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Consolidated Statements of Financial Position | |||||||||||||
Convenience translation to U.S. dollars | 20.3183 | 645.9000 | 7.7285 | 20.5835 | 20.5835 | 615.7800 | 7.8095 | 19.9487 | 19.9487 | 573.4400 | 7.6988 | 18.8452 | 18.8452 |
Consolidated Statements of Operations $ in Thousands, $ in Thousands |
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Operating revenues (Notes 21 and 26): | ||||
Fare revenues | $ 1,248,726 | $ 25,703,144 | $ 12,873,174 | $ 23,129,991 |
Other passenger revenues | 854,773 | 17,594,223 | 8,613,398 | 10,569,208 |
Passenger revenues | 2,103,499 | 43,297,367 | 21,486,572 | 33,699,199 |
Other non-passenger revenues (Note 21) | 75,696 | 1,558,092 | 882,360 | 897,586 |
Cargo | 11,718 | 241,202 | 201,881 | 228,836 |
Non-derivatives financial instruments | (21,110) | (434,522) | (411,222) | (72,949) |
Operating revenues | 2,169,803 | 44,662,139 | 22,159,591 | 34,752,672 |
Other operating income (Note 22) | (10,583) | (217,838) | (730,333) | (327,208) |
Fuel expense, net | 601,271 | 12,376,263 | 6,640,820 | 11,626,069 |
Landing, take-off and navigation expenses | 292,500 | 6,020,681 | 4,090,864 | 5,108,489 |
Depreciation of right of use assets (Note 14) | 265,389 | 5,462,625 | 5,048,976 | 4,702,971 |
Salaries and benefits | 235,970 | 4,857,083 | 3,453,382 | 3,600,762 |
Sales, marketing and distribution expenses | 95,316 | 1,961,936 | 1,840,819 | 1,447,637 |
Maintenance expenses | 94,843 | 1,952,202 | 1,167,720 | 1,488,431 |
Aircraft and engine variable lease expenses | 81,953 | 1,686,875 | 1,845,254 | 961,657 |
Other operating expenses (Note 22) | 64,944 | 1,336,792 | 1,157,240 | 1,112,927 |
Depreciation and amortization (Notes 12 and 13) | 56,318 | 1,159,224 | 898,445 | 675,514 |
Operating income (loss) | 391,882 | 8,066,296 | (3,253,596) | 4,355,423 |
Finance income (Note 23) | 3,477 | 71,578 | 101,511 | 207,799 |
Finance cost (Note 23) | (137,585) | (2,831,989) | (3,018,484) | (2,269,829) |
Foreign exchange (loss) gain, net (Note 3 b (i)) | (125,897) | (2,591,406) | 470,594 | 1,440,501 |
Income (loss) before income tax | 131,877 | 2,714,479 | (5,699,975) | 3,733,894 |
Income tax (expense) benefit (Note 20) | (28,855) | (593,928) | 1,406,184 | (1,094,831) |
Net income (loss) | $ 103,022 | $ 2,120,551 | $ (4,293,791) | $ 2,639,063 |
Earnings (loss) per share basic: | (per share) | $ 0.088 | $ 1.819 | $ (4.203) | $ 2.608 |
Earnings (loss) per share diluted: | (per share) | $ 0.088 | $ 1.819 | $ (4.203) | $ 2.608 |
Consolidated Statements of Operations (Parenthetical) |
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Consolidated Statements of Operations | |||||||||||||
Convenience translation to U.S. dollars | 20.3183 | 645.9000 | 7.7285 | 20.5835 | 20.5835 | 615.7800 | 7.8095 | 19.9487 | 19.9487 | 573.4400 | 7.6988 | 18.8452 | 18.8452 |
Consolidated Statements of Comprehensive Income (Parenthetical) |
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Consolidated Statements of Comprehensive Income | |||||||||||||
Convenience translation to U.S. dollars | 20.3183 | 645.9000 | 7.7285 | 20.5835 | 20.5835 | 615.7800 | 7.8095 | 19.9487 | 19.9487 | 573.4400 | 7.6988 | 18.8452 | 18.8452 |
Consolidated Statements of Changes in Equity $ in Thousands, $ in Thousands |
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Balance as of beginning of the year at Dec. 31, 2018 | $ 2,973,559 | $ (122,661) | $ 1 | $ 291,178 | $ 1,837,073 | $ (2,200,651) | $ (73,346) | $ 2,705,153 | |||||||
Treasury shares | (75,375) | 56,483 | (18,892) | ||||||||||||
Exercise of stock options (Note 18) | 14,773 | 14,773 | |||||||||||||
Long-term incentive plan cost (Note 18) | 13,549 | (13,549) | |||||||||||||
Net income (loss) for the period | 2,639,063 | 2,639,063 | |||||||||||||
Other comprehensive income (loss) items | 189,586 | 189,586 | |||||||||||||
Total comprehensive income (loss) for the year | 2,639,063 | 189,586 | 2,828,649 | ||||||||||||
Balance as of end of the year at Dec. 31, 2019 | 2,973,559 | (169,714) | 1 | 291,178 | 1,880,007 | 438,412 | 116,240 | 5,529,683 | |||||||
Capital stock increase (Note 19) | 452,847 | 2,819,985 | 3,272,832 | ||||||||||||
Treasury shares | (94,564) | 60,763 | (33,801) | ||||||||||||
Long-term incentive plan cost (Note 18) | 40,534 | (40,534) | |||||||||||||
Net income (loss) for the period | (4,293,791) | (4,293,791) | |||||||||||||
Other comprehensive income (loss) items | (1,678,738) | (1,678,738) | |||||||||||||
Total comprehensive income (loss) for the year | (4,293,791) | (1,678,738) | (5,972,529) | ||||||||||||
Balance as of end of the year at Dec. 31, 2020 | 3,426,406 | (223,744) | 1 | 291,178 | 4,720,221 | (3,855,379) | (1,562,498) | 2,796,185 | |||||||
Treasury shares | (89,209) | (19,215) | (108,424) | ||||||||||||
Exercise of stock options (Note 18) | 56,904 | 56,904 | |||||||||||||
Long-term incentive plan cost (Note 18) | 46,666 | (46,666) | |||||||||||||
Net income (loss) for the period | 2,120,551 | $ 103,022 | 2,120,551 | ||||||||||||
Other comprehensive income (loss) items | 1,580,222 | 76,771 | 1,580,222 | ||||||||||||
Total comprehensive income (loss) for the year | 2,120,551 | 1,580,222 | 179,793 | 3,700,773 | |||||||||||
Balance as of end of the year at Dec. 31, 2021 | $ 166,464 | $ 3,426,406 | $ (10,172) | $ (209,383) | $ 1 | $ 14,146 | $ 291,178 | $ 226,120 | $ 4,654,340 | $ (84,282) | $ (1,734,828) | $ 861 | $ 17,724 | $ 313,137 | $ 6,445,438 |
Consolidated Statements of Changes in Equity (Parenthetical) |
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Consolidated Statements of Changes in Equity | |||||||||||||
Convenience translation to U.S. dollars | 20.3183 | 645.9000 | 7.7285 | 20.5835 | 20.5835 | 615.7800 | 7.8095 | 19.9487 | 19.9487 | 573.4400 | 7.6988 | 18.8452 | 18.8452 |
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Consolidated Statements of Cash Flows | |||||||||||||
Convenience translation to U.S. dollars | 20.3183 | 645.9000 | 7.7285 | 20.5835 | 20.5835 | 615.7800 | 7.8095 | 19.9487 | 19.9487 | 573.4400 | 7.6988 | 18.8452 | 18.8452 |
Description of the business and summary of significant accounting policies |
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Description of the business and summary of significant accounting policies | 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 the laws of Mexico 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 City, Mexico, 01210. 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. On February 24, 2020, Concesionaria’s concession was extended for a 20-year term starting on May 9, 2020. Concesionaria made its first commercial flight as a low-cost airline on March 13, 2006. Concesionaria 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 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 Rica Civil Aviation Authority 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 20, 2021 Volaris Costa Rica´s Air Operator Certificate was renewed, modified and extended for an additional - year term. Volaris Costa Rica started operations on December 1, 2016.On June 20, 2019, Concesionaria, issued 15,000,000 asset backed trust notes (certificados bursátiles fiduciarios; the “ Trust Notes ”), under the ticker symbol VOLARCB 19 for the amount of Ps.1.5 billion Mexican pesos by CIBanco, S.A., Institución de Banca Multiple, acting as Trustee under the Irrevocable Trust number CIB/3249 created by Concesionaria in the first issuance under a program approved by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) for an amount of up to Ps.3.0 billion Mexican pesos. The Trust Notes are backed by future receivables under agreements entered into with credit card processors with respect to funds received from the sale of airplane tickets and ancillaries denominated in Mexican pesos, through credit cards VISA and Mastercard, via the Company’s website, mobile app and travel agencies. The Trust Notes were listed on the Mexican Stock Exchange, have a maturity of five years and will pay an interest rate of Tasa de Interes Interbancaria de Equilibrio (“TIIE”) 28 plus 175 percentage points. On December 11, 2020, the Company announced the closing of an upsized primary follow-on equity offering in which the Company offered 134,000,000 of its Ordinary Participation Certificates (Certificados de Participación Ordinarios), or CPOs, in the form of American Depositary Shares, or ADSs, at a price to the public of USD$.11.25 per ADS in the United States and other countries outside of Mexico, pursuant to the Company’s shelf registration statement filed with the Securities and Exchange Commission (the “SEC”). In connection with the offering, the underwriters exercised their option to purchase up to 20,100,000 additional CPOs in the form of ADSs. Each ADS represents 10 CPOs and each CPO represents a financial interest in one Series A share of common stock of the Company. The accompanying consolidated financial statements and notes were approved by the Company's Board of Directors on April 20, 2022 and by the Shareholders on April 26, 2022. These consolidated financial statements were also approved for issuance in the Company's annual report on Form 20-F by the Company's Vice President and Chief Executive Officer, Enrique Beltranena, and the Senior Vice President and Chief Financial Officer, Jaime E. Pous, on April 26, 2022 and subsequent events were considered through that date. a) Relevant events Change in functional currency An entity’s functional currency is the currency of the primary economic environment in which it operates. During the second half of 2021 management identified indicators of changes in the primary economic environment in which its main subsidiary Concesionaria operates, as follows: (i) increase in the international market transactions during 2021, (ii) change in the determination of rates (iii) most representative costs are determined and denominated in US dollars. As a result, the Company evaluated the functional currency of its main subsidiary in accordance with the regulatory provisions contained in IAS-21 “Effects of Variations in Foreign Currency Exchange Rates”, concluding that the functional currency has changed from the Mexican peso to the US dollar as of December 31, 2021. In addition, considering the dependency of Controladora in its operations related to its wholly owned subsidiary Concesionaria, management has evaluated and concluded that its functional currency has also changed from the Mexican peso to US dollar as of December 31, 2021.The change in functional currency is prospectively applied from the date of the change. As of December 31,2021,the Company´s presentation currency remains Mexican pesos, consequently there is no impact on any comparative financial information presented. Derived from the foregoing, once reviewed and authorized by the Board of Directors and its Audit and Corporate Governance Committee, as well as informed to the corresponding regulators, as of December 31, 2021, the Company and Concesionaria changed prospectively its functional currency from the Mexican peso to the US dollar (Note 3b). New purchase order for 39 A321NEO aircraft On November 15, 2021, the Company executed an amendment to its purchase agreement with Airbus to purchase 39 A321NEO aircraft, securing its growth on the upcoming years. In addition to the acquisition of these 39 aircraft, the Company exercised its rights under the purchase agreement with Airbus to convert 20 aircraft from A320NEO to A321NEO aircraft of its current order. Obtention of the Operation Permit of Vuela El Salvador, S.A. de C.V. (“Volaris El Salvador”) On August 25, 2021, the Company through its subsidiary Vuela El Salvador, S.A. de C.V. (“Volaris El Salvador”) obtained from the El Salvadorian Civil Aviation Authority an Operation Permit, for scheduled and non-scheduled international public air transportation services for passengers, cargo and mail valid until May 30, 2024. Volaris El Salvador started operations on September 15, 2021. Merger between subsidiaries The Company analyzed the impacts resulting from the amendments to certain laws regarding labor subcontracting, or outsourcing matters, published in the Official Gazette of the Federation (Diario Oficial de la Federacion) on April 23, 2021, which prohibits the subcontracting or outsourcing activities in Mexico, that is, when any individual or legal entity provides or make available its own employees for the benefit of third parties. As the only exception, it is established that the rendering of specialized services or the execution of specialized works, which are not part of the corporate purpose or the economic activity of the beneficiary of the services, will not be considered subcontracting of personnel. The modifications became effective on April 24, 2021, the day following date of its publication in the Official Gazette of the Federation. According to the foregoing, the management concluded that the employees of the subsidiary “Servicios Administrativos Volaris, S.A. de C.V.” directly participate in the main activity of the subsidiary “Concesionaria”, therefore, to comply with the guidelines of the reform, the corresponding employer substitution was performed. On July 14, 2021, the Subsidiaries “Concesionaria”, and “Servicios Administrativos”, agreed to merge, the first being “the merging company” and the second “the merged company”, respectively. The merger takes full effect against third parties after three months from the date of registration of the merger agreements in the Public Registry of Property and Commerce of Mexico City, in accordance with the provisions of Article 224 of the General Corporations Law. The merger entered into full legal, accounting and tax effects on August 31, 2021. Any intercompany assets and liabilities between the “Merging company” and the “Merged company” were extinguished on the effective date of the merger. Serving as an accounting basis for this merger the statements of financial position of the entities, this transaction was carried out between subsidiaries of the Company, therefore it did not affect the consolidated financial statements. Covid-19 commentary During 2021 the Company managed to recover its pre-pandemic capacity despite spikes in the COVID19 cases, especially during the 1st half of the year. As the vaccination program evolved in the markets the Company operates, the Company achieved an important recovery in capacity. As the national authorities eased the migratory requirements the Company restarted operations to and from Costa Rica, Guatemala and El Salvador. In fact, during September 2021 the Company effectively started operations of a new operating subsidiary Volaris El Salvador. As of December 31, 2021, the Company´s capacity as measured by available seat miles (“ASMs”) was increased 53.7% compared to the previous year and a 14.7% growth compared with 2019. The Company has taken actions to preserve liquidity and sustain its operations during the period and certain other measures. Customers and employees The Company has made a great effort in 2021 to face health contingency of COVID-19 internally (with all employees) and externally (with all clients) through the implementation of different strategies like: sanitation programs in work centers, placement of “entrance, exit and safe distance” signs, manuals and training courses with sanitary protocols, implementation “home office scheme”, medical follow up to employees, routine application of random Rapid Tests to employees, some trips to USA with employees to facilitate vaccination. Second issuance asset backed trust notes On October 13, 2021, “Concesionaria”, completed the issuance of fifteen million (15,000,000) of asset backed trust notes (certificados bursátiles fiduciarios) (the “Trust Notes”) issued under the ticker VOLARCB 21L for an amount of Ps.1.5 billion Mexican pesos, issued by CIBanco, S.A., Institución de Banca Múltiple, acting as Trustee of the Irrevocable Trust number CIB/3249 created by Concesionaria, in the second offering under the program authorized by the Mexican National Banking and Securities Commission for an amount of up to Ps.3.0 billion (three billion pesos 00/100 national currency). The Trust Notes are backed by future receivables under agreements entered into with credit card processors with respect to funds received from the sale of airplane tickets and ancillaries denominated in Mexican pesos, through credit cards VISA and Mastercard, via the Company’s website, mobile app and travel agencies. The Trust Notes were rated “HR AA (E)”and “AA+/M(e)” by the rating agencies HR Ratings de México, S.A. de C.V. and Verum Calificadora de Valores, S.A.P.I. de C.V., respectively, will have a maturity term of 5 (five) years and will pay an interest rate of TIIE + two hundred (200) basis points. The Trust Notes comply with the Sustainability-Linked Bond Principles 2020, administered by the International Capital Market Association (ICMA) and has Sustainability Objectives (SPT) for the KPI, to reduce carbon dioxide emissions measured as grams of CO2 emissions per revenue passenger/kilometer (gCO2 / RPK) by 21.54%, 24.08% and 25.53% by 2022, 2023 and 2024, respectively, compared to 2015. This offering will help the Company to accomplish its long-term sustainable goals, among which are to reduce CO2 emissions by 35.42% by 2030. A feature of the asset backed trust notes is that they will pay an additional ( ) basis points to the interest rate if the sustainability goals are not met, with the possibility of mitigating the additional rate if the 2023 or 2024 targets are met.Shares conversion On December 20, 2021, one of the Company´s shareholders concluded the conversion of 30,538,000 Series B Shares for the equivalent number of Series A Shares. This conversion has no impact either on the total number of outstanding shares nor on the earnings-per-share calculation. b) Basis of preparation Statement of compliance These consolidated financial statements comprise the financial statements of the Company and its subsidiaries at December 31, 2021 and 2020 and for each of the three years ended December 31, 2021, and were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which each entity operates (“functional currency”). The functional currency of Controladora and its subsidiary Concesionaria was the Mexican peso until December 31, 2021, and since such date changed to US dollar. The presentation currency of the Company’s consolidated financial statements is the Mexican peso, which is used also for compliance with its legal obligations. All values in the consolidated financial statements are rounded to the nearest thousand (Ps.000), except when otherwise indicated. The Company has consistently applied its accounting policies to all periods presented in these consolidated financial statements and provide comparative information in respect of the previous period. 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. 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. c) Basis of consolidation The accompanying consolidated financial statements comprise the financial statements of the Company and its subsidiaries. On December 31, 2021 and 2020, for accounting purposes the companies included in the consolidated financial statements are as follows:
*The Companies have not started operations yet in Guatemala **The Company has not started operations yet
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:
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:
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. All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated in full on consolidation in the consolidated financial statements. 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 the average exchange rates prevailing at the time. 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. d) Revenue recognition 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 contract 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 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) other passenger revenues. Other passenger services include but are not limited to fees charged for excess baggage, bookings through the call center or third-party agencies, advanced seat selection, itinerary changes and charters. They are recognized as revenue when the obligation of passenger transportation service is provided by the Company or when the non-refundable ticket expires at the date of the scheduled travel. The Company also classifies as other passenger revenue “V Club” and other similar services, which are recognized as revenue over time when the service is provided. Non-passenger revenues The most significant non-passenger revenues include revenues generated from: (i) revenues from other non-passenger services described below and (ii) cargo services. Revenues from other non-passenger services mainly include but are not limited to commissions charged to third parties for the sale of hotel reservations, trip insurance, rental cars and advertising spaces to third parties. They are recognized as revenue at the time the service is provided. The Company also evaluated the principal versus agent considerations as it relates to certain non-air travel services arrangements with third party providers. No changes were identified under this analysis as the Company is agent for those services provided by third parties. Code-share agreement The Company sells certain tickets with connecting flights with one or more segments operated by its other airline partner. For segments operated by its other airline partner, the Company has determined that it is acting as an agent on behalf of the other airline, as is responsible for its portion of the contract (i.e., transportation of the passenger). The Company, as the agent, recognizes revenue within Other operating revenue at the time of the travel, for the net amount retained by the Company for any segments flown by other airline. On January 16, 2018, the Company and Frontier Airlines (herein after Frontier) entered into a code-share operations agreement, which started operations in September 2018. Through this alliance, the Company´s customers gain access to additional cities in the U.S. beyond the current available destinations as the Company’s customers are able to buy a ticket throughout any of Frontier’s actual destinations; and Frontier customers gain first-time access to new destinations in Mexico through Volaris presence in Mexican airports. Code-share tickets can be purchased directly from the Volaris’ website. The airline that provides the transportation recognize the revenue when the service is provided. Other considerations analyzed as part of revenue from contracts with customers All revenues offered by the Company including sales of tickets for future flights, other passenger related services and non-passenger revenue must be paid through a full cash settlement. The payment of the transaction price is equal to the cash settlement from the client at the sales time (using different payment options like credit or debit cards, paying through a third party or directly at the counter in cash). There is little or no judgment to determine the point in time of the revenue recognition, and the amount of it. Even if mainly all the sales of services are initially recognized as contract liabilities, there is no financing component in these transactions. The cost to obtain a contract is represented by the commissions paid to the travel agencies and the bank commissions charged by the financial institutions for processing electronic transactions (Note 10). The Company does not incur any additional costs to obtain and fulfill a contract that is eligible for capitalization. Trade receivables are mainly with financial institutions due to transactions with credit and debit cards, and therefore they are non-interest bearing and are mainly on terms of to hours. The Company has the right of collection at the beginning of the contracts and there are no discounts, payment incentives, bonuses, or other variable considerations subsequent to the purchase that could modify the amount of the transaction price.The Company´s tickets are non-refundable. However, if the Company cancels a flight for causes attributable to the airline, including as a result of the COVID-19 pandemic, then the passenger is entitled to either move their flight at no cost, receive a refund or a voucher. No revenue is recognized until either the voucher is redeemed, and the associate flight occurs, or the voucher expires. When vouchers issued exceed the amount of the original amount paid by the passenger the excess is recorded as reduction of the operating revenues. All of the Company´s revenues related to future services are rendered through an approximate period of 12 months. e) Cash, cash equivalents and restricted cash Cash and cash equivalents are represented by bank deposits and highly liquid investments with maturities of 90 days or less at the original purchase date. For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash and short-term investments as defined above. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. These credit card processing agreements don’t have significant cash reserve requirements. Restricted cash are used to constitute the debt service reserves and cannot be used for purposes other than those established. f) Financial instruments -initial recognition and subsequent measurement 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. i) Financial assets Initial recognition Classification of financial assets and initial recognition The Company determines the classification and measurement of financial assets, in accordance with the categories in IFRS 9, which are based on both: the characteristics of the contractual cash flows of these assets and the business model objective for holding them. Financial assets include those carried at FVTPL, whose objective to hold them is for trading purposes (short-term investments), or at amortized cost, for accounts receivables held to collect the contractual cash flows, which are characterized by solely 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. 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:
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:
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 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 credit - impaired. A financial asset is credit- impaired when one or more events have 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 that a financial asset is credit – impaired may 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. Further disclosures related to impairment of financial assets are also provided in Note 8. For trade receivables, the Company applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Company does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. Based on this evaluation, allowances are taken into account for the expected losses of these receivables. For the years ended December 31, 2021 and 2020 the Company recorded expected credit losses on accounts receivable of Ps.16,118 and Ps.13,664, respectively (Note 8). iii) Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, including loans and borrowings, accounts payables to suppliers, unearned transportation revenue, other accounts payable and financial instruments. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Subsequent measurement 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. Loans and borrowings are the category most relevant to the Company. After initial recognition at fair value (consideration received), interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method (EIR). 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 (Note 5). Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities under the fair value option, which are classified as held for trading, if they are acquired for the purpose of selling them in the near future. This category includes derivative financial instruments that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. 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:
g) 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. h) 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 based on the method of specific identification and expensed when used in operations. The Company recognizes the necessary estimates for decreases in the value of its inventories due to impairment, obsolescence, slow movement and causes that indicate that the use or realization of the aircraft spare parts and flight equipment accessories that are part of the inventory will be less than recorded value. The cost of inventories is determined based on the specific identification method and is recorded as an expense as it is used in operations. i) Intangible assets Cost related to the purchase or development of computer software that is separable from an item of related hardware is capitalized separately measured at cost 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. For the years ended December 31, 2021, and 2020, the Company did not record any impairment loss in the value of its intangible assets. Software Acquired computer software licenses are capitalized on the basis of cost incurred to acquire, implement and bring the software into use. Costs associated with maintaining computer software programs are expensed as incurred. In case of development or improvement to systems that will generate probable future economic benefits, the Company capitalizes software development costs, including directly attributable expenditures on materials, labor, and other direct costs. Acquired software cost is amortized on a straight-line basis over its useful life. Licenses and software rights acquired by the Company have finite useful lives and are amortized on a straight–line basis over the term of the contract. Amortization expense is recognized in the consolidated statements of operations. j) 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 (Note 11). Deposits for flight equipment maintenance paid to lessors Most of the Company’s lease contracts stipulate the obligation to pay maintenance deposits to aircraft lessors, in order to guarantee major maintenance work. These lease agreements establish that maintenance deposits are reimbursable to the Company at the time the major maintenance event is concluded for an amount equal to: (i) the maintenance deposit held by the lessor associated with the specific maintenance event, or (ii) the qualifying costs related to the specific maintenance event. Substantially all major maintenance deposits are generally calculated based on the use of leased aircraft and engines (flight hours or operating cycles). The sole purpose of these deposits is to guarantee to the lessor the execution of maintenance work on the aircraft and engines. Maintenance deposits that the Company expects to recover from lessors are presented as security deposits in the consolidated statement of financial position. These deposits are registered as a monetary asset and are revalued to record changes in foreign currency in each reporting period. According to the term of the lease, in each contract it is evaluated whether major maintenance of the leased aircraft and engines is expected to be carried out. In the event that major maintenance is not expected to be performed on its own account, it is recorded as a variable lease payment, since it represents part of the use of the leased goods and is determined based on time or flight cycles. For the years ended December 31, 2021, 2020 and 2019, the Company made a supplemental lease payment of Ps.775,579, Ps.421,030 and Ps.295,720, respectively. When modifications are made to the contracts that entail an extension of the lease term, said maintenance deposits can be converted into recoverable deposits, in that case, to the date of modification of the agreement. Deposits are considered a recoverable asset that is recognized as a decrease in the expense recognized for variable leases. During the years ended December 31, 2021, 2020 and 2019, the Company added fifteen, seven and seven net new aircrafts to its fleet, respectively (Note 14). During the year ended December 31, 2021, the Company extended the lease period for aircrafts and engines, through lease agreements for fifteen aircraft and three engines. During the year ended December 31, 2020, the Company did not extend the period of lease contracts for aircrafts and engines. During the year ended December 31, 2019, the Company extended the lease period, through lease agreements, of one aircraft. Additionally, the Company extended the lease period for a spare engine in 2019. Certain other aircraft lease agreements do not require the obligation to pay maintenance deposits in advance to lessors to guarantee important maintenance activities; therefore, the Company does not record or make payments for guarantee deposits with respect to these aircrafts. However, some of these lease agreements include the obligation to make maintenance adjustment payments to lessors at the end of the lease period. These maintenance adjustments cover maintenance events that are not expected to be performed before the termination of the lease; for such agreements, the Company accumulates a liability related to the amount of the costs that will be incurred at the end of the lease, since no maintenance deposits have been made (Note 16). k) Aircraft and engine maintenance The Company is required to conduct various 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 consist of scheduled maintenance checks on the Company’s aircraft, including pre-flight, daily, weekly and overnight checks, any diagnostics and routine repairs and any unscheduled tasks performed as required. These type of maintenance events are currently serviced by 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 to 14 days to accomplish and are required approximately every 24 or 36 months, such as 24 month checks and C checks. All routine maintenance costs are expensed as incurred.(ii) Major maintenance consists of a series of more complex tasks that can take up to to accomplish and typically are required every 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 time of usage. The United States Federal Aviation Administration (“FAA”) and the Mexican Federal Civil Aviation Agency (Agencia Federal de Aviación Civil - AFAC) 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. During the years ended December 31, 2021 and 2020, the Company capitalized major maintenance events as part of leasehold improvements to flight equipment for an amount of Ps.1,742,979 and Ps.646,219, respectively. For the years ended December 31, 2021, 2020 and 2019, the amortization of major maintenance leasehold improvement costs was Ps.838,433, Ps.652,091 and Ps.450,371 respectively. The amortization of deferred maintenance costs is recorded as part of depreciation and amortization in the consolidated statements of operations. (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. The Company has an engine flight hour agreement (component repair 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 monthly as incurred in the consolidated statements of operations. l) Rotable spare parts, furniture and equipment, net Rotable spare parts, furniture and equipment, are recorded at cost and are depreciated to estimated residual values over their estimated useful lives using the straight-line method. Aircraft spare engines have significant components with different useful lives; therefore, they are accounted for as separate items (major components) of spare engine parts (Note 12). 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:
The Company reviews annually the useful lives of these assets and any changes are accounted for prospectively. The Company identified one Cash Generating Unit (CGU), which includes the entire aircraft fleet and flight equipment. The Company assesses at each reporting date, whether there is objective evidence that rotable spare parts, furniture and equipment and right of use asset are impaired in the CGU. The Company records impairment charges on rotable spare parts, furniture and equipment and right of use assets used in operations when events and circumstances indicate that the assets may be impaired or when the carrying amount of a long-lived asset or 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 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. On December 2021, the Company reviewed through an analysis if there were signs of impairment, according to the result it was concluded there were not sings of impairment. On December 2020, the Company performed its annual impairment test. The recoverable amount of the CGU was determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management, covering a five-year period. The projected cash flows have been updated to reflect the future operating cashflows. It was concluded that the carrying amount of the CGU did not exceed the value in use. m) Foreign currency transactions and exchange differences The Company’s consolidated financial statements are presented in Mexican pesos, which is the presentation 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 each entity operates (“the functional currency”). The financial statements of foreign subsidiaries prepared under IFRS and denominated in their respective local currencies different from its functional currency are translated into their functional currency as follows:
Any differences resulting from the currency functional translation are recognized in the consolidated statements of operations. For the year ended December 31, 2021, 2020 and 2019, the exchange rates of local currencies translated to functional currencies are as follows:
The exchange rates used to translate the above amounts to Mexican pesos on December 31, 2021, 2020 and 2019, were Ps.20.5835, Ps.19.9487 and Ps.18.8452, respectively, per U.S. dollar. The Company’s consolidated financial statements are presented in Mexican pesos. Assets and liabilities from foreign subsidiaries are converted from the functional currency to the presentation currency at the exchange rate on the reporting date; revenues and expenses are translated at the average exchange rate. Foreign currency differences arising on translation into the presentation currency are recognized in OCI. Exchange differences on translation of foreign entities for the years ended December 31, 2021, 2020 and 2019, were Ps.(4,021), Ps.23,970 and Ps.8,045, respectively. n) 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. o) 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. For the years ended December 31, 2021 and 2020, no termination benefits provision has been recognized. iii) Seniority premiums In accordance with Mexican Labor Law, the Company provides seniority premium benefits to the employees which rendered services to its Mexican subsidiaries under certain circumstances. These benefits consist of a one-time payment equivalent to 12 days’ wages for each year of service (at the employee’s most recent salary, but not to exceed twice the legal minimum wage), 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. The latest actuarial computation was prepared as of December 31, 2021. 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. The defined benefit asset or liability comprises the present value of the defined benefit obligation using a discount rate based on government bonds, less the fair value of plan assets out of which the obligations are to be settled. For entities in Costa Rica, Guatemala and El Salvador there is no obligation to pay seniority premium, these countries have Post- Employee 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 years ended December 31, 2021, 2020 and 2019 the Company expensed Ps.75,418, Ps.25,918 and Ps.62,825, respectively, as quarterly incentive bonuses, recorded under the caption salaries and benefits. The Company has a 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. A provision is recognized based on the estimated amount of the incentive payment (Note 7). v) Long-term incentive plan (“LTIP”) and 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”. This incentive plan has been granting annual extensions in the same terms from the original granted in 2014. The Company measures the cost of its equity-settled transactions at fair value at the date the equity benefits are conditionally granted to employees. The cost of equity-settled transactions is recognized in the statement of operations, together with a corresponding increase in treasury shares, over the period in which the performance and/or service conditions are fulfilled. For grants that vest on meeting performance conditions, compensation cost is recognized when it becomes probable that the performance condition will be met. During 2021, 2020 and 2019, the Company approved a new long-term retention plan (“LTRP”), which consisted in a purchase plan (equity-settled). This plan does not include cash compensations granted through appreciation rights on the Company’s shares. The retention plans granted in previous periods will continue in full force and effect until their respective due dates and the cash compensation derived from them will be settled according to the conditions established in each plan. 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 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 (Note 18). During the years ended December 31, 2021, 2020 and 2019, the Company expensed Ps.89,464, Ps.75,040 and Ps.49,659, respectively, related to RSUs granted under the LTIP and LTRP. The expenses were recorded under the caption salaries and benefits. - 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 (Note 18). As of December 31, 2021 the Company did not record an expense or benefit related to the SARs included in the LTIP. During the years ended December 31, 2020 and 2019, the Company recorded a (benefit) expense for Ps.(1,901) and Ps.2,964, respectively, related to the SARs included in the LTIP. These amounts were recorded under the caption salaries and benefits. The cost of the SARs plan is measured initially at fair value at the grant date, further details of which are given in (Note 18). This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. As with the equity settled awards described above, the valuation of cash settled award also requires using similar inputs, as appropriate. b) Management incentive plan (“MIP”) - MIP I 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 20. requisite service period (Note 18). The total cost of this plan has been totally recognized during the required 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 (Note 18). During the years ended December 31, 2021, 2020 and 2019, the Company recorded a (benefit) expense for Ps. (62,262), Ps.107,204 and Ps.37,760, respectively, related to MIP II into the consolidated statement of operations. c) Board of Directors Incentive Plan (BoDIP) Certain members of the Board of Directors of the Company receive additional benefits through a share-based plan, which has been classified as an equity-settled share-based payment and therefore accounted under IFRS 2 “Shared based payments”. In April 2018, the Board of Directors of the Company authorized a Board of Directors Incentive Plan “BoDIP”, for the benefit of certain board members. The BoDIP grants options to acquire shares of the Company or CPOs during a period, which was determined on the grant date. Under this plan, no service or performance conditions are required to the board members for exercise the option to acquire shares, and therefore, they have the right to request the delivery of those shares at the time they pay for them.vii) Employee profit sharing 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%. For the years ended December 31, 2021, 2020 and 2019, the employee profit sharing is Ps.262,667, Ps.13,458 and Ps.22,134, respectively, and is presented as an operating 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 regulations. p) Leases The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease liabilities for payments to be made under the lease term and right-of-use assets representing the right to use the underlying assets. i. Right-of-use assets The Company recognizes right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset to the condition required by the terms and conditions of the lease, and lease payments made at or before the commencement date less any lease incentives received. Components of the right-of-use assets are depreciated on a straight-line basis over the shorter of the remining lease term and the estimated useful lives of the assets, as follows:
ii. Lease Liabilities At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset. The short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term. During the years ended December 31, 2021, 2020 and 2019, there were no impairment charges recorded in respect of the Company right-of-use asset. iii. Sale and leaseback The Company enters into sale and leaseback agreements whereby an aircraft or engine is sold to a lessor upon delivery and the lessor agrees to lease such aircraft or engine back to the Company. The Company measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by the seller-lessee. Accordingly, the Company recognizes in the Statement of Operations only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the lease are not at market rates, then the Company adjusts the difference to measure the sale proceeds at fair value and accounts for any below-market terms as a prepayment of lease payments an any above market terms as additional financing provided by the buyer-lessor to the seller-lessee. First, the sale and leaseback transactions are analyzed within the scope of IFRS 15 - Revenue from Contracts with Customers, in order to verify whether the performance obligation has been satisfied and, therefore, are accounted for the sale of the asset. If this requirement is not met, it is a financing with the asset given as collateral. If the requirements related to the performance obligation established in IFRS 15 are met, the Company measures an asset for right of use that arises from the sale transaction with subsequent lease in proportion to the book value of the asset related to the right-of-use assets retained by the Company. Consequently, only the gains or losses related to the rights transferred to the lessor-buyer are recognized. q) Return obligations The aircraft lease agreements of the Company also require that the aircraft components (airframe, APU and landing gears) and engines (overhaul and limited life parts) 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 variable lease expenses and the provision is included as part of other liabilities, through the remaining lease term. The Company estimates the provision related to aircraft components and engines using certain assumptions including the projected usage of the aircraft and the expected costs of maintenance tasks to be performed. This provision is made in relation to the present value of the expected future costs of meeting the return conditions (Note 14 and 16). r) 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. s) 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. 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 recognized in respect of 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. 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. Income taxes are computed based on tax laws approved in Mexico, Costa Rica, Guatemala and El Salvador at the date of the consolidated statement of financial position. The IFRIC Interpretation 23 Uncertainty over Income Tax Treatment addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:
The Company determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. The Company applies significant judgement in identifying uncertainties over income tax treatments. Since the Company operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements. Upon adoption of the Interpretation, the Company considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Company determined, based on its tax compliance and transfer pricing studies, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. As of December 31, 2021 and 2020 the Interpretation did not have an impact on the consolidated financial statements of the Company. t) Derivative and non-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 and non-derivative financial instrument. In accordance with IFRS 9, derivative financial instruments and non-derivative financial instruments are recognized in the consolidated statement of financial position at fair value. At 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 have been effective throughout the financial reporting periods for which they were designated, hedge accounting treatment can be used. Under the cash flow hedge (CFH) accounting model, the effective portion of the hedging instrument’s changes in fair value is recognized in OCI, while the ineffective portion is recognized in current year earnings in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item. The amounts recognized in OCI are transferred to earnings in the period in which the hedged transaction affects earnings. During the year ended December 31, 2021, the Company did not recognize an ineffective portion with respect to derivative financial instruments. As of December 31,2020, the Company recorded the ineffective portion of Ps.448.6 million, with respect to derivative financial instruments. During the year ended December 31, 2019, there was no ineffectiveness with respect to derivative financial instruments. The realized gain or loss of derivative financial instruments and non-derivative financial instruments that qualify as CFH are recorded in the same caption of the hedged item in the consolidated statement of operations (Note 3 b (i)). Accounting for the time value of options The Company accounts for the time value of options in accordance with IFRS 9, 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 are recognized in income. u) 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 (Notes 4 and 5). v) 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, issuance 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 were settled with treasury shares (Note 18). w) Operating segments Management of Controladora monitors the Company 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, Central America and South America) Note 26. x) 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. 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. y) Impact of new International Financial Reporting Standards New and amended standards and interpretations already effective The Company applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after January 1, 2021. 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: Covid-19-Related Rent Concessions beyond June 30, 2021 Amendments to IFRS 16 On May 28, 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification. The amendment was intended to apply until June 30, 2021, but as the impact of the Covid-19 pandemic is continuing, on March 31, 2021, the IASB extended the period of application of the practical expedient to June 30, 2022.The amendment applies to annual reporting periods beginning on or after April 1st, 2021. As of December 31, 2021 this amendment did not have impact on the consolidated financial statements of the Company (Note 14). Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients:
These amendments had no impact on the consolidated financial statements of the Company (Note 3c). Standards issued but not yet effective Annual Improvements to IFRS Standards 2018–2020 IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual reporting periods beginning on or after January 1st, 2022 with earlier adoption permitted. The Company expects to adopt the improvements in their effective dates considering preliminarily no significant effects. Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 In May 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after January 1st, 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. The Company expects to adopt the amendments in their effective dates considering preliminarily no significant effects. Reference to the Conceptual Framework – Amendments to IFRS 3 In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework. The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its requirements. The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential “day 2” gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 Levies, if incurred separately. At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively. The Company expects to adopt the amendments in their effective dates considering preliminarily no significant effects. Amendments to IAS 1: Classification of Liabilities as Current or Non-current In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:
The amendments are effective for annual reporting periods beginning on or after January 1st, 2023 and must be applied retrospectively. The Company is currently assessing the impact of these amendments which expects to adopt in their effective date. Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to IAS 1 are applicable for annual periods beginning on or after January 1st, 2023 with earlier application permitted. Since the amendments to the Practice Statement 2 provide non-mandatory guidance on the application of the definition of material to accounting policy information, an effective date for these amendments is not necessary. The Company is currently assessing the impact of these amendments which expects to adopt in their effective date. Definition of Accounting Estimates – Amendments to IAS 8 In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of “accounting Estimates”. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective for annual reporting periods beginning on or after January 1st, 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted as long as this fact is disclosed. The Company is currently assessing the impact of these amendments which expects to adopt in their effective date. Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 The amendments to IAS 12 Income Taxes require companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendment is effective for annual reporting periods beginning on January 1st, 2023 and should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, entities should recognize deferred tax assets (to the extent that it is probable that they can be utilized) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with:
The cumulative effect of recognizing these adjustments is recognized in retained earnings, or another component of equity, as appropriate. IAS 12 did not previously address how to account for the tax effects of on-balance sheet leases and similar transactions and various approaches were considered acceptable. At the date of adoption of IFRS 16, the Company applied the criterion of recognizing the deferred assets and liabilities associated with the lease liability and the right of use, which is consistent with this amendment to IAS 12, and therefore this will not generate effects in the Company. (Note 20). z) Convenience translation U.S. dollar amounts on December 31, 2021 shown in the consolidated financial statements have been included solely for the convenience of the reader and are translated from Mexican pesos, using an exchange rate of Ps.20.5835 per U.S. dollar, as reported by the Mexican Central Bank (Banco de México) as the rate for the payment of obligations denominated in foreign currency payable in Mexico in effect on December 31, 2021. 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 not audited, is solely for information purposes and does not represent that the amounts are in accordance with IAS 21 Effects of variations in foreign currency exchange rates 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. |
Significant accounting judgments, estimates and assumptions |
12 Months Ended |
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Dec. 31, 2021 | |
Significant accounting judgments, estimates and assumptions | |
Significant accounting judgments, estimates and assumptions | 2. Significant accounting judgments, estimates and assumptions The preparation of these financial statements requires management to make estimates, assumptions and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s consolidated financial statements. Note 1 to the Company’s consolidated financial statements provides a detailed discussion of the significant accounting policies.Certain of the Company’s accounting policies reflect significant judgments, assumptions or estimates about matters that are both inherently uncertain and material to the Company’s financial position or results of operations. Actual results could differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimate is revised. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. For Leases significant accounting judgments, estimates and assumptions refer to Note 1q. i) Return obligations The aircraft lease agreements of the Company also require that the aircraft components (airframe, APU and landing gears) and engines (overhaul and limited life parts) 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 variable lease expenses and the provision is included as part of other liabilities, through the remaining lease term. The Company estimates the provision related to aircraft components and engines using certain assumptions including the projected usage of the aircraft and the expected costs of maintenance tasks to be performed. This provision is made in relation to the present value of the expected future costs of meeting the return conditions (Note 14 and 16). ii) Deferred taxes Deferred tax assets are recognized for all available tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Management’s judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning opportunities to advance taxable profit before expiration of available tax losses. Tax losses relate to operations of the Company on a stand-alone basis, in conformity with current Tax Law and may be carried forward against taxable income generated in the succeeding years at each country and may not be used to offset taxable income elsewhere in the Company’s consolidated group (Note 20). During the years ended December 31, 2021, 2020 and 2019, the Company utilized Ps.1,944,922, Ps.0 and Ps.214,460, respectively, of the available tax loss carry-forwards. iii) Fair value measurement of financial instruments Where the fair value of financial assets and financial liabilities recorded in the consolidated statements of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and expected volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments (Note 4). iv) Impairment of long-lived assets The Company assesses whether there are indicators of impairment for long-lived assets and right of use assets, annually and at other times when such indicators exist in the related CGU. Impairment exists when the carrying amount of a long-lived asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less cost to sell and its value-in-use. In making these determinations, the Company uses certain assumptions, including, but not limited to estimated, undiscounted future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service the asset will be used in the Company’s operations, excluding additions and extensions. The Company’s assumptions about future conditions important to its assessment of potential impairment of its long-lived assets, including the impact of the COVID-19 pandemic to its business, are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as new information becomes available, and will updated its analyses accordingly. For the year ended December 31, 2021 the Company has evaluated whether there were indications of impairment in its long-lived assets and right-of-use assets and concluded that there are no triggering events. For the year ended December 31, 2020 the Company evaluated whether there were indications of impairment and concluded that there were triggering events. Therefore, performed a quantitative impairment test and estimated the recoverable amount of the CGU by calculating the CGU value in use. As a result of this analysis, the Company determined the recoverable amount was in excess of the CGU book value and, therefore, no impairment was recorded. v) Leases - Estimating the incremental borrowing rate The Company cannot readily determine the interest rate implicit in its leases, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency). The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). |
Financial instruments and risk management |
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Financial instruments and risk management | 3. Financial instruments and 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 risk 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. Since adverse movements erode the value of recognized financial assets and liabilities, as well some other off-balance sheet financial exposures, there is a need for value preservation, by transforming the profiles of these fair value exposures. The Company has a Finance and Risk Management department, which identifies and measures financial risk exposures, in order to design strategies to mitigate or transform the profile of certain risk exposures, which are taken up to the corporate governance level for approval. Market risk a) Jet fuel price risk 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 on 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 years ended December 31, 2021, 2020 and 2019 represented 34%, 26% and 38% (includes derivative and non-derivative financial instruments) of the Company’s operating expenses, respectively. The foreign currency risk is disclosed within subsection b) in this note. During the year ended December 31, 2021, the Company did not enter into derivative financial instruments to hedge US Gulf Coast Jet Fuel 54 Asian call options and US Gulf Coast Jet Fuel 54 Asian Zero-Cost collar options. As of the year ended December 31, 2020, the Company entered into US Gulf Coast Jet fuel 54 Asian call options designated to hedge 23,967 thousand gallons. Such hedges represented a portion of the projected consumption for the 2Q20, 3Q20 & 1Q21. Additionally, during the year ended December 31, 2020, the Company entered into US Gulf Coast Jet Fuel 54 Asian Zero-Cost collar options designated to hedge 81,646 thousand gallons. Such hedges represented a portion of the projected consumption for the 2Q20, 2H20 & 2Q21. As of the year ended December 31, 2020 the Company recognized an unwind of the Zero cost collar of Ps.42,643 which was recognized as part of finance cost. In accordance with IFRS 9 the Company separates the intrinsic value from the extrinsic value of an option contract; as such, the change in the intrinsic value can be designated as hedge accounting. Because extrinsic value (time and volatility values) of the Asian call options is related to a “transaction related hedged item”, it is required to be segregated and accounted for as a cost of hedging in OCI and accrued as a separate component of stockholders’ equity until the related hedged item matures and therefore impacts profit and loss. 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 an 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”. All the Company’s Asian calls matured throughout the first quarter of 2021. The Zero-Cost Collars matured throughout the second quarter of 2021, leaving no outstanding fuel position going forward as of December 31, 2021. As of December 31, 2020, the fair value of the outstanding US Gulf Coast Jet Fuel Asian call options was an unrealized gain of Ps.206; as for the Zero-Cost Collars it was an unrealized loss of Ps.9,657 and is presented as part of the derivative financial assets and derivative financial liabilities in the consolidated statement of financial position. (See Note 4). During the year ended December 31, 2021, the intrinsic value of the Asian call options recycled to the fuel cost was an expense of Ps.12,577. During the year ended December 31, 2020, the intrinsic value of the Asian call options recycled to the fuel cost was an expense of Ps.33,627 (Ps.20,646 which was recognized in the fuel cost and an expense of Ps.12,981 in finance cost). During the year ended December 31, 2019, the intrinsic value of the Asian call options recycled to the fuel cost was an expense of Ps.61,069. During the year ended December 31, 2021, there was no cash flow to recycle for the Zero-Cost collar position. During the year ended December 31, 2020, the intrinsic value of the Zero-Cost Collars recycled to the fuel cost was an expense of Ps.1,271,462 (Ps.835,884 which was recognized in the fuel cost and an expense of Ps.435,578 in finance cost) and for the year ended December 2019 the intrinsic value of the Zero-Cost Collars recycled to the fuel cost was an expense of Ps.9,477. The cost of hedging derived from the extrinsic value changes of the jet fuel hedged position as of December 31, 2020 recognized in other comprehensive income totals Ps.21,650. As of December 31, 2019 the benefits of the hedges was Ps.(133,567), and was recycled to the fuel cost in 2021, as these options were expired on a monthly basis and the jet fuel was consumed. During the year ended December 31, 2021, all the derivative financial instruments were effective. For the period ended December 31, 2021, there was no cost of hedging as all the derivatives position matured all through 2Q21. As of December 31,2021, the Company didn´t hold any outstanding fuel position. The following table includes the notional amounts and strike prices of the derivative financial instruments outstanding as of the end of December 2020:
* US Gulf Coast Jet 54 as underlying asset ** Weighted average Fuel Sensitivity The sensitivity analysis provided below presents the impact of a change of US$0.01 per gallon in fuel market spot price in the Company´s financial performance. Considering these figures, an increase of US$0.01 per gallon in the fuel prices during 2021 and 2020 would have impacted the Company’s operating costs in US$2,731 and US$1,762, respectively.
