ps.

4,911

Ps.

4,481

Ps.

126

Ps.

– Ps. 3,672,090 Ps.

142,738 Ps.

1,214,589

Ps. 5,782,282

Content

129

Additions

Disposals and transfers

Borrowing costs, net*

Other movements

Depreciation

As of December 31, 2019

Cost

692,186

5,596

1,730

1,461

2,487

3,137

(538,370)

–

(131)

–

(10)

–

34,840

1,999

2,757

(84,888)

(14,721)

(7,074)

(5,854)

733,250

40,950

1,287,102

172,460

13,071

47,566

36,660

70,709

–

2,487

(1,084)

9,012

20,412

–

284

(1,938)

4,852

26,875

–

9,529

(341)

9,634

15,026

355

4,278

2,273

(3,000)

1,412,790

525,556

661,954

3,310,803

(2)

–

1,446

(933)

5,777

14,099

(35)

–

2,529

(1,044)

10,209

16,301

–

(278)

2,121

7,675

(704,852)

(3,957)

127,742

–

(190,097)

133,939

(1,247,357)

127,742

(287)

–

(469,694)

(587,849)

(3,000)

4,507,770

474,240

1,540,788

7,385,334

(3,000)

4,507,770

474,240

4,220,672

10,877,907

Accumulated depreciation

(553,852)

(131,510)

(34,495)

(34,049)

(11,400)

(22,023)

(5,392)

(8,322)

(6,092)

(5,554)

–

(2,679,884)

(3,492,573)

Net book amount as of December 31, 2019

Additions

Disposals and transfers

Borrowing costs, net*

Other movements

Depreciation

As of December 31, 2020

Cost

733,250

668,376

(861,761)

–

40,950

128

–

2,317

(73,952)

(16,379)

465,913

27,016

13,071

1,648

–

713

(7,613)

7,819

1,689,473

175,407

49,945

36,660

9,012

733

–

101

(5,768)

31,726

67,035

–

(1,373)

7,675

20,448

4,852

851

–

222

(2,374)

(2,533)

3,329

27,727

7,323

15,247

–

1,083

(1,095)

5,765

14,803

–

4,273

(1,549)

12,933

20,574

Accumulated depreciation

(1,223,560)

(148,391)

(42,126)

(35,309)

(12,773)

(24,398)

(7,924)

(9,038)

(7,641)

2,121

1,541

–

(558)

3,104

9,216

(6,112)

2,185,902

176,607

646,219

3,682,005

(1,755,724)

(354,146)

(17,822)

–

(243,156)

235,509

(2,971,631)

(17,822)

1,098

–

(684,633)

(797,827)

(3,000)

4,920,126

53,545

1,737,883

7,281,157

(3,000)

4,920,126

53,545

5,092,049

12,152,595

–

(3,354,166)

(4,871,438)

9,634

5,777

10,209

(3,000)

4,507,770

474,240

1,540,788

7,385,334

–

Net book amount as of December 31, 2020

Ps.

465,913 Ps.

27,016 Ps.

7,819

Ps.

31,726

Ps.

7,675 Ps.

3,329 Ps.

7,323

Ps.

5,765

Ps.

12,933

Ps.

3,104

Ps.

(3,000) Ps. 4,920,126 Ps.

53,545 Ps.

1,737,883

Ps. 7,281,157

Depreciation expense for the years ended December 31, 2020, 2019 and 2018, was Ps.797,827, Ps.587,849 and Ps.427,756,

In November 2018, the Company amended the agreement with Airbus to reschedule the remaining 26 fleet deliveries between

respectively. Depreciation charges for the year are recognized as a component of operating expenses in the consolidated

2019 and 2022. Also, in this amendment Volaris used its rights on the Airbus Purchase Agreement to convert six A320NEO into

statements of operations.

A321NEO. In July 2020, we amended the agreement with Airbus to reschedule the 80 aircraft deliveries between 2023 and

2028. In October 2020, we amended the agreement with Airbus to reschedule the remaining 18 fleet deliveries between 2020

b) In October 2005 and December 2006, the Company entered into purchase agreements with Airbus and International Aero

and 2022.

Engines AG (“IAE”) for the purchase of aircraft and engines, respectively. Under such agreements and prior to the delivery of

each aircraft and engine, the Company agreed to make pre-delivery payments, which were calculated based on the reference

On August 16, 2013, the Company entered into certain agreements with IAE and United Technologies Corporation Pratt & Whitney

price of each aircraft and engine, and following a formula established for such purpose in the agreements.

Division (“P&W”), which included the purchase of the engines for 14 A320CEO and 30 A320NEO respectively, to be delivered

between 2014 and 2022. This agreement also included the purchase of one spare engine for the A320CEO fleet (which was

In 2011, the Company amended the agreement with Airbus for the purchase of 44 A320 family aircraft to be delivered from

received during the fourth quarter of 2016) and six spare engines for the A320NEO fleet to be received from 2017 to 2022. In

2015 to 2020. The new order includes 14 A320CEO (“Current Engine Option Aircraft”) and 30 A320NEO. Additionally, during

November 2015, the Company amended the agreement with the engine supplier to provide major maintenance services for the

December 2017, the Company amended the agreement with Airbus for the purchase of 80 A320 family aircraft to be delivered

engines of sixteen aircrafts (10 A320NEO and 6 A321NEO). This agreement also includes the purchase of three spare engines,

from 2022 to 2026. The new order includes 46 A320NEO and 34 A321NEO. Under such agreement and prior to the delivery of

two of them for the A320NEO fleet, and one for the A321NEO fleet.

each aircraft, the Company agreed to make pre-delivery payments, which shall be calculated based on the reference price of

each aircraft, and following a formula established for such purpose in the agreement.

The Company received credit notes from P&W in December 2017 of Ps.58,530 (US$3.06 million), which are being amortized

on a straight-line basis, prospectively during the term of the agreement. As of December 31, 2020, and 2019, the Company

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amortized a corresponding benefit from these credit notes of Ps.4,878 and Ps.4,878, respectively, which is recognized as an

13. Intangible assets, net

offset to maintenance expenses in the consolidated statements of operations.

The composition and movement of intangible assets is as follows:

During the years ended December 31, 2020 and 2019, the amounts paid for aircraft and spare engine pre-delivery payments

were of Ps.2,185,902 (US$102.7 million) and Ps.1,412,790 (US$75.0 million), respectively.

The current purchase agreement with Airbus requires the Company to accept delivery of 96 Airbus A320 family aircraft during

the following eight years (from January 2021 to October 2028). The agreement provides for the addition of 96 Aircraft to its

fleet as follows: four in 2021, twelve in 2022, three in 2023, thirteen in 2024, fifteen in 2025, twenty-five in 2026, eleven in 2027

and thirteen in 2028.

Commitments to acquisitions of property and equipment are disclosed in Note 23.

During the years ended December 31, 2020, 2019 and 2018 the Company entered into aircraft and spare engines sale and

leaseback transactions, resulting in a gain of Ps.710,522, Ps.284,759 and Ps.609,168, respectively, that was recorded under the

caption other operating income in the consolidated statement of operations, only the amount of gains that relates to the rights

transferred to the buyer-lessor. The rest of the gains are amortized under the lease term (Note 20).

c) During December 2017, the Company entered into an updated total support agreement with Lufthansa for 66 months, with an

effective date on July 1, 2018. This agreement includes similar terms and conditions as the original agreement.

As part of this agreement, the Company received credit notes of Ps.28,110 (US$1.5 million), which are being amortized on a

straight-line basis, prospectively during the term of the agreement. As of December 31, 2020, 2019 and 2018, the Company

amortized a corresponding benefit from these credit notes of Ps.5,230, Ps.5,230 and Ps.7,191, respectively, recognized as an

offset to maintenance expenses in the consolidated statements of operations.

Gross value

Accumulated amortization

Net carrying amount

At December 31,

Useful Life years

2020

2019

2020

2019

2020

2019

Software

1 – 4

Ps.

704,257

Ps. 579,360

Ps. (512,695)

Ps.

(411,963)

Ps.

191,562

Ps.

167,397

Balance as of January 1st, 2019

Ps.

179,124

Additions

Disposals

Amortization

Exchange differences

Balance as of December 31, 2019

Additions

Disposals

Amortization

Exchange differences

Balance as of December 31, 2020

77,325

–

(87,667)

(1,385)

167,397

124,724

–

(100,618)

Ps.

191,562

Software amortization expense for the years ended December 31, 2020, 2019 and 2018 was Ps.100,618, Ps.87,667 and Ps.72,885,

respectively. These amounts were recognized in depreciation and amortization in the consolidated statements of operations.

d) On September 5, 2019, the Company acquired one previously leased A319 aircraft from the lessor, which was accounted for

a cost for a total amount of Ps.392,076 (US$19,600). This transaction did not generate any gain or loses in our consolidated

statements of operations.

14. Leases

The Company identified the major components as separate parts at their respective cost. These major components of the

The most significant leases are as follows:

aircraft are presented as part of the aircraft and depreciated over their useful life.

During the month of December 2019, the Company sold the recently acquired aircraft engines in a sale and lease back transaction.

As of December 31, 2020, the carry amount of the remaining owned aircraft and the depreciation was Ps.52,984 and Ps.5,946,

respectively. As of December 31, 2019, the carry amount of the remaining owned aircraft and the depreciation was Ps.54,771

and Ps.1,787, respectively.

Aircraft and engine represent the Company´s most significant lease agreements. At December 31, 2020, the Company leases

85 aircraft (81 as of December 31, 2019) and 18 spare engines under lease agreements (14 as of December 31, 2019) that have

maximum terms through 2033. These leases are generally guaranteed by either deposit in cash or letters of credits.

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Composition of the fleet and spare engines, leases*:

During the year ended December 31, 2019, the Company also leased two NEO spare engines (based on the terms of the Pratt

& Whitney purchase agreement FMP) and two CEO spare engines to its fleet. These four engines incorporated were subject to

Aircraft Type

A319

A320

A320NEO

A321

A321NEO

Model

132

133

233

232

271N

231

271N

At December 31, 2020

At December 31, 2019

sale and leaseback transactions and their respective lease agreements were accounted as leases. Additionally, during 2019 the

Company extended the lease term of one spare engine (effective from November 2019).

During the year ended December 31, 2018, the Company added ten new leased aircraft to its fleet (acquired three A320 NEO’s

through sale leaseback transactions under our existing Airbus purchase agreement and seven obtained directly from the lessors).

Also, the Company extended the lease term of Aircraft (effective from 2019) and two spare engines (effective from February

and April 2018), and returned four aircraft to their respective lessors.

During the year ended December 31, 2018, the Company also added two NEO spare engines to its fleet based on the terms of the

Pratt & Whitney purchase agreement (FMP). These two engines incorporated were subject to sale and leaseback transactions.

Engine spare Type

Model

At December 31, 2020

At December 31, 2019

Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:

V2500

PW1100

V2524–A5

V2527M–A5

V2527E–A5

V2527–A5

PW1127G–JM

PW1133G–JM

* Certain of the Company’s aircraft and engine lease agreements include an option to extend the lease term period. Terms and conditions

are subject to market conditions at the time of renewal.

As at January 1st, 2019

Additions

Depreciation on right of use assets

As at December 31, 2019

Additions

Disposals

Foreign exchange effect

Aircraft leases

Spare engine

leases

Land and

building leases

Total

Ps.

31,126,169

Ps.

579,696

Ps.

176,188

Ps. 31,882,053

6,676,492

(4,490,572)

33,312,089

4,876,071

(17,742)

–

230,200

(132,698)

677,198

362,081

–

42,992

(79,701)

139,479

15,222

–

795

6,949,684

(4,702,971)

34,128,766

5,253,374

(17,742)

795

During the year ended December 31, 2020, the Company added seven new leased aircraft to its fleet (seven A320 NEO´s

As at December 31, 2020

Ps. 33,406,490

Ps.

829,200

Ps.

80,527

Ps.

34,316,217

Depreciation on right of use assets

(4,763,928)

(210,079)

(74,969)

(5,048,976)

acquired through sale and leaseback transactions under our existing Airbus purchase agreement). Also, the Company returned

three aircraft to their respective lessors.

During the year ended December 31, 2020, the Company also leased two NEO spare engines (based on the terms of the Pratt

& Whitney purchase agreement FMP) and two CEO spare engines to its fleet. These four engines incorporated were subject to

sale and leaseback transactions and their respective lease agreements were accounted as leases.

During the year ended December 31, 2019, the Company added seven new leased aircraft to its fleet (three A320 NEO´s

acquired through sale and leaseback transactions under our existing Airbus purchase agreement and four obtained directly

from the lessor´s). Also, the Company extended the lease term of one spare engine (effective from 2019) and returned two

aircraft to their respective lessors. All the aircraft incorporated through the lessor´s aircraft order book was not subject to sale

and leaseback transactions.

Set out below are the carrying amounts of lease liabilities and the movements during the period:

As at January 1st

Additions

Disposals

Accretion of interest

Foreign exchange effect

Payments

As at 31 December

Current

Non-current

2020

2019

Ps. 40,517,045

Ps. 39,565,146

5,572,764

(231,566)

2,218,982

2,163,886

7,186,613

2,037,540

(1,772,452)

(6,110,569)

(6,499,802)

Ps. 44,130,542

Ps. 40,517,045

Ps. 6,484,092

Ps. 4,720,505

Ps. 37,646,450

Ps. 35,796,540

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The Company applied practical expedients to leases from applying IFRS 16 guidance on lease modification accounting for rent

15. Accrued liabilities

concessions for those lease modifications arising as a direct result of COVID-19. The net impact on the consolidated statements

of operations for 2020 was Ps.190,811, which reflects the changes to lease payments that arose from such concessions.

a) An analysis of current accrued liabilities at December 31, 2020 and 2019 is as follows:

The following are the amounts recognized in profit or loss:

Depreciation of right-of-use assets

Ps.

(5,048,976)

Ps.

(4,702,971)

Ps.

(4,043,691)

As of December 31,

2020

2019

2018

Interest expense on lease liabilities and aircraft and

engine lease return obligation (Note 21)

Aircraft and engine variable expenses

Total amount recognized in profit or loss

(2,350,250)

(1,845,254)

(2,128,162)

(961,657)

(1,755,978)

(956,010)

Ps.

(9,244,480)

Ps.

(7,792,790)

Ps.

(6,755,679)

Deferred revenue from V Club membership

The Company had total cash outflows for leases of Ps.6,110,569 in 2020 (Ps.6,499,802 in 2019 and Ps.5,710,907 in 2018).

i) Return obligations

The aircraft lease agreements of the Company also require that the aircraft and engines be returned to lessors under specific

conditions of maintenance. The costs of return, which no case are related to scheduled major maintenance, are estimated and

recognized ratably as a provision from the time it becomes likely such costs will be incurred and can be estimated reliably.

These return costs are recognized on a straight-line basis as a component of variable lease expenses and the provision is

included as part of other liabilities, through the remaining lease term.

The Company estimates the provision related to airframe, engine overhaul and limited life parts using certain assumptions

including the projected usage of the aircraft and the expected costs of maintenance tasks to be performed. For the years

ended December 31, 2020, 2019 and 2018, the Company expensed as supplemental rent Ps.1,428,179, Ps.680,964 and

Ps.659,106, respectively.

Purchase of 80 A320 New Engine Option (“NEO”) aircraft

On December 28, 2017, the Company amended the agreement with Airbus, S.A.S. (“Airbus”) for the purchase of additional

80 A320NEO family aircraft to be delivered from 2022 to 2026, to support the Company’s targeted growth markets in

Mexico, United States and Central America. The related commitments for the acquisitions of such aircraft are disclosed

in Note 23.

Content

132

2020

2019

Ps.

1,285,931

Ps.

1,507,659

337,467

179,342

174,549

122,729

98,942

86,374

35,359

20,830

10,634

3,888

242

296,829

230,935

132,085

81,124

120,254

48,526

67,808

35,465

10,634

–

542

Ps.

2,356,287

Ps.

2,531,861

2020

2019

Ps.

45,270

Ps.

55,905

16,847

4,581

19,439

15,452

Ps.

66,698

Ps.

90,796

Fuel and traffic accrued expenses

Salaries and benefits

Sales, marketing and distribution accrued expenses

Maintenance deposits

Accrued administrative expenses

Maintenance and aircraft parts accrued expenses

Others

Information and communication accrued expenses

Supplier services agreement

Benefits from suppliers

Advances from travel agencies

b) Non-current accrued liabilities at December 31, 2020 and 2019 is as follows:

Supplier services agreement

Benefits from suppliers

Other

c) An analysis of other liabilities is as follows:

Balance as of

January 1, 2020

Increase for

the year

Payments

December 31, 2020

Balance as of

Aircraft and engine lease return obligation

Ps.

1,852,688

Ps.

2,126,401

Ps.

(1,474,605)

Ps.

2,504,484

Guarantee deposit

Employee profit sharing (Note 16)

Current maturities

Non-current

–

24,097

250,000

20,810

–

(30,490)

250,000

14,417

Ps.

1,876,785

Ps.

2,397,211

Ps.

(1,505,095)

Ps.

2,768,901

Ps.

101,218

Ps.

2,667,683

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Balance as of

January 1, 2019

Increase for

the year

Payments

December 31, 2019

Balance as of

Changes in the defined benefit obligation are as follows:

Aircraft and engine lease return obligation

Ps.

1,831,045

Ps.

725,506

Ps.

703,863

Ps.

1,852,688

Employee profit sharing (Note 16)

14,984

22,134

13,021

24,097

Ps.

1,846,029

Ps.

747,640

Ps.

716,884

Ps.

1,876,785

Current maturities

Non-current

Ps.

407,190

Ps.

1,469,595

During the years ended December 31, 2020 and 2019 no cancellations or write-offs related to these liabilities were recorded.

Defined benefit obligation at January 1,

Net period cost charged to profit or loss:

Current service cost

Interest cost on benefit obligation

Remeasurement losses in other comprehensive income:

Actuarial changes arising from changes in assumptions

Payments made

Defined benefit obligation at December 31,

Content

133

2020

2019

Ps.

38,151

Ps.

18,153

8,449

2,630

2,651

(1,254)

8,214

1,872

10,192

(225)

Ps.

50,627

Ps.

38,206

On September 12, 2012, the Company entered into a cobrand credit card agreement with Banco Invex, S.A., Institución de Banca

Múltiple, Invex, Grupo Financiero Invex “Invex”.

The significant assumptions used in the computation of the seniority premium obligations are shown below:

On June 26, 2020, the Company signed a new amendment with Invex. Through this agreement, Invex pays certain commissions

to Volaris related to the cobrand credit card and Invex’s clients receive vouchers to be redeemed in different Volaris services

under certain conditions. A portion of the voucher cost is paid by Volaris and the remaining amount by Invex.

During the year ended December 31, 2020, Invex prepaid certain commissions to Volaris, which were recorded as part of other

liabilities.

16. Employee benefits

The components of net period cost recognized in the consolidated statement of operations and the obligations for seniority

premium for the years ended December 31, 2020, 2019 and 2018, are as follows:

Analysis of net period cost:

Current service cost

Interest cost on benefit obligation

Net period cost

2020

2019

2018

Ps.

8,449

2,630

11,079

Ps.

8,214

1,872

Ps.

10,086

Ps.

4,977

1,424

6,401

Financial:

Discount rate

Expected rate of salary increases

Annual increase in minimum salary

Biometric:

Mortality (1)

Disability (2)

2020

7.04%

5.50%

4.00%

2019

7.18%

5.50%

4.00%

2018

9.91%

5.65%

4.15%

EMSSA 09, CEPAL* 2010

EL SALVADOR, CEPAL*2010

COSTA RICA

IMSS–97

EL SALVADOR, CEPAL*2010
COSTA RICA

IMSS–97

EMSSA 09

IMSS–97

Mexican Experience of social security (EMSSA), Economic Commission for Latin America and the Caribbean (CEPAL for its Spanish acronym).

(1)
(2) Mexican Experience of Instituto Mexicano del Seguro Social (IMSS).

Accruals for short-term employee benefits at December 31, 2020 and 2019, respectively, are as follows:

Employee profit-sharing (Note 15c)

Ps.

14,417

Ps.

24,097

2020

2019

The key management personnel of the Company include the members of the Board of Directors (Note 7).

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17. Share-based payments

a) LTRP

In November 2020, 2019 and 2018, the extensions to the LTIP were approved by the Company’s shareholder’s and Company’s

Board of Directors, respectively. The total cost of the extensions approved were Ps.92,132 (Ps.59,899 net of withheld taxes),

Ps.86,772 (Ps.56,407 net of withheld taxes) and Ps.63,961 (Ps.41,590 net of withheld taxes), respectively. Under the terms of the

On November 6, 2014, the shareholders of the Company and the shareholders of its subsidiary Servicios Corporativos, approved

incentive plan, certain key employees of the Company were granted a special bonus that was transferred to the Administrative

an amendment to the current LTRP for the benefit of certain key employees, based on the recommendations of the Board of

Trust for the acquisition of Series A shares of the Company.

Directors of the Company at its meetings held on July 24 and August 29, 2014. For such purposes on November 10, 2014 an

irrevocable Administrative Trust was created by Servicios Corporativos and the key employees. The new plan was restructured

As of December 31, 2020, 2019 and 2018, the number of shares into the Administrative Trust associated with the Company’s

and named LTIP, which consists of a share purchase plan (equity-settled transaction) and SARs plan (cash settled).

share purchase payment plans is as follows:

On October 18, 2018, the Board of Directors of the Company approved a new long-term retention plan LTRP for certain executives

of the Company, through which the beneficiaries of the plan, will receive shares of the Company once the service conditions

are met. This plan does not include cash compensations granted through appreciation rights on the Company's shares. The

retention plans granted in previous periods under LTRP will continue in full force and effect until their respective due dates and

the cash compensation derived from them will be settled according to the conditions established in each plan.

b) LTIP

– Share purchase plan (equity-settled)

Under the share purchase plan (equity- settled), in November 2014 certain key employees of the Company were granted with

a special bonus by an amount of Ps.10,831, to be used to purchase Company’s shares. The plan consisted in:

(i) Servicios Corporativos granted a bonus to each key executive;

(ii) The bonus amount by Ps.7,059, net of withheld taxes, was transferred on November 11, 2014, as per the written instructions

of each key employees, to the Administrative Trust for the acquisition of Series A shares of the Company through an

intermediary authorized by the BMV based on the Administration Trust’s Technical Committee instructions;

(iii) Subject to specified terms and conditions set forth in the Administrative Trust, the acquired shares were in escrow under

the Administrative Trust for its administration until the vesting period date for each key executive, date as of which the key

executive can fully dispose of the shares and instruct as desired.

