UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 6-K
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
 
For the month of October 2018
 
Commission File Number: 001-36059

 

Controladora Vuela Compañía de Aviación, S.A.B. de C.V.
(Name of Registrant)
 
Av. Antonio Dovalí Jaime No. 70, 13 Floor, Tower B
Colonia Zedec Santa Fe
United Mexican States, Mexico City 01210
+(52) 55-5261-6400
(Address of Principal Executive Offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F x               Form 40-F ¨
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
 
Yes ¨                  No  x
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
 
Yes ¨                  No  x
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes ¨                  No  x
 
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- __________

 

 

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, Controladora Vuela Compañía de Aviación, S.A.B. de C.V. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 	Controladora Vuela Compañía de Aviación, S.A.B. de C.V.	
 	 	 	
Date: October 25, 2018	By:	/s/ Carlos A. González López	
 	Name:  	Carlos A. González López	
 	Title:	Acting Chief Financial Officer	
 	 	 	
 	By:	/s/ Jaime E. Pous Fernández	
 	Name:	Jaime E. Pous Fernández	
 	Title:	Senior Vice President	
 	 	Chief Legal Officer and Corporate Affairs	

 
 
EXHIBIT INDEX
 
The following exhibit is filed as part of this Form 6-K:
 
Exhibit	 	Description	 	
 	 	 	
99.98	 	Third quarter 2018 financial statements and press release dated October 25, 2018	

 
Exhibit 99.98
 
VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	

Management commentary

 

Management commentary

 

 1  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
General information about financial statements
 
Ticker:	VLRS	
Period covered by financial statements:	2018-01-01 al 2018-09-30	
Date of end of reporting period:	2018-09-30	
Name of reporting entity or other means of identification:	VLRS	
Description of presentation currency:	MXN	
Level of rounding used in financial statements:	Thousands	
Consolidated:	Yes	
Number of quarter:	3	
Type of issuer:	ICS	
Explanation of change in name of reporting entity or other means of identification from end of preceding reporting period:	 	
Description of nature of financial statements:	 	

 

Follow-up of analysis

 
 
Analyst Coverage
 
Firm	 	Analyst	
Banorte	 	José Itzamna Espitia	
Barclays	 	Pablo Monsivais	
Bradesco BBI - Equity Research	 	Victor Mizusaki	
Citi	 	Stephen Trent	
Cowen Securities	 	Helane Becker	
Deutsche Bank	 	Michael Linenberg	
Evercore Partners	 	Duane Pfennigwerth	
GBM	 	Mauricio Martinez	
HSBC	 	Alexandre P Falcao	
Intercam Casa de Bolsa	 	Alejandra Marcos	
Morgan Stanley	 	Joshua Milberg	
Santander	 	Pedro Bruno	
UBS	 	Rogerio Araujo	
Vector	 	Marco Antonio Montañez	
 
 2  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Consolidated Statements of financial position
 
 	 	As of September 30,
2018	 	 	As December 31,
2017 (Adjusted)	 	
Statement of financial position	 	 	 	 	 	 	 	 	
Assets	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	6,081,650	 	 	 	6,950,879	 	
Trade and other current receivables	 	 	1,609,817	 	 	 	878,931	 	
Recoverable Income tax	 	 	435,366	 	 	 	570,361	 	
Financial instruments	 	 	227,706	 	 	 	497,403	 	
Inventories	 	 	309,061	 	 	 	294,850	 	
Current biological assets	 	 	0	 	 	 	0	 	
Other current non-financial assets	 	 	1,603,652	 	 	 	2,120,606	 	
Total current assets other than non-current assets or disposal groups classified as held for sale or as held for distribution to owners	 	 	10,267,252	 	 	 	11,313,030	 	
Non-current assets or disposal groups classified as held for sale or as held for distribution to owners	 	 	0	 	 	 	0	 	
Total current assets	 	 	10,267,252	 	 	 	11,313,030	 	
Non-current assets	 	 	 	 	 	 	 	 	
Trade and other non-current receivables	 	 	0	 	 	 	0	 	
Current tax assets, non-current	 	 	0	 	 	 	0	 	
Non-current inventories	 	 	0	 	 	 	0	 	
Non-current biological assets	 	 	0	 	 	 	0	 	
Financial instruments	 	 	0	 	 	 	0	 	
Investments accounted for using equity method	 	 	0	 	 	 	0	 	
Investments in subsidiaries, joint ventures and associates	 	 	0	 	 	 	0	 	
Rotable spare parts, furniture and equipment, net	 	 	5,080,716	 	 	 	4,375,697	 	
Investment property	 	 	0	 	 	 	0	 	
Goodwill	 	 	0	 	 	 	0	 	
Intangible assets, net	 	 	161,812	 	 	 	190,420	 	
Deferred income tax	 	 	571,125	 	 	 	562,445	 	
Other non-current non-financial assets	 	 	5,602,600	 	 	 	6,224,675	 	
Total non-current assets	 	 	11,416,253	 	 	 	11,353,237	 	
Total assets	 	 	21,683,505	 	 	 	22,666,267	 	
Equity and liabilities	 	 	 	 	 	 	 	 	
Liabilities	 	 	 	 	 	 	 	 	
Short-term liabilities	 	 	 	 	 	 	 	 	
Trade and other current payables	 	 	5,536,300	 	 	 	4,656,925	 	
Income tax payable	 	 	155,091	 	 	 	111,292	 	
Other current financial liabilities	 	 	2,397,398	 	 	 	2,403,562	 	
Accrued liabilities	 	 	2,262,781	 	 	 	2,050,973	 	
Short-term provisions	 	 	 	 	 	 	 	 	
Current provisions for employee benefits	 	 	0	 	 	 	0	 	
Other liabilities	 	 	84,807	 	 	 	280,744	 	
Total short-term provisions	 	 	84,807	 	 	 	280,744	 	
Total short-term liabilities other than liabilities included in disposal groups classified as held for sale	 	 	10,436,377	 	 	 	9,503,496	 	
Liabilities included in disposal groups classified as held for sale	 	 	0	 	 	 	0	 	
Total short-term liabilities	 	 	10,436,377	 	 	 	9,503,496	 	
Long-term liabilities	 	 	 	 	 	 	 	 	
Trade and other non-current payables	 	 	0	 	 	 	0	 	
Current tax liabilities, non-current	 	 	0	 	 	 	0	 	
Other non-current financial liabilities	 	 	799,561	 	 	 	1,079,152	 	
Other non-current non-financial liabilities	 	 	152,938	 	 	 	199,848	 	
 
 3  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	As of September 30,
2018	 	 	As December 31,
2017 (Adjusted)	 	
Non-current provisions	 	 	 	 	 	 	 	 	
Non-current provisions for employee benefits	 	 	22,255	 	 	 	19,289	 	
Other non-current provisions	 	 	290,617	 	 	 	216,702	 	
Total non-current provisions	 	 	312,872	 	 	 	235,991	 	
Deferred tax liabilities	 	 	1,119,590	 	 	 	1,616,282	 	
Total non-current liabilities	 	 	2,384,961	 	 	 	3,131,273	 	
Total liabilities	 	 	12,821,338	 	 	 	12,634,769	 	
Equity	 	 	 	 	 	 	 	 	
Capital stock	 	 	2,973,559	 	 	 	2,973,559	 	
Additional paid in capital	 	 	1,813,022	 	 	 	1,804,528	 	
Treasury shares	 	 	100,233	 	 	 	85,034	 	
Retained earnings	 	 	3,749,515	 	 	 	4,948,376	 	
Other reserves	 	 	426,304	 	 	 	390,069	 	
Total equity attributable to owners of parent	 	 	8,862,167	 	 	 	10,031,498	 	
Non-controlling interests	 	 	0	 	 	 	0	 	
Total equity	 	 	8,862,167	 	 	 	10,031,498	 	
Total equity and liabilities	 	 	21,683,505	 	 	 	22,666,267	 	
 
 4  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Consolidated Statements of Operations
 
 	 	For the nine months
ended September
30, 2018	 	 	For the nine months
ended September
30, 2017
(Adjusted)	 	 	For the three
months ended
September
30, 2018	 	 	For the three
months ended
September
30, 2017 (Adjusted)	 	
Profit or loss	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Profit (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating revenues	 	 	19,396,491	 	 	 	18,263,719	 	 	 	7,316,075	 	 	 	6,571,254	 	
Cost of sales	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Gross profit	 	 	19,396,491	 	 	 	18,263,719	 	 	 	7,316,075	 	 	 	6,571,254	 	
Sales, marketing and distribution expenses	 	 	1,078,881	 	 	 	1,212,452	 	 	 	339,743	 	 	 	468,241	 	
Administrative expenses	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other operating income	 	 	474,805	 	 	 	18,811	 	 	 	243,039	 	 	 	7,990	 	
Other operating expense	 	 	20,027,740	[1]	 	 	17,125,263	[2]	 	 	6,973,517	[3]	 	 	5,487,867	[4]	
Operating (loss) income	 	 	(1,235,325	)	 	 	(55,185	)	 	 	245,854	 	 	 	623,136	 	
Finance income	 	 	108,123	 	 	 	72,716	 	 	 	37,180	 	 	 	155,106	 	
Finance costs	 	 	585,456	 	 	 	1,640,193	 	 	 	483,089	 	 	 	19,756	 	
Share of profit (loss) of associates and joint ventures accounted for using equity method	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
(Loss) income before income tax	 	 	(1,712,658	)	 	 	(1,622,662	)	 	 	(200,055	)	 	 	758,486	 	
Income tax (benefit) expense	 	 	(513,797	)	 	 	(516,686	)	 	 	(81,237	)	 	 	38,828	 	
(Loss) income from continuing operations	 	 	(1,198,861	)	 	 	(1,105,976	)	 	 	(118,818	)	 	 	719,658	 	
(Loss) income from discontinued operations	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Net (loss) income	 	 	(1,198,861	)	 	 	(1,105,976	)	 	 	(118,818	)	 	 	719,658	 	
(Loss) income, attributable to	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) income, attributable to owners of parent	 	 	(1,198,861	)	 	 	(1,105,976	)	 	 	(118,818	)	 	 	719,658	 	
(Loss) income, attributable to non-controlling interests	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (loss) earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (loss) earnings per share from continuing operations	 	 	(1.18	)	 	 	(1.09	)	 	 	(0.12	)	 	 	0.71	 	
Basic (loss) earnings per share from discontinued operations	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total basic (loss) earnings per share	 	 	(1.18	)	 	 	(1.09	)	 	 	(0.12	)	 	 	0.71	 	
Diluted (loss) earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted (loss) earnings per share from continuing operations	 	 	(1.18	)	 	 	(1.09	)	 	 	(0.12	)	 	 	0.71	 	
Diluted (loss) earnings per share from discontinued operations	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total diluted (loss) earnings per share	 	 	(1.18	)	 	 	(1.09	)	 	 	(0.12	)	 	 	0.71	 	
 
	[1]	Includes the following expenses: i) Fuel by Ps. 7,250,251, ii) Aircraft and engine rent expenses by Ps. 4,692,864, iii) Landing, take-off and navigation expenses by Ps. 3,424,740, iv) Salaries and benefits by Ps. 2,329,898, v) Maintenance by Ps. 1,125,722 vi) Other operating expenses by Ps. 833,466 and vii) Depreciation and amortization by Ps. 370,799.	
 
	[2]	Includes the following expenses: i) Fuel by Ps. 5,283,561, ii) Aircraft and engine rent expenses by Ps. 4,460,718, iii) Landing, take-off and navigation expenses by Ps. 3,029,335, iv) Salaries and benefits by Ps. 2,108,296, v) Maintenance by Ps. 1,037,239, vi) Other operating expenses by Ps. 788,499 and vii) Depreciation and amortization by Ps. 417,615.	
 
	[3]	Includes the following expenses:  i) Fuel by Ps. 2,630,552, ii) Aircraft and engine rent expenses by Ps. 1,592,501, iii) Landing, take-off and navigation expenses by Ps. 1,149,531, iv) Salaries and benefits by Ps. 833,769, v) Maintenance by Ps. 394,185, vi) Other operating expenses by Ps. 258,115 and vii) Depreciation and amortization by Ps. 114,864.	
 
	[4]	Includes the following expenses: i) Fuel by Ps. 1,697,741, ii) Aircraft and engine rent expenses by Ps. 1,383,631, iii) Landing, take-off and navigation expenses by Ps. 988,854, iv) Salaries and benefits by Ps. 695,156, v) Maintenance by Ps. 323,930, vi) Other operating expenses by Ps. 248,665 and vii) Depreciation and amortization by Ps. 149,890.	
 
 5  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Consolidated Statements of Comprehensive Income
 
 	 	For the nine months
ended September
30, 2018	 	 	For the nine months
ended September
30, 2017
(Adjusted)	 	 	For the three
months ended
September
30, 2018	 	 	For the three
months ended
September
30, 2017 (Adjusted)	 	
Statement of comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income for the period	 	 	(1,198,861	)	 	 	(1,105,976	)	 	 	(118,818	)	 	 	719,658	 	
Other comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Components of other comprehensive income that will not be reclassified to profit or loss, net of tax	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive income, net of tax, gains (losses) from investments in equity instruments	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, gains (losses) on revaluation	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, gains (losses) on remeasurements of defined benefit plans	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, change in fair value of financial liability attributable to change in credit risk of liability	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, gains (losses) on hedging instruments that hedge investments in equity instruments	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Share of other comprehensive income of associates and joint ventures accounted for using equity method that will not be reclassified to profit or loss, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total other comprehensive income that will not be reclassified to profit or loss, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Components of other comprehensive income that will be reclassified to profit or loss, net of tax	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exchange differences on translation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on exchange differences on translation, net of tax	 	 	26,781	 	 	 	298	 	 	 	6,008	 	 	 	(4,170	)	
Reclassification adjustments on exchange differences on translation, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income (loss), net of tax, exchange differences on translation	 	 	26,781	 	 	 	298	 	 	 	6,008	 	 	 	(4,170	)	
Available-for-sale financial assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on remeasuring available-for-sale financial assets, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Reclassification adjustments on available-for-sale financial assets, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, available-for-sale financial assets	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Cash flow hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on cash flow hedges, net of tax	 	 	0	 	 	 	5,288	 	 	 	0	 	 	 	172,033	 	
Reclassification adjustments on cash flow hedges, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amounts removed from equity and included in carrying amount of non-financial asset (liability) whose acquisition or incurrence was hedged highly probable forecast transaction, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, cash flow hedges	 	 	0	 	 	 	5,288	 	 	 	0	 	 	 	172,033	 	
Hedges of net investment in foreign operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on hedges of net investments in foreign operations, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Reclassification adjustments on hedges of net investments in foreign operations, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, hedges of net investments in foreign operations	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Change in value of time value of options	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on change in value of time value of options, net of tax	 	 	9,454	 	 	 	(154,962	)	 	 	(157,571	)	 	 	2,782	 	
Reclassification adjustments on change in value of time value of options, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, change in value of time value of options	 	 	9,454	 	 	 	(154,962	)	 	 	(157,571	)	 	 	2,782	 	
 
 6  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	For the nine months
ended September
30, 2018	 	 	For the nine months
ended September
30, 2017
(Adjusted)	 	 	For the three
months ended
September
30, 2018	 	 	For the three
months ended
September
30, 2017 (Adjusted)	 	
Change in value of forward elements of forward contracts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on change in value of forward elements of forward contracts, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Reclassification adjustments on change in value of forward elements of forward contracts, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, change in value of forward elements of forward contracts	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Change in value of foreign currency basis spreads	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gains (losses) on change in value of foreign currency basis spreads, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Reclassification adjustments on change in value of foreign currency basis spreads, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income, net of tax, change in value of foreign currency basis spreads	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Share of other comprehensive income of associates and joint ventures accounted for using equity method that will be reclassified to profit or loss, net of tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total other comprehensive income that will be reclassified to profit or loss, net of tax	 	 	36,235	 	 	 	(149,376	)	 	 	(151,563	)	 	 	170,645	 	
Total other comprehensive income (loss)	 	 	36,235	 	 	 	(149,376	)	 	 	(151,563	)	 	 	170,645	 	
Total comprehensive (loss) income	 	 	(1,162,626	)	 	 	(1,255,352	)	 	 	(270,381	)	 	 	890,303	 	
Comprehensive income attributable to	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive (loss) income, attributable to owners of parent	 	 	(1,162,626	)	 	 	(1,255,352	)	 	 	(270,381	)	 	 	890,303	 	
Comprehensive income, attributable to non-controlling interests	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
 
 7  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Consolidated statement of cash flows, indirect method
 
 	 	For the nine months
ended September
30, 2018	 	 	For the nine months
ended September
30, 2017
(Adjusted)	 	
Consolidated statement of cash flows	 	 	 	 	 	 	 	 	
Cash flows from (used in) operating activities	 	 	 	 	 	 	 	 	
Net loss	 	 	(1,198,861	)	 	 	(1,105,976	)	
Adjustments to reconcile profit (loss)	 	 	 	 	 	 	 	 	
Discontinued operations	 	 	0	 	 	 	0	 	
Adjustments for income tax expense	 	 	(513,797	)	 	 	(516,686	)	
Adjustments for finance costs	 	 	328,381	 	 	 	793,120	 	
Adjustments for depreciation and amortization expense	 	 	370,799	 	 	 	417,615	 	
Adjustments for impairment loss (reversal of impairment loss) recognized in profit or loss	 	 	0	 	 	 	0	 	
Adjustments for provisions	 	 	0	 	 	 	0	 	
Adjustments for unrealized foreign exchange losses (gains)	 	 	0	 	 	 	0	 	
Adjustments for share-based payments	 	 	7,236	 	 	 	6,458	 	
Adjustments for fair value losses (gains)	 	 	0	 	 	 	0	 	
Adjustments for undistributed profits of associates	 	 	0	 	 	 	0	 	
Adjustments for losses (gains) on disposal of non-current assets	 	 	(460,533	)	 	 	290	 	
Participation in associates and joint ventures	 	 	0	 	 	 	0	 	
Adjustments for increase in inventories	 	 	(14,211	)	 	 	(28,891	)	
Adjustments for decrease (increase) in trade accounts receivable	 	 	(235,195	)	 	 	67,723	 	
Adjustments for increase in other operating receivables	 	 	(236,782	)	 	 	(466,562	)	
Adjustments for increase (decrease) in trade accounts payable	 	 	(100,034	)	 	 	(71,495	)	
Adjustments for increase in other operating payables	 	 	618,516	 	 	 	364,916	 	
Other adjustments for non-cash items	 	 	(73,679	)	 	 	(57,918	)	
Other adjustments for which cash effects are investing or financing cash flow	 	 	0	 	 	 	0	 	
Straight-line rent adjustment	 	 	0	 	 	 	0	 	
Amortization of lease fees	 	 	0	 	 	 	0	 	
Setting property values	 	 	0	 	 	 	0	 	
Other adjustments to reconcile profit	 	 	2,012,429	 	 	 	1,088,096	 	
Total adjustments to reconcile profit	 	 	1,703,130	 	 	 	1,596,666	 	
Net cash flows from provided by operations	 	 	504,269	 	 	 	490,690	 	
Dividends paid	 	 	0	 	 	 	0	 	
Dividends received	 	 	0	 	 	 	0	 	
Interest paid	 	 	0	 	 	 	0	 	
Interest received	 	 	108,123	 	 	 	72,716	 	
Income taxes refund	 	 	148,679	 	 	 	693,989	 	
Other inflows (outflows) of cash	 	 	0	 	 	 	0	 	
Net cash flows from provided by (used in) operating activities	 	 	463,713	 	 	 	(130,583	)	
Cash flows from (used in) investing activities	 	 	 	 	 	 	 	 	
Cash flows from losing control of subsidiaries or other businesses	 	 	0	 	 	 	0	 	
Cash flows used in obtaining control of subsidiaries or other businesses	 	 	0	 	 	 	0	 	
Other cash receipts from sales of equity or debt instruments of other entities	 	 	0	 	 	 	0	 	
Other cash payments to acquire equity or debt instruments of other entities	 	 	0	 	 	 	0	 	
Other cash receipts from sales of interests in joint ventures	 	 	0	 	 	 	0	 	
Other cash payments to acquire interests in joint ventures	 	 	0	 	 	 	0	 	
Proceeds from sales of property, plant and equipment	 	 	1,132,267	 	 	 	101,260	 	
Purchase of property, plant and equipment	 	 	1,737,726	 	 	 	1,430,003	 	
Proceeds from sales of intangible assets	 	 	0	 	 	 	0	 	
Purchase of intangible assets	 	 	35,695	 	 	 	79,863	 	
Proceeds from sales of other long-term assets	 	 	0	 	 	 	0	 	
 
 8  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	For the nine months
ended September
30, 2018	 	 	For the nine months
ended September
30, 2017
(Adjusted)	 	
Purchase of other long-term assets	 	 	0	 	 	 	0	 	
Proceeds from government grants	 	 	0	 	 	 	0	 	
Cash advances and loans made to other parties	 	 	0	 	 	 	0	 	
Cash receipts from repayment of advances and loans made to other parties	 	 	0	 	 	 	0	 	
Cash payments for future contracts, forward contracts, option contracts and swap contracts	 	 	0	 	 	 	0	 	
Cash receipts from future contracts, forward contracts, option contracts and swap contracts	 	 	0	 	 	 	0	 	
Dividends received	 	 	0	 	 	 	0	 	
Interest paid	 	 	0	 	 	 	0	 	
Interest received	 	 	0	 	 	 	0	 	
Income taxes refund (paid)	 	 	0	 	 	 	0	 	
Other inflows (outflows) of cash	 	 	0	 	 	 	0	 	
Net cash flows used in investing activities	 	 	(641,154	)	 	 	(1,408,606	)	
Cash flows from (used in) financing activities	 	 	 	 	 	 	 	 	
Proceeds from changes in ownership interests in subsidiaries that do not result in loss of control	 	 	0	 	 	 	0	 	
Payments from changes in ownership interests in subsidiaries that do not result in loss of control	 	 	0	 	 	 	0	 	
Proceeds from issuing shares	 	 	0	 	 	 	0	 	
Proceeds from issuing other equity instruments	 	 	0	 	 	 	0	 	
Payments to acquire or redeem entity's shares	 	 	0	 	 	 	0	 	
Payments of other equity instruments	 	 	0	 	 	 	0	 	
Proceeds from borrowings	 	 	717,313	 	 	 	1,299,443	 	
Repayments of borrowings	 	 	953,301	 	 	 	700,185	 	
Payments of finance lease liabilities	 	 	0	 	 	 	0	 	
Proceeds from government grants	 	 	0	 	 	 	0	 	
Dividends paid	 	 	0	 	 	 	0	 	
Interest paid	 	 	117,696	 	 	 	66,633	 	
Income taxes refund (paid)	 	 	0	 	 	 	0	 	
Other outflows of cash	 	 	(32,305	)	 	 	638	 	
Net cash flows (used in) provided by financing activities	 	 	(385,989	)	 	 	533,263	 	
Net decrease in cash and cash equivalents before effect of exchange rate changes	 	 	(563,430	)	 	 	(1,005,926	)	
Effect of exchange rate changes on cash and cash equivalents	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	(305,799	)	 	 	(692,343	)	
Net decrease in cash and cash equivalents	 	 	(869,229	)	 	 	(1,698,269	)	
Cash and cash equivalents at beginning of period	 	 	6,950,879	 	 	 	7,071,251	 	
Cash and cash equivalents at end of period	 	 	6,081,650	 	 	 	5,372,982	 	
 
 9  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Consolidated Statements of changes in equity - Accumulated Current
 