The Company has been proactively trying to mitigate this impact over our business through revenue yielding and a continued effort towards a reduced fuel consumption. Nonetheless, our ability to pass on any significant increases in fuel costs through fare increases is also limited by our ultra-low-cost business model and market high elasticity to price. b) Foreign currency risk On December 31, 2021 the Company and its main subsidiary Concesionaria changed their functional currency from the Mexican Pesos to the US Dollar. The change of functional currency was accounted for prospectively with no impact on prior period information (Note 1m). Through the year ending December 31, 2021 and before the change, the Mexican peso was the functional currency of Controladora and its main subsidiary Concesionaria, a significant portion of its operating expenses are denominated in U.S. dollar; thus, the Company relies on sustained U.S. dollar cash flows coming from operations in the United States of America, Central America and South America to support part of its commitments in such currency. Foreign currency risk arises from possible unfavorable movements in the exchange rate which could have a negative impact in the Company’s cash flows. To mitigate this risk, the Company may use foreign exchange derivative financial instruments and non-derivative financial instruments. Company’s expenditures, particularly those related to aircraft leasing and acquisition, are denominated in U.S. dollar. In addition, although jet fuel for those flights originated in Mexico are paid in Mexican pesos, the price formula is impacted by the Mexican peso /U.S. dollar exchange rate. The Company’s exposure to currency risk as of December 31, 2021 is as set forth below:
*The foreign exchange exposure includes: Quetzales, Colombian pesos and Colones. The Company’s foreign exchange exposure as of December 31, 2020 is as set forth below:
At April 26, 2022, date of issuance of these financial statements, the exchange rate was Ps.20.3183 per U.S. dollar. In determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the Company initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Company determines the transaction date for each payment or receipt of advance consideration. As of December 31, 2021 and 2020, the Company did not enter into foreign exchange rate derivatives financial instruments. All the Company’s remaining position in FX plain vanilla forwards matured throughout the first quarter of 2019 (January). For the year ended December 31, 2019, the net gains on the foreign currency forward contracts were Ps.4,199, which were recognized as part of rental expense in the consolidated statements of operations. Foreign currency sensitivity On December 31, 2021, the Company and its main subsidiary Concesionaria changed its functional currency from the Mexican peso to the US dollar. The following table demonstrates the sensitivity of a possible change in Mexican peso exchange rate to US dollar that would affect the Company prospectively from December 31, 2021 considering the change in functional currency, with all other variables held constant. The movement in the pre-tax effect shown below represents the result of a change in the fair value of assets and liabilities denominated in Mexican peso. The Company’s exposure to foreign currency exchange rates for all other currencies is not material.
The following tables demonstrate the sensitivity to a reasonably possible change in USD exchange rates that would have occurred as of December 31, 2021 before consideration of the change in functional currency of Concesionaria and Controladora, with all other variables held constant. The movement in the pre-tax effect is a result of a change in the fair value of assets and liabilities denominated in US dollars before the change in functional currency. The Company’s exposure to foreign currency changes for all other currencies is not material.
i) Hedging relationships designating non-derivative financial instruments as hedging instruments for Foreign Exchange (FX) risk Regarding the foreign currency risk effective since January 1st, 2019, the Company implemented two hedging strategies associated to forecasted FX exposures, by using non-derivatives financial assets and liabilities denominated in USD as hedging instruments. In the first FX hedging strategy, the Company designated a hedge to mitigate the variability in FX fluctuation denominated in USD associated to forecasted revenues by using a portion of USD denominated financial liabilities associated to a portfolio of leasing liabilities up until the terms of the remaining leasing arrangements. As of December 31, 2021, there was not outstanding USD balance designated under this hedging strategy due to the discontinuation of the hedge relationships. The outstanding USD balance designated under this hedging strategy as of December 31, 2020 amount to USD $1.5 billion, represented by recognized leasing liabilities, which have been designated as hedging instruments tagged to USD denominated forecasted revenues over the remaining lease term. Additionally, during the year ended December 31, 2021 and 2020, the impact of these hedges was Ps.434,522 and Ps.411,222, respectively, which has been presented as part of the total operating revenue. The second FX strategy consisted on designating a hedging relationship by using a portion of USD denominated non-derivative financial assets as hedging instruments, to mitigate the FX variability (MXN/USD) contractually included as a component in the purchase of a portion of future Jet Fuel consumption. For this strategy designated in 2019, a portion of the Jet Fuel consumption over the two following years was designated as hedged item; while the hedging instrument was represented by USD denominated recognized assets, including guaranteed deposits and cash and cash equivalents equivalent to USD$410 million, which represent a portion of the financial assets denominated in USD. During the first quarter of 2021, the designated hedging instrument back in 2019 for USD$410 million expired consistent with the same foreign exchange strategy, the Company decided to designate a new hedging relationship, like the one concluded. For this new strategy a portion of the Jet Fuel consumption over the two following years has been designated as hedged item; while the hedging instrument was represented by USD denominated recognized assets, including guaranteed deposits and cash and cash equivalents equivalent to USD$350 million, which represent a portion of the financial assets denominated in USD. As of December 31, 2021, there was not outstanding USD balance designated under this hedging strategy due to the discontinuation of the hedge relationships.The outstanding USD balance designated under this hedging strategy as of December 31, 2020 amount to USD$60.5 million, which does represent a portion of the recognized financial assets. During the year ended December 31, 2021 and 2020, the impact of these hedges was Ps.182,190 and Ps.409,174, respectively, which has been presented as part of the total fuel expense. Since the hedged items on for both hedging strategies were targeted at mitigating the cash flow variability of highly expected forecasted transactions, these were represented by multiple hedging relationships which do follow the Cash Flow Hedge Accounting Model. The effective portion of the hedging instrument’s changes in fair value, were taken to the hedge reserve within the OCI, presented as a separate caption within the Company’s Stakeholders Equity, which is in accordance with IFRS 9 criteria. The amounts recorded in OCI were recycled to profit and loss on a timely basis as corresponding USD denominated Income and/or Jet Fuel consumptions also affected the Company’s operating margin and are presented as adjustments to both operating income and expense, with respect to each FX hedging strategy in a timely manner, as USD denominated income and jet fuel consumption were recognized within operating earnings, hence reflecting a portion of both operating income and expenses amounts, net of both FX Hedging activities. As of December 31, 2021, as a result of the change in functional currency from the Mexican peso to the US dollar, the Company concluded that these hedging strategies will no longer be effective, for which reason it accounted for the discontinuation of the hedge relationships. Accordingly, the cash flow hedge reserve in other comprehensive income at the date of the change of Ps.2,251,442 or US$109 million was reclassified to the income statement, which represented a loss within the foreign exchange (loss) gain, net caption. 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 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”). For the replacement of the USD LIBOR by the Secured Overnight Financing Rate (“SOFR”) the company is taking the necessary measures to adopt the new benchmark rates. Although USD LIBOR was planned to be discontinued by the end of 2021, in November 2020 the ICE Benchmark Administration (“IBA”), the FCA-regulated and authorized administrator of LIBOR, announced that it had started to consult on its intention to cease the publication of certain USD LIBORs after June 2023. As of 31 December 2021, it is still unclear when the announcement that will set a date for the termination of the publication of US dollar LIBOR will take place. The Company uses derivative financial instruments to reduce its exposure to fluctuations in market interest rates and accounts for these instruments as an accounting hedge. In most cases, when a derivative can be tailored within the terms and it perfectly matches cash flows of a leasing agreement, it may be designated as a CFH and the effective portion of fair value variations are recorded in equity until the date the cash flow of the hedged lease payment is recognized in the consolidated statements of operations. The Irrevocable Trust number CIB/3249, whose trustor is the Company, entered a cap to mitigate the risk due to interest rate increases on the CEBUR (VOLARCB19) coupon payments. The floating rate coupons reference to TIIE 28 are limited under the cap to 10% on the reference rate for the life of the CEBUR (VOLARCB19) and have the same amortization schedule. Thus, the cash flows of the CEBUR (VOLARCB19) are perfectly matched by the hedging instrument. The sensitivity analysis of the change in the fair value of the interest hedging instrument on the CEBUR (VOLARCB19) as a result of a reasonably possible change in rates, keeping all other variables constant is as set forth below:
The cap start date was July 19, 2019, and the maturity date is June 20, 2024; consisting of 59 “caplets” with the same specifications as the CEBUR (VOLARCB19) coupons for reference rate determination, coupon term, and fair value. In addition, during November 2021 the Trust entered into a cap to mitigate the risk due to interest rate increases on the CEBUR (VOLARCB21L) coupon payments. The floating rate coupons reference to TIIE 28 are limited under the cap to 10% on the reference rate for the life of the CEBUR (VOLARCB21L) and have the same amortization schedule. Thus, the cash flows of the CEBUR (VOLARCB21L) are perfectly matched by the hedging instrument. The cap start date was November 3, 2021, and the maturity date is October 20, 2026; consisting of 59 “caplets” with the same specifications as the CEBUR (VOLARCB21L) coupons for reference rate determination, coupon term, and fair value. The sensitivity analysis of the change in the fair value of the interest hedging instrument on the CEBUR (VOLARCB21L) as a result of a reasonably possible change in rates, keeping all other variables constant is as set forth below:
As of December 31, 2021 and December 31, 2020, the Company’s outstanding hedging contracts in the form of interest rate caps with original notional amount of Ps.3.0 billion and Ps.1.5 billion, respectively, had fair values of Ps.28,771 and Ps.326, respectively, and are presented as part of the financial assets in the consolidated statement of financial position. As of December 31, 2021, the effect allocated in OCI in relation to the interest rate caps amounts to Ps.5,407. Debt Sensitivity Analysis The following sensitivity analysis considers the position exposed to variable interest rates. The target interest rate of the Banco de Mexico increased 125 bp in 2021, going from 4.25% to 5.50%. In addition to the reference changes, if the interest rate had changed on an annual average in the magnitude shown, the impact on results would have been as shown below:
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. 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, lease liabilities and derivative contracts. The Company’s off-balance sheet exposure represents the future obligations related to aircraft purchase contracts. The Company concluded that it has a low concentration of risk since it has access to alternate sources of funding. As of December 31, 2021, our cash, cash equivalents and restricted cash were Ps.15,254,876. The table below presents the Company’s contractual principal payments required on its financial liabilities and the derivative financial instruments fair value:
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. 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. On December 31, 2021, 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 enough for its present requirements and will be sufficient to meet its anticipated requirements for capital expenditures and other cash requirements for the next 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 years ended December 31, 2021 and 2020. The Company is not subject to any externally imposed capital requirement, other than the legal reserve (Note 19). As part of the management strategies related to acquisition of its aircrafts (pre-delivery payments), the Company pays the associated short-term obligations by entering into sale-leaseback agreements, whereby an aircraft is sold to a lessor upon delivery (Note 5 b). |
Fair value measurements |
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Fair value measurements | 4. Fair value measurements The only financial assets and liabilities measured at fair value after initial recognition are the derivative financial instruments. Fair value is the price that would be received from sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
The principal or the most advantageous market must be accessible to the Company. The fair value of an asset or a liability is assessed using the course of thought which 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:
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:
The following table summarizes the fair value measurements on December 31, 2021:
** LIBOR, SOFR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt. There were no transfers between level 1 and level 2 during the period. The following table summarizes the fair value measurements on December 31, 2020:
* Jet fuel forwards levels and LIBOR curve. ** LIBOR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt. There were no transfers between level and level during the period.The following table summarizes the losses from derivatives financial instruments recognized in the consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019:
The following table summarizes the net gain (loss) on CFH before taxes recognized in the consolidated statements of comprehensive income for the years ended December 31, 2021, 2020 and 2019: Consolidated statements of other comprehensive income (loss)
*As of December 31, 2021, includes the effect of the discontinuation of the hedging strategies by Ps.2,251,442 as described in note 3b (i). The exchange rates used to translate the above amounts to Mexican pesos at December 31, 2021, 2020 and 2019 were Ps.20.5835, Ps.19.9487 and Ps.18.8452, respectively, per U.S. dollar. |
Financial assets and liabilities |
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Financial assets and liabilities | 5. Financial assets and liabilities As of December 31, 2021 and 2020, the Company’s financial assets are represented by cash, cash equivalents and restricted cash, trade and other accounts receivable, accounts receivable for which their carrying amount is a reasonable approximation of fair value. a) Financial assets
b) Financial debt (i) As of December 31, 2021 and 2020, the Company’s short-term and long-term debt consists of the following:
TIIE: Mexican interbank rate (ii) The following table provides a summary of the Company’s scheduled principal payments of financial debt and accrued interest on December 31, 2021:
iii) Since 2011, the Company has financed the pre-delivery payments with Santander/Bancomext for the acquisition of its aircraft through a revolving financing facility. The “Santander/Bancomext” loan agreement provides for certain covenants, including limits to the ability to, among others:
On December 31, 2021, the Company was in compliance with the covenants under the above-mentioned loan agreement. On December 31, 2020, the Company was not in compliance with the financial ratio, therefore, the Company requested a waiver to the banks. The company received a waiver dated October 23, 2020, for the covenant regarding the financial ratio for the PDP financing facility that included the third and fourth quarter of 2020 and the first and second quarter of 2021. The waiver was provided by both banks, Santander and Bancomext. For purposes of financing the pre-delivery payments, Mexican trusts were created whereby, the Company assigned its rights and obligations under the Airbus Purchase Agreement with Airbus S.A.S. (“Airbus”), including its obligation to make pre-delivery payments to the Mexican trusts, and the Company guaranteed the obligations of the Mexican trusts under the financing agreement (CIBanco, S.A., Institución de Banca Múltiple, Fidecomiso (previously Deutsche Bank México, S.A. Fideicomisos 1710 and 1711)). As of December 31, 2021, the financial debt related to finance pre-delivery payments of aircraft amounts to Ps.3,535,649, the company covers this short-term obligation through the celebration of the sale and the collection made by the transaction denominated as sale and leaseback at the time of delivery, therefore, it does not represent a disbursement that directly impacts the company’s working capital. As of December 31, 2021, the Company has committed credit lines totaling Ps.9,949,640 of which Ps.6,967,530 were related to financial debt (Ps.200,000 were undrawn) and Ps.2,982,110 were related to letters of credit (Ps.476,689 were undrawn). As of December 31, 2020, the Company had available credit lines totaling Ps.9,256,978 of which Ps.6,851,338 were related to financial debt (Ps.1,500,726 were undrawn) and Ps.2,405,640 were related to letters of credit (Ps.214,012 were undrawn). On June 20, 2019, the Company, through its subsidiary Concesionaria issued 15,000,000 asset backed trust notes (“CEBUR”) under the ticket VOLARCB 19 for Ps.1.5 billion Mexican pesos through the Fideicomiso Irrevocable de Administración número CIB/3249 created by Concesionaria. The issuance amount is part of a program approved by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) for an amount of up to Ps.3.0 billion Mexican pesos. The notes have a five-year maturity annual reduction of Ps.250,000, Ps.500,000, Ps.500,000 and Ps.250,000 in 2021, 2022, 2023 and 2024, respectively, with a floating one-month coupon rate referenced to TIIE 28 plus with a basis point spread. The notes start amortizing at the end of the second year.On October 13, 2021, the Company, through its subsidiary Concesionaria issued in the Mexico market a second issuance of 15,000,000 asset backed trust notes (“CEBUR”) under the ticket VOLARCB 21L for Ps.1.5 billion Mexican pesos through the Fideicomiso Irrevocable de Administración número CIB/3249 created by Concesionaria. The issuance amount is part of a program approved by the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) for an amount of up to Ps.3.0 billion Mexican pesos. With this second issuance the total amount approved for the program has been reached. The Trust Notes comply with the Sustainability-Linked Bond Principles 2020, administered by the International Capital Market Association (ICMA). Which has Sustainability Objectives (SPT) for the KPI, to reduce carbon dioxide emissions measured as grams of CO2 emissions per revenue passenger/kilometer (gCO2 / RPK) by 21.54%, 24.08% and 25.53% by 2022, 2023 and 2024, respectively, compared to 2015. This offering will help the Company to accomplish its long-term sustainable goals, among which are to reduce CO2 emissions by 35.42% by 2030. A feature of the asset backed trust notes is that they will pay an additional twenty-five ( ) basis points to the interest rate if the sustainability goals are not met, with the possibility of mitigating the additional rate if the 2023 or 2024 targets are met.The notes have a maturity annual reductions of Ps.83,333, Ps.500,000, Ps.500,000 and Ps.416,667 in 2023, 2024, 2025 and 2026, respectively, with a floating one-month coupon rate referenced to TIIE 28 plus with a basis point spread. The notes start amortizing at the end of the second year.The asset backed trust note’s structure operate on specific rules and provide a DSCR “Debt Service Coverage Ratio” which is computed by comparing the Mexican Peso collections over the previous six months to the next 6 months of debt service. In general, not retention of funds exists if the ratio exceeds 2.5 times. Amortization on the asset backed trust notes began in July of 2021 for the first issuance and the second issuance will begin in October of 2023. In addition, early amortization applies if:
In the event of default, the Trustee will refrain from delivering any amount that it would otherwise be to require to deliver to Concesionaria and will dedicate use such cash flow to amortize the principal of the trust notes (“CEBUR”). In December 2021, the Company renewed the working capital facility with Banco Sabadell S.A., Institución de Banca Multiple (“Sabadell”) in Mexican pesos, bearing annual interest rate at TIIE 28 days plus a basis points. As of December 31, 2021, the company paid the dispositions made during the year, therefore, it does not have a balance pending settlement.In December 2019, the Company entered into a short-term working capital facility with Banco Sabadell S.A., Institución de Banca Multiple (“Sabadell”) in Mexican pesos, bearing annual interest rate at TIIE 28 days plus a basis points. The “Sabadell” working capital facility has the following covenant:
At December 31, 2021 and 2020, the Company was in compliance with the covenants under the terms and conditions of the asset backed trusted notes and short-term working capital facilities. Changes in liabilities arising from financing activities For the years ended December 31, 2021 and 2020, the changes in liabilities from financing activities from the Company are summarized in the following table:
* This balance is net of interest provisions and interest effectively paid as of December 31, 2021 and 2020, respectively. c) Other financial liabilities At December 31, 2021 and 2020, the derivative financial instruments designated as CFH from the Company are summarized in the following table:
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Cash and cash equivalents | 6. Cash, cash equivalents and restricted cash An analysis of this caption is as follows:
As of December 31, 2021 and 2020, the Company recorded a portion of advance ticket sales by an amount of Ps.147,415 and Ps.91,040, respectively, as a restricted fund (Note 1e). The restricted funds held in Trusts are used to constitute the debt service reserves and cannot be used for purposes other than those established in the contracts of the Trusts. |
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Related parties | 7. Related parties a) An analysis of balances due from/to related parties at December 31, 2021 and 2020 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:
b) During the years ended December 31, 2021, 2020 and 2019, the Company had the following transactions with related parties:
Frontier started having transactions with the Company in August 2018. As of December 31, 2021 and 2020, there have been no guarantees provided or received for any related party receivables or payables. For the years ended December 31, 2021 and 2020, no provision for expected credit losses has been recognized, due to the Company considers the credit risk is minimal, and these balances are current accounts. c) Servprot Servprot S.A. de C.V. (“Servprot”) is a related party because Enrique Beltranena, the Company’s President and Chief Executive Officer and director, is shareholder of such company. Servprot provides security services for Mr. Beltranena and his family. As of December 31,2021, and 2020 there are not outstanding balances due to Servprot under this agreement. During the years ended December 31, 2021, 2020 and 2019 the Company expensed Ps.3,531, Ps.3,464 and Ps.3,120, respectively for this concept. d) Aeroman Aeroman is a related party, because Marco Baldocchi a member of the board of the Company’s board of directors is an alternate director of Aeroman. The Company entered into an aircraft repair and maintenance service agreement with Aeroman on January 1, 2017. This agreement provides that the Company must use Aeroman, exclusively for aircraft repair and maintenance services, subject to availability. Under this agreement, Aeroman provides inspection, maintenance, repair and overhaul services for aircraft. The Company makes payments under this agreement depending on the services performed. This agreement is for a -year term. As of December 31, 2021 and 2020, the balances due under the agreement to Aeroman were Ps.8,295 and Ps.39,284, respectively. The Company incurred expenses in aircraft maintenance and technical support under this agreement amounted to Ps.163,514, Ps.243,063 and Ps.207,439 for the years ended December 31, 2021, 2020 and 2019, respectively.e) OneLink Onelink, S.A. de C.V. (“Onelink”) was a related party until December 31, 2017, because Marco Baldocchi, a member of the board, was a director of Onelink. As of October 24, 2019 and until June 30, 2020 Onelink Holdings, S.A. (“Onelink Holdings”) and its subsidiary Onelink were related parties, because Mr. Rodrigo Antonio Escobar Nottebohm, a former alternate board member of Onelink Holdings, became an alternate Director of the Company. Pursuant to this agreement, Onelink received calls from the customers to book flights and provides customers with information about fares, schedules and availability. As of December 31, 2021 and 2020, the Company did not recognize any outstanding balances, from Onelink as related party transaction. During the year ended December 31, 2021, the Company did not recognize any revenue and expense transactions as a related party. During the years ended December 31, 2020 and 2019, Company recognized an expense under this agreement of Ps.73,167 and Ps.37,026, respectively. f) Mijares, Angoitia, Cortés y Fuentes Mijares, Angoitia, Cortés y Fuentes, S.C. (“MACF”) is a related party because Ricardo Maldonado Yañez and Eugenio Macouzet de León, member and alternate member, respectively, of the board of the Company since April 2018, are partners of MACF which provides legal services to us. As of December 31, 2021, the Company did not have outstanding balance due to MACF and December 31, 2020, the balance due for the services received from MACF was Ps. 166. During the years ended December 31, 2021, 2020 and 2019, the Company recognize expense transactions with this related party of Ps.4,311, Ps.5,582 and Ps.1,321, respectively. g) Frontier Frontier is a related party because Mr. William A. Franke and Brian H. Franke are members of the board of the Company and Frontier as well as Indigo Partners, the later has investments in both companies. As of December 31, 2021 and 2020, the accounts receivable from Frontier were Ps.95,951 and Ps.72,629, respectively. Additionally, as of December 31, 2021 and 2020, the account payable was Ps.42 and Ps.39, respectively. During the years ended December 31, 2021, 2020 and 2019 the Company recognized revenue under this agreement of Ps.71,210, Ps.148,964 and Ps.208,968, respectively. h) Grupo Aeroportuario del Centro Norte (“OMA”) On April 22, 2020, Grupo Aeroportuario del Centro Norte (“OMA”) became a related party because Mrs. Guadalupe Phillips Margain is an independent member of the board of directors of the Company and member of the board of directors of OMA. Mr. Ricardo Maldonado Yañez is also an independent member of the board of directors of the Company and OMA. As of December 31, 2021 and 2020, the account payable with OMA was Ps.199,393 and Ps.80,681, respectively. During the years ended December 31, 2021 and 2020, the Company recognized expenses with OMA of Ps.133,296 and Ps.32,193, respectively. i) Chevez, Ruiz, Zamarripa y Cia, S.C. (“Chevez”) Chevez, Ruiz, Zamarripa y Cia, S.C. (“Chevez”) is a related party because Mr. José Luis Fernández Fernández is an independent member of the board of directors, as well as the chairman of the Audit and Corporate Governance Committee of the Company and non-managing partner of Chevez. Chevez provides tax advisory services to us. As of December 31, 2021 and 2020, the account payable with Chevez was Ps.9,373 and Ps.4,823, respectively. During the years ended December 31, 2021 and 2020, the Company recognized expenses with Chevez of Ps.4,798 and Ps.4,823, respectively. j) Directors and officers During the years ended December 31, 2021, 2020 and 2019, the chairman and the independent members of the Company’s board of directors received a net compensation of Ps.12,598, Ps.5,762 and Ps.8,085, respectively, and the rest of the directors received a net compensation of Ps.3,620, Ps.3,692 and Ps.4,367, respectively. During the years ended December 31, 2021, 2020 and 2019, all the Company’s senior managers received an aggregate compensation of short and long-term benefits of Ps.383,838, Ps.253,681 and Ps.237,846, respectively, these amounts were recognized in salaries and benefits in the consolidated statement of operations. During the years ended December 31, 2021, 2020 and 2019 the cost of the share-based payments transactions (MIP and LTIP) was Ps.89,464, Ps.75,040 and Ps.49,659, respectively. The (benefit) cost of the cash-settled payments transactions MIP II and SARs were Ps. (62,262), Ps.105,303 and Ps.40,724, respectively (Note 18). The Company has a short-term benefit plan for certain personnel whereby cash bonuses are awarded for meeting certain Company’s performance targets. During the year ended December 31, 2021 the Company recorded a provision in the amount of Ps.155,388. During the year ended December 31,2020 the Company did not record a provision. During the year ended December 31, 2019 the Company recorded a provision in the amount of Ps.80,634. During the years ended December 31, 2021, 2020 and 2019 the Company recorded an expense for an amount of Ps.155,388, Ps.0 and Ps.80,634, respectively, under the caption salaries and benefits. |
Other accounts receivable, net |
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Other accounts receivable, net | 8. Other accounts receivable, net An analysis of other accounts receivable as of December 31, 2021 and 2020, is detailed below:
Accounts receivable have the following aging:
The movement in the allowance for credit losses from January 1, 2019 to December 31, 2021 is as follows:
An allowance for expected credit losses on accounts receivables is established in accordance with the information mentioned in Note 1f) ii). |
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Inventories | 9. Inventories An analysis of inventories as of December 31, 2021 and 2020 is as follows:
The inventory items are consumed during or used mainly in delivery of in-flight services and for maintenance services by the Company and are valued at the lower of cost or replacement value. The Company recognizes the necessary estimates for decreases in the value of its inventories due to impairment, obsolescence, slow movement and causes that indicate that the use or realization of the aircraft spare parts and flight equipment accessories that are part of the inventory will be less than recorded value. During the years ended as of December 31, 2021, 2020 and 2019, the amount of consumption of inventories, recorded as an operating expense as part of maintenance expense was Ps.312,462, Ps.234,691 and Ps.284,687, respectively. |
Prepaid expenses and other current assets |
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Prepaid expenses and other current assets | 10. Prepaid expenses and other current assets An analysis of prepaid expenses and other current assets at December 31, 2021 and 2020 is as follows:
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Guarantee deposits | 11. Guarantee deposits An analysis of this caption as of December 31, 2021 and 2020 is as follows:
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Rotable spare parts, furniture and equipment, net | 12. Rotable spare parts, furniture and equipment, net
* During the years ended December 31, 2021 and 2020, the Company capitalized borrowing costs of Ps.143,966 and Ps.384,038, respectively. The amount of this line is net of disposals of capitalized borrowing costs related to sale and leaseback transactions of Ps.84,273 and Ps.401,862, respectively.
a) On 2021, the Company acquired two NEO spare engines (based on the terms of the Pratt & Whitney purchase agreement FMP), which were accounted for a cost for a total amount of Ps.394,254 (US$19,082). The Company had identified the major components as separate parts at their respective cost. These major components of the engine are presented as part of the flight equipment and depreciated over their useful life. b) During the years ended December 31, 2021, 2020 and 2019, the Company capitalized borrowing costs which amounted to Ps.143,966, Ps.384,038 and Ps.456,313, respectively (Note 23). The rate used to determine the amount of borrowing cost was 2.76%, 3.58% and 5.10%, for the years ended December 31, 2021, 2020 and 2019, respectively. c) Depreciation expense for the years ended December 31, 2021, 2020 and 2019, was Ps.1,022,012, Ps.797,827 and Ps.587,849, respectively. Depreciation charges for the year are recognized as a component of operating expenses in the consolidated statements of operations. d) In October 2005 and December 2006, the Company entered into purchase agreements with Airbus and International Aero Engines AG (“IAE”) for the purchase of aircraft and engines, respectively. Under such agreements and prior to the delivery of each aircraft and engine, the Company agreed to make pre-delivery payments, which were calculated based on the reference price of each aircraft and engine, and following a formula established for such purpose in the agreements. In 2011, the Company amended the agreement with Airbus for the purchase of 44 A320 family aircraft to be delivered from 2015 to 2020. The new order includes 14 A320CEO (“Current Engine Option Aircraft”) and 30 A320NEO. Additionally, during December 2017, the Company amended the agreement with Airbus for the purchase of 80 A320 family aircraft to be delivered from 2022 to 2026. The new order includes 46 A320NEO and 34 A321NEO. Under such agreement and prior to the delivery of each aircraft, the Company agreed to make pre-delivery payments, which shall be calculated based on the reference price of each aircraft, and following a formula established for such purpose in the agreement. In November 2018, the Company amended the agreement with Airbus to reschedule the remaining 26 fleet deliveries between 2019 and 2022. Also, in this amendment the Company used its rights on the Airbus Purchase Agreement to convert six A320NEO into A321NEO. In July 2020, the Company amended the agreement with Airbus to reschedule the 80 aircraft deliveries between 2023 and 2028. In October 2020, the Company amended the agreement with Airbus to reschedule the remaining 18 fleet deliveries between 2020 and 2022. In 2021, the Company amended the agreement with Airbus for the purchase of 39 A320 family aircraft to be delivered from 2023 to 2029. The new order includes only A321NEO aircraft. Under such agreement and prior to the delivery of each aircraft, the Company agreed to make pre-delivery payments, which shall be calculated based on the reference price of each aircraft, and following a formula established for such purpose in the agreement. Also, in this agreement the Company used its rights on the Airbus Purchase Agreement to convert twenty A320NEO into A321NEO. On August 16, 2013, the Company entered into certain agreements with IAE and United Technologies Corporation Pratt & Whitney Division (“P&W”), which included the purchase of the engines for 14 A320CEO and 30 A320NEO respectively, to be delivered between 2014 and 2022. This agreement also included the purchase of one spare engine for the A320CEO fleet (which was received during the fourth quarter of 2016) and six spare engines for the A320NEO fleet to be received from 2017 to 2022. In November 2015, the Company amended the agreement with the engine supplier to provide major maintenance services for the engines of sixteen aircrafts (10 A320NEO and 6 A321NEO). This agreement also includes the purchase of three spare engines, two of them for the A320NEO fleet, and one for the A321NEO fleet. In April 2021, the Company amended the agreement with the engine supplier to provide major maintenance services for the engines of two aircrafts A320NEO. On May 12, 2020, the Company entered into certain agreements with IAE and United Technologies Corporation Pratt & Whitney Division (“P&W”), which included the purchase of the engines for 46 A320NEO and 34 A321NEO respectively, to be delivered between 2022 and 2028. This agreement also included the purchase of eleven firm spare engines for the A320NEO fleet to be received from 2022 to 2029. In October 2021, the Company amended the agreement with the engine supplier to provide major maintenance services for the engines of thirteen aircrafts (all A320NEO). This agreement also includes the purchase of one spare engine for the A320NEO fleet. The Company received credit notes from P&W in December 2017 of Ps.58,530 (USD$3.06 million), which are being amortized on a straight-line basis, prospectively during the term of the agreement. As of December 31, 2021 and 2020, the Company amortized a corresponding benefit from these credit notes of Ps.4,878 and Ps.4,878, respectively, which is recognized as an offset to maintenance expenses in the consolidated statements of operations. During the years ended December 31, 2021 and 2020, the amounts paid for aircraft and spare engine pre-delivery payments were of Ps.1,130,669 (USD$55,639 million) and Ps.2,185,902 (USD$102.7 million), respectively. The current purchase agreement with Airbus requires the Company to accept delivery of 132 Airbus A320 family aircraft during a period of nine years (from January 2022 to November 2029). The agreement provides for the addition of 132 Aircraft to its fleet as follows: thirteen in 2022, five in 2023, seventeen in 2024, sixteen in 2025, twenty-seven in 2026, twenty-one in 2027, nineteen 2028 and fourteen in 2029. Commitments to acquisitions of property and equipment are disclosed in Note 25. During the years ended December 31, 2021, 2020 and 2019 the Company entered into aircraft and spare engines sale and leaseback transactions, resulting in gains of Ps.195,552, Ps.710,522 and Ps.284,759, respectively, these were recorded under the caption other operating income in the consolidated statement of operations, that represented only the amount of gains that relate to the rights transferred to the buyer-lessor. (Note 22). d) During December 2017, the Company entered into an updated total support agreement with Lufthansa for 66 months, with an effective date on July 1, 2018. This agreement includes similar terms and conditions as the original agreement. As part of this agreement, the Company received credit notes of Ps.28,110 (USD$1.5 million), which are being amortized on a straight-line basis, prospectively during the term of the agreement. As of December 31, 2021, 2020 and 2019, the Company amortized a corresponding benefit from these credit notes of Ps.5,230, Ps.5,230 and Ps.5,230, respectively, recognized as an offset to maintenance expenses in the consolidated statements of operations. e) On September 5, 2019, the Company acquired one previously leased A319 aircraft from the lessor, which was accounted for a cost for a total amount of Ps.392,076 (USD$19,600). This transaction did not generate any gain or loss in our consolidated statements of operations. The Company identified the major components as separate parts at their respective cost. These major components of the aircraft are presented as part of the aircraft and depreciated over their useful life. During December 2019, the Company sold acquired aircraft engines in a sale and lease back transaction. As of December 31, 2021 and 2020 the carrying amount of the remaining owned aircraft was Ps.7,859 and Ps.47,039, respectively, and for the years ended December 31, 2021, 2020 and 2019 the depreciation expense was Ps.39,179, Ps.5,946, and 1,787, respectively. |
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Intangible assets, net | 13. Intangible assets, net The composition and movement of intangible assets is as follows:
The Company had implemented the SAP4HANA software. As a result of the analysis carried out, it was concluded that the Company controls the software, therefore it is the only beneficiary with respect to the configuration, since the settings made were customized according to the needs of the business. The costs directly attributable to the implementation were recognized as an intangible asset, the other costs different to the implementation were recognized in Net Income As of December 31, 2021, the capitalization for this implementation was Ps.90,187. Software amortization expense for the years ended December 31, 2021, 2020 and 2019 was Ps.137,212, Ps.100,618 and Ps.87,667, respectively. These amounts were recognized in depreciation and amortization caption on the consolidated statements of operations. |
Leases |
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Leases | 14. Leases As of December 31, 2021 and 2020 the most significant leases are as follows: a) Aircraft and engines represent the Company’s most significant lease agreements. On December 31, 2021, the Company leases 100 aircraft (85 as of December 31, 2020) and 20 spare engines under lease agreements (18 as of December 31, 2020) that have maximum terms through 2033. These leases are generally guaranteed by either deposit in cash or letters of credits. Composition of the fleet and spare engines, leases*:
* Certain of the Company’s aircraft and engine lease agreements include an option to extend the lease term period. Management evaluates extensions based on the market conditions at the time of renewal. During the year ended December 31, 2021, the Company added fifteen new leased aircraft to its fleet (five A320 NEO´s acquired through sale and leaseback transactions under our existing Airbus purchase agreement and ten obtained directly from the lessor’s aircraft order book). Also, the Company extended the lease term of thirteen A320CEO (effective from 2022, 2023 and 2025) and two A319CEO (effective from 2021). All the aircraft incorporated through the lessor´s aircraft order were not subject to sale and leaseback transactions. During the year ended December 31, 2021, the Company also incorporated two NEO spare engines. Such leases were not subject to sale and leaseback transactions. Also, the Company extended the lease term of three spare engines (two of them effective from February 2021 and the from October 2021).During the year ended December 31, 2020, the Company added seven new leased aircraft to its fleet (seven A320 NEO´s acquired through sale and leaseback transactions under our existing Airbus purchase agreement). Also, the Company returned three aircraft to their respective lessors. During the year ended December 31, 2020, the Company also incorporated two NEO spare engines (based on the terms of the Pratt & Whitney purchase agreement FMP) and two CEO spare engines to its fleet. These four engines incorporated were subject to sale and leaseback transactions and their respective lease agreements were accounted for leases. Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:
Set out below are the carrying amounts of lease liabilities and the movements during the period:
The Company had total cash outflows for leases of Ps.9,308,477 in 2021 (Ps.6,110,569 in 2020 and Ps.6,499,802 in 2019). The Company applied practical expedients to leases in accordance with IFRS 16 guidance on lease modification accounting for rent concessions for those lease modifications arising as a direct result of COVID-19. The net impact on the consolidated statements of operations for 2020 was Ps.190,811, which reflects the changes to lease payments that arose from such concessions. During the year ended of December 31, 2021, the Company have not rent concessions for lease modifications arising as a direct result of COVID-19. For the years ended December 31, 2021, 2020 and 2019 the amounts recognized in profit or loss were as follow:
i) Return obligations The aircraft lease agreements of the Company also require that the aircraft and engines be returned to lessors under specific conditions of maintenance. The costs of return, which no case are related to scheduled major maintenance, are estimated and recognized ratably as a provision from the time it becomes likely such costs will be incurred and can be estimated reliably. These return costs are recognized on a straight-line basis as a component of variable lease expenses and the provision is included as part of other liabilities, through the remaining lease term. The Company estimates the provision related to airframe, engine overhaul and limited life parts using certain assumptions including the projected usage of the aircraft and the expected costs of maintenance tasks to be performed. For the years ended December 31, 2021, 2020 and 2019, in relation with this provision the Company expensed as supplemental rent Ps.1,131,107, Ps.1,428,179 and Ps.680,964, respectively. Extension options Some lease contracts contain extension options, which the Company evaluates exercising once the lease period comes to its end based on the market conditions at such moment. The lease liabilities corresponding to leases on which it was decided to extend are remeasured for the period negotiated between the Company and the lessor. For the leases which it was decided to exercise the extension options during 2021, resulted in an increase in the lease liability and corresponding right of use by Ps.1,376,005. |
Accrued liabilities |
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Accrued liabilities | 15. Accrued liabilities a) The detail of current accrued liabilities as of December 31, 2021 and 2020 is as follows:
b) Non-current accrued liabilities as of December 31, 2021 and 2020 is as follows:
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Other liabilities | 16. Other liabilities
During the years ended December 31, 2021 and 2020 no cancellations or write-offs related to these liabilities were recorded. Since 2012, the Company holds a cobrand credit card agreement with Banco Invex, S.A., Institución de Banca Múltiple, Invex, Grupo Financiero Invex “Invex”. Through this agreement, Invex pays certain commissions to Volaris related to the cobrand credit card and Invex’s clients receive vouchers to be redeemed in different Volaris services under certain conditions. A portion of the voucher cost is paid by Volaris and the remaining amount by Invex. During the years ended December 31, 2021 and December 31, 2020, Invex prepaid certain commissions to Volaris, which were recorder in guarantee deposit as part of other liabilities. |
Employee benefits |
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Employee benefits | 17. Employee benefits The components of net period cost recognized in the consolidated statement of operations and the obligations for seniority premium for the years ended December 31, 2021, 2020 and 2019, are as follows:
Changes in the defined benefit obligation are as follows:
The significant assumptions used in the computation of the seniority premium obligations are shown below:
Accruals for short-term employee benefits (included as part of other liabilities). As of December 31, 2021 and 2020, respectively, are as follows:
The key management personnel of the Company include the members of the Board of Directors (Note 7). Sensitivity analysis The reasonably possible variations at the date of the report, in one of the most significant actuarial assumptions, and assuming that the rest of the variables had remained constant, would have affected the benefit obligations defined as of December 31, 2021 in the amounts shown below:
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Share-based payments |
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Share-based payments | 18. Share-based payments a) LTRP On November 6, 2014, the shareholders of the Company and the shareholders of its subsidiary Servicios Corporativos, approved an amendment to the current LTRP for the benefit of certain key employees, based on the recommendations of the Board of Directors of the Company at its meetings held on July 24 and August 29, 2014. For such purposes on November 10, 2014 an irrevocable Administrative Trust was created by Servicios Corporativos and the key employees. The new plan was restructured and named LTIP, which consists of a share purchase plan (equity-settled transaction) and SARs plan (cash settled). On October 18, 2018, the Board of Directors of the Company approved a new long-term retention plan LTRP for certain executives of the Company, through which the beneficiaries of the plan, will receive shares of the Company once the service conditions are met. This plan does not include cash compensations granted through appreciation rights on the Company’s shares. The retention plans granted in previous periods under LTRP will continue in full force and effect until their respective due dates and the cash compensation derived from them will be settled according to the conditions established in each plan. b) LTIP - Share purchase plan (equity-settled) Under the share purchase plan (equity- settled), in November 2014 certain key employees of the Company were granted with a special bonus by an amount of Ps.10,831, to be used to purchase Company’s shares. The plan consisted in:
As the Administrative Trust is controlled and therefore consolidated by Controladora, shares purchased in the market and held within the Administrative Trust are presented for accounting purposes as treasury stock in the consolidated statement of changes in equity. In November 2021, 2020 and 2019, the extensions to the LTIP were approved, respectively by the Company’s shareholder’s and Company’s Board of Directors, respectively. The total cost of the extensions approved were Ps.104,698 (Ps.68,066 net of withheld taxes), Ps.92,132 (Ps.59,899 net of withheld taxes) and Ps.86,772 (Ps.56,407 net of withheld taxes), respectively. Under the terms of the incentive plan, certain key employees of the Company were granted a special bonus that was transferred to the Administrative Trust for the acquisition of Series A shares of the Company. As of December 31, 2021, 2020 and 2019, the number of shares into the Administrative Trust associated with the Company’s share purchase payment plans is as follows:
* These shares are presented as treasury shares in the consolidated statement of financial position as of December 31, 2021, 2020 and 2019. The vesting period of the shares granted under the Company’s share purchase plans is as follows:
In accordance with IFRS 2, the share purchase plans are classified as equity-settled transactions on the grant date. This valuation is the result of multiplying the total number of Series A shares deposited in the Administrative Trust and the price per share, plus the balance in cash deposited in the Administrative Trust. For the years ended December 31, 2021, 2020 and 2019, the compensation expense recorded in the consolidated statement of operations amounted to Ps.89,464, Ps.75,040 and Ps.49,659, respectively. All shares held in the Administrative Trust are considered outstanding for both basic and diluted earnings (loss) per share purposes, since the shares are entitled to dividend if and when declared by the Company. During 2021, 2020 and 2019, some key employees left the Company; therefore, the vesting conditions were not fulfilled. In accordance with the terms of the plan, Servicios Corporativos is entitled to receive the proceeds of the sale of such shares, the number of forfeited shares as of December 31, 2021, 2020 and 2019, were (551,732), (327,217) and (173,090), respectively. - SARs (cash settled) On November 6, 2014, the Company granted 4,315,264 SARs to key employees that entitle them to a cash payment and vest as long as the employee continues to be employed by the Company at the end of each anniversary, during a - years period. The total amount of the appreciation rights granted under this plan at the grant date was Ps.10,831.Fair value of the SARs was measured at each reporting date. The carrying amount of the liability relating to the SARs as of December 31, 2019 was Ps.1,901. The retention plan granted in previous periods expired in November 2020. The compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits over the service period. During the years ended December 31, 2021, 2020 and 2019, the Company recorded an expense (benefit) of Ps.0, Ps. (1,901) and Ps.2,964, respectively, in the consolidated statement of operations. The fair value of these SARs was estimated at the grant date and at each reporting date using the Black-Scholes option pricing model, taking into account the terms and conditions on which the SARs were granted. During the year ended December 31, 2019, the Company made a cash payment to key employees related to the SARs plan in the amount of Ps.2,395. Such payment was determined based on the increase in the share price of the Company from the grant date to the exercisable date. During the year ended December 31, 2021 and 2020 the Company did not make a cash payment to key employees related to the SARs plan. c) MIP - MIP I In April 2012, the Board of Directors authorized a MIP for the benefit of certain key employees, subject to shareholders’ approval. On December 21, 2012, the shareholders approved the MIP consisting of: (i) the issuance of an aggregate of 25,164,126 Series A and Series B shares, representing 3.0% of the Company’s fully diluted capital stock; (ii) a grant of options to acquire shares of the Company or CPOs having shares as underlying securities for which, as long as certain conditions occur, the employees will have the right to request the delivery of those shares (iii) the creation of an Administrative Trust to deposit such shares in escrow until they are delivered to the officers or returned to the Company in the case that certain conditions do not occur; and (iv) the execution of share sale agreements setting forth the terms and conditions upon which the officers may exercise its shares at Ps.5.31 (five Mexican pesos 31/100) per share. On December 24, 2012, the Administrative Trust was created, and the share sale agreements were executed. On December 27, 2012, the trust borrowed Ps.133,723 from the Company and immediately after; the trust paid the Company the same amount borrowed as purchase price for the shares. The share sale agreements provide that the officers may pay for the shares at the same price upon the occurrence of either an initial public offering of the Company’s capital stock or a change of control and as long as they remain employees until the options are exercised, with a maximum term of ten years. Upon payment of the shares by the officers to the Management Trust, it must pay such amount back to the Company as repayment of the loan, for which the Company charges no interest. The MIP has been classified as equity-settled, by which, the grant date, fair value is fixed and is not adjusted by subsequent changes in the fair value of capital instruments. Equity-settled transactions are measured at fair value at the date the equity benefits are conditionally granted to employees. The total cost of the MIP determined by the Company was Ps.2,722 to be recognized from the time it becomes probable the performance condition will be met over the vesting period. Total cost of the MIP related to the vested shares has been fully recognized in the consolidated statements of operations during the vesting years. This cost was determined by using the improved Binomial valuation model from Hull and White, on the date in which the plan had already been approved by the shareholders and a shared understanding of the terms and conditions of the plan was reached with the employees (December 24, 2012, defined as the grant date), with the following assumptions:
The expected volatility reflects the assumption that the historical volatility of comparable companies is indicative of future trends, which may not necessarily be the actual outcome. Under the methodology followed by the Company, at the grant date and December 31, 2012, the granted shares had no positive intrinsic value. In 2019, the key employees exercised 2,780,000 Series A shares. As a result, the key employees paid to the Management Trust Ps.14,773 corresponding to the exercised shares for the year ended December 31, 2019. During 2020, there were no exercised shares under the MIP. For the year ended December 31, 2021, the key employees exercised 7,653,981 Series A shares. As a result, the key employees paid to the Management Trust Ps.40,668 corresponding to the exercised shares for the year ended December 31, 2021. Thereafter, the Company has received from the Management Trust the payment related to the exercised shares by the key employees as a repayment of the loan between the Company and the Management Trust. Movements in share options The following table illustrates the number of shares options and fixed exercise prices during the years 2021 and 2020:
As of December 31, 2021 all the share options were exercised. As of December 31, 2020, 7,653,981 share options pending to exercise were considered as treasury shares. - MIP II On February 19, 2016, the Board of Directors of the Company authorized an extension to the MIP for certain key employees. Such extension was modified as of November 6, 2016. Under MIP II, 13,536,960 share appreciation rights of our Series A shares were granted to be settled annually in cash in a period of five years in accordance with the established service conditions. In addition, a five-year extension to the period in which the employees can exercise MIP II once the SARs are vested was approved. Fair value of the SARs is measured at each reporting period using a Black-Scholes option pricing model, taking into consideration the terms and conditions granted to the employees. The amount of the cash payment is determined based on the increase in our share price between the grant date and the settlement date. The carrying amount of the liability relating to the SARs as of December 31, 2021 and 2020 was Ps.115,508 and Ps.177,770, respectively. The compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits over the service period. During the years ended December 31, 2021 and 2020, the Company recorded a (benefit) expense of Ps. (62,262) and Ps. 107,204, respectively, in the consolidated statement of operations. No SARs were exercised during 2021 and 2020. The (benefit) expense recognized for the Company’s retention plans during the years 2021, 2020 and 2019 is shown in the following table:
d) Board of Directors Incentive Plan (BoDIP) Certain members of the Board of Directors of the Company receive additional benefits through a share-based plan, which has been classified as an equity-settled share-based payment and therefore accounted under IFRS 2 “Shared based payments”. In April 2018, the Board of Directors of the Company authorized a Board of Directors Incentive Plan “BoDIP”, for the benefit of certain board members. The BoDIP grants options to acquire shares of the Company or CPOs during a - year period with an exercise share price at Ps.32.23, Ps.9.74 and Ps.16.80 for the years ended 2021, 2020 and 2019, respectively, which was determined on the grant date. Under this plan, no service or performance conditions are required to the board members for exercise the option to acquire shares, and therefore, they have the right to request the delivery of those shares at the time they pay for them.For such purposes on August 29, 2018 the Fideicomiso Irrevocable de Administración número CIB/3081 was created by Controladora Vuela Compañía de Aviación S.A.B de C.V as trustee and CIBanco, S.A., Institucion de Banco Multiple as trustor. The number of shares held as of December 31, 2021 and 2020 available to be exercised is 4,589,726 and 5,233,693, respectively. |
Equity |
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Equity | 19. Equity As of December 31, 2021, the total number of the Company’s authorized shares was 1,165,976,677; represented by common registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:
(1) The number of forfeited shares as of December 31, 2021 were 551,732, which are include in treasury shares. As of December 31, 2020, the total number of the Company’s authorized shares was 1,165,976,677; represented by common registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:
On December 20, 2021, one of the Company’s shareholders concluded the conversion of 30,538,000 Series B Shares for the equivalent number of Series A Shares. This conversion had not impact either on the total number of outstanding shares nor on the earnings-per-share calculation. On December 11, 2020, the Company announced the closing of an upsized primary follow-on equity offering in which the Company offered 134,000,000 of its Ordinary Participation Certificates (Certificados de Participación Ordinarios), or CPOs, in the form of American Depositary Shares, or ADSs, at a price to the public of USD11.25 per ADS in the United States and other countries outside of Mexico, pursuant to the Company’s shelf registration statement filed with the Securities and Exchange Commission. In connection with the offering, the underwriters exercised their option to purchase up to 20,100,000 additional CPOs in the form of ADSs. Each ADS represents 10 CPOs and each CPO represents a financial interest in one Series A share of common stock of the Company. The net proceeds of USD$164,419,000 (after the deduction of the underwriters´ commission and expenses payable by the Company) obtained from the offering for general corporate purposes. The increase in capital stock amounted Ps.3,272,832. 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 shareholders’ resolution. The Company’s revolving line of credit with Santander and Bancomext limits the Company’s ability to declare and pay dividends if the Company fails to comply with the payment terms thereunder. Only Series A shares from the Company are listed. During the years ended December 31, 2021, 2020 and 2019 the Company did not declare any dividends. a) Earnings (loss) per share Basic earnings (loss) per share (“EPS or LPS”) amounts are calculated by dividing the net earnings (loss) for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted EPS (LPS) amounts are calculated by dividing the earnings (loss) attributable to ordinary equity holders of the parent (after adjusting for interest on the convertible preference shares, if any), by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares (to the extent that their effect is dilutive). The following table shows the calculations of the basic and diluted earnings (loss) income per share for the years ended December 31, 2021, 2020 and 2019.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorization of these financial statements. b) In accordance with the Mexican Corporations Act, the Company is required to allocate at least 5% of the net income of each year to increase the legal reserve. This practice must be continued until the legal reserve reaches 20% of capital stock. As of December 31, 2021, 2020 and 2019, the Company’s legal reserve was Ps.291,178, or 8.5%, 8.5% and 9.8% respectively of our capital stock. For the years ended December 31, 2021, 2020 and 2019, we did not allocate any amount to our legal reserve fund. As of December 31, 2021, 2020 and 2019 the Company’s legal reserve has not reached the 20% of its capital stock. c) Any distribution of earnings in excess of the net tax profit account (Cuenta de utilidad fiscal neta or “CUFIN”) balance will be subject to corporate income tax, payable by the Company, at the enacted income tax rate at that time. A 10% withholding tax is imposed on dividends distributions to individuals and foreign shareholders from earnings generated starting January 1, 2014.Dividends paid will be free of Income taxes if they come from the (“CUFIN”). Dividends that exceed the CUFIN and the CUFINRE will cause a tax equivalent to 42.86%. Dividends paid that come from profits by the ISR will not be subject to any withholding or additional payment of taxes. d) Shareholders may contribute certain amounts for future increases in capital stock, either in the fixed or variable capital. Said contributions will be kept in a special account until the shareholders meeting authorizes an increase in the capital stock of the Company, at which time each shareholder will have a preferential right to subscribe and pay the increase with the contributions previously made. As it is not strictly regulated in Mexican law, the shareholders meeting may agree to return the contributions to the shareholders or even set a term in which the increase in the capital stock must be authorized. |
Income tax |
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Income tax | 20. Income tax a) In accordance with the MITL, the Company and its Mexican subsidiaries are subject to income tax and each files its tax returns on an individual entity basis and the related tax results are included in the accompanying consolidated financial statements. The income tax is computed taking into consideration the taxable and deductible effects of inflation, such as depreciation calculated on Adjusted assets values. Taxable income is increased or reduced by the effects of inflation on certain monetary assets and liabilities through the annual inflation adjustment.
The income tax rates for 2021, 2020 and 2019 in Guatemala, Costa Rica and El Salvador are 25%, 30% and 30%, respectively. b) For the years ended December 31, 2021, 2020 and 2019, the Company reported on a combined basis taxable income of Ps.1,224,156, Ps.302,029 and Ps.938,304, respectively, which was partially offset by tax losses from prior years. In accordance with the MITL and Costa Rican Income Tax Law (CRITL), tax losses may be carried forward against taxable income generated in the succeeding and three years, respectively. Carryforward tax losses are adjusted based on inflation.In accordance with Guatemala Income Tax Law (GITL) and El Salvador Income Tax Law (ESITL), tax losses cannot be carried forward against taxable income generated. c) An analysis of consolidated income tax expense for the years ended December 31, 2021, 2020 and 2019 is as follows: Consolidated statements of operations
(1) Includes translation effect by Ps. (2,015) (2) Includes translation effect by Ps.2,035 (3) Includes translation effect by Ps. (2,278) Consolidated statements of comprehensive income
d) A reconciliation of the statutory corporate income tax rate to the Company’s effective tax rate for financial reporting purposes is as follows: The Company’s using domestic tax rate
Mexican income tax matters For Mexican purposes, corporate income tax is computed on accrued basis. MITL requires taxable profit to be determined by considering revenue net of tax deductions. Prior years’ tax losses can be utilized to offset current year taxable income. Income tax is determined by applying the 30% rate on the net amount after tax losses utilization. For tax purposes, income is considered taxable at the earlier of: (i) the time the revenue is collected, (ii) the service is provided or (iii) the time of the issuance of the invoice. Expenses are deductible for tax purposes generally on accrual basis, with some exceptions, once the requirements established in the tax law are fulfilled. Central America (Guatemala, Costa Rica and El Salvador) According to Guatemala Corporate Income tax law, under the regime on profits from business activities, net operating losses cannot offset taxable income in prior or future years. For the years ended December 31, 2021, 2020 and 2019, our subsidiary in Guatemala generated net operating losses of Ps.664, Ps.1,835 and Ps.1,085, respectively. According to Costa Rica Corporate Income tax law, under the regime on profits from business activities, net operating losses can offset taxable income in a term of three years. For the years ended December 31, 2021, 2020 and 2019, our subsidiary in Costa Rica generated net operating losses for an amount of Ps.122,427, Ps.55,751 and Ps.50,246, respectively, for which no deferred tax asset has been recognized. According to El Salvador Corporate Income tax law, under the regime on profits from business activities, net operating losses cannot offset taxable income in prior or future years. For the year ended December 31, 2021, 2020 and 2019, our subsidiary in El Salvador generated net operating losses for an amount of Ps.53,550, Ps.16,619, Ps.32,494 respectively. e) An analysis of consolidated deferred taxes is as follows:
Reflected in the consolidated statement of financial position as follows:
A reconciliation of deferred tax asset, net is as follows:
*Includes the tax effect of the discontinuation of the hedging reserve by 473 million. On December 31, 2021 and 2020 the table shown above includes deferred income tax asset recognized by Comercializadora (2021 and 2020) for tax losses carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority. According to IAS 12, Income Taxes, a deferred tax asset should be recognized for the carry-forward of available tax losses to the extent that it is probable that future taxable income will be available against which the available tax losses can be utilized. In these regards, the Company has recognized on December 31, 2021, 2020 and 2019 a deferred tax asset for tax losses of Ps.100,472, Ps.576,422 and Ps.303,970 respectively. During 2020, the Company recognized a deferred tax asset for the carry-forward of available tax losses of Concesionaria and Comercializadora, based on the positive evidence of the Company to generate taxable profit related to the same taxation authority against which the available tax losses can be utilized before they expire. Positive evidence includes Concesionaria’s actions to increase its aircraft fleet in the following years, increase in flight frequencies, and routes, inside and outside of Mexico; the profit of Comercializadora, is derived directly from Concesionaria’s operations. The temporary differences associated with investments in the Company’s subsidiaries, for which a deferred tax liability has not been recognized in the periods presented, aggregate to Ps.157,422 (2020: Ps.150,683). The Company has determined that the undistributed profits of its subsidiaries will not be distributed in the foreseeable future. The Company has an agreement with its associate that the profits of the associate will not be distributed until it obtains the consent of the Company. The Company does not anticipate giving such consent at the reporting date. Furthermore, the Group’s joint venture will not distribute its profits until it obtains the consent of all venture partners. An analysis of the available tax losses carry-forward of the Company at December 31, 2021 is as follows:
A breakdown of available tax loss carry-forward of Controladora and its subsidiaries on December 31, 2021 is as follows:
f) At December 31, 2021 the Company had the following tax balances:
*The calculation comprises all the subsidiaries of the Company. |
Operating Revenues |
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Operating Revenues | 21. Operating Revenues As of December 31, 2021, 2020 and 2019, the revenues from contracts with customers is described as follows:
Transactions from unearned transportation revenues
The performance obligations related to contract liability are recognized over the following 12 months and are related to the scheduled flights and other passenger services purchased by the client in advance. |
Other operating income and expenses |
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Other operating income and expenses | 22. Other operating income and expenses An analysis of other operating income is as follows:
An analysis of other operating expenses is as follows:
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Finance income and cost |
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Finance income and cost | 23. Finance income and cost An analysis of finance income is as follows:
An analysis of finance cost is as follows:
* The borrowing costs related to the acquisition or construction of qualifying assets are capitalized as part of the cost of the asset (Note 12). Interest expense not capitalized is related to the short-term working capital facility from Citibanamex.
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Components of other comprehensive (loss) income |
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Components of other comprehensive (loss) income | 24. Components of other comprehensive (loss) income
*As of December 31, 2021, includes the effect of the discontinuation of the hedging strategies by Ps.2,251,442 as described in note 3b (i). |
Commitments and contingencies |
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Commitments and contingencies | 25. Commitments and contingencies Aircraft related commitments and financing arrangements 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:
All aircraft acquired by the Company through the Airbus purchase agreement through December 31, 2021, have been executed through sale and leaseback transactions. In addition, we have commitments to execute sale and leaseback over the next two years. The estimated proceeds from these commitments are as follows:
For future aircraft deliveries the Company will review the lease and financing structure applicable based on the then current market conditions. The future lease payments for these non-cancellable sale and leaseback contracts are as follows:
Purchase of additional A320 New Engine Option (“NEO”) family aircraft On December 28, 2017, the Company amended the agreement with Airbus, S.A.S. (“Airbus”) for the purchase of additional 80 A320NEO family aircraft to be delivered from 2022 to 2026, which was further amended in July 2020 to reschedule the deliveries between 2023 and 2028. Additionally, in November 2021 the Company entered into a new amendment to the referred agreement to purchase 39 additional A32O New Engine Option family Aircraft to be delivered between 2023 and 2029, all to support the Company’s targeted growth markets in Mexico, United States, Central America and South America. Litigation The Company is a party to legal proceedings and claims that arise during the ordinary course of business. Certain proceedings are considered possible obligations. Based on the plaintiffs’ claims, as of December 31, 2021 and 2020, these possible contingencies amount to a total of Ps.163 million and Ps.125 million respectively. |
Operating segments |
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Operating segments | 26. Operating segments The Company is managed as a single business unit that provides air transportation services. The Company has two geographic segments identified below:
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. |
Subsequent events |
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Subsequent events | 27. Subsequent events Subsequent to December 31, 2021 and through April 26, 2022:
Following the recent geopolitical crisis in Eastern Europe, as of February 21st, 2022, the Russian Federation recognized the independence of the Ukrainian separatist regions of Donetsk and Luhansk in the Donbas region. On the day after, the Federal Council of Russia authorized use of military force abroad, which triggered an invasion of Ukraine by the Russian Armed Forces on February 24th, 2022. The invasion was widely condemned internationally with several sanctions being imposed against Russia and Belarus. As a result, the global markets reacted negatively, with the fuel prices touching the highest price since 2008, amid global concerns on the commodity supply. The airline industry has been impacted by the price and availability of fuel. However, the airline industry and the Company are implementing strategies to mitigate these effects.