Outstanding as of January 1st, 2018

Purchased during the year

Granted during the year

Exercised/vested during the year

Forfeited during the year

Outstanding as of December 31, 2018

Purchased during the year

Granted during the year

Exercised/vested during the year

Forfeited during the year

Outstanding as of December 31, 2019

Purchased during the year

Granted during the year

Exercised/vested during the year

Forfeited during the year

Outstanding as of December 31, 2020

Number of
Series A shares

820,088 *

3,208,115

–

(353,457)

(121,451)

3,553,295 *

2,694,600

–

(959,614)

(173,090)

5,115,191

3,159,763

–

(2,142,426)

(327,217)

5,805,311 *

(iv) The share purchase plan provides that if the terms and conditions are not met by the vesting period date, then the shares

* These shares are presented as treasury shares in the consolidated statement of financial position as of December 31, 2020, 2019 and 2018.

would be sold in the BMV, and Servicios Corporativos would be entitled to receive the proceeds of the sale of shares.

(v) The key employees’ account balance will be tracked by the Administrative Trust. The Administrative Trust’s objectives are

to acquire Series A shares on behalf of the key employees and to manage the shares granted to such key executive based

on instructions set forth by the Technical Committee.

As the Administrative Trust is controlled and therefore consolidated by Controladora, shares purchased in the market and

held within the Administrative Trust are presented for accounting purposes as treasury stock in the consolidated statement of

changes in equity.

The vesting period of the shares granted under the Company’s share purchase plans is as follows:

Number of Series A shares

2,979,412

1,819,440

1,006,459

5,805,311

Vesting period

November 2020 – 2021

November 2021 – 2022

November 2022 – 2023

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In accordance with IFRS 2, the share purchase plans are classified as equity-settled transactions on the grant date. This valuation

of the Company or CPOs having shares as underlying securities for which, as long as certain conditions occur, the employees

is the result of multiplying the total number of Series A shares deposited in the Administrative Trust and the price per share,

will have the right to request the delivery of those shares (iii) the creation of an Administrative Trust to deposit such shares

plus the balance in cash deposited in the Administrative Trust.

in escrow until they are delivered to the officers or returned to the Company in the case that certain conditions do not occur;

and (iv) the execution of share sale agreements setting forth the terms and conditions upon which the officers may exercise

For the years ended December 31, 2020, 2019 and 2018, the compensation expense recorded in the consolidated statement

its shares at Ps.5.31 (five Mexican pesos 31/100) per share.

of operations amounted to Ps.75,040, Ps.49,659 and Ps.19,980, respectively. All shares held in the Administrative Trust are

considered outstanding for both basic and diluted (loss) earnings per share purposes, since the shares are entitled to dividend

On December 24, 2012, the Administrative Trust was created, and the share sale agreements were executed. On December 27,

if and when declared by the Company.

2012, the trust borrowed Ps.133,723 from the Company and immediately after; the trust paid the Company the same amount

During 2020, 2019 and 2018, some key employees left the Company; therefore, the vesting conditions were not fulfilled. In

borrowed as purchase price for the shares.

accordance with the terms of the plan, Servicios Corporativos is entitled to receive the proceeds of the sale of such shares,

The share sale agreements provide that the officers may pay for the shares at the same price upon the occurrence of

the number of forfeited shares as of December 31, 2020, 2019 and 2018, were (327,217), (173,090) and (121,451), respectively.

either an initial public offering of the Company’s capital stock or a change of control and as long as they remain employees

– SARs (cash settled)

until the options are exercised, with a maximum term of ten years. Upon payment of the shares by the officers to the

Management Trust, it must pay such amount back to the Company as repayment of the loan, for which the Company

On November 6, 2014, the Company granted 4,315,264 SARs to key employees that entitle them to a cash payment and vest as

charges no interest.

long as the employee continues to be employed by the Company at the end of each anniversary, during a 3 years period. The

total amount of the appreciation rights granted under this plan at the grant date was Ps.10,831 at such date.

The MIP has been classified as equity-settled, by which, the grant date, fair value is fixed and is not adjusted by subsequent

changes in the fair value of capital instruments. Equity-settled transactions are measured at fair value at the date the equity

Fair value of the SARs was measured at each reporting date. The carrying amount of the liability relating to the SARs as of

benefits are conditionally granted to employees. The total cost of the MIP determined by the Company was Ps.2,722 to be

December 31, 2019 and 2018 were Ps.1,901 and Ps.537, respectively. The retention plan granted in previous periods expired in

recognized from the time it becomes probable the performance condition will be met over the vesting period. Total cost

November 2020.

of the MIP related to the vested shares has been fully recognized in the consolidated statements of operations during the

The compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits

vesting years.

over the service period. During the years ended December 31, 2020, 2019 and 2018, the Company recorded a expense (benefit)

This cost was determined by using the improved Binomial valuation model from Hull and White, on the date in which the plan

of Ps.(1,901), Ps.2,964 and Ps.(186), respectively, in the consolidated statement of operations.

had already been approved by the shareholders and a shared understanding of the terms and conditions of the plan was reached

with the employees (December 24, 2012, defined as the grant date), with the following assumptions:

The fair value of these SARs was estimated at the grant date and at each reporting date using the Black-Scholes option pricing

model, taking into account the terms and conditions on which the SARs were granted.

During the years ended December 31, 2019, the Company made a cash payment to key employees related to the SARs plan in

the amount of Ps.2,395.

Such payments were determined based on the increase in the share price of the Company from the grant date to the exercisable

date.

c) MIP

– MIP I

Dividend yield (%)

Volatility (%)

Risk–free interest rate (%)

Expected life of share options (years)

Exercise share price (in Mexican pesos Ps.)

Exercise multiple

Fair value of the stock at grant date

2012

0.00%

37.00%

5.96%

8.8

5.31

1.1

1.73

The expected volatility reflects the assumption that the historical volatility of comparable companies is indicative of future

In April 2012, the Board of Directors authorized a MIP for the benefit of certain key employees, subject to shareholders’ approval.

trends, which may not necessarily be the actual outcome.

On December 21, 2012, the shareholders approved the MIP consisting of: (i) the issuance of an aggregate of 25,164,126 Series

A and Series B shares, representing 3.0% of the Company’s fully diluted capital stock; (ii) a grant of options to acquire shares

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Under the methodology followed by the Company, at the grant date and December 31, 2012, the granted shares had no positive

The carrying amount of the liability relating to the SARs as of December 31, 2020 and 2019 was Ps.177,770 and Ps.70,567,

intrinsic value.

respectively. The compensation cost is recognized in the consolidated statement of operations under the caption of salaries

In 2019, the key employees exercised 2,780,000 Series A shares. As a result, the key employees paid to the Management Trust

and benefits over the service period.

Ps.14,773 corresponding to the exercised shares for the year ended December 31, 2019. During 2020, there were no exercised

During the years ended December 31, 2020 and 2019, the Company recorded a (benefit) expense of Ps.107,204 and Ps.37,760,

shares under the MIP.

respectively, in the consolidated statement of operations. No SARs were exercised during 2020.

Thereafter, the Company received from the Management Trust the payment related to the exercised shares by the key employees

The vesting schedule is summarized in the table below:

as a repayment of the loan between the Company and the Management Trust.

Movements in share options

The following table illustrates the number of shares options and fixed exercise prices during the year:

Number of SARs

3,391,020

3,391,020 *

Vesting date

February 2021

Number of share

Exercise price

Total in thousands

options

in Mexican pesos

of Mexican pesos

* Includes forfeited SARs of 0, 0 and 1,563,520, for the years ended December 31, 2020, 2019 and 2018, respectively.

Content

136

Outstanding as of December 31, 2018

Ps.

10,433,981

Ps.

5.31

Ps.

55,441

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2019

Granted during the year

Forfeited during the year

Exercised during the year

–

(2,780,000)

7,653,981

Ps.

–

5.31

–

(14,773)

Ps.

40,668

–

The expense (benefit) recognized for the Company’s retention plans during the year is shown in the following table:

Expense (benefit) arising from cash-settled share-based

payments transactions

Ps.

105,303

Ps.

40,724

Ps.

(5,238)

2020

2019

2018

Expense arising from equity-settled share-based

payments transactions

75,040

49,659

19,980

14,742

Outstanding as of December 31, 2020

Ps.

7,653,981

Ps.

5.31

Ps.

40,668

Total expense arising from share-based payments transactions

Ps.

180,343

Ps.

90,383

Ps.

At December 31, 2020 and 2019, 7,653,981 and 7,653,981 share options pending to exercise were considered as treasury shares,

d) Board of Directors Incentive Plan (BoDIP)

respectively.

– MIP II

Certain members of the Board of Directors of the Company receive additional benefits through a share-based plan, which has

been classified as an equity-settled share-based payment and therefore accounted under IFRS 2 “Shared based payments”.

On February 19, 2016, the Board of Directors of the Company authorized an extension to the MIP for certain key employees.

In April 2018, the Board of Directors of the Company authorized a Board of Directors Incentive Plan “BoDIP”, for the benefit

Such extension was modified as of November 6, 2016. Under MIP II, 13,536,960 share appreciation rights of our Series A

of certain board members. The BoDIP grants options to acquire shares of the Company or CPOs during a four years period

shares were granted to be settled annually in cash in a period of five years in accordance with the established service

with an exercise price share at Ps.9.74, Ps.16.80 and Ps.16.12 for the years ended 2020, 2019 and 2018, respectively, which was

conditions. In addition, a five-year extension to the period in which the employees can exercise MIP II once the SARs are

determined on the grant date. Under this plan, no service or performance conditions are required to the board members for

vested was approved.

exercise the option to acquire shares, and therefore, they have the right to request the delivery of those shares at the time

Fair value of the SARs is measured at each reporting period using a Black-Scholes option pricing model, taking into consideration

they pay for them.

the terms and conditions granted to the employees. The amount of the cash payment is determined based on the increase in

For such purposes on August 29, 2018 the Trust Agreement number CIB/3081 was created by Controladora Vuela, Compañia

our share price between the grant date and the settlement date.

de Aviación S.A.B de C.V as trustee and CIBanco, S.A., Institucion de Banco Multiple as trustor. The number of shares hold as

of December 31, 2020 and 2019 available to be exercised is 5,233,693 and 2,072,344, respectively.

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18. Equity

All shares representing the Company’s capital stock, either Series A shares or Series B shares, grant the holders the same

economic rights and there are no preferences and/or restrictions attaching to any class of shares on the distribution of dividends

As of December 31, 2020, the total number of the Company’s authorized shares was 1,165,976,677; represented by common

and the repayment of capital. Holders of the Company’s Series A common stock and Series B common stock are entitled to

registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:

dividends when, and if, declared by a shareholders’ resolution. The Company’s revolving line of credit with Santander and

Content

137

Bancomext limits the Company’s ability to declare and pay dividends in the event that the Company fails to comply with the

payment terms thereunder. Only Series A shares from the Company are listed.

Variable

Class II

Total

During the years ended December 31, 2020 and 2019, the Company did not declare any dividends.

1,077,914,326

1,077,924,804

a) Earnings (loss) per share

Series A shares (1)

Series B shares (1)

Treasury shares (Note 17)

Fixed

Class I

10,478

13,702

24,180

–

24,180

88,038,171

88,051,873

1,165,952,497

1,165,976,677

(19,020,202)

(19,020,202) (1)

1,146,932,295

1,146,956,475

(1) The number of forfeited shares as of December 31, 2020 were 327,217, which are include in treasury shares.

On December 11, 2020, Controladora Vuela Compañía de Aviación, S.A.B. de C.V announced the closing of an upsized primary

follow-on equity offering in which the Company offered 134,000,000 of its Ordinary Participation Certificates (Certificados de

Participación Ordinarios), or CPOs, in the form of American Depositary Shares, or ADSs, at a price to the public of USD11.25

per ADS in the United States and other countries outside of Mexico, pursuant to the Company’s shelf registration statement

filed with the Securities and Exchange Commission (the “SEC”). In connection with the offering, the underwriters exercised

their option to purchase up to 20,100,000 additional CPOs in the form of ADSs. Each ADS represents 10 CPOs and each CPO

represents a financial interest in one Series A share of common stock of the Company. The Company currently intends to use

the net proceeds of approximately USD164,419,000 (after the deduction of the underwriters´ commission and expenses payable

Basic earnings (loss) per share (“EPS or LPS”) amounts are calculated by dividing the net income (loss) for the year attributable

to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS or LPS amounts are calculated by dividing the profit (loss) attributable to ordinary equity holders of the parent

(after adjusting for interest on the convertible preference shares, if any), by the weighted average number of ordinary shares

outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all

the dilutive potential ordinary shares into ordinary shares (to the extent that their effect is dilutive).

The following table shows the calculations of the basic and diluted earnings (loss) income per share for the years ended

December 31, 2020, 2019 and 2018.

Net (loss) income for the period

Ps.

(4,293,791)

Ps.

2,639,063

Ps.

(942,882)

At December 31,

2020

2019

2018 (Adjusted)

by the Company) from the offering for general corporate purposes. The increase in capital stock amounts of Ps.3,272,832.

Weighted average number of shares outstanding (in thousands):

As of December 31, 2019, the total number of the Company’s authorized shares was 1,011,876,677; represented by common

registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:

Series A shares (1)

Series B shares (1)

Treasury shares (Note 17)

Variable

Class II

Total

923,814,326

923,824,804

88,038,171

88,051,873

1,011,852,497

1,011,876,677

(15,136,057)

(15,136,057) (1)

996,716,440

996,740,620

Fixed

Class I

10,478

13,702

24,180

–

24,180

Basic

Diluted

EPS - LPS:

Basic

Diluted

1,021,561

1,011,877

(4.203)

2.608

(0.932)

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and

the date of authorization of these financial statements.

b) In accordance with the Mexican Corporations Act, the Company is required to allocate at least 5% of the net income of each year

to increase the legal reserve. This practice must be continued until the legal reserve reaches 20% of capital stock. As of December

31, 2020, 2019 and 2018, the Company’s legal reserve was Ps.291,178 or 8.5%, 9.8% and 9.8% respectively of our capital stock. For

(1) The number of forfeited shares as of December 31, 2019 were 294,541, which are include in treasury shares.

the years ended December 31, 2020, 2019 and 2018, we did not allocate any amount to our legal reserve fund.

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At an ordinary general shareholders’ meeting held on April 19, 2017 the shareholders approved to increase legal reserve in the

(v) A 10% withholding tax is imposed on dividends distributions to individuals and foreign shareholders from earnings generated

amount of Ps.252,928. As of December 31, 2020, 2019 and 2018 the Company’s legal reserve has not reached the 20% of its

starting January 1, 2014.

capital stock.

c) Any distribution of earnings in excess of the net tax profit account (Cuenta de utilidad fiscal neta or “CUFIN”) balance will be

subject to corporate income tax, payable by the Company, at the enacted income tax rate at that time. A 10% withholding tax

b) For the years ended December 31, 2020, 2019 and 2018, the Company reported on a consolidated basis taxable income of

is imposed on dividends distributions to individuals and foreign shareholders from earnings generated starting January 1, 2014.

Ps.302,029, Ps.938,304 and Ps.777,513, respectively, which was partially offset by tax losses from prior years.

The income tax rates for 2020, 2019 and 2018 in Guatemala, Costa Rica and El Salvador are 25%, 30% and 30% respectively.

d) Shareholders may contribute certain amounts for future increases in capital stock, either in the fixed or variable capital. Said

In accordance with the MITL and Costa Rican Income Tax Law (CRITL), tax losses may be carried forward against taxable

contributions will be kept in a special account until the shareholders meeting authorizes an increase in the capital stock of the

income generated in the succeeding ten and three years, respectively. Carryforward tax losses are Adjusted based on inflation.

Company, at which time each shareholder will have a preferential right to subscribe and pay the increase with the contributions

previously made. As it is not strictly regulated in Mexican law, the shareholders meeting may agree to return the contributions

An analysis of consolidated income tax expense for the years ended December 31, 2020, 2019 and 2018 is as follows:

to the shareholders or even set a term in which the increase in the capital stock has to be authorized.

19. Income tax

In accordance with the MITL, the Company and its Mexican subsidiaries are subject to income tax and each files its tax returns

on an individual entity basis and the related tax results are included in the accompanying consolidated financial statements.

The income tax is computed taking into consideration the taxable and deductible effects of inflation, such as depreciation

calculated on Adjusted assets values. Taxable income is increased or reduced by the effects of inflation on certain monetary

assets and liabilities through the annual inflation adjustment.

(i) Based on the approved law, corporate income tax rate for 2020 and thereafter is 30%.

Consolidated statements of operations

Current year income tax expense

Deferred income tax benefit (expense)

Total income tax benefit (expense)

(1) Includes translation effect by Ps.2,035
(2) Includes translation effect by Ps.(2,278)
(3) Includes translation effect by Ps.2,680

2020

2019

2018

Ps.

(90,609)

Ps.

(281,491)

Ps.

(232,824)

1,496,793 (1)

(813,340) (2)

582,644 (3)

Ps.

1,406,184

Ps.

(1,094,831)

Ps.

349,820

(ii) The tax rules include limits in the deductions of the exempt compensation amount certain items, as follows: Wages and

Consolidated statements of comprehensive income

benefits paid to workers 47% of income paid to workers and in certain cases up to 53% (holiday bonus, savings fund, employee

profit sharing, seniority premiums) will be deductible for employers. As a result, certain wage and salary provisions have

difference between tax and book values at year-end.

(iii) The MITL sets forth criteria and limits for applying some deductions, such as: the deduction of payments which, in turn, are

Deferred income tax related to items recognized in OCI

during the year

Net gain (loss) cash flow hedges

exempt income for workers, contributions for creating or increasing provisions for pension funds, contributions to the Mexican

Remeasurement (loss) gain of employee benefits

2020

2019

2018

Ps.

46,835

Ps.

(74,820)

Ps.

85,107

794

3,058

(1,797)

Institute of Social Security payable by the worker that are paid by the employer, as well as the possible non-deduction of

Deferred income tax charged to OCI

Ps.

47,629

Ps.

(71,762)

Ps.

83,310

payments made to related parties in the event of failing to meet certain requirements.

(iv) Taxable income for purposes of the employee profit sharing is the same used for the Corporate Income Tax except for

certain items.

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d) A reconciliation of the statutory corporate income tax rate to the Company’s effective tax rate for financial reporting purposes

e) An analysis of consolidated deferred taxes is as follows:

Content

139

is as follows:

Statutory income tax rate

Amendment tax return effects and other tax adjustments

Inflation on furniture, intangible and equipment

Inflation of tax losses

Foreign countries difference with Mexican statutory rate

Annual inflation adjustment

Unrecorded deferred taxes on tax losses

Non-deductible expenses

Mexican income tax matters

2020

2019

2018

30.00%

0.92%

0.29%

0.23%

(0.06%)

(0.91%)

(1.29%)

(4.51%)

24.67%

30.00%

(0.51%)

(0.48%)

(0.21%)

0.11%

(0.05%)

0.27%

0.19%

29.32%

30.00%

0.05%

2.08%

1.16%

(0.02%)

0.26%

(3.96%)

(2.51%)

27.06%

Activos por impuestos diferidos:

Deferred income tax assets:

Lease liability

Unearned transportation revenue

Extension lease agreement

Tax losses available for offsetting

against future taxable income

Intangible

Allowance for doubtful accounts

Employee benefits

Financial instruments

For Mexican purposes, corporate income tax is computed on accrued basis. MITL requires taxable profit to be determined by

Employee profit sharing

considering revenue net of tax deductions. Prior years' tax losses can be utilized to offset current year taxable income. Income

Provisions

tax is determined by applying the 30% rate on the net amount after tax losses utilization.

Non derivative financial instruments

For tax purposes, income is considered taxable at the earlier of: (i) the time the revenue is collected, (ii) the service is provided

or (iii) the time of the issuance of the invoice. Expenses are deductible for tax purposes generally on accrual basis, with some

exceptions, once the requirements established in the tax law are fulfilled.

Central America (Guatemala, Costa Rica and El Salvador)

According to Guatemala Corporate Income tax law, under the regime on profits from business activities, net operating losses

cannot offset taxable income in prior or future years. For the year ended December 31, 2020, 2019 and 2018, the Company

obtained a net operating (loss) income of Ps.(1,835), Ps.(1,085) and Ps.8,549, respectively.

Deferred income tax liabilities:

Right of use asset

Supplemental rent

Rotable spare parts, furniture and

equipment, net

Inventories

Other prepayments

Prepaid expenses and other assets

2020

2019

Consolidated statement Consolidated statement Consolidated statement Consolidated statement

of financial position

of operations

of financial position

of operations

Ps.

13,239,254

Ps.

1,084,140

Ps.

12,155,114

Ps.

1,233,661

773,443

576,422

420,908

61,565

15,191

7,948

4,323

(91,253)

(473,242)

15,768,220

10,292,753

1,878,865

707,092

83,402

9,786

(132,462)

12,839,436

436,598

314,100

272,452

(25,941)

47,476

2,934

(22)

(2,904)

(442,598)

(477,471)

1,208,764

797,063

459,343

303,970

446,849

14,089

11,463

(38,865)

7,227

351,345

4,229

14,511,827

55,824

171,916

10,236,929

1,706,949

(177,384)

(6,885)

(17,942)

(311,523)

884,476

90,287

27,728

179,061

313,137

61,708

(137,639)

(5,350)

(13,741)

9,187

2,958

–

2,734

60,655

4,229

297,878

672,311

111,430

239,452

1,392

(4,329)

88,683

According to Costa Rica Corporate Income tax law, under the regime on profits from business activities, net operating losses

can offset taxable income in a term of three years. For the years ended December 31, 2020, 2019 and 2018, the Company

generated net operating losses for an amount of Ps.55,751, Ps.50,246 and Ps.170,731, respectively, for which no deferred tax

Reflected in the consolidated statement of financial position as follows:

asset has been recognized.

Ps.

2,928,784

Ps.

1,494,758

Ps.

1,386,397

Ps.

(811,061)

According to El Salvador Corporate Income tax law, under the regime on profits from business activities, net operating losses

cannot offset taxable income in prior or future years. For the year ended December 31, 2020 and 2019, the Company obtained

a net operating loss of Ps.16,619 and Ps.32,494.

Deferred tax assets

Deferred tax liabilities

Deferred tax assets, net

2020

2019

Ps.

3,128,555

Ps.

1,542,536

(199,771)

(156,139)

Ps.

2,928,784

Ps.

1,386,397

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(285,994)

13,125,430

1,108,939

Consolidated Financial Statements

A reconciliation of deferred tax asset, net is as follows:

An analysis of the available tax losses carry-forward of the Company at December 31, 2020 is as follows:

Opening balance as of January 1,

Ps.

1,386,397

Ps.

2,269,220

2020

2019

Deferred income tax (expense) benefit during the current year

recorded on profits

Deferred income tax (expense) benefit during the current year

recorded in accumulated other comprehensive income (loss)

Closing balance as of December 31,

1,494,758

(811,061)

47,629

(71,762)

Ps.

