CONTROLADORA VUELA COMPANIA DE AVIACION, S.A.B. DE C.V., 20-F filed on 4/26/2018
Annual and Transition Report (foreign private issuer)
v3.8.0.1
Document and Entity Information
12 Months Ended
Dec. 31, 2017
shares
Entity Registrant Name Controladora Vuela Compania de Aviacion, S.A.B. de C.V.
Entity Central Index Key 0001520504
Document Type 20-F
Document Period End Date Dec. 31, 2017
Amendment Flag false
Current Fiscal Year End Date --12-31
Entity Well-known Seasoned Issuer Yes
Entity Voluntary Filers No
Entity Current Reporting Status Yes
Entity Filer Category Large Accelerated Filer
Document Fiscal Year Focus 2017
Document Fiscal Period Focus FY
Ordinary Participation Certificates  
Entity Common Stock, Shares Outstanding 756,478,447
Series A shares  
Entity Common Stock, Shares Outstanding 923,824,804
v3.8.0.1
Consolidated Statements of Financial Position
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Current assets:      
Cash and cash equivalents $ 352,204 $ 6,950,879 $ 7,071,251
Accounts receivable:      
Other accounts receivable, net 24,244 478,467 427,403
Recoverable value added tax and others 20,292 400,464 342,348
Recoverable income tax 28,900 570,361 192,967
Inventories 14,940 294,850 243,884
Prepaid expenses and other current assets 38,900 767,713 1,562,526
Financial instruments 25,204 497,403 543,528
Guarantee deposits 68,552 1,352,893 1,167,209
Total current assets 573,236 11,313,030 11,551,116
Non-current assets:      
Rotable spare parts, furniture and equipment, net 221,718 4,375,697 2,525,008
Intangible assets, net 9,649 190,420 114,041
Financial instruments     324,281
Deferred income taxes 28,499 562,445 559,083
Guarantee deposits 309,001 6,098,252 6,559,878
Other assets 6,406 126,423 148,364
Total non-current assets 575,273 11,353,237 10,230,655
Total assets 1,148,509 22,666,267 21,781,771
Short-term liabilities:      
Unearned transportation revenue 109,531 2,161,636 2,153,567
Suppliers 54,594 1,077,438 861,805
Related parties 2,074 40,931 65,022
Accrued liabilities 103,924 2,050,973 1,785,439
Other taxes and fees payable 63,097 1,245,247 1,476,242
Income taxes payable 5,639 111,292 196,242
Financial instruments     14,144
Financial debt 121,789 2,403,562 1,051,237
Other liabilities 14,225 280,744 284,200
Total short-term liabilities 474,873 9,371,823 7,887,898
Long-term liabilities:      
Financial debt 54,681 1,079,152 943,046
Accrued liabilities 10,126 199,848 169,808
Other liabilities 10,980 216,702 136,555
Employee benefits 977 19,289 13,438
Deferred income taxes 81,901 1,616,282 1,836,950
Total long-term liabilities 158,665 3,131,273 3,099,797
Total liabilities 633,538 12,503,096 10,987,695
Equity:      
Capital stock 150,671 2,973,559 2,973,559
Treasury shares (4,309) (85,034) (83,365)
Contributions for future capital increases   1 1
Legal reserve 14,754 291,178 38,250
Additional paid-in capital 91,436 1,804,528 1,800,613
Retained earnings 257,408 5,080,049 5,927,576
Accumulated other comprehensive income 5,011 98,890 137,442
Total equity 514,971 10,163,171 10,794,076
Total liabilities and equity $ 1,148,509 $ 22,666,267 $ 21,781,771
v3.8.0.1
Consolidated Statements of Financial Position (Parenthetical)
Apr. 25, 2018
$ / $
Dec. 31, 2017
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Consolidated Statements of Financial Position              
Convenience translation to U.S. dollars 18.8628 19.7354 7.3448 572.5600 20.6640 7.5221 561.1000
v3.8.0.1
Consolidated Statements of Operations
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
$ / shares
Dec. 31, 2017
MXN ($)
$ / shares
Dec. 31, 2016
MXN ($)
$ / shares
Dec. 31, 2015
MXN ($)
$ / shares
Operating revenues:        
Passenger $ 901,493 $ 17,791,317 $ 17,790,130 $ 14,130,365
Non-ticket 357,431 7,054,058 5,722,321 4,049,339
Total revenues 1,258,924 24,845,375 23,512,451 18,179,704
Other operating income (4,903) (96,765) (496,742) (193,155)
Fuel 367,646 7,255,636 5,741,403 4,721,108
Aircraft and engine rent expenses 307,696 6,072,502 5,590,058 3,525,336
Landing, take-off and navigation expenses 203,184 4,009,915 3,272,051 2,595,413
Salaries and benefits 143,075 2,823,647 2,419,537 1,902,748
Sales, marketing and distribution expenses 85,710 1,691,524 1,413,348 1,088,805
Maintenance expenses 72,618 1,433,147 1,344,110 874,613
Other operating expenses 55,152 1,088,440 952,452 697,786
Depreciation and amortization 27,802 548,687 536,543 456,717
Operating income 944 18,642 2,739,691 2,510,333
Finance income 5,361 105,795 102,591 47,034
Finance cost (4,376) (86,357) (35,116) (21,703)
Foreign exchange (loss) gain, net (40,225) (793,854) 2,169,505 966,554
(Loss) income before income tax (38,296) (755,774) 4,976,671 3,502,218
Income tax benefit (expense) 8,167 161,175 (1,457,182) (1,038,348)
Net (loss) income $ (30,129) $ (594,599) $ 3,519,489 $ 2,463,870
(Loss) Earnings per share basic: | (per share) $ (0.030) $ (0.588) $ 3.478 $ 2.435
(Loss) Earnings per share diluted: | (per share) $ (0.030) $ (0.588) $ 3.478 $ 2.435
v3.8.0.1
Consolidated Statements of Operations (Parenthetical)
Apr. 25, 2018
$ / $
Dec. 31, 2017
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Consolidated Statements of Operations              
Convenience translation to U.S. dollars 18.8628 19.7354 7.3448 572.5600 20.6640 7.5221 561.1000
v3.8.0.1
Consolidated Statements of Comprehensive Income
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Consolidated Statements of Comprehensive Income        
Net (loss) income for the year $ (30,129) $ (594,599) $ 3,519,489 $ 2,463,870
Other comprehensive (loss) income to be reclassified to profit or loss in subsequent periods:        
Net (loss) gain on cash flow hedges (2,136) (42,148) 624,694 (193,869)
Income tax effect 609 12,017 (187,408) 58,161
Exchange differences on translation of foreign operations (364) (7,178) (4,756)  
Other comprehensive (loss) income not to be reclassified to profit or loss in subsequent periods:        
Remeasurement loss of employee benefits (90) (1,776) (442) (1,174)
Income tax effect 27 533 132 352
Other comprehensive (loss) income for the year, net of tax (1,954) (38,552) 432,220 (136,530)
Total comprehensive (loss) income for the year, net of tax $ (32,083) $ (633,151) $ 3,951,709 $ 2,327,340
v3.8.0.1
Consolidated Statements of Comprehensive Income (Parenthetical)
Apr. 25, 2018
$ / $
Dec. 31, 2017
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Consolidated Statements of Comprehensive Income              
Convenience translation to U.S. dollars 18.8628 19.7354 7.3448 572.5600 20.6640 7.5221 561.1000
v3.8.0.1
Consolidated Statements of Changes in Equity
$ in Thousands, $ in Thousands
Capital stock
USD ($)
Capital stock
MXN ($)
Treasury shares
USD ($)
Treasury shares
MXN ($)
Contribution for future capital increases
MXN ($)
Legal reserve
USD ($)
Legal reserve
MXN ($)
Additional paid-in capital
USD ($)
Additional paid-in capital
MXN ($)
Retained earnings (Accumulated losses)
USD ($)
Retained earnings (Accumulated losses)
MXN ($)
Remeasurement of employee benefits
USD ($)
Remeasurement of employee benefits
MXN ($)
Cash flow hedges
USD ($)
Cash flow hedges
MXN ($)
Exchange differences on translation of foreign operations
USD ($)
Exchange differences on translation of foreign operations
MXN ($)
USD ($)
MXN ($)
Balance as of beginning of the year at Dec. 31, 2014   $ 2,973,559   $ (114,789) $ 1   $ 38,250   $ 1,786,790   $ (55,783)   $ (1,482)   $ (156,766)       $ 4,469,780
Exercise of stock options       23,461                             23,461
Long-term incentive plan cost                 4,250                   4,250
Net (loss) income for the period                     2,463,870               2,463,870
Other comprehensive (loss) income items                         (822)   (135,708)       (136,530)
Total comprehensive (loss) income                     2,463,870   (822)   (135,708)       2,327,340
Balance as of end of the year at Dec. 31, 2015   2,973,559   (91,328) 1   38,250   1,791,040   2,408,087   (2,304)   (292,474)       6,824,831
Treasury shares       (17,025)         17,025                    
Exercise of stock options       17,536                             17,536
Forfeited shares from incentive plan       963         (963)                    
Long-term incentive plan cost       6,489         (6,489)                    
Net (loss) income for the period                     3,519,489               3,519,489
Other comprehensive (loss) income items                         (310)   437,286   $ (4,756)   432,220
Total comprehensive (loss) income                     3,519,489   (310)   437,286   (4,756)   3,951,709
Balance as of end of the year at Dec. 31, 2016   2,973,559   (83,365) 1   38,250   1,800,613   5,927,576   (2,614)   144,812   (4,756)   10,794,076
Legal reserve increase             252,928       (252,928)                
Treasury shares       (10,108)         10,108                    
Exercise of stock options       638                             638
Long-term incentive plan cost       7,801         (6,193)                   1,608
Net (loss) income for the period                     (594,599)             $ (30,129) (594,599)
Other comprehensive (loss) income items                         (1,243)   (30,131)   (7,178) (1,954) (38,552)
Total comprehensive (loss) income                     (594,599)   (1,243)   (30,131)   (7,178) (32,083) (633,151)
Balance as of end of the year at Dec. 31, 2017 $ 150,671 $ 2,973,559 $ (4,309) $ (85,034) $ 1 $ 14,754 $ 291,178 $ 91,436 $ 1,804,528 $ 257,408 $ 5,080,049 $ (195) $ (3,857) $ 5,811 $ 114,681 $ (605) $ (11,934) $ 514,971 $ 10,163,171
v3.8.0.1
Consolidated Statements of Changes in Equity (Parenthetical)
Apr. 25, 2018
$ / $
Dec. 31, 2017
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Consolidated Statements of Changes in Equity              
Convenience translation to U.S. dollars 18.8628 19.7354 7.3448 572.5600 20.6640 7.5221 561.1000
v3.8.0.1
Consolidated Statements of Cash Flows
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Operating activities        
(Loss) income before income tax $ (38,296) $ (755,774) $ 4,976,671 $ 3,502,218
Non-cash adjustment to reconcile income before tax to net cash flows from operating activities:        
Depreciation and amortization 27,802 548,687 536,543 456,717
Provision for doubtful accounts 239 4,720 9,164 8,825
Finance income (5,361) (105,795) (102,591) (47,034)
Finance cost 4,376 86,357 35,116 21,703
Net foreign exchange differences 25,556 504,366 (1,054,333) (483,329)
Financial instruments 2,534 50,007 353,943 287,550
Net gain on disposal of rotable spare parts, furniture and equipment and gain on sale of aircraft (3,292) (64,978) (483,565) (180,433)
Employee benefits 236 4,657 3,122 2,549
Aircraft and engine lease extension benefit and other benefits from service agreements (5,096) (100,580) (82,178) (62,122)
Management incentive and long-term incentive plans 445 8,783 4,826 4,250
Cash flows from operating activities before changes in working capital 9,143 180,450 4,196,718 3,510,894
Changes in operating assets and liabilities:        
Related parties (1,221) (24,091) 50,706 13,749
Other accounts receivable 7,082 139,774 (157,370) (52,157)
Recoverable and prepaid taxes (22,243) (438,966) (361,377) 63,499
Inventories (2,582) (50,966) (80,811) (23,400)
Prepaid expenses 36,790 726,020 (1,027,040) (353,451)
Other assets 1,112 21,941 19,540 28,758
Guarantee deposits 2,910 57,425 (1,957,350) (1,164,911)
Suppliers 9,936 196,082 136,178 300,447
Accrued liabilities 14,690 289,920 499,584 272,555
Other taxes and fees payable 17,887 353,014 523,524 433,863
Unearned transportation revenue 409 8,069 196,313 536,319
Financial instruments 6,387 126,053 (450,902) (637,879)
Other liabilities 567 11,198 260,437 127,170
Cash flows from operating activities before interest received and income tax paid 80,867 1,595,923 1,848,150 3,055,456
Interest received 5,361 105,795 102,591 47,034
Income tax paid (36,272) (715,849) (972,009) (32,877)
Net cash flows provided by operating activities 49,956 985,869 978,732 3,069,613
Investing activities        
Acquisitions of rotable spare parts, furniture and equipment (127,778) (2,521,752) (2,198,697) (1,403,863)
Acquisitions of intangible assets (6,633) (130,908) (60,792) (52,228)
Pre-delivery payments reimbursements 10,841 213,947 1,733,093 669,718
Proceeds from disposals of rotable spare parts, furniture and equipment 9,033 178,273 498,438 185,096
Net cash flows used in investing activities (114,537) (2,260,440) (27,958) (601,277)
Financing activities        
Proceeds from exercised stock options 32 638 20,186 23,461
Treasury shares purchase (512) (10,108) (17,025)  
Interest paid (5,340) (105,388) (39,350) (41,538)
Other finance interest paid     (137,830) (40,113)
Payments of financial debt (46,864) (924,867) (1,531,460) (801,335)
Proceeds from financial debt 123,535 2,438,025 1,716,244 924,611
Net cash flows provided by financing activities 70,851 1,398,300 10,765 65,086
Increase in cash and cash equivalents 6,270 123,729 961,539 2,533,422
Net foreign exchange differences on cash balance (12,369) (244,101) 952,399 359,034
Cash and cash equivalents at beginning of year 358,303 7,071,251 5,157,313 2,264,857
Cash and cash equivalents at end of year $ 352,204 $ 6,950,879 $ 7,071,251 $ 5,157,313
v3.8.0.1
Consolidated Statements of Cash Flows (Parenthetical)
Apr. 25, 2018
$ / $
Dec. 31, 2017
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Consolidated Statements of Cash Flows              
Convenience translation to U.S. dollars 18.8628 19.7354 7.3448 572.5600 20.6640 7.5221 561.1000
v3.8.0.1
Description of the business and summary of significant accounting policies
12 Months Ended
Dec. 31, 2017
Description of the business and summary of significant accounting policies  
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 Mexican Corporate laws on October 27, 2005.