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Description of the business and summary of significant accounting policies (Policies) |
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Basis of preparation | b) Basis of preparation Statement of compliance These consolidated financial statements comprise the financial statements of the Company and its subsidiaries at December 31, 2021 and 2020 and for each of the three years ended December 31, 2021, and were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which each entity operates (“functional currency”). The functional currency of Controladora and its subsidiary Concesionaria was the Mexican peso until December 31, 2021, and since such date changed to US dollar. The presentation currency of the Company’s consolidated financial statements is the Mexican peso, which is used also for compliance with its legal obligations. All values in the consolidated financial statements are rounded to the nearest thousand (Ps.000), except when otherwise indicated. The Company has consistently applied its accounting policies to all periods presented in these consolidated financial statements and provide comparative information in respect of the previous period. 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. 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. |
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Basis of consolidation | c) Basis of consolidation The accompanying consolidated financial statements comprise the financial statements of the Company and its subsidiaries. On December 31, 2021 and 2020, for accounting purposes the companies included in the consolidated financial statements are as follows:
*The Companies have not started operations yet in Guatemala **The Company has not started operations yet
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:
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:
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. All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated in full on consolidation in the consolidated financial statements. 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 the average exchange rates prevailing at the time. 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. |
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Revenue recognition | d) Revenue recognition 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 contract 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 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) other passenger revenues. Other passenger services include but are not limited to fees charged for excess baggage, bookings through the call center or third-party agencies, advanced seat selection, itinerary changes and charters. They are recognized as revenue when the obligation of passenger transportation service is provided by the Company or when the non-refundable ticket expires at the date of the scheduled travel. The Company also classifies as other passenger revenue “V Club” and other similar services, which are recognized as revenue over time when the service is provided. Non-passenger revenues The most significant non-passenger revenues include revenues generated from: (i) revenues from other non-passenger services described below and (ii) cargo services. Revenues from other non-passenger services mainly include but are not limited to commissions charged to third parties for the sale of hotel reservations, trip insurance, rental cars and advertising spaces to third parties. They are recognized as revenue at the time the service is provided. The Company also evaluated the principal versus agent considerations as it relates to certain non-air travel services arrangements with third party providers. No changes were identified under this analysis as the Company is agent for those services provided by third parties. Code-share agreement The Company sells certain tickets with connecting flights with one or more segments operated by its other airline partner. For segments operated by its other airline partner, the Company has determined that it is acting as an agent on behalf of the other airline, as is responsible for its portion of the contract (i.e., transportation of the passenger). The Company, as the agent, recognizes revenue within Other operating revenue at the time of the travel, for the net amount retained by the Company for any segments flown by other airline. On January 16, 2018, the Company and Frontier Airlines (herein after Frontier) entered into a code-share operations agreement, which started operations in September 2018. Through this alliance, the Company´s customers gain access to additional cities in the U.S. beyond the current available destinations as the Company’s customers are able to buy a ticket throughout any of Frontier’s actual destinations; and Frontier customers gain first-time access to new destinations in Mexico through Volaris presence in Mexican airports. Code-share tickets can be purchased directly from the Volaris’ website. The airline that provides the transportation recognize the revenue when the service is provided. Other considerations analyzed as part of revenue from contracts with customers All revenues offered by the Company including sales of tickets for future flights, other passenger related services and non-passenger revenue must be paid through a full cash settlement. The payment of the transaction price is equal to the cash settlement from the client at the sales time (using different payment options like credit or debit cards, paying through a third party or directly at the counter in cash). There is little or no judgment to determine the point in time of the revenue recognition, and the amount of it. Even if mainly all the sales of services are initially recognized as contract liabilities, there is no financing component in these transactions. The cost to obtain a contract is represented by the commissions paid to the travel agencies and the bank commissions charged by the financial institutions for processing electronic transactions (Note 10). The Company does not incur any additional costs to obtain and fulfill a contract that is eligible for capitalization. Trade receivables are mainly with financial institutions due to transactions with credit and debit cards, and therefore they are non-interest bearing and are mainly on terms of to hours. The Company has the right of collection at the beginning of the contracts and there are no discounts, payment incentives, bonuses, or other variable considerations subsequent to the purchase that could modify the amount of the transaction price.The Company´s tickets are non-refundable. However, if the Company cancels a flight for causes attributable to the airline, including as a result of the COVID-19 pandemic, then the passenger is entitled to either move their flight at no cost, receive a refund or a voucher. No revenue is recognized until either the voucher is redeemed, and the associate flight occurs, or the voucher expires. When vouchers issued exceed the amount of the original amount paid by the passenger the excess is recorded as reduction of the operating revenues. All of the Company´s revenues related to future services are rendered through an approximate period of 12 months. |
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Cash and cash equivalents | e) Cash, cash equivalents and restricted cash Cash and cash equivalents are represented by bank deposits and highly liquid investments with maturities of 90 days or less at the original purchase date. For the purposes of the consolidated statements of cash flows, cash and cash equivalents consist of cash and short-term investments as defined above. The Company has agreements with financial institutions that process customer credit card transactions for the sale of air travel and other services. These credit card processing agreements don’t have significant cash reserve requirements. Restricted cash are used to constitute the debt service reserves and cannot be used for purposes other than those established. |
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Financial instruments initial recognition and subsequent measurement | f) Financial instruments -initial recognition and subsequent measurement 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. i) Financial assets Initial recognition Classification of financial assets and initial recognition The Company determines the classification and measurement of financial assets, in accordance with the categories in IFRS 9, which are based on both: the characteristics of the contractual cash flows of these assets and the business model objective for holding them. Financial assets include those carried at FVTPL, whose objective to hold them is for trading purposes (short-term investments), or at amortized cost, for accounts receivables held to collect the contractual cash flows, which are characterized by solely 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. 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:
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:
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 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 credit - impaired. A financial asset is credit- impaired when one or more events have 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 that a financial asset is credit – impaired may 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. Further disclosures related to impairment of financial assets are also provided in Note 8. For trade receivables, the Company applies a simplified approach in calculating expected credit losses (ECLs). Therefore, the Company does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. Based on this evaluation, allowances are taken into account for the expected losses of these receivables. For the years ended December 31, 2021 and 2020 the Company recorded expected credit losses on accounts receivable of Ps.16,118 and Ps.13,664, respectively (Note 8). iii) Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at FVTPL, including loans and borrowings, accounts payables to suppliers, unearned transportation revenue, other accounts payable and financial instruments. All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Subsequent measurement 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. Loans and borrowings are the category most relevant to the Company. After initial recognition at fair value (consideration received), interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method (EIR). 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 (Note 5). Financial liabilities at FVTPL Financial liabilities at FVTPL include financial liabilities under the fair value option, which are classified as held for trading, if they are acquired for the purpose of selling them in the near future. This category includes derivative financial instruments that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. 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:
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Other accounts receivable | g) 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. |
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Inventories | h) 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 based on the method of specific identification and expensed when used in operations. The Company recognizes the necessary estimates for decreases in the value of its inventories due to impairment, obsolescence, slow movement and causes that indicate that the use or realization of the aircraft spare parts and flight equipment accessories that are part of the inventory will be less than recorded value. The cost of inventories is determined based on the specific identification method and is recorded as an expense as it is used in operations. |
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Intangible assets | i) Intangible assets Cost related to the purchase or development of computer software that is separable from an item of related hardware is capitalized separately measured at cost 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. For the years ended December 31, 2021, and 2020, the Company did not record any impairment loss in the value of its intangible assets. Software Acquired computer software licenses are capitalized on the basis of cost incurred to acquire, implement and bring the software into use. Costs associated with maintaining computer software programs are expensed as incurred. In case of development or improvement to systems that will generate probable future economic benefits, the Company capitalizes software development costs, including directly attributable expenditures on materials, labor, and other direct costs. Acquired software cost is amortized on a straight-line basis over its useful life. Licenses and software rights acquired by the Company have finite useful lives and are amortized on a straight–line basis over the term of the contract. Amortization expense is recognized in the consolidated statements of operations. |
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Guarantee deposits | j) 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 (Note 11). Deposits for flight equipment maintenance paid to lessors Most of the Company’s lease contracts stipulate the obligation to pay maintenance deposits to aircraft lessors, in order to guarantee major maintenance work. These lease agreements establish that maintenance deposits are reimbursable to the Company at the time the major maintenance event is concluded for an amount equal to: (i) the maintenance deposit held by the lessor associated with the specific maintenance event, or (ii) the qualifying costs related to the specific maintenance event. Substantially all major maintenance deposits are generally calculated based on the use of leased aircraft and engines (flight hours or operating cycles). The sole purpose of these deposits is to guarantee to the lessor the execution of maintenance work on the aircraft and engines. Maintenance deposits that the Company expects to recover from lessors are presented as security deposits in the consolidated statement of financial position. These deposits are registered as a monetary asset and are revalued to record changes in foreign currency in each reporting period. According to the term of the lease, in each contract it is evaluated whether major maintenance of the leased aircraft and engines is expected to be carried out. In the event that major maintenance is not expected to be performed on its own account, it is recorded as a variable lease payment, since it represents part of the use of the leased goods and is determined based on time or flight cycles. For the years ended December 31, 2021, 2020 and 2019, the Company made a supplemental lease payment of Ps.775,579, Ps.421,030 and Ps.295,720, respectively. When modifications are made to the contracts that entail an extension of the lease term, said maintenance deposits can be converted into recoverable deposits, in that case, to the date of modification of the agreement. Deposits are considered a recoverable asset that is recognized as a decrease in the expense recognized for variable leases. During the years ended December 31, 2021, 2020 and 2019, the Company added fifteen, seven and seven net new aircrafts to its fleet, respectively (Note 14). During the year ended December 31, 2021, the Company extended the lease period for aircrafts and engines, through lease agreements for fifteen aircraft and three engines. During the year ended December 31, 2020, the Company did not extend the period of lease contracts for aircrafts and engines. During the year ended December 31, 2019, the Company extended the lease period, through lease agreements, of one aircraft. Additionally, the Company extended the lease period for a spare engine in 2019. Certain other aircraft lease agreements do not require the obligation to pay maintenance deposits in advance to lessors to guarantee important maintenance activities; therefore, the Company does not record or make payments for guarantee deposits with respect to these aircrafts. However, some of these lease agreements include the obligation to make maintenance adjustment payments to lessors at the end of the lease period. These maintenance adjustments cover maintenance events that are not expected to be performed before the termination of the lease; for such agreements, the Company accumulates a liability related to the amount of the costs that will be incurred at the end of the lease, since no maintenance deposits have been made (Note 16). |
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Aircraft and engine maintenance | k) Aircraft and engine maintenance The Company is required to conduct various 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 consist of scheduled maintenance checks on the Company’s aircraft, including pre-flight, daily, weekly and overnight checks, any diagnostics and routine repairs and any unscheduled tasks performed as required. These type of maintenance events are currently serviced by 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 to 14 days to accomplish and are required approximately every 24 or 36 months, such as 24 month checks and C checks. All routine maintenance costs are expensed as incurred.(ii) Major maintenance consists of a series of more complex tasks that can take up to to accomplish and typically are required every 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 time of usage. The United States Federal Aviation Administration (“FAA”) and the Mexican Federal Civil Aviation Agency (Agencia Federal de Aviación Civil - AFAC) 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. During the years ended December 31, 2021 and 2020, the Company capitalized major maintenance events as part of leasehold improvements to flight equipment for an amount of Ps.1,742,979 and Ps.646,219, respectively. For the years ended December 31, 2021, 2020 and 2019, the amortization of major maintenance leasehold improvement costs was Ps.838,433, Ps.652,091 and Ps.450,371 respectively. The amortization of deferred maintenance costs is recorded as part of depreciation and amortization in the consolidated statements of operations. (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. The Company has an engine flight hour agreement (component repair 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 monthly as incurred in the consolidated statements of operations. |
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Rotable spare parts, furniture and equipment, net | l) Rotable spare parts, furniture and equipment, net Rotable spare parts, furniture and equipment, are recorded at cost and are depreciated to estimated residual values over their estimated useful lives using the straight-line method. Aircraft spare engines have significant components with different useful lives; therefore, they are accounted for as separate items (major components) of spare engine parts (Note 12). 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:
The Company reviews annually the useful lives of these assets and any changes are accounted for prospectively. The Company identified one Cash Generating Unit (CGU), which includes the entire aircraft fleet and flight equipment. The Company assesses at each reporting date, whether there is objective evidence that rotable spare parts, furniture and equipment and right of use asset are impaired in the CGU. The Company records impairment charges on rotable spare parts, furniture and equipment and right of use assets used in operations when events and circumstances indicate that the assets may be impaired or when the carrying amount of a long-lived asset or 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 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. On December 2021, the Company reviewed through an analysis if there were signs of impairment, according to the result it was concluded there were not sings of impairment. On December 2020, the Company performed its annual impairment test. The recoverable amount of the CGU was determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management, covering a five-year period. The projected cash flows have been updated to reflect the future operating cashflows. It was concluded that the carrying amount of the CGU did not exceed the value in use. |
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Foreign currency transactions and exchange differences | m) Foreign currency transactions and exchange differences The Company’s consolidated financial statements are presented in Mexican pesos, which is the presentation 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 each entity operates (“the functional currency”). The financial statements of foreign subsidiaries prepared under IFRS and denominated in their respective local currencies different from its functional currency are translated into their functional currency as follows:
Any differences resulting from the currency functional translation are recognized in the consolidated statements of operations. For the year ended December 31, 2021, 2020 and 2019, the exchange rates of local currencies translated to functional currencies are as follows:
The exchange rates used to translate the above amounts to Mexican pesos on December 31, 2021, 2020 and 2019, were Ps.20.5835, Ps.19.9487 and Ps.18.8452, respectively, per U.S. dollar. The Company’s consolidated financial statements are presented in Mexican pesos. Assets and liabilities from foreign subsidiaries are converted from the functional currency to the presentation currency at the exchange rate on the reporting date; revenues and expenses are translated at the average exchange rate. Foreign currency differences arising on translation into the presentation currency are recognized in OCI. Exchange differences on translation of foreign entities for the years ended December 31, 2021, 2020 and 2019, were Ps.(4,021), Ps.23,970 and Ps.8,045, respectively. |
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Liabilities and provisions | n) 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. |
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Employee benefits | o) 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. For the years ended December 31, 2021 and 2020, no termination benefits provision has been recognized. iii) Seniority premiums In accordance with Mexican Labor Law, the Company provides seniority premium benefits to the employees which rendered services to its Mexican subsidiaries under certain circumstances. These benefits consist of a one-time payment equivalent to 12 days’ wages for each year of service (at the employee’s most recent salary, but not to exceed twice the legal minimum wage), 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. The latest actuarial computation was prepared as of December 31, 2021. 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. The defined benefit asset or liability comprises the present value of the defined benefit obligation using a discount rate based on government bonds, less the fair value of plan assets out of which the obligations are to be settled. For entities in Costa Rica, Guatemala and El Salvador there is no obligation to pay seniority premium, these countries have Post- Employee 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 years ended December 31, 2021, 2020 and 2019 the Company expensed Ps.75,418, Ps.25,918 and Ps.62,825, respectively, as quarterly incentive bonuses, recorded under the caption salaries and benefits. The Company has a 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. A provision is recognized based on the estimated amount of the incentive payment (Note 7). v) Long-term incentive plan (“LTIP”) and 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”. This incentive plan has been granting annual extensions in the same terms from the original granted in 2014. The Company measures the cost of its equity-settled transactions at fair value at the date the equity benefits are conditionally granted to employees. The cost of equity-settled transactions is recognized in the statement of operations, together with a corresponding increase in treasury shares, over the period in which the performance and/or service conditions are fulfilled. For grants that vest on meeting performance conditions, compensation cost is recognized when it becomes probable that the performance condition will be met. During 2021, 2020 and 2019, the Company approved a new long-term retention plan (“LTRP”), which consisted in a purchase plan (equity-settled). This plan does not include cash compensations granted through appreciation rights on the Company’s shares. The retention plans granted in previous periods will continue in full force and effect until their respective due dates and the cash compensation derived from them will be settled according to the conditions established in each plan. 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 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 (Note 18). During the years ended December 31, 2021, 2020 and 2019, the Company expensed Ps.89,464, Ps.75,040 and Ps.49,659, respectively, related to RSUs granted under the LTIP and LTRP. The expenses were recorded under the caption salaries and benefits. - 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 (Note 18). As of December 31, 2021 the Company did not record an expense or benefit related to the SARs included in the LTIP. During the years ended December 31, 2020 and 2019, the Company recorded a (benefit) expense for Ps.(1,901) and Ps.2,964, respectively, related to the SARs included in the LTIP. These amounts were recorded under the caption salaries and benefits. The cost of the SARs plan is measured initially at fair value at the grant date, further details of which are given in (Note 18). This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. As with the equity settled awards described above, the valuation of cash settled award also requires using similar inputs, as appropriate. b) Management incentive plan (“MIP”) - MIP I 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 20. requisite service period (Note 18). The total cost of this plan has been totally recognized during the required 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 (Note 18). During the years ended December 31, 2021, 2020 and 2019, the Company recorded a (benefit) expense for Ps. (62,262), Ps.107,204 and Ps.37,760, respectively, related to MIP II into the consolidated statement of operations. c) Board of Directors Incentive Plan (BoDIP) Certain members of the Board of Directors of the Company receive additional benefits through a share-based plan, which has been classified as an equity-settled share-based payment and therefore accounted under IFRS 2 “Shared based payments”. In April 2018, the Board of Directors of the Company authorized a Board of Directors Incentive Plan “BoDIP”, for the benefit of certain board members. The BoDIP grants options to acquire shares of the Company or CPOs during a period, which was determined on the grant date. Under this plan, no service or performance conditions are required to the board members for exercise the option to acquire shares, and therefore, they have the right to request the delivery of those shares at the time they pay for them.vii) Employee profit sharing 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%. For the years ended December 31, 2021, 2020 and 2019, the employee profit sharing is Ps.262,667, Ps.13,458 and Ps.22,134, respectively, and is presented as an operating 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 regulations. |
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Leases | p) Leases The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration. The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognizes lease liabilities for payments to be made under the lease term and right-of-use assets representing the right to use the underlying assets. i. Right-of-use assets The Company recognizes right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, an estimate of costs to be incurred by the Company in dismantling and removing the underlying asset to the condition required by the terms and conditions of the lease, and lease payments made at or before the commencement date less any lease incentives received. Components of the right-of-use assets are depreciated on a straight-line basis over the shorter of the remining lease term and the estimated useful lives of the assets, as follows:
ii. Lease Liabilities At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset. The short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term. During the years ended December 31, 2021, 2020 and 2019, there were no impairment charges recorded in respect of the Company right-of-use asset. iii. Sale and leaseback The Company enters into sale and leaseback agreements whereby an aircraft or engine is sold to a lessor upon delivery and the lessor agrees to lease such aircraft or engine back to the Company. The Company measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right of use retained by the seller-lessee. Accordingly, the Company recognizes in the Statement of Operations only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. If the fair value of the consideration for the sale of an asset does not equal the fair value of the asset, or if the payments for the lease are not at market rates, then the Company adjusts the difference to measure the sale proceeds at fair value and accounts for any below-market terms as a prepayment of lease payments an any above market terms as additional financing provided by the buyer-lessor to the seller-lessee. First, the sale and leaseback transactions are analyzed within the scope of IFRS 15 - Revenue from Contracts with Customers, in order to verify whether the performance obligation has been satisfied and, therefore, are accounted for the sale of the asset. If this requirement is not met, it is a financing with the asset given as collateral. If the requirements related to the performance obligation established in IFRS 15 are met, the Company measures an asset for right of use that arises from the sale transaction with subsequent lease in proportion to the book value of the asset related to the right-of-use assets retained by the Company. Consequently, only the gains or losses related to the rights transferred to the lessor-buyer are recognized. q) Return obligations The aircraft lease agreements of the Company also require that the aircraft components (airframe, APU and landing gears) and engines (overhaul and limited life parts) 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 variable lease expenses and the provision is included as part of other liabilities, through the remaining lease term. The Company estimates the provision related to aircraft components and engines using certain assumptions including the projected usage of the aircraft and the expected costs of maintenance tasks to be performed. This provision is made in relation to the present value of the expected future costs of meeting the return conditions (Note 14 and 16). |
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Other taxes and fees payable | r) 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. |
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Income taxes | s) 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. 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 recognized in respect of 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. 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. Income taxes are computed based on tax laws approved in Mexico, Costa Rica, Guatemala and El Salvador at the date of the consolidated statement of financial position. The IFRIC Interpretation 23 Uncertainty over Income Tax Treatment addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation specifically addresses the following:
The Company determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. The Company applies significant judgement in identifying uncertainties over income tax treatments. Since the Company operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its consolidated financial statements. Upon adoption of the Interpretation, the Company considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Company determined, based on its tax compliance and transfer pricing studies, that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. As of December 31, 2021 and 2020 the Interpretation did not have an impact on the consolidated financial statements of the Company. |
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Derivative and non-derivative financial instruments and hedge accounting | t) Derivative and non-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 and non-derivative financial instrument. In accordance with IFRS 9, derivative financial instruments and non-derivative financial instruments are recognized in the consolidated statement of financial position at fair value. At 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 have been effective throughout the financial reporting periods for which they were designated, hedge accounting treatment can be used. Under the cash flow hedge (CFH) accounting model, the effective portion of the hedging instrument’s changes in fair value is recognized in OCI, while the ineffective portion is recognized in current year earnings in the statement of profit or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the hedging instrument and the cumulative change in fair value of the hedged item. The amounts recognized in OCI are transferred to earnings in the period in which the hedged transaction affects earnings. During the year ended December 31, 2021, the Company did not recognize an ineffective portion with respect to derivative financial instruments. As of December 31,2020, the Company recorded the ineffective portion of Ps.448.6 million, with respect to derivative financial instruments. During the year ended December 31, 2019, there was no ineffectiveness with respect to derivative financial instruments. The realized gain or loss of derivative financial instruments and non-derivative financial instruments that qualify as CFH are recorded in the same caption of the hedged item in the consolidated statement of operations (Note 3 b (i)). Accounting for the time value of options The Company accounts for the time value of options in accordance with IFRS 9, 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 are recognized in income. |
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Financial instruments - Disclosures | u) 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 (Notes 4 and 5). |
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Treasury shares | v) 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, issuance 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 were settled with treasury shares (Note 18). |
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Operating segments | w) Operating segments Management of Controladora monitors the Company 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, Central America and South America) Note 26. |
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Current versus non-current classification | x) 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. 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. |
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Impact of new International Financial Reporting Standards | y) Impact of new International Financial Reporting Standards New and amended standards and interpretations already effective The Company applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after January 1, 2021. 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: Covid-19-Related Rent Concessions beyond June 30, 2021 Amendments to IFRS 16 On May 28, 2020, the IASB issued Covid-19-Related Rent Concessions - amendment to IFRS 16 Leases The amendments provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the Covid-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification. A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way it would account for the change under IFRS 16, if the change were not a lease modification. The amendment was intended to apply until June 30, 2021, but as the impact of the Covid-19 pandemic is continuing, on March 31, 2021, the IASB extended the period of application of the practical expedient to June 30, 2022.The amendment applies to annual reporting periods beginning on or after April 1st, 2021. As of December 31, 2021 this amendment did not have impact on the consolidated financial statements of the Company (Note 14). Interest Rate Benchmark Reform – Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendments include the following practical expedients:
These amendments had no impact on the consolidated financial statements of the Company (Note 3c). Standards issued but not yet effective Annual Improvements to IFRS Standards 2018–2020 IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual reporting periods beginning on or after January 1st, 2022 with earlier adoption permitted. The Company expects to adopt the improvements in their effective dates considering preliminarily no significant effects. Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 In May 2020, the IASB issued Property, Plant and Equipment - Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after January 1st, 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. The Company expects to adopt the amendments in their effective dates considering preliminarily no significant effects. Reference to the Conceptual Framework – Amendments to IFRS 3 In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework. The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its requirements. The Board also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential “day 2” gains or losses arising for liabilities and contingent liabilities that would be within the scope of IAS 37 or IFRIC 21 Levies, if incurred separately. At the same time, the Board decided to clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively. The Company expects to adopt the amendments in their effective dates considering preliminarily no significant effects. Amendments to IAS 1: Classification of Liabilities as Current or Non-current In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:
The amendments are effective for annual reporting periods beginning on or after January 1st, 2023 and must be applied retrospectively. The Company is currently assessing the impact of these amendments which expects to adopt in their effective date. Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to IAS 1 are applicable for annual periods beginning on or after January 1st, 2023 with earlier application permitted. Since the amendments to the Practice Statement 2 provide non-mandatory guidance on the application of the definition of material to accounting policy information, an effective date for these amendments is not necessary. The Company is currently assessing the impact of these amendments which expects to adopt in their effective date. Definition of Accounting Estimates – Amendments to IAS 8 In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of “accounting Estimates”. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective for annual reporting periods beginning on or after January 1st, 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted as long as this fact is disclosed. The Company is currently assessing the impact of these amendments which expects to adopt in their effective date. Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 The amendments to IAS 12 Income Taxes require companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendment is effective for annual reporting periods beginning on January 1st, 2023 and should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, entities should recognize deferred tax assets (to the extent that it is probable that they can be utilized) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with:
The cumulative effect of recognizing these adjustments is recognized in retained earnings, or another component of equity, as appropriate. IAS 12 did not previously address how to account for the tax effects of on-balance sheet leases and similar transactions and various approaches were considered acceptable. At the date of adoption of IFRS 16, the Company applied the criterion of recognizing the deferred assets and liabilities associated with the lease liability and the right of use, which is consistent with this amendment to IAS 12, and therefore this will not generate effects in the Company. (Note 20). |
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Convenience translation | z) Convenience translation U.S. dollar amounts on December 31, 2021 shown in the consolidated financial statements have been included solely for the convenience of the reader and are translated from Mexican pesos, using an exchange rate of Ps.20.5835 per U.S. dollar, as reported by the Mexican Central Bank (Banco de México) as the rate for the payment of obligations denominated in foreign currency payable in Mexico in effect on December 31, 2021. 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 not audited, is solely for information purposes and does not represent that the amounts are in accordance with IAS 21 Effects of variations in foreign currency exchange rates 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. |
Description of the business and summary of significant accounting policies (Tables) |
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Schedule of companies included in the consolidated financial statements |
*The Companies have not started operations yet in Guatemala **The Company has not started operations yet
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Schedule of depreciation rates |
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Schedule of exchange rates of local currencies translated to functional currencies |
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Summary of estimated useful lives of the assets |
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Financial instruments and risk management (Tables) |
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Financial instruments and risk management | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of notional amounts and strike prices of derivative financial instruments |
* US Gulf Coast Jet 54 as underlying asset ** Weighted average |
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Schedule of Fuel Sensitivity |
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Schedule of foreign exchange exposure |
*The foreign exchange exposure includes: Quetzales, Colombian pesos and Colones.