2,928,784

Ps.

1,386,397

Year

of loss

2017

2018

2019

2020

Historical

loss

Adjusted

tax loss

Utilized

Total remaining

amount

Year of

expiration

Ps.

1,067,836

Ps.

1,206,232

Ps.

217,393

Ps.

988,839

92,604

4,922

863,847

55,751

92,604

5,186

878,533

55,751

78,849

–

13,755

5,186

878,533

55,751

Ps.

2,084,960

Ps.

2,238,306

Ps.

296,242

Ps.

1,942,064

2027

2021

2029

2030

2023

Content

140

At December 31, 2020, 2019 and 2018, the table shown above includes deferred income tax asset recognized by Concesionaria

(2020 and 2017), Comercializadora (2019 and 2020) and Vuela Aviación (2020) for tax losses carry-forwards to the extent

that the realization of the related tax benefit through future taxable profits is probable. The Company offsets tax assets and

liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred

tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

According to IAS 12, Income Taxes, a deferred tax asset should be recognized for the carry-forward of available tax losses to

the extent that it is probable that future taxable income will be available against which the available tax losses can be utilized.

In these regards, the Company has recognized at December 31, 2020, 2019 and 2018 a deferred tax asset for tax losses of

Ps.576,422, Ps.303,970 and Ps.309,320 respectively.

During 2020, the Company recognized a deferred tax asset for the carry-forward of available tax losses of Concesionaria and

Comercializadora, based on the positive evidence of the Company to generate taxable profit related to the same taxation

authority against which the available tax losses can be utilized before they expire. Positive evidence includes Concesionaria’s

actions to increase its aircraft fleet in the following years, increase in flight frequencies, and routes, inside and outside of Mexico;

Unrecognized NOLs

Tax rate

Deferred income tax

A breakdown of available tax loss carry-forward of Controladora and its subsidiaries at December 31, 2020 is as follows:

Historical

loss

Adjusted

tax loss

Utilized

remaining amount

Total

Comercializadora

Ps.

42,777

Ps.

43,685

Ps.

–

Ps.

43,685

Concesionaria

Operaciones Volaris

Vuela Aviación

1,875,180

18,648

148,355

2,027,302

18,965

148,354

217,393

–

78,849

1,809,909

18,965

69,505

Ps.

2,084,960

Ps.

2,238,306

Ps.

296,242

Ps.

1,942,064

the profit of Comercializadora, is derived directly from Concesionaria’s operations.

f) At December 31, 2020 the Company had the following tax balances:

The temporary differences associated with investments in the Company’s subsidiaries, for which a deferred tax liability has not

been recognized in the periods presented, aggregate to Ps.150,683 (2019: Ps.276,393). The Company has determined that the

undistributed profits of its subsidiaries will not be distributed in the foreseeable future. The Company has an agreement with

Adjusted contributed capital account (Cuenta de capital de aportación or “CUCA”)

Ps.

4,607,752

its associate that the profits of the associate will not be distributed until it obtains the consent of the Company. The Company

CUFIN*

3,241,275

does not anticipate giving such consent at the reporting date. Furthermore, the Group’s joint venture will not distribute its

profits until it obtains the consent of all venture partners.

* The calculation comprises all the subsidiaries of the Company.

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20,657

Ps.

1,921,407

Ps.

30%

576,422

2020

Consolidated Financial Statements

20. Other operating income and expenses

An analysis of finance cost is as follows:

An analysis of other operating income is as follows:

Gain on sale and leaseback (Note 12)

Ps.

710,522

Ps.

284,759

Ps.

609,168

Loss on sale of rotable spare parts furniture and equipment

Other income

(2,604)

22,415

(8,954)

51,403

(2,356)

15,161

Ps.

730,333

Ps.

327,208

Ps.

621,973

2020

2019

2018

An analysis of other operating expenses is as follows:

Interest expense on lease liabilities and aircraft

and engine lease return obligation

Financial instruments loss

Interest on asset backed trust notes

Cost of letter credit notes

Bank fees and others

Interest on debts and borrowings*

Other finance costs

Content

141

2020

2019

2018

Ps.

2,350,250

Ps.

2,128,162

Ps.

1,755,978

448,559

116,240

73,141

3,707

16,368

10,219

–

80,314

49,856

3,607

1,660

6,230

–

57,277

6,141

56,916

–

Ps.

3,018,484

Ps.

2,269,829

Ps.

1,876,312

2020

2019

2018

12). Interest expense not capitalized is related to the short-term working capital facility from Citibanamex.

* The borrowing costs related to the acquisition or construction of qualifying assets are capitalized as part of the cost of the asset (Note

Administrative and operational support expenses

Ps.

632,041

Ps.

581,181

Ps.

536,079

Technology and communications

Passenger services

Insurance

Others

383,648

87,850

53,507

194

381,055

65,477

74,661

10,553

385,841

70,337

60,892

5,949

Interest on debts and borrowings

Capitalized interest (Note 12)

Ps.

1,157,240

Ps.

1,112,927

Ps.

1,059,098

Net interest on debts and borrowing

2020

2019

2018

Ps.

400,406

Ps.

457,973

Ps.

414,836

(384,038)

(456,313)

(357,920)

in the consolidated statements of operations

Ps.

16,368

Ps.

1,660

Ps.

56,916

21. Finance income and cost

An analysis of finance income is as follows:

Interest on cash and equivalents

Interest on asset backed trust notes

Interest on recovery of guarantee deposits

22. Components of other comprehensive (loss) income

An analysis of the other comprehensive (loss) income for the years ended December 31, 2020, 2019 and 2018 is as follows:

2020

2019

2018

Ps.

93,122

Ps.

201,191

Ps.

152,437

6,342

2,047

6,525

–

166

Derivative financial instruments:

Reclassification of call options and forwards during the year

2020

2019

2018

Ps.

101,511

Ps.

207,799

Ps.

152,603

to profit or loss

Ps.

–

Ps.

–

Ps.

(455,009)

Extrinsic value of changes on jet fuel Asian call options

Extrinsic value of changes on jet fuel Zero cost collars

(Loss) gain of the matured foreign currency forward contracts

Loss of the interest rate Cap

Non derivative financial instruments

Total

(11,993)

(143,224)

–

(900)

(1,591,569)

11,148

256,515

(14,241)

(4,023)

14,096

227,509

(122,948)

66,757

–

Ps.

(1,747,686)

Ps.

263,495

Ps.

(283,691)

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23. Commitments and contingencies

Litigation

Aircraft related commitments and financing arrangements

The Company is a party to legal proceedings and claims that arise during the ordinary course of business. The Company believes

the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of

Committed expenditures for aircraft purchase and related flight equipment related to the Airbus purchase agreement, including

operations, or cash flows.

estimated amounts for contractual prices escalations and pre-delivery payments, will be as follows:

Commitment expenditures
in U.S. dollars

Commitment expenditures
equivalent in Mexican pesos (1)

24. Operating segments

2021

2022

2023

2024

2025 and thereafter

US$

Ps.

40,213

138,919

265,836

705,331

3,221,596

US$

4,371,895

Ps.

802,197

2,771,253

5,303,083

14,070,437

64,266,652

87,213,622

(1) Using the exchange rate as of December 31, 2020 of Ps.19.9487.

The Company is managed as a single business unit that provides air transportation services. The Company has two geographic

segments identified below:

Operating revenues:

Domestic (Mexico)

International:

2020

2019

2018

Ps.

16,572,198

Ps. 24,594,797

Ps.

18,493,476

All aircraft acquired by the Company through the Airbus purchase agreement through December 31, 2020 have been executed

through sale and leaseback transactions.

United States of America and Central America*

Non-derivative financial instruments

Total operating revenues

5,998,615

(411,222)

10,230,824

8,811,674

(72,949)

–

Ps.

22,159,591

Ps. 34,752,672

Ps. 27,305,150

In addition, we have commitments to execute sale and leaseback over the next two years. The estimated proceeds from these

* United States of America represents approximately 27%, 29% and 31% of total revenues from external customers in 2020, 2019 and 2018,

commitments are as follows:

respectively.

2021

2022

Aircraft sale prices estimated

in U.S. dollars

in Mexican pesos (1)

US$

209,500

Ps.

547,328

756,828

Ps.

4,179,253

10,918,482

15,097,735

(1) Using the exchange rate as of December 31, 2020 of Ps.19.9487.

The future lease payments for these non-cancellable sale and leaseback contracts are as follows:

2021

2022

2023

2024

2025 and thereafter

in U.S. dollars

in Mexican pesos (1)

Aircraft leases

US$

9,720

47,972

63,222

574,529

758,665

Ps.

193,901

956,979

1,261,197

11,461,107

15,134,381

(1) Using the exchange rate as of December 31, 2020 of Ps.19.9487.

Revenues are allocated by geographic segments based upon the origin of each flight. The Company does not have material

non-current assets located in foreign countries.

25. Subsequent events

Subsequent to December 31, 2020 and through April 29, 2021:

During the first quarter of 2021, the Company demonstrated flexibility focusing on capacity management in the face of a volatile

demand environment. The Company finished the quarter operating 88.3% of the Available Seat Miles flown in the first quarter

of the prior year.

On April 16, 2021, the Company received the Famous Brand Declaration from the Mexican Institute of Industrial Property ("IMPI")

for the "Volaris" brand, which is the first trademark within the Mexican aviation industry declared as a Famous Brand by IMPI.

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Operating and Financial
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5Operating and Financial Review and ProspectsA. Operating Results

You should read the following discussion of our financial condition
and results of operations in conjunction with our consolidated
financial statements and the notes thereto included elsewhere in
this annual report. The following discussion contains forward-loo-
king statements that reflect our plans, estimates and beliefs.
Our actual results could differ materially from those discussed
in the forward-looking statements. Factors that could cause or
contribute to these differences include those discussed below
and elsewhere in this annual report, particularly in “Risk Factors.”

revenues are based upon our capacity, load factor and the average
ticket revenue per booked passenger. Our capacity is measured
in terms of ASMs, which represents the number of seats we make
available on our aircraft multiplied by the number of miles the
seats are flown. Load factor, or the percentage of our capacity
that is actually used by paying customers, is calculated by di-
viding RPMs by ASMs. The average ticket revenue per booked
passenger represents the total passenger revenue divided by
booked passengers.

Description of Our Principal Line Items
Operating Revenues
As of January 1, 2018, we adopted IFRS 15 “Revenue from Con-
tracts with Customers” using the full retrospective method of
adoption. The main impact of IFRS 15 on us is the timing of re-
cognition of certain air travel-related ancillary services. Under the
new standard, certain ancillary services are recognized when we
satisfy our performance obligations, which is typically when the
air transportation service is rendered (at the time of the flight).
In addition, these ancillary services do not constitute separate
performance obligations or represent administrative tasks that
do not represent a different promised service and therefore
should be accounted for together with the air fare as a single
performance obligation of providing passenger transportation.

Therefore, the classification of certain ancillary fees in our state-
ment of operations, such as advanced seat selection, fees charged
for excess baggage, itinerary changes and other air travel-related
services, changed with adoption of IFRS 15, since they are part
of the single performance obligation of providing passenger
transportation.

Other passenger revenues include but are not limited to fees
charged for excess baggage, bookings through our call center
or third-party agencies, advanced seat selection, itinerary chan-
ges, V-Club memberships and charters. They are recognized as
revenue when the obligation of passenger transportation service
is provided by us or when the non-refundable ticket expires at
the date of the scheduled travel. Approximately 3% of our total
operating revenues were derived from other passenger revenues
in 2020.

Non-Passenger Revenues
Our non-passenger revenues include income generated from (i)
other non-passenger revenues and (ii) cargo services. In 2020, we
derived approximately Ps. 0.7 billion, or 3% of our total operating
revenues from these sources.

Revenues from other non-passenger services mainly include but
are not limited to commissions charged to third parties for the
sale of hotel reservations, trip insurance, rental cars and adver-
tising spaces to third parties. They are recognized as revenue at
the time the service is provided.

Passenger Revenues
Our passenger revenue includes income generated from: (i) fare
revenue and (ii) other passenger revenue.

Revenues from cargo services are recognized when the cargo
transportation is provided (upon delivery of the cargo to the
destination).

We derive our operating revenues primarily from transporting
passengers on our aircraft and some tickets sold by other airli-
nes such as Frontier. Approximately 58% of our total operating
revenues were derived from passenger fares in 2020. Passenger

The following table shows each of the line items in our conso-
lidated statements of operations for the periods indicated as a
percentage of our total operating revenues for that period:

Content

144

For the Years ended
December 31,

2018
Adjusted (1)

2019

2020

Operating revenues:

Passenger revenues:

Fare revenues

Other passenger revenues

Non-passenger revenues:

Other non-passenger revenues

Cargo

Non-derivative financial instruments:

Total operating revenues
Other operating income

Fuel expense, net

Landing, take-off and navigation
expenses

Depreciation of right of use assets

Salaries and benefits

Maintenance expenses

Sales, marketing and distribution
expenses
Aircraft and engine variable lease
expenses

Other operating expenses

Depreciation and amortization

68%

29%

67%

30%

58%

39%

(2)%

100% 100% 100%
(3)%
(1)%
(2)%

37%

33%

30%

17%

15%

11%

15%

14%

10%

18%

23%

16%

Total operating expenses, net

98%

87%

115%

Operating income
Finance income

Finance cost

Exchange gain, net

Income (loss) before income tax

Income tax (expense) benefit

Net income (loss)

2%
1%

(7)%

(5)%

13% (15)%
0%

(7)%

(14)%

11% (26)%

(3)%

8% (19)%

(1) On adoption of IFRS 16 we apply the new standard on the required effective date
as of January 1, 2019, using the full retrospective method of adoption in order to
provide for comparative results in all periods presented, recognizing the effect in
retained earnings as of January 1, 2017.

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Revenues from our international operations represented 32%, 29%
and 27% of our total revenues in 2018, 2019 and 2020, respec-
tively, and revenues from our domestic operations represented
68%, 71% and 73% of our total revenues in 2018, 2019 and 2020,
respectively.

Revenue Recognition
General
As of January 1, 2018, we adopted IFRS 15 “Revenue from Con-
tracts with Customers” using the full retrospective method of
adoption. The main impact of IFRS 15 on us is the timing of re-
cognition of certain air travel-related ancillary services. Under the
new standard, certain ancillary services are recognized when we
satisfy our performance obligations, which is typically when the
air transportation service is rendered (at the time of the flight).
In addition, these ancillary services do not constitute separate
performance obligations or represent administrative tasks that
do not represent a different promised service and therefore
should be accounted for together with the air fare as a single
performance obligation of providing passenger transportation.

Passenger revenues
Revenues from the air transportation of passengers are recog-
nized at the earlier of when the service is provided or when the
non-refundable ticket expires at the date of the scheduled travel.

Ticket sales for future flights are initially recognized as contract
liabilities under the caption unearned transportation revenue and,
once we provide the transportation service or when the non-re-
fundable ticket expires at the date of the scheduled travel, the
earned revenue is recognized as fare revenue and the unearned
transportation revenue is reduced by the same amount. All of
our tickets are non-refundable and are subject to change upon

a payment of a fee. Additionally, the Company does not operate
a frequent flier program.

Passenger revenues includes income generated from: (i) fare
revenues and (ii) other passenger revenues. Other passenger
services include but are not limited to fees charged for excess
baggage, bookings through the call center or third-party agen-
cies, advanced seat selection, itinerary changes and charters.
They are recognized as revenue when the obligation of passenger
transportation service is provided by the Company or when the
non-refundable ticket expires at the date of the scheduled travel.

We also classify as other passenger revenue “V-Club” and other
similar services, which are recognized as revenue over time when
the service is provided, as a modification of the tickets sold to
V-Club members.

Tickets sold by other airlines such as Frontier where we provide
the transportation are recognized as passenger revenue when
the service is provided.

We sell certain tickets with connecting flights with one or more
segments operated by other airline partners. For segments
operated by other airline partners, we have determined that we
are acting as an agent on behalf of the other airlines as they are
responsible for their portion of the contract (i.e. transportation
of the passenger). We, as the agent, recognize revenue within
other operating revenue at the time of the travel for the net
amount retained by us for any segments flown by other airlines.

Our tickets are non-refundable. However, if we cancel a flight for
causes attributable to us, including as a result of the COVID-19
pandemic, then the passenger is entitled to either reschedule
their flight at no cost or receive a refund or a voucher. No reve-
nue is recognized until either the voucher is redeemed and the
associated flight occurs, or the voucher expires. When vouchers
issued exceed the original amount paid by the passenger, the
excess is recorded as a decrease of operating revenues. All of
our revenues related to future services are rendered through a
period of approximately 12 months.

Content

145

Non-passenger revenues
Non-passenger revenues include revenues generated from: (i)
other non-passenger revenues and (ii) cargo services.

We concluded that the timing of satisfaction of revenue from
advertising spaces is to be recognized over time because the
customer simultaneously receives and consumes the benefits
we provide.

Additionally, we recognize as revenue the air transportation faci-
lity charges for non-show passengers, when the non-refundable
ticket expires at the date of the scheduled travel.

We also evaluated principal versus agent considerations as they
relate to certain non-air travel services arrangements with third
party providers. No changes were identified under this analysis
as we are the agent for those services provided by third parties.

We are also required to collect certain taxes and fees from cus-
tomers on behalf of government agencies and airports and remit
these back to the applicable governmental entity or airport on
a periodic basis. These taxes and fees include value added tax,
federal transportation taxes, federal security charges, airport
passenger facility charges, and foreign arrival and departure
taxes. These items are collected from customers at the time
they purchase their tickets, but are not included in passenger
revenue. We record a liability upon collection from the customer
and discharge the liability when payments are remitted to the
applicable governmental entity or airport.

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Operating Expenses, net

Our operating expenses consist of the following line items.

Other Operating Income. Other operating income primarily
includes the gains from sale and lease back operations of our
aircraft and engines.

Fuel expense, net. Fuel expense is our single largest opera-
ting expense. It includes the cost of fuel, related taxes, fueling
into-plane fees and transportation fees. It also includes reali-
zed gains and losses that arise from any fuel price derivative
activity qualifying for hedge accounting and gains and losses
that arise from non-derivative financial instruments.

Landing, Take-off and Navigation Expenses. Landing, take-off
and navigation expenses include airport fees, handling charges,
and other rents, which are fixed and variable facilities’ expenses,
such as the fees charged by airports for the use or lease of air-
port facilities, as well as costs associated with ground handling
services that we outsource at certain airports. This expense also
includes route charges, which are the costs of using a country’s
or territory’s airspace and are levied depending on the distance
flown over such airspace.

Depreciation of right–of–use assets. Depreciation of right-of-use
assets use includes the depreciation of all aircraft and engine
leases and some land and building leases that qualify under
IFRS 16.

With respect to this line item, IFRS 16 was issued in January
2016 and replaces IAS 17 “Leases,” IFRIC 4 “Determining Whe-
ther an Arrangement Contains a Lease,” SIC-15 “Operating
Leases-Incentives” and SIC-27 “Evaluating the Substance
of Transactions Involving the Legal Form of a Lease.” IFRS
16 sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to
account for all leases under a single on-balance sheet model
similar to the accounting for finance leases under IAS 17. Un-
der IFRS 16, at the commencement date of a lease, a lessee
recognizes a liability to make lease payments (i.e., the lease

liability) and an asset representing the right to use the under-
lying asset during the lease term (i.e., the right-of-use asset).
Lessees are required to separately recognize the interest
expense on the lease liability and the depreciation expense
on the right-of-use asset. Lessees are also required to reme-
asure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term or a change in future lease
payments). The lessee generally recognizes the amount of
the remeasurement of the lease liability as an adjustment to
the right-of-use asset. In addition, for leases denominated in
a foreign currency other than our functional currency (which
is the Mexican Peso) the lease liability will be remeasured at
each reporting date, using the foreign exchange of the pe-
riod. We adopted IFRS 16 on the mandatory date, January 1,
2019, through the full retrospective method recognizing the
effect on our statement of financial position as of January 1,
2017. This led to approximately Ps. 23.5 billion of right-of-use
assets and Ps. 32.7 billion as lease liabilities as of January 1,
2017. Our financial results as of and for the years ended De-
cember 31, 2017 and 2018 as presented in our annual report
for the year ended December 31, 2018 filed with the SEC on
April 26, 2019 have been adjusted in our Audited Consolidated
Financial Statements presented in this annual report to take
into account this application of IFRS 16. See note 1x to our
Audited Consolidated Financial Statements for more details.

Salaries and Benefits. Salaries and benefits expense include
the salaries, hourly wages, employee health insurance coverage
and variable compensation that are provided to employees for
their services, as well as the related expenses associated with
employee benefit plans and employer payroll taxes.

Maintenance Expenses. Maintenance expenses include all parts,
materials, repairs and fees for repairs performed by third party
vendors directly required to maintain our fleet. It excludes the
direct labor cost of our own mechanics, which is included under
salaries and benefits and includes only routine and ordinary main-
tenance expenses. Major maintenance expenses are capitalized
and subsequently amortized as described in “—Depreciation
and Amortization—” below.

Sales, Marketing and Distribution Expenses. Sales, marketing
and distribution expenses consist of advertising and promotional
expenses directly related to our services, including the cost of
web support, our outsourced call center, travel agent commis-
sions, and credit card discount fees that are associated with the
sale of tickets and other products and services.

Aircraft and Engine Variable Lease Expenses. Aircraft and en-
gine variable expenses consist of the maintenance deposits we
pay to the lessor as maintenance deposits when we determine
that we will probably not recover such deposits in whole or in
part. In these cases, we record these amounts in the results of
operations as additional aircraft rent (supplemental rent) from
the time we make the determination over the remaining term
of the lease. Aircraft and engine variable lease expense also
includes the estimated return costs of our fleet, which in no
case are related to scheduled major maintenance. The return
costs are recognized on a straight-line basis as a component
of supplemental rent.

Other Operating Expenses. Other operating expenses include
(i) administrative support such as travel expenses, stationery,
administrative training, monthly rent paid for our headquarters’
facility, professional fees and all other administrative and ope-
rational overhead expenses; (ii) costs for technological support,
communication systems, cell phones, and internal and operatio-
nal telephone lines; (iii) premiums and all expenses related to the
aviation insurance policy (hull and liability); and (iv) outsourced
ground services and the cost of snacks and beverages that we
serve on board to our passengers.

Depreciation and Amortization. Depreciation and amortiza-
tion expense include the depreciation of all flight equipment,
furniture and equipment we own and leasehold improvements
to flight equipment. It also includes the amortization of major
maintenance expenses we defer under the deferral method of
accounting for major maintenance events associated with the
aging of our fleet and recognize over the shorter period of the
next major maintenance event or the remaining lease term.