 	 	Statements of changes in equity	 	
 	 	Capital
stock	 	 	Additional
paid in
capital	 	 	Treasury
shares	 	 	Retained
earnings	 	 	Revaluation
surplus	 	 	Exchange
differences
on translation
of foreign
operations	 	 	Cash flow
hedges	 	 	Reserve of
gains and
losses on
hedging
instruments
that hedge
investments
in equity
instruments	 	 	Change in
value of time
value of
options	 	
Statement of changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity at beginning of period	 	 	2,973,559	 	 	 	1,804,528	 	 	 	85,034	 	 	 	4,948,376	 	 	 	0	 	 	 	(11,934	)	 	 	0	 	 	 	0	 	 	 	114,681	 	
Changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(1,198,861	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	26,781	 	 	 	0	 	 	 	0	 	 	 	9,454	 	
Total comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(1,198,861	)	 	 	0	 	 	 	26,781	 	 	 	0	 	 	 	0	 	 	 	9,454	 	
Issue of equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Dividends recognized as distributions to owners	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through other contributions by owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Decrease through other distributions to owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through other changes, equity	 	 	0	 	 	 	15,730	 	 	 	15,199	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through treasury share transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through share-based payment transactions, equity	 	 	0	 	 	 	(7,236	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of cash flow hedges and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of time value of options and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of forward elements of forward contracts and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of foreign currency basis spreads and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total increase (decrease) in equity	 	 	0	 	 	 	8,494	 	 	 	15,199	 	 	 	(1,198,861	)	 	 	0	 	 	 	26,781	 	 	 	0	 	 	 	0	 	 	 	9,454	 	
Equity at end of period	 	 	2,973,559	 	 	 	1,813,022	 	 	 	100,233	 	 	 	3,749,515	 	 	 	0	 	 	 	14,847	 	 	 	0	 	 	 	0	 	 	 	124,135	 	
 
 10  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	Statements of changes in equity	 	
 	 	Reserve of
change in
value of
forward
elements of
forward
contracts	 	 	Reserve of
change in
value of
foreign
currency
basis
spreads	 	 	Reserve of
gains and
losses on
remeasuring
available-for-sale
financial assets	 	 	Reserve of
share-based
payments	 	 	Reserve of
remeasurements
of defined
benefit plans	 	 	Amount
recognized
in other
comprehensive
income and
accumulated
in equity
relating to
non-current
assets or
disposal groups
held for sale	 	 	Reserve of
gains and
losses from
investments
in equity
instruments	 	 	Reserve of
change in
fair value
of financial
liability
attributable
to change in
credit risk
of liability	 	 	Reserve for
catastrophe	 	
Statement of changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity at beginning of period	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(3,857	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Profit (loss)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Issue of equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Dividends recognized as distributions to owners	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through other contributions by owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Decrease through other distributions to owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through other changes, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through treasury share transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through share-based payment transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of cash flow hedges and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of time value of options and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of forward elements of forward contracts and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of foreign currency basis spreads and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total increase (decrease) in equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Equity at end of period	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(3,857	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
 
 11  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	Statements of changes in equity	 	
 	 	Reserve for
equalization	 	 	Reserve of
discretionary
participation
features	 	 	Other
comprehensive
income	 	 	Other
reserves	 	 	Equity
attributable
to owners
of parent	 	 	Non-controlling
interests	 	 	Total
Equity	 	
Statement of changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity at beginning of period	 	 	0	 	 	 	0	 	 	 	291,179	 	 	 	390,069	 	 	 	10,031,498	 	 	 	0	 	 	 	10,031,498	 	
Changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(1,198,861	)	 	 	0	 	 	 	(1,198,861	)	
Other comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	36,235	 	 	 	36,235	 	 	 	0	 	 	 	36,235	 	
Total comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	36,235	 	 	 	(1,162,626	)	 	 	0	 	 	 	(1,162,626	)	
Issue of equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Dividends recognized as distributions to owners	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through other contributions by owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Decrease through other distributions to owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through other changes, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	531	 	 	 	0	 	 	 	531	 	
Increase (decrease) through treasury share transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through share-based payment transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(7,236	)	 	 	0	 	 	 	(7,236	)	
Amount removed from reserve of cash flow hedges and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of time value of options and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of forward elements of forward contracts and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of foreign currency basis spreads and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total increase (decrease) in equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	36,235	 	 	 	(1,169,331	)	 	 	0	 	 	 	(1,169,331	)	
Equity at end of period	 	 	0	 	 	 	0	 	 	 	291,179	 	 	 	426,304	 	 	 	8,862,167	 	 	 	0	 	 	 	8,862,167	 	
 
 12  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Consolidated Statement of changes in equity - Accumulated Previous (Adjusted)
 
 	 	Statements of changes in equity	 	
 	 	Capital stock	 	 	Additional
paid in
capital	 	 	Treasury
shares	 	 	Retained
earnings	 	 	Revaluation
surplus	 	 	Exchange
differences
on translation
of foreign
operations	 	 	Cash flow
hedges	 	 	Reserve of
gains and
losses on
hedging
instruments
that hedge
investments
in equity
instruments	 	 	Reserve of
change in
value of time
value of
options	 	
Statement of changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity at beginning of period	 	 	2,973,559	 	 	 	1,800,613	 	 	 	83,365	 	 	 	5,853,092	 	 	 	0	 	 	 	(4,756	)	 	 	(7,815	)	 	 	0	 	 	 	152,627	 	
Changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(1,105,976	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income (loss)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	298	 	 	 	5,288	 	 	 	0	 	 	 	(154,962	)	
Total comprehensive (loss) income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(1,105,976	)	 	 	0	 	 	 	298	 	 	 	5,288	 	 	 	0	 	 	 	(154,962	)	
Issue of equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Dividends recognized as distributions to owners	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through other contributions by owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Decrease through other distributions to owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Decrease through other changes, equity	 	 	0	 	 	 	0	 	 	 	(638	)	 	 	(252,928	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through treasury share transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through share-based payment transactions, equity	 	 	0	 	 	 	6,458	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of cash flow hedges and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of time value of options and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of forward elements of forward contracts and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of foreign currency basis spreads and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total increase (decrease) in equity	 	 	0	 	 	 	6,458	 	 	 	(638	)	 	 	(1,358,904	)	 	 	0	 	 	 	298	 	 	 	5,288	 	 	 	0	 	 	 	(154,962	)	
Equity at end of period	 	 	2,973,559	 	 	 	1,807,071	 	 	 	82,727	 	 	 	4,494,188	 	 	 	0	 	 	 	(4,458	)	 	 	(2,527	)	 	 	0	 	 	 	(2,335	)	
 
 13  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	Statements of changes in equity	 	
 	 	Reserve of
change in
value of
forward
elements
of forward
contracts	 	 	Reserve of
change in
value of
foreign
currency
basis spreads	 	 	Reserve of
gains and
losses on
remeasuring
available-for-sale
financial assets	 	 	Reserve of
share-based
payments	 	 	Remeasurements
of defined
benefit	 	 	Amount
recognized
in other
comprehensive
income and
accumulated
in equity
relating to
non-current
assets or
disposal
groups held
for sale	 	 	Reserve of
gains and
losses from
investments
in equity
instruments	 	 	Reserve of
change in
fair value
of financial
liability
attributable
to change in
credit risk of
liability	 	 	Reserve for
catastrophe	 	
Statement of changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity at beginning of period	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(2,614	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Profit (loss)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Issue of equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Dividends recognized as distributions to owners	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through other contributions by owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Decrease through other distributions to owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through other changes, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through treasury share transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through share-based payment transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of cash flow hedges and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of time value of options and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of forward elements of forward contracts and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of foreign currency basis spreads and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total increase (decrease) in equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Equity at end of period	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(2,614	)	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
 
 14  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	Statements of changes in equity	 	
 	 	Reserve for
equalization	 	 	Reserve of
discretionary
participation
features	 	 	Other
comprehensive
income	 	 	Other
reserves	 	 	Equity
attributable
to owners
of parent	 	 	Non-controlling
interests	 	 	Equity	 	
Statement of changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Equity at beginning of period	 	 	0	 	 	 	0	 	 	 	38,251	 	 	 	175,693	 	 	 	10,719,592	 	 	 	0	 	 	 	10,719,592	 	
Changes in equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(1,105,976	)	 	 	0	 	 	 	(1,105,976	)	
Other comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(149,376	)	 	 	(149,376	)	 	 	0	 	 	 	(149,376	)	
Total comprehensive income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	(149,376	)	 	 	(1,255,352	)	 	 	0	 	 	 	(1,255,352	)	
Issue of equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Dividends recognized as distributions to owners	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through other contributions by owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Decrease through other distributions to owners, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase through other changes, equity	 	 	0	 	 	 	0	 	 	 	252,928	 	 	 	252,928	 	 	 	638	 	 	 	0	 	 	 	638	 	
Increase (decrease) through treasury share transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through changes in ownership interests in subsidiaries that do not result in loss of control, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Increase (decrease) through share-based payment transactions, equity	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	6,458	 	 	 	0	 	 	 	6,458	 	
Amount removed from reserve of cash flow hedges and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of time value of options and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of forward elements of forward contracts and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Amount removed from reserve of change in value of foreign currency basis spreads and included in initial cost or other carrying amount of non-financial asset (liability) or firm commitment for which fair value hedge accounting is applied	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total increase (decrease) in equity	 	 	0	 	 	 	0	 	 	 	252,928	 	 	 	103,552	 	 	 	(1,248,256	)	 	 	0	 	 	 	(1,248,256	)	
Equity at end of period	 	 	0	 	 	 	0	 	 	 	291,179	 	 	 	279,245	 	 	 	9,471,336	 	 	 	0	 	 	 	9,471,336	 	
 
 15  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Informative data about the Consolidated Statement of financial position
 
 	 	As of September 30,
2018	 	 	As of December 31,
2017	 	
Informative data of the Statement of Financial Position	 	 	 	 	 	 	 	 	
Capital stock	 	 	2,973,559	 	 	 	2,973,559	 	
Restatement of capital stock	 	 	0	 	 	 	0	 	
Plan assets for pensions and seniority premiums	 	 	0	 	 	 	0	 	
Number of executives	 	 	0	 	 	 	0	 	
Number of employees	 	 	4,611	 	 	 	4,752	 	
Number of workers	 	 	0	 	 	 	0	 	
Outstanding shares	 	 	1,011,876,677	 	 	 	1,011,876,677	 	
Repurchased shares	 	 	0	 	 	 	0	 	
Restricted cash	 	 	0	 	 	 	0	 	
Guaranteed debt of associated companies	 	 	0	 	 	 	0	 	
 
 16  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Informative data about the Consolidated Statement of Operations
 
 	 	For the nine months
ended September
30, 2018	 	 	For the nine months
ended September
30, 2017
(Adjusted)	 	 	For the three
months ended
September
30, 2018	 	 	For the three
months ended
September
30, 2017 (Adjusted)	 	
Informative data of the Income Statement	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	370,799	 	 	 	417,615	 	 	 	114,864	 	 	 	149,890	 	
 
 17  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Informative data – Consolidated Statements of operations for 12 months
 
 	 	For the twelve
months ended
September
30, 2018	 	 	For the twelve
months ended
September
30, 2017 (Adjusted)	 	
Informative data - Income Statement for 12 months	 	 	 	 	 	 	 	 	
Operating revenues	 	 	25,920,958	 	 	 	24,674,353	 	
Operating (loss) income	 	 	(1,218,687	)	 	 	360,065	 	
Net loss	 	 	(744,673	)	 	 	(190,524	)	
Net loss, attributable to owners of parent	 	 	(744,673	)	 	 	(190,524	)	
Depreciation and amortization	 	 	501,871	 	 	 	559,829	 	
 
 18  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Breakdown of credits
 
 	 	 	 	 	 	 	 	 	 	Denomination	 	
 	 	 	 	 	 	 	 	 	 	Credits in domestic currency	 	 	Credits in foreign currency	 	
 	 	 	 	 	 	 	 	 	 	Time interval	 	 	Time interval	 	
Credit type /
Institution	 	Foreign
institution
(yes/no)	 	Contract
signing date	 	Expiration
date	 	Interest
rate	 	Current year	 	 	Until
1 year	 	 	Until
2 years	 	 	Until
3 years	 	 	Until
4 years	 	 	Until
5 years
or more	 	 	Current
year	 	 	Until
1 year	 	 	Until
2 years	 	 	Until
3 years	 	 	Until
4 years	 	 	Until
5 years
or more	 	
Banks	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign trade	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Banks - secured	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Commercial banks	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Banco Santander - Bancomext (1)	 	NO	 	2011-07-27	 	2021-11-30	 	LIBOR + 1.99%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,199,167	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Banco Santander Bancomext (2)	 	NO	 	2011-07-27	 	2021-11-30	 	LIBOR + 2.25%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	720,506	 	 	 	691,665	 	 	 	107,896	 	 	 	 	 	 	 	 	 	
Banco Nacional de México (1)	 	NO	 	2018-09-14	 	2018-12-13	 	TIIE + 0.9%	 	 	236,666	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Banco Nacional de México (2)	 	NO	 	2018-09-14	 	2018-12-13	 	TIIE + 0.9%	 	 	236,665	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	473,331	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	1,199,167	 	 	 	720,506	 	 	 	691,665	 	 	 	107,896	 	 	 	0	 	 	 	0	 	
Other banks	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total banks	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	473,331	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	1,199,167	 	 	 	720,506	 	 	 	691,665	 	 	 	107,896	 	 	 	0	 	 	 	0	 	
Stock market	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Listed on stock exchange - unsecured	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Listed on stock exchange - secured	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Private placements - unsecured	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Private placements - secured	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total listed on stock exchanges and private placements	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other current and non-current liabilities with cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other current and non-current liabilities with cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total other current and non-current liabilities with cost	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Suppliers	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Suppliers	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Landing, take off and navigation expenses	 	NO	 	2018-10-19	 	2018-10-19	 	 	 	 	286,897	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fuel	 	NO	 	2018-10-19	 	2018-10-19	 	 	 	 	234,578	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales, marketing and distribution expense	 	NO	 	2018-10-19	 	2018-10-19	 	 	 	 	27,046	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Maintenance expenses	 	NO	 	2018-10-19	 	2018-10-19	 	 	 	 	12,171	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Administrative expenses	 	NO	 	2018-10-19	 	2018-10-19	 	 	 	 	11,876	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Technology and communication expenses	 	NO	 	2018-10-19	 	2018-10-19	 	 	 	 	11,689	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other service	 	NO	 	2018-10-19	 	2018-10-19	 	 	 	 	2,234	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Maintenance expenses USD	 	SI	 	2018-10-19	 	2018-10-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	170,237	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Aircraft and engine rent expenses USD	 	SI	 	2018-10-19	 	2018-10-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	92,051	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Technology and communication expenses USD	 	SI	 	2018-10-19	 	2018-10-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	60,834	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Landing, take off and navigation expenses USD	 	SI	 	2018-10-19	 	2018-10-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	34,099	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 19  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	

 	 	 	 	 	 	 	 	 	 	Denomination	 	
 	 	 	 	 	 	 	 	 	 	Credits in domestic currency	 	 	Credits in foreign currency	 	
 	 	 	 	 	 	 	 	 	 	Time interval	 	 	Time interval	 	
Credit type /
Institution	 	Foreign
institution
(yes/no)	 	Contract
signing date	 	Expiration
date	 	Interest
rate	 	Current year	 	 	Until
1 year	 	 	Until
2 years	 	 	Until
3 years	 	 	Until
4 years	 	 	Until
5 years
or more	 	 	Current
year	 	 	Until
1 year	 	 	Until
2 years	 	 	Until
3 years	 	 	Until
4 years	 	 	Until
5 years
or more	 	
Administrative expenses USD	 	SI	 	2018-10-19	 	2018-10-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	23,067	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales, marketing and distribution expense USD	 	SI	 	2018-10-19	 	2018-10-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12,012	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other service USD	 	SI	 	2018-10-19	 	2018-10-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	108	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	586,491	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	392,408	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total suppliers	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	586,491	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	392,408	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other current and non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other current and non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total other current and non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total credits	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
TOTAL	 	 	 	 	 	 	 	 	 	 	1,059,822	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	 	 	1,591,575	 	 	 	720,506	 	 	 	691,665	 	 	 	107,896	 	 	 	0	 	 	 	0	 	
 
 20  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Annex - Monetary foreign currency position
 
Disclosure of monetary foreign currency position

 

U.S. dollar amounts at September 30, 2018 have been included solely for the convenience of the reader and are translated from Mexican pesos, using an exchange rate of Ps.18.8120 per U.S. dollar, as reported by the Mexican Central Bank (Banco de Mexico) as the ride for the payment of obligations denominated in foreign currency payable in Mexico in effect on September 30, 2018.

 

 	 	Currencies	 	
 	 	Dollars	 	 	Dollar equivalent in
pesos	 	 	Other currencies
equivalent in dollars	 	 	Other currencies
equivalent in pesos	 	 	Total pesos	 	
Foreign currency position	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Monetary assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current monetary assets	 	 	399,509	 	 	 	7,515,563	 	 	 	0	 	 	 	0	 	 	 	7,515,563	 	
Non-current monetary assets	 	 	292,480	 	 	 	5,502,134	 	 	 	0	 	 	 	0	 	 	 	5,502,134	 	
Total monetary assets	 	 	691,989	 	 	 	13,017,697	 	 	 	0	 	 	 	0	 	 	 	13,017,697	 	
Liabilities position	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Short-term liabilities	 	 	164,081	 	 	 	3,086,692	 	 	 	0	 	 	 	0	 	 	 	3,086,692	 	
Long-term liabilities	 	 	42,503	 	 	 	799,566	 	 	 	0	 	 	 	0	 	 	 	799,566	 	
Total liabilities	 	 	206,584	 	 	 	3,886,258	 	 	 	0	 	 	 	0	 	 	 	3,886,258	 	
Net monetary assets	 	 	485,405	 	 	 	9,131,439	 	 	 	0	 	 	 	0	 	 	 	9,131,439	 	
 
 21  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Annex - Distribution of income by product
 
 	 	Income type	 	
 	 	Domestic	 	 	International	 	 	Income of
subsidiaries abroad	 	 	Total operating
income	 	
Operating Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Domestic (Mexico)	 	 	13,076,849	 	 	 	0	 	 	 	0	 	 	 	13,076,849	 	
International (United States of America and Central America)	 	 	0	 	 	 	0	 	 	 	6,319,642	 	 	 	6,319,642	 	
Total operating revenues	 	 	13,076,849	 	 	 	0	 	 	 	6,319,642	 	 	 	19,396,491	 	
 
 22  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Annex - Financial derivate instruments
 
Management’s discussion about derivative financial instrument policies explaining whether these policies allow them to be used only for hedging or other purposes such as trading.
 
The Company´s activities are exposed to different financial risks resulting from exogenous variables that are not under its control, but whose effects can be potentially adverse. The Company’s global risk management program is focused on existing uncertainty in the financial markets and is intended to minimize potential adverse effects on net earnings and working capital requirements. Volaris uses derivative financial instruments to mitigate part of these risks and does not acquire/engage financial derivative instruments for speculative or trading purposes.
 
For optimal use of the above mentioned instruments and fulfillment of punctual aims, the Company has a Risk Management team which identifies and evaluates the exposure to different financial risks. It is also in charge of designing strategies to mitigate them. Accordingly, it has a Hedging Policy in place and procedures related thereto, on which those strategies are based. All policies, procedures and strategies are approved by different administrative entities based on the Corporate Governance.
 
The document previously mentioned, as well as its processes are approved by different administrative entities according to the Corporate Governance. The Hedging Policy establishes that derivative financial instrument transactions will be approved and implemented/monitored by certain committees. Compliance with the Hedging Policy and its procedures are subject to internal and external audits.
 
The Hedging Policy holds a conservative position regarding derivative financial instruments, since it only allows the company to enter into positions that are correlated with the primary position to be hedged (in accordance with International Financial Reporting Standards  “IFRS” , under which the Company prepares its financial information). The Company’s objective is to apply hedge accounting treatment to all derivative financial instruments.
 
Volaris aims to transfer a portion of market risk to its financial counterparties through the use of derivative financial instruments, described as follows:
 
	1.	Fuel price fluctuation risk: Volaris’ contractual agreements with its fuel suppliers are linked to the market price index of the underlying asset; therefore, it is exposed to an increase in such price. Volaris enters into derivative financial instruments to hedge against significant increases in the fuel price. The instruments are traded on over-the-counter (“OTC”) markets, with approved counterparties and limits by the Hedging Policy. As of the date of this report, the Company uses Asian call options and Zero-Cost Collars, being U.S. Gulf Coast Jet Fuel 54 the underlying asset. Asian instruments consider the monthly average price of the underlying, hence it matches the outflows of Volaris main fuel supplier. All derivative financial instruments qualified as hedge accounting.	
 
	2.	Foreign currency risk: The Company's exposure to the risk fluctuations in foreign exchange rates is mainly related to the Company’s activities (considering revenues and/or expenses are denominated in a currency other than the Company’s functional currency). Such exposure arises from expenses that are linked or/and denominated in U.S. dollars. To mitigate this risk, the Hedging Policy allows the Company to use foreign exchange derivative financial instruments. As of the date of this report, the Company has outstanding position on foreign exchange plain vanilla forwards.	
 
 23  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	3.	Interest rate fluctuation risk: The Company’s exposure to the risk of changes in market interest rates is related primarily to the Company’s flight equipment operating lease agreements and long-term debt obligations with floating interest rates. The Company enters into derivative financial instruments to hedge a portion of such exposure by using interest rate swaps. As of the date of this report, the Company does not have any outstanding position on interest rate derivatives.	
 
Outstanding derivative financial instruments may require collateral as guarantee for a portion of the loss amount non-settled prior to maturity. The collateral delivered in pledge, is presented as part of non-current assets under guarantee deposits. It is assessed and adjusted accordingly on daily basis.
 
Trading markets and eligible counterparties
 
The Company only operates in over the counter (“OTC”) markets. To minimize counterparty risk, the Company enters into ISDA agreements with counterparties with recognized financial capacity; therefore, significant risks of default on any of them are not foreseen. As of September 30, 2018, the Company has 7 ISDAs in place with different financial institutions and held operations with 4 of them during the third quarter 2018.
 
Those agreements have a Credit Support Annex ("CSA") section, which sets credit conditions and guidelines for margin calls that are stipulated therein, including minimum amounts and rounding off. Hedging positions are distributed among different counterparties with the purpose of diversifying our exposure, and thus, optimizing financial conditions of different CSA thresholds. Minimizing the potential margin calls.
 
Generic description of the valuation techniques, distinguishing instruments that are valued at cost or fair value, as well as valuation methods and techniques.
 
The designation of calculation agents is documented at the ISDAs whereby Volaris operates. The Company uses the valuations provided by the financial institutions of each derivative financial instrument. Afterwards, that fair value is compared with internally developed valuation techniques that use valid and recognized methodologies based on the assets listed on its respective market and using Bloomberg as the main source of information for the levels.
 
In accordance with International Financial Reporting Standards ("IFRS"), the Company prepares its financial statements, Volaris performs prospective effectiveness tests, as well as hedging records in which derivative financial instruments are classified in accordance with the type of underlying asset (monitored and updated constantly). As of the date of this report, all of the Company’s financial derivative instruments are considered effective and, therefore, are recorded under hedge accounting assumptions.
 
Management discussion on internal and external sources of liquidity that could be used to meet the requirements related to derivative financial instruments
 
The Company only operates with financial counterparties with which it has an ISDA agreement. Those agreements have a Credit Support Annex ("CSA") section, which sets credit conditions and guidelines for margin calls that are stipulated therein, including minimum amounts and rounding off. Hedging positions are distributed among different counterparties with the purpose of diversifying our exposure, and thus, optimizing financial conditions of different CSA thresholds. Moreover, the Company has internal resources to meet the requirements related to derivative financial instruments.
 
 24  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Explanation of changes in exposure to the main risks identified and in managing them, as well as contingencies and events known or expected by management that can affect future reports.
 
The Company’s activities are exposed to several market risks, such as fuel price, exchange rates and interest rates. During the third quarter of 2018, there was no evidence of significant changes that could modify the exposure to the risks described above, a situation that can change in the future.
 
Quantitative information
 
As of the date of this report, all the derivative financial instruments held by the Company qualified as hedge accounting; for this reason, the changes in their fair value will only be the result of changes in the price levels of the underlying asset, and it will not modify the objective of the hedge for which it was initially entered for.
 