 

Controladora is domiciled in Mexico City at Av. Antonio Dovali Jaime No. 70, 13th Floor, Tower B, Colonia Zedec Santa Fe, Mexico City.

 

The Company, through its subsidiary Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V. (“Concesionaria”), has a concession to provide air transportation services for passengers, cargo and mail throughout Mexico and abroad.

 

Concesionaria’s concession was granted by the Mexican federal government through the Mexican Communications and Transportation Ministry (Secretaría de Comunicaciones y Transportes) on May 9, 2005 initially for a period of five years and was extended on February 17, 2010 for an additional period of ten years.

 

Concesionaria made its first commercial flight as a low-cost airline on March 13, 2006. The Company operates under the trade name of “Volaris”. On June 11, 2013, Controladora Vuela Compañía de Aviación, S.A.P.I. de C.V. changed its corporate name to Controladora Vuela Compañía de Aviación, S.A.B. de C.V.

 

On September 23, 2013, the Company completed its dual listing Initial Public Offering (“IPO”) on the New York Stock Exchange (“NYSE”) and on the Mexican Stock Exchange (Bolsa Mexicana de Valores, or “BMV”), and on September 18, 2013 its shares started trading under the ticker symbol “VLRS” and “VOLAR”, respectively.

 

On November 16, 2015, certain shareholders of the Company completed a secondary follow-on equity offering on the NYSE (Note 18a).

 

On November 10, 2016, the Company, through its subsidiary Vuela Aviación, S.A. (“Volaris Costa Rica”), obtained from the Costa Rican civil aviation authorities an air operator certificate to provide air transportation services for passengers, cargo and mail, in scheduled and non-scheduled flights for an initial period of five years. On December 1, 2016, Volaris Costa Rica started operations.

 

The accompanying consolidated financial statements and notes were authorized for issuance by the Company’s Chief Executive Officer, Enrique Beltranena, and Chief Financial Officer, Fernando Suárez, on April 6, 2018. Those consolidated financial statements and notes were approved by the Company´s Board of Directors and by the Shareholders on April 19, 2018. The accompanying consolidated financial statements were approved for issuance in the Company´s annual report on Form 20-F by the Company´s Chief Executive Officer and Chief Financial Officer on April 25, and subsequent events were considered through that date (Note 25).

 

a)Relevant events

 

Purchase of 80 A320 New Engine Option (“NEO”) aircraft

 

On December 28, 2017, the Company amended the agreement with Airbus, S.A.S. (“Airbus”) for the purchase of 80 A320NEO family aircraft to be delivered from 2022 to 2026, to support the Company’s targeted growth markets in Mexico, United States and Central America. The related commitments for the acquisitions of such aircraft are disclosed in Note 23.

 

Operations in Central America

 

On December 1, 2016, the Company’s subsidiary Vuela Aviación, started operations in Costa Rica.

 

Secondary follow-on equity offering

 

On November 16, 2015, the Company completed a secondary follow-on equity offering, in which certain shareholders sold 108,900,000 of the Company’s Ordinary Participation Certificates (Certificados de Participación Ordinarios or “CPOs”), in the form of American Depositary Shares or “ADSs”, in the United States and other countries outside Mexico. No CPOs or ADSs were sold by the Company and the selling shareholders received all of the proceeds from this offering.

 

b)  Basis of preparation

 

Statement of compliance

 

These consolidated financial statements comprise the financial statements of the Company and its subsidiaries at December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017, 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 the entity operates (“functional currency”). The presentation currency of the Company’s consolidated financial statements is the Mexican peso, which is used also for compliance with its legal and tax 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. The consolidated financial statements 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 and investments in marketable securities measured at fair value through profit and loss (“FVTPL”). The preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from those estimates.

 

c)  Basis of consolidation

 

The accompanying consolidated financial statements comprise the financial statements of the Company and its subsidiaries. At December 31, 2017 and 2016, for accounting purposes the companies included in the consolidated financial statements are as follows:

 

 

 

Principal

 

 

 

% Equity interest

 

Name

 

Activities

 

Country

 

2017

 

2016

 

Concesionaria

 

Air transportation services for passengers, cargo and mail throughout Mexico and abroad

 

Mexico

 

100

%

100

%

Volaris Costa Rica

 

Air transportation services for passengers, cargo and mail in Costa Rica and abroad

 

Costa Rica

 

100

%

100

%

Vuela, S.A. (“Vuela”)*

 

Air transportation services for passengers, cargo and mail in Guatemala and abroad

 

Guatemala

 

100

%

100

%

Comercializadora Volaris, S.A. de C.V.

 

Merchandising of services

 

Mexico

 

100

%

100

%

Servicios Earhart, S.A.*

 

Recruitment and payroll

 

Guatemala

 

100

%

100

%

Servicios Corporativos Volaris, S.A. de C.V. (“Servicios Corporativos”)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Servicios Administrativos Volaris, S.A. de C.V (“Servicios Administrativos”)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Operaciones Volaris, S.A. de C.V (“Operaciones Volaris”)(1)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Deutsche Bank México, S.A., Trust 1710

 

Pre-delivery payments financing (Note 5)

 

Mexico

 

100

%

100

%

Deutsche Bank México, S.A., Trust 1711

 

Pre-delivery payments financing (Note 5)

 

Mexico

 

100

%

100

%

Irrevocable Administrative Trust number F/307750 “Administrative Trust”

 

Share administration trust (Note 17)

 

Mexico

 

100

%

100

%

Irrevocable Administrative Trust number F/745291

 

Share administration trust (Note 17)

 

Mexico

 

100

%

100

%

 

*The Company has not started operations in Guatemala.

(1)

With effect from August 3, 2016, the name of the Company was changed from Servicios Operativos Terrestres Volaris, S.A. de C.V. to Operaciones Volaris, S.A. de C.V.

 

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.

 

Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and only if, the Company has:

 

(i)

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).

(ii)

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

(iii)

The ability to use its power over the investee to affect its returns.

 

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

 

(i)

The contractual arrangement with the other vote holders of the investee.

(ii)

Rights arising from other contractual arrangements.

(iii)

The Company’s voting rights and potential voting rights.

 

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.

 

All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated in full.

 

On consolidation, the assets and liabilities of foreign operations are translated into Mexican pesos at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognized in other comprehensive income (“OCI”). On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognized in profit or loss.