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A common measure of per unit costs in the airline industry is cost per available seat mile (CASM). The following table shows the
breakdown of CASM for the periods indicated:

Other operating income

Fuel expense, net

Landing, take-off and navigation expenses

Depreciation of right of use assets

Salaries and benefits

Maintenance expenses

Sales, marketing and distribution expenses

Aircraft and engine variable lease expenses

Other operating expenses

Depreciation and amortization

Total operating expenses, net

For the years ended December 31,

2018 Adjusted (2)

2019

2020

(In Ps. cents)

(In U.S. $ cents) (1)

(3.0)

48.2

21.8

19.2

14.9

7.2

7.1

4.6

5.0

2.4

(1.3)

47.7

20.9

19.2

14.7

6.0

5.9

3.9

4.5

2.8

(4.0)

36.3

22.4

27.6

18.9

6.4

10.1

6.3

4.9

Ps.127.4

Ps.124.3

Ps.139.0

(0.2)

1.8

1.1

1.4

0.9

0.3

0.5

0.3

0.2

6.8

(1) Peso amounts were converted to U.S. dollars solely for the convenience of the reader at the rate of Ps. 19.9487 per U.S. $1.00 as the rate for the payment of obligations deno-
minated in foreign currency payable in Mexico in effect on December 31, 2020. Such conversions should not be construed as a representation that the peso amounts actually
represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated, or at all.

(2) On adoption of IFRS 16 we apply the new standard described elsewhere in this annual report as of the effective date of January 1, 2019, using the full retrospective method

of adoption in order to provide for comparative results in all periods presented, recognizing the effect in retained earnings as of January 1, 2017.

Recent Developments
The outbreak of COVID-19 that has since grown into a global pan-
demic was first reported on December 31, 2019 in Wuhan, Hubei
Province, China. From Wuhan, the disease spread rapidly to other
parts of China as well as other countries, including Mexico and
the United States. Since the pandemic began, countries around
the world have responded by taking various containment mea-
sures, including imposing quarantines and medical screenings,
restricting domestic and international travel, closing borders,
restricting or prohibiting public gatherings and widely suspending
previously scheduled activities and events. In addition, concerns
related to COVID-19 have drastically reduced demand for air tra-

vel and caused major disruptions and volatility in global financial
markets, resulting in the fall of stock prices (including the price
of our stock), both trends which may continue. There are other
broad and continuing concerns related to the potential effects
of COVID-19 on international trade (including supply chain dis-
ruptions and export levels), travel, restrictions on our ability to
access our facilities or aircraft, requirements to collect additional
passenger data, employee productivity, employee illness, increa-
sed unemployment levels, securities markets, and other economic
activities, particularly for airlines, that may have a destabilizing
effect on financial markets and economic activity. Please refer to
“Risk Factors—Risks related to the airline industry—Public health

Content

147

threats, such as the H1N1 flu virus, the bird flu, Severe Acute Res-
piratory Syndrome (SARS), the Zika virus, COVID-19 and other
highly communicable diseases, affect travel behavior and could
have a material adverse effect on the Mexican economy, airline
industry reputation, the price of our shares, our business, results
of operations and financial condition” for a discussion of the ways
COVID-19 may impact our business and the Mexican economy.

As a result of the national health emergency and health security
measures imposed by the Mexican government in the spring of
2020, we reduced our capacity as measured by available seat mi-
les (“ASMs”). In April and May of 2020, our capacity as measured
by ASMs was reduced by up to 80% and 90%, respectively, and
remained reduced from June to November of 2020. Additionally,
we suspended service on certain routes. Costa Rica, Guatemala
and El Salvador imposed operational and migratory restrictions
that made it impossible to operate international passenger flights
to those countries. While a gradual opening of the economy and
easing of lockdown measures in Mexico and the other countries
in which we operate led to a recovery in our ASMs and route
operation during the second half of the year, with our capacity
returning to over 100% of 2019 levels for the month of December,
we can offer no assurance that additional travel restrictions, re-
quirements or border closures will not be enacted or reenacted
in the countries where we operate, which could result in reduced
passenger demand, revenue, and further capacity reductions.
For example, on January 26, 2021, an order issued by the United
States Center for Disease Control came into effect requiring all
international air passengers arriving to the United States to be
tested for COVID-19 no more than three days prior to departure,
which may have an adverse effect on demand for travel to the
United States.

Our business and the airline industry have experienced material
adverse impacts due to COVID-19. particularly in terms of pas-
senger traffic. The following chart sets forth passenger traffic
for the Mexican airline industry in each of the four quarters of
2020 as compared to the each of the four quarters of 2019, as
reported by AFAC:

2019

2020

Variation

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(In thousands, except for %)

First Quarter

15,753.9

15,229.4

(3.3)%

Second Quarter

17,966.2

1,868.5

(89.6)%

Third Quarter

Fourth Quarter

Total

18,427.2

6,983.7

(62.1)%

18,157.6

10,232.3

(43.6)%

70,304.9

34,313.9

(51.2)%

We cannot offer any assurance that these impacts will not inten-
sify to the extent that the pandemic persists. Further, additional
government COVID-19 response measures remain unknown and
depend on future developments with respect to COVID-19, inclu-
ding the scope and duration of the pandemic, which are highly
fluid, uncertain and cannot be predicted. It is not yet possible to
determine when the adverse effects of COVID-19 will abate and
the extent to which they will further decrease demand for air tra-
vel, which could continue to materially and negatively affect our
business, results of operations and financial condition. In order
to mitigate the impact of the COVID-19 pandemic on us, we took
the following measures:

Preserving liquidity and cash. We implemented a strict liquidity
preservation program, which has resulted in approximately U.S.
$200.0 million of savings as of December 31, 2020 through items
such as cost reductions and deferral agreements with suppliers.
In addition, we negotiated cost reductions with more than 360
suppliers and cut non-essential expenses. We also implemented
online training and leave of absence programs in order to redu-
ce costs. We expect to continue reducing costs with the aim of
reaching a CASM ex-fuel (calculated based on total operating
expenses, net excluding fuel expense divided by ASMs) similar
to 2019 levels by the end of 2021. As of December 31, 2020, our
cash and cash equivalents were approximately Ps. 10.1 billion.
Additionally, as of December 31, 2020 our credit lines totaled Ps.
9.3 billion, of which Ps. 6.9 billion were related to financial debt
and Ps. 2.4 billion were related to letters of credit (and of which
Ps. 1.7 billion were undisbursed).

Defending ourselves against sales declines. We decreased scheduled
capacity in order to protect our profitability. We also strengthened
our relationships with customers by revamping our website and
maintaining close communications via social media and email.

Developing commercial and network growth opportunities. We
are closely monitoring capacity reductions from competitors for
possible opportunities, testing new ancillary products and running
targeted promotions to test potential stimulation of air travel. Cer-
tain of our competitors are facing financial difficulties which has
led them to stop utilizing certain slots at the Mexico City Airport.
We have been allowed to use some of these slots to open new
destinations and increase operations at this airport, and by the end
of 2020 we held 25% of the market share by ASMs. However, since
the Mexico City Airport has issued a waiver to the minimum usage
requirement due to the COVID-19 pandemic, we will not be granted
historical priority of such slots unless (i) the waiver is terminated,
(ii) the slots are not reclaimed by their prior holders and (iii) we
continue operating the slots in accordance with certain conditions,
including usage at least 85% of the time and conducting on time
operations at least 85% of the time (operations are considered on
time if they fall within 15 minutes of the assigned slot time). We can
offer no assurance that our competitors will not reclaim the use of
such slots prior to the expiration of the waiver, or that the waiver
will not be extended. If our competitors do reclaim the slots prior
to the expiration of the waiver, we may lose the preferential use
of such slots almost immediately. Since the start of the COVID-19
pandemic, we have launched six new domestic routes and eight
new international routes, now operating 105 domestic and 65 in-
ternational routes in total.

Reviewing our fleet plan. Our new contractual fleet plan with
Airbus allows us to maintain a “cautiously” sized fleet that will
remain at approximately 85 aircraft, net of new deliveries and
redeliveries, until 2023.

Protecting our customers and employees. We launched a new
biosecurity and cleaning protocol and are communicating proacti-
vely with all staff, especially with crews and airport staff, regarding
health and COVID-19 developments. For employees who are able
to work remotely, we have activated home office technologies
and protocols.

For additional information see “—Trends and Uncertainties Affec-
ting Our Business—Impact of COVID-19” below.

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148

Trends and Uncertainties Affecting Our Business
We believe our operating and business performance is driven
by various factors that affect airlines and their markets, trends
affecting the broader travel industry, and trends affecting the
specific markets and customer base that we target. The following
key factors may affect our future performance.

Impact of COVID-19. COVID-19 has drastically reduced demand
for air travel and caused major disruptions and volatility in global
financial markets, resulting in the fall of stock prices (including
the price of our stock), both trends which may continue. There
are other broad and continuing concerns related to the poten-
tial effects of COVID-19 on international trade (including supply
chain disruptions and export levels), travel, restrictions on our
ability to access our facilities or aircraft, requirements to collect
additional passenger data, employee productivity, employee
illness, increased unemployment levels, securities markets, and
other economic activities, particularly for airlines, that may have
a destabilizing effect on financial markets and economic activity.

From a macroeconomic point of view, the impact of COVID-19 in
Mexico is uncertain. Mexico’s GDP, previously predicted to grow
between 0.5% and 1.5% in 2020, contracted by 8.2% as a result
of the pandemic. Initial estimates indicate that Mexico’s GDP,
previously predicted to grow between 1.1% and 2.1% in 2021, could
grow 4.5% mainly as a result of the COVID-19 pandemic’s adverse
impact on GDP in 2020 and recent news regarding the slow pro-
duction and distribution of COVID-19 vaccines. However, as the
full effects of the pandemic have yet to be realized, Mexican GDP
may contract in an amount that is not yet possible to estimate.
Economic stagnation, the depreciation of the peso, contraction
and decreased income levels and increased unemployment levels
could result in decreased passenger demand and lower net inco-
me in the long term, even after any potential COVID-19-related
travel restrictions and border closures are lifted. For example, for
the period from March 31, 2020 to December 31, 2020, 709,211
jobs were lost in Mexico. Furthermore, the COVID-19 pandemic
has also resulted in increased volatility in both the local and the
international financial markets and economic indicators, such as
exchange rates, interest rates, credit spreads and commodity
prices. Any shocks or unexpected movements in these market
factors could result in financial losses.

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Despite the gradual recovery we have seen in ASMs and route
operation, the ongoing COVID-19 pandemic is likely to continue
to have a negative impact on our financial condition and results
of operations, as a result of the following indicators:

• a resurgence of COVID-19 infection rates could lead Mexico
and the countries in which we operate to return to partial or
total lockdowns, which would most likely result in a decrease
in demand for our flights (which in turn may require reductions
to our ASMs at levels similar to the early months of the pande-
mic) and aircraft utilization rate and consequently a decrease
in our total operating revenue;

• any further downward volatility in the international capital
markets could result in (i) the fall of stock prices, including
the price of our stock and (ii) financial losses associated with
our financial portfolio, which may cause a deterioration of our
financial condition or limitations on our ability to meet our
liabilities;

• if our revenues decrease for a significant portion of time, we
may have less cash available to meet our obligations under our
aircraft and engine lease agreements and additional sources
of financing may be difficult to obtain at favorable rates;

• even after the COVID-19 pandemic eases, there is a risk that we
will experience reduced demand in the near to mid-term due to
the potential economic impact of the pandemic on the travel
industry (business and leisure) and on our customers, as well as
customer health concerns about the safety of air travel.

Economic Conditions in Mexico. Mexico’s GDP is expected to grow
by 2.23% per year for the next ten years according to the Mexican
Central Bank, which is in line with the expected annual growth
for the United States during the same period as reported by the
U.S. Federal Reserve. See “Key Information—Risk Factors—Risks
Related to the Airline Industry—Public health threats, such as the
H1N1 flu virus, the bird flu, Severe Acute Respiratory Syndrome
(SARS), the Zika virus, COVID-19 and other highly communicable
diseases, could affect suspension of domestic and international
flights, travel behavior and could have a material adverse effect
on the Mexican economy, airline industry reputation, the price of
our shares, our business, results of operations and financial con-
dition” for more recent information on the impact of COVID-19
on Mexico’s future macroeconomic condition.

Regarding population dynamics as of 2015, according to the INEGI
intercensal survey, around 36% of the Mexican population was
under 20 years of age, which benefits us by providing a strong
base of potential customer growth. Inflation in Mexico during
2020 was 3.15% according to the INEGI. As of December 31, 2020,
international reserves were at U.S. $195.7 billion.

Competition. The airline industry is highly competitive. The prin-
cipal competitive factors in the airline industry are fare pricing,
total price, flight schedules, aircraft type, passenger amenities and
related services, number of routes served from a city, customer
service, safety record and reputation, code-sharing relationships
and frequent flier programs and redemption opportunities. Our
current and potential competitors include traditional network air-
lines, low-cost carriers, regional airlines and new entrant airlines.
We typically compete in markets served by legacy carriers and
other low-cost carriers, and, to a lesser extent, regional airlines.
Some of our current or future competitors may have greater liqui-
dity and access to capital and may serve more routes than we do.

Our principal competitive advantages are our low base fares and
our focus on VFR travelers, leisure travelers and cost-conscious
business people. These low base fares are facilitated by our low
CASM, which at Ps. 141.3 cents (U.S. $6.60 cents) we believe was
the lowest CASM in Latin America in 2020, compared to Avianca
at U.S. $26.11 cents, Azul at U.S. $10.75 cents, Copa at U.S. $17.29
cents, Gol at U.S. $8.78 cents, Grupo Aeroméxico at U.S. $17.98
cents and LATAM at U.S. $17.33 cents. We also have lower costs
than our publicly traded target market competitors in the United
States, including Alaska Air at U.S. $14.33 cents, Frontier at U.S.
$9.53, Spirit at U.S. $8.36 cents, American at U.S. $19.39 cents,
Delta at U.S. $22.01 cents, Jet Blue at U.S. $14.29 cents, Southwest
Airlines at U.S. $12.44 cents and United at U.S. $17.68 cents.

Our competitors and the Mexican airline industry as a whole have
also been significantly impacted by the COVID-19 pandemic.
Our principal competitors for the domestic market are Grupo
Aeroméxico, Interjet and VivaAerobus. Interjet and VivaAerobus
are low-cost carriers in Mexico. In 2020, the Mexican low-cost
carriers (including us) combined had 71.5% of the domestic mar-
ket based on passenger flight segments. We had 38.3% of the
domestic market which placed us first, according to the AFAC.
According to information published by AFAC, as of December

31, 2020, the number of commercial aircraft in service in Mexi-
co had decreased to 275, as compared to 355 as of December
31, 2019. This 23% reduction was comprised mainly of narrow
body aircraft, including 70 Airbus A320s, 47 Boeing 737s, and
19 Airbus A321s. On June 30, 2020, Grupo Aeroméxico, our
largest competitor by domestic and international market share
in 2019, announced that it was filing for Chapter 11 bankruptcy
protection in the United States. According to its public filings
with the CNBV, Grupo Aeroméxico has maintained regular ope-
rations during the restructuring process but has received court
approval to return at least 19 aircraft to lessors, which would
reduce its fleet size by around 15%. As of December 31, 2020,
AFAC reports indicate that Grupo Aeroméxico’s subsidiaries
Aeroméxico and Aeroméxico Connect had fleets of 58 and 44
aircraft, respectively, as compared to 69 and 56, respectively, as
of December 30, 2019. In addition, Interjet, our second largest
competitor by international market share in 2019, has been una-
ble to resume international flights since suspending the routes
in March 2020. Interjet’s fleet decreased by almost 96% in 2020,
from 67 aircraft as of December 30, 2019 to 3 as of December
31, 2020, according to information published by the AFAC. In-
terjet has not operated any domestic flights since December
2020. According to media reports, on April 26, 2021, Interjet
announced that an extraordinary shareholders meeting appro-
ved the filing of a reorganization process (concurso mercantil)
in Mexico. While VivaAerobus, our second largest competitor
by domestic market share in 2019, has increased their fleet from
37 as of December 30, 2019 to 43 as of December 31, 2020, this
increase does not compensate for the reductions observed in
the market. In addition to these changes in fleet size, our market
share has also increased. As of December 2020, our domestic
market share had increased 9 percentage points to 40% and our
international market share had increased 6 percentage points
to 14%, in each case as compared to our market shares as of
December 2019.

We also face domestic competition from ground transportation
alternatives, primarily long-distance bus companies. There are
limited passenger rail services in Mexico. There is a large bus in-
dustry in Mexico, with total passenger segments of approximately
3.07 billion in 2019 (the latest year for which data is available
as of the date of this annual report), of which approximately
82.9 million were executive and luxury passenger segments,

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according to the Mexican Authority of Ground Transportation
(Dirección General de Autotransporte Federal) and which could
include both long- and short-distance travel. We set certain of
our promotional fares at prices lower than bus fares for similar
routes in order to stimulate demand for air travel among pass-
engers who in the past have traveled long distances primarily
by bus. We believe a small shift of bus passengers to air travel
would dramatically increase the number of airline passengers
and bring the air trips per capita figures in Mexico closer to
those of other countries in the Americas.

Our principal competitors for the international routes between
Mexico and the United States are Grupo Aeroméxico, Alaska Air,
American, Delta and United. We reached 11% market share on
the routes that we operate and 15% market share considering all
routes between Mexico and the United States in 2020, according
to the AFAC.

Seasonality and Volatility. Our results of operations for any inte-
rim period are not necessarily indicative of those for the entire
year because our business is subject to seasonal fluctuations. We
generally expect demand to be greater during the summer in the
northern hemisphere, in December and around Easter, which can
fall either in the first or second quarter, compared to the rest of
the year. Our business is also volatile and highly affected by eco-
nomic cycles and trends. Consumer confidence and discretionary
spending, fear of terrorism or war, health outbreaks, weakening
economic conditions, fare initiatives, fluctuations in fuel prices,
labor actions, weather and other factors have resulted in signi-
ficant fluctuations in our revenues and results of operations in
the past. Particularly, in 2008, the demand for air transportation
services was significantly adversely affected by both the severe
economic recession and the record high fuel prices. We believe,
however, that demand for business travel historically has been
more sensitive to economic pressures than demand for low-price
leisure and VFR travel, which are the primary markets we serve.

Donald Trump became president of the United States on January
20, 2017, and implemented a number of immigration policies that
have adversely affected the United States—Mexico travel behavior,
especially in the VFR and leisure markets. President Trump was
not elected to a second term, and on January 20, 2021, Joseph

Biden became the president of the United States. While Presi-
dent Biden is expected to reverse many of President Trump’s
immigration policies, we can offer no assurance of the extent to
which his administration will do so. President Trump’s immigration
policies had a negative impact on our results of operations during
2018, 2019 and 2020 and this negative impact can be expected
to continue as long as these immigration policies are in force.

Fuel. Fuel costs represent the single largest operating expense
for most airlines, including ours, accounting for 38%, 38% and
26% (including non-derivative financial instruments) of our total
operating expenses for 2018, 2019 and 2020, respectively. Fuel
availability and pricing are also subject to refining capacity, pe-
riods of market surplus and shortage, and demand for heating
oil, gasoline and other petroleum products, as well as economic,
social and political factors and other events occurring throughout
the world, which we can neither control nor accurately predict.
We source a significant portion of our fuel from refining sources
located in Mexico.

During the year ended December 31, 2020, we entered into US Gulf
Coast Jet Fuel 54 Asian call options designated to hedge 23,967
thousand gallons of fuel. Such hedges represented a portion of
our projected consumption for third quarter 2020 and the first
quarter of 2021. Additionally, during the same period, we entered
into US Gulf Coast Jet Fuel 54 Asian Zero-Cost collar options
designated to hedge 81,646 thousand gallons of fuel. The latter
hedges represented a portion of our projected consumption for
the second half of 2020 and 2021.

During the year ended December 31, 2019, we entered into US Gulf
Coast Jet Fuel 54 Asian call options designated to hedge 13,492
thousand gallons of fuel. Such hedges represented a portion of
our fourth quarter 2019 projected consumption. Additionally,
during the same period, we entered into US Gulf Coast Jet Fuel
54 Asian Zero-Cost collar options designated to hedge 70,136
thousand gallons of fuel. The latter hedges represented a portion
of our projected third quarter 2019 and our 2020 consumption.

During the year ended December 31, 2018, we entered into US
Gulf Coast Jet Fuel 54 Asian Call options designated to hedge
45.6 million gallons of fuel.

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As of December 31, 2020, we purchased our domestic fuel under
the ASA fuel service contract, and international fuel under the
WFS, Shell, Uno Petrol, Uno El Salvador, BP Products North Ame-
rica, Chevron and Associated Energy Group fuel service contracts.
The cost and future availability of fuel cannot be predicted with
any degree of certainty.

Foreign Exchange Gains and Losses. While most of our revenue
is generated in pesos, 32%, 29% and 27% of our revenues came
from our operations in the United States and Central America
during the years ended December 31, 2018, 2019 and 2020, res-
pectively, and U.S. dollar denominated collections accounted for
38%, 43% and 44% of our total collections in 2018, 2019 and 2020,
respectively. In addition, the majority of our operating costs are
denominated in or indexed to U.S. dollars, constituting 73%, 72%
and 69% of our total operating costs in 2018, 2019 and 2020. Our
key U.S. dollar-denominated operating costs include fuel, aircraft
rentals and maintenance costs.

We manage our foreign exchange risk exposure by a policy of
matching, to the extent possible, receipts and local payments in
each individual currency. Most of the surplus funds are conver-
ted into U.S. dollars. However, we are exposed to fluctuations in
exchange rates between the peso and the U.S. dollar.

As of December 31, 2018, 2019 and 2020, our net monetary liability
position denominated in U.S. dollars was U.S. $1.7 billion, U.S. $1.7
billion and U.S. $1.7 billion, respectively. As a result of either the
appreciation or depreciation of the peso against the U.S. dollar in
2018, 2019 and 2020, as the case may be, and our net U.S. dollar
liability position, we recorded a foreign exchange gain (loss), net
of Ps. (0.1) billion, Ps. 1.4 billion and Ps. 0.5 billion, respectively. In
order to mitigate the foreign exchange risk, we also entered into
hedge relationships through non-derivative financial instruments.

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Maintenance Expenses. We are required to conduct varying levels
of aircraft and engine maintenance, which involve significantly
different labor and materials inputs. Maintenance requirements
depend on the age and type of aircraft and the route network
over which they operate. Fleet maintenance requirements may
involve short cycle engineering checks, for example, component
checks, monthly checks, annual airframe checks and periodic
major maintenance and engine checks. Aircraft maintenance and
repair costs for routine and non-routine maintenance are divided
into three general categories:

(i) Routine maintenance requirements consist of daily and wee-
kly scheduled maintenance checks on our aircraft, including
pre-flight, daily, weekly and overnight checks, diagnostic and
routine repairs and any necessary unscheduled tasks perfor-
med. These types of line maintenance are currently serviced
by our mechanics and are primarily completed at the main
airports that we currently serve.