 25  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Notes - Subclassifications of assets, liabilities and equities
 
 	 	As of September 30,
2018	 	 	As of December 31,
2017 (Adjusted)	 	
Subclassifications of assets, liabilities and equities	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	 	 	
Cash	 	 	 	 	 	 	 	 	
Cash on hand	 	 	4,720	 	 	 	5,403	 	
Balances with banks	 	 	1,001,764	 	 	 	963,162	 	
Total cash	 	 	1,006,484	 	 	 	968,565	 	
Cash equivalents	 	 	 	 	 	 	 	 	
Short-term deposits, classified as cash equivalents	 	 	0	 	 	 	0	 	
Short-term investments, classified as cash equivalents	 	 	5,075,166	 	 	 	5,982,314	 	
Other banking arrangements, classified as cash equivalents	 	 	0	 	 	 	0	 	
Total cash equivalents	 	 	5,075,166	 	 	 	5,982,314	 	
Other cash and cash equivalents	 	 	0	 	 	 	0	 	
Total cash and cash equivalents	 	 	6,081,650	 	 	 	6,950,879	 	
Trade and other current receivables	 	 	 	 	 	 	 	 	
Current trade receivables	 	 	520,837	 	 	 	290,812	 	
Current receivables due from related parties	 	 	0	 	 	 	0	 	
Current prepayments	 	 	 	 	 	 	 	 	
Current advances to suppliers	 	 	0	 	 	 	0	 	
Current prepaid expenses	 	 	0	 	 	 	0	 	
Total current prepayments	 	 	0	 	 	 	0	 	
Current receivables from taxes other than income tax	 	 	620,588	 	 	 	400,464	 	
Current value added tax receivables	 	 	0	 	 	 	0	 	
Current receivables from sale of properties	 	 	0	 	 	 	0	 	
Current receivables from rental of properties	 	 	0	 	 	 	0	 	
Other current receivables	 	 	468,392	 	 	 	187,655	 	
Total trade and other current receivables	 	 	1,609,817	 	 	 	878,931	 	
Classes of current inventories	 	 	 	 	 	 	 	 	
Current raw materials and current production supplies	 	 	 	 	 	 	 	 	
Current raw materials	 	 	0	 	 	 	0	 	
Current production supplies	 	 	0	 	 	 	0	 	
Total current raw materials and current production supplies	 	 	0	 	 	 	0	 	
Current merchandise	 	 	0	 	 	 	0	 	
Current work in progress	 	 	0	 	 	 	0	 	
Current finished goods	 	 	0	 	 	 	0	 	
Spare parts and accessories of flight equipment	 	 	301,389	 	 	 	285,185	 	
Property intended for sale in ordinary course of business	 	 	0	 	 	 	0	 	
Miscellaneous supplies	 	 	7,672	 	 	 	9,665	 	
Total current inventories	 	 	309,061	 	 	 	294,850	 	
Non-current assets or disposal groups classified as held for sale or as held for distribution to owners	 	 	 	 	 	 	 	 	
Non-current assets or disposal groups classified as held for sale	 	 	0	 	 	 	0	 	
Non-current assets or disposal groups classified as held for distribution to owners	 	 	0	 	 	 	0	 	
Total non-current assets or disposal groups classified as held for sale or as held for distribution to owners	 	 	0	 	 	 	0	 	
Trade and other non-current receivables	 	 	 	 	 	 	 	 	
Non-current trade receivables	 	 	0	 	 	 	0	 	
Non-current receivables due from related parties	 	 	0	 	 	 	0	 	
Non-current prepayments	 	 	0	 	 	 	0	 	
Non-current lease prepayments	 	 	0	 	 	 	0	 	
Non-current receivables from taxes other than income tax	 	 	0	 	 	 	0	 	
Non-current value added tax receivables	 	 	0	 	 	 	0	 	
Non-current receivables from sale of properties	 	 	0	 	 	 	0	 	
 
 26  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	As of September 30,
2018	 	 	As of December 31,
2017 (Adjusted)	 	
Non-current receivables from rental of properties	 	 	0	 	 	 	0	 	
Revenue for billing	 	 	0	 	 	 	0	 	
Other non-current receivables	 	 	0	 	 	 	0	 	
Total trade and other non-current receivables	 	 	0	 	 	 	0	 	
Investments in subsidiaries, joint ventures and associates	 	 	 	 	 	 	 	 	
Investments in subsidiaries	 	 	0	 	 	 	0	 	
Investments in joint ventures	 	 	0	 	 	 	0	 	
Investments in associates	 	 	0	 	 	 	0	 	
Total investments in subsidiaries, joint ventures and associates	 	 	0	 	 	 	0	 	
Property, plant and equipment	 	 	 	 	 	 	 	 	
Land and buildings	 	 	 	 	 	 	 	 	
Land	 	 	0	 	 	 	0	 	
Buildings	 	 	0	 	 	 	0	 	
Total land and buildings	 	 	0	 	 	 	0	 	
Machinery	 	 	0	 	 	 	0	 	
Vehicles	 	 	 	 	 	 	 	 	
Ships	 	 	0	 	 	 	0	 	
Aircraft	 	 	0	 	 	 	0	 	
Motor vehicles	 	 	0	 	 	 	0	 	
Total vehicles	 	 	0	 	 	 	0	 	
Fixtures and fittings	 	 	0	 	 	 	0	 	
Office equipment	 	 	39,518	 	 	 	22,295	 	
Tangible exploration and evaluation assets	 	 	0	 	 	 	0	 	
Mining assets	 	 	0	 	 	 	0	 	
Oil and gas assets	 	 	0	 	 	 	0	 	
Construction in progress	 	 	3,468,269	 	 	 	3,002,078	 	
Construction prepayments	 	 	0	 	 	 	0	 	
Other property, plant and equipment	 	 	1,572,929	 	 	 	1,351,324	 	
Total property, plant and equipment	 	 	5,080,716	 	 	 	4,375,697	 	
Investment property	 	 	 	 	 	 	 	 	
Investment property completed	 	 	0	 	 	 	0	 	
Investment property under construction or development	 	 	0	 	 	 	0	 	
Investment property prepayments	 	 	0	 	 	 	0	 	
Total investment property	 	 	0	 	 	 	0	 	
Intangible assets and goodwill	 	 	 	 	 	 	 	 	
Intangible assets other than goodwill	 	 	 	 	 	 	 	 	
Brand names	 	 	0	 	 	 	0	 	
Intangible exploration and evaluation assets	 	 	0	 	 	 	0	 	
Mastheads and publishing titles	 	 	0	 	 	 	0	 	
Computer software	 	 	67,235	 	 	 	134,419	 	
Licences and franchises	 	 	3,043	 	 	 	3,365	 	
Copyrights, patents and other industrial property rights, service and operating rights	 	 	0	 	 	 	0	 	
Recipes, formulae, models, designs and prototypes	 	 	0	 	 	 	0	 	
Intangible assets under development	 	 	91,534	 	 	 	52,636	 	
Other intangible assets	 	 	0	 	 	 	0	 	
Total intangible assets other than goodwill	 	 	161,812	 	 	 	190,420	 	
Goodwill	 	 	0	 	 	 	0	 	
Total intangible assets and goodwill	 	 	161,812	 	 	 	190,420	 	
Trade and other current payables	 	 	 	 	 	 	 	 	
Current trade payables	 	 	978,899	 	 	 	1,077,438	 	
Current payables to related parties	 	 	86,079	 	 	 	40,931	 	
Accruals and deferred income classified as current	 	 	 	 	 	 	 	 	
Deferred income classified as current	 	 	2,806,037	 	 	 	2,293,309	 	
Rent deferred income classified as current	 	 	0	 	 	 	0	 	
 
 27  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	As of September 30,
2018	 	 	As of December 31,
2017 (Adjusted)	 	
Accruals classified as current	 	 	0	 	 	 	0	 	
Short-term employee benefits accruals	 	 	0	 	 	 	0	 	
Total accruals and deferred income classified as current	 	 	2,806,037	 	 	 	2,293,309	 	
Current payables on social security and taxes other than income tax	 	 	1,665,285	 	 	 	1,245,247	 	
Current value added tax payables	 	 	0	 	 	 	0	 	
Current retention payables	 	 	0	 	 	 	0	 	
Other current payables	 	 	0	 	 	 	0	 	
Total trade and other current payables	 	 	5,536,300	 	 	 	4,656,925	 	
Other current financial liabilities	 	 	 	 	 	 	 	 	
Bank loans current	 	 	2,393,004	 	 	 	2,403,562	 	
Stock market loans current	 	 	0	 	 	 	0	 	
Other current iabilities at cost	 	 	0	 	 	 	0	 	
Other current liabilities no cost	 	 	0	 	 	 	0	 	
Other current financial liabilities	 	 	4,394	 	 	 	0	 	
Total Other current financial liabilities	 	 	2,397,398	 	 	 	2,403,562	 	
Trade and other non-current payables	 	 	 	 	 	 	 	 	
Non-current trade payables	 	 	0	 	 	 	0	 	
Non-current payables to related parties	 	 	0	 	 	 	0	 	
Accruals and deferred income classified as non-current	 	 	 	 	 	 	 	 	
Deferred income classified as non-current	 	 	0	 	 	 	0	 	
Rent deferred income classified as non-current	 	 	0	 	 	 	0	 	
Accruals classified as non-current	 	 	0	 	 	 	0	 	
Total accruals and deferred income classified as non-current	 	 	0	 	 	 	0	 	
Non-current payables on social security and taxes other than income tax	 	 	0	 	 	 	0	 	
Non-current value added tax payables	 	 	0	 	 	 	0	 	
Non-current retention payables	 	 	0	 	 	 	0	 	
Other non-current payables	 	 	0	 	 	 	0	 	
Total trade and other non-current payables	 	 	0	 	 	 	0	 	
Other non-current financial liabilities	 	 	 	 	 	 	 	 	
Bank loans non-current	 	 	799,561	 	 	 	1,079,152	 	
Stock market loans non-current	 	 	0	 	 	 	0	 	
Other non-current liabilities at cost	 	 	0	 	 	 	0	 	
Other non-current liabilities no cost	 	 	0	 	 	 	0	 	
Other non-current financial liabilities	 	 	0	 	 	 	0	 	
Total Other non-current financial liabilities	 	 	799,561	 	 	 	1,079,152	 	
Other provisions	 	 	 	 	 	 	 	 	
Other non-current provisions	 	 	290,617	 	 	 	216,702	 	
Other current provisions	 	 	84,807	 	 	 	280,744	 	
Total other provisions	 	 	375,424	 	 	 	497,446	 	
Other reserves	 	 	 	 	 	 	 	 	
Revaluation surplus	 	 	0	 	 	 	0	 	
Reserve of exchange differences on translation	 	 	0	 	 	 	0	 	
Reserve of cash flow hedges	 	 	0	 	 	 	0	 	
Reserve of gains and losses on hedging instruments that hedge investments in equity instruments	 	 	0	 	 	 	0	 	
Reserve of change in value of time value of options	 	 	0	 	 	 	0	 	
Reserve of change in value of forward elements of forward contracts	 	 	0	 	 	 	0	 	
Reserve of change in value of foreign currency basis spreads	 	 	0	 	 	 	0	 	
Reserve of gains and losses on remeasuring available-for-sale financial assets	 	 	0	 	 	 	0	 	
Reserve of share-based payments	 	 	0	 	 	 	0	 	
Reserve of remeasurements of defined benefit plans	 	 	0	 	 	 	0	 	
Amount recognized in other comprehensive income and accumulated in equity relating to non-current assets or disposal groups held for sale	 	 	0	 	 	 	0	 	
Reserve of gains and losses from investments in equity instruments	 	 	0	 	 	 	0	 	
Reserve of change in fair value of financial liability attributable to change in credit risk of liability	 	 	0	 	 	 	0	 	
 
 28  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	As of September 30,
2018	 	 	As of December 31,
2017 (Adjusted)	 	
Reserve for catastrophe	 	 	0	 	 	 	0	 	
Reserve for equalization	 	 	0	 	 	 	0	 	
Reserve of discretionary participation features	 	 	0	 	 	 	0	 	
Reserve of equity component of convertible instruments	 	 	0	 	 	 	0	 	
Capital redemption reserve	 	 	1	 	 	 	1	 	
Merger reserve	 	 	0	 	 	 	0	 	
Statutory reserve	 	 	291,178	 	 	 	291,178	 	
Other comprehensive income	 	 	135,125	 	 	 	98,890	 	
Total other reserves	 	 	426,304	 	 	 	390,069	 	
Net assets (liabilities)	 	 	 	 	 	 	 	 	
Assets	 	 	21,683,505	 	 	 	22,666,267	 	
Liabilities	 	 	12,821,338	 	 	 	12,634,769	 	
Net assets (liabilities)	 	 	8,862,167	 	 	 	10,031,498	 	
Net current assets (liabilities)	 	 	 	 	 	 	 	 	
Current assets	 	 	10,267,252	 	 	 	11,313,030	 	
Current liabilities	 	 	10,436,377	 	 	 	9,503,496	 	
Net current assets (liabilities)	 	 	(169,125	)	 	 	1,809,534	 	
 
 29  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Notes - Analysis of income and expense
 
 	 	For the nine months
ended September
30, 2018	 	 	For the nine months
ended September
30, 2017
(Adjusted)	 	 	For the three
months ended
September
30, 2018	 	 	For the three
months ended
September
30, 2017 (Adjusted)	 	
Analysis of income and expense	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenue	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenue from rendering of services	 	 	19,396,491	 	 	 	18,263,719	 	 	 	7,316,075	 	 	 	6,571,254	 	
Revenue from sale of goods	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Interest income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Royalty income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Dividend income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Rental income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Revenue from construction contracts	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other revenue	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total revenue	 	 	19,396,491	 	 	 	18,263,719	 	 	 	7,316,075	 	 	 	6,571,254	 	
Finance income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income	 	 	108,123	 	 	 	72,716	 	 	 	37,180	 	 	 	29,912	 	
Net gain on foreign exchange	 	 	0	 	 	 	0	 	 	 	0	 	 	 	125,194	 	
Gains on change in fair value of derivatives	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Gain on change in fair value of financial instruments	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other finance income	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Total finance income	 	 	108,123	 	 	 	72,716	 	 	 	37,180	 	 	 	155,106	 	
Finance costs	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Net loss on foreign exchange	 	 	456,414	 	 	 	1,577,913	 	 	 	418,603	 	 	 	0	 	
Losses on change in fair value of derivatives	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Loss on change in fair value of financial instruments	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Other finance cost	 	 	129,042	 	 	 	62,280	 	 	 	64,486	 	 	 	19,756	 	
Total finance costs	 	 	585,456	 	 	 	1,640,193	 	 	 	483,089	 	 	 	19,756	 	
Tax income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current income tax	 	 	0	 	 	 	0	 	 	 	0	 	 	 	0	 	
Deferred income tax (benefit) expense	 	 	(513,797	)	 	 	(516,686	)	 	 	(81,237	)	 	 	38,828	 	
Total tax income (benefit) expense	 	 	(513,797	)	 	 	(516,686	)	 	 	(81,237	)	 	 	38,828	 	
 
 30  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Notes - List of notes
 
CONTROLADORA VUELA COMPAÑÍA DE AVIACIÓN, S.A.B. DE C.V. AND SUBSIDIARIES
(d.b.a. VOLARIS)
 
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
 
At September 30, 2018 and December 31, 2017
 
(In thousands of Mexican pesos and thousands of U.S. dollars,
except when indicated otherwise)
 
	1.	Description of the business and summary of significant accounting policies	
 
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.
 
Controladora is domiciled in Mexico City at Av. Antonio Dovali Jaime No. 70, 13th Floor, Tower B, Colonia Zedec Santa Fe, Mexico D.F.
 
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.
 
Concesionaria’s concession was granted by the Mexican federal government through the Mexican Communications and Transportation Ministry ( Secretaría de Comunicaciones y Transportes ) on May 9, 2005 initially for a period of five years and was extended on February 17, 2010 for an additional period of ten years.
 
Concesionaria made its first commercial flight as a low-cost airline on March 13, 2006. The Company operates under the trade name of “Volaris”. On June 11, 2013, Controladora Vuela Compañía de Aviación, S.A.P.I. de C.V. changed its corporate name to Controladora Vuela Compañía de Aviación, S.A.B. de C.V.
 
On September 23, 2013, the Company completed its dual listing Initial Public Offering (“IPO”) on the New York Stock Exchange (“NYSE”) and on the Mexican Stock Exchange ( Bolsa Mexicana de Valores, or “BMV” ), and on September 18, 2013 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.
 
On November 10, 2016, the Company, through its subsidiary Vuela Aviación, S.A. (“Volaris Costa Rica”), obtained from the Costa Rican civil aviation authorities an air operator certificate to provide air transportation services for passengers, cargo and mail, in scheduled and non-scheduled flights for an initial period of five years. On December 1, 2016, Volaris Costa Rica started operations.
 
The accompanying unaudited interim condensed consolidated financial statements and notes were authorized for their issuance by the Company’s Chief Executive Officer, Enrique Beltranena, and Interim Chief Financial Officer, Carlos González, on October 18, 2018. Subsequent events have been considered through that date.

 31  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	a)	Relevant events	
 
	a)	On February 16, 2018, one of the Company’s shareholders concluded the conversion of 45,968,598 Series B Shares for the equivalent number of Series A Shares. This conversion has no impact either on the total number of outstanding shares or on the earnings-per-share calculation.	
 
	b)	On January 16, 2018, the Company and Frontier Airlines (Frontier) signed the first codeshare agreement in history between two ultra-low-cost airlines, which is subject to governmental approvals in Mexico and the United States. Once implemented the Company´s customers will gain access to new cities in the U.S. beyond the current destinations, and Frontier customers will gain first-time access to new destinations in Mexico.	
 
	c)	On December 28, 2017, the Company amended the agreement with Airbus, S.A.S. (“Airbus”) for the purchase of 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. Commitments to acquisition of property, plant and equipment are disclosed in Note 15.	
 
	b)	Basis of preparation	
 
The unaudited interim condensed consolidated financial statements, which include the consolidated statements of financial position as of September 30, 2018 (unaudited) and December 31, 2017(adjusted), an d the related consolidated statements of operations, comprehensive income for the three and nine months ended September 30, 2018 and 2017; and changes in equity and cash flows for each of the nine months period ended September 30, 2018 and 2017 (unaudited) , have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting and using the same accounting policies applied in preparing the annual financial statements, except as explained below .
 
The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements as of December 31, 2017 and 2016, and for the three years’ period ended December 31, 2017.
 
	c)	Basis of consolidation	
 
The accompanying unaudited interim condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries. At September 30, 2018 and December 31, 2017, for accounting purposes the companies included in the unaudited interim condensed consolidated financial statements are as follows:

 	 	 	 	 		% Equity interest	
Name	 	Principal activities	 	Country		September 30, 2018	 	December 31, 2017	
Concesionaria	 	Air transportation services for passengers, cargo and mail throughout Mexico and abroad	 	Mexico	 	100%	 	100%	
Volaris Costa Rica	 	Air transportation services for passengers, cargo and mail in Costa Rica and abroad	 	Costa Rica	 	100%	 	100%	
Vuela, S.A. (“Vuela”)*	 	Air transportation services for passengers, cargo and mail in Guatemala and abroad	 	Guatemala	 	100%	 	100%	
Comercializadora Volaris, S.A. de C.V.	 	Merchandising of services	 	Mexico	 	100%	 	100%	
Servicios Earhart, S.A. *	 	Recruitment and payroll	 	Guatemala	 	100%	 	100%	
Servicios Corporativos Volaris, S.A. de C.V.   
(“Servicios Corporativos”)	 	Recruitment and payroll	 	Mexico	 	100%	 	100%	
Servicios Administrativos Volaris, S.A. de C.V
(“Servicios Administrativos”)	 	Recruitment and payroll	 	Mexico	 	100%	 	100%	
Viajes Vuela, S.A. de C.V  
(“Viajes Vuela”) (1)	 	Travel agency	 	Mexico	 	100%	 	100%	
Deutsche Bank México, S.A., Trust 1710	 	Pre-delivery payments financing	 	Mexico	 	100%	 	100%	
Deutsche Bank México, S.A., Trust 1711	 	Pre-delivery payments financing	 	Mexico	 	100%	 	100%	
Irrevocable Administrative Trust number F/307750 “Administrative Trust”	 	Share administration trust	 	Mexico	 	100%	 	100%	
Irrevocable Administrative Trust number F/745291	 	Share administration trust	 	Mexico	 	100%	 	100%	
 
	*	The Company has not started operations in Central America.	
	(1)	With effect from July 16, 2018, the name of the Company was changed from Operaciones Volaris, S.A. de C.V. to Viajes Vuela, S.A. de C.V.	

 32  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	d)	Retrospective changes in classification	
 
During 2018, the Company modified certain amounts in the consolidated statements of financial position as of December 31, 2017 and in the consolidated statements of operations for the three and nine months period ended September 30, 2017 as required by IAS 1 Presentation of Financial Statements . These modifications resulted from the adoption of IFRS 15 Revenue from Contracts with Customers.
 
IFRS 15 was issued in May 2014 and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard will supersede all current revenue recognition requirements under IFRS. IFRS 15 also requires additional disclosures about the nature, timing, and uncertainty of revenue cash flows arising from customer contracts, including significant judgments and changes in judgments.
 
The Company adopted the new standard on the required effective date as of January 1, 2018, 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, 2016.
 
The main impact of IFRS 15 is the timing of recognition of certain air travel-related services (“ancillaries”). Under the new standard, certain ancillaries are recognized when the air transportation service is rendered (at the time of the flight). This change arises primarily because those ancillaries do not constitute separate performance obligations or represent administrative tasks that do not represent a promised service and therefore should be accounted for together with the air fare as a single performance obligation of providing passenger transportation. Also certain services provided to the Company´s customers that under the new standard qualify as variable consideration that are recorded as reduction revenues.
 
Also the classification of certain ancillary fees in the statement of operations, such as advanced seat selection, fees charges 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.
 
The Company also evaluated the principal versus agent considerations as it relates to certain non-air travel services arrangements with third party providers. That not represented changes on revenue.
 
The following table provides details about the adoption:
 
Consolidated statements of financial position
 
 	 	As previously reported as of
December 31, 2017	 	 	Adjustment	 	 	As adjusted	 	
Short term liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Trade and other current payables	 	 	4,525,252	 	 	 	131,673	 	 	 	4,656,925	 	
Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Retained earnings	 	 	5,080,049	 	 	 	(131,673	)	 	 	4,948,376	 	
 
Consolidated statements of operations
 
 	 	As previously reported for the nine months ended September 30, 2017	 	 	Adjustment	 	 	As adjusted	 	
Operating revenues	 	 	18,219,620	 	 	 	44,099	 	 	 	18,263,719	 	
 
 	 	As previously reported for the three months ended September 30, 2017	 	 	Adjustment	 	 	As adjusted	 	
Operating revenues	 	 	6,582,223	 	 	 	(10,969	)	 	 	6,571,254	 	

 33  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	2.	Impact of new International Reporting Standard	
 
New and amended standards and interpretations
 
The accounting policies adopted in the preparation of the unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2017, except for the adoption of new standards and interpretations effective as of January 1, 2018. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
 
The nature and the effect of these changes are disclosed below. Although these new standards and amendments apply for the first time in 2018, they do not have a material impact on the unaudited interim condensed consolidated financial statements of the Company. The nature and the impact of each new standard or amendment is described below:
 
Amendments to IAS 7 – Statement of cash flows: Disclosure Initiative
 
The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Company has provided the information in its annual consolidated financial statements for the year ended December 31, 2017.
 
Amendments to IAS 12 – Income Taxes: Recognition of Deferred Tax Assets for Unrecognized Losses
 
The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. However, their application has no effect on the Company’s financial position and performance as there are no deductible temporary differences or assets that are in the scope of the amendments.
 