 

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 liabilities under the caption unearned transportation revenue and, once the transportation service is provided by the Company or when the non-refundable ticket expires at the date of the scheduled travel, the earned revenue is recognized as passenger ticket revenues and the unearned transportation revenue is reduced by the same amount. All of the Company’s tickets are non-refundable and are subject to change upon a payment of a fee. Additionally, the Company does not operate a frequent flier program.

 

Non-ticket revenues:

 

The most significant non-ticket revenues include revenues generated from: (i) air travel-related services (ii) revenues from non-air travel-related services and (iii) cargo services.

 

Air travel-related services include but are not limited to fees charged for excess baggage, bookings through the call center or third-party agencies, advanced seat selection, itinerary changes, charters and airport passenger facility charges for no-show tickets. They are recognized as revenue when the related service is provided by the Company.

 

Revenues from non-air travel-related services include commissions charged to third parties for the sale of hotel rooms, trip insurance and rental cars. They are recognized as revenue at the time the service is provided. Additionally, services not directly related to air transportation include VClub membership fees and the sale of advertising to third parties. VClub membership fees are recognized as revenues over the term of the membership. Revenue from the sale of advertising is recognized over the period in which the service is provided.

 

Revenues from cargo services are recognized when the cargo transportation is provided (upon delivery of the cargo to the destination).

 

The breakdown of the Company’s non-ticket revenues for the years ended December 31, 2017, 2016 and 2015 is as follows:

 

 

 

For the years ended December 31,

 

 

 

2017

 

2016

 

2015

 

Air travel-related services

 

Ps.

6,293,747

 

Ps.

5,055,836

 

Ps.

3,418,654

 

Non-air travel-related services

 

589,338

 

494,864

 

441,393

 

Cargo

 

170,973

 

171,621

 

189,292

 

 

 

 

 

 

 

 

 

Total non-ticket revenues

 

Ps.

7,054,058

 

Ps.

5,722,321

 

Ps.

4,049,339

 

 

 

 

 

 

 

 

 

 

 

 

 

e)  Cash and cash equivalents

 

Cash and cash equivalents are represented by bank deposits and highly liquid investments with maturities of 90 days or less at the original purchase date.

 

For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of cash and short-term investments as defined above.

 

f)  Financial instruments

 

A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity. The Company early adopted IFRS 9.

 

Under IFRS 9 (2013), the FVTPL category used under IAS 39 remains permissible, although new categories of financial assets are introduced. These new categories are based on the characteristics of the instruments and the business model under which these are held, to either be measured at fair value or at amortized cost.

 

For financial liabilities, categories provided under IAS 39 are maintened. As a result, there was no difference in valuation and recognition of the financial assets under IFRS 9 (2013), since those financial assets categorized under IAS 39 as FVTPL remain in that same category under IFRS 9 (2013). In the case of trade receivables, these were not affected in terms of the valuation model under this version of IFRS 9 (2013), since they are carried at amortized cost and continued to be accounted for as such.

 

Also, the hedge accounting section of IFRS 9 (2013) requires, for options that qualify and are formally designated as hedging instruments, the intrinsic value of the option to be defined as the hedging instrument, thus allowing for the exclusion of changes in fair value attributable to extrinsic value (time value and volatility), to be accounted, under the transaction-related method, separately as a cost of hedging that needs to be initially recognized in OCI and accumulated in a separate component of equity, since the hedged item is a portion of the forecasted jet fuel consumption. The extrinsic value is recognized in the consolidated statement of operations when the hedged item is recognized in income.

 

IFRS 9 requires the Company to record expected credit losses on all trade receivables, either on a 12 month or lifetime basis. The Company recorded lifetime expected losses on all trade receivables.

 

i)  Financial assets

 

Classification of financial assets

 

The Company determines the classification and measurement of financial assets, in accordance with the categories in IFRS 9 (2013), which are based on both: the characteristics of the contractual cash flows of these assets and the business model objective for holding them.

 

Financial assets include those carried at FVTPL, whose objective to hold them is for trading purposes (short-term investments), or at amortized cost, for accounts receivables held to collect the contractual cash flows, which are characterized by solely payments of principal and interest (“SPPI”). Derivative financial instruments are also considered financial assets when these represent contractual rights to receive cash or another financial asset.

 

Initial recognition

 

All the Company’s financial assets are initially recognized at fair value, including derivative financial instruments.

 

Subsequent measurement

 

The subsequent measurement of financial assets depends on their initial classification, as is described below:

 

1.

Financial assets at FVTPL, which include financial assets held for trading.

2.

Financial assets at amortized cost, whose characteristics meet the SPPI criterion and were originated to be held to collect principal and interest in accordance with the Company’s business model.

3.

Derivative financial instruments are designated for hedging purposes under the cash flow hedge (“CFH”) accounting model and are measured at fair value.

 

Derecognition

 

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:

 

a)

The rights to receive cash flows from the asset have expired;

 

b)

The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; or

 

c)

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

 

ii)  Impairment of financial assets

 

The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events has occurred since the initial recognition of an asset (an incurred ‘loss event’), that has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.  Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in receivables, 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 2(vi) and Note 8.

 

For trade receivables, the Company records allowance for credit losses in accordance with the objective evidence of the incurred losses. Based on this evaluation, allowances are taken into account for the expected losses of these receivables.

 

For the years ended December 31, 2017, 2016 and 2015, the Company recorded an impairment on accounts receivable of Ps.4,720, Ps.9,164 and Ps.8,825, respectively (Note 8).

 

iii) Financial liabilities

 

Classification of financial liabilities

 

Financial liabilities under IFRS 9 (2013) are classified at amortized cost or at FVTPL.

 

Derivative financial instruments are also considered financial liabilities when these represent contractual obligations to deliver cash or another financial asset.

 

Initial recognition

 

The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value.

 

The Company’s financial liabilities include accounts payable to suppliers, unearned transportation revenue, other accounts payable, financial debt and financial instruments.

 

Subsequent measurement

 

The measurement of financial liabilities depends on their classification as described below:

 

Financial liabilities at amortized cost

 

Accounts payable are subsequently measured at amortized cost and do not bear interest or result in gains and losses due to their short-term nature.

 

After initial recognition at fair value (consideration received), interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

 

Amortized cost is calculated by taking into account any discount or premium on issuance and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidated statements of operations. This amortized cost category generally applies to interest-bearing loans and borrowings (Note 5).

 

Financial liabilities at FVTPL

 

FVTPL include financial liabilities designated upon initial recognition at fair value through profit or loss. Financial liabilities under the fair value option are classified as held for trading, if they are acquired for the purpose of selling them in the near future. This category includes derivative financial instruments that are not designated as hedging instruments in hedge relationships as defined by IFRS 9 (2013). During the years ended December 31, 2017, 2016 and 2015 the Company has not designated any financial liability as at FVTPL.

 

Derecognition

 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled, or expires.

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or  modification is treated as the derecognition of the original liability and the recognition of a new liability.

 

The difference in the respective carrying amounts is recognized in the consolidated statements of operations.

 

Offsetting of financial instruments

 

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is:

 

(i)

A currently enforceable legal right to offset the recognized amounts, and

(ii)

An intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

 

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 their cost and their net realization value. The cost is determined on the basis of the method of specific identification, and expensed when used in operations.

 

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 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, 2017, 2016 and 2015, there were no indicators of impairment. No impairment charges were recorded in respect of the Company’s value of intangible assets.

 

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).

 

Aircraft maintenance deposits paid to lessors

 

Most of the Company’s lease agreements require the Company to pay maintenance deposits to aircraft lessors to be held as collateral in advance of the Company’s performance of major maintenance activities. These lease agreements provide that maintenance deposits are reimbursable to the Company upon completion of the maintenance event in an amount equal to the lesser of (i) the amount of the maintenance deposits held by the lessor associated with the specific maintenance event, or (ii) the qualifying costs related to the specific maintenance event.

 

Substantially all of these maintenance deposits are calculated based on a utilization measure of the leased aircrafts and engines, such as flight hours or cycles, and are used solely to collateralize the lessor for maintenance time run off the aircraft and engines until the completion of the maintenance of the aircraft and engines.

 

Maintenance deposits expected to be recovered from lessors are reflected as guarantee deposits in the accompanying consolidated statement of financial position. The portion of prepaid maintenance deposits that is deemed unlikely to be recovered, primarily relating to the rate differential between the maintenance deposits and the expected cost for the next related maintenance event that the deposits serve to collateralize, is recognized as supplemental rent in the consolidated statements of operations. Thus, any excess of the required deposit over the expected cost of the major maintenance event is recognized as supplemental rent in the consolidated statements of operations starting from the period the determination is made.

 

For the years ended December 31, 2017, 2016 and 2015, the Company expensed as supplemental rent Ps.103,648, Ps.143,923 and Ps.73,258, respectively.

 

Any usage-based maintenance deposits to be paid to the lessor, related with a major maintenance event that (i) is not expected to be performed before the expiration of the lease agreement, (ii) is nonrefundable to the Company and (iii) is not substantively related to the maintenance of the leased asset, is accounted for as contingent rent in the consolidated statements of operations. The Company records lease payment as contingent rent when it becomes probable and reasonably estimable that the maintenance deposits payments will not be refunded.

 

During the year ended December 31 2017 and, 2016, the Company added five and 17 new net aircraft to its fleet, respectively. Some lease agreements of these aircraft do not require the obligation to pay maintenance deposits to lessors in advance in order to ensure major maintenance activities, so the Company does not record guarantee deposits regarding these aircraft. However, some lease agreements provide the obligation to make a maintenance adjustment payment to the lessors at the end of the contract period. This adjustment covers maintenance events that are not expected to be made before the termination of the contract.

 

The Company recognizes this cost as a contingent rent during the lease term of the related aircraft, in the consolidated statement of operations.

 

For the years ended December 31, 2017, 2016 and 2015, the Company expensed as contingent rent Ps.162,108, Ps.201,434 and Ps.290,857, respectively.

 

The Company makes certain assumptions at the inception of the lease and at each consolidated statement of financial position date to determine the recoverability of maintenance deposits. These assumptions are based on various factors such as the estimated time between the maintenance events, the date the aircraft is due to be returned to the lessor, and the number of flight hours the aircraft and engines is estimated to be utilized before it is returned to the lessor.