All other maintenance activities are sub-contracted to quali-
fied maintenance, repair and overhaul organizations. Routine
maintenance also includes scheduled tasks that can take from
seven to 14 days to accomplish and are required approximately
every 22 months. All routine maintenance costs are expensed
as incurred.

(ii) Major maintenance consists of a series of more complex tasks
that can take from one to six weeks to accomplish and are
generally required approximately every five to six years. Ma-
jor maintenance is accounted for under the deferral method,
whereby the cost of major maintenance and major overhaul
and repair is capitalized as improvements to leased assets and
amortized over the shorter period of the next major mainte-
nance event or the remaining lease term.

(iii) Engine services are provided pursuant to an engine flight
hour agreement that guarantees a cost per overhaul, provi-
des miscellaneous engine coverage, caps the cost of foreign
objects damage events, ensures protection from annual esca-
lations and grants an annual credit for scrapped components.
We also have a power-by-hour agreement for component
services, which guarantees the availability of aircraft parts
for our fleet when they are required and provides aircraft

parts that are not included in the redelivery conditions of the
contract without constituting an additional cost at the time
of redelivery. The costs associated with the miscellaneous
engine coverage and the component services agreements
are recorded in the consolidated statements of operations.

continue to grow, we would expect to continue to experience a
lag between when new routes are put into service and when they
reach their full profit potential. See Item 3: “Key Information—Risk
Factors—Airline consolidations and reorganizations could adver-
sely affect the industry.”

Due to the young age of our fleet (approximately 5.3 years on
average as of December 31, 2020), maintenance expense in 2018,
2019 and 2020 remained relatively low. For the years ended De-
cember 31, 2018, 2019 and 2020 we capitalized major maintenance
events as part of leasehold improvements to the flight equipment
in the amount of Ps. 676.5 million, Ps. 659.1 million and Ps. 646.2
million, respectively. For the years ended December 31, 2018, 2019
and 2020 the amortization of these deferred major maintenan-
ce expenses was Ps. 313.5 million, Ps. 450.4 million and Ps. 652.1
million, respectively. The amortization of deferred maintenance
expenses is included in depreciation and amortization rather than
total maintenance costs as described in “—Critical Accounting
Polices and Estimates.” In 2018, 2019 and 2020, total maintenance
costs amounted to Ps. 1.5 billion, Ps. 1.5 billion and Ps. 1.2 billion,
respectively. As the fleet ages, we expect that maintenance costs
will increase in absolute terms. The amount of total maintenance
costs and related amortization of heavy maintenance expense is
subject to many variables such as future utilization rates, average
stage length, the size and makeup of the fleet in future periods
and the level of unscheduled maintenance events and their actual
costs. Accordingly, we cannot reliably quantify future maintenance
expenses for any significant period of time. However, we estimate
that based on our scheduled maintenance events, current main-
tenance expense and maintenance-related amortization expense
will be approximately Ps. 2.3 billion (U.S. $110 million) in 2021.

Aircraft Maintenance Deposits Paid to Lessors. The terms of our
aircraft lease agreements require us to pay maintenance deposits
to lessors to be held as collateral for the performance of ma-
jor maintenance activities, resulting in our recording significant
prepaid deposits on our consolidated statements of financial
position. As a result, the cash costs of scheduled major mainte-
nance events are paid well in advance of the recognition of the
maintenance event in our results of operations. Please see Item
5:—Critical Accounting Policies and Estimates.”
Ramp-up Period for New Routes. During 2018 we opened 35
new routes, added 30 more in 2019 and 13 more in 2020. As we

Critical Accounting Policies and Estimates
The following discussion and analysis of our consolidated financial
condition and results of operations is based on our consolidated
financial statements, which have been prepared in accordance with
IFRS. The preparation of these consolidated financial statements
requires us to make estimates and judgments that affect the re-
ported amount of assets and liabilities, revenues and expenses,
and related disclosure of supplemental assets and liabilities at the
date of our consolidated financial statements. Note 1 to our con-
solidated financial statements included herein provides a detailed
discussion of our significant accounting policies.

Critical accounting policies are defined as those policies that re-
flect significant judgments or estimates about matters that are
both inherently uncertain and material to our financial condition
or results of operations.

Aircraft Maintenance Deposits Paid to Lessors. Our lease agree-
ments provide that we pay maintenance deposits or supplement
rent to aircraft lessors to be held as collateral in advance of our
performance of major maintenance activities. Maintenance de-
posits are held as collateral in cash. These lease agreements
provide that maintenance deposits are reimbursable to us upon
completion of the maintenance event in an amount equal to the
lesser of (i) the amount of the maintenance deposits held by the
lessor associated with the specific maintenance event or (ii) the
qualifying costs related to the specific maintenance event. Subs-
tantially all of these maintenance deposits are calculated based
on a utilization measure, such as flight hours or cycles, and are
used solely to collateralize the lessor for maintenance time run
off the aircraft until the completion of the maintenance of the
aircraft and engines. We paid Ps. 454 million, Ps. 64.6 million and
Ps. 702 million in maintenance deposits, net of reimbursements,
to our lessors for the years ended December 31, 2018, 2019 and
2020, respectively.
At lease inception and at each consolidated statement of financial
position date, we assess whether the maintenance deposit payments

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required by the lease agreements are substantively and contractually
related to the maintenance of the leased asset. Maintenance deposit
payments that are substantively and contractually related to the
maintenance of the leased asset are accounted for as maintenan-
ce deposits. Maintenance deposits expected to be recovered from
lessors are reflected as guarantee deposits in the accompanying
consolidated statement of financial position.

The portion of prepaid maintenance deposits that are deemed
unlikely to be recovered, primarily relate to the rate differential
between the maintenance deposits payments and the expected
cost for the next related maintenance event that the deposits
serve to collateralize is recognized as supplemental rent.

Thus, any excess of the required deposit over the expected cost
of the major maintenance event is recognized as supplemental
rent starting from the period the determination is made. When
it is not probable that we will recover amounts currently on de-
posit with a lessor, such amounts are expensed as supplemental
rent. We expensed Ps. 299.6 million in 2018, Ps. 295.7 million in
2019 and Ps. 421.0 million in 2020 of maintenance deposits as
supplemental rent.

As of December 31, 2018, 2019 and 2020 we had prepaid mainte-
nance deposits of Ps. 6.5 billion, Ps. 6.4 billion and Ps. 7.1 billion,
respectively, recorded in our consolidated statements of financial
position. We currently expect that these prepaid maintenance
deposits are likely to be recovered primarily because there is no
rate differential between the maintenance deposit payments and
the expected cost for the related next maintenance event that
the deposits serve to collateralize.

During the years ended December 31, 2018 and 2019, we exten-
ded the lease term of two aircraft agreements and one aircraft
agreement, respectively, but made no such extensions in 2020.
Additionally, we extended the lease term of one spare engine
agreement in 2019 and two spare engine agreements in 2018 but
made no such extensions in 2020.

Because the lease extension benefits are considered lease in-
centives, the effect of these extensions are recorded reducing
the right of use asset. See note 14 to our audited consolidated
financial statements included elsewhere in this annual report.

During the year ended December 31, 2020, we added seven new
net aircraft to our fleet. The lease agreements of some of these
aircraft do not require the obligation to pay maintenance depo-
sits to lessors in advance in order to ensure major maintenance
activities, so we do not record guarantee deposits regarding
these aircraft. However, some of these agreements provide the
obligation to make a maintenance adjustment payment to the
lessors at the end of the contract period. This adjustment covers
maintenance events that are not expected to be made before the
termination of the contract. We recognize this cost as supple-
mental rent during the lease term of the related aircraft, in the
consolidated statements of operations.

For the years ended December 31, 2018, 2019 and 2020, we ex-
pensed as supplemental rent Ps. 299.6 million, Ps. 295.7 million
and Ps. 421.0 million, respectively.

Aircraft and Engine Maintenance. We account for major mainte-
nance under the deferral method. Under the deferral method, the
cost of major maintenance is capitalized (leasehold improvements
to flight equipment) and amortized as a component of deprecia-
tion and amortization expense until the next major maintenance
event or during the remaining contractual lease term, whichever
occurs first. The next major maintenance event is estimated based
on assumptions including estimated usage maintenance intervals
mandated by the FAA in the United States and the AFAC in Mexico
and average removal times suggested by the manufacturer. These
assumptions may change based on changes in the utilization of
aircraft, changes in government regulations and changes in su-
ggested manufacturer maintenance intervals. In addition, these
assumptions can be affected by unplanned incidents that could
damage an airframe, engine, or major component to a level that
would require a major maintenance event prior to a scheduled
maintenance event. To the extent the planned usage increases,
the estimated useful life would decrease before the next main-
tenance event, resulting in additional amortization expense over
a shorter period.

In 2018, 2019 and 2020, we capitalized costs of major maintenance
events of Ps. 676.5 million, Ps. 659.1 million and Ps. 646.2 million,
respectively and we recognized amortization expenses of Ps.
313.5 million, Ps. 450.4 million and Ps. 650.1 million, respectively.

The amortization of deferred maintenance expenses is included
under the caption depreciation and amortization expense in our
consolidated statements of operations. If the amortization of
major maintenance expenditures were classified as maintenance
expense, they would amount to Ps. 1.8 billion, Ps. 1.9 billion and
Ps. 1.8 billion for the years ended December 31, 2018, 2019 and
2020, respectively.

In August 2012, we entered into a total support agreement with
Lufthansa Technik AG (LHT), as amended in December 2016, that
expires June 30, 2023, which includes a total component support
agreement (power-by-hour) and ensures the availability of air-
craft components for our fleet when they are required. The cost
of the total component support agreement is applied monthly
to the results of operations. As part of this total support agree-
ment, we received credit notes of Ps. 46.5 million and of Ps. 28.1
million, which was deferred on the consolidated statements of
financial position and is being amortized on a straight line basis,
prospectively during the term of the agreement.

During 2018, 2019 and 2020, we amortized a corresponding bene-
fit from these credit notes of, Ps. 7.2 million, Ps. 5.2 million and Ps.
5.2 million, respectively, which is recognized in the consolidated
statements of operations as a reduction of maintenance expenses.

Return obligations. The aircraft and engine lease agreements also
require that the aircraft and engines be returned to lessors under
specific conditions of maintenance. The costs of return, which
in most cases are related to scheduled major maintenance, are
estimated and recognized ratably as a provision from the time it
becomes likely such costs will be incurred and can be estimated
reliably. These return costs are recognized on a straight-line basis
as a component of variable rent expenses and the provision is
included as part of other liabilities, through the remaining lease
term. We estimate the provision related to airframe, engine over-
haul and limited life parts using certain assumptions including the
projected usage of the aircraft and the expected costs of mainte-
nance tasks to be performed. For the years ended December 31,
2018, 2019 and 2020, the Company expensed as variable rent Ps.
659.1 million, Ps. 681.0 million and Ps. 1,428.2 million, respectively.
Fair Value. The fair value of our financial assets and financial liabi-
lities recorded in the consolidated statements of financial position
cannot be derived from active markets. They are determined using

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valuation techniques such as the discounted cash flow model. The
inputs to these models are taken from observable markets where
possible, but where this is not feasible, a degree of judgment is
required in establishing fair values. The judgments include consi-
derations of inputs such as liquidity risk, credit risk and expected
volatility. Changes in assumptions regarding these factors could
affect the reported fair value of financial instruments.

Gains and Losses on Sale and Leaseback. We enter into sale and
leaseback agreements whereby an aircraft or engine is sold to a
lessor upon delivery and the lessor agrees to lease such aircraft
or engine back to us.

Starting January 1, 2019, we measure the right-of-use asset arising
from the leaseback at the proportion of the previous carrying
amount of the asset that relates to the right of use retained by
the seller-lessee. Accordingly, we recognize in the Statement of
Operations only the amount of any gain or loss that relates to
the rights transferred to the buyer-lessor. The rest of the gain is
amortized over the lease term.

During the year ended December 31, 2018, 2019 and 2020 we sold
and transferred aircraft and engines to third parties, giving rise to
a gain of approximately Ps. 609.2 million, Ps. 284.8 million and Ps.
710.5 million respectively, that was recorded as other operating
income in the consolidated statements of operations.

During the year ended December 31, 2011, we entered into aircraft
and spare engine sale and leaseback transactions, which resulted
in a loss of Ps. 30.7 million. This loss was deferred on the conso-
lidated statements of financial position and is being amortized
over the contractual lease term. For the years ended December
31, 2018, 2019 and 2020, we amortized a loss of Ps. 3.0 million, Ps.
3.0 million and Ps. 3.0 million, respectively, as additional aircraft
rental expense.

Equity-settled Transactions
Equity-settled transactions are measured at fair value at the date
the equity benefits are conditionally granted to employees. Our
Equity-settled Transactions include long-term retention plans
comprised of: (i) a management incentive plan; (ii) long-term
incentive plan; and (iii) a board of directors incentive plan.

Long-Term Retention Plans
Management Incentive Plan
The management incentive plan has been classified as an equi-
ty-settled transaction because as of the grant date the fair value of
the transaction is fixed and is not adjusted by subsequent changes
in the fair value of capital instruments.

The total cost of the management incentive plan is Ps. 2.7 million.
This amount is being expensed over the vesting period, which
commenced retroactively upon consummation of our initial pu-
blic offering and ended on December 31, 2015. During 2012, we
did not recognize any compensation expense associated with
the management incentive plan in our consolidated statements
of operations. During 2013, 2014 and 2015, we recorded Ps. 2.1
million Ps. 0.3 million and Ps. 0.3 million, respectively, as a cost of
the management incentive plan related to the vested shares, as
recorded in our consolidated statements of operations.

The factors considered in the valuation model for the management
incentive plan included a volatility assumption estimated from
historical returns on common stock of comparable companies and
other inputs obtained from independent and observable sources,
such as Bloomberg. The share spot price fair value was determi-
ned using the market approach valuation methodology, with the
following assumptions:

Dividend yield (%)

Volatility (%)

Risk—free interest rate (%)

Expected life of share options (years)

Exercise share price (in pesos)

Exercise multiple

Fair value of the stock at grant date

2012

0.00

37.00

5.96

8.80

5.31

1.10

1.73

Content

153

U.S. and Latin American publicly traded airlines. The expected
volatility reflects the assumption that the historical volatility of
comparable companies is indicative of future trends, which may
not necessarily be the actual outcome.

The risk-free interest rate is the interbank interest rate in Mexico,
continuously expressed, accordingly to the corresponding term.

The expected life of the share options is an output of the valuation
model and represents the average time the option is expected
to remain viable, assuming the employee does not leave during
the vesting period.

The management incentive plan explicitly incorporates expecta-
tions of the employee’s early exercise behavior by assuming that
early exercise happens when the stock price is a certain multiple,
M, of the exercise price. The exercise multiple M, of 1.1x incorpo-
rates the assumption that the employee’s exercise of the options
can occur when the share prices are 1.1 times the exercise price,
i.e. 10% above the exercise price.

On September 18, 2013, the key employees participating in the
management incentive plan exercised 4,891,410 shares. As a result,
the key employees paid Ps. 25.9 million to the Management Trust
corresponding to the exercised shares. Thereafter, we received
from the Management Trust the payment related to the exercised
shares by the key employees as a repayment of the loan between
the Company and the Management Trust.

On November 16, 2015, as part of the secondary follow-on equity
offering, the key employees exercised 4,414,860 Series A shares.
The key employees paid Ps. 23.5 million to the Management Trust
corresponding to the exercised shares. Thereafter, we received
from the Management Trust the payment related to the exercised
shares by the key employees as a repayment of the loan between
the Company and the Management Trust.

The dividend yield was set at zero because at the time the ma-
nagement incentive plan was valued and as of the date of this
annual report, we do not have any plans to pay a dividend.
The volatility was determined based on average historical vola-
tilities. Such volatilities were calculated according to a database
including up to 18 months of historical stock price returns of

During 2016, the key employees participating in the management
incentive plan exercised 3,299,999 Series A shares. The key emplo-
yees paid Ps. 17.5 million to the Management Trust corresponding
to the exercised shares. Thereafter, we received from the Mana-
gement Trust the payment related to the exercised shares by the
key employees as a repayment of the loan between the Company

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and the Management Trust.

During 2017, the key employees participating in the management
incentive plan exercised 120,000 Series A shares. The key emplo-
yees paid Ps. 0.6 million to the Management Trust corresponding
to the exercised shares. Thereafter, we received from the Mana-
gement Trust the payment related to the exercised shares by the
key employees as a repayment of the loan between the Company
and the Management Trust.

During 2018, the key employees participating in the management
incentive plan exercised 2,003,876 Series A shares. The key emplo-
yees paid Ps. 10.7 million to the Management Trust corresponding
to the exercised shares. Thereafter, we received from the Mana-
gement Trust the payment related to the exercised shares by the
key employees as a repayment of the loan between the Company
and the Management Trust.

During 2019, the key employees participating in the management
incentive plan exercised 2,780,000 Series A shares. The key emplo-
yees paid Ps. 14.8 million to the Management Trust corresponding
to the exercised shares. Thereafter, we received from the Mana-
gement Trust the payment related to the exercised shares by the
key employees as a repayment of the loan between the Company
and the Management Trust.

During 2020, the key employees participating in the management
incentive plan did not exercise any Series A shares. Thus, the key
employees did not pay any amounts to the Management Trust
corresponding to any exercised shares.

As of December 31, 2020, 2019 and 2018, the 7,653,981, 7,653,981
and 10,433,981 share options pending to be exercised, respectively,
were considered as treasury shares.

Movements during the year
The following table illustrates the number of share options and
fixed exercise prices during the year:

Outstanding as of December 31, 2012

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2013

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2014

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2015

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2016

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2017

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2018

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding as of December 31, 2019

Granted during the year

Forfeited during the year

Exercised during the year

Content

154

Number

Exercise price
in pesos

Total in
thousands of pesos

25,164,126

—

(4,891,410)

20,272,716

—

20,272,716

—

(4,414,860)

15,857,856

—

(3,299,999)

12,557,857

—

(120,000)

12,437,857

—

(2,003,876)

10,433,981

—

(2,780,000)

7,653,981

—

Ps.5.31

—

5.31

Ps.5.31

—

Ps.5.31

—

5.31

Ps.5.31

—

5.31

Ps.5.31

—

5.31

Ps.5.31

—

5.31

Ps.5.31

—

5.31

Ps.5.31

—

Ps.133,723

—

(25,993)

Ps.107,730

—

Ps.107,730

—

(23,461)

Ps.84,269

—

(17,536)

Ps.66,733

—

(638)

Ps.66,095

—

(10,654)

Ps.55,441

—

(14,773)

Ps.40,668

—

Outstanding as of December 31, 2020

7,653,981

Ps.5.31

Ps.40,668

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At December 31, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019
and 2020, the shares held in trust to satisfy the management
options were considered as treasury shares. At December 31,
2018, 2019 and 2020, 10,433,981, 7,653,981 and 7.653,981 share
options pending to be exercised were considered as treasury
shares, respectively.

Long-term Incentive Plan (equity-settled)
In November 2014, we established an equity-settled long-term in-
centive plan pursuant to which certain of our key executives were
granted a special bonus equal to a fair value of Ps. 10.8 million to
be used to purchase our shares. On April 21, 2016, an amendment
to this plan was approved at our annual ordinary shareholders’
meeting. The key components of the plan are as follows:

(i) Servicios Corporativos granted a bonus to each key executive.

(ii) Pursuant to the instructions of such key executives, on No-
vember 11, 2014, an amount equal to Ps. 7.1 million (the fair
value of the bonus net of withheld taxes) was transferred to
an administrative trust for the acquisition of our Series A sha-
res through an intermediary authorized by the Mexican stock
market, based on the instructions of the administration trust’s
technical committee. An amount equal to Ps. 7.5 million (the
fair value of the bonus net of withheld taxes) was approved
in April 2016 as an extension of this plan for the acquisition of
our Series A shares, following the same mechanism.

(iii) Subject to the terms and conditions set forth in the admi-
nistrative trust agreement signed in connection thereto, the
acquired shares are to be held in escrow in the administra-
tive trust until the applicable vesting period date for each
key executive, which is the date as of which each such key
executive can fully dispose of the shares as desired.

(iv) If the terms and conditions set forth therein are not meet by
the applicable vesting period date, then the shares will be
sold in the BMV and Servicios Corporativos will be entitled
to receive the proceeds from such sale.

(v) Each key executive’ account balance will be administered by
the administrative trustee, whose objective is to manage the
shares granted to each key executive based on instructions

set forth by the administrative trust’s technical committee.

The vesting period of the shares granted under the Company’s
equity-settled long-term incentive plan is as follows:

The total cost of this plan is Ps. 10.8 million. This valuation is the
result of multiplying the total number of our Series A shares de-
posited in the administrative trust and the price per share, plus the
balance in cash deposited in the administrative trust. This amount
is being expensed over the vesting period, which commenced on
November 11, 2014 and ended in November 2019.

In November 2020, 2019 and 2018, extensions to this plan were
approved by our board of directors. The total cost of each of
the extensions approved was Ps. 92.1 million (or Ps. 59.9 million,
net of withheld taxes), Ps. 86.8 million (or Ps. 56.4 million, net
of withheld taxes) and Ps. 64.0 million (or Ps. 41.6 million, net
of withheld taxes), respectively. Under these extensions, certain
of our key employees were granted a special bonus that was
transferred to the administrative trust for the acquisition of our
Series A shares.

During 2018, 2019 and 2020, we recognized Ps. 20.0 million, Ps.
49.7 million and Ps. 75.0 million, respectively, as compensation
expense associated with the long-term incentive plan in our
consolidated statements of operations.

Movements during the year
The following table illustrates the number of shares associated
with our long-term incentive plan during the year:

Outstanding as of December 31, 2019

Purchased during the year

Granted during the year

Exercised during the year

Forfeited during the year

Outstanding as of December 31, 2020

Number
of Series A shares

*5,115,191

3,159,763

—

(2,142,426

(327,217

*5,805,311

* These shares were presented as treasury shares in the consolidated statements of
financial position as of December 31, 2019 and 2020 and all are considered outs-
tanding for basic and diluted earnings per share purposes because the holders are
entitled to dividends if and when distributed.

Number
of Series A shares

2,979,412

1,819,440

1,006,459

5,805,311

Vesting period

November 2020-2021

November 2021-2022

November 2022-2023

During the year ended December 31, 2020, some key employees
left the Company; therefore, these employees did not fulfill
the vesting conditions. In accordance with the plan, Servicios
Corporativos is entitled to receive the proceeds of the sale of
such shares. During the year ended December 31, 2020, 327,217
shares were forfeited.