New and amended standards and interpretations not yet effective
 
Except for IFRS 9 adopted in 2014, the Company has not early adopted any of the following standards, interpretations or amendments that have been issued but is not yet effective.
 
IFRS 9 (2014) Financial Instruments
 
The Company adopted IFRS 9 (2013) in connection with its 2014 consolidated financial statements. IFRS 9 (2014) requires entities to apply an expected credit loss (ECL) model that replaces the IAS 39’s incurred loss model. The ECL model applies to debt instruments accounted for at amortized cost or at fair value through OCI, most loan commitments, financial guarantee contracts, contract assets under IFRS 15 Revenue from Contracts with Customers and lease receivables under IAS 17 Leases or IFRS 16 Leases.
 
IFRS 9 (2014) is effective for annual periods beginning on or after January 1, 2018, since the Company early adopted IFRS 9 (2013), no additional impact is expected

 34  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
IFRS 16 Leases
 
IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining Whether 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. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less).
 
At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).
 
Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
 
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
 
IFRS 16 also requires lessees to make more extensive disclosures than under IAS 17.
 
IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.
 
The Company is in process of completing an assessment of the potential impact of adopting IFRS 16. The adoption of this standard will have a significant impact on the accounting for leased aircraft, engines and other lease agreements, requiring the presentation of those leases with durations of greater than twelve months on the consolidated statement of financial position.
 
IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2
 
In June 2016, the IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled, share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.
 
On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after January 1, 2018. The adoption not represented a significant effect on its consolidated financial statements.
 
 35  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
IFRIC 23 — Uncertainty over Income Tax Treatments
 
IFRIC 23 clarifies the accounting for uncertainties in income taxes, the interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.
 
An entity has to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments, that it used or plans to use in its income tax filing; if the entity concludes that it is probable that a particular tax treatment is accepted, the entity has to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.
 
IFRIC 23 is effective for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted. The Company expects to adopt this interpretation at the effective date.
 
IAS 34 Interim Financial Reporting
 
The amendment clarifies that the required interim disclosures must either be in the unaudited interim condensed consolidated financial statements or incorporated by cross-reference between the unaudited interim condensed consolidated financial statements and wherever they are included within the interim financial report. The other information within the interim financial report must be available to users on the same terms as the unaudited interim condensed consolidated financial statements and at the same time. This amendment must be applied retrospectively.
 
These amendments are not expected to have any impact on the Company.
 
	3.	Significant accounting judgments, estimates and assumptions	
 
The preparation of these unaudited interim condensed consolidated financial statements in accordance with IAS 34 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 unaudited interim condensed consolidated financial statements.
 
	4.	Convenience translation	
 
U.S. dollar amounts at September 30, 2018 shown in the unaudited interim condensed 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.18.8120 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 September 30, 2018. 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 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.
 
	5.	Seasonality of operations	
 
The results of operations for any interim period are not necessarily indicative of those for the entire year because the business is subject to seasonal fluctuations. The Company 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. The Company and subsidiaries generally experience their lowest levels of passenger traffic in February, September and October, given their proportion of fixed costs, seasonality can affect their profitability from quarter to quarter. This information is provided to allow for a better understanding of the results, however management has concluded that this does not constitute “highly seasonal” as considered by IAS 34.

 36  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	6.	Risk management	
 
Financial risk management
 
The Company’s activities are exposed to different financial risks stemmed from exogenous variables which are not under their control but whose effects might be potentially adverse such as: (i) market risk, (ii) credit risk, and (iii) liquidity risk. The Company’s global risk management program is focused on uncertainty in the financial markets and tries to minimize the potential adverse effects on net earnings and working capital requirements. The Company uses derivative financial instruments 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 liabilities, as well as in “off-balance sheet” contractual agreements and on highly expected forecasted transactions. These on and off-balance sheet exposures, depending on their profiles, do represent potential cash flow variability exposure, in terms of receiving less inflows or facing the need to meet outflows which are higher than expected, therefore increase the working capital requirements.
 
Also, since adverse movements also erode the value of recognized financial assets and liabilities, as well some other off-balance sheet financial exposures such as operating leases, there is a need for value preservation, by transforming the profiles of these fair value exposures.
 
The Company has a Finance and Risk Management unit, which identifies and measures financial risk exposures, in order to design the 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	
 
Since the contractual agreements with jet fuel suppliers include reference to jet fuel index, the Company is exposed to fuel price risk which might have an impact in the forecasted consumption volumes. The Company’s jet fuel risk management 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 with approved counterparties and within approved limits. Aircraft jet fuel consumed in the nine months ended September 30, 2018 and 2017 represented 35% and 29%, of the Company’s operating expenses, respectively. Additionally, the Aircraft jet fuel consumed in the three months ended September 30, 2018 and 2017 represented 37% and 29%, of the Company’s operating expenses, respectively.
 
During the nine months ended September 30, 2018, the Company enter into US Gulf Coast Jet fuel 54 Asian Zero-Cost collars options designated to hedge 9.4 million gallons. Such hedges represent a portion of the projected consumption for the 1Q19.
 
During the nine months ended September 30, 2017, the Company entered into US Gulf Coast Jet fuel 54 Asian call options designated to hedge 61.1 million gallons. Such hedges represent a portion of the projected consumption for the next 9 months.
 
During the three months period ended September 30, 2018, the Company entered into US Gulf Coast Jet fuel 54 Asian Zero-Cost collars options designated to hedge 9.4 million gallons. Such hedges represent a portion of the projected consumption for the 1Q19.
 
During the three months period ended September 30, 2017, the Company did not enter into US Gulf Coast Jet fuel 54 Asian call options.

The Company decided to early adopt IFRS 9 (2013), beginning on October 1, 2014, which allows the Company 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. Because the external value (time value) of the Asian call and put 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.

 37  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The underlying (US Gulf Coast Jet Fuel 54) of the options held by the Company is a consumption asset (energy commodity), which is not in the Company’s inventory. Instead, it is directly consumed by the Company’s fleet at different airport terminals. Therefore, although a non-financial asset is involved, its initial recognition does not generate a book adjustment in the Company’s inventories. Rather, it is initially accounted for in the Company’s OCI and a reclassification adjustment is made from OCI to profit and loss and recognized in the same period or periods in which the hedged item is expected to be allocated to profit and loss. Furthermore, the Company hedges its forecasted jet fuel consumption month after month, which is congruent with the maturity date of the monthly serial Asian call options and Zero-Cost collars.
 
As of September 30, 2018, the fair value of the outstanding US Gulf Coast Jet Fuel Asian call options was a gain of Ps.213,763; as for the Zero-Cost collars it was a gain of Ps.6,749 and is presented as part of the financial assets in the unaudited interim condensed consolidated statement of financial position.
 
As of December 31, 2017, the fair value of the outstanding US Gulf Coast Jet Fuel Asian call options was a gain of Ps.497,403, and is presented as part of the financial assets in the unaudited interim condensed consolidated statement of financial position.
 
The amount of positive cost of hedging derived from the extrinsic value changes of these options as of September 30, 2018 recognized in other comprehensive income totals Ps.174,542 (the positive cost of hedging in December 2017 totals Ps.163,836), and will be recycled to the fuel cost during 2018 and 2019, as these options expire on a monthly basis.
 
During the three months ended September 30, 2018 and 2017, the net cost of these options recycled to the fuel cost was a benefit of Ps.(162,576) and Ps.2,596, respectively.
 
During the nine months period ended September 30, 2018 and September 30, 2017, the net cost of these options recycled to the fuel cost was a (benefit) and expense Ps.(364,050) and Ps.129,886, respectively.
 
The following table includes the notional amounts and strike prices of the derivative financial instruments outstanding as of the end of the year:

 	 	 	 	 	Position as of September 30, 2018	 	
 	 	 	 	 	Jet fuel Asian call and Zero-Cost
collars option contracts maturities	 	
Jet fuel risk	 	4Q 2018	 	 	2018 Total	 	 	1Q 2019	 	 	2019 Total	 	
Notional volume in gallons (thousands)*	 	 	27,006	 	 	 	27,006	 	 	 	9,426	 	 	 	9,426	 	
Strike price agreed rate per gallon  (U.S. dollars)**	 	US$	1.8486	 	 	US$	1.8486	 	 	US$	1.91/2.48		 	US$	1.91/2.48		
Approximate percentage of hedge
(of expected consumption value)	 	 	45	%	 	 	45	%	 	 	15	%	 	 	4	%	
 
	*	US Gulf Coast Jet 54 as underlying asset	
	**	Weighted average	
 
Position as of December 31, 2017 Jet fuel Asian call option contracts maturities

 	 	Position as of December 31, 2017
Jet fuel Asian call option contracts maturities	 	
Jet fuel risk	 	1H18	 	 	2H18	 	 	2018 Total	 	
Notional volume in gallons (thousands)*	 	 	69,518	 	 	 	61,863	 	 	 	131,381	 	
Strike price agreed rate per gallon
(U.S. dollars)**	 	US$	1.6861	 	 	US$	1.8106	 	 	US$	1.7447	 	
Approximate percentage of hedge
(of expected consumption value)	 	 	60	%	 	 	50	%	 	 	55	%	
 
	*	US Gulf Coast Jet 54 as underlying asset	
	**	Weighted average	

 38  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	b)	Foreign currency risk	
 
While Mexican Peso is the functional currency of the Company, a significant portion of its operating expenses is 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. 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.
 
Most of the Company’s revenue is generated in Mexican pesos, although 33% of its revenues came from operations in the United States of America and Central America for the nine months ended September 30, 2018 (30% for the nine months ended September 30, 2017).
 
For the three months ended September 30, 2018, 31% of the Company´s revenues came from operations in the United States of America and Central America (32% for the three months ended September 30, 2017).
 
U.S. dollar denominated collections accounted for 38% and 40% of the Company’s total collections as of September 30, 2018 and December, 31 2017, respectively. However, certain of its expenditures, particularly those related to aircraft leasing and acquisition, are also U.S. dollar denominated also and although jet fuel for those flights originated in Mexico are paid in Mexican pesos, the price formula is impacted by the Mexican Pesos /U.S. dollars exchange rate.
 
The Company’s foreign exchange on and off-balance sheet exposure as of September 30, 2018 and December 31, 2017 is as set forth below:
 
 	 	Thousands of U.S. dollars	 	
 	 	 	 	
 	 	September 30,
2018	 	 	December 31,
2017	 	
Assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	US$	307,041	 	 	US$	344,038	 	
Other accounts receivable	 	 	32,524	 	 	 	13,105	 	
Aircraft maintenance deposits paid to lessors	 	 	317,733	 	 	 	352,142	 	
Deposits for rental of flight equipment	 	 	22,587	 	 	 	25,343	 	
Derivative financial instruments	 	 	12,104	 	 	 	25,204	 	
Total assets	 	 	691,989	 	 	 	759,832	 	
 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	
Financial debt	 	 	142,497	 	 	 	128,296	 	
Foreign suppliers	 	 	50,412	 	 	 	53,729	 	
Taxes and fees payable	 	 	13,441	 	 	 	10,304	 	
Derivative financial instruments	 	 	234	 	 	 	-	 	
Total liabilities	 	 	206,584	 	 	 	192,329	 	
Net foreign currency position	 	US$	485,405	 	 	US$	567,503	 	

 39  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
At October 18, 2018, date of issuance of these financial statements, the exchange rate was Ps.18.7693 per U.S. dollar.
 
 	 	Thousands of U.S. dollars	 	
 	 	 	 	
 	 	September 30, 2018	 	 	December 31, 2017	 	
Off-balance sheet transactions exposure:	 	 	 	 	 	 	 	 	
Aircraft and engine operating lease payments (Note 12)	 	US$	2,111,178	 	 	US$	1,856,909	 	
Aircraft and engine commitments (Note 15)	 	 	1,085,690	 	 	 	1,123,377	 	
Total foreign currency	 	US$	3,196,868	 	 	US$	2,980,286	 	
 
As of September 30, 2018, the company entered into Plain Vanilla Mexican Peso / U.S. dollar FX forwards in order to hedge approximately 20% of its next twelve months aircraft rental expenses.
 
As of September 30, 2018, the fair value of the foreign currency forward contracts was a gain of Ps.2,800, and it is presented as part of the financial assets in the unaudited interim condensed consolidated statements of financial position.
 
This unrealized gain of Ps.2,800 relating to the foreign currency forward contracts is included in OCI.
 
As of December 31, 2017, the Company did not enter into foreign exchange rate derivatives financial instruments.
 
	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. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations and flight equipment operating 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 “cash flow hedge” 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 unaudited interim condensed consolidated statements of operations.
 
For the nine and three months ended September 30, 2018, the Company did not have interest rate swaps.
 
All of the Company’s position in the form of interest rate swaps matured on March 31, 2017 and April 30, 2017, consequently there is no outstanding balance as of September 30, 2017.
 
	d)	Liquidity risk	
 
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 of its fleet, the Company requires liquid funds to meet its obligations.
 
 40  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The Company attempts to manage its cash and cash equivalents and its financial assets, relating the term of investments with those of its obligations. Its policy is that the average term of its investments may not exceed the average term of its obligations. This cash and cash equivalents position is invested in highly-liquid short-term instruments through financial entities.
 
The Company has future obligations related to maturities of bank borrowings and derivative contracts.
 
The Company’s off-balance sheet exposure represents the future obligations related to operating lease contracts and aircraft purchase contracts. The Company concluded that it has a low concentration of risk since it has access to alternate sources of funding.
 
The table below presents the Company’s contractual principal payments required on its financial liabilities and the derivative financial instruments fair value:
 
 	 	September 30, 2018	 	
 	 	Within one
year	 	 	One to five
years	 	 	Total	 	
Interest-bearing borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	
Pre-delivery payments facilities	 	Ps.	1,859,029	 	 	Ps.	799,561	 	 	Ps.	2,658,590	 	
Short-term working capital facilities	 	 	471,441	 	 	 	-	 	 	 	471,441	 	
Total	 	Ps.	2,330,470	 	 	Ps.	799,561	 	 	Ps.	3,130,031	 	
 
 	 	December 31, 2017	 	
 	 	Within one
year	 	 	One to five
years	 	 	Total	 	
Interest-bearing borrowings:	 	 	 	 	 	 	 	 	 	 	 	 	
Pre-delivery payments facilities	 	Ps.	1,449,236	 	 	Ps.	1,079,152	 	 	Ps.	2,528,388	 	
Short-term working capital facilities	 	 	948,354	 	 	 	-	 	 	 	948,354	 	
Total	 	Ps.	2,397,590	 	 	Ps.	1,079,152	 	 	Ps.	3,476,742	 	
 
	e)	Credit risk	
 
Credit risk is the risk that any counterparty will not meet its obligations under a financial instrument or customer contract, 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 other financial instruments including derivatives.
 
Financial instruments that expose the Company to credit risk involve mainly cash equivalents and accounts receivable. Credit 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 Company has a high receivable turnover; hence management believes credit risk is minimal due to the nature of its businesses, 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 credit-ratings assigned by international credit-rating agencies.

 41  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Some of the outstanding derivative financial instruments expose the Company to credit loss in the event of nonperformance 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. To manage credit risk, the Company selects counterparties based on credit assessments, limits overall exposure to any single counterparty and monitors the market position with each counterparty. The Company does not purchase or hold derivative financial instruments for trading purposes. At September 30, 2018, 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 only enters into derivative financial instruments with banks with high credit-rating assigned by international credit-rating agencies.
 
	f)	Capital management	
 
Management believes that the resources available to the Company are sufficient for its present requirements and will be sufficient to meet its anticipated requirements for capital expenditures and other cash requirements for the 2018 fiscal year.
 
The primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios to support its business and maximize the shareholder’s value. No changes were made in the objectives, policies or processes for managing capital during the nine months ended September 30, 2018. The Company is not subject to any externally imposed capital requirement, other than the legal reserve.
 
	7.	Fair value measurements	
 
The only financial assets and liabilities recognized at fair value on a recurring basis 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:
 
	(i)	In the principal market for the asset or liability, or	
	(ii)	In the absence of a principal market, in the most advantageous market for the asset or liability.	
 
The principal or the most advantageous market must be accessible to the Company.
 
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
 
The assessment of a non-financial asset’s fair value considers the market participant's ability to generate economic benefits by 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 and best use.
 
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
 
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
 
	·	Level 1 – Quoted (unadjusted) prices in active markets for identical assets or liabilities.	
 
	·	Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.	
 
	·	Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.	

 42  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
 
Set out below, is a comparison by class of the carrying amounts and fair values of the Company’s financial instruments, other than those for which carrying amounts are reasonable approximations of fair values:
 
 	 	Carrying amount	 	 	Fair value	 	
 	 	September 30, 2018	 	 	December 31, 2017	 	 	September 30, 2018	 	 	December 31, 2017	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative financial instruments	 	Ps.	223,312,	 	 	Ps.	497,403	 	 	Ps.	223,312	 	 	Ps.	497,403	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Financial debt	 	 	(3,130,031	)	 	 	(3,476,742	)	 	 	(3,138,094	)	 	 	(3,481,741	)	
Total	 	Ps.	(2,906,719	)	 	Ps.	(2,979,339	)	 	Ps.	(2,914,782	)	 	Ps.	(2,984,338	)	
 
The following table summarizes the fair value measurements at September 30, 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.	-	 	 	Ps.	213,763	 	 	Ps.	-	 	 	Ps.	213,763	 	
Jet fuel Asian Zero-Cost collars contracts*	 	 	 	 	 	 	6,749	 	 	 	 	 	 	 	6,749	 	
Foreign currency forward	 	 	 	 	 	 	2,800	 	 	 	 	 	 	 	2,800	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities for which fair values are disclosed:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest-bearing loans and borrowings**	 	 	 	 	 	 	(3,138,094	)	 	 	 	 	 	 	(3,138,094	)	
Net	 	Ps.	-	 	 	Ps.	(2,914,782	)	 	Ps.	-	 	 	Ps.	(2,914,782	)	
 
	*	Jet fuel forwards levels.	
	**	LIBOR curve	
 
There were no transfers between level 1 and level 2 during the period.

 43  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The following table summarizes the fair value measurements at December 31, 2017:
 
 	 	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.	-	 	 	Ps.	497,403	 	 	Ps.	-	 	 	Ps.	497,403	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities for which fair values are disclosed:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest-bearing loans and borrowings**	 	 	-	 	 	 	(3,481,741	)	 	 	-	 	 	 	(3,481,741	)	
Net	 	Ps.	-	 	 	Ps.	(2,984,338	)	 	Ps.	-	 	 	Ps.	(2,984,338	)	
 
* Jet fuel forwards levels.
** LIBOR curve.
 
There were no transfers between level 1 and level 2 during the period.
 
The following table summarizes the gain (loss) from derivatives financial instruments recognized in the unaudited interim condensed consolidated statements of operations for the three months ended September 30, 2018 and 2017:
 
Consolidated statements of operations

 	 	 	 	Three months ended	 	
Instrument	 	Financial statements line	 	September 30,
2018	 	 	September 30,
2017	 	
 	 	 	 	 	 	 	 	 	
Jet fuel Asian call options contracts	 	Fuel	 	Ps.	162,576	 	 	Ps.	2,596	 	
Foreign currency forward	 	Aircraft and engine rent expenses	 	 	-	 	 	 	(9,224	)	
Total	 	 	 	Ps.	162,576	 	 	Ps.	(6,628	)	
 
The following table summarizes the gain (loss) from derivatives financial instruments recognized in the unaudited interim condensed consolidated statements of operations for the nine months ended September 30, 2018 and 2017:
 
Consolidated statements of operations
 
 	 	 	 	Nine months ended	 	
Instrument	 	Financial statements line	 	September 30,
2018	 	 	September 30,
2017	 	
 	 	 	 	 	 	 	 	 	
Jet fuel Asian call options contracts	 	Fuel	 	Ps.	364,050	 	 	Ps.	(129,886	)	
Foreign currency forward	 	Aircraft and engine rent expenses	 	 	-	 	 	 	(9,224	)	
Interest rate swap contracts	 	Aircraft and engine rent expenses	 	 	-	 	 	 	(13,827	)	
Total	 	 	 	Ps.	364,050	 	 	Ps.	(153,937	)	
 
The following table summarizes the net gain (loss) on CFH before taxes recognized in the unaudited interim condensed consolidated statements of comprehensive income for the three months ended September 30, 2018 and 2017:

 44  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Consolidated statements of other comprehensive income

 	 	 	 	Three months ended	 	
 	 	 	 	September 30,	 	
Instrument	 	Financial statements line	 	2018	 	 	2017	 	
Jet fuel Asian call options	 	OCI	 	Ps.	145,764	 	 	Ps.	245,762	 	
Interest rate swap contracts	 	OCI	 	 	-	 	 	 	-	 	
Foreign currency contracts	 	OCI	 	 	81,893	 	 	 	3,974	 	
Total	 	 	 	Ps.	227,657	 	 	Ps.	249,736	 	
 
The following table summarizes the net gain (loss) on CFH before taxes recognized in the unaudited interim condensed consolidated statements of comprehensive income for the nine months ended September 30, 2018 and 2017:
 
Consolidated statements of other comprehensive income
 
 	 	 	 	Nine months ended	 	
 	 	 	 	September 30,	 	
Instrument	 	Financial statements line	 	2018	 	 	2017	 	
Jet fuel Asian call options	 	OCI	 	Ps.	(8,150	)	 	Ps.	(221,374	)	
Interest rate swap contracts	 	OCI	 	 	-	 	 	 	14,144	 	
Foreign currency contracts	 	OCI	 	 	(2,800	)	 	 	(6,591	)	
Total	 	 	 	Ps.	(10,950	)	 	Ps.	(213,821	)	
 
	8.	Financial assets and liabilities	
 
At September 30, 2018 and December 31, 2017, 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	
 
 	 	September 30,
2018	 	 	December 31, 2017	 	
Derivative financial instruments designated as cash flow
hedges (effective portion recognized within OCI)	 	 	 	 	 	 	 	 	
Jet fuel Asian call options	 	Ps.	213,763	 	 	Ps.	497,403	 	
Jet fuel Asian Zero-Cost collars	 	 	6,749	 	 	 	-	 	
Foreign currency forward	 	 	2,800	 	 	 	-	 	
Total financial assets	 	Ps.	223,312	 	 	Ps.	497,403	 	
 	 	 	 	 	 	 	 	 	
Presented on the consolidated statements of financial position as follows:	 	 	 	 	 	 	 	 	
Current	 	Ps.	223,312	 	 	Ps.	497,403	 	
Non-current	 	Ps.	-	 	 	Ps.	-	 	

 45  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	b)	Financial debt	
 
	i)	At September 30, 2018 and December 31, 2017, the Company’s short-term and long-term debt consists of the following:	
 
 	 	 	September 30, 2018	 	 	December 31 2017	 	
I.	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 November 30, 2021, bearing annual interest rate at the three-month LIBOR plus a spread according to the contractual conditions of each disbursement in a range of 199 to 225 basis points.	 	Ps.	2,658,590	 	 	Ps.	2,528,388	 	
 	 	 	 	 	 	 	 	 	 	
II.	The Company entered into a short-term working capital facility with Banco Nacional de México S.A. (“Citibanamex”) in Mexican pesos, bearing annual interest rate at TIIE 28 days plus a spread of 90 basis points.	 	 	471,441	 	 	 	948,354	 	
 	 	 	 	 	 	 	 	 	 	
 III.  	Accrued interest and other financial cost	 	 	62,534	 	 	 	5,972	 	
 	 	 	 	3,192,565	 	 	 	3,482,714	 	
 	Less: Short-term maturities	 	 	2,393,004	 	 	 	2,403,562	 	
 	Long-term	 	Ps.	799,561	 	 	Ps.	1,079,152	 	
 
TIIE: Mexican interbank rate
 
	(ii)	The following table provides a summary of the Company’s scheduled principal payments of financial debt and accrued interest at September 30, 2018:	
 
 	 	Within one year	 	 	October-2019 September 2020	 	 	October 2020- September 2021	 	 	Total	 	
Finance debt:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Santander/Bancomext	 	Ps.	1,919,673	 	 	Ps.	691,665	 	 	Ps.	107,896	 	 	Ps.	2,719,234	 	
Citibanamex	 	 	473,331	 	 	 	-	 	 	 	-	 	 	 	473,331	 	
Total	 	Ps.	2,393,004	 	 	Ps.	691,665	 	 	Ps.	107,896	 	 	Ps.	3,192,565	 	
 
The “Santander/Bancomext” loan agreement provides for certain covenants, including limits to the ability to, among others:
 
	i)	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.	
 