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Schedule of contractual principal payments required on financial liabilities and derivative instruments fair value |
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Summary of impact on the equity due to changes in the fair value of forward exchange contracts |
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Schedule of sensitivity analysis of change in fair value of interest hedging instrument |
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Schedule of debt sensitivity analysis |
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Fair value measurements (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying amounts and fair values of financial instruments |
The following table summarizes the fair value measurements on December 31, 2021:
** LIBOR, SOFR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt. There were no transfers between level 1 and level 2 during the period. The following table summarizes the fair value measurements on December 31, 2020:
* Jet fuel forwards levels and LIBOR curve. ** LIBOR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt. There were no transfers between level and level during the period. |
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Schedule of (loss) gain on derivatives recognized in consolidated statements of operations and comprehensive income | The following table summarizes the losses from derivatives financial instruments recognized in the consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019:
The following table summarizes the net gain (loss) on CFH before taxes recognized in the consolidated statements of comprehensive income for the years ended December 31, 2021, 2020 and 2019: Consolidated statements of other comprehensive income (loss)
*As of December 31, 2021, includes the effect of the discontinuation of the hedging strategies by Ps.2,251,442 as described in note 3b (i). |
Financial assets and liabilities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets and liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of financial assets |
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Schedule of short-term and long-term debt |
TIIE: Mexican interbank rate |
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Summary of scheduled principal payments of financial debt and accrued interest |
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Schedule of changes in liabilities from financing activities |
* This balance is net of interest provisions and interest effectively paid as of December 31, 2021 and 2020, respectively. |
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Schedule of other financial liabilities | At December 31, 2021 and 2020, the derivative financial instruments designated as CFH from the Company are summarized in the following table:
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Cash and cash equivalents (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash and cash equivalents |
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Related parties (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related parties | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of balances due from/to related parties |
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Schedule of transactions with related parties |
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Other accounts receivable, net (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other accounts receivable, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other accounts receivables |
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Schedule of aging of accounts receivable |
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Schedule of movement in the allowance for doubtful accounts |
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Inventories (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||
Inventories. | ||||||||||||||||||||||||||||||||||||
Schedule of inventories | An analysis of inventories as of December 31, 2021 and 2020 is as follows:
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Prepaid expenses and other current assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of prepaid expenses and other current assets |
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Guarantee deposits (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantee deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of guarantee deposits |
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Rotable spare parts, furniture and equipment, net (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Rotable spare parts, furniture and equipment, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of rotable spare parts, furniture and equipment, net |
* During the years ended December 31, 2021 and 2020, the Company capitalized borrowing costs of Ps.143,966 and Ps.384,038, respectively. The amount of this line is net of disposals of capitalized borrowing costs related to sale and leaseback transactions of Ps.84,273 and Ps.401,862, respectively.
a) On 2021, the Company acquired two NEO spare engines (based on the terms of the Pratt & Whitney purchase agreement FMP), which were accounted for a cost for a total amount of Ps.394,254 (US$19,082). The Company had identified the major components as separate parts at their respective cost. These major components of the engine are presented as part of the flight equipment and depreciated over their useful life. b) During the years ended December 31, 2021, 2020 and 2019, the Company capitalized borrowing costs which amounted to Ps.143,966, Ps.384,038 and Ps.456,313, respectively (Note 23). The rate used to determine the amount of borrowing cost was 2.76%, 3.58% and 5.10%, for the years ended December 31, 2021, 2020 and 2019, respectively. c) Depreciation expense for the years ended December 31, 2021, 2020 and 2019, was Ps.1,022,012, Ps.797,827 and Ps.587,849, respectively. Depreciation charges for the year are recognized as a component of operating expenses in the consolidated statements of operations. d) In October 2005 and December 2006, the Company entered into purchase agreements with Airbus and International Aero Engines AG (“IAE”) for the purchase of aircraft and engines, respectively. Under such agreements and prior to the delivery of each aircraft and engine, the Company agreed to make pre-delivery payments, which were calculated based on the reference price of each aircraft and engine, and following a formula established for such purpose in the agreements.
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Intangible assets, net (Tables) |
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Intangible assets, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets, net |
The Company had implemented the SAP4HANA software. As a result of the analysis carried out, it was concluded that the Company controls the software, therefore it is the only beneficiary with respect to the configuration, since the settings made were customized according to the needs of the business. The costs directly attributable to the implementation were recognized as an intangible asset, the other costs different to the implementation were recognized in Net Income As of December 31, 2021, the capitalization for this implementation was Ps.90,187. |
Leases (Tables) |
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Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of composition of fleet and spare engines, operating leases |
* Certain of the Company’s aircraft and engine lease agreements include an option to extend the lease term period. Management evaluates extensions based on the market conditions at the time of renewal. |
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Summary of carrying amounts of right-of-use assets recognized and the movements during the period |
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Summary of carrying amounts of lease liabilities and the movements during the period |
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Summary of amounts recognized in profit or loss |
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Accrued liabilities (Tables) |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of analysis of accrued liabilities short - term |
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Schedule of accrued liabilities long term |
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Other liabilities (Tables) |
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Other liabilities. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other liabilities |
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Employee benefits (Tables) |
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Employee benefits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of analysis of net period cost |
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Schedule of changes in defined benefit obligation |
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Summary of significant assumptions used in the computation of the seniority premium obligations |
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Schedule of accruals for short-term employee benefits |
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Share-based payments (Tables) |
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Share-based payments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of movement in number of shares under share purchase payment plans |
* These shares are presented as treasury shares in the consolidated statement of financial position as of December 31, 2021, 2020 and 2019. |
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Schedule of weighted average assumptions used to estimate the fair market value of the MIP at the date of grant |
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Schedule of movement in number of shares options and fixed exercise prices |
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Schedule of retention plan (benefit) expenses recognized |
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Share purchase plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based payments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of vesting period of shares granted |
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Equity (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of authorized shares |
(1) The number of forfeited shares as of December 31, 2021 were 551,732, which are include in treasury shares.
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Schedule of basic and diluted earnings (loss) per share |
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Income tax (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of income tax in consolidated statements of operations |
(1) Includes translation effect by Ps. (2,015) (2) Includes translation effect by Ps.2,035 (3) Includes translation effect by Ps. (2,278) |
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Schedule of income tax in consolidated statements of OCI |
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Schedule of reconciliation of corporate income tax rate to effective tax rate |
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Schedule of consolidated deferred taxes |
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Schedule of components of deferred taxes in the consolidated statement of financial position |
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Schedule of reconciliation of deferred tax liability, net |
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Schedule of available tax carry-forwards | An analysis of the available tax losses carry-forward of the Company at December 31, 2021 is as follows:
A breakdown of available tax loss carry-forward of Controladora and its subsidiaries on December 31, 2021 is as follows:
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Schedule of tax balances |
*The calculation comprises all the subsidiaries of the Company. |
Operating Revenues (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Revenues | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of revenues from contracts with customers |
Transactions from unearned transportation revenues
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Other operating income and expenses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other operating income and expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other operating income |
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Schedule of other operating expenses |
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Finance income and cost (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance income and cost | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of finance income |
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Schedule of finance cost |
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Schedule of capitalized interest |
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Components of other comprehensive (loss) income (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of other comprehensive (loss) income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of analysis of other comprehensive income |
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Schedule of components of other comprehensive (loss) income |
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Commitments and contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of committed expenditures |
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Schedule of future minimum lease payments |
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Summary of future lease payments from sale and leaseback |
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Operating segments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of geographic segments |
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Description of the business and summary of significant accounting policies - financial instruments (Details) - MXN ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2021 |
Dec. 31, 2020 |
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Revenue recognition | ||
Discounts, payment incentives, bonuses or other variable considerations | $ 0 | |
Non-ticket revenues | ||
Expected credit losses on accounts receivable | $ 16,118 | $ 13,664 |
Minimum | ||
Revenue recognition | ||
Term of trade receivables | 1 day | |
Maximum | ||
Revenue recognition | ||
Term of trade receivables | 2 days |
Description of the business and summary of significant accounting policies - Intangible assets (Details) |
12 Months Ended |
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Dec. 31, 2021 | |
Software | |
Intangible assets | |
Useful life of intangible assets | 5 years |
Description of the business and summary of significant accounting policies - Foreign currency exchange differences and liabilities and provisions (Details) $ in Thousands |
12 Months Ended | |||||||||||||||||||||
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Dec. 31, 2021
USD ($)
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Dec. 31, 2021
MXN ($)
USD ($)
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Dec. 31, 2021
₡ / $
USD ($)
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Dec. 31, 2021
Q / $
USD ($)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
MXN ($)
USD ($)
|
Dec. 31, 2020
₡ / $
USD ($)
|
Dec. 31, 2020
USD ($)
Q / $
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
MXN ($)
USD ($)
|
Dec. 31, 2019
₡ / $
USD ($)
|
Dec. 31, 2019
Q / $
USD ($)
|
Apr. 26, 2022
$ / $
|
Dec. 31, 2021
₡ / $
|
Dec. 31, 2021
Q / $
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Dec. 31, 2021
$ / $
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Dec. 31, 2020
₡ / $
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Dec. 31, 2020
Q / $
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Dec. 31, 2020
$ / $
|
Dec. 31, 2019
₡ / $
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Dec. 31, 2019
Q / $
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Dec. 31, 2019
$ / $
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Description of the business and summary of significant accounting policies | ||||||||||||||||||||||
Average exchange rate for year | 20.9853 | 641.2439 | 7.75370 | 21.4961 | 588.4240 | 7.7292 | 19.2618 | 590.9574 | 7.7066 | |||||||||||||
Exchange rate as of end of the year | 20.5835 | 20.5835 | 20.5835 | 20.5835 | 19.9487 | 19.9487 | 19.9487 | 19.9487 | 18.8452 | 18.8452 | 18.8452 | 18.8452 | 20.3183 | 645.9000 | 7.7285 | 20.5835 | 615.7800 | 7.8095 | 19.9487 | 573.4400 | 7.6988 | 18.8452 |
Exchange differences on translation of foreign operations | $ (195,000) | $ (4,021) | $ 23,970 | $ 8,045 |
Description of the business and summary of significant accounting policies - Derivative and non-derivative financial instruments and hedge accounting and Operating segments (Details) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021
segment
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
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Description of the business and summary of significant accounting policies | |||
Number of operating segments | 1 | ||
Number of geographic segments | 2 | ||
Ineffective portion with respect to derivative financial instruments | $ | $ 448.6 | $ 0.0 |
Description of the business and summary of significant accounting policies - Additional details (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
Dec. 31, 2018
MXN ($)
|
|
IFRS Statement [Line Items] | ||||||
Cash and cash equivalents. | $ 741,122 | $ 490,849 | $ 15,254,876 | $ 10,103,385 | $ 7,979,972 | $ 5,862,942 |
28-day TIIE | ||||||
IFRS Statement [Line Items] | ||||||
Percentage of Available Seat Miles | 53.70% | 14.70% |
Significant accounting judgments, estimates and assumptions (Details) - MXN ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
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Significant accounting judgments, estimates and assumptions | |||
Tax loss carry-forwards used | $ 1,944,922 | $ 0 | $ 214,460 |
Impairment loss | $ 0 |
Financial instruments and risk management - Fuel Sensitivity (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Financial instruments and risk management | ||
+ US$0.01 per gallon | $ 0.01 | $ 0.01 |
- US$0.01 per gallon | $ 0.01 | $ 0.01 |
Increase in Operating costs | $ 2,731 | $ 1,762 |
Decrease in Operating costs | $ (2,731) | $ (1,762) |
Financial assets and liabilities - Financial assets (Details) $ in Thousands, $ in Thousands |
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
MXN ($)
|
---|---|---|---|
Financial assets | |||
Total financial assets | $ 28,771 | $ 532 | |
Current | 206 | ||
Non-current | 28,771 | $ 1,398 | 326 |
Jet fuel Asian call options contracts | |||
Financial assets | |||
Total financial assets | 206 | ||
Interest rate Cap | |||
Financial assets | |||
Total financial assets | $ 28,771 | $ 326 |
Financial assets and liabilities - Line of credit (Details) - MXN ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Financial assets and liabilities | ||
Total available credit lines | $ 9,949,640 | $ 9,256,978 |
Available credit lines related to letters of credit | 2,982,110 | 2,405,640 |
Available credit lines related to financial debt | 6,967,530 | 6,851,338 |
Undrawn credit of financial debt | 1,500,726 | |
Undrawn credit of letters of credit | $ 476,689 | $ 214,012 |
Financial assets and liabilities - Other financial liabilities (Details) $ in Thousands |
Dec. 31, 2020
MXN ($)
|
---|---|
Other financial liabilities | |
Total financial liabilities | $ 9,657 |
Current | 9,657 |
Zero cost collar options | |
Other financial liabilities | |
Total financial liabilities | $ 9,657 |
Cash and cash equivalents (Details) $ in Thousands, $ in Thousands |
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
Dec. 31, 2018
MXN ($)
|
---|---|---|---|---|---|---|
Cash and cash equivalents | ||||||
Cash in banks | $ 9,543,860 | $ 6,907,295 | ||||
Short-term investments | 5,558,131 | 3,068,618 | ||||
Restricted funds held in trust related to debt service reserves | 147,415 | 91,040 | ||||
Cash on hand | 5,470 | 36,432 | ||||
Total cash, cash equivalents and restricted cash | $ 741,122 | $ 15,254,876 | $ 490,849 | $ 10,103,385 | $ 7,979,972 | $ 5,862,942 |
Other accounts receivable, net (Details) - MXN ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Other accounts receivable, net | ||||
Credit cards | $ 760,016 | $ 231,260 | ||
Other points of sales | 140,952 | 67,315 | ||
Cargo clients | 51,790 | 45,201 | ||
Travel agencies and insurance commissions | 33,864 | 16,099 | ||
Other accounts receivable | 33,688 | 87,204 | ||
Employees | 15,637 | 36,287 | ||
Benefits from suppliers | 10,616 | 105,947 | ||
Marketing services receivable | 706 | 4,020 | ||
Airport services | 15 | |||
Other current accounts receivable, gross | 1,047,269 | 593,348 | ||
Allowance for expected credit losses | (12,665) | (32,708) | $ (40,308) | $ (11,304) |
Other accounts receivable, net | $ 1,034,604 | $ 560,640 |
Other accounts receivable, net - Aging of accounts receivable (Details) - MXN ($) $ in Thousands |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Accounts receivable aging | ||||
Impaired accounts receivable | $ 12,665 | $ 32,708 | $ 40,308 | $ 11,304 |
Not impaired accounts receivable | 1,034,604 | 560,640 | ||
Total accounts receivable | 1,047,269 | 593,348 | ||
0-30 Days | ||||
Accounts receivable aging | ||||
Impaired accounts receivable | 10,347 | 4,090 | ||
Not impaired accounts receivable | 976,313 | 486,001 | ||
Total accounts receivable | 986,660 | 490,091 | ||
31-60 Days | ||||
Accounts receivable aging | ||||
Not impaired accounts receivable | 27,411 | 13,872 | ||
Total accounts receivable | 27,411 | 13,872 | ||
61-90 Days | ||||
Accounts receivable aging | ||||
Not impaired accounts receivable | 8,453 | 6,081 | ||
Total accounts receivable | 8,453 | 6,081 | ||
91-120 Days | ||||
Accounts receivable aging | ||||
Impaired accounts receivable | 2,318 | 28,618 | ||
Not impaired accounts receivable | 22,427 | 54,686 | ||
Total accounts receivable | $ 24,745 | $ 83,304 |
Other accounts receivable, net - Movement in the allowance for doubtful accounts (Details) - MXN ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Other accounts receivable, net | |||
Balance as of beginning of the year | $ (32,708) | $ (40,308) | $ (11,304) |
Write-offs | 36,161 | 21,264 | 11,389 |
Increase in allowance | (16,118) | (13,664) | (40,393) |
Balance as of end of the year | $ (12,665) | $ (32,708) | $ (40,308) |
Inventories (Details) $ in Thousands, $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
|
Inventories. | |||||
Spare parts and accessories of flight equipment | $ 271,454 | $ 296,345 | |||
Miscellaneous supplies | 7,505 | ||||
Total | 278,959 | $ 14,397 | $ 296,345 | ||
Consumption of inventories included in maintenance expense | $ 312,462 | $ 234,691 | $ 284,687 |
Prepaid expenses and other current assets (Details) $ in Thousands, $ in Thousands |
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
---|---|---|---|
Prepaid expenses and other current assets | |||