Board of Directors Incentive Plan (BoDIP)
In April 2018, our shareholders at the annual shareholders meeting
authorized a stock plan for the benefit of certain independent
members of our board of directors (the “BoDIP”). The BoDIP
was implemented through the execution of: (i) trust agreement
number CIB/3081 created by us, as trustor, and CIBanco, S.A.,
Institucion de Banco Multiple, as trustee, on August 29, 2018; and
(ii) a stock purchase agreement between each plan participant
and the trustee, under which a plan participant has a period of
four years to exercise his/her option to pay a fixed purchase price,
with the title to the shares transferring to the plan participant
upon payment of such purchase price by the plan participant.
The number of shares held by the trustee as of December 31,
2020 was 5,233,693, of which 3,161,349 shares were priced at Ps.
9.74, 968,706 shares were priced at Ps. 16.80, 977,105 shares were
priced at Ps. 16.12 and 126,533 shares were priced at Ps. 26.29. As
of December 31, 2020, there were no exercises under the BoDIP.

Cash-settled Transactions
Cash-settled transactions include share appreciation rights
(“SARs”). Our cash-settled transactions include long-term re-
tention plans comprised of: (i) management incentive plan II and
(ii) a cash-settled long-term incentive plan.

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Long-term Retention Plans
Management Incentive Plan II
On November 6, 2016, our board of directors approved an exten-
sion of the management incentive plan to certain key employees,
known as MIP II. Under MIP II, 13,536,960 share appreciation rights
of our Series A shares were granted to be settled annually in
cash in a period of five years in accordance with the established
service conditions. In addition, a five-year extension to the period
in which the executives can exercise MIP II once the SARs are
vested was also approved.

the purpose of which is to retain high-performing employees
within the organization by paying incentives depending on our
performance. Incentives under this plan were payable in three
annual installments, following the provisions for other long-term
benefits under IAS 19. During the year ended December 31, 2013
and 2012 we expensed Ps. 6.3 million and Ps. 6.5 million respec-
tively, as bonuses as part of the caption salaries and benefits.
During 2014, this plan was structured as a long-term incentive
plan, which consists of a long-term incentive plan (equity-settled)
and long-term incentive plan (cash-settled).

The fair value of these SARs is estimated at the grant date and
at each reporting date using the Black-Scholes option pricing
model, which takes into account the terms and conditions on
which the SARs were granted. The amount of the cash payment
is determined based on the increase in our share price between
the grant date and the settlement date.

The carrying amount of the liability relating to these SARs as
of December 31, 2020, 2019 and 2018 was Ps. 177.8 million, Ps.
70.6 million and Ps. 32.9 million, respectively. The compensation
cost is recognized in our consolidated statements of operations
under the caption salaries and benefits over the service period.
During the years ended December 31, 2020, 2019 and 2018 we
recorded a expense (benefit) of Ps. 107.2 million, Ps. 37.8 million
and Ps. (5.1) million, respectively, associated with these SARs in
our consolidated statements of operations. No SARs were exer-
cised during 2020.

Number of SARs (Grant date:
November 6, 2016)

3,391,020

3,391,020*

Exercisable date

February 2021

* Includes forfeited SARs of 1,563,520, 0 and 0 for the years ended December 31, 2018,

2019 and 2020 respectively.

Cash-settled Long-term Incentive Plan
During 2010, we adopted an employee long-term incentive plan,

On November 6, 2014 we granted 4,315,264 Series A SARs to key
executives. The SARs vest during a three-year period as long as
the employee completes the required service period and entitle
them to a cash payment. As of the grant date the amount of SARs
granted under this plan totaled Ps. 10.8 million.

Under the plan program extensions described above, no SARs
were granted to any of our key executives for the years ended
December 31, 2018, 2019 and 2020.

The carrying amount of the liability relating to the SARs as of
December 31, 2018, 2019 and 2020 was Ps. 0.5 million, Ps. 1.9
million and Ps. 0.0 million, respectively. The compensation cost
is recognized in our consolidated statements of operations un-
der the caption of salaries and benefits over the service period.
During the years ended December 31, 2018, 2019 and 2020, we
recorded an expense (benefit) of Ps. (0.2) million, Ps. 3.0 million
and Ps. (1.9) million, respectively, in respect of these SARs in our
consolidated statements of operations.

Derivative Financial Instruments and Hedge Accounting. We
mitigate certain financial risks, such as volatility in the price of jet
fuel, adverse changes in interest rates and exchange rate fluctua-

tions, through a controlled risk management policy that includes
the use of derivative financial instruments. The derivative financial
instruments are recognized in the consolidated statement of fi-
nancial position at fair value. The effective portion of a cash flow
hedge’s unrecognized gain or loss is recognized in “Accumulated
other comprehensive income (loss) items,” while the ineffective
portion is recognized in current year earnings. The realized gain
or loss of derivative financial instruments that qualify as hedging
is recorded in the same statements of operations as the realized
gain or loss of the hedged item. Derivative financial instruments
that are not designated as or not effective as a hedge are recog-
nized at fair value with changes in fair value recorded in current
year earnings. Outstanding derivative financial instruments may
require collateral to guarantee a portion of the unsettled loss
prior to maturity. The amount of collateral delivered in guarantee,
which is presented as part of “Guarantee deposits,” is reviewed
and adjusted on a daily basis, based on the fair value of the de-
rivative position. As of December 31, 2020, we did not have any
collateral recorded as a guarantee deposits.

(i)

Aircraft Fuel Price Risk. We account for derivative financial
instruments at fair value and recognize them in the consoli-
dated statements of financial position as an asset or liability.
The cost of aircraft fuel consumed in 2018, 2019 and 2020
represented 38%, 38% and 26% (including non-derivative fi-
nancial instruments) of our operating expenses, respectively.
To manage aircraft fuel price risk, we periodically enter into
derivatives financial instruments.

During the year ended December 31, 2020, we entered into
US Gulf Coast Jet Fuel 54 Asian call options designated to
hedge 23,967 thousand gallons of fuel. Such hedges repre-
sented a portion of our projected consumption for the second
quarter of 2020, third quarter of 2020 and first quarter of
2021. Additionally, during the year ended December 31, 2020,
we entered into US Gulf Coast Jet Fuel 54 Asian Zero-Cost
collar options designated to hedge 81,646 thousand gallons
of fuel. The latter hedges represented a portion of our pro-
jected consumption for the second quarter of 2020, second
half of 2020 and second quarter of 2021.

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During the year ended December 31, 2019, we entered into
US Gulf Coast Jet Fuel 54 Asian call options designated
to hedge 13,492 thousand gallons of fuel. Such hedges re-
presented a portion of our fourth quarter 2019 projected
consumption. Additionally, during the year ended Decem-
ber 31, 2020, we entered into US Gulf Coast Jet Fuel 54
Asian Zero-Cost collar options designated to hedge 70,136
thousand gallons of fuel. The latter hedges represented a
portion of our projected third quarter 2019 and our 2020
consumption.

During the year ended December 31, 2018, we entered into
US Gulf Coast Jet Fuel 54 Asian Call options designated to
hedge 45.6 million gallons of fuel. Additionally, as of Decem-
ber 31, 2017, we entered into US Gulf Coast Jet Fuel 54 Asian
call options designated to hedge 61.1 million gallons of fuel.

During the year ended December 31, 2020, the US Gulf Coast
Jet Fuel 54 Asian Zero-Cost collar options were designated
to hedge approximately 3% of our 2021 fuel consumption,
as well as US Gulf Coast fuel 54 Asian call options to hedge
approximately 3% of projected fuel consumption for 2021.
During the year ended December 31, 2019, we entered into
US Gulf Coast Jet Fuel 54 Asian Zero-Cost collar options
designated to hedge approximately 20% of our 2020 fuel
consumption, as well as US Gulf Coast fuel 54 Asian call
options that expired by the end of 2019 to hedge approxi-
mately 5% of projected fuel consumption for 2019. During
the year ended December 31, 2018, we entered into US Gulf
Coast Jet Fuel 54 Asian Zero-Cost collar options and US
Gulf Coast fuel 54 Asian call options designated to hedge
approximately 18% of our 2019 projected fuel consumption.

We utilize IFRS 9, which comprises aspects related to classi-
fications and measurement of financial assets and financial
liabilities, as well as hedge accounting treatment. Paragraph
6.2.4 (a) of IFRS 9 allows us to separate the intrinsic value
and time value of an option contract and to designate as the
hedging instrument only the change in the intrinsic value of
the option. As further required in paragraph 6.5.15 therein,
because the external value (time value) of the Jet fuel 54

Asian call options are related to a “transaction related hedged
item,” it is required to be segregated and accounted for as
a “cost of hedging” in other comprehensive income (“OCI”)
and accrued as a separate component of stockholders’ equity
until the related hedged item affects profit and loss.

Since monthly forecasted jet fuel consumption is considered
the hedged item of the “related to a transaction” type, then
the time value included as accrued changes on external value
in capital is considered as a “cost of hedging” under IFRS 9.
The hedged item (jet fuel consumption) of the Jet fuel 54
Asian call options contracted by us represent a non-financial
asset (energy commodity), which is not in our inventory.
Instead, it is directly consumed by our aircraft at different
airport terminals. Therefore, although a non-financial asset
is involved, its initial recognition does not generate a book
adjustment in our inventories. Rather, it is initially accounted
for in our OCI and a reclassification adjustment is made from
OCI toward the profit and loss and recognized in the same
period or periods during which the hedged item is expected
to be allocated to profit and loss (in accordance with IFRS
9.6.5.15, B6.5.29 (a), B6.5.34 (a) and B6.5.39). As of January
2015, we began to reclassify these amounts (previously re-
cognized as a component of equity) to our statement of
operations in the same period in which our expected jet
fuel volume consumed affects our jet fuel purchase line item
therein.

As of December 31, 2018, 2019 and 2020 the fair value of
our outstanding US Gulf Coast Jet Fuel 54 Asian call op-
tions was Ps. 48.2 million, Ps. 0.0 million and Ps. 0.2 mi-
llion, respectively. During the year ended December 31,
2020, the Company entered into US Gulf Coast Jet Fuel 54
Asian call options with 2020 and 2021 maturities. During
the years ended December 31, 2018, 2019 and 2020, the
net negative (positive) cost of these options recycled to
our fuel cost totaled (Ps. 402.5) million, Ps. 61.1 million and
Ps. 20.6 million, respectively.
As of December 31, 2019 and 2020, the fair value of our
outstanding US Gulf Coast Jet Fuel 54 Zero-Cost collar op-
tions was Ps. 134 million and Ps. (9.7) million, respectively,

Content

157

and these were presented as part of the financial assets and
financial liabilities line items in our consolidated statements
of financial position. During the years ended December 31,
2019 and 2020, the net cost of these options recycled to
our fuel cost totaled Ps. 9.4 million and Ps. 835.9 million,
respectively.

The amount of (negative) positive cost of hedging derived
from the extrinsic value changes of these options as of De-
cember 31, 2018, 2019 and 2020 recognized in other com-
prehensive income totaled Ps. (134.1) million, Ps. 133.6 million
and Ps. 21.7 million, respectively, the latter will be recycled
to our fuel cost during 2021, as these options expire on a
monthly basis and as jet fuel is consumed.

(ii) Foreign Currency Risk. Foreign currency risk is the risk that
the fair value of future cash flows will fluctuate because of
changes in foreign exchange rates. Our exposure to the risk
of changes in foreign exchange rates relates primarily to our
operating activities (when revenue or expense is denominated
in a different currency than pesos). Exchange exposure rela-
tes to amounts payable arising from U.S. dollar-denominated
and U.S. dollar-linked expenses and payments. To mitigate
this risk, we may use foreign exchange derivative financial
instruments and non-derivative financial instruments.

During the years ended December 31, 2018, the Company
entered into foreign currency forward contracts in U.S. do-
llars to hedge approximately 20% of its next 12 months of
aircraft rental expenses. A portion of the Company’s foreign
currency forwards matured during the fourth quarter of 2018
(November and December), and the remainder of the Com-
pany’s outstanding position matured during the first quarter
of 2019 (January).

During the year ended December 31, 2020, the Company did
not enter into foreign currency forward contracts.

Volaris, the Lowest Cost Publicly
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Volaris Value
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Our foreign exchange exposure as of December 31, 2018,
2019 and 2020 was a net liability position of U.S. $1.7 billion,
U.S. $1.7 billion and U.S. $1.7 billion, respectively.

Hedging relationships with non-derivative financial ins-
truments.
We mitigate certain financial risks, such as volatility in the
price of jet fuel, adverse changes in interest rates and exchan-
ge rate fluctuations, through risk management that includes
the use of derivative financial instruments and non-derivative
financial instruments.

In accordance with IFRS 9, derivative financial instruments
and non-derivative financial instruments are recognized in
the consolidated statement of financial position at fair value.
At the inception of a hedge relationship, we formally desig-
nate and document the hedge relationship to which we wish
to apply hedge accounting, as well as the risk management
objective and strategy for undertaking the hedge. The do-
cumentation includes the hedging strategy and objective,
identification of the hedging instrument, the hedged item or
transaction, the nature of the risks being hedged and how
we will assess the effectiveness of changes in the hedging
instrument’s fair value in offsetting the exposure to changes
in the hedged item’s fair value or cash flows attributable to
the hedged risks.

Only if such hedges (i) are expected to be effective in achie-
ving offsetting changes in fair value or cash flows of the
hedge items and (ii) are assessed on an ongoing basis to
determine that they have been effective throughout the
financial reporting periods for which they were designated,
can hedge accounting treatment be used.

Under the cash flow hedge (CFH) accounting model, the
effective portion of the hedging instrument’s changes in fair
value is recognized in OCI, while the ineffective portion is re-
cognized in current year earnings in the statement of profit
or loss. The cash flow hedge reserve is adjusted to the lower
of the cumulative gain or loss on the hedging instrument and
the cumulative change in fair value of the hedged item.

Content

158

The realized gain or loss of derivative financial instruments
and non-derivative financial instruments that qualify as CFH
are recorded in the same caption as the hedged item in the
consolidated statement of operations.

(iii) Interest Rate Risk. Interest rate risk is the risk that the fair
value of future cash flows will fluctuate because of changes
in market interest rates. Our exposure to the risk of changes
in market interest rates relates primarily to our long-term
debt obligations and lease obligations with floating interest
rates. As of December 31, 2018, the Company did not have
any interest rate derivatives. As of December 31, 2019, we had
an outstanding hedging contract in the form of an interest
rate cap with a notional amount of Ps. 1.5 billion and a fair
value of Ps. 2.7 million. As of December 31, 2020, we had an
outstanding hedging contract in the form of an interest rate
cap with a notional amount of Ps. 1.5 billion and a fair value
of Ps. 0.3 million. These instruments are included as assets
in our consolidated statements of financial position. All the
Company’s positions in the form of interest rate swaps ma-
tured on March 31 and April 30, 2017. Consequently, there
was no outstanding balance as of December 31, 2018.

Deferred Taxes. We account for income taxes using the liability
method. Deferred taxes are recorded based on differences be-
tween the financial statement basis and tax basis of assets and
liabilities and available tax loss and credit carry-forwards. In as-
sessing our ability to realize deferred tax assets, our management
considers whether it is more likely than not that some or all of
the deferred tax assets will be realized. In evaluating our ability to
utilize our deferred tax assets, we consider all available evidence,
both positive and negative, in determining future taxable income
on a jurisdiction by jurisdiction basis. At December 31, 2018, 2019
and 2020, we had tax loss carry-forwards amounting to Ps. 1.6
billion, Ps. 1.3 billion and Ps. 1.9 billion, respectively. These losses
relate to our and our subsidiaries’ operations on a stand-alone
basis, which in conformity with current Mexican Income Tax Law
may be carried forward against taxable income generated in the
succeeding years in each country and may not be used to offset
taxable income elsewhere in our consolidated group. During the
years ended December 31, 2018 and 2019, we used tax-loss ca-
rry-forwards of Ps. 154.4 million and Ps. 214.5 million, respectively.
During the year ended December 31, 2020, we did not use any
tax-loss carry-forwards.

The table below presents the payments required by our financial liabilities:

Interest-bearing borrowings:

Pre-delivery payment facilities

Short-term working capital facilities

Asset backed trust note

Total

Within one
Year

One to five
Years

Total

Ps.1,096,543

Ps.2,554,069

Ps.3,650,612

200,000

250,000

—

1,250,000

200,000

1,500,000

Ps.1,546,543

Ps.3,804,069

Ps.5,350,612

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Content

159

Central America (Guatemala, Costa Rica and El Salvador)
According to Guatemala corporate income tax law, under
the regime on profits from business activities net operating
losses cannot offset taxable income in prior or future years.
For the years ended December 31, 2018, 2019 and 2020, we
generated a net operating income (loss) of Ps. 8.5 million, Ps.
(1.1) million and Ps. (1.8) million, respectively.

According to Costa Rica corporate income tax law, the tax
is based on the net income earned from traffic whose origin
or final destination is Costa Rica and net operating losses
can offset taxable income in a term of three years. For the
years ended December 31, 2018, 2019 and 2020, we obtained
net operating losses of Ps. 170.7 million, Ps. 50.2 million and
Ps. 55.8 million, respectively, which have not been recognized
as deferred tax assets.

According to El Salvador corporate income tax law, under the
regime on profits from business activities, net operating los-

ses cannot offset taxable income in prior or future years. For
the years ended December 31, 2020 and 2019, we obtained a
net operating loss of Ps. 16.6 million and Ps. 32.5 million, res-
pectively.

Impairment of Long-Lived Assets. The carrying value of flight
equipment, furniture and equipment and right of use assets is
reviewed for impairment when events or changes in circum-
stances indicate the carrying value may not be recoverable
and the cumulative impairment losses are shown as a reduc-
tion in the carrying value of flight equipment, furniture and
equipment and right of use assets.

We record impairment charges on long-lived assets used in
operations when events and circumstances indicate that the
assets may be impaired or when the carrying amount of a
long-lived asset or cash generating unit exceeds its recove-
rable amount, which is the higher of its fair value less cost to
sell and its value in use.

The value in use calculation is based on a discounted cash
flow model, using our projections of operating results for the
near future. The recoverable amount of long-lived assets is
sensitive to the uncertainties inherent in the preparation of
projections and the discount rate used in the calculation.

For the years ended December 31, 2018, 2019 and 2020, no
impairment charges were recorded in respect of our long-li-
ved assets.

Allowance for Credit Losses. An allowance for credit los-
ses is established using the life-time expected credit loss
approach, based on objective evidence that we will not be
able to collect all amounts due according to the original
terms of the receivables. At December 31, 2018, 2019 and
2020, the allowance for credit losses was Ps. 11.3 million,
Ps. 40.3 million and Ps. 32.7 million, respectively.

Volaris, the Lowest Cost Publicly
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Volaris Value
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Operating Revenues

2019 compared to 2020

Operating Revenues

Passenger revenues:

Fare revenues

Other passenger revenues

Non-passenger revenues:

Other non-passenger revenues

Cargo

Non-derivative financial instruments

Total operating revenues

Operating Data

Capacity (in ASMs in thousands)

% Load factor booked

Booked passengers (in thousands)

Average ticket revenue per booked passenger

Average other passenger revenue per booked passenger

Average total ancillary revenue per booked passenger

Revenue passenger miles (RPMs in thousands)

Content

160

For the years ended December 31,

2019

2020

Variation

(In thousands of pesos, except for % and operating data)

Ps.23,129,991

10,569,208

Ps.12,873,174

8,613,398

Ps.(10,256,817)

(1,955,810)

897,586

228,836

(72,949)

882,360

201,881

(411,222)

(15,226)

(26,955)

(338,273)

Ps.34,752,672

Ps.22,159,591

Ps.(12,593,081)

24,498,893

18,274,946

(6,223,947)

86%

21,975

1,054

481

532

80%

14,712

875

585

659

(6pp)

(7,263)

(179)

104

127

21,032,364

14,596,745

(6,435,619)

(44.3%)

(18.5%)

(1.7%)

(11.8%)

>100.0%

(36.2%)

(25.4%)

–

(33.1%)

(17.0%)

21.7%

23.9%

(30.6%)

Fare revenues. The decrease in fare revenues in 2020 was pri-
marily due to the significant reduction in our ASM capacity by
25.4% resulting from a substantial decrease in customer demand
as a result of the impact of the COVID-19 pandemic. As a conse-
quence, our booked passengers also decreased 33.1%, and our
average ticket revenue per booked passenger decreased 17.0%
year over year.

Other passenger revenues. The decrease in other passenger re-
venues in 2020 was primarily due to lower volume of passengers
electing to purchase additional services as a result of a substantial
decrease in customer demand, which in turn was a result of the
impact of the COVID-19 pandemic.

Other non-passenger revenues. The decrease in other non-pass-
enger revenues was primarily due to lower revenues from airport
incentives recorded during 2020.

Cargo. The decrease in cargo revenues in 2020 was primarily due
to a lower volume of cargo operations recorded during 2020.

Volaris, the Lowest Cost Publicly
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Volaris Value
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2018 compared to 2019

Operating Revenues

Passenger revenues:

Fare revenues

Other passenger revenues

Non-passenger revenues:

Other non-passenger revenues

Cargo

Non-derivative financial instruments

Total operating revenues

Operating Data

Capacity (in ASMs in thousands)

% Load factor booked

Booked passengers (in thousands)

Average ticket revenue per booked passenger

Average other passenger revenue per booked passenger

Average total ancillary revenue per booked passenger

Revenue passenger miles (RPMs in thousands)

Content

161

For the years ended December 31,

2018 Adjusted (1)

2019

Variation

(In thousands of pesos, except for % and operating data)

Ps.18,487,858

7,892,497

Ps.23,129,991

10,569,208

697,357

227,438

–

897,586

228,836

(72,949)

Ps.4,642,133

2,676,711

200,229

1,398

(72,949)

Ps.27,305,150

Ps.34,752,672

Ps.7,447,522

21,009,545

24,498,893

3,489,348

85%

18,396

1,006

429

479

86%

21,975

1,054

481

532

–

3,579

17,748,408

21,032,364

3,283,956

25.1%

33.9%

28.7%

0.6%

100%

27.3%

16.6%

1.0pp

19.5%

4.8%

12.1%

11.1%

18.5%

(1) On adoption of IFRS 16 we apply the new standard on the required effective date as of January 1, 2019, using the full retrospective method of adoption in order to provide for comparative results in all periods presented, recognizing the effect in retained earnings

as of January 1, 2017.

Fare revenues. The increase in fare revenues in 2019 was primarily
due to growth in our ASM capacity by 16.6% resulting from the
incorporation of five new net aircraft. Additionally, our booked
passengers increased 19.5%, and our average ticket revenue per
booked passenger increased 4.8% year over year.