At September 30, 2018 and December 31, 2017, the Company was in compliance with the covenants under the above-mentioned loan agreement.
 
For purposes of financing the pre-delivery payments, Mexican trust structures 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-delivery payments to the Mexican trusts, and the Company guaranteed the obligations of the Mexican trusts under the financing agreement (Deutsche Bank Mexico, S.A. Trust 1710 and 1711).

 46  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	9.	Related parties	
 
a)      An analysis of balances due from/to related parties at September 30, 2018 and December 31, 2017 is provided below. All companies are considered affiliates, since the Company’s primary shareholders or directors are also direct or indirect shareholders of the related parties:
 
 	 	Type of transaction	 	Country of origin	 	September 30,
2018	 	 	December 31,
2017	 	 	Terms	 	
Due to:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
One Link, S.A. de C.V. (“One Link”)	 	Call center fees	 	El Salvador	 	Ps.	54,907	 	 	Ps.	24,980	 	 	30 days	 	
Aeromantenimiento, S.A. (“Aeroman”)	 	Aircraft and engine maintenance	 	El Salvador	 	 	31,172	 	 	 	15,951	 	 	30 days	 	
 	 	 	 	 	 	Ps.	86,079	 	 	Ps.	40,931	 	 	 	 	
 
	b)	During the three months ended September 30, 2018 and 2017, the Company had the following transactions with related parties:	
 
Related party transactions	 	Country of origin	 	2018	 	 	2017	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	
Aircraft and engine maintenance	 	El Salvador/Guatemala	 	Ps.	89,131	 	 	Ps.	47,375	 	
Call center fees and other fees	 	Mexico/El Salvador	 	 	25,698	 	 	 	53,868	 	
Other	 	Mexico/El Salvador/ Guatemala	 	 	-	 	 	 	3,849	 	
 
During the nine months ended September 30, 2018 and 2017, the Company had the following transactions with related parties:
 
Related party transactions	 	Country of origin	 	2018	 	 	2017	 	
Expenses:	 	 	 	 	 	 	 	 	 	 	
Aircraft and engine maintenance	 	El Salvador/Guatemala	 	Ps.	276,108	 	 	Ps.	178,155	 	
Call center fees and other fees	 	Mexico/El Salvador	 	 	114,224	 	 	 	150,553	 	
Other	 	Mexico/El Salvador/ Guatemala	 	 	-	 	 	 	7,801	 	
 
	c)	Servprot	
 
Servprot S.A. de C.V. (“Servprot”) is a related party because Enrique Beltranena, the Company’s Chief Executive Officer and member of the board of directors, and Rodolfo Montemayor, a member of the board of directors, until April 19, 2018 is shareholder of such company. Servprot provides security services for Mr. Beltranena and his family, as well as for Mr. Montemayor.
 
During the three months ended September 30, 2018 and 2017 the Company expensed Ps.706 and Ps.551, respectively, for this concept.
 
During the nine months ended September 30, 2018 and 2017 the Company expensed Ps.1,943 and Ps.1,393, respectively, for this concept.

	d)	Aeroman	
 
Aeroman is a related party because Roberto José Kriete Ávila, a member of the Company’s board of directors, and members of his immediate family are shareholders of Aeroman. Te Company entered into an aircraft repair and maintenance service agreement with Aeroman on January 1 2017. This agreement provides that we the Company has to 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 10 year term.
 
As of September 30, 2018 and December 31, 2017, the balances due under the agreement with Aeroman were Ps.31,172 and Ps.15,951, respectively.

 47  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
During the three months ended September 30, 2018 and 2017, the Company expensed Ps.89,131 and Ps.48,646, respectively for this concept.
 
During the nine months ended September 30, 2018 and 2017, the Company expensed Ps.276,108 and Ps.180,989, respectively for this concept.
 
	e)	HCI	
 
The Company entered into a professional services agreement with Human Capital International HCI, S.A. de C.V., or Human Capital International, on February 25, 2015, for the selection and hiring of executives. Rodolfo Montemayor Garza, member of the Company’s board of directors until April 19, 2018, is a founder and chairman of the board of directors of Human Capital International.
 
During the three months period ended September 30, 2017, the Company expensed Ps.20 for this concept.
 
During the nine months period ended September 30, 2018 and 2017, the Company expensed Ps.324 and Ps.816, respectively, for this concept.
 
	f)	One Link, S.A de C.V.	
 
One Link is a related party because Marco Baldocchi, an alternate member of the board, is a director of the Company. Pursuant to this agreement, One Link receives calls from our customers to book flights and provides customers with information about fares, schedules and availability.
 
As of September 30, 2018 and December 31, 2017, the balances due under the agreement with One Link were Ps.54,907 and Ps.24,980, respectively.
 
During the three months period ended September 30, 2018 and 2017, the Company expensed Ps.24,930 and Ps.53,297, respectively, for this concept.
 
During the nine months period ended September 30, 2018 and 2017, the Company expensed Ps.111,108 and Ps.148,079, respectively, for this concept.
 
	g)	SearchForce, Inc.	
 
SearchForce is a related party because William Dean Donovan, an alternate member of the board, is a director of the Company. Pursuant to this agreement, SearchForce provides consultation services, reports, findings, analysis or other deliverables to us regarding the software and the implementation of the internet marketing strategy developed to the Company at its request.
 
During the three months ended September 30, 2018 and 2017, the Company expensed Ps.0 and Ps.528, respectively, for this concept.
 
During the nine months ended September 30, 2018 and 2017, the Company expensed Ps.0 and Ps.1,946, respectively, for this concept.
 
	h)	Aviateca, S.A.	
 
Aviateca is a related party because it is a subsidiary of Avianca which Roberto Kriete, a member of the board of the company, is a director too.
 
During the three months ended September 30, 2018 and 2017, the Company expensed Ps.0 and Ps.1,405, respectively, for this concept.
 
During the nine months ended September 30, 2018 and 2017, the Company expensed Ps.0 and Ps.1,405, respectively, for this concept.

 48  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	i)	Mijares, Angoitia, Cortés y Fuentes, S.C.	
 
Mijares, Angoitia, Cortés y Fuentes, S.C. is a related party because Eugenio Macouzet and Ricardo Maldonado Yañez, members of the board since April 2018, are partners of the Company.
 
During the three months period ended September 30, 2018 and 2017, the Company expensed Ps.326 and Ps.0, respectively, for this concept.
 
During the nine months period ended September 30, 2018 and 2017, the Company expensed Ps.849 and Ps.0, respectively, for this concept.
 
	j)	Directors and officers	
 
During the three months ended September 30, 2018 and 2017, all of the Company’s senior managers received an aggregate compensation of short and long-term benefits of Ps.27,872 and Ps.21,183, respectively.
 
During the nine months ended September 30, 2018 and 2017, all of the Company’s senior managers received an aggregate compensation of short and long-term benefits of Ps.79,525 and Ps.87,893, respectively.
 
During the three months ended September 30, 2018 and 2017, the chairman and the independent members of the Company’s board of directors received an aggregate compensation of approximately Ps.2,721 and Ps.2,190, respectively, and the rest of the directors received a compensation of Ps.2,373 and Ps.2,701, respectively.
 
During the nine months ended September 30, 2018 and 2017, the chairman and the independent members of the Company’s board of directors received an aggregate compensation of approximately Ps.7,286 and Ps.6,295, respectively, and the rest of the directors received a compensation of Ps.5,827 and Ps.6,091, respectively.
 
	10.	Rotable spare parts, furniture and equipment, net	
 
	a)	Acquisitions and disposals	
 
During nine months period ended September 30, 2018 and the year ended December 31, 2017, the Company acquired rotable spare parts, furniture and equipment by an amount of Ps.1,737,726 and Ps.2,584,232, respectively.
 
Rotable spare parts, furniture and equipment by Ps.1,132,267 and Ps.319,671 were disposed during nine months period ended September 30, 2018 and during the year ended December 31, 2017 respectively. These amounts included reimbursements of pre-delivery payments for aircraft acquisition of Ps.443,797 and Ps.213,947 respectively.
 
	b)	Depreciation expense	
 
Depreciation expense for the three months ended September 30, 2018 and 2017 was Ps.96,690 and Ps.132,949, respectively. Depreciation expense for the nine months ended September 30, 2018 and 2017 was Ps.315,904 and Ps.380,847, respectively. Depreciation charges for the period are recognized as a component of operating expenses in the unaudited interim condensed consolidated statements of operations.

 49  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	11.	Intangible assets, net	
 
	a)	Acquisitions	
 
During nine months period ended September 30, 2018 and the year ended December 31, 2017, the Company acquired intangible assets by an amount of Ps.35,695 and Ps.130,908 respectively.
 
	b)	Amortization expense	
 
Software amortization expense for the three months ended September 30, 2018 and 2017 was Ps.18,174 and Ps.16,941, respectively. Software amortization expense for the nine months ended September 30, 2018 and 2017 was Ps.54,895 and Ps.36,768, respectively. These amounts were recognized in depreciation and amortization in the unaudited interim condensed consolidated statements of operations.
 
	12.	Operating leases	
 
The most significant operating leases are as follows:
 
Aircraft and engine rent. At September 30, 2018, the Company leases 73 aircraft (71 as of December 31, 2017) and 10 spare engines under operating leases (8 as of December 31, 2017) that have maximum terms through 2032. Rents are guaranteed by deposits in cash or letters of credit. The aircraft lease agreements contain certain covenants to which the Company is bound. The most significant covenants include the following:
 
	(i)	Maintain the records, licenses and authorizations required by the competent aviation authorities and make the corresponding payments.	
	(ii)	Provide maintenance services to the equipment based on the approved maintenance program.	
	(iii)	Maintain insurance policies on the equipment for the amounts and risks stipulated in each agreement.	
	(iv)	Periodic submission of financial and operating information to the lessors.	
	(v)	Comply with the technical conditions relative to the return of aircraft.	
 
As of September 30, 2018 and December 31 2017, the Company was in compliance with the covenants under the above mentioned aircraft lease agreements.
 
Composition of the fleet and spare engines, operating leases*:
 
Aircraft Type	 	Model		At September
30, 2018	 		At December
31, 2017	 	
A319	 	132	 	 	4	 	 	 	6	 	
A319	 	133	 	 	4	 	 	 	6	 	
A320	 	233	 	 	39	 	 	 	39	 	
A320	 	232	 	 	4	 	 	 	4	 	
A320NEO	 	271N	 	 	9	 	 	 	6	 	
A321	 	231	 	 	10	 	 	 	10	 	
A321NEO	 	271N	 	 	3	 	 	 	-	 	
 	 	 	 	 	73	 	 	 	71	 	

Engine Type	 	Model	 	At September
30, 2018	 	 	At December
31, 2017	 	
V2500	 	V2527M-A5	 	 	3	 	 	 	3	 	
V2500	 	V2527E-A5	 	 	3	 	 	 	3	 	
V2500	 	V2527-A5	 	 	2	 	 	 	2	 	
PW1100	 	PW1127G-JM	 	 	2	 	 	 	-	 	
 	 	 	 	 	10	 	 	 	8	 	
 
	*	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.	

 50  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
During the nine months period ended September 30, 2018, the Company incorporate six new aircraft to its fleet, three A320NEO and three A321NEO, also the Company extended the lease term of two aircraft (effective from 2019) and two spare engine (effective from february and april 2018), additionally during this period the Company returned four aircraft to their respective lessors.
 
During the nine months period ended September 30,2018, the Company also incorporate two NEO spare engines to its fleet based on the terms of the Pratt and Whitney purchase agreement (FMP). These two engines incorporated were subject to sale and leaseback transactions and their respective lease agreements were accounted as operating leases
 
During the year ended December 31, 2017, the Company incorporate five aircraft to its fleet (one of them based on the terms of the Airbus purchase agreement and four from a lessor´s order book). These new aircraft lease agreements were accounted for as operating leases. Also, the Company returned three aircraft to their respective lessors. All the aircraft incorporated through the lessor´s aircraft order book were not subject to sale and leaseback transactions.
 
Additionally, during 2017 the Company extended the lease term of three aircraft (effective from 2018) and two spare engines (effective from July 2017 and September 2017 respectively). Such leases were accounted as operating leases and were not subject to sale and leaseback transactions.
 
As of September 30, 2018 and December 31, 2017, all of the Company’s aircraft and spare engines lease agreements were accounted for as operating leases.
 
Provided below is an analysis of future minimum aircraft and engine rent payments in U.S. dollars and its equivalent to Mexican pesos:

 	 	Aircraft operating leases	 	 	Engine operating leases	 	
 	 	in U.S.
dollars	 	 	in Mexican
pesos (1)	 	 	in U.S.
dollars	 	 	in Mexican
pesos (1)	 	
2018	 	US$	71,065	 	 	Ps.$	1,336,875	 	 	US$	1,859	 	 	Ps.$	34,972	 	
2019	 	 	279,538	 	 	 	5,258,669	 	 	 	7,314	 	 	 	137,591	 	
2020	 	 	274,111	 	 	 	5,156,576	 	 	 	6,694	 	 	 	125,928	 	
2021	 	 	266,368	 	 	 	5,010,915	 	 	 	6,537	 	 	 	122,974	 	
2022 and thereafter	 	 	1,181,441	 	 	 	22,225,268	 	 	 	16,251	 	 	 	305,713	 	
Total	 	US$	          2,072,523	 	 	Ps.$	38,988,303	 	 	US$	38,655	 	 	Ps.$	727,178	 	
 
	(1)	Using the exchange rate as of September 30, 2018 of Ps.18.8120.	
 
Such amounts are determined based on stipulated rent contained within the agreements without considering renewals and using the prevailing exchange rate and interest rates as of September 30, 2018.
 
During the three months period ended September 30, 2018 , the Company entered into certain sale and leaseback transactions related to two A320NEO Aircraft, which resulted in a gain of Ps.242,009.
 
During the nine months period ended September 30, 2018 , the Company entered into certain sale and leaseback transactions related to two NEO spare engines and two A320NEO Aircraft, which resulted in a gain of Ps.461,825.
 
During the year ended December 31, 2011, the Company entered into aircraft and spare engines sale and leaseback transactions, which resulted in a loss of Ps.30,706. This loss was deferred on the unaudited interim condensed consolidated statements of financial position and is being amortized over the contractual lease term. As of September 30, 2018 and December 31, 2017, the current portion of the loss on sale amounts to Ps.3,047 and Ps.3,047, respectively, which is recorded in the caption of prepaid expenses and other current assets, and the non-current portion amounts to Ps.9,127 and Ps.11,413, respectively, which is recorded in the caption of other assets.

 51  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
For the three months ended September 30, 2018 and 2017, the Company amortized a loss of Ps.762, and Ps.762, respectively, as additional aircraft rental expense.
 
For the nine months ended September 30, 2018 and 2017, the Company amortized a loss of Ps.2,286, and Ps.2,286, respectively, as additional aircraft rental expense.
 
	13.	Equity	
 
As of September 30, 2018, the total number of 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:

 	 	Shares	 	 	 	 	
 	 	Fixed
Class I	 	 	Variable
Class II	 	 	Total shares	 	
Series A shares	 	 	10,478	 	 	 	923,814,326	 	 	 	923,824,804	 	
Series B shares	 	 	13,702	 	 	 	88,038,171	 	 	 	88,051,873	 	
 	 	 	24,180	 	 	 	1,011,852,497	 	 	 	1,011,876,677	 	
Treasury shares	 	 	-	 	 	 	(14,361,583	)	 	 	(14,361,583	)	
 	 	 	24,180	 	 	 	997,490,914	 	 	 	997,515,094	 	
 
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 and the repayment of capital. Holders of the Company’s Series A common stock and Series B common stock are entitled to dividends when, and if, declared by a shareholder resolution. The Company’s revolving line of credit with Santander and 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.
 
During the nine months period ended September 30, 2018 and for the year ended December 31, 2017, the Company did not declare any dividends.
 
	a)	(Loss) earnings per share	
 
Basic (loss) earnings per share (“LPS” and “EPS”) amounts are calculated by dividing the net (loss) income for the period attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
 
Diluted and (LPS) EPS amounts are calculated by dividing the (loss) income attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.
 
The following table shows the calculations of the basic and diluted (loss) earnings per share for the three months ended September 30, 2018 and 2017:
 
 	 	2018	 	 	2017	 	
Net (loss) income for the period	 	Ps.	(118,818	)	 	Ps.	719,658	 	
 	 	 	 	 	 	 	 	 	
Weighted average number of shares outstanding (in thousands):	 	 	 	 	 	 	 	 	
Basic	 	 	1,011,877	 	 	 	1,011,877	 	
Diluted	 	 	1,011,877	 	 	 	1,011,877	 	
 	 	 	 	 	 	 	 	 	
EPS (LPS):	 	 	 	 	 	 	 	 	
Basic	 	 	(0.117	)	 	 	0.711	 	
Diluted	 	 	(0.117	)	 	 	0.711	 	

 52  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The following table shows the calculations of the basic and diluted loss per share for the nine months ended September 30, 2018 and 2017:
 
 	 	2018	 	 	2017	 	
Net loss for the period	 	Ps.	(1,198,861	)	 	Ps.	(1,105,976	)	
 	 	 	 	 	 	 	 	 	
Weighted average number of shares outstanding (in thousands):	 	 	 	 	 	 	 	 	
Basic	 	 	1,011,877	 	 	 	1,011,877	 	
Diluted	 	 	1,011,877	 	 	 	1,011,877	 	
 	 	 	 	 	 	 	 	 	
LPS:	 	 	 	 	 	 	 	 	
Basic	 	 	(1.185	)	 	 	(1.093	)	
Diluted	 	 	(1.185	)	 	 	(1.093	)	
 
	14.	Income tax	
 
The Company calculates the period income tax expense using the tax rate that would be applicable to the expected total annual earnings. The major components of income tax expense in the unaudited interim condensed statement of operations are:
 
Consolidated statement of operations

 	 	Three months ended
September 30,	 	
 	 	2018	 	 	2017	 	
Deferred income tax benefit (expense)	 	Ps.	81,237	 	 	Ps.	(38,828	)	
Total income tax expense	 	Ps.	81,237	 	 	Ps.	(38,828	)	
 
The Company’s effective tax rate during the three months period ended September 30, 2018 and 2017 was 40.61% and 5.12% respectively.
 
 	 	Nine months ended
September 30,	 	
 	 	2018	 	 	2017	 	
Deferred income tax benefit	 	Ps.	513,797	 	 	Ps.	516,686	 	
Total income tax benefit on profits	 	Ps.	513,797	 	 	Ps.	516,686	 	
 
The Company’s effective tax rate during the nine months period ended September 30, 2018 and 2017 was 30.00% and 31.84% respectively. 

 53  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
15. Commitments and contingencies
 
Committed expenditures for aircraft purchase and related flight equipment related to the Airbus purchase agreement, including 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)	 	
2018	 	$	38,507	 	 	$	724,394	 	
2019	 	$	130,013	 	 	$	2,445,804	 	
2020	 	$	101,585	 	 	$	1,911,017	 	
2021	 	$	145,683	 	 	$	2,740,589	 	
2022 and thereafter	 	$	669,902	 	 	$	12,602,196	 	
 	 	$	1,085,690	 	 	$	20,424,000	 	
 
	(1)	Using the exchange rate as of September 30, 2018 of Ps.18.8120.	
 
All aircraft acquired by the Company through the Airbus purchase agreement at September 30, 2018 and December 31, 2017 have been executed through sale and leaseback transactions.
 
Litigation
 
	a)	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 operations, or cash flows.	
 
	b)	On January 18, 2018, the Mexican antitrust authority, Comisión Federal de Competencia Económica (“COFECE”), served Volaris with a preliminary ruling of potential responsibility (Dictamen de Probable Responsabilidad or “DPR”) in which the investigating body of COFECE asserts certain allegations regarding antitrust activities in Mexico´s domestic commercial air passenger transportation market during the period from April 2008 up to February 2010 by different Mexican carriers, including Volaris. The DPR does not constitute a final ruling of culpability against Volaris. Since all the activities which were allegedly committed by the carriers were committed within the framework of the Mexican Federal Antitrust Law (Ley Federal de Competencia Económica) in effect during 2010, any applicable fines would be made pursuant to such 2010 law. The maximum fine contemplated by Article 35 section IV of such law is one million five hundred thousand times the minimum wage for Mexico City in effect during 2010. Therefore, in the event that the final ruling imposes a fine on Volaris, such fine is not expected to have a material adverse effect on the financial position or performance of the Company. Nevertheless, the COFECE proceedings are ongoing and the Company cannot predict the final outcome of such proceedings and accordingly the Company has not established a provision on the accompanying consolidated financial statements for a loss arising from this assessment.	
 
	16.	Operating segments	
 
The Company is managed as a single business unit that provides air transportation services. The Company has two geographic segments identified below:
 
 	 	Three months ended
September 30,	 	
 	 	2018	 	 	2017	 	
Operating revenues:	 	 	 	 	 	 	 	 	
Domestic (Mexico)	 	Ps.	5,028,160	 	 	Ps.	4,487,397	 	
International:	 	 	 	 	 	 	 	 	
(United States of America and Central America)	 	 	2,287,915	 	 	 	2,083,857	 	
Total operating revenues	 	Ps.	7,316,075	 	 	Ps.	6,571,254	 	
 
	*	United States of America represents approximately 31% and 30% of total revenues from, external customers during 2018 and 2017 respectively.	

 54  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
 	 	Nine months ended
September 30,	 	
 	 	2018	 	 	2017	 	
Operating revenues:	 	 	 	 	 	 	 	 	
Domestic (Mexico)	 	Ps.	13,076,849	 	 	Ps.	12,857,610	 	
International:	 	 	 	 	 	 	 	 	
(United States of America and Central America)	 	 	6,319,642	 	 	 	5,406,109	 	
Total operating revenues	 	Ps.	19,396,491	 	 	Ps.	18,263,719	 	
 
	*	United States of America represents approximately 33% and 28% of total revenues from, external customers during 2018 and 2017 respectively.	
 
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.
 
The breakdown of our non-ticket revenues for the three months ended September 30, 2018 and 2017 is as follows:
 
 	 	Three months ended
September 30,	 	
 	 	2018	 	 	2017	 	
Non-ticket revenues	 	 	 	 	 	 	 	 	
Air travel-related services	 	Ps.	2,065,241	 	 	Ps.	1,595,537	 	
Non-air travel-related services	 	 	100,368	 	 	 	164,578	 	
Cargo	 	 	54,839	 	 	 	38,030	 	
Total non-ticket revenues	 	Ps.	2,220,448	 	 	Ps.	1,798,145	 	
 
The breakdown of our non-ticket revenues for the nine months ended September 30, 2018 and 2017 is as follows:
 
 	 	Nine months ended
September 30,	 	
 	 	2018	 	 	2017	 	
Non-ticket revenues	 	 	 	 	 	 	 	 	
Air travel-related services	 	Ps.	5,693,009	 	 	Ps.	4,647,179	 	
Non-air travel-related services	 	 	429,484	 	 	 	449,177	 	
Cargo	 	 	156,233	 	 	 	117,663	 	
Total non-ticket revenues	 	Ps.	6,278,726	 	 	Ps.	5,214,019	 	
 
	17.	Subsequent events	
 
Subsequent to September 30, 2018 and through October 18, 2018, the Company does not have any relevant subsequent event to report.

 55  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Notes - List of accounting policies
 
Basis of preparation
 
Statement of compliance
 
The unaudited interim condensed consolidated financial statements, which include the consolidated statements of financial position as of September 30, 2018 (unaudited) and December 31, 2017 (adjusted), and the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the nine months period ended September 30, 2018 and 2017, have been prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting and using the same accounting policies applied in preparing the annual financial statements, except as explained below.
 