 

In the event that lease extensions are negotiated, any extension benefit is recognized as a deferred lease incentive. The aggregate benefit of extension is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

 

During the years ended December 31, 2017 and 2016, the Company extended the lease term of three and two aircraft agreements, respectively, and two engine agreements in 2017. These extensions made available to the Company maintenance deposits that were recognized in prior periods in the consolidated statements of operations as contingent rent of Ps.65,716 and Ps.92,528 during 2017 and 2016, respectively. The maintenance event for which the maintenance deposits were previously expensed was scheduled to occur after the original lease term and as such the contingent rental payments were expensed. However, when the leases were amended, the maintenance deposits amounts became probable of recovery due to the longer lease term and as such they are being recognized as an asset.

 

The effect of these lease extensions were recognized as a guarantee deposit and a deferred aircraft and engine lease extension benefit in the consolidated statements of financial position at the time of lease extension.

 

Because the lease extension benefits are considered lease incentives, the benefits are deferred in the statement of financial position and are being recognized on a straight-line basis over the remaining revised lease terms. For the years ended December 31, 2017, 2016 and 2015, the Company amortized Ps.88,224, Ps.74,748 and Ps.45,313, respectively, of lease incentives which was recognized as a reduction of rent expenses in the consolidated statements of operations.

 

k)  Aircraft and engine maintenance

 

The Company is required to conduct diverse levels of aircraft maintenance. Maintenance requirements depend on the type of aircraft, age and the route network over which it operates.

 

Fleet maintenance requirements may involve short cycle engineering checks, for example, component checks, monthly checks, annual airframe checks and periodic major maintenance and engine checks.

 

Aircraft maintenance and repair consists of routine and non-routine works, divided into three general categories: (i) routine maintenance, (ii) major maintenance and (iii) component service.

 

(i) Routine maintenance requirements 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. This type of maintenance events is currently serviced by the Company mechanics and are primarily completed at the main airports that the Company currently serves. All other maintenance activities are sub-contracted to qualified maintenance business partner, repair and overhaul organizations. Routine maintenance also includes scheduled tasks that can take from seven to 14 days to accomplish and typically are required approximately every 22 months. All routine maintenance costs are expensed as incurred.

 

(ii) Major maintenance consists of a series of more complex tasks that can take up to six weeks to accomplish and typically are required approximately every five to six years.

 

Major maintenance is accounted for under the deferral method, whereby the cost of major maintenance and major overhaul and repair is capitalized (leasehold improvements to flight equipment) and amortized over the shorter of the period to the next major maintenance event or the remaining contractual lease term. The next major maintenance event is estimated based on assumptions including estimated usage. The United States Federal Aviation Administration (“FAA”) and the Mexican Civil Aeronautic Authority (Dirección General de Aeronáutica Civil, or “DGAC”) mandate maintenance intervals and average removal times as suggested by the manufacturer.

 

These assumptions may change based on changes in the utilization of aircraft, changes in government regulations and suggested manufacturer maintenance intervals. In addition, these assumptions can be affected by unplanned incidents that could damage an airframe, engine, or major component to a level that would require a heavy maintenance event prior to a scheduled maintenance event. To the extent the planned usage increases, the estimated life would decrease before the next maintenance event, resulting in additional expense over a shorter period.

 

During the years ended December 31, 2017 and 2016, the Company capitalized major maintenance events as part of leasehold improvements to flight equipment for an amount of Ps.529,331 and Ps.226,526, respectively (Note 12).

 

For the years ended December 31, 2017, 2016 and 2015, the amortization of major maintenance leasehold improvement costs was Ps.382,745, Ps.404,659 and Ps.352,932, respectively (Note 12). 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 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 parts with different useful lives; therefore, they are accounted for as separate items (major components) of rotable spare parts (Note 12d).

 

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.

 

During the years ended December 31, 2017, 2016 and 2015, the Company capitalized borrowing costs which amounted to Ps.193,389, Ps.95,445 and Ps.90,057, respectively (Note 21). The rate used to determine the amount of borrowing cost was 3.30%, 2.88% and 2.80%, for the years ended December 31, 2017, 2016 and 2015, respectively.

 

Depreciation rates are as follows:

 

 

 

Annual
depreciation rate

 

Aircraft parts and rotable spare parts

 

8.3-16.7%

 

Aircraft spare engines

 

4.0-8.3%

 

Standardization

 

Remaining contractual lease term

 

Computer equipment

 

25%

 

Communications equipment

 

10%

 

Office furniture and equipment

 

10%

 

Electric power equipment

 

10%

 

Workshop machinery and equipment

 

10%

 

Service carts on board

 

20%

 

Leasehold improvements to flight equipment

 

The shorter of: (i) remaining contractual lease term, or (ii) the next major maintenance event

 

 

The Company reviews annually the useful lives and salvage values of these assets and any changes are accounted for prospectively.

 

The Company records impairment charges on rotable spare parts, furniture and equipment used in operations when events and circumstances indicate that the assets may be impaired or when the carrying amount of a long-lived asset or related cash generating unit exceeds its recoverable amount, which is the higher of (i) its fair value less cost to sell and (ii) its value in use.

 

The value in use calculation is based on a discounted cash flow model, using 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, 2017, 2016 and 2015, there were no indicators of impairment. No impairment charges were recorded in respect of the Company’s rotable spare parts, furniture and equipment.

 

m)  Foreign currency transactions and exchange differences

 

The Company’s consolidated financial statements are presented in Mexican peso, which is the reporting and functional currency of the parent company. For each subsidiary, the Company determines the functional currency and items included in the financial statements of each entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”).

 

The financial statements of foreign subsidiaries prepared under IFRS and denominated in their respective local currencies, are translated into the functional currency as follows:

 

·

Transactions in foreign currencies are translated into the respective functional currencies at the exchange rates at the dates of the transactions.

 

·

All monetary assets and liabilities were translated at the exchange rate at the consolidated statement of financial position date.

 

·

All non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

 

·

Equity accounts are translated at the prevailing exchange rate at the time the capital contributions were made and the profits were generated.

 

·

Revenues, costs and expenses are translated at the average exchange rate during the applicable period.

 

Any differences resulting from the currency translation are recognized in the consolidated statements of operations.

 

For the year ended December 31, 2017 and 2016 the exchange rates of local currencies translated to functional currencies are as follows:

 

 

 

 

 

 

 

Exchange rates of local currencies
translated to functional currencies

 

Exchange rates of local currencies
translated to functional currencies

 

Country

 

Local
currency

 

Functional
currency

 

Average exchange
rate for 2017

 

Exchange rate
as of 2017

 

Average exchange
rate for 2016

 

Exchange rate
as of 2016

 

Costa Rica

 

Colon

 

U.S. dollar

 

₵.

572.2000

 

₵.

572.5600

 

₵.

564.3332

 

₵.

561.1000

 

Guatemala

 

Quetzal

 

U.S. dollar

 

Q.

7.3509

 

Q.

7.3448

 

Q.

7.4931

 

Q.

7.5221

 

 

The exchange rates used to translate the above amounts to Mexican pesos at December 31, 2017 and 2016 were Ps.19.7354 and Ps.20.6640, respectively, per U.S. dollar.

 

Foreign currency differences arising on translation into the presentation currency are recognized in OCI. Exchange differences on translation of foreign entities for the year ended December 31, 2017 and 2016 were Ps.7,178 and Ps.4,756, respectively. For the year ended December 31, 2015 exchange differences on translation of foreign entities were immaterial

 

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.

 

For the operating leases, the Company is contractually obligated to return the leased aircraft in a specific condition. The Company accrues for restitution costs related to aircraft held under operating leases throughout the term of the lease, based upon the estimated cost of satisfying the return condition criteria for each aircraft. These return obligations are related to the costs to be incurred in the reconfiguration of aircraft (interior and exterior), painting, carpeting and other costs, which are estimated based on current cost adjusted for inflation. The return obligation is estimated at the inception of each leasing arrangement and recognized over the term of the lease (Note 15c).

 

The Company records aircraft lease return obligation reserves based on the best estimate of the return obligation costs under each aircraft lease agreement.

 

The aircraft lease agreements of the Company also require that the aircraft and engines be returned to lessors under specific conditions of maintenance. The costs of return, which in no case are related to scheduled major maintenance, are estimated and recognized ratably as a provision from the time it becomes likely such costs will be incurred and can be estimated reliably. These return costs are recognized on a straight-line basis as a component of supplemental rent and the provision is included as part of other liabilities, through the remaining lease term. The Company estimates the provision related to airframe, engine overhaul and limited life parts using certain assumptions including the projected usage of the aircraft and the expected costs of maintenance tasks to be performed. For the years ended December 31, 2017, 2016 and 2015, the Company expensed as supplemental rent Ps.851,410, Ps.933,730 and Ps.91,698, respectively.

 

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, 2017, 2016 and 2015, 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 who 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, 2017.

 

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 (Certificados de la Tesorería de la Federación, or “CETES” in Mexico), less the fair value of plan assets out of which the obligations are to be settled.

 

For entities in Costa Rica and Guatemala there is no obligation to pay seniority premium or other retirement benefits.

 

iv)  Incentives

 

The Company has a quarterly incentive plan for certain personnel whereby cash bonuses are awarded for meeting certain performance targets. These incentives are payable shortly after the end of each quarter and are accounted for as a short-term benefit under IAS 19, Employee Benefits. A provision is recognized based on the estimated amount of the incentive payment.

 

During the years ended December 31, 2017, 2016 and 2015 the Company expensed Ps.48,384, Ps.40,829 and Ps.50,558, respectively, as quarterly incentive bonuses, recorded under the caption salaries and benefits.

 

During the year ended December 31, 2015, the Company adopted a new short-term benefit plan for certain key personnel whereby cash bonuses are awarded when certain of the 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. During the years ended December 31, 2017, 2016 and 2015 the Company recorded an expense for an amount of Ps.0, Ps.53,738, and Ps.70,690, respectively, under the caption salaries and benefits.

 

v)  Long-term retention plan (“LTRP”)

 

The Company has adopted a Long-term incentive plan (“LTIP”). This plan consists of a share purchase plan (equity-settled) and a share appreciation rights “SARs” plan (cash settled), and is therefore accounted under IFRS 2 “Shared based payments”

 

vi)  Share-based payments

 

a)  LTIP

 

Share purchase plan (equity-settled)

 

Certain key employees of the Company receive additional benefits through a share purchase plan denominated in Restricted Stock Units (“RSUs”), which has been classified as an equity-settled share-based payment. The cost of the equity-settled share purchase plan is measured at the grant date, taking into account the terms and conditions on which the share options were granted. The equity-settled compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits, over the requisite service period (Note 17).