Other passenger revenues. The increase in other passenger
revenues in 2019 was primarily due to higher volume of pass-
engers electing to purchase additional services. We continue
executing our fare unbundling and demand stimulation strategy.
In particular, during 2019, our total ancillary revenues increased
due to improved revenue from fees charged for excess baggage,
advanced seat selection and itinerary changes.

Other non-passenger revenues. The increase in other non-pass-
enger revenues was primarily due to higher revenues from airport
incentives recorded during 2019.

Cargo. The increase in cargo revenues in 2019 was primarily due
to a higher volume of cargo operations recorded during 2019.

Volaris, the Lowest Cost Publicly
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Volaris Value
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Operating Expenses, net

2019 compared to 2020

Other operating income

Fuel expense, net

Landing, take-off and navigation expenses

Depreciation of right of use assets

Salaries and benefits

Sales, marketing and distribution expenses

Maintenance expenses

Aircraft and engine variable lease expenses

Other operating expenses

Depreciation and amortization

Total operating expenses, net

Content

162

For the years ended December 31,

2019

2020

Variation

(In thousands of pesos, except for )%

Ps.(327,208)

Ps.(730,333)

11,626,069

5,108,489

4,702,971

3,600,762

1,447,637

1,488,431

961,657

1,112,927

675,514

6,640,820

4,090,864

5,048,976

3,453,382

1,840,819

1,167,720

1,845,254

1,157,240

898,445

Ps.(403,125)

(4,985,249)

(1,017,625)

346,005

(147,380)

393,182

(320,711)

883,597

44,313

222,931

Ps.30,397,249

Ps.25,413,187

Ps.(4,984,062)

>100.0%

(42.9%)

(19.9%)

7.4%

(4.1%)

27.2%

(21.5%)

91.9%

4.0%

33.0%

(16.4%)

Total operating expenses, net decreased 16.4% in 2020 primarily
as a result of decrease of operations and other factors described
below.

Other Operating Income. Other operating income increased Ps.
403.1 million or more than 100.0% in 2020, primarily due to higher
sale and leaseback gains recorded during 2020 compared to the
previous year as a result of the adoption of IFRS 16.

Fuel expense, net. The 42.9% decrease in fuel expense was
primarily as a result of a decrease in the average fuel cost per
gallon of 14.0% and a decrease in fuel gallons consumed of
29.8% which, in turn, was primarily due to the significant 29.2%
decrease in departures as a result of the substantial decrease in
customer demand due to the impact of the COVID-19 pandemic.

During the years ended December 31, 2020 and 2019, we entered
into US Gulf Coast Jet Fuel 54 Asian Zero Cost collar options and
Asian call options contracts. These instruments also qualify for
hedge accounting. As a result, during 2020, their intrinsic value
loss of Ps. 856.5 million was recycled to the cost of fuel.

Landing, Take-off and Navigation Expenses. The 19.9% decrease
in landing, take-off and navigation expenses in 2020 was prima-
rily due to a decrease in our operations as measured by number
of departures by 29.2%, as a result of the substantial decrease
in customer demand, which in turn was a result of the impact of
the COVID-19 pandemic.

Depreciation of right of use assets. The 7.4% increase in de-
preciation of right of use assets in 2020 was primarily due to an
increase in our fleet (lease agreements), as we incorporated four

new net aircraft leases and eight new net engine leases during
2020.

Salaries and Benefits. The 4.1% decrease in salaries and benefits
in 2020 was primarily the result of a decrease in employee salaries
as result of reduced flight operations and cost-cutting measures
in response to the COVID-19 pandemic. Additionally, the variable
compensation of our workforce decreased also due to lower ope-
rations recorded during 2020, as well as the accounting accrual
impact related to our management retention plans. See Item 6:
“Directors, Senior Management and Employees—Employees.”

Sales, Marketing and Distribution Expenses. The 27.2% increase
in sales, marketing and distribution expenses was mainly due
to a one-time VAT expense of Ps. 746 million resulting from an
adjustment on the northern border VAT rate, which was partially

Volaris, the Lowest Cost Publicly
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offset by a decrease in our marketing and distribution expenses
as a result of the COVID-19 pandemic and the related decrease
in customer demand.

Maintenance Expenses. The 21.5% decrease in maintenance ex-
penses in 2020 was mainly due to lower maintenance expenses
as result of reduced operations due to the COVID-19 pandemic,
which was partially offset by the depreciation of approximately
11.6% in the average exchange rate of the peso against the U.S.
dollar during 2020 since some of these maintenance expenses
are denominated in U.S. dollars.

Aircraft and engine variable lease expenses. The 91.9% increase

in aircraft and engine variable expenses in 2020 was primarily
due to an increase in redelivery expenses and the depreciation
of approximately 11.6% in the average exchange rate of the peso
against the U.S. dollar, since the majority of these expenses are
denominated in U.S. dollars.

Other Operating Expenses. The 4.0% increase in other operating
expenses in 2020 was primarily the result of our purchase of ad-
ditional insurance to cover flight equipment. Additionally, during
2020, other operating expenses on a dollar basis increased due to
the depreciation of approximately 11.6% in the average exchange
rate of the peso against the U.S. dollar during 2020, since some

Content

163

of these expenses are denominated in U.S. dollars.

Depreciation and Amortization. The 33.0% increase in depre-
ciation and amortization in 2020 was primarily due to higher
amortization of major maintenance events associated with the
aging of our fleet. The cost of the major maintenance events is
accounted for under the deferral method. During 2019 and 2020,
we recorded amortization of major maintenance leasehold im-
provements of Ps. 450.4 million and Ps. 652.1 million, respectively.

2018 compared to 2019

Other operating income

Fuel expense, net

Landing, take-off and navigation expenses

Depreciation of right of use assets

Salaries and benefits

Sales, marketing and distribution expenses

Maintenance expenses

Aircraft and engine variable lease expenses

Other operating expenses

Depreciation and amortization

Total operating expenses, net

For the years ended December 31,

2018 (1)

2019

Variation

Ps.(621,973)

Ps.(327,208)

Ps.294,765

(In thousands of pesos, except for%)

10,134,982

4,573,319

4,043,691

3,125,393

1,501,203

1,497,989

956,010

1,059,098

500,641

11,626,069

5,108,489

4,702,971

3,600,762

1,447,637

1,488,431

961,657

1,112,927

675,514

1,491,087

535,170

659,280

475,369

(53,566)

(9,558)

5,647

53,829

174,873

Ps.26,770,353

Ps.30,397,249

Ps.3,626,896

(47.4)%

14.7%

11.7%

16.3%

15.2%

(3.6)%

(0.6)%

0.6%

5.1%

34.9%

13.5%

(1) As of January 1, 2019, we adopted IFRS 16 using the full retrospective method of adoption in order to provide comparative results in all periods presented, recognizing the effect in retained earnings as of January 1, 2017.

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Volaris Value
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Total operating expenses, net increased 13.5% in 2019 primarily
as a result of growth of operations and other factors described
below.

Other Operating Income. Other operating income decreased Ps.
294.8 million or 47.4% in 2019, primarily due to lower sale and
leaseback gains recorded during 2019 compared to the previous
year as a result of the adoption of IFRS 16.

Fuel expense, net. The 14.7% increase in fuel expense was prima-
rily as a result of an increase in the average fuel cost per gallon of
4.1% and an increase in fuel gallons consumed of 10.7% which, in
turn, was primarily due to more aircraft in operation and a 17.1%
increase in our departures.

During the years ended December 31, 2019 and 2018, we entered
into Asian Zero-Cost collar options and Asian call options con-
tracts. These instruments also qualify for hedge accounting. As
a result, during 2019, their intrinsic value loss of Ps. 70.5 million
was recycled to the cost of fuel.

Landing, Take-off and Navigation Expenses. The 11.7% increase
in landing, take-off and navigation expenses in 2019 was prima-
rily due to an increase in our operations as measured by number
of departures by 17.1%. These increases were partially offset by
a decrease in the number of airports where we operated during
the year and incentives received from certain airport groups as
a result of the growth of our operations.

Depreciation of right of use assets. The 16.3% increase in de-
preciation of right of use assets in 2019 was primarily due to an
increase in our fleet, as we incorporated five new net aircraft and
four new net engine leases during 2019.

Salaries and Benefits. The 15.2% increase in salaries and benefits
in 2019 was primarily the result of the annual salary increase and
an increase of 7.6% in our total number of employees during the
year. Additionally, the variable compensation of our workforce
increased also due to higher operations recorded during 2019, as
well as the accounting accrual impact related to our management
retention plans. See Item 6: “Directors, Senior Management and
Employees—Employees.”

Sales, Marketing and Distribution Expenses. The 3.6% decrease
in sales, marketing and distribution expenses was mainly due to
efficiencies in our marketing and distribution expenses related
to our efficiency and cost reduction plan.

Maintenance Expenses. The 0.6% decrease in maintenance ex-
penses in 2019 was mainly due to the receipt of credit notes from
some maintenance suppliers. This decrease was partially offset
by the 6.5% increase in our fleet size as a result of the addition
of five new net aircraft received during the year and the depre-
ciation of approximately 0.1% in the average exchange rate of
the peso against the U.S. dollar during 2019 since some of these
maintenance expenses are denominated in U.S. dollars.

Content

164

Aircraft and engine variable lease expenses. The 0.6% increase
in aircraft and engine variable expenses in 2019 was primarily
due to the depreciation in the average exchange rate of the peso
against the U.S. dollar, since the majority of these expenses are
denominated in U.S. dollars.

Other Operating Expenses. The 5.1% increase in other operating
expenses in 2019 was primarily the result of our purchase of ad-
ditional insurance to cover flight equipment and an increase in
other administrative expenses. Additionally, during 2019, other
operating expenses on a dollar basis increased due to the de-
preciation of approximately 0.1% in the average exchange rate of
the peso against the U.S. dollar during 2019, since some of these
expenses are denominated in U.S. dollars.

Depreciation and Amortization. The 34.9% increase in depre-
ciation and amortization in 2019 was primarily due to higher
amortization of major maintenance events associated with the
aging of our fleet. The cost of the major maintenance events is
accounted for under the deferral method. During 2018 and 2019,
we recorded amortization of major maintenance leasehold im-
provements of Ps .313.5 million and Ps. 450.4 million, respectively.

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Operating Results

2019 compared to 2020

Operating Results

Total operating revenues

Total operating expenses, net

Operating income

Content

165

For the years ended December 31,

2019

2020

Variation

(In thousands of pesos, except for%)

Ps.34,752,672

30,397,249

Ps.4,355,423

Ps.22,159,591

25,413,187

Ps.(3,253,596)

Ps.(12,593,081)

(4,984,062)

Ps.(7,609,019)

36.2%

(16.4)%

(100)%

Operating Income (loss). As a result of the factors outlined above, our operating loss was Ps. (3,254) million in 2020, as compared to our operating income of Ps. 4,355 million in 2019.

2018 compared to 2019

Operating Results

Total operating revenues

Total operating expenses, net

Operating income

For the years ended December 31,

2018 Adjusted (1)

2019

Variation

(In thousands of pesos, except for%)

Ps.27,305,150

26,770,353

Ps.534,797

Ps.34,752,672

30,397,249

Ps.4,355,423

Ps.7,447,522

3,626,896

Ps.3,820,626

27.3%

13.5%

>100%

Operating Income. As a result of the factors outlined above, our operating income was Ps. 4,355 million in 2019, a greater than 100% increase compared to our operating income of Ps. 534.8 million
in 2018. As a consequence of the adoption of IFRS 16, operating expenses decreased and our operating income increased.

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2019 compared to 2020

Financing Results

Finance income

Finance cost

Exchange gain, net

Total financing results

Content

166

For the years ended December 31,

2019

2020

Variation

(In thousands of pesos, except for%)

Ps.207,799

(2,269,829)

1,440,501

Ps.(621,529)

Ps.101,511

(3,018,484)

470,594

Ps.(106,288)

(748,655)

(969,907)

Ps.(2,446,379)

Ps.(1,824,850)

(51.1%)

(33.0%)

(67.3%)

>100%

Total Financing Results. The greater than 100% increase in our
total financing loss in 2020 was primarily due to the increase in
our finance cost, year over year.

During 2020, we recorded a net exchange loss of Ps. (1.1) billion,
which resulted from the 5.8% depreciation of the peso against

the U.S. dollar at year-end, since we maintained a net monetary
liability position of U.S. $1.7 billion in 2020. Our U.S. dollar net
monetary liability position mainly resulted from the value of our
lease liabilities and financial debt. This net exchange loss was
partially offset by the Ps. 1.6 billion gain on our non-derivative
financial instruments recorded during 2020. Additionally, our

finance income decreased by Ps. 106.3 million, mainly due to
a decrease in our short-term investments. Our finance cost
increased by Ps. 748.7 million, mainly due to our lease finance
costs and interest paid on our asset backed trust notes.

2018 compared to 2019

Financing Results

Finance income

Finance cost

Exchange (loss) gain, net

Total financing results

2018 (Adjusted) (1)

2019

Variation

For the years ended December 31,

(In thousands of pesos, except for%)

Ps.152,603

(1,876,312)

(103,790)

Ps.(1,827,499)

Ps.207,799

(2,269,829)

1,440,501

Ps.(621,529)

Ps.55,196

(393,517)

1,544,291

Ps.1,205,970

36.2%

21.0%

n.a.

(66.0)%

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Total Financing Results. The 66.0% decrease in our total finan-
cing loss in 2019 was primarily due to the increase in our foreign
exchange gain, year over year.

During 2019, we recorded an exchange gain of Ps. 1.4 billion,
which resulted from the 4.3% appreciation of the peso against

the U.S. dollar at year-end, since we maintained a net monetary
liability position of U.S. $1.7 billion in 2019. Our U.S. dollar net
monetary liability position mainly resulted from the value of
our lease liabilities and financial debt. Additionally, our finance
income increased by Ps. 55.2 million, mainly due to an increase
in our short-term investments as a result of a higher level of Cash

during 2019. Our finance cost increased by Ps. 393.5 million,
mainly due to an increase in our lease financial cost related to
the recognition of IFRS 16 and interest paid on our asset backed
trust notes.

Content

167

Income Tax Expense and Net Income

2019 compared to 2020

Net (loss) income

(Loss) income before income tax

Income tax benefit (expense)

Net (loss) income

For the years ended December 31,

2019

2020

Variation

(In thousands of pesos, except for%)

Ps.3,733,894

(1,094,831)

Ps.2,639,063

Ps.(5,699,975)

Ps.(9,433,869)

1,406,184

2,501,015

Ps.(4,293,791)

Ps.(6,932,854)

>100%

We recorded a net loss of Ps. 4.3 billion in 2020 com-
pared to a net gain of Ps. 2.6 billion in 2019. During the
years ended December 31, 2020 and 2019, we recorded a
tax benefit (expense) of Ps. 1.4 billion and Ps. (1.1 billion),
respectively. At December 31, 2020, our tax loss ca-

rry-forwards amounted to Ps. 1.9 billion (Ps. 1.3 billion of
December 31, 2019).

During the year ended December 31, 2020, we did not
use any available tax loss carry-forwards, whereas during

the year ended December 31, 2019, we used Ps. 214.5 mi-
llion in available tax loss carry-forwards. The effective tax
rate during 2020 and 2019 was of 24.7% and 29.3%,
respectively.

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Net (loss) income

(Loss) income before income tax

Income tax benefit (expense)

Net (loss) income

Content

168

2018 (Adjusted) (1)

2019

Variation

For the years ended December 31,

(In thousands of pesos, except for%)

Ps.(1,292,702)

349,820

Ps.(942,882)

Ps.3,733,894

(1,094,831)

Ps.2,639,063

Ps.5,026,596

(1,444,651)

Ps.3,581,945

n.a

We recorded net gain of Ps. 2.6 billion in 2019 compared to a
net loss of Ps. 942.9 million in 2018. During the years ended
December 31, 2019 and 2018, we recorded a tax (expense)
benefit of Ps. (1.1 billion) and Ps. 349.8 million, respectively.
At December 31, 2019, our tax loss carry-forwards amounted

to Ps. 1.3 billion (Ps. 1.6 billion of December 31, 2018).

tax rate during 2019 and 2018 was of 29.3% and 27.1%
respectively.

During the years ended December 31, 2019 and 2018, we
used Ps. 214.5 million and Ps. 154.4 million, in available
tax loss carry-forwards, respectively. The effective

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B. Liquidity and Capital Resources

Liquidity
Our primary source of liquidity is cash provided by operations, with our primary uses of liquidity being working capital and capital expenditures.

Net cash flows provided by operating activities

Net cash flows used in investing activities

Net cash flows used in financing activities

For the years ended December 31,

2018 (Adjusted) (1)

2019

6,276,707

(1,389,395)

(5,946,059)

(In thousands of pesos)

9,509,643

(1,879,341)

(5,238,840)

4,359,445

(67,757)

(3,040,840)

(1) On adoption of IFRS 16 we apply the new standard on the required effective date as of January 1, 2019, using the full retrospective method of adoption in order to provide for comparative results in all periods presented, recognizing the effect in retained earnings

as of January 1, 2017.

In recent years, we have been able to meet our working capital
requirements through cash from our operations. Our capital
expenditures consist primarily of the acquisition of flight
equipment, including pre-delivery payments for aircraft acqui-
sitions. From time to time, we finance pre-delivery payments
related to our aircraft with revolving lines of credit with the
commercial banks. We have obtained committed financing
for pre-delivery payments in respect of all the aircraft to be
delivered through 2022.

Our cash and cash equivalents increased by Ps. 2.1 billion, from
Ps. 8.0 billion at December 31, 2019 to Ps. 10.1 billion at Decem-
ber 31, 2020. At December 31, 2020 our credit lines totaled
Ps. 9.3 billion, of which Ps. 6.9 billion were related to financial
debt and Ps. 2.4 billion were related to letters of credit (and of
which Ps. 1.7 billion were undisbursed). At December 31, 2019,
we had available credit lines totaling Ps. 9.0 billion, of which Ps.
6.6 billion were related to financial debt and Ps. 2.4 billion were
related to letters of credit (Ps. 1.7 billion were undisbursed).

We have an investment policy to optimize the performance and
ensure availability of, and minimize the risk associated with, the
investment of cash, cash equivalents and short-term invest-
ments. Such policy provides for guidelines regarding minimum
balance, currency mix, instruments, deadlines, counterparties

and credit risk. At December 31, 2020, 98% of our cash, cash
equivalents and short-term investments were denominated
in U.S. dollars and 2% were denominated in pesos. See note
3 to our audited consolidated financial statements included
elsewhere in this annual report.

Net cash flows provided by operating activities. We rely pri-
marily on cash flows from operating activities to provide wor-
king capital for current and future operations. Net cash flows
provided by operating activities totaled Ps. 4.4 billion and Ps.
9.5 billion in 2020 and 2019, respectively. Our net operating
cash flows decreased primarily due to the negative impact of
the COVID-19 pandemic on our operating activities as des-
cribed above.

Net cash flows provided by operating activities totaled
Ps. 9.5 billion and Ps. 6.3 billion in 2019 and 2018, respectively.
Our net cash flows increased primarily due to a significant
increase in unearned transportation revenue as compared
to 2018.

Net cash flows used in investing activities. During 2020, net
cash flow used in investing activities totaled Ps. 0.1 billion, which
consisted primarily of pre-delivery payments for aircraft and
engine acquisitions totaling Ps. 2.2 billion, partially offset by

pre-delivery payments reimbursements totaling Ps. 1.7 billion.
Additionally, we recorded other capital expenditures relating
to engine, aircraft parts and rotable spare parts acquisitions,
intangible assets and major maintenance costs, which were
offset by the receipt of net proceeds from disposals. The net
amount of proceeds was Ps. 0.4 billion.

During 2019, net cash flow used in investing activities totaled
Ps. 1.9 billion, which consisted primarily of pre-delivery pay-
ments for aircraft and engine acquisitions, partially offset by
pre-delivery payments reimbursements totaling Ps. 0.7 billion.
Additionally, we recorded other capital expenditures relating
to aircraft parts and rotable spare parts acquisitions, intangi-
ble assets and major maintenance costs, net of disposals of
Ps. 1.2 billion.

During 2018, net cash flow used in investing activities totaled
Ps. 1.4 billion, which consisted primarily of pre-delivery pay-
ments for aircraft and engine acquisitions totaling Ps. 1.2 bi-
llion, partially offset by pre-delivery payments reimbursements
totaling Ps. 0.6 billion. Additionally, we recorded other capital
expenditures relating to aircraft parts and rotable spare parts
acquisitions, intangible assets and major maintenance costs,
net of disposals of Ps. 0.8 billion.

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Net cash flow used in financing activities. During 2020, net
cash flows used in financing activities totaled Ps. 3.0 billion,
which consisted primarily of payments of the principal por-
tion of lease liabilities of Ps. 6.1 billion (aircraft and spare
engine rent payment), payments of financial debt related to
the aircraft financing pre-delivery payments for a net amount
of Ps. 1.9 billion, payments of working capital credit lines of
Ps. 0.2 billion, payments of treasury shares of Ps. 0.1 billion
and interest paid of Ps. 0.3 billion, which were partially off-
set by proceeds from our SEC-registered follow-on equity
offering of Ps. 3.3 billion, proceeds from disbursements un-
der our revolving credit facility with Banco Santander and
Bancomext of Ps. 2.1 billion and proceeds from additional
short-term working capital facilities with Banco Sabadell,
S.A. of Ps. 0.2 billion.

During 2019, net cash flows used in financing activities to-
taled Ps. 5.2 billion, which consisted primarily of payments
of the principal portion of lease liabilities of Ps. 6.4 billion
(aircraft and spare engine rent payment), payments of fi-
nancial debt related to the aircraft financing pre-delivery
payments for a net amount of Ps. 0.7 billion, payments of
working capital credit lines of Ps. 0.5 billion and interest paid
of Ps. 0.3 billion, which were partially offset by proceeds
from disbursements under our revolving credit facility with
Banco Santander and Bancomext of Ps. 1.1 billion, proceeds
from our asset backed trust notes (CEBUR) of Ps. 1.4 billion,
which take into account amortized transaction costs, and
proceeds from additional short-term working capital facilities
with Banco Sabadell, S.A. of Ps. 0.2 billion.

During 2018, net cash flows used in financing activities to-
taled Ps. 5.9 billion, which consisted primarily of payments
of the principal portion of lease liabilities of Ps. 5.7 billion
(aircraft and spare engine rent payments), payments of fi-
nancial debt related to the aircraft financing pre-delivery
payments for a net amount of Ps. 0.7 billion, payments of
working capital credit lines of Ps. 0.5 billion and interest paid
of Ps. 0.2 billion, which were partially offset by proceeds
from disbursements under our revolving credit facility with
Banco Santander and Bancomext of Ps. 1.2 billion.