The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company’s annual consolidated financial statements as of December 31, 2017 and 2016 (audited), and for the three years period ended December 31, 2017.
 
Basis of measurement and presentation
 
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 through profit and loss (“FVTPL”). The preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from those estimates.
 
a) Basis of consolidation
 
The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.
 
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:
 
	(i)	Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).	

	(ii)	Exposure, or rights, to variable returns from its involvement with the investee.	

	(iii)	The ability to use its power over the investee to affect its returns.	
 
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:
 
	(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.	
 
The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the 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 control until the date the Company ceases to control the subsidiary.
 
 56  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated in full.
 
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 recognized in profit or loss.
 
b) Revenue recognition
 
During the first quarter 2018, the Company adopted IFRS 15 Revenue from Contracts with Customers.
 
IFRS 15 was issued in May 2014 and amended in April 2016 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard supersedes all current revenue recognition requirements under IFRS, including IAS 18. IFRS 15 also requires additional disclosures about the nature, timing, and uncertainty of revenue cash flows arising from customer contracts, including significant judgments and changes in judgments.
 
The Company adopted the new standard on the required effective date as of January 1, 2018, 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, 2016.
 
During 2016, the Company performed a preliminary assessment of IFRS 15, which was continued with a more detailed analysis completed in 2017. The main impact of IFRS 15 is the timing of recognition of certain air travel-related services (“ancillaries”). Under IAS 18 Revenue (standard used before IFRS 15), certain ancillaries are recognized as revenue at the time of the booking by customer (or when the service is provided); under the new standard, those ancillaries are recognized when the air transportation service is rendered (at the time of the flight). This change arises primarily because those ancillaries do not constitute separate performance obligations or represent administrative tasks that do not represent a promised service and therefore should be accounted for together with the air fare as a single performance obligation of providing passenger transportation. Also, certain services provided to the Company’s customers that under the new standard qualify as variable considerations that will be recorded as reduction to revenues. The Company considers this accounting change will not have a material impact on its results of operations and financial position.
 
The classification of certain ancillary fees in the statement of operations, such as advanced seat selection, fees charges for excess baggage, itinerary changes and other air travel-related services, changed upon adoption of IFRS 15 since they are part of the single performance obligation of providing passenger transportation. The revenues classified as non-ticket revenues, by an approximately amount of Ps.5,915,263 in 2017 and Ps.4,758,074 in 2016, were reclassified to passenger revenues.
 
The Company also evaluated the principal versus agent considerations as it relates to certain non-air travel services arrangements with third party providers. The Company expects that there will be no changes on revenue.
 
The Company has also identified and implemented changes to its accounting policies and practices, systems and controls, as well as designed and implemented specific controls over its evaluation of the impact of the new guidance on the Company, including a calculation of the cumulative effects, disclosure requirements and the collection of relevant data into the reporting process.
 
 57  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Passenger revenues:
 
Revenues from the air transportation of passengers are recognized 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 liabilities under the caption unearned transportation revenue and, once the transportation service is provided by the Company or when the non-refundable ticket expires at the date of the scheduled travel, the earned revenue is recognized as passenger ticket revenues and the unearned transportation revenue is reduced by the same amount. All of 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.
 
The most significant passenger revenue includes revenues generated from: (i) fare revenue and (ii) air-related services. Air travel-related services include but are not limited to fees charged for excess baggage, bookings through the call center or third-party agencies, advanced seat selection, itinerary changes, charters and airport passenger facility charges for no-show tickets. 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.
 
Non-passenger revenues:
 
The most significant non-passenger revenues include revenues generated from: (i) revenues from non-air travel-related services and (ii) cargo services.
 
Revenues from non-air travel-related services include commissions charged to third parties for the sale of hotel rooms, trip insurance and rental cars. They are recognized as revenue at the time the service is provided. Additionally, services not directly related to air transportation include Volaris’ sale of VClub membership and the sale of advertising spaces to third parties. VClub membership fees are recognized as revenues over the term of the membership. Revenue from the sale of advertising spaces is recognized over the period in which the space is provided.
 
Revenues from cargo services are recognized when the cargo transportation is provided (upon delivery of the cargo to destination).
 
c) Cash and cash equivalents
 
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 purpose of the consolidated statements of cash flows, cash and cash equivalents consist of cash and short-term investments as defined above.
 
d) Financial instruments
 
Adoption of IFRS 9 (2013)
 
A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity. The Company early adopted IFRS 9 on October 1, 2014.
 
Under IFRS 9 (2013), the FVTPL category used under IAS 39 remains permissible, although new categories of financial assets are introduced. These new categories are based on the characteristics of the instruments and the business model under which these are held, to either be measured at fair value or at amortized cost.
 
For financial liabilities, categories provided under IAS 39 are kept. As a result, there was no difference in valuation and recognition of the financial assets under IFRS 9 (2013), since those financial assets categorized under IAS 39 as FVTPL remain in that same category under IFRS 9 (2013). In the case of trade receivables, these were not affected in terms of valuation model by this version of IFRS 9 (2013), since they are carried at amortized cost and continued to be accounted for as such.
 
 58  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Also, the hedge accounting section of IFRS 9 (2013) requires for options that qualify and are formally designated as hedging instruments, the intrinsic value of the option to be defined as the hedging instrument, thus allowing for the exclusion of changes in fair value attributable to extrinsic value (time value and volatility), to be accounted, under the transaction-related method, separately as a cost of hedging that needs to be initially recognized in OCI and accumulated in a separate component of equity, since the hedged item is a portion of the forecasted jet fuel consumption. The extrinsic value is recognized in the consolidated statement of operations when the hedged item is recognized in income.
 
IFRS 9 requires the Company to record expected credit losses on all trade receivables, either on a 12 month or lifetime basis. The Company recorded lifetime expected losses on all trade receivables.
 
 59  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
e) Financial assets
 
Classification of financial assets
 
The Company determines the classification and measurement of financial assets, in accordance with the new categories introduced by IFRS 9 (2013), 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 payments of principal and interest (“SPPI”). Derivative financial instruments are also considered financial assets when these represent contractual rights to receive cash or another financial asset.
 
Initial recognition
 
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:
 
	1.	Financial assets at FVTPL which include financial assets held for trading.	

	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.	Derivative financial instruments are designated for hedging purposes under the cash flow hedge (“CFH”) accounting model and are measured at fair value.	
 
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;	
 
	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 has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; or	
 
	c)	When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. 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. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial 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.
 
For trade receivables, the Company records allowance for credit losses in accordance with the objective evidence of the incurred losses. Based on this evaluation, allowances are taken into account for the expected losses of these receivables.
 
 60  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
iii) Financial liabilities
 
Classification of financial liabilities
 
Financial liabilities under IFRS 9 (2013) are classified at amortized cost or at FVTPL.
 
Derivative financial instruments are also considered financial liabilities when these represent contractual obligations to deliver cash or another financial asset.
 
Initial recognition
 
The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value.
 
The Company’s financial liabilities include accounts payable to suppliers, unearned transportation revenue, other accounts payable, financial debt and financial instruments.
 
Subsequent measurement
 
The measurement of financial liabilities depends on their classification as described below:
 
Financial liabilities at amortized cost
 
Accounts payable are subsequently measured at amortized cost and do not bear interest or result in gains and losses due to their short-term nature.
 
After initial recognition at fair value (consideration received), interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.
 
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.
 
Financial liabilities at FVTPL
 
FVTPL include financial liabilities designated upon initial recognition at fair value through profit or loss. Financial liabilities under the fair value option 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 (2013). During the years ended December 31, 2017 and 2016 the Company has not designated any financial liability as at FVTPL.
 
 61  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Derecognition
 
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 liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the consolidated statements of operations.
 
Offsetting of financial instruments
 
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial 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.	
 
f) Other accounts receivable
 
Other accounts receivables are due primarily from major credit card processors associated with the sales of tickets and are stated at cost less allowances made for credit losses, which approximates fair value given their short-term nature.
 
g) Inventories
 
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 method of specific identification, and expensed when used in operations.
 
h) Intangible assets
 
Cost related to the purchase or development of computer software that is separable from an item of related hardware is capitalized separately and amortized over the period in which it will generate benefits not exceeding five years on a straight-line basis. The Company annually reviews the estimated useful lives and salvage values of intangible assets and any changes are accounted for prospectively.
 
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 unit exceeds its recoverable amount, which is the higher of (i) its fair value less cost to sell, and (ii) 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.
 
i) Guarantee deposits
 
Guarantee deposits consist primarily of aircraft maintenance deposits paid to lessors, deposits for rent of flight equipment and other guarantee deposits. Aircraft and engine deposits are held by lessors in U.S. dollars and are presented as current assets and non-current assets, based on the recovery dates of each deposit established in the related agreements.
 
 62  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Aircraft maintenance deposits paid to lessors
 
Most of the Company’s lease agreements require the Company to pay maintenance deposits to aircraft lessors to be held as 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 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.
 
Substantially all of these maintenance deposits are calculated based on a utilization measure of the leased aircrafts and engines, 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.
 
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 is deemed unlikely to be recovered, primarily relating to the rate differential between the maintenance deposits and the expected cost for the next related maintenance event that the deposits serve to collateralize, is recognized as supplemental rent in the consolidated statements of operations. Thus, any excess of the required deposit over the expected cost of the major maintenance event is recognized as supplemental rent in the consolidated statements of operations starting from the period the determination is made.
 
Any usage-based maintenance deposits to be paid to the lessor, related with a major maintenance event that (i) is not expected to be performed before the expiration of the lease agreement, (ii) is nonrefundable to the Company and (iii) is not substantively related to the maintenance of the leased asset, is accounted for as contingent rent in the consolidated statements of operations. The Company records lease payment as contingent rent when it becomes probable and reasonably estimable that the maintenance deposits payments will not be refunded.
 
During the year ended December 31, 2017 and 2016, the Company added five and 17 new aircraft to its fleet, respectively. Some lease agreements of these aircraft do not require the obligation to pay maintenance deposits to lessors in advance in order to ensure major maintenance activities, so the Company does 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. The Company recognizes this cost as a contingent rent during the lease term of the related aircraft, in the consolidated statement of operations.
 
The Company makes certain assumptions at the inception of the lease and at each consolidated statement of financial position date to determine the recoverability of maintenance deposits. These 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 is returned to the lessor.
 
In the event that lease extensions are negotiated, any extension benefit is recognized as a deferred lease incentive. The aggregate benefit of extension is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
 
During the years ended December 31, 2017 and 2016, the Company extended the lease term of three and two aircraft agreements, respectively, and two engine agreements in 2017. These extensions made available to the Company maintenance deposits that were recognized in prior periods in the consolidated statements of operations as contingent rent. The maintenance event for which the maintenance deposits were previously expensed was scheduled to occur after the original lease term and as such the contingent 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.
 
 63  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The effect of these lease extensions were recognized as a guarantee deposit and a deferred lease incentive in the consolidated statements of financial position at the time of lease extension.
 
Because the lease extension benefits are considered lease incentives, the benefits are deferred in the statement of financial position and are being recognized on a straight-line basis over the remaining revised lease terms.
 
j) Aircraft and engine maintenance
 
The Company is required to conduct diverse levels of aircraft maintenance. Maintenance requirements depend on the type of aircraft, age and the route network over which it operates.
 
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 consists of routine and non-routine works, divided into three general categories: (i) routine maintenance, (ii) major maintenance and (iii) component service.
 
(i) Routine maintenance requirements consists 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. This type of maintenance events is currently serviced by the Company mechanics and are primarily completed at the main airports that the Company currently serves. All other maintenance activities are sub-contracted to qualified maintenance business partner, repair and overhaul organizations. Routine maintenance also includes scheduled tasks that can take from seven to 14 days to accomplish and typically are required approximately every 22 months. All routine maintenance costs are expensed as incurred.
 
(ii) Major maintenance consist of a series of more complex tasks that can take up to six weeks to accomplish and typically are required approximately every five to six years.
 
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 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 Civil Aeronautic Authority (Dirección General de Aeronáutica Civil, or “ DGAC ”) 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 suggested 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 maintenance event. To the extent the planned usage increases, the estimated life would decrease before the next maintenance event, resulting in additional expense over a shorter period.
 
(iii) The Company has a power-by-the hour agreement for component services, which guarantees the availability of aircraft parts for the Company’s fleet when they are required. It also provides aircraft parts that are included in the redelivery conditions of the contract (hard time) without constituting an additional cost at the time of redelivery. The monthly maintenance cost associated with this agreement is recognized as incurred in the consolidated statements of operations.
 
 64  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The Company has an engine flight hour agreement that guarantees a cost per overhaul, provides miscellaneous engines coverage, caps the cost of foreign objects damage events, ensures there is protection from annual escalations, and grants an annual credit for scrapped components. The cost associated with the miscellaneous engines coverage is recorded as incurred in the consolidated statements of operations.
 
k) 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.
 
Aircraft spare engines have significant parts with different useful lives; therefore, they are accounted for as separate items (major components) of rotable spare parts.
 
Pre-delivery payments refer to prepayments made to aircraft and engine manufacturers during the manufacturing stage of the aircraft.
 
The borrowing costs related to the acquisition or construction of a qualifying asset are capitalized as part of the cost of that asset.
 
Depreciation rates are as follows:
 
 	 	Annual
depreciation rate	
Aircraft parts and rotable spare parts	 	8.3-16.7%	
Aircraft spare engines	 	4.0-8.3%	
Standardization	 	Remaining contractual lease term	
Computer equipment	 	25%	
Communications equipment	 	10%	
Office furniture and equipment	 	10%	
Electric power equipment	 	10%	
Workshop machinery and equipment	 	10%	
Service carts on board	 	20%	
Leasehold improvements to flight equipment	 	The shorter of: (i) remaining contractual lease
term, or (ii) the next major maintenance event	
 
 65  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The Company reviews annually the useful lives and salvage values of these assets and any changes are accounted for prospectively.
 
The Company records impairment charges on rotable spare parts, furniture and equipment 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 related cash generating unit exceeds its recoverable amount, which is the higher of (i) its fair value less cost to sell and (ii) 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.
 
l) Foreign currency transactions and exchange differences
 
The Company’s consolidated financial statements are presented in Mexican peso, which is the reporting and functional currency 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 (“the functional currency”).
 
The financial statements of foreign subsidiaries prepared under IFRS and denominated in their respective local currencies, are translated into the functional currency as follows:
 
 	·	Transactions in foreign currencies are translated into the respective functional currencies at the exchange rates at the dates of the transactions.	
 
 	·	All monetary assets and liabilities were translated at the exchange rate at the consolidated statement of financial position date.	
 
 	·	All non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange 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 profits were generated.	
 
 	·	Revenues, costs and expenses are translated at the average exchange rate during the applicable period.	
 
Any differences resulting from the currency translation are recognized in the consolidated statements of operations.
 
Foreign currency differences arising on translation into the presentation currency are recognized in OCI.
 
m) Liabilities and provisions
 
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
 
 66  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
For the operating leases, the Company is contractually obligated to return the leased aircraft in a specific condition. The Company accrues for restitution costs related to aircraft held under operating leases throughout the term of the lease, based upon the estimated cost of satisfying the return condition criteria for each aircraft. These return obligations are related to the costs to be incurred in the reconfiguration of aircraft (interior and exterior), painting, carpeting and other costs, which are estimated based on current cost adjusted for inflation. The return obligation is estimated at the inception of each leasing arrangement and recognized over the term of the lease.
 
The Company records aircraft lease return obligation reserves based on the best estimate of the return obligation costs under each aircraft lease agreement.
 
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 in 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 supplemental rent 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.
 
n) Employee benefits
 
i) Personnel vacations
 
The Company and its subsidiaries in Mexico and Central America recognize a reserve for the costs of paid absences, such as vacation time, based on the accrual method.
 
ii) Termination benefits
 
The Company recognizes a liability and expense for termination benefits at the earlier of the following dates:
 
a) When it can no longer withdraw the offer of those benefits; and
 
b) When it recognizes costs for a restructuring that is within the scope of IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and involves the payment of termination benefits.
 
The Company is demonstrably committed to a termination when, and only when, it has a detailed formal plan for the termination and is without realistic possibility of withdrawal.
 
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), payable to all employees with 15 or more years of service, as well as to certain employees terminated involuntarily prior to the vesting of their seniority premium benefit.
 
Obligations relating to seniority premiums other than those arising from restructurings, are recognized based upon actuarial calculations and are determined using the projected unit credit method.
 
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 subsequent periods.
 
 67  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The defined benefit asset or liability comprises the present value of the defined benefit obligation using a discount rate based on government bonds ( Certificados de la Tesorería de la Federación , or “ CETES ” in Mexico), less the fair value of plan assets out of which the obligations are to be settled.
 
For entities in Costa Rica and Guatemala; there is no obligation to pay seniority premium or other retirement benefits.
 
iv) Incentives
 
The Company has a quarterly incentive plan for certain personnel whereby cash bonuses are awarded for meeting certain performance targets. These incentives are payable shortly after the end of each quarter and are accounted for as a short-term benefit under IAS 19, Employee Benefits . A provision is recognized based on the estimated amount of the incentive payment.
 
During the year ended December 31, 2015, the Company adopted a new short-term benefit plan for certain key personnel whereby cash bonuses are awarded when certain Company’s performance targets are met. These incentives are payable shortly after the end of each year and also are accounted for as a short-term benefit under IAS 19, Employee Benefits. A provision is recognized based on the estimated amount of the incentive payment.
 
v) Long-term retention plan (“LTRP”)
 
The Company has adopted a Long-term incentive plan (“LTIP”). This plan consists of a share purchase plan (equity-settled) and a share appreciation rights “SARs” plan (cash settled), and therefore accounted under IFRS 2 “Shared based payments”.
 
vi) Share-based payments
 
a) LTIP
 
- Share purchase plan (equity-settled)
 
Certain key employees of the Company receive additional benefits through a share purchase plan denominated in Restricted Stock Units (“RSUs”), which has been classified as an equity-settled share-based payment. The cost of the equity-settled share purchase plan is measured at the grant date, taking into account the terms and conditions on which the share options were granted. The equity-settled compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits, over the requisite service period.
 
- SARs plan (cash settled)
 
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 time of exercise. The liability for the SARs is measured, initially and at the end of each reporting period until settled, at the fair value of the SARs, taking into account the terms and conditions on which the SARs were granted. The compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits, over the requisite service period.
 
b) Management incentive plan (“MIP”)
 
- MIP I
 
 68  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
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 of operations under the caption of salaries and benefits, over the requisite service period.
 
- MIP II
 
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 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 time of exercise. The liability for the SARs is measured initially and at the end of each reporting period until settled at the fair value of the SARs, taking into account the terms and conditions on which the SARs were granted. The compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits, over the requisite service period.
 
vii) Employee profit sharing
 
For the years ended December 2017 and 2016, the Mexican Income Tax Law (“MITL”), establishes that the base for computing current year employee profit sharing shall be the taxpayer’s taxable income of the year for income tax purposes, including certain adjustments established in the Income Tax Law, at the rate of 10%. The cost of employee profit sharing earned for the current-year 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.
 
o) Leases
 
The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
 
Property and equipment lease agreements are recognized as finance leases if the risks and benefits incidental to ownership of the leased assets have been transferred to the Company when (i) the ownership of the leased asset is transferred to the Company upon termination of the lease; (ii) the agreement includes an option to purchase the asset at a reduced price; (iii) the term of the lease is for the major part of the economic life of the leased asset; (iv) the present value of minimum lease payments is at least substantially all of the fair value of the leased asset; or (v) the leased asset is of a specialized nature for the Company.
 
When the risks and benefits incidental to the ownership of the leased asset remain mostly with the lessor, they are classified as operating leases and rental payments are charged to results of operations on a straight-line over the term of the lease.
 
The Company’s lease contracts for aircraft, engines and components parts are classified as operating leases.
 
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. Leases under sale and leaseback agreements meet the conditions for treatment as operating leases.
 
Profit or loss related to a sale transaction followed by an operating lease, is accounted for as follows:
 
 	(i)	Profit or loss is recognized immediately when it is clear that the transaction is established at fair value.	
 
 69  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
	(ii)	If the sale price is at or below fair value, any profit or loss is recognized immediately. However, if the loss is compensated for by future lease payments at below market price, such loss is recognized as an asset in the consolidated statements of financial position, and amortized to the consolidated statements of operations in proportion to the lease payments over the contractual lease term.	
 
	(iii)	If the sale price is above fair value, the excess of the price above the fair value is deferred and amortized to the consolidated statements of operations over the asset’s expected lease term, including probable renewals, with the amortization recorded as a reduction of rent expense.	
 
p) 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 applicable governmental entity or airport.
 
q) 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 and not in the income statement. Management 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.
 
Deferred tax
 
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. Deferred tax assets are recognized 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 which the temporary differences can be utilized.
 
 70  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
The Company considers the following criteria in assessing the probability that taxable profit will be available against which the unused tax losses or unused tax credits can be utilized: (a) whether the entity has sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity, which will result in taxable amounts against which the unused tax losses or unused tax credits can be utilized before they expire; (b) whether it is probable that the Company will have taxable profits before the unused tax losses or unused tax credits expire; (c) whether the unused tax losses result from identifiable causes which are unlikely to recur; and (d) whether tax planning opportunities are available to the Company that will create taxable profit in the period in which the unused tax losses or unused tax credits can be utilized.
 
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized 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.
 
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
 
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction in OCI.
 
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
 
The charge for income taxes incurred is computed based on tax laws approved in Mexico, Costa Rica and Guatemala at the date of the consolidated statement of financial position.
 
r) Derivative financial instruments and hedge accounting
 
The Company mitigates certain financial risks, such as volatility in the price of jet fuel, adverse changes in interest rates and exchange rate fluctuations, through a risk management program that includes the use of derivative financial instruments.
 
In accordance with IFRS 9 (2013), derivative financial instruments are recognized in the consolidated statement of financial position at fair value. At inception of a hedge relationship, the Company formally designates 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 hedging instrument, the hedged item or transaction, the nature of the risks being hedged and how the entity 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 risk(s).
 
Only if such hedges are expected to be effective in achieving offsetting changes in fair value or cash flows of the hedge item(s) and are assessed on an ongoing basis to determine that they actually have been effective throughout the financial reporting periods for which they were designated, hedge accounting treatment can be used.
 
 71  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
Under the CFH accounting model, the effective portion of the hedging instrument’s changes in fair value is recognized in OCI, while the ineffective portion is recognized in current year earnings. During the years ended December 31, 2017 and 2016, there was no ineffectiveness with respect to derivative financial instruments. The amounts recognized in OCI are transferred to earnings in the period in which the hedged transaction affects earnings.
 
The realized gain or loss of derivative financial instruments that qualify as CFH is recorded in the same caption of the hedged item in the consolidated statement of operations.
 
Accounting for the time value of options
 
The Company accounts for the time value of options in accordance with IFRS 9 (2013), which requires all derivative financial instruments to be initially recognized at fair value. Subsequent measurement for options purchased and designated as CFH requires that the option’s changes in fair value be segregated into its intrinsic value (which will be considered the hedging instrument’s effective portion in OCI) and its correspondent changes in extrinsic value (time value and volatility). The extrinsic value changes will be considered as a cost of hedging (recognized in OCI in a separate component of equity) and accounted for in income when the hedged items also is recognized in income.
 
s) Financial instruments – Disclosures
 
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.
 
t) Treasury shares
 
The Company’s equity instruments that are reacquired (treasury shares), are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of treasury shares. Any difference between the carrying amount and the consideration received, if reissued, is recognized in additional paid in capital.
 
Share-based payment options exercised during the reporting period are settled with treasury shares.
 
u) Operating segments
 
The Company is managed as a single business unit that provides air transportation and related services, accordingly it has only one operating segment.
 
The Company has two geographic areas identified as domestic (Mexico) and international (United States of America and Central America).
 
v) Current versus non-current classification
 
The Company presents assets and liabilities in the consolidated statement of financial position based on current/non-current classification. An asset is current when it is: (i) expected to be realized or intended to be sold or consumed in normal operating cycle, (ii) expected to be realized within twelve months after the reporting period, or, (iii) cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current.
 