 

During the years ended December 31, 2017, 2016 and 2015, the Company expensed Ps.13,508, Ps.7,816 and Ps.6,018, respectively, related to RSUs. 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 17).

 

During the years ended December 31, 2017, 2016 and 2015, the Company recorded a (benefit) expense for Ps.(8,999), Ps.31,743, Ps.44,699, respectively, related to the SARs included in the LTIP. These amounts were recorded under the caption salaries and benefits.

 

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 requisite service period (Note 17).

 

During the year ended December 31, 2015, the Company recorded an expense by Ps.327 as cost of the MIP, related to the vested shares, the expense was recorded in the consolidated statement of operations under the caption salaries and benefits.

 

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 17).

 

During the years ended December 31, 2017 and 2016, the Company recorded a (benefit) expense for Ps.(16,499) and Ps.54,357, respectively, related to MIP II into the consolidated statement of operations.

 

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 2017, 2016 and 2015, the cost of employee profit sharing earned is Ps.8,342, Ps.9,967 and Ps.9,938, respectively, and is presented as an expense in the consolidated statements of operations. Subsidiaries in Central America do not have such profit sharing benefit, as it is not required by local regulation.

 

p)  Leases

 

The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

 

Property and equipment lease agreements are recognized as finance leases if the risks and benefits incidental to ownership of the leased assets have been transferred to the Company when (i) the ownership of the leased asset is transferred to the Company upon termination of the lease; (ii) the agreement includes an option to purchase the asset at a reduced price; (iii) the term of the lease is for the major part of the economic life of the leased asset; (iv) the present value of minimum lease payments is at least substantially all of the fair value of the leased asset; or (v) the leased asset is of a specialized nature for the Company.

 

When the risks and benefits incidental to the ownership of the leased asset remain mostly with the lessor, they are classified as operating leases and rental payments are charged to results of operations on a straight-line over the term of the lease. The Company’s lease contracts for aircraft, engines and components parts are classified as operating leases.

 

Sale and leaseback

 

The Company enters into sale and leaseback agreements whereby an aircraft or engine is sold to a lessor upon delivery and the lessor agrees to lease such aircraft or engine back to the Company. Leases under sale and leaseback agreements meet the conditions for treatment as operating leases.

 

Profit or loss related to a sale transaction followed by an operating lease, is accounted for as follows:

 

(i)

Profit or loss is recognized immediately when it is clear that the transaction is established at fair value.

 

(ii)

If the sale price is at or below fair value, any profit or loss is recognized immediately. However, if the loss is compensated for by future lease payments at below market price, such loss is recognized as an asset in the consolidated statements of financial position and amortized to the consolidated statements of operations in proportion to the lease payments over the contractual lease term.

 

(iii)

If the sale price is above fair value, the excess of the price above the fair value is deferred and amortized to the consolidated statements of operations over the asset’s expected lease term, including probable renewals, with the amortization recorded as a reduction of rent expense.

 

q)  Other taxes and fees payable

 

The Company is required to collect certain taxes and fees from customers on behalf of government agencies and airports and to remit these to the applicable governmental entity or airport on a periodic basis. These taxes and fees include federal transportation taxes, federal security charges, airport passenger facility charges, and foreign arrival and departure fees. These charges are collected from customers at the time they purchase their tickets, but are not included in passenger revenue. The Company records a liability upon collection from the customer and discharges the liability when payments are remitted to the applicable governmental entity or airport.

 

r)  Income taxes

 

Current income tax

 

Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date.

 

Current income tax relating to items recognized directly in equity is recognized in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

 

Deferred tax

 

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

 

Deferred tax liabilities are recognized for all taxable temporary differences, except, in respect of taxable temporary differences associated with investments in subsidiaries when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred tax assets are recognized for all deductible temporary differences, the carry-forward of unused tax credits and any available tax losses 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.

 

The charge for income taxes incurred is computed based on tax laws approved in Mexico, Costa Rica and Guatemala at the date of the consolidated statement of financial position.

 

s)  Derivative financial instruments and hedge accounting

 

The Company mitigates certain financial risks, such as volatility in the price of jet fuel, adverse changes in interest rates and exchange rate fluctuations, through a risk management program that includes the use of derivative financial instruments.

 

In accordance with IFRS 9 (2013), derivative financial instruments are recognized in the consolidated statement of financial position at fair value. At inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting, as well as the risk management objective and strategy for undertaking the hedge. The documentation includes the hedging strategy and objective, identification of the hedging instrument, the hedged item or transaction, the nature of the risks being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk(s).

 

Only if such hedges are expected to be effective in achieving offsetting changes in fair value or cash flows of the hedge item(s) and are assessed on an ongoing basis to determine that they actually have been effective throughout the financial reporting periods for which they were designated, hedge accounting treatment can be used.

 

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. During the years ended December 31, 2017, 2016 and 2015, there was no ineffectiveness with respect to derivative financial instruments. The amounts recognized in OCI are transferred to earnings in the period in which the hedged transaction affects earnings.

 

The realized gain or loss of derivative financial instruments that qualify as CFH is recorded in the same caption of the hedged item in the consolidated statement of operations.

 

Accounting for the time value of options

 

The Company accounts for the time value of options in accordance with IFRS 9 (2013), which requires all derivative financial instruments to be initially recognized at fair value. Subsequent measurement for options purchased and designated as CFH requires that the option’s changes in fair value be segregated into its intrinsic value (which will be considered the hedging instrument’s effective portion in OCI) and its correspondent changes in extrinsic value (time value and volatility). The extrinsic value changes will be considered as a cost of hedging (recognized in OCI in a separate component of equity) and accounted for in income when the hedged item also is recognized in income.

 

t)  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).

 

u)  Treasury shares

 

The Company’s equity instruments that are reacquired (treasury shares), are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of treasury shares. Any difference between the carrying amount and the consideration received, if reissued, is recognized in additional paid in capital. Share-based payment options exercised during the reporting period are settled with treasury shares (Note 17).

 

v)  Operating segments

 

The Company is managed as a single business unit that provides air transportation and related services and accordingly, it has only one operating segment.

 

The Company has two geographic areas identified as domestic (Mexico) and international (United States of America and Central America) (Note 24).

 

w)  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.

 

x) 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, 2017. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

Although these new standards and amendments applied for the first time in 2017, they did not have a material impact on the annual consolidated financial statements of the Company. The nature and the impact of these changes to each new standard and amendment are described below:

 

Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative

 

The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Company has provided the information for both the current and the comparative period in Note 5.

 

Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses

 

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. However, their application has no effect on the Company’s financial position and performance as there are no deductible temporary differences or assets that are in the scope of the amendments.

 

New and amended standards and interpretations not yet effective

 

Except for IFRS 9 adopted in 2014, the Company has not early adopted any of the following standards, interpretations or amendments that have been issued but is not yet effective.

 

IFRS 9 (2014) Financial Instruments

 

The Company adopted IFRS 9 (2013) in connection with its 2014 consolidated financial statements. IFRS 9 (2014) requires entities to apply an expected credit loss (ECL) model that replaces the IAS 39’s incurred loss model. The ECL model applies to debt instruments accounted for at amortized cost or at fair value through OCI, most loan commitments, financial guarantee contracts, contract assets under IFRS 15 Revenue from Contracts with Customers and lease receivables under IAS 17 Leases or IFRS 16 Leases.

 

IFRS 9 (2014) is effective for annual periods beginning on or after January 1, 2018, and since the Company early adopted IFRS 9 (2013), no additional impact is expected

 

IFRS 15 Revenue from Contracts with Customers

 

IFRS 15 was issued in May 2014 and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard will supersede all current revenue recognition requirements under IFRS. IFRS 15 also requires additional disclosures about the nature, timing, and uncertainty of revenue cash flows arising from customer contracts, including significant judgments and changes in judgments.

 

The Company will adopt the new standard on the required effective date as of January 1, 2018, using the full retrospective method of adoption, in order to provide for comparative results in all periods presented, recognizing the effect in retained earnings as of January 1, 2016.

 

During 2016, the Company performed a preliminary assessment of IFRS 15, which was continued with a more detailed analysis completed in 2017. The Company expects that the main impact of IFRS 15 is the timing of recognition of certain air travel-related services (“ancillaries”). Under the current accounting policy, certain ancillaries are recognized as revenue at the time of the booking by customer (or when the service is provided); under the new standard, those ancillaries will be recognized when the air transportation service is rendered (at the time of the flight). This change arises primarily because those ancillaries do not constitute separate performance obligations or represent administrative tasks that do not represent a promised service and therefore should be accounted for together with the air fare as a single performance obligation of providing passenger transportation.  Also certain services provided to the Company’s customers that under the new standard qualify as variable considerations that will be recorded as reduction to revenues.  The Company considers this accounting change will not have a material impact on its results of operations and financial position.

 

The Company also expects that the classification of certain ancillary fees in the statement of operations, such as advanced seat selection, fees charges for excess baggage, itinerary changes and other air travel-related services, will change upon adoption of IFRS 15 since they are part of the single performance obligation of providing passenger transportation. The Company expects that these revenues currently classified as non-ticket revenues, approximately Ps.5,915,263 in 2017 and Ps.4,758,074 in 2016, will be reclassified to passenger revenues.

 

The Company also evaluated the principal versus agent considerations as it relates to certain non-air travel services arrangements with third party providers. The Company expects that there will be no changes on revenue.

 

The Company has also identified and implemented changes to its accounting policies and practices, systems and controls, as well as designed and implemented specific controls over its evaluation of the impact of the new guidance on the Company, including a calculation of the cumulative effects, disclosure requirements and the collection of relevant data into the reporting process. While the Company is substantially complete with the process of quantifying the impacts from applying the new guidance, final impact assessment will be finalized during the first quarter of 2018.

 

IFRS 16 Leases

 

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees — leases of low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less).

 

At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).

 

Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

 

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

 

IFRS 16 also requires lessees to make more extensive disclosures than under IAS 17.

 

IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.

 

The Company is in process of completing an assessment of the potential impact of adopting IFRS 16. The adoption of this standard will have a significant impact on the accounting for leased aircraft, engines and other lease agreements, requiring the presentation of those leases with durations of greater than twelve months on the consolidated statement of financial position. The Company anticipates adopting the new standard using the full retrospective method, see Note 14 for more information on the Company’s lease agreements.

 

IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2

 

In June 2016, the IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled, share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.

 

On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after January 1, 2018, with early application permitted. The Company does not expect the amendments to have a significant effect on its consolidated financial statements.

 

IFRIC 23 — Uncertainty over Income Tax Treatments

 

IFRIC 23 clarifies the accounting for uncertainties in income taxes, the interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.