Loan Agreements
The revolving credit facility with Banco Santander México and
Bancomext, dated July 27, 2011 as amended and restated on
August 1, 2013 and as further amended on February 28, 2014
and November 27, 2014, under which we are a guarantor, pro-
vides financing for pre-delivery payments in connection with
our purchase of nineteen A320 aircraft. On August 25, 2015,
we entered into an additional amendment to such loan agree-
ment to finance pre-delivery payments of eight additional
A320 aircraft. In November 2016, we entered into an additional
amendment to such loan agreement to finance the pre-delivery
payments for the twenty-two remaining A320 aircraft under
the Airbus purchase agreement. In December 2017, we ente-
red an additional amendment to extend the term of the loan
agreement to November 2021. In November 2018, we entered
an amendment to extend the term of the loan agreement to
May 2022. Finally, we entered into one further amendment to
this loan agreement in October 2020 to extend the term to
October 2022.

pital facility with Banco Sabadell, S.A., Institución de Banca
Multiple (“Sabadell”) with Concesionaria as our obligor in the
amount of Ps. 200 million and bearing annual interest at TIIE
28 days plus 300 basis points. As of December 31, 2020, we
were current with principal and interest payments as well as
in compliance with the covenants under our revolving credit
facility and short-term working capital facilities.

C. Research and Development, Patents and
Licenses, Etc.
We have registered the trademark “Volaris” with the trade-
mark office in Mexico, the United States and in the countries
in which operate in Central America. We have also registered
several additional trademarks and slogans with the trademark
office in Mexico, the United States and in the countries in
which we operate in Central America. On April 16, 2021, the
Mexican authorities recognized the trademark “Volaris” in
the category of famous brand.

The aggregate principal amount of this revolving line is for up
to U.S. $183.0 million, of which U.S. $103.7 million is provided
by Banco Santander México and U.S. $79.3 million by Ban-
comext. This revolving credit facility bears annual interest at
three-month LIBOR plus 260 basis points. The maturity is on
October 31, 2022, but it could be extended to November 2022.
This revolving line of credit may limit our ability to, among
others, declare and pay dividends in the event that we fail to
comply with the payment terms thereunder, dispose of certain
assets, incur indebtedness and create certain liens.

We operate software products under licenses from our ven-
dors, including Jeppesen Systems AB, Navitaire LLC and
Juniper Technologies Corporation. Under our agreements
with Airbus, we use Airbus’ proprietary information to main-
tain our aircraft.

D. Trend Information
See Item 5: “Operating and Financial Review and Prospects—
Operating Results—Trends and Uncertainties Affecting our
Business.”

On June 20, 2019, our subsidiary Volaris Opco issued
15,000,000 asset backed trust notes under the ticker VO-
LARCB 19 in the amount of Ps. 1.5 billion through Irrevocable
Trust number CIB/3249 created by Volaris Opco. This issuance
is part of a program approved by the CNBV for an amount of
up to Ps. 3.0 billion. The notes mature in five years, have prin-
cipal amortizations of Ps. 250,000, Ps. 500,000, Ps. 500,000
and Ps. 250,000 in 2021, 2022, 2023 and 2024, respectively,
and bear annual interest at TIIE 28 days plus 175 basis points.

In December 2019, we entered into a short-term working ca-

E. Off-Balance Sheet Arrangements
None of our operating lease obligations are reflected on
our statements of financial position. We are responsible for
all maintenance, insurance and other costs associated with
operating these aircraft; however, we have not made any
residual value guarantee to our lessors.

F. Tabular Disclosure of Contractual
Obligations

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The following table sets forth certain contractual obligations as of December 31, 2020:

Debt(1)

Lease liabilities(2)

Future lease liabilities(3)

Flight equipment, spare engines and spare parts purchase
obligations(4)

Contractual Obligations* Payments due by Period

Total

Less than 1 year

1 to 3 years

3 to 5 years

More than 5 years

(In thousands of pesos, except for%)

Ps.5,370,175

44,130,542

15,134,381

87,213,622

Ps.1,566,106

6,484,092

193,901

802,197

Ps.3,554,069

11,235,142

2,218,176

8,074,336

Ps.250,000

8,677,232

2,522,394

30,971,314

Ps. –

17,734,076

10,199,910

47,365,775

future payments on contractual obligations

Ps.151,848,720

Ps.9,046,296

Ps.25,081,723

Ps.42,420,940

Ps.75,299,761

Includes scheduled interest payments.

(1)
(2) Does not include maintenance deposit payments because they depend on the utilization of the aircraft.
(3) Our sale and leaseback agreements consist primarily of future lease payments with the lessors.
(4)

Our contractual purchase obligations consist primarily of aircraft and engine acquisitions through manufacturers and aircraft leasing companies. In December 2017, we signed an amendment to our purchase agreement with Airbus to purchase 80 aircraft which
we are committed to receive from 2022 to 2026.

* Disclosure of contractual obligations does not include obligations relating to our post-employment benefits which totaled Ps. 50.6 million at December 31, 2020.

Committed expenditures for these aircraft, spare engines,
spare parts and related flight equipment, including estima-
ted amounts for contractual price escalations of pre-delivery
payments, will be approximately Ps. 18.6 billion from 2021 to
2026 and thereafter.

In 2021, we expect our capital expenditures, excluding pre-de-
livery payments, to be Ps. 87.2 billion, consisting primarily of
aircraft parts and rotable spare parts, construction and improve-
ments to leased assets, and major maintenance costs (leasehold
improvements to flight equipment recorded into rotable spare
parts furniture and equipment, net).

G. Safe Harbor
Not applicable.

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Content
Content

About this
Report

Content
6.1.

Materiality Assessment

6.2.

GRI and SASB Content Index

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6Content

173

About this
Report

GRI 102-12, 102-45, 102-46, 102-48, 102-49, 102-50,
102-54

Through our 2020 Annual Integrated Report we
share with our stakeholders the economic, cor-
porate governance, labor, social, environmental
and financial results, as well as the actions im-
plemented to respond to the health crisis caused
by COVID-19, for the period from January 1st to
December 31, 2020.

We compiled the information reported based
on the data analyzed from our operations in the
countries and regions where we are present, i.e.,
Mexico, the United States of America and Central
America.

This report was prepared in accordance with
the Global Reporting Initiative (GRI) Standards:
Essential option. The contents used were defined
based on our 2018 Materiality Assessment. The
information provided has not been restated in
any manner.

Likewise, we maintain our commitment to con-
tribute to the Sustainable Development Goals
(SDG) of the United Nations 2030 Agenda. Our
Corporate Sustainability Program contributes
directly to the goals of 11 SDG related to the
industry.

Striving to improve how we manage ESG issues,
in addition to the GRI contents and our contri-
butions to the Sustainable Development Goals,
for the first time we include information to meet
the Sustainability Accounting Standards Board
(SASB) standards applicable to Airlines.

The Sustainability Accounting Standards Board
(SASB) is an independent body that develops
specific standards for numerous sectors, and
whose mission is to inform businesses and inves-
tors about the financial impacts of sustainabil-
ity by promoting the reporting of material ESG
issues (environmental, social and governance).

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In 2021, we will update our materiality assessment and stakeholder
engagement to identify risks, opportunities, performance indicators
and strategic goals regarding our impact within the airline industry,
especially in the current context due to the COVID-19 pandemic.

Consolidated Risk (X)

J. Research, development and innovation

A. Corporate social responsibility (CSR)
management

F. Brand management

H. Operations

Ñ. Biodiversity

IV WIDESPREAD

Z
V
U

%
0
0
1

Y
T
I

R
U
T
A
M
T
E
K
R
A
M

6.1. Materiality
Assessment

GRI 102-46, 102-47

The materiality assessment and the stakeholder
engagement that we conducted in 2018, as well
as the True Value exercise conducted with KPMG
in 2019, were essential for our restatement of the
Volaris Corporate Sustainability Program and the
Volaris Value Creation Model defined in 2019 and
submitted in this report.

We supplemented this methodology in order to
obtain comparable results on significant issues
according to the updates made under the Global
Reporting Initiative (GRI) Standards, and taking
into account the Dow Jones Sustainability Index
(DJSI) items addressed to the aviation industry.

O. Climate change and other atmospheric emissions

III NECESSARY

D. Ethics and integrity

S. Employee satisfaction

Q. Waste management

N. Energy

L. Environmental policies/management

W. Human rights

M. Materials

R. Talent attraction and retention

Y. Stakeholder relations

K. Customer relation management

C. Risk management

X. Social impacts on Communities

T. Human capital development

P. Water resource management

E. Corruption/transparency

V. Occupational health and safety

Z. Standards with Suppliers

B. Corporate governance

%
0

I EMERGING

CONSOLIDATED RISK

100%

I. Service Responsibility

II URGENT

U. Labor practices

G. Financial issues

High

Medium

Low

Adjusted to
100%

100%

80%

72%

67%

66%

65%

64%

63%

61%

60%

57%

55%

54%

50%

49%

48%

47%

45%

44%

42%

41%

40%

32%

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Disclosure

Description

Page / Answer

Content

175

GRI 102-55

6.2. GRI and SASB
Content Index

GRI 102: General
disclosures 2016

102-1

102-2

102-3

102-4

102-5

102-6

102-7

102-8

102-9

102-10

102-11

102-12

102-13

102-14

102-15

102-16

102-17

102-18

102-19

102-20

102-21

102-22

102-23

Name of the organization

Activities, brands, products, and services

1. Organizational profile

Location of headquarters

Location of operations

Ownership and legal form

Markets served

Scale of the organization

Information on employees and other workers

Supply chain

31, 34

182

9, 31, 34, 36

28, 31, 34, 36

Significant changes to the organization and its supply chain

30, 34

Precautionary principle or approach

External initiatives

Membership of associations

2. Strategy

Statement from senior decision-maker

Key impacts, risks, and opportunities

3. Ethics and integrity
Values, principles, standards, and norms of behavior

Mechanisms for advice and concerns about ethics

4. Governance

Governance structure

Delegating authority

Executive-level responsibility for economic, environmental,
and social topics

Consulting stakeholders on economic, environmental, and
social topics

Composition of the highest governance body and its
committees

Chair of the highest governance body

21, 24

10, 40, 173

21, 60

4, 21, 24

25, 27

10, 17

17, 40

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

GRI or SASB Standard

Disclosure
102-24

GRI 102: General
disclosures 2016

102-25

102-26

102-27

102-28

102-29

102-30

102-31

102-32

102-33

102-35

102-36

102-40

102-41

102-42

102-43

102-44

102-45

102-46

102-47

102-48

102-49

102-50

102-51

102-52

102-53

Description

Page / Answer

Content

176

Nominating and selecting the highest governance body

Conflicts of interest

Role of highest governance body in setting purpose, values,
and strategy

Collective knowledge of highest governance body

Evaluating the highest governance body’s performance

12, 25

12, 17

Identifying and managing economic, environmental, and social
impacts

17, 21

Effectiveness of risk management processes

Review of economic, environmental, and social topics

Highest governance body’s role in sustainability reporting

Communicating critical concerns

Remuneration policies

Process for determining remuneration

5. Stakeholder engagement

List of stakeholder groups

Collective bargaining agreements

Identifying and selecting stakeholders

Approach to stakeholder engagement

Key topics and concerns raised

40, 43

Entities included in the consolidated financial statements

173

Defining report content and topic boundaries

173, 174

6. Reporting practices

List of material topics

Restatements of information

Changes in reporting

Reporting period

Date of most recent report

Reporting cycle

Contact point for questions regarding the report

174

173

2019

Annual

182

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

Content

177

GRI or SASB Standard

GRI 102: General
disclosures 2016

Disclosure
102-54

102-55

102-56

Description

Page / Answer

Claims of reporting in accordance with the GRI Standards

GRI content index

External assurance

173

175

This report has no external assurance.

TR-AL-000.A

Available seat kilometers (ASK)

TR-AL-000.B

Passenger load factor

SASB Airlines:
Activity metrics

TR-AL-000.C

Revenue passenger kilometers (RPK)

TR-AL-000.D

Revenue ton kilometers (RTK)

TR-AL-000.E

Number of departures

TR-AL-000.F

Average age of fleet

GRI 103:
Management
approach 2016

GRI 201: Economic
performance 2016

103-1
103-2
103-3
201-1

201-2

201-3

GRI 200: Economic Standards
Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach
Direct economic value generated and distributed

Financial implications and other risks and opportunities
due to climate change

Defined benefit plan obligations and other retirement
plans

201-4

Financial assistance received from government

“SASB Competitive
behavior”

TR-AL-520a.1

Total amount of monetary losses as a result of legal
proceedings associated with anticompetitive behavior
regulation

4, 21, 24, 30
4, 21, 24, 30
4, 21, 24, 30
45, 48
Volaris plans to use the TCFD
framework for managing risks and
opportunities related to climate change
in the next two years.
Retirement plans are granted in
accordance with the law's guidelines
and through the IMSS.
We collaborate with the Tourism
Departments from all states to promote
the destinations of the new routes,
through several means of advertising
such as the website, social networks
and the advertising spaces in the
aircraft.
25
In 2020, we had no fines or sanctions
related to anticompetitive behavior. "

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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this Report

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GRI or SASB Standard

Disclosure

Description

Page / Answer

Content

178

GRI 103:
Management
approach 2016

GRI 301: Materials
2016

GRI 103:
Management
approach 2016

GRI 302: Energy
2016

GRI 103:
Management
approach 2016

103-1
103-2
103-3

301-2

103-1
103-2
103-3
302-1
302-3
302-4

302-5

103-1
103-2
103-3

GRI 300: Environmental Standards
Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach

Recycled input materials used

Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach
Energy consumption within the organization
Energy intensity
Reduction of energy consumption
Reductions in energy requirements of products and
services
Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach

GRI 304: Biodiversity
2016

304-3

Habitats protected or restored

GRI 103:
Management
approach 2016

GRI 305: Emissions
2016

103-1
103-2
103-3
305-1
305-2
305-4
305-5

Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach
Direct (Scope 1) GHG emissions
Energy indirect (Scope 2) GHG emissions
GHG emissions intensity
Reduction of GHG emissions

64, 69
64, 69
64, 69

64, 65
64, 65
64, 65
65
65
65

64, 69
64, 69
64, 69
We do not directly restore habitats;
however, we support initiatives and
associations that are responsible
for protecting natural areas and
endangered species, as well as raising
awareness about their preservation.
64, 72
64, 72
64, 72
72
72
65, 72
65, 72

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

GRI or SASB Standard

Disclosure

Description

Page / Answer

GRI 300: Environmental Standards

Content

179

GRI 305: Emissions
2016

305-7

Nitrogen oxides (NOX), sulfur oxides (SOX), and other
significant air emissions

TR-AL-110a.1

Gross global Scope 1 emissions

“SASB Greenhouse
gas emissions”

TR-AL-110a.2

Discussion of long-term and short-term strategy or
plan to manage Scope 1 emissions, emissions reduction
targets, and an analysis of performance against those
targets

TR-AL-110a.3

Total fuel consumed, percentage alternative, percentage
sustainable

103-1
103-2
103-3
306-3
306-4
306-5
103-1
103-2
103-3

Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach
Waste generated
Waste diverted from disposal
Waste directed to disposal
Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach

307-1

Non-compliance with environmental laws and regulations

This specific type of gas (NOx) is not
monitored, as it is considered the
equivalent emission factor for aviation
established through the International
Civil Aviation Organization (ICAO),
according to Annex VI, volume IV, of the
Chicago Convention.
72
65
Volaris plans to use the TCFD
framework for managing risks and
opportunities related to climate change
in the next two years.
58
Volaris does not use alternative fuel in
its aircraft.
64, 69
64, 69
64, 69
73
69
73
64, 72
64, 72
64, 72
During 2020, we had no fines or
sanctions related to environmental
non-compliances.

103-1
103-2
103-3

402-1

GRI 400: Social Standards
Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach

28
28
28

Minimum notice periods regarding operational changes

All notice periods established by the
Federal Labor Law are respected.

GRI 103:
Management
approach 2016

GRI 306: Waste
2020

GRI 103:
Management
approach 2016

GRI 307:
Environmental
compliance 2016

GRI 103:
Management
approach 2016

GRI 402: Labor /
management
relations 2016

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

GRI or SASB Standard

Disclosure

Description

GRI 400: Social Standards

Content

180

Page / Answer

SASB Labor
practices

GRI 103:
Management
approach 2016

GRI 410: Security
practices 2016

SASB Accident
& safety
management

GRI 103:
Management
approach 2016

GRI 412: Human
rights assessment
2016

GRI 103:
Management
approach 2016

GRI 419:
Socioeconomic
compliance 2016

TR-AL-310a.1

Percentage of active workforce covered under collective
bargaining agreements

TR-AL-310a.2

Number of work stoppages and total days idle

103-1
103-2
103-3

410-1

TR-AL-540a.1

TR-AL-540a.2

TR-AL-540a.3

Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach
Security personnel trained in human rights policies or
procedures
Description of implementation and outcomes of a Safety
Management System
Number of aviation accidents

Number of governmental enforcement actions of aviation
safety regulations

103-1
103-2
103-3

412-1

412-2

412-3

103-1
103-2
103-3

419-1

Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach
Operations that have been subject to human rights
reviews or impact assessments
Employee training on human rights policies or
procedures
Significant investment agreements and contracts that
include human rights clauses or that underwent human
rights screening
Explanation of the material topic and its boundary
The management approach and its components
Evaluation of the management approach

Non-compliance with laws and regulations in the social
and economic area

In 2020, there were no work stoppages
or days of inactivity due to strikes or
labor disputes.
92
92
92

93-94

93
In 2020, the competent authorities
did not impose any measures against
Volaris related to aviation security.
92
92
92

25, 92

93, 95
93, 95
93, 95
Derived from the case we have with
Profeco, we have pending resolution
and in litigation the defense means
filed against a fine amounting Ps.
$200,000.00.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

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Content

181

Except otherwise stated, all figures in this document are as of December, 31, 2020.

This integrated annual report contains various forward-looking statements, which represent the Company’s
expectations, beliefs or projections concerning future events and financial trends affecting the financial con-
dition of our business. When used in this annual report, the words “expects,” “intends,” “estimates,” “predicts,”
“plans,” “anticipates,” “indicates,” “believes,” “forecast,” “guidance,” “potential,” “outlook,” “may,” “continue,”
“will,” “should,” “seeks,” “targets” and similar expressions are intended to identify forward-looking statements.
Similarly, statements that describe the Company’s objectives, plans or goals, or actions the Company may
take in the future, are forward-looking statements. Forward-looking statements include, without limitation,
statements regarding the Company’s intentions and expectations regarding the delivery schedule of aircraft
on order, announced new service routes and customer savings programs. Forward-looking statements should
not be read as a guarantee or assurance of future performance or results and will not necessarily be accu-
rate indications of the times at, or by, which such performance or results will be achieved. Forward-looking
statements are based on information available at the time those statements are made and/or management’s
good faith belief as of that time with respect to future events and are subject to risks and uncertainties that
could cause actual performance or results to differ materially from those expressed in or suggested by the
forward-looking statements. Forward-looking statements are subject to a number of factors that could cause
the Company’s actual results to differ materially from the Company’s expectations, including the competi-
tive environment in the airline industry; the Company’s ability to keep costs low; changes in fuel costs; the
impact of worldwide economic conditions on customer travel behavior; the Company’s ability to generate
non-ticket revenues; and government regulation. Additional information concerning these and other factors
is contained in the Company’s Securities and Exchange Commission filings. All forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary
statements set forth above.

Any investor should not put undue reliance on any forward-looking statements. We assume no obligation
to update forward-looking statements to reflect actual results, changes in assumptions or changes in other
factors affecting forward-looking information, except to the extent required by applicable law. If we update
one or more forward-looking statements, no inference should be drawn that we will make additional up-
dates with respect to those or other forward-looking statements. Important factors that could cause such
differences include, but are not limited to:

 the competitive environment in our industry
 ability to keep costs low
 changes in our fuel cost, the effectiveness of our fuel cost hedges and our ability to hedge fuel costs
 the impact of worldwide economic conditions, including the impact of the economic recession on customer

travel behavior

 actual or threatened terrorist attacks, global instability, geopolitical risks and potential U.S. military actions

or activities

 ability to generate non-ticket revenues
 external conditions, including air traffic congestion, weather conditions and outbreak of disease and pandemics
 ability to maintain slots in the airports that we operate and service provided by airport operators
 ability to operate through new airports that match our operative criteria;
 air travel substitutes
 labor disputes, employee strikes and other labor-related disruptions, including in connection with our

negotiations with our union

 ability to attract and retain qualified personnel
 loss of key personnel
 aircraft-related fixed obligations
 dependence on cash balances and operating cash flows;
 our aircraft utilization rate
 maintenance costs
 our reliance on automated systems and the risks associated with changes made to those systems
 use of personal data
 lack of marketing alliances
 government regulation, changes in law and interpretation and supervision of compliance with applicable law
 maintaining and renewing our permits and concessions
 our ability to execute our growth strategy
 operational disruptions
 our indebtedness
 currency fluctuations or the devaluation and depreciation of the peso
 our liquidity
 our reliance on third-party vendors and partners
 our reliance on a single fuel provider in Mexico
 an aircraft accident or incident
 our aircraft and engine suppliers
 changes in the Mexican and VFR (passengers who are visiting friends and relatives) markets
 insurance costs
 environmental regulations
 cyber-attacks
 our ability to respond to global health crises, such as the ongoing COVID-19 pandemic

Readers are encouraged to jointly review this integrated annual report with our 2020 Annual Report presented
to the National Banking and Securities Commission and the Mexican Stock Exchange S.A.B. de C.V., on April
30, 2021, as well as our future reports presented to said institutions.

The information in this report is subject to change without notice, and we are not obligated to publish updates
or revise statements about future acts after the date of this report or to reflect the anticipated or unanticipated
occurrence of certain events or circumstances.

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

Content
Content

182

GRI 102-3, 102-53

Contact

Av. Antonio Dovalí Jaime No. 70
13th floor, Tower B
Colonia Zedec Santa Fe
C.P. 01210, Mexico City

Corporate Affairs Director
José Alfonso Lozano
+5255 52616400
volaris.corporativo@volaris.com

Investor Relations Director
María Elena Rodríguez
+5255 52616444
ir@volaris.com

@viajaVolaris

@viajavolaris

Volaris, the Lowest Cost Publicly
Traded Airline in the Americas

Volaris Value
Creation

Volaris
Performance

Consolidated Financial
Statements

Operating and Financial Review and Prospects

About
this Report

Contact

72 0 2 0 I n t e g r a t e d A n n u a l R e p o r t

Publication date: August 5, 2021