 72  of 73

VLRS	Consolidated	
Ticker:      VLRS	Quarter:     3     Year:     2018	
 
A liability is current when: (i) it is expected to be settled in normal operating cycle, (ii) it is due to be settled within twelve months after the reporting period, or, (iii) there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. The Company classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as noncurrent assets and liabilities.
 
w) Convenience translation
 
U.S. dollar amounts at September 30, 2018 shown in the unaudited interim condensed 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.18.8120 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 September 30, 2018. 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 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.
 
 73  of 73

 

Volaris Reports Third Quarter 2018 Results: Ancillary Revenue Expansion And Reduction Of Unit Cost Excluding Fuel
 
Mexico City, Mexico, October 25, 2018 – Volaris* (NYSE: VLRS and BMV: VOLAR), the ultra-low-cost airline serving Mexico, the United States and Central America, today announced its financial results for the third quarter 2018.
 
The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS).
 
Third Quarter 2018 Highlights
 
	<	Total operating revenues reached Ps.7,316 million for the third quarter, an increase of 11.3% year over year.	
 
	<	Total ancillary revenues were Ps.2,220 million for the third quarter, an increase of 23.5% year over year. The total ancillary revenues per passenger for the third quarter were Ps.474, increasing 10.1% year over year.	
 
	<	Total operating revenues per available seat mile (TRASM) were Ps.134.9 cents for the third quarter, a decrease of 1.9% year over year.	
 
	<	Operating expenses per available seat mile (CASM) were Ps.130.4 cents for the third quarter, an increase of 4.8% year over year; with an average economic fuel cost per gallon of Ps.43.5, increasing 36.9% year over year, and an average exchange rate of Ps.18.98, a year over year increase of 6.5%. Operating expenses per available seat mile excluding fuel (CASM ex fuel) were Ps.81.9 cents for the third quarter, a decrease of 7.9% year over year.	
 
	<	Operating income was Ps.246 million for the third quarter, with an operating margin of 3.4%, equal to a year over year operating margin decrease of 6.1 percentage points.	
 
	<	Net loss was Ps.119 million (Ps. (0.12) per share / US$(1.17) per ADS for the third quarter, with a net loss margin of (1.6%), equal to a year over year net margin decrease of 12.6 percentage points.	
 
	<	At the close of the third quarter, the Mexican peso had appreciated 5.3% against the U.S. dollar with respect to the end of period exchange rate of the previous quarter. The Company booked a foreign exchange loss of Ps.419 million as a consequence of our U.S. dollar net monetary asset position.	
 
	<	Net cash flow used in operating activities was Ps.136 million, in conjunction with cash flow provided by investing activities of Ps.20 million, net cash flow used in financing activities of Ps.247 million, and a negative net foreign exchange difference of Ps.326 million; the net cash decrease in the third quarter was Ps.689 million. As of September 30, 2018, cash and cash equivalents were Ps.6,082 million.	

 	1 	 	

 
Stable Macroeconomics and Domestic Consumer Demand with Exchange Rate Depreciation and Fuel Price Pressures
 
	<	Resilient macroeconomics and domestic consumer demand: The macroeconomic indicators in Mexico during the third quarter were stable, with same store sales [1] increasing 5.3% year over year; remittances [2] increased 9.68% year over year during July and August 2018; and the Mexican Consumer Confidence Balance Indicator (BCC) [3] increasing 17% year over year in third quarter 2018.	
 
	<	Air traffic volume increase: The Mexican DGAC reported overall passenger volume growth for Mexican carriers of 8.1% year over year in July and August; domestic overall passenger volume increased 7.4%, while international overall passenger volume increased 10.4%.	
 
	<	Exchange rate volatility: The Mexican peso depreciated 6.5% year over year against the US dollar, from an average exchange rate of Ps.17.82 pesos per US dollar in the third quarter 2017 to Ps.18.98 pesos per US dollar during the third quarter 2018. At the close of the third quarter, the Mexican peso had appreciated 5.3% with respect to the end of period exchange rate of the previous quarter. The Company booked a foreign exchange loss of Ps.419 million, mainly as a consequence of our US dollar net monetary asset position.	
 
	<	Higher fuel prices: The average economic fuel cost per gallon increased 36.9% to Ps.43.5 per gallon (US$2.3) in the third quarter 2018, year over year.	
 
Passenger Traffic Stimulation, Further Ancillary Revenue Expansion, and Positive TRASM Trend Reaching Almost the Same Level Last Year
 
	<	Passenger traffic stimulation: Volaris booked 4.7 million passengers in the third quarter of 2018, up 12.1% year over year. Volaris traffic (measured in terms of fare revenue miles, or RPMs) increased 9.9% for the same period. System load factor during the quarter decreased 2.7 percentage points year over year to 83.5%.	
 
	<	Positive TRASM trend almost at the same level of last year: For the third quarter of 2018, yield decreased 2.8% with TRASM decreasing 1.9%, year over year. During the third quarter 2018, in terms of ASMs, domestic capacity grew 15.8%, while international capacity increased 8.4%, year over year.	
 
	<	Total ancillary revenue growth: For the third quarter of 2018, total ancillary revenues and total ancillary revenues per passenger increased 23.5% and 10.1% year over year, respectively. The total ancillary revenue generation continues to grow with new and matured products, appealing to customers’ needs, representing 30.3% of the total operating revenues.	

 
[1] Source: Asociación Nacional de Tiendas de Autoservicio y Departamentales, A. C. (ANTAD)
[2] Source: Banco de México (BANXICO)
[3] Source: Instituto Nacional de Estadística y Geografía (INEGI)

 	2 	 	

 
	<	New routes: In the third quarter 2018, Volaris announced 11 domestic routes from its focus cities Tijuana and Guadalajara, as well as from Mexico City and Bajio; and three international routes, two from Bajio to Sacramento and San Jose, California and one from Guadalajara to Charlotte, North Carolina.	
 
Cost Control and Discipline, Despite Fuel Price Pressure and Exchange Rate Depreciation
 
	<	CASM and CASM ex fuel for the third quarter 2018 were Ps.130.4 (US$6.9 cents) and Ps.81.9 cents (US$4.3 cents), respectively. This represented an increase of 4.8% and a decrease of 7.9%, respectively; mainly driven by higher average economic fuel cost per gallon of 36.9% and an average exchange rate depreciation of 6.5%, which were offset by a tightening cost control discipline.	
 
Young and Fuel-efficient Fleet
 
	<	During the third quarter 2018, the Company incorporated three aircraft (two A320 neo and one A321 neo) to its fleet; during this quarter no redeliveries were registered. As of September 30, 2018, Volaris’ fleet was composed of 73 aircraft (8 A319s, 52 A320s and 13 A321s), with an average age of 4.6 years. At the end of the third quarter 2018, Volaris’ fleet had an average of 184 seats, 72% of which were in sharklet-equipped aircraft.	
 
Solid Balance Sheet and Good Liquidity
 
	<	Net cash flow used in operating activities was Ps.136 million, in conjunction with cash flow provided by investing activities of Ps.20 million, net cash flow used in financing activities of Ps.247 million, and a negative net foreign exchange differences of Ps.326 million; the net cash used in the third quarter 2018 was Ps.689 million. As of September 30, 2018, cash and cash equivalents were Ps.6,082 million, representing now 23% of last twelve months operating revenues. Volaris registered negative net debt (or a positive net cash position) of Ps.2,889 million and total equity of Ps.8,863 million.	
 
Active in Risk Management
 
	<	Volaris remains active in its fuel risk management program. Volaris used call options to hedge 58% of its third quarter 2018 fuel consumption, at an average strike price of US $1.78 per gallon, which combined with the 42% unhedged consumption, resulted in a blended average economic fuel cost of US$2.3 per gallon.	
 
IFRS 15: Revenue from Contracts with Customers
 
	<	During 1Q 2018, we adopted IFRS 15 “Revenue from Contracts with Customers” which replaces existing revenue recognition guidance, including IAS 18 “Revenue” . IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.	

 	3 	 	

 
	<	The adoption of the IFRS 15 impacted the classification and timing of recognition of certain ancillary items such as bags, advanced seat selection, itinerary changes and other air travel-related fees, since they are deemed part of the single performance obligation of providing passenger transportation. These ancillary items are now recognized in passenger revenue (disclosed in the consolidated statement of operations including in these quarterly earnings release as “other passenger revenue” ). 	
 
	<	Non-passenger revenue primarily consists of revenue from the sale of other items such as rental cars, insurance, hotels and cargo. This change did not have a material impact on our income statement or balance sheet in any period presented.	
 
	<	This quarterly earnings release includes supplemental information for comparable basis, with recast amounts with the IFRS 15 adoption effects, and were derived from unaudited financial statements included in the quarterly reports on Form 6-K during the year ended December 31, 2017.  	
 
IFRS 16: Leases
 
	<	The Accounting Standards Board (IASB) issued IFRS 16 Leases, which is effective for annual reporting periods beginning on or after January 1, 2019, with limited earlier application permitted. This new standard will replace the current IAS 17 Leases standard.	
 
	<	Under IFRS 16, leases are accounted for based on a ‘right-of-use model’. The model reflects that, at the commencement date, a lessee has a financial obligation to make lease payments to the lessor for its right to use the underlying asset during the lease term. The lessor conveys that right to use the underlying asset at lease commencement, which is the time when it makes the underlying asset available for use by the lessee. 	

 	4 	 	

 
	<	The most significant impacts of the new standard in airlines:	
 
	<	The new standard requires almost all lease agreements to be recognized on the balance sheet; assets and liabilities will be increased significantly.	
	<	Almost all the lease payments will no longer be recognized as part of the “rent expenses”, but as part of the “depreciation expense”.	
	<	The standard includes certain recognition exemptions: a) leases with a lease term of 12 months, and b) leases where the underlying asset has a low value when new, of US$5,000 or less.	
	<	IFRS 16 permits two different adoption models. Full retrospective model or modified retrospective model.	
	<	The impact of U.S. dollar volatility will have greater impact in Mexican airlines with Mexican peso as functional currency. Accounting and taxes implication for the impact of non-cash foreign exchange gain or losses as consequence of the recognition of the required lease liabilities under the adoption of this new standard.	
	<	Cash Flows impact. Under IAS 17 (current standard) cash flows related to rent payments are recorded as part of the operating cash flows, but under IFRS 16 the cash flows related to rental payments will be presented as part of the financial cash flows.	
	<	Income tax accounting. a) Recognition and measurement of deferred tax assets and liabilities; and b) Assessment of the recoverability of deferred tax assets.	
	<	Additional disclosures	
 
	<	The Company is in process of completing an assessment of the potential impact of adopting IFRS 16.	
 
Investors are urged to carefully read the Company's periodic reports filed with or furnished to the Securities and Exchange Commission, for additional information regarding the Company.
 
Conference Call/Webcast Details:
 
Presenters for the Company:	Mr. Enrique Beltranena, CEO
Mr. Holger Blankenstein, Airline EVP
Ms. Maria Elena Rodriguez, Investor Relations & Corporate Finance Director	
Date:	Friday, October 26, 2018	
Time:	10:00 am U.S. EDT (9:00 am Mexico City Time)	
United States dial in (toll free):	1-877-830-2576	
Mexico dial in (toll free):	001-800-514-6145	
Brazil dial in (toll free):	0-800-891-6744	
International dial in:	+ 1-785-424-1726	
Participant passcode:	VOLARIS (8652747)	
Webcast will be available at:	https://webcasts.eqs.com/volaris20181026	

 	5 	 	

 
About Volaris:
*Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (“Volaris” or the “Company”) (NYSE: VLRS and BMV: VOLAR), is an ultra-low-cost carrier, with point-to-point operations, serving Mexico, the United States 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 five to more than 167 and its fleet from four to 73 aircraft. Volaris offers more than 319 daily flight segments on routes that connect 40 cities in Mexico and 27 cities in the United States and Central America with the youngest fleet in Mexico. Volaris targets passengers who are visiting friends and relatives, cost-conscious business people and leisure travelers in Mexico and to select destinations in the United States and Central America. Volaris has received the ESR Award for Social Corporate Responsibility for eight consecutive years. For more information, please visit: www.volaris.com
 
Forward-looking Statements:
Statements in this release contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent the Company's expectations, beliefs or projections concerning future events and financial trends affecting the financial condition of our business. When used in this release, 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 accurate 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 competitive 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.  Forward-looking statements speak only as of the date of this release.  You 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 updates with respect to those or other forward-looking statements.
 
Investor Relations Contact:
Maria Elena Rodríguez & Andrea González / Investor Relations / ir@volaris.com / +52 55 5261 6444
Media Contact:
Gabriela Fernández / volaris@gcya.net / +52 55 5246 0100

 	6 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Financial and Operating Indicators
 
Unaudited
(In Mexican pesos, except otherwise indicated)	 	Three months
ended September
30, 2018
(US Dollars)*	 	 	Three months
ended
September 30,
2018	 	 	Three months
ended September
30, 2017
(Adjusted)	 	 	Variance
(%)	 	
Total operating revenues (millions)	 	 	389	 	 	 	7,316	 	 	 	6,571	 	 	 	11.3%	 	
Total operating expenses (millions)	 	 	376	 	 	 	7,070	 	 	 	5,948	 	 	 	18.9%	 	
EBIT (millions)	 	 	13	 	 	 	246	 	 	 	623	 	 	 	(60.5%	)	
EBIT margin	 	 	3.4%	 	 	 	3.4%	 	 	 	9.5%	 	 	 	(6.1) pp	 	
Depreciation and amortization	 	 	6	 	 	 	115	 	 	 	150	 	 	 	(23.4%	)	
Aircraft and engine rent expense	 	 	85	 	 	 	1,593	 	 	 	1,384	 	 	 	15.1%	 	
Net (loss) income (millions)	 	 	(6	)	 	 	(119	)	 	 	720	 	 	 	NA	 	
Net (loss) income margin	 	 	(1.6%	)	 	 	(1.6%	)	 	 	11.0%	 	 	 	(12.6) pp	 	
(Loss) income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (pesos)	 	 	(0.01	)	 	 	(0.12	)	 	 	0.71	 	 	 	NA	 	
Diluted (pesos)	 	 	(0.01	)	 	 	(0.12	)	 	 	0.71	 	 	 	NA	 	
(Loss) income per ADS:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (pesos)	 	 	(0.06	)	 	 	(1.17	)	 	 	7.11	 	 	 	NA	 	
Diluted (pesos)	 	 	(0.06	)	 	 	(1.17	)	 	 	7.11	 	 	 	NA	 	
Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	-	 	 	 	1,011,876,677	 	 	 	1,011,876,677	 	 	 	0.0%	 	
Diluted	 	 	-	 	 	 	1,011,876,677	 	 	 	1,011,876,677	 	 	 	0.0%	 	
Available seat miles (ASMs) (millions) (1)	 	 	-	 	 	 	5,422	 	 	 	4,780	 	 	 	13.4%	 	
Domestic	 	 	-	 	 	 	3,752	 	 	 	3,239	 	 	 	15.8%	 	
International	 	 	-	 	 	 	1,670	 	 	 	1,541	 	 	 	8.4%	 	
Revenue passenger miles (RPMs) (millions) (1)	 	 	-	 	 	 	4,526	 	 	 	4,119	 	 	 	9.9%	 	
Domestic	 	 	-	 	 	 	3,230	 	 	 	2,852	 	 	 	13.3%	 	
International	 	 	-	 	 	 	1,296	 	 	 	1,267	 	 	 	2.3%	 	
Load factor (2)	 	 	-	 	 	 	83.5%	 	 	 	86.2%	 	 	 	(2.7) pp	 	
Domestic	 	 	-	 	 	 	86.1%	 	 	 	88.1%	 	 	 	(2.0) pp	 	
International	 	 	-	 	 	 	77.6%	 	 	 	82.2%	 	 	 	(4.6) pp	 	
Total operating revenue per ASM (TRASM) (cents) (1)	 	 	7.2	 	 	 	134.9	 	 	 	137.5	 	 	 	(1.9%	)	
Fare revenue per ASM (RASM) (cents) (1)	 	 	5.0	 	 	 	94.0	 	 	 	99.9	 	 	 	(5.9%	)	
Fare revenue per RPM (Yield) (cents) (1)	 	 	6.0	 	 	 	112.6	 	 	 	115.9	 	 	 	(2.8%	)	
Average fare (2)	 	 	58	 	 	 	1,091	 	 	 	1,146	 	 	 	(4.8%	)	
Average other passenger revenue (1)	 	 	22	 	 	 	419	 	 	 	362	 	 	 	15.7%	 	
Average non-passenger revenue (1)	 	 	2.9	 	 	 	55	 	 	 	68	 	 	 	(19.4%	)	
Total ancillary revenue per passenger (4)	 	 	25.2	 	 	 	474	 	 	 	431	 	 	 	10.1%	 	
Operating expenses per ASM (CASM) (cents) (1)	 	 	6.9	 	 	 	130.4	 	 	 	124.4	 	 	 	4.8%	 	
Operating expenses per ASM (CASM) (US cents) (3)	 	 	-	 	 	 	6.9	 	 	 	7.0	 	 	 	(1.6%	)	
CASM ex fuel (cents) (1)	 	 	4.4	 	 	 	81.9	 	 	 	88.9	 	 	 	(7.9%	)	
CASM ex fuel (US cents) (3)	 	 	-	 	 	 	4.3	 	 	 	5.0	 	 	 	(13.5%	)	
Booked passengers (thousands) (1)	 	 	-	 	 	 	4,680	 	 	 	4,173	 	 	 	12.1%	 	
Departures (1)	 	 	-	 	 	 	30,391	 	 	 	26,999	 	 	 	12.6%	 	
Block hours (1)	 	 	-	 	 	 	82,977	 	 	 	73,725	 	 	 	12.5%	 	
Fuel gallons consumed (millions)	 	 	-	 	 	 	60.5	 	 	 	53.4	 	 	 	13.2%	 	
Average economic fuel cost per gallon	 	 	2.3	 	 	 	43.5	 	 	 	31.8	 	 	 	36.9%	 	
Aircraft at end of period	 	 	-	 	 	 	73	 	 	 	67	 	 	 	9.0%	 	
Average aircraft utilization (block hours)	 	 	-	 	 	 	13.1	 	 	 	12.5	 	 	 	4.4%	 	
Average exchange rate	 	 	-	 	 	 	18.98	 	 	 	17.82	 	 	 	6.5%	 	
End of period exchange rate	 	 	-	 	 	 	18.81	 	 	 	18.20	 	 	 	3.4%	 	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only
(1) Includes schedule + charter	(3) Dollar amounts were converted at average exchange rate of each period	
(2) Includes schedule	(4) Includes “other passenger revenues” and “non-passenger revenues”	

 	7 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Financial and Operating Indicators
 
Unaudited
(In Mexican pesos, except otherwise indicated)	 	Nine months
ended September
30, 2018
(US Dollars) *	 	 	Nine months
ended
September 30,
2018	 	 	Nine months
ended September
30, 2017
(Adjusted)	 	 	Variance
(%)	 	
Total operating revenues (millions)	 	 	1,031	 	 	 	19,396	 	 	 	18,264	 	 	 	6.2%	 	
Total operating expenses (millions)	 	 	1,097	 	 	 	20,632	 	 	 	18,319	 	 	 	12.6%	 	
EBIT (millions)	 	 	(66	)	 	 	(1,235	)	 	 	(55	)	 	 	>100%	 	
EBIT margin	 	 	(6.4%	)	 	 	(6.4%	)	 	 	(0.3%	)	 	 	(6.1) pp	 	
Depreciation and amortization	 	 	20	 	 	 	371	 	 	 	418	 	 	 	(11.2%	)	
Aircraft and engine rent expense	 	 	249	 	 	 	4,693	 	 	 	4,461	 	 	 	5.2%	 	
Net loss (millions)	 	 	(64	)	 	 	(1,199	)	 	 	(1,106	)	 	 	8.4%	 	
Net loss margin	 	 	(6.2%	)	 	 	(6.2%	)	 	 	(6.1%	)	 	 	(0.1) pp	 	
Loss per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (pesos)	 	 	(0.06	)	 	 	(1.18	)	 	 	(1.09	)	 	 	8.4%	 	
Diluted (pesos)	 	 	(0.06	)	 	 	(1.18	)	 	 	(1.09	)	 	 	8.4%	 	
Loss per ADS:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (pesos)	 	 	(0.63	)	 	 	(11.85	)	 	 	(10.93	)	 	 	8.4%	 	
Diluted (pesos)	 	 	(0.63	)	 	 	(11.85	)	 	 	(10.93	)	 	 	8.4%	 	
Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	-	 	 	 	1,011,876,677	 	 	 	1,011,876,677	 	 	 	0.0%	 	
Diluted	 	 	-	 	 	 	1,011,876,677	 	 	 	1,011,876,677	 	 	 	0.0%	 	
Available seat miles (ASMs) (millions) (1)	 	 	-	 	 	 	15,538	 	 	 	13,966	 	 	 	11.3%	 	
Domestic	 	 	-	 	 	 	10,687	 	 	 	9,379	 	 	 	13.9%	 	
International	 	 	-	 	 	 	4,851	 	 	 	4,587	 	 	 	5.8%	 	
Revenue passenger miles (RPMs) (millions) (1)	 	 	-	 	 	 	13,017	 	 	 	11,875	 	 	 	9.6%	 	
Domestic	 	 	-	 	 	 	9,227	 	 	 	8,165	 	 	 	13.0%	 	
International	 	 	-	 	 	 	3,790	 	 	 	3,710	 	 	 	2.2%	 	
Load factor (2)	 	 	-	 	 	 	83.8%	 	 	 	85.0%	 	 	 	(1.2) pp	 	
Domestic	 	 	-	 	 	 	86.3%	 	 	 	87.1%	 	 	 	(0.8) pp	 	
International	 	 	-	 	 	 	78.2%	 	 	 	80.8%	 	 	 	(2.6) pp	 	
Total operating revenue per ASM (TRASM) (cents) (1)	 	 	6.6	 	 	 	124.8	 	 	 	130.8	 	 	 	(4.5%	)	
Fare revenue per ASM (RASM) (cents) (1)	 	 	4.5	 	 	 	84.4	 	 	 	93.4	 	 	 	(9.6%	)	
Fare revenue per RPM (Yield) (cents) (1)	 	 	5.4	 	 	 	100.8	 	 	 	109.9	 	 	 	(8.3%	)	
Average fare (2)	 	 	52	 	 	 	978	 	 	 	1,074	 	 	 	(8.9%	)	
Average other passenger revenue (1)	 	 	21	 	 	 	402	 	 	 	356	 	 	 	13.0%	 	
Average non-passenger revenue (1)	 	 	3.5	 	 	 	65	 	 	 	71	 	 	 	(8.7%	)	
Total ancillary revenue per passenger (4)	 	 	24.8	 	 	 	467	 	 	 	427	 	 	 	9.4%	 	
Operating expenses per ASM (CASM) (cents) (1)	 	 	7.1	 	 	 	132.8	 	 	 	131.2	 	 	 	1.2%	 	
Operating expenses per ASM (CASM) (US cents) (3)	 	 	-	 	 	 	7.0	 	 	 	6.9	 	 	 	0.6%	 	
CASM ex fuel (cents) (1)	 	 	4.6	 	 	 	86.1	 	 	 	93.3	 	 	 	(7.7%	)	
CASM ex fuel (US cents) (3)	 	 	-	 	 	 	4.5	 	 	 	4.9	 	 	 	(8.3%	)	
Booked passengers (thousands) (1)	 	 	-	 	 	 	13,434	 	 	 	12,200	 	 	 	10.1%	 	
Departures (1)	 	 	-	 	 	 	87,076	 	 	 	80,182	 	 	 	8.6%	 	
Block hours (1)	 	 	-	 	 	 	237,485	 	 	 	217,562	 	 	 	9.2%	 	
Fuel gallons consumed (millions)	 	 	-	 	 	 	168.7	 	 	 	157.2	 	 	 	7.3%	 	
Average economic fuel cost per gallon	 	 	2.3	 	 	 	43.0	 	 	 	33.6	 	 	 	27.9%	 	
Aircraft at end of period	 	 	-	 	 	 	73	 	 	 	67	 	 	 	9.0%	 	
Average aircraft utilization (block hours)	 	 	-	 	 	 	13.4	 	 	 	12.5	 	 	 	7.1%	 	
Average exchange rate	 	 	-	 	 	 	19.04	 	 	 	18.93	 	 	 	0.6%	 	
End of period exchange rate	 	 	-	 	 	 	18.81	 	 	 	18.20	 	 	 	3.4%	 	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only
(1) Includes schedule + charter	(3) Dollar amounts were converted at average exchange rate of each period	
(2) Includes schedule	(4) Includes “other passenger revenues” and “non-passenger revenues”	