 

An entity has to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments, that it used or plans to use in its income tax filing; if the entity concludes that it is probable that a particular tax treatment is accepted, the entity has to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.

 

IFRIC 23 is effective for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted. The Company expects to adopt this interpretation at the effective date.

 

y)  Convenience translation

 

U.S. dollar amounts at December 31, 2017 shown in the consolidated financial statements have been included solely for the convenience of the reader and are translated from Mexican pesos, using an exchange rate of Ps.19.7354 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, 2017. Such translation should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollars at this or any other rate. The referred information in U.S. dollars is solely for information purposes and does not represent that the amounts are in accordance with IFRS or the equivalent in U.S. dollars in which the transactions were conducted or in which the amounts presented in Mexican pesos can be translated or realized.

v3.8.0.1
Significant accounting judgments, estimates and assumptions
12 Months Ended
Dec. 31, 2017
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.

 

i)  Aircraft maintenance deposits paid to lessors

 

The Company makes certain assumptions at the inception of a lease and at each reporting date to determine the recoverability of maintenance deposits. The key assumptions include the estimated time between the maintenance events, the costs of future maintenance, the date the aircraft is due to be returned to the lessor and the number of flight hours the aircraft is estimated to be flown before it is returned to the lessor (Note 11).

 

ii)  LTIP and MIP (equity settled)

 

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 earnings, together with a corresponding increase in other capital reserves in equity, 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. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest.

 

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model, including the expected life of the share option, volatility and dividend yield, and making assumptions about them. The assumptions and models used for estimating fair value for share-based payment transactions are disclosed in (Note 17).

 

SARs plan (cash settled)

 

The cost of the SARs plan is measured initially at fair value at the grant date, further details of which are given in (Note 17). This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognized in salaries and benefits expense together with the fair value at the grant date. As with the equity settled awards described above, the valuation of cash settled awards also requires using similar inputs, as appropriate.

 

iii)  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.

 

At December 31, 2017, the Company’s tax loss carry-forwards amounted to Ps.1,501,630, (Ps.111,083 at December 31, 2016). These losses relate to operations of the Company on a stand-alone basis, which in conformity with current Mexican Income Tax Law (“MITL”) and Costa Rican Income Tax Law (“CRITL”) may be carried forward against taxable income generated in the succeeding ten and three years, respectively, and may not be used to offset taxable income elsewhere in the Company’s consolidated group (Note 19).

 

During the years ended December 31, 2017, 2016 and 2015, the Company used Ps.16,378, Ps.195,116 and Ps.1,618,850, respectively, of the available tax loss carry-forwards (Note 19).

 

iv)  Fair value 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).

 

v)  Impairment of long-lived assets

 

The Company assesses whether there are indicators of impairment for long-lived assets annually and at other times when such indicators exist. 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. The value-in-use calculation is based on a discounted cash flow model, using the Company’s 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.

 

vi)  Allowance for expected credit loss

 

An allowance for expected credit loss on accounts receivables is established in accordance with the information mentioned in Note (1f) (ii).

v3.8.0.1
Financial instruments and risk management
12 Months Ended
Dec. 31, 2017
Financial instruments and risk management  
Financial instruments and risk management

 

3.  Financial instruments and risk management

 

Financial risk management

 

The Company’s activities are exposed to different financial risks stemming from exogenous variables which are not under their control but whose effects might be potentially adverse such as: (i) market risk, (ii) credit risk, and (iii) liquidity risk. The Company’s global risk management program is focused on uncertainty in the financial markets and tries to minimize the potential adverse effects on net earnings and working capital requirements. The Company uses derivative financial instruments to hedge part of such risks. The Company does not enter into derivatives for trading or speculative purposes.

 

The sources of these financial risks exposures are included in both “on balance sheet” exposures, such as recognized financial assets and liabilities, as well as in “off-balance sheet” contractual agreements and on highly expected forecasted transactions. These on and off-balance sheet exposures, depending on their profiles, do represent potential cash flow variability exposure, in terms of receiving less inflows or facing the need to meet outflows which are higher than expected, therefore increase the working capital requirements.

 

Also, since adverse movements erode the value of recognized financial assets and liabilities, as well some other off-balance sheet financial exposures such as operating leases, there is a need for value preservation, by transforming the profiles of these fair value exposures.

 

The Company has a Finance and Risk Management 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 references to the 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, 2017, 2016 and 2015 represented 29%, 28% and 30%, of the Company’s operating expenses, respectively.

 

During the years ended December 31, 2017 and 2016, the Company entered into US Gulf Coast Jet fuel 54 Asian call options designated to hedge 61.1 million gallons and 134.3 million gallons, respectively. Such hedges represent a portion of the projected consumption for the next nine and twenty-one months respectively.

 

The Company decided to early adopt IFRS 9 (2013), beginning on October 1, 2014, which allows the Company to separate 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 a book adjustment in the Company’s inventories. Rather, it is initially accounted for in the Company’s OCI and a reclassification adjustment is made from OCI to profit and loss and recognized in the same period or periods in which the hedged item is expected to be allocated to profit and loss. Furthermore, the Company hedges its forecasted jet fuel consumption month after month, which is congruent with the maturity date of the monthly serial Asian call options.

 

As of December 31, 2017 and 2016, the fair value of the outstanding US Gulf Coast Jet Fuel Asian call options was Ps.497,403 and Ps.867,809, respectively, and is presented as part of the financial assets in the consolidated statement of financial position (See Note 5).

 

The amount of positive cost of hedging derived from the extrinsic value changes of these options as of December 31, 2017 recognized in other comprehensive income totals Ps.163,836 (the positive cost of hedging in 2016 totals Ps. 218,038), and will be recycled to the fuel cost during 2018, as these options expire on a monthly basis and the jet fuel is consumed. During the years ended December 31, 2017, 2016 and 2015, the net cost of these options recycled to the fuel cost was Ps.26,980, Ps.305,166 and Ps.112,675 respectively.

 

The following table includes the notional amounts and strike prices of the derivative financial instruments outstanding as of the end of the year:

 

 

 

Position as of December 31, 2017

 

 

 

Jet fuel Asian call option contracts maturities

 

 

 

1 Half 2018

 

2 Half 2018

 

2018 Total

 

Jet fuel risk

 

 

 

 

 

 

 

Notional volume in gallons (thousands)*

 

69,518

 

61,863

 

131,381

 

Strike price agreed rate per gallon (U.S. dollars)**

 

US$

1.6861

 

US$

1.8106

 

US$

1.7447

 

Approximate percentage of hedge (of expected consumption value)

 

60

%

50

%

55

%

 

* US Gulf Coast Jet 54 as underlying asset

** Weighted average

 

 

 

Position as of December 31, 2016

 

 

 

Jet fuel Asian call option contracts maturities

 

 

 

1 Half 2017

 

2 Half 2017

 

2017 Total

 

1 Half 2018

 

3Q 2018

 

2018 Total

 

Jet fuel risk

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional volume in gallons (thousands)*

 

55,436

 

63,362

 

118,798

 

62,492

 

7,746

 

70,238

 

Strike price agreed rate per gallon (U.S. dollars)**

 

US$

1.6245

 

US$

1.4182

 

US$

1.5145

 

US$

1.6508

 

US$

1.5450

 

US$

1.6392

 

Approximate percentage of hedge (of expected consumption value)

 

51

%

53

%

52

%

45

%

10

%

24

%

 

* US Gulf Coast Jet 54 as underlying asset

** Weighted average

 

b)  Foreign currency risk

 

While Mexican Peso is the functional currency of the Company, a significant portion of its operating expenses is denominated in U.S. dollar; thus, Volaris relies on sustained U.S. dollar cash flows coming from operations in the United States of America and Central America to support part of its commitments in such currency, however there’s still a mismatch. Foreign currency risk arises from possible unfavorable movements in the exchange rate which could have a negative impact in the Company’s cash flows. To mitigate this risk, the Company may use foreign exchange derivative financial instruments.

 

Most of the Company’s revenue is generated in Mexican pesos, although 30% of its revenues came from operations in the United States of America and Central America for the year ended at December 31, 2017 (33% at December 31, 2016) and U.S. dollar denominated collections accounted for 40% and 38% of the Company’s total collections in 2017 and 2016, respectively.

 

However, certain of its expenditures, particularly those related to aircraft leasing and acquisition, are also U.S. dollar denominated. 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 foreign exchange on and off-balance sheet exposure as of December 31, 2017 and 2016 is as set forth below:

 

 

 

Thousands of U.S. dollars

 

 

 

2017

 

2016

 

Assets:

 

 

 

 

 

Cash and cash equivalents

 

US$

344,038

 

US$

297,565

 

Other accounts receivable

 

13,105

 

11,619

 

Aircraft maintenance deposits paid to lessors

 

352,142

 

343,787

 

Deposits for rental of flight equipment

 

25,343

 

30,025

 

Derivative financial instruments

 

25,204

 

41,996

 

 

 

 

 

 

 

Total assets

 

759,832

 

724,992

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Financial debt (Note 5)

 

128,296

 

76,789

 

Foreign suppliers

 

53,729

 

56,109

 

Taxes and fees payable

 

10,304

 

6,874

 

Derivative financial instruments

 

 

684

 

 

 

 

 

 

 

Total liabilities

 

192,329

 

140,456

 

 

 

 

 

 

 

Net foreign currency position

 

US$

567,503

 

US$

584,536

 

 

 

 

 

 

 

 

 

 

At April 25, 2018, date of issuance of these financial statements, the exchange rate was Ps.18.8628 per U.S. dollar.

 

 

 

Thousands of U.S. dollars

 

 

 

2017

 

2016

 

Off-balance sheet transactions exposure:

 

 

 

 

 

Aircraft and engine operating lease payments (Note 14)

 

US$

1,856,909

 

US$

1,727,644

 

Aircraft and engine commitments (Note 23)

 

1,123,377

 

315,326

 

 

 

 

 

 

 

Total

 

US$

2,980,286

 

US$

2,042,970

 

 

 

 

 

 

 

 

 

 

During the year ended December 31, 2017, the Company entered into foreign currency forward contracts in U.S. dollars to hedge approximately 9% of the aircraft rental expense for the second half of 2017. As of December 31, 2016, the Company did not enter into foreign exchange rate derivatives financial instruments.

 

All of the Company’s position in foreign currency forward contracts matured throughout the second half of 2017 (August, September, November and December), therefore there is no outstanding balance as of December 31, 2017. For the year ended December 31, 2017, the net loss on the foreign currency forward contracts was Ps.11,290, which was recognized as part of rental expense in the consolidated statements of operations. As there were no foreign currency forward contracts as of December 31, 2016, no impact was recognized in the consolidated statements of operations.