Other prepaid expenses | $ 214,874 | $ 81,803 | |
Sales commission to travel agencies | 190,052 | 151,342 | |
Advances to suppliers | 175,830 | 163,044 | |
Flight credits | 123,964 | 389,927 | |
Prepaid insurance | 85,418 | 64,309 | |
Total | $ 38,387 | $ 790,138 | $ 850,425 |
Guarantee deposits (Details) $ in Thousands, $ in Thousands |
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
---|---|---|---|
Current assets: | |||
Credit letters deposits | $ 1,127,302 | $ 829,918 | |
Aircraft maintenance deposits paid to lessors (Note 1j) | 434,866 | 279,390 | |
Deposits for rental of flight equipment | 34,723 | 23,584 | |
Other guarantee deposits | 28,995 | 9,064 | |
Total | $ 78,990 | 1,625,886 | 1,141,956 |
Non-current assets: | |||
Aircraft maintenance deposits paid to lessors | 8,320,612 | 7,641,544 | |
Deposits for rental of flight equipment | 1,029,323 | 741,871 | |
Other guarantee deposits | 23,219 | 41,323 | |
Total | $ 455,372 | 9,373,154 | 8,424,738 |
Total guarantee deposits | $ 10,999,040 | $ 9,566,694 |
Leases - Carrying amounts of lease liabilities (Details) $ in Thousands, $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
|
Leases | |||||
As at 1 January | $ 44,130,542 | $ 40,517,045 | |||
Additions | 9,411,524 | 5,572,764 | |||
Modifications | 1,370,795 | ||||
Disposals | (5,898) | (231,566) | |||
Accretion of interest | 2,582,391 | 2,218,982 | |||
Foreign exchange effect | 1,469,362 | 2,163,886 | |||
Payments | (9,308,477) | (6,110,569) | $ (6,499,802) | ||
As at 31 December | $ 49,650,239 | 44,130,542 | $ 40,517,045 | ||
Current | 6,484,092 | $ 283,843 | $ 5,842,492 | ||
Lease liabilities | $ 37,646,450 | $ 2,128,294 | $ 43,807,747 |
Leases - Amounts recognized in profit and loss (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Leases | ||||
Depreciation of right of use assets | $ (5,462,625) | $ (265,389) | $ (5,048,976) | $ (4,702,971) |
Interest expense on lease liabilities | (2,603,820) | (2,350,250) | (2,128,162) | |
Aircraft and engine variable expenses | (1,686,875) | $ (81,953) | (1,845,254) | (961,657) |
Total amount recognized in profit or loss | (9,753,320) | (9,244,480) | (7,792,790) | |
Cash outflow for leases | 9,308,477 | 6,110,569 | 6,499,802 | |
Supplemental Rent | 1,131,107 | $ 1,428,179 | $ 680,964 | |
Changes to lease payments that arose from concessions of lease modifications | 190,811 | |||
Increase in the lease liability from exercise of extension options | 1,376,005 | |||
Increase in the right-of-use assets from exercise of extension options | $ 1,376,005 |
Accrued liabilities - Short-term (Details) $ in Thousands, $ in Thousands |
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
---|---|---|---|
Accrued liabilities | |||
Fuel and traffic accrued expenses | $ 1,819,353 | $ 1,285,931 | |
Salaries and benefits | 432,596 | 337,467 | |
Maintenance and aircraft parts accrued expenses | 466,566 | 98,942 | |
Sales, marketing and distribution accrued expenses | 386,388 | 179,342 | |
Accrued administrative expenses | 196,856 | 122,729 | |
Maintenance deposits | 170,158 | 174,549 | |
Deferred revenue from V Club membership | 75,434 | 20,830 | |
Others | 45,987 | 86,374 | |
Information and communication accrued expenses | 40,899 | 35,359 | |
Supplier services agreement | 23,763 | 10,634 | |
Benefits from suppliers | 7,776 | 3,888 | |
Advances from travel agencies | 65 | 242 | |
Total accrued liabilities | $ 178,096 | $ 3,665,841 | $ 2,356,287 |
Accrued liabilities - Long-term (Details) $ in Thousands, $ in Thousands |
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
---|---|---|---|
Accrued liabilities | |||
Supplier services agreement | $ 15,704 | $ 45,270 | |
Benefits from suppliers | 9,071 | 16,847 | |
Other | 5,588 | 4,581 | |
Total long-term accrued liabilities | $ 1,475 | $ 30,363 | $ 66,698 |
Other liabilities (Details) - MXN ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Analysis of accrued liabilities | ||
Balance at beginning of the year | $ 2,768,901 | $ 1,876,785 |
Increase for the year | 1,684,800 | 2,397,211 |
Payments | (304,797) | (1,505,095) |
Balance at end of the year | 4,148,904 | 2,768,901 |
Aircraft and engine lease return obligation | ||
Analysis of accrued liabilities | ||
Balance at beginning of the year | 2,504,484 | 1,852,688 |
Increase for the year | 1,422,133 | 2,126,401 |
Payments | (38,828) | (1,474,605) |
Balance at end of the year | 3,887,789 | 2,504,484 |
Guarantee deposit | ||
Analysis of accrued liabilities | ||
Balance at beginning of the year | 250,000 | |
Increase for the year | 250,000 | |
Payments | (250,000) | |
Balance at end of the year | 250,000 | |
Employee profit sharing | ||
Analysis of accrued liabilities | ||
Balance at beginning of the year | 14,417 | 24,097 |
Increase for the year | 262,667 | 20,810 |
Payments | (15,969) | (30,490) |
Balance at end of the year | $ 261,115 | $ 14,417 |
Other liabilities, short-term and long-term (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
|
Accrued liabilities | ||||
Current maturities | $ 101,218 | $ 34,635 | $ 712,903 | |
Non-current | 2,667,683 | $ 166,930 | $ 3,436,001 | |
Cancellations, or write off related to liabilities | $ 0 | $ 0 |
Employee benefits - Analysis of net period cost (Details) - MXN ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Employee benefits | |||
Current service cost | $ 8,611 | $ 8,449 | $ 8,214 |
Interest cost on benefit obligation | 2,585 | 2,630 | 1,872 |
Net period cost | $ 11,196 | $ 11,079 | $ 10,086 |
Share-based payments - Share purchase plan (Details) $ in Thousands |
1 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Nov. 11, 2014
MXN ($)
|
Nov. 30, 2021
MXN ($)
|
Nov. 30, 2020
MXN ($)
|
Nov. 30, 2019
MXN ($)
|
Nov. 30, 2014
MXN ($)
|
Dec. 31, 2021
EquityInstruments
shares
|
Dec. 31, 2020
EquityInstruments
shares
|
Dec. 31, 2019
EquityInstruments
shares
|
|
Share purchase plan | ||||||||
Forfeited during the year | (551,732) | (327,217) | ||||||
Share purchase plan | ||||||||
Share purchase plan | ||||||||
Special bonus granted | $ | $ 10,831 | |||||||
Special bonus net of withheld taxes | $ | $ 7,059 | |||||||
Cost of extensions to LTIP approved | $ | $ 104,698 | $ 92,132 | $ 86,772 | |||||
Cost of extensions net of withheld taxes | $ | $ 68,066 | $ 59,899 | $ 56,407 | |||||
Outstanding at beginning of the year | 5,805,311 | 5,115,191 | 3,553,295 | |||||
Purchased during the year | shares | 1,849,417 | 3,159,763 | 2,694,600 | |||||
Exercised/vested during the year | (2,612,575) | (2,142,426) | (959,614) | |||||
Forfeited during the year | (551,732) | (327,217) | (173,090) | |||||
Outstanding at end of the year | 4,490,421 | 5,805,311 | 5,115,191 |
Share-based payments - SARs (cash settled) (Details) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Nov. 06, 2014
MXN ($)
EquityInstruments
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Share-based payments | ||||
Compensation expense recorded in the consolidated statement of operations | $ (62,262) | |||
Compensation (benefit) recorded in the consolidated statement of operations | $ 105,303 | $ 40,724 | ||
SARs - cash settled | ||||
Share-based payments | ||||
Granted | EquityInstruments | 4,315,264 | |||
Vesting period | 3 years | |||
Total amount granted | $ 10,831 | |||
Carrying amount of the liability | 1,901 | |||
Compensation expense recorded in the consolidated statement of operations | (1,901) | |||
Compensation (benefit) recorded in the consolidated statement of operations | $ 0 | $ 2,964 | ||
Cash payment related to key employees related to SARs plan | $ 2,395 |
Share-based payments - MIP I (Details) $ / shares in Units, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 27, 2012
MXN ($)
|
Dec. 24, 2012
$ / shares
|
Dec. 21, 2012
EquityInstruments
$ / shares
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Share-based payments | ||||||
Cost of MIP related to the vested shares | $ 27,202 | $ 180,343 | $ 90,383 | |||
MIP I | ||||||
Share-based payments | ||||||
Exercise price of shares | $ / shares | $ 5.31 | |||||
Amount borrowed by trust | $ 133,723 | |||||
Maximum term of share options | 10 years | |||||
Total cost of MIP determined | $ 2,722 | |||||
Series A and B shares | MIP I | ||||||
Share-based payments | ||||||
Number of instruments granted in share-based payment arrangement | EquityInstruments | 25,164,126 | |||||
Shares issued as a percentage of diluted capital stock | 3.00% | |||||
Exercise price of shares | $ / shares | $ 5.31 |
Share-based payments - MIP I, assumptions (Details) - MIP I |
12 Months Ended | |||
---|---|---|---|---|
Dec. 24, 2012
MXN ($)
Y
$ / shares
|
Dec. 31, 2021
MXN ($)
EquityInstruments
|
Dec. 31, 2020
MXN ($)
EquityInstruments
|
Dec. 31, 2019
MXN ($)
|
|
Share-based payments | ||||
Dividend yield (%) | 0.00% | |||
Volatility (%) | 37.00% | |||
Risk-free interest rate (%) | 5.96% | |||
Expected life of share options (years) | Y | 8.8 | |||
Exercise price of shares | $ / shares | $ 5.31 | |||
Exercise multiple | 1.1 | |||
Fair value of the stock at grant date | $ | $ 1.73 | |||
Shares exercised | EquityInstruments | 7,653,981 | |||
Series A shares | ||||
Share-based payments | ||||
Shares exercised | EquityInstruments | 7,653,981 | 2,780,000 | ||
Amount paid to Management Trust corresponding to exercised shares | $ | $ 40,668,000 | $ 0 | $ 14,773,000 |
Share-based payments - MIP II (Details) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021
MXN ($)
EquityInstruments
|
Dec. 31, 2020
MXN ($)
EquityInstruments
|
Dec. 31, 2019
MXN ($)
EquityInstruments
|
|
Share-based payments | |||
Compensation expense recorded in the consolidated statement of operations | $ 89,464 | $ 75,040 | $ 49,659 |
Forfeited during the year | EquityInstruments | 551,732 | 327,217 | |
MIP II | |||
Share-based payments | |||
Vesting period | 5 years | ||
Extension of vesting period | 5 years | ||
Carrying amount of the liability | $ 115,508 | $ 177,770 | |
Compensation expense recorded in the consolidated statement of operations | $ (62,262) | ||
Compensation (benefit) recorded in the consolidated statement of operations | $ 107,204 | ||
Exercised during the year (shares) | EquityInstruments | 0 | ||
Granted | EquityInstruments | 13,536,960 |
Share-based payments - Expense (benefit) recognized in retention plans (Details) - MXN ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Share-based payments | |||
Expense (benefit) arising from cash-settled share-based payments transactions | $ 105,303 | $ 40,724 | |
Expense arising from cash-settled share-based payments transactions | $ (62,262) | ||
Expense arising from equity-settled share-based payments transactions | 89,464 | 75,040 | 49,659 |
Total expense arising from share-based payments transactions | $ 27,202 | $ 180,343 | $ 90,383 |
Share-based payments - Board of Directors Incentive Plan (BoDIP) (Details) - BODIP |
1 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Apr. 30, 2018 |
Dec. 31, 2021
EquityInstruments
$ / shares
|
Dec. 31, 2020
EquityInstruments
$ / shares
|
Dec. 31, 2019
$ / shares
|
|
Disclosure of terms and conditions of share-based payment arrangement [line items] | ||||
Vesting period | 5 years | 5 years | ||
Exercise price | $ / shares | $ 32.23 | $ 9.74 | $ 16.80 | |
Shares available to be exercised | EquityInstruments | 4,589,726 | 5,233,693 |
Equity - Earnings (loss) per share (Details) $ / shares in Units, $ / shares in Units, shares in Thousands, $ in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2021
USD ($)
$ / shares
shares
|
Dec. 31, 2021
MXN ($)
$ / shares
shares
|
Dec. 31, 2020
MXN ($)
$ / shares
shares
|
Dec. 31, 2019
MXN ($)
$ / shares
shares
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2018
MXN ($)
|
|
Equity | ||||||
Net income (loss) for the period | $ 103,022 | $ 2,120,551 | $ (4,293,791) | $ 2,639,063 | ||
Weighted average number of shares outstanding (in thousands): | ||||||
Basic | 1,165,977 | 1,165,977 | 1,021,561 | 1,011,877 | ||
Diluted | 1,165,977 | 1,165,977 | 1,021,561 | 1,011,877 | ||
EPS- LPS : | ||||||
Basic | (per share) | $ 0.088 | $ 1.819 | $ (4.203) | $ 2.608 | ||
Diluted | (per share) | $ 0.088 | $ 1.819 | $ (4.203) | $ 2.608 | ||
Legal reserve | $ 14,146 | $ 291,178 | $ 291,178 | $ 291,178 | $ 291,178 | |
Legal reserve as a percent of capital stock | 8.50% | 8.50% | 9.80% | 8.50% | ||
Withholding tax on dividends distributions (as a percent) | 10.00% | 10.00% | ||||
Tax rate for dividends which exceeds the CUFIN and CUFINRE | 42.86% | 42.86% |
Income tax - Income tax rates (Details) - MXN ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income tax | |||
Corporate income tax rate | 30.00% | 30.00% | 30.00% |
Employee wages and benefits tax deductible (as a percent) | 47.00% | ||
Withholding tax on dividends distributions (as a percent) | 10.00% | ||
Consolidated basis tax income | $ 1,224,156 | $ 302,029 | $ 938,304 |
Maximum | |||
Income tax | |||
Employee wages and benefits tax deductible (as a percent) | 53.00% | ||
Guatemala | |||
Income tax | |||
Corporate income tax rate | 25.00% | ||
Costa Rica | |||
Income tax | |||
Corporate income tax rate | 30.00% | ||
Period in which tax losses can be carried forward | 3 years | ||
El Salvador | |||
Income tax | |||
Corporate income tax rate | 30.00% | ||
Mexico | |||
Income tax | |||
Period in which tax losses can be carried forward | 10 years |
Income tax - Analysis of income tax expense (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Income tax | ||||
Current year income tax expense | $ (347,803) | $ (90,609) | $ (281,491) | |
Deferred income tax (expense) benefit | (246,125) | 1,496,793 | (813,340) | |
Total income tax benefit (expense) | $ (28,855) | (593,928) | 1,406,184 | (1,094,831) |
Deferred income tax expense, translation effect | (2,015) | 2,035 | (2,278) | |
Deferred income tax related to items recognized in OCI during the year | ||||
Net (loss) gain cash flow hedges | (5,655) | 46,835 | (74,820) | |
Remeasurement gain of employee benefits | 2,850 | 794 | 3,058 | |
Deferred income tax recognized in OCI | $ (2,805) | $ 47,629 | $ (71,762) |
Income tax - Reconciliation of statutory corporate income tax rate to effective tax rate (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Reconciliation of accounting profit multiplied by applicable tax rates [abstract] | ||||
Statutory income tax rate | $ 814,344 | $ (1,709,992) | $ 1,120,168 | |
Amendment tax return effects and other tax adjustments | 93 | 53,192 | 18,770 | |
Inflation on furniture, intangible and equipment | (48,751) | (17,442) | (17,839) | |
Inflation of tax losses | (41,375) | (13,512) | (8,018) | |
Foreign countries difference with Mexican statutory rate | 2,609 | 3,509 | 4,143 | |
Annual inflation adjustment | (167,294) | 51,768 | (1,882) | |
Recorded deferred taxes on tax losses | (9,123) | 74,597 | 10,025 | |
Non-deductible expenses | 43,425 | 258,080 | 7,004 | |
Total income tax expense | $ 28,855 | $ 593,928 | $ (1,406,184) | $ 1,094,831 |
Statutory income tax rate | 30.00% | 30.00% | 30.00% | 30.00% |
Amendment tax return effects and other tax adjustments | (0.01%) | (0.01%) | 0.92% | (0.51%) |
Inflation on furniture, intangible and equipment | (1.79%) | (1.79%) | 0.29% | (0.48%) |
Inflation of tax losses | (1.52%) | (1.52%) | 0.23% | (0.21%) |
Foreign countries difference with Mexican statutory rate | 0.10% | 0.10% | (0.06%) | 0.11% |
Annual inflation adjustment | (6.16%) | (6.16%) | (0.91%) | (0.05%) |
Recorded deferred taxes on tax losses | (0.34%) | (0.34%) | (1.29%) | 0.27% |
Non-deductible expenses | 1.60% | 1.60% | (4.51%) | 0.19% |
Total effective tax rate | 21.88% | 21.88% | 24.67% | 29.32% |
Operating Revenues (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Revenue recognition | ||||
Fare revenues | $ 1,248,726 | $ 25,703,144 | $ 12,873,174 | $ 23,129,991 |
Other passenger revenues | 854,773 | 17,594,223 | 8,613,398 | 10,569,208 |
Passenger revenues | 2,103,499 | 43,297,367 | 21,486,572 | 33,699,199 |
Other non-passenger revenue | 75,696 | 1,558,092 | 882,360 | 897,586 |
Cargo | 11,718 | 241,202 | 201,881 | 228,836 |
Total | 45,096,661 | 34,825,621 | ||
Non-derivatives financial instruments | (21,110) | (434,522) | (411,222) | (72,949) |
Operating revenues | $ 2,169,803 | 44,662,139 | 22,159,591 | 34,752,672 |
Transactions from unearned transportation revenues | ||||
January 1, | 5,850,917 | 3,679,926 | ||
Deferred | 43,703,458 | 23,657,563 | ||
Recognized in revenue during the year | (43,297,367) | (21,486,572) | ||
December 31, | 6,257,008 | 5,850,917 | 3,679,926 | |
Total Revenues | ||||
Revenue recognition | ||||
Fare revenues | 8,613,398 | |||
Other passenger revenues | 21,486,572 | |||
Passenger revenues | 12,873,174 | |||
Other non-passenger revenue | 882,360 | |||
Cargo | 201,881 | |||
Total | 22,570,813 | |||
Non-derivatives financial instruments | (411,222) | |||
Operating revenues | 22,159,591 | |||
Domestic (Mexico) | ||||
Revenue recognition | ||||
Operating revenues | 33,754,354 | 16,572,198 | 24,594,797 | |
Domestic (Mexico) | At the flight time | ||||
Revenue recognition | ||||
Fare revenues | 17,466,759 | 6,920,141 | 15,833,878 | |
Other passenger revenues | 14,376,043 | 15,375,788 | 7,531,725 | |
Passenger revenues | 31,842,802 | 8,455,647 | 23,365,603 | |
Other non-passenger revenue | 1,546,600 | 875,610 | 888,353 | |
Cargo | 231,653 | 196,349 | 221,375 | |
Total | 33,621,055 | 16,447,747 | 24,475,331 | |
Domestic (Mexico) | At the sale | ||||
Revenue recognition | ||||
Fare revenues | 124,450 | |||
Other passenger revenues | 135,992 | 124,450 | 119,466 | |
Passenger revenues | 135,992 | 119,466 | ||
Total | 135,992 | 124,450 | 119,466 | |
International | At the flight time | ||||
Revenue recognition | ||||
Fare revenues | 8,236,385 | 1,536,206 | 7,296,113 | |
Other passenger revenues | 3,049,608 | 5,953,733 | 2,865,555 | |
Passenger revenues | 11,285,993 | 4,417,527 | 10,161,668 | |
Other non-passenger revenue | 11,492 | 6,750 | 9,233 | |
Cargo | 9,549 | 5,532 | 7,461 | |
Total | 11,307,034 | 5,966,015 | 10,178,362 | |
International | At the sale | ||||
Revenue recognition | ||||
Fare revenues | 32,601 | |||
Other passenger revenues | 32,580 | 32,601 | 52,462 | |
Passenger revenues | 32,580 | 52,462 | ||
Total | $ 32,580 | $ 32,601 | $ 52,462 |
Other operating income and expenses (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Analysis of other operating income | ||||
Gain on sale and leaseback transactions of aircraft and spare engines | $ 195,552 | $ 710,522 | $ 284,759 | |
Loss on sale of rotable spare parts furniture and equipment | (2,571) | (2,604) | (8,954) | |
Other income | 24,857 | 22,415 | 51,403 | |
Other operating income | $ 10,583 | 217,838 | 730,333 | 327,208 |
Analysis of other operating expenses | ||||
Administrative and operational support expenses | 752,434 | 632,041 | 581,181 | |
Technology and communications | 431,855 | 383,648 | 381,055 | |
Passenger services | 76,107 | 87,850 | 65,477 | |
Insurance | 74,499 | 53,507 | 74,661 | |
Others | 1,897 | 194 | 10,553 | |
Other operating expenses | $ 64,944 | $ 1,336,792 | $ 1,157,240 | $ 1,112,927 |
Finance income and cost (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Analysis of finance income | ||||
Interest on cash and equivalents | $ 58,269 | $ 93,122 | $ 201,191 | |
Interest on asset backed trust notes | 5,714 | 6,342 | 6,525 | |
Interest on recovery of guarantee deposits | 7,595 | 2,047 | 83 | |
Total finance income | $ 3,477 | 71,578 | 101,511 | 207,799 |
Analysis of finance cost | ||||
Leases financial cost | 2,603,820 | 2,350,250 | 2,128,162 | |
Financial instruments loss | 448,559 | |||
Interest on asset backed trust notes | 115,578 | 116,240 | 80,314 | |
Cost of letter credit notes | 61,549 | 73,141 | 49,856 | |
Interest on debts and borrowings | 14,222 | 16,368 | 1,660 | |
Bank fees and others | 4,574 | 3,707 | 3,607 | |
Other finance costs | 32,246 | 10,219 | 6,230 | |
Total finance costs | $ 137,585 | 2,831,989 | 3,018,484 | 2,269,829 |
Capitalized borrowing costs | ||||
Interest on debts and borrowings | 158,188 | 400,406 | 457,973 | |
Capitalized interest | (143,966) | (384,038) | (456,313) | |
Interest on debts and borrowing in the consolidated statements of operations | $ 14,222 | $ 16,368 | $ 1,660 |
Components of other comprehensive income (loss) - Schedule of analysis of the other comprehensive (loss) income (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Balances at the beginning | $ (1,562,498) | $ 116,240 | ||
Comprehensive (loss) income of the year | 1,583,027 | (1,726,367) | ||
Deferred Tax effect | (2,805) | 47,629 | $ (71,762) | |
Net balances at the end | $ 861 | 17,724 | (1,562,498) | 116,240 |
Remeasurements of employee benefits | ||||
Balances at the beginning | (8,655) | (6,798) | ||
Comprehensive (loss) income of the year | (9,279) | (2,651) | ||
Deferred Tax effect | 2,850 | 794 | ||
Net balances at the end | (15,084) | (8,655) | (6,798) | |
Derivative and non-derivative financial instruments | ||||
Balances at the beginning | (1,596,079) | 104,772 | ||
Comprehensive (loss) income of the year | 1,596,327 | (1,747,686) | ||
Deferred Tax effect | (5,655) | 46,835 | ||
Net balances at the end | (5,407) | (1,596,079) | 104,772 | |
Exchange differences on the translation of foreign | ||||
Balances at the beginning | 42,236 | 18,266 | ||
Comprehensive (loss) income of the year | (4,021) | 23,970 | ||
Net balances at the end | $ 38,215 | $ 42,236 | $ 18,266 |
Commitments and contingencies (Details) $ in Thousands |
Apr. 26, 2022
$ / $
|
Dec. 31, 2021
₡ / $
|
Dec. 31, 2021
Q / $
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2021
$ / $
|
Dec. 31, 2021
MXN ($)
|
Dec. 31, 2020
₡ / $
|
Dec. 31, 2020
Q / $
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
$ / $
|
Dec. 31, 2019
₡ / $
|
Dec. 31, 2019
Q / $
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
$ / $
|
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commitments and contingencies | ||||||||||||||
2022 | $ 114,563,000 | $ 2,358,108 | ||||||||||||
2023 | 314,660,000 | 6,476,797 | ||||||||||||
2024 | 903,776,000 | 18,602,869 | ||||||||||||
2025 | 981,657,000 | 20,205,930 | ||||||||||||
2026 and thereafter | 4,362,996,000 | 89,805,726 | ||||||||||||
Total committed expenditures | $ 6,677,652,000 | $ 137,449,430 | ||||||||||||
Exchange rate | 20.3183 | 645.9000 | 7.7285 | 20.5835 | 20.5835 | 615.7800 | 7.8095 | 19.9487 | 19.9487 | 573.4400 | 7.6988 | 18.8452 | 18.8452 |
Operating segments (Details) $ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021
USD ($)
segment
|
Dec. 31, 2021
MXN ($)
segment
|
Dec. 31, 2020
MXN ($)
|
Dec. 31, 2019
MXN ($)
|
|
Operating segments | ||||
Number of geographic segments | segment | 2 | 2 | ||
Total operating revenues | $ 2,169,803 | $ 44,662,139 | $ 22,159,591 | $ 34,752,672 |
Non-derivatives financial instruments | $ (21,110) | (434,522) | (411,222) | (72,949) |
Domestic (Mexico) | ||||
Operating segments | ||||
Total operating revenues | 33,754,354 | 16,572,198 | 24,594,797 | |
United States of America and Central America | ||||
Operating segments | ||||
Total operating revenues | 11,342,307 | $ 5,998,615 | $ 10,230,824 | |
United States of America | ||||
Operating segments | ||||
Total operating revenues | $ 5,343,692 |