 	8 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Operations
 
Unaudited
(In millions of Mexican pesos)	 	Three months
ended
September 30,
2018
(US Dollars) *	 	 	Three months
ended September
30, 2018	 	 	Three months
ended September
30, 2017
(Adjusted)	 	 	Variance
(%)	 	
Operating revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Passenger revenues	 	 	375	 	 	 	7,058	 	 	 	6,286	 	 	 	12.3	%	
Fare revenues	 	 	271	 	 	 	5,096	 	 	 	4,773	 	 	 	6.8	%	
Other passenger revenues	 	 	104	 	 	 	1,962	 	 	 	1,513	 	 	 	29.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-passenger revenues	 	 	14	 	 	 	258	 	 	 	285	 	 	 	(9.5	%)	
Cargo	 	 	3	 	 	 	55	 	 	 	38	 	 	 	44.7	%	
Other non-passenger revenues	 	 	11	 	 	 	203	 	 	 	247	 	 	 	(17.8	%)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	 	389	 	 	 	7,316	 	 	 	6,571	 	 	 	11.3	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other operating income	 	 	(13	)	 	 	(243	)	 	 	(8	)	 	 	>100	%	
Fuel	 	 	140	 	 	 	2,631	 	 	 	1,698	 	 	 	54.9	%	
Aircraft and engine rent expense	 	 	85	 	 	 	1,593	 	 	 	1,384	 	 	 	15.1	%	
Landing, take-off and navigation expenses	 	 	61	 	 	 	1,150	 	 	 	989	 	 	 	16.2	%	
Salaries and benefits	 	 	44	 	 	 	834	 	 	 	695	 	 	 	19.9	%	
Maintenance expenses	 	 	21	 	 	 	393	 	 	 	324	 	 	 	21.3	%	
Sales, marketing and distribution expenses	 	 	18	 	 	 	340	 	 	 	468	 	 	 	(27.4	%)	
Other operating expenses	 	 	14	 	 	 	257	 	 	 	248	 	 	 	3.6	%	
Depreciation and amortization	 	 	6	 	 	 	115	 	 	 	150	 	 	 	(23.4	%)	
Operating expenses	 	 	376	 	 	 	7,070	 	 	 	5,948	 	 	 	18.9	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income	 	 	13	 	 	 	246	 	 	 	623	 	 	 	(60.5	%)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Finance income	 	 	2	 	 	 	37	 	 	 	30	 	 	 	23.3	%	
Finance cost	 	 	(4	)	 	 	(64	)	 	 	(20	)	 	 	>100	%	
Exchange (loss) gain, net	 	 	(22	)	 	 	(419	)	 	 	125	 	 	 	NA	 	
Comprehensive financing result	 	 	(24	)	 	 	(446	)	 	 	135	 	 	 	NA	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) income before income tax	 	 	(11	)	 	 	(200	)	 	 	758	 	 	 	NA	 	
Income tax benefit (expense)	 	 	4	 	 	 	81	 	 	 	(38	)	 	 	NA	 	
Net (loss) income	 	 	(6	)	 	 	(119	)	 	 	720	 	 	 	NA	 	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only.

 	9 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Operations
 
Unaudited
(In millions of Mexican pesos)	 	Nine months ended
September 30, 2018
(US Dollars)*	 	 	Nine months
ended September
30, 2018	 	 	Nine months
ended September
30, 2017
(Adjusted)	 	 	Variance
(%)	 	
Operating revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Passenger revenues	 	 	984	 	 	 	18,520	 	 	 	17,392	 	 	 	6.5	%	
Fare revenues	 	 	697	 	 	 	13,118	 	 	 	13,050	 	 	 	0.5	%	
Other passenger revenues	 	 	287	 	 	 	5,402	 	 	 	4,342	 	 	 	24.4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-passenger revenues	 	 	47	 	 	 	877	 	 	 	872	 	 	 	0.5	%	
Cargo	 	 	9	 	 	 	156	 	 	 	118	 	 	 	32.2	%	
Other non-passenger revenues	 	 	38	 	 	 	720	 	 	 	754	 	 	 	(4.5	%)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	 	1,031	 	 	 	19,396	 	 	 	18,264	 	 	 	6.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other operating income	 	 	(25	)	 	 	(475	)	 	 	(19	)	 	 	>100	%	
Fuel	 	 	385	 	 	 	7,250	 	 	 	5,284	 	 	 	37.2	%	
Aircraft and engine rent expense	 	 	249	 	 	 	4,693	 	 	 	4,461	 	 	 	5.2	%	
Landing, take-off and navigation expenses	 	 	182	 	 	 	3,425	 	 	 	3,029	 	 	 	13.1	%	
Salaries and benefits	 	 	124	 	 	 	2,330	 	 	 	2,108	 	 	 	10.5	%	
Maintenance expenses	 	 	60	 	 	 	1,126	 	 	 	1,037	 	 	 	8.5	%	
Sales, marketing and distribution expenses	 	 	57	 	 	 	1,079	 	 	 	1,212	 	 	 	(11.0	%)	
Other operating expenses	 	 	45	 	 	 	832	 	 	 	789	 	 	 	5.4	%	
Depreciation and amortization	 	 	20	 	 	 	371	 	 	 	418	 	 	 	(11.2	%)	
Operating expenses	 	 	1,097	 	 	 	20,632	 	 	 	18,319	 	 	 	12.6	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating loss	 	 	(66	)	 	 	(1,235	)	 	 	(55	)	 	 	>100	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Finance income	 	 	6	 	 	 	108	 	 	 	72	 	 	 	50.0	%	
Finance cost	 	 	(7	)	 	 	(129	)	 	 	(62	)	 	 	>100	%	
Exchange loss, net	 	 	(24	)	 	 	(457	)	 	 	(1,578	)	 	 	(71.0	%)	
Comprehensive financing result	 	 	(25	)	 	 	(477	)	 	 	(1,567	)	 	 	(69.5	%)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loss before income tax	 	 	(91	)	 	 	(1,713	)	 	 	(1,623	)	 	 	5.5	%	
Income tax benefit	 	 	27	 	 	 	514	 	 	 	517	 	 	 	(0.6	%)	
Net loss	 	 	(64	)	 	 	(1,199	)	 	 	(1,106	)	 	 	8.4	%	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only.

 	10 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Reconciliation of total ancillary revenue per passenger
 
The adoption of the IFRS 15 impacted the classification and timing of recognition of certain ancillary items such as bags, advanced seat selection, itinerary changes and other air travel-related fees, since they are deemed part of the single performance obligation of providing passenger transportation. These ancillary items are now recognized in passenger revenue (disclosed below as “ other passenger revenue ”).
 
Non-passenger revenue primarily consists of revenue from the sale of other items such as rental cars, insurance, hotels and cargo. This change did not have a material impact on our income statement or balance sheet in any period presented.
 
The following table shows quarterly additional detail about the components of total ancillary revenue:
 
Unaudited
(In millions of Mexican pesos)	 	Three months
ended
September 30,
2018
(US Dollars)*	 	 	Three months
ended
September 30,
2018	 	 	Three months
ended
September 30,
2017
(Adjusted)	 	 	Variance
(%)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Other passenger revenues	 	 	104	 	 	 	1,962	 	 	 	1,513	 	 	 	29.7	%	
Non-passenger revenues	 	 	14	 	 	 	258	 	 	 	285	 	 	 	(9.5	%)	
Total ancillary revenues	 	 	118	 	 	 	2,220	 	 	 	1,798	 	 	 	23.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Booked passengers (thousands)	 	 	4,680	 	 	 	4,680	 	 	 	4,173	 	 	 	12.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total ancillary revenue per passenger	 	 	25.2	 	 	 	474	 	 	 	431	 	 	 	10.1	%	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only.

 	11 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Financial Position
 
(In millions of Mexican pesos)	 	September 30, 2018
Unaudited
(US Dollars)*	 	 	September 30, 2018
Unaudited	 	 	December 31, 2017
(Adjusted)	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	323	 	 	 	6,082	 	 	 	6,951	 	
Accounts receivable	 	 	110	 	 	 	2,045	 	 	 	1,449	 	
Inventories	 	 	16	 	 	 	309	 	 	 	295	 	
Prepaid expenses and other current assets	 	 	36	 	 	 	678	 	 	 	768	 	
Financial instruments	 	 	12	 	 	 	228	 	 	 	497	 	
Guarantee deposits	 	 	49	 	 	 	925	 	 	 	1,353	 	
Total current assets	 	 	546	 	 	 	10,267	 	 	 	11,313	 	
Rotable spare parts, furniture and equipment, net	 	 	270	 	 	 	5,081	 	 	 	4,376	 	
Intangible assets, net	 	 	9	 	 	 	162	 	 	 	190	 	
Deferred income taxes	 	 	30	 	 	 	571	 	 	 	563	 	
Guarantee deposits	 	 	291	 	 	 	5,477	 	 	 	6,098	 	
Other assets	 	 	7	 	 	 	126	 	 	 	126	 	
Total non-current assets	 	 	607	 	 	 	11,417	 	 	 	11,353	 	
Total assets	 	 	1,153	 	 	 	21,684	 	 	 	22,666	 	
Liabilities	 	 	 	 	 	 	 	 	 	 	 	 	
Unearned transportation revenue	 	 	149	 	 	 	2,806	 	 	 	2,293	 	
Accounts payable	 	 	57	 	 	 	1,065	 	 	 	1,118	 	
Accrued liabilities	 	 	120	 	 	 	2,263	 	 	 	2,051	 	
Other taxes and fees payable	 	 	89	 	 	 	1,665	 	 	 	1,245	 	
Income taxes payable	 	 	8	 	 	 	155	 	 	 	111	 	
Financial instruments	 	 	-	 	 	 	4	 	 	 	-	 	
Financial debt	 	 	127	 	 	 	2,393	 	 	 	2,404	 	
Other liabilities	 	 	5	 	 	 	85	 	 	 	281	 	
Total short-term liabilities	 	 	555	 	 	 	10,436	 	 	 	9,503	 	
Financial debt	 	 	43	 	 	 	800	 	 	 	1,079	 	
Accrued liabilities	 	 	8	 	 	 	153	 	 	 	200	 	
Other liabilities	 	 	15	 	 	 	291	 	 	 	217	 	
Employee benefits	 	 	1	 	 	 	22	 	 	 	19	 	
Deferred income taxes	 	 	60	 	 	 	1,119	 	 	 	1,617	 	
Total long-term liabilities	 	 	127	 	 	 	2,385	 	 	 	3,132	 	
Total liabilities	 	 	682	 	 	 	12,821	 	 	 	12,635	 	
Equity	 	 	 	 	 	 	 	 	 	 	 	 	
Capital stock	 	 	158	 	 	 	2,974	 	 	 	2,974	 	
Treasury shares	 	 	(5	)	 	 	(100	)	 	 	(85	)	
Contributions for future capital increases	 	 	-	 	 	 	-	 	 	 	-	 	
Legal reserve	 	 	16	 	 	 	291	 	 	 	291	 	
Additional paid-in capital	 	 	96	 	 	 	1,813	 	 	 	1,804	 	
Retained earnings	 	 	199	 	 	 	3,750	 	 	 	4,948	 	
Accumulated other comprehensive losses	 	 	7	 	 	 	135	 	 	 	99	 	
Total equity	 	 	471	 	 	 	8,863	 	 	 	10,031	 	
Total liabilities and equity	 	 	1,153	 	 	 	21,684	 	 	 	22,666	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total shares outstanding fully diluted	 	 	 	 	 	 	1,011,876,677	 	 	 	1,011,876,677	 	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

 	12 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Cash Flows – Cash Flow Data Summary
 
Unaudited
(In millions of Mexican pesos)	 	Three months
ended September
30, 2018
(US Dollars)*	 	 	Three months
ended September
30, 2018	 	 	Three months
ended September
30, 2017
(Adjusted)	 	
 	 	 	 	 	 	 	 	 	 	
Net cash flow used in operating activities	 	 	(7	)	 	 	(136	)	 	 	(385	)	
Net cash flow provided by (used in) investing activities	 	 	1	 	 	 	20	 	 	 	(564	)	
Net cash flow (used in) provided by financing activities	 	 	(13	)	 	 	(247	)	 	 	268	 	
Decrease in cash and cash equivalents	 	 	(19	)	 	 	(363	)	 	 	(681	)	
Net foreign exchange differences	 	 	(17	)	 	 	(326	)	 	 	73	 	
Cash and cash equivalents at beginning of period	 	 	359	 	 	 	6,771	 	 	 	5,981	 	
Cash and cash equivalents at end of period	 	 	323	 	 	 	6,082	 	 	 	5,373	 	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

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Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Cash Flows – Cash Flow Data Summary
 
Unaudited
(In millions of Mexican pesos)	 	Nine months
ended September
30, 2018
(US Dollars)*	 	 	Nine months
ended September
30, 2018	 	 	Nine months
ended September
30, 2017
(Adjusted)	 	
 	 	 	 	 	 	 	 	 	 	
Net cash flow provided by (used in) operating activities	 	 	25	 	 	 	464	 	 	 	(130	)	
Net cash flow used in investing activities	 	 	(34	)	 	 	(641	)	 	 	(1,409	)	
Net cash flow (used in) provided by financing activities	 	 	(21	)	 	 	(386	)	 	 	533	 	
Decrease in cash and cash equivalents	 	 	(30	)	 	 	(563	)	 	 	(1,006	)	
Net foreign exchange differences	 	 	(16	)	 	 	(306	)	 	 	(692	)	
Cash and cash equivalents at beginning of period	 	 	369	 	 	 	6,951	 	 	 	7,071	 	
Cash and cash equivalents at end of period	 	 	323	 	 	 	6,082	 	 	 	5,373	 	
 
*Peso amounts were converted to U.S. dollars at end of period exchange rate for convenience purposes only

 	14 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
 
The following table shows adjusted balances after the adoption of IFRS 15, " Revenue from Contracts with Customers " on the quarterly statements of operations for each quarter of 2017. These recast amounts were derived from unaudited financial statements included in the quarterly reports on Form 6-K during the year ended December 31, 2017.
 
Unaudited 
(In millions of Mexican pesos)	 	Three
months
ended March
31, 2017	 	 	Three months
ended June
30, 2017	 	 	Three months
ended
September
30, 2017	 	 	Three months
ended
December 31,
2017	 	 	Full Year 2017
Adjusted	 	
Operating revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Passenger revenues	 	 	5,407	 	 	 	5,700	 	 	 	6,286	 	 	 	6,257	 	 	 	23,650	 	
Fare revenues	 	 	4,025	 	 	 	4,252	 	 	 	4,773	 	 	 	4,741	 	 	 	17,791	 	
Other passenger revenues	 	 	1,382	 	 	 	1,448	 	 	 	1,513	 	 	 	1,516	 	 	 	5,859	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-passenger revenues	 	 	292	 	 	 	294	 	 	 	285	 	 	 	267	 	 	 	1,138	 	
Cargo	 	 	41	 	 	 	39	 	 	 	38	 	 	 	53	 	 	 	171	 	
Other non-passenger revenues	 	 	251	 	 	 	255	 	 	 	247	 	 	 	214	 	 	 	967	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	 	5,699	 	 	 	5,994	 	 	 	6,571	 	 	 	6,524	 	 	 	24,788	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other operating income	 	 	(1	)	 	 	(10	)	 	 	(8	)	 	 	(78	)	 	 	(97	)	
Fuel	 	 	1,892	 	 	 	1,694	 	 	 	1,698	 	 	 	1,972	 	 	 	7,256	 	
Aircraft and engine rent expense	 	 	1,699	 	 	 	1,378	 	 	 	1,384	 	 	 	1,612	 	 	 	6,073	 	
Landing, take-off and navigation expenses	 	 	1,035	 	 	 	1,006	 	 	 	989	 	 	 	981	 	 	 	4,011	 	
Salaries and benefits	 	 	696	 	 	 	717	 	 	 	695	 	 	 	715	 	 	 	2,823	 	
Sales, marketing and distribution expenses	 	 	358	 	 	 	387	 	 	 	468	 	 	 	479	 	 	 	1,692	 	
Maintenance expenses	 	 	351	 	 	 	362	 	 	 	324	 	 	 	396	 	 	 	1,433	 	
Other operating expenses	 	 	270	 	 	 	270	 	 	 	248	 	 	 	300	 	 	 	1,088	 	
Depreciation and amortization	 	 	128	 	 	 	139	 	 	 	150	 	 	 	131	 	 	 	548	 	
Operating expenses	 	 	6,428	 	 	 	5,943	 	 	 	5,948	 	 	 	6,508	 	 	 	24,827	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating (loss) income	 	 	(729	)	 	 	51	 	 	 	623	 	 	 	16	 	 	 	(39	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Finance income	 	 	21	 	 	 	21	 	 	 	30	 	 	 	34	 	 	 	106	 	
Finance cost	 	 	(21	)	 	 	(22	)	 	 	(20	)	 	 	(23	)	 	 	(86	)	
Exchange (loss) gain, net	 	 	(1,145	)	 	 	(558	)	 	 	125	 	 	 	784	 	 	 	(794	)	
Comprehensive financing result	 	 	(1,145	)	 	 	(559	)	 	 	135	 	 	 	795	 	 	 	(774	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) income before income tax	 	 	(1,874	)	 	 	(508	)	 	 	758	 	 	 	811	 	 	 	(813	)	
Income tax benefit	 	 	556	 	 	 	-	 	 	 	(38	)	 	 	(357	)	 	 	161	 	
Net (loss) income	 	 	(1,318	)	 	 	(508	)	 	 	720	 	 	 	454	 	 	 	(652	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss) earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (pesos)	 	 	(1.30	)	 	 	(0.50	)	 	 	0.71	 	 	 	0.45	 	 	 	(0.64	)	
Diluted (pesos)	 	 	(1.30	)	 	 	(0.50	)	 	 	0.71	 	 	 	0.45	 	 	 	(0.64	)	
(Loss) earnings per ADS:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (pesos)	 	 	(13.02	)	 	 	(5.02	)	 	 	7.11	 	 	 	4.49	 	 	 	(6.44	)	
Diluted (pesos)	 	 	(13.02	)	 	 	(5.02	)	 	 	7.11	 	 	 	4.49	 	 	 	(6.44	)	

 	15 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
 
The following table shows quarterly adjustments made due to the adoption of IFRS 15, " Revenue from Contracts with Customers " on the statements of operations for 2017.
 
Unaudited
(In millions of Mexican pesos)	 	Full Year 2017
as Reported	 	 	Three months
ended March 31,
2017	 	 	Three months
ended June 30,
2017	 	 	Three months
ended
September 30,
2017	 	 	Three months
ended
December 31,
2017	 	 	Full Year 2017
Adjusted	 	
Operating revenues:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Passenger revenues	 	 	17,791	 	 	 	1,382	 	 	 	1,448	 	 	 	1,513	 	 	 	1,516	 	 	 	23,650	 	
Fare revenues	 	 	17,791	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	17,791	 	
Other passenger revenues	 	 	-	 	 	 	1,382	 	 	 	1,448	 	 	 	1,513	 	 	 	1,516	 	 	 	5,859	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-passenger revenues	 	 	7,054	 	 	 	(1,339	)	 	 	(1,435	)	 	 	(1,524	)	 	 	(1,618	)	 	 	1,138	 	
Cargo	 	 	171	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	171	 	
Other non-passenger revenues	 	 	6,883	 	 	 	(1,339	)	 	 	(1,435	)	 	 	(1,524	)	 	 	(1,618	)	 	 	967	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total operating revenues	 	 	24,845	 	 	 	43	 	 	 	13	 	 	 	(11	)	 	 	(102	)	 	 	24,788	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other operating income	 	 	(97	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(97	)	
Fuel	 	 	7,256	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	7,256	 	
Aircraft and engine rent expense	 	 	6,073	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	6,073	 	
Landing, take-off and navigation expenses	 	 	4,011	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	4,011	 	
Salaries and benefits	 	 	2,823	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	2,823	 	
Sales, marketing and distribution expenses	 	 	1,692	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,692	 	
Maintenance expenses	 	 	1,433	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,433	 	
Other operating expenses	 	 	1,088	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	1,088	 	
Depreciation and amortization	 	 	548	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	548	 	
Operating expenses	 	 	24,827	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	24,827	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating income (loss)	 	 	18	 	 	 	43	 	 	 	13	 	 	 	(11	)	 	 	(102	)	 	 	(39	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Finance income	 	 	106	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	106	 	
Finance cost	 	 	(86	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(86	)	
Exchange (loss), net	 	 	(794	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(794	)	
Comprehensive financing result	 	 	(774	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(774	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Loss)income before income tax	 	 	(756	)	 	 	43	 	 	 	13	 	 	 	(11	)	 	 	(102	)	 	 	(813	)	
Income tax benefit	 	 	161	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	161	 	
Net (loss) income	 	 	(595	)	 	 	43	 	 	 	13	 	 	 	(11	)	 	 	(102	)	 	 	(652	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic (loss) earnings per share	 	 	(0.59	)	 	 	0.04	 	 	 	0.01	 	 	 	(0.01	)	 	 	(0.10	)	 	 	(0.64	)	
Diluted (loss) earnings per share	 	 	(0.59	)	 	 	0.04	 	 	 	0.01	 	 	 	(0.01	)	 	 	(0.10	)	 	 	(0.64	)	

 	16 	 	

 
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. and Subsidiaries
Reconciliation of total ancillary revenue per passenger
 
The adoption of the IFRS 15 impacted the classification and timing of recognition of certain ancillary items such as bags, advanced seat selection, itinerary changes and other air travel-related fees, since they are deemed part of the single performance obligation of providing passenger transportation. These ancillary items are now recognized in passenger revenue (disclosed below as “ other passenger revenue ”).
 
Non-passenger revenue primarily consists of revenue from the sale of other items such as rental cars, insurance hotels and cargo. This change did not have a material impact on our income statement or balance sheet in any period presented.
 
The following table shows quarterly additional detail about the components of total ancillary revenue:
 
Unaudited
(In millions of Mexican pesos)	 	Three months
ended March
31, 2017	 	 	Three months
ended June
30, 2017	 	 	Three months
ended
September 30,
2017	 	 	Three months
ended
December 31,
2017	 	 	Full Year 2017
Adjusted	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other passenger revenues	 	 	1,382	 	 	 	1,448	 	 	 	1,513	 	 	 	1,516	 	 	 	5,859	 	
Non-passenger revenues	 	 	292	 	 	 	294	 	 	 	285	 	 	 	267	 	 	 	1,138	 	
Total ancillary revenues	 	 	1,674	 	 	 	1,742	 	 	 	1,798	 	 	 	1,783	 	 	 	6,997	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Booked passengers (thousands)	 	 	3,964	 	 	 	4,063	 	 	 	4,173	 	 	 	4,226	 	 	 	16,426	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total ancillary revenue per passenger	 	 	422	 	 	 	429	 	 	 	431	 	 	 	422	 	 	 	426	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total ancillary revenue per passenger (as reported) (*)	 	 	411	 	 	 	426	 	 	 	434	 	 	 	446	 	 	 	429	 	
 
(*) These recast amounts were derived from unaudited financial statements included in the quarterly reports on Form 6-K during the year ended December 31, 2017, under the called name “Non-ticket revenue per passenger”.

 	17