 

c)  Interest rate risk

 

Interest rate risk is the risk that the fair value of future cash flows will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations and flight equipment operating lease agreements with floating interest rates.

 

The Company’s results are affected by fluctuations in certain benchmark market interest rates due to the impact that such changes may have on operational lease payments indexed to the London Inter Bank Offered Rate (“LIBOR”). The Company uses derivative financial instruments to reduce its exposure to fluctuations in market interest rates and accounts for these instruments as an accounting hedge. In most cases, when a derivative can be tailored within the terms and it perfectly matches cash flows of a leasing agreement, it may be designated as a 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 operation.

 

As of December 31, 2016, the Company had outstanding hedging contracts in the form of interest rate swaps with notional amount of US$ 70 million and fair value of Ps.14,144, respectively, recorded in liabilities. For the years ended December 31, 2017, 2016 and 2015, the reported loss on the interest rate swaps was Ps.13,827, Ps.48,777 and Ps.46,545, respectively, which was recognized as part of rental expense in the consolidated statements of operations. All of the Company’s position in the form of interest rate swaps matured on March 31 and April 30, 2017 consequently there is no outstanding balance as of December 31, 2017.

 

d)  Liquidity risk

 

Liquidity risk represents the risk that the Company has insufficient funds to meet its obligations.

 

Because of the cyclical nature of the business, the operations, and its investment and financing needs related to the acquisition of new aircraft and renewal of its fleet, the Company requires liquid funds to meet its obligations.

 

The Company attempts to manage its cash and cash equivalents and its financial assets, relating the term of investments with those of its obligations. Its policy is that the average term of its investments may not exceed the average term of its obligations. This cash and cash equivalents position is invested in highly-liquid short-term instruments through financial entities.

 

The Company has future obligations related to maturities of bank borrowings and derivative contracts. The Company’s off-balance sheet exposure represents the future obligations related to operating lease contracts and aircraft purchase contracts. The Company concluded that it has a low concentration of risk since it has access to alternate sources of funding.

 

The table below presents the Company’s contractual principal payments required on its financial liabilities and the derivative financial instruments fair value:

 

 

 

December 31, 2017

 

 

 

Within one
year

 

One to five
years

 

Total

 

Interest-bearing borrowings:

 

 

 

 

 

 

 

Pre-delivery payments facilities (Note 5)

 

Ps.

1,449,236

 

Ps.

1,079,152

 

Ps.

2,528,388

 

Short-term working capital facilities (Note 5)

 

948,354

 

 

948,354

 

 

 

 

 

 

 

 

 

Total

 

Ps.

2,397,590

 

Ps.

1,079,152

 

Ps.

3,476,742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

 

Within one
year

 

One to five
years

 

Total

 

Interest-bearing borrowings:

 

 

 

 

 

 

 

Pre-delivery payments facilities (Note 5)

 

Ps.

328,845

 

Ps.

943,046

 

Ps.

1,271,891

 

Short-term working capital facilities (Note 5)

 

716,290

 

 

716,290

 

 

 

 

 

 

 

 

 

Derivative financial instruments:

 

 

 

 

 

 

 

Interest rate swaps contracts

 

14,144

 

 

14,144

 

 

 

 

 

 

 

 

 

Total

 

Ps.

1,059,279

 

Ps.

943,046

 

Ps.

2,002,325

 

 

 

 

 

 

 

 

 

 

 

 

 

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. At December 31, 2017, the Company concluded that its credit risk related to its outstanding derivative financial instruments is low, since it has no significant concentration with any single counterparty and it only enters into derivative financial instruments with banks with high credit-rating assigned by international credit-rating agencies.

 

f)  Capital management

 

Management believes that the resources available to the Company are sufficient for its present requirements and will be sufficient to meet its anticipated requirements for capital expenditures and other cash requirements for the 2017 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, 2017 and 2016. The Company is not subject to any externally imposed capital requirement, other than the legal reserve (Note 18).

v3.8.0.1
Fair value measurements
12 Months Ended
Dec. 31, 2017
Fair value measurements  
Fair value measurements

 

4.  Fair value measurements

 

The only financial assets and liabilities recognized at fair value on a recurring basis are the derivative financial instruments.

 

Fair value is the price that would be received from sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

 

(i)

In the principal market for the asset or liability, or

(ii)

In the absence of a principal market, in the most advantageous market for the asset or liability.

 

The principal or the most advantageous market must be accessible to the Company.

 

The fair value of an asset or a liability is 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 is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

 

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

 

Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.

 

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

 

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

 

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

 

Set out below, is a comparison by class of the carrying amounts and fair values of the Company’s financial instruments, other than those for which carrying amounts are reasonable approximations of fair values:

 

 

 

Carrying amount

 

Fair value

 

 

 

2017

 

2016

 

2017

 

2016

 

Assets

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

Ps.

497,403

 

Ps.

867,809

 

Ps.

497,403

 

Ps.

867,809

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Financial debt

 

(3,476,742

)

(1,988,181

)

(3,481,741

)

(1,988,445

)

Derivative financial instruments

 

 

(14,144

)

 

(14,144

)

 

 

 

 

 

 

 

 

 

 

Total

 

Ps.

(2,979,339

)

Ps.

(1,134,516

)

Ps.

(2,984,338

)

Ps.

(1,134,780

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes the fair value measurements at December 31, 2017:

 

 

 

Fair value measurement

 

 

 

Quoted prices
in active
markets
Level 1

 

Significant
observable
inputs
Level 2

 

Significant
unobservable
inputs
Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Derivatives financial instruments:

 

 

 

 

 

 

 

 

 

Jet fuel Asian call options contracts*

 

Ps.

 

Ps.

497,403

 

Ps.

 

Ps.

497,403

 

Liabilities for which fair values are disclosed:

 

 

 

 

 

 

 

 

 

Interest-bearing loans and borrowings**

 

 

(3,481,741

)

 

(3,481,741

)

 

 

 

 

 

 

 

 

 

 

Net

 

Ps.

 

Ps.

(2,984,338

)

Ps.

 

Ps.

(2,984,338

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Jet fuel forwards levels and LIBOR curve.

** LIBOR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt.

There were no transfers between level 1 and level 2 during the period.

 

The following table summarizes the fair value measurements at December 31, 2016:

 

 

 

Fair value measurement

 

 

 

Quoted prices
in active
markets
Level 1

 

Significant
observable
inputs
Level 2

 

Significant
unobservable
inputs
Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Derivatives financial instruments:

 

 

 

 

 

 

 

 

 

Jet fuel Asian call options contracts*

 

Ps.

 

Ps.

867,809

 

Ps.

 

Ps.

867,809

 

Liabilities

 

 

 

 

 

 

 

 

 

Derivatives financial instruments:

 

 

 

 

 

 

 

 

 

Interest rate swap contracts**

 

 

(14,144

)

 

(14,144

)

Liabilities for which fair values are disclosed:

 

 

 

 

 

 

 

 

 

Interest-bearing loans and borrowings**

 

 

(1,988,445

)

 

(1,988,445

)

 

 

 

 

 

 

 

 

 

 

Net

 

Ps.

 

Ps.

(1,134,780

)

Ps.

 

Ps.

(1,134,780

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Jet fuel forwards levels and LIBOR curve.

** LIBOR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt.

There were no transfers between level 1 and level 2 during the period.

 

The following table summarizes the loss from derivatives financial instruments recognized in the consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015:

 

Consolidated statements of operations

 

Instrument

 

Financial statements line

 

2017

 

2016

 

2015

 

Jet fuel swap contracts

 

Fuel

 

Ps.

 

Ps.

 

Ps.

(128,330

)

Jet fuel Asian call options contracts

 

Fuel

 

(26,980

)

(305,166

)

(112,675

)

Foreign currency forward

 

Aircraft and engine rent expenses

 

(11,290

)

 

 

Interest rate swap contracts

 

Aircraft and engine rent expenses

 

(13,827

)

(48,777

)

(46,545

)

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Ps.

(52,097

)

Ps.

(353,943

)

Ps.

(287,550

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes the net (loss) gain on CFH before taxes recognized in the consolidated statements of comprehensive income for the years ended December 31, 2017, 2016 and 2015:

 

Consolidated statements of other comprehensive (loss) income

 

Instrument

 

Financial statements
line

 

2017

 

2016

 

2015

 

Jet fuel Asian call options Contracts

 

OCI

 

Ps.

(54,202

)

Ps.

583,065

 

Ps.

(221,592

)

Interest rate swap contracts

 

OCI

 

14,144

 

41,629

 

27,723

 

Foreign currency forward

 

OCI

 

(2,090

)

 

 

 

 

 

 

 

 

 

 

 

 

Total (Note 22)

 

 

 

Ps.

(42,148

)

Ps.

624,694

 

Ps.

(193,869

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Financial assets and liabilities
12 Months Ended
Dec. 31, 2017
Financial assets and liabilities  
Financial assets and liabilities

 

5.  Financial assets and liabilities

 

At December 31, 2017 and 2016, the Company’s financial assets are represented by cash and cash equivalents, trade and other accounts receivable, accounts receivable with carrying amounts that approximate their fair value.

 

a)  Financial assets

 

 

 

2017

 

2016

 

Derivative financial instruments designated as cash flow hedges (effective portion recognized within OCI)

 

 

 

 

 

Jet fuel Asian call options

 

Ps.

497,403

 

Ps.

867,809

 

 

 

 

 

 

 

 

 

Total financial assets

 

Ps.

497,403

 

Ps.

867,809

 

 

 

 

 

 

 

 

 

Presented on the consolidated statements of financial position as follows:

 

 

 

 

 

Current

 

Ps.

497,403

 

Ps.

543,528

 

 

 

 

 

 

 

 

 

Non-current

 

Ps.

 

Ps.

324,281

 

 

 

 

 

 

 

 

 

 

b)  Financial debt

 

(i)At December 31, 2017 and 2016, the Company’s short-term and long-term debt consists of the following:

 

 

 

2017

 

2016

 

I.  Revolving line of credit with Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander (“Santander”) and Banco Nacional de Comercio Exterior, S.N.C. (“Bancomext”), in U.S. dollars, to finance pre-delivery payments, maturing on November 30, 2021, bearing annual interest rate at the three-month LIBOR plus a spread according to the contractual conditions of each disbursement in a range of 199 to 225 basis points.

 

Ps.

2,528,388

 

Ps.

1,271,891

 

 

 

 

 

 

 

II. In December 2016, the Company entered into a short-term working capital facility with Banco Nacional de México S.A. (“Citibanamex”) in Mexican pesos, bearing annual interest rate at TIIE 28 days plus a spread according to the contractual conditions of each disbursement in a range of 20 to 80 basis points.

 

948,354

 

406,330

 

 

 

 

 

 

 

III. In December 2016, the Company entered into a U.S. dollar denominated short-term working capital facility with Bank of America México S.A. Institución de Banca Múltiple (“Bank of America”) in U.S. dollars, bearing annual interest rate at the one-month LIBOR plus 160 basis points.

 

 

309,960

 

IV. Accrued interest

 

5,972

 

6,102

 

 

 

 

 

 

 

 

 

3,482,714

 

1,994,283

 

Less: Short-term maturities

 

2,403,562

 

1,051,237

 

 

 

 

 

 

 

Long-term

 

Ps.

1,079,152

 

Ps.

943,046

 

 

 

 

 

 

 

 

 

 

TIIE: Mexican interbank rate

 

(ii) The following table provides a summary of the Company’s scheduled principal payments of financial debt and accrued interest at December 31, 2017:

 

 

 

2018

 

2019

 

2020

 

2021

 

Total

 

Finance debt denominated in foreign currency:

 

 

 

 

 

 

 

 

 

 

 

Santander/Bancomext

 

Ps.

1,452,826

 

Ps.

670,388

 

Ps.

333,303

 

Ps.

75,461

 

Ps.

2,531,978

 

Citibanamex

 

950,736

 

 

 

 

950,736

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Ps.

2,403,562

 

Ps.

670,388

 

Ps.

333,303

 

Ps.

75,461

 

Ps.

3,482,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(iii) Since 2011, the Company has financed the pre-delivery payments for the acquisition of its aircraft through a revolving financing facility. During the year ended December 31, 2017, the pre-delivery payments for one A320NEO aircraft were financed through this revolving financing facility.

 

On August 1, 2013, the Company signed an amendment to the loan agreement to finance the pre-delivery payments of eight additional A320CEO (“Current Engine Option”) that were delivered in 2015 and 2016.

 

On February 28, 2014 and November 27, 2014, the Company signed amendments to the loan agreement to finance pre-delivery payments of two and four additional A320CEO, respectively, one was delivered in 2014 and five in 2016.

 

On August 25, 2015, the Company signed an amendment to the loan agreement to finance pre-delivery payments of eight additional A320NEO aircraft to be delivered between 2017 and 2018. One of these aircraft was incorporated to the Company´s fleet during 2017.

 

On November 30, 2016, the Company signed an additional amendment to the loan agreement to finance pre-delivery payments of 22 additional A320NEO aircraft to be delivered between 2019 and 2020. This amendment was modified on December 19, 2017 to reschedule the delivery dates of the aircraft listed on August 25, 2015 and November 30, 2016, seven and twenty two aircraft, respectively. The new delivery date will be between 2019 and 2021. In accordance with this last amendment, the revolving line with Santander Bancomext will expire as of November 30, 2021.

 

The “Santander/Bancomext” loan agreement provides for certain covenants, including limits to the ability to, among others:

 

i)

Incur debt above a specified debt basket unless certain financial ratios are met.

ii)

Create liens.

iii)

Merge with or acquire any other entity without the previous authorization of the Banks.

iv)

Dispose of certain assets.

v)

Declare and pay dividends, or make any distribution on the Company’s share capital unless certain financial ratios are met.

 

At December 31, 2017 and 2016, the Company was in compliance with the covenants under the above-mentioned loan agreement.

 

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, including its obligation to make pre-delivery payments to the Mexican trusts, and the Company guaranteed the obligations of the Mexican trusts under the financing agreement (Deutsche Bank Mexico, S.A. Trust 1710 and 1711).

 

(iv) At December 31, 2017, the Company had available credit lines totaling Ps.7,368,346, of which Ps.4,616,861 were related to financial debt and Ps.2,751,485 were related to letters of credit (Ps.1,739,775 were undrawn). At December 31, 2016, the Company had available credit lines totaling Ps. 6,936,237, of which Ps. 5,048,477 were related to financial debt and Ps.1,887,760 were related to letters of credit (Ps.3,703,184 were undrawn).

 

Changes in liabilities arising from financing activities

 

At December 31, 2017 and 2016, the changes in liabilities from financing activities from the Company are summarized in the following table:

 

 

 

January 1,
2017

 

Net cash
flows

 

Foreign exchange
movement

 

Current vs non 
current
reclassification and
other

 

December, 31,
2017

 

Current interest- bearing loans and borrowings

 

Ps.

1,051,237

 

Ps.

419,350

 

Ps.

25,924

 

Ps.

907,051

 

Ps.

2,403,562

 

Non-current interest - bearing loans and borrowings

 

943,046

 

1,093,808

 

(50,521

)

(907,181

)

1,079,152

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities from financing activities

 

Ps.

1,994,283

 

Ps.

1,513,158

 

Ps.

(24,597

)

Ps.

(130

)

Ps.

3,482,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1,
2016

 

Net cash
flows

 

Foreign exchange
movement

 

Current vs non
current
reclassification and
other

 

December, 31,
2016

 

Current interest- bearing loans and borrowings

 

Ps.

1,371,202

 

Ps.

(753,897

)

Ps.

121,271

 

Ps.

312,661

 

Ps.

1,051,237

 

Non-current interest - bearing loans and borrowings

 

219,817

 

938,681

 

98,450

 

(313,902

)

943,046

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities from financing activities

 

Ps.

1,591,019

 

Ps.

184,874

 

Ps.

219,721

 

Ps.

(1,241

)

Ps.

1,994,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c)  Other financial liabilities

 

 

 

2017

 

2016

 

Derivative financial instruments designated as CFH (effective portion recognized within OCI):

 

 

 

 

 

Interest rate swap contracts

 

Ps.

 

Ps.

14,144

 

 

 

 

 

 

 

 

 

Total financial liabilities

 

Ps.

 

Ps.

14,144

 

 

 

 

 

 

 

 

 

Presented on the consolidated statements of financial position as follows:

 

 

 

 

 

Current

 

Ps.

 

Ps.

14,144

 

 

 

 

 

 

 

 

 

Non-current

 

Ps.

 

Ps.

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Cash and cash equivalents
12 Months Ended
Dec. 31, 2017
Cash and cash equivalents  
Cash and cash equivalents

 

6.  Cash and cash equivalents

 

An analysis of this caption is as follows:

 

 

 

2017

 

2016

 

Short-term investments

 

Ps.

5,982,314

 

Ps.

4,433,559

 

Cash in banks

 

963,162

 

2,632,878

 

Cash on hand

 

5,403

 

4,814

 

 

 

 

 

 

 

Total cash and cash equivalents

 

Ps.

6,950,879

 

Ps.

7,071,251

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Related parties
12 Months Ended
Dec. 31, 2017
Related parties  
Related parties

 

7.  Related parties

 

a) An analysis of balances due from/to related parties at December 31, 2017 and 2016 is provided below. All companies are considered affiliates, since the Company’s primary shareholders or directors are also direct or indirect shareholders of the related parties:

 

 

 

Type of transaction

 

Country
of origin

 

2017

 

2016

 

Terms

 

Due to:

 

 

 

 

 

 

 

 

 

 

 

One Link, S.A. de C.V. (“One Link”)

 

Call center fees

 

El Salvador

 

Ps.

24,980

 

Ps.

33,775

 

30 days

 

Aeromantenimiento, S.A. (“Aeroman”)

 

Aircraft and engine maintenance

 

El Salvador

 

15,951

 

30,627

 

30 days

 

SearchForce, Inc. (“SearchForce”)

 

Internet services

 

Mexico

 

 

620

 

30 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

40,931

 

Ps.

65,022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

b) During the years ended December 31, 2017, 2016 and 2015, the Company had the following transactions with related parties:

 

Related party transactions

 

Country of origin

 

2017

 

2016

 

2015

 

Expenses:

 

 

 

 

 

 

 

 

 

Aircraft and engine maintenance

 

El Salvador/Guatemala

 

Ps.

249,266

 

Ps.

304,399

 

Ps.

111,641

 

Call center fees and other fees

 

Mexico/El Salvador

 

202,689

 

173,197

 

57,809

 

Other

 

Mexico/El Salvador/ Guatemala

 

8,088

 

8,105

 

2,516

 

 

During the years ended December 31, 2017, 2016 and 2015 the Company did not have any revenue transactions with related parties.

 

c)  Servprot

 

Servprot S.A. de C.V. (“Servprot”) is a related party because Enrique Beltranena, the Company’s Chief Executive Officer, and Rodolfo Montemayor, a member of the board of directors, are shareholders of such company. Servprot provides security services for Mr. Beltranena and his family, as well as for Mr. Montemayor. During the years ended December 31, 2017, 2016 and 2015 the Company expensed Ps.1,838, Ps.1,733 and Ps.768, respectively for this concept.

 

d)  Aeroman

 

Aeroman is a related party because Roberto José Kriete Ávila, a member of the Company’s board of directors, and members of his immediate family are shareholders of Aeroman. The Company entered into an aircraft repair and maintenance service agreement with Aeroman on January 1, 2017. This agreement provides that the Company has to use Aeroman, exclusively for aircraft repair and maintenance services, subject to availability. Under this agreement, Aeroman provides inspection, maintenance, repair and overhaul services for aircraft. The Company makes payments under this agreement depending on the services performed. This agreement is for a 10 year term. As of December 31, 2017 and 2016, the balances due under the agreement with Aeroman were Ps.15,951 and Ps.30,627,respectively. The Company incurred expenses in aircraft, engine maintenance and technical support under this agreement of Ps.251,731, Ps.308,731 and Ps.114,157 for the years ended December 31, 2017, 2016 and 2015, respectively.

 

e)  Human Capital International

 

The Company entered into a professional services agreement with Human Capital International HCI, S.A. de C.V., or Human Capital International, on February 25, 2015, for the selection and hiring of executives. Rodolfo Montemayor Garza, a member of the Company’s board of directors, is a founder and chairman of the board of directors of Human Capital International. As of December 31, 2017 and 2016, the Company recognized an expense under this agreement of Ps.816 and Ps.3,127, respectively.

 

f)  One Link

 

One Link is a related party because Marco Baldocchi, an alternate member of the board, is a director of the Company. Pursuant to this agreement, One Link receives calls from the customers to book flights and provides customers with information about fares, schedules and availability. As of December 31, 2017 and 2016, the balance due under this agreement was Ps.24,980 and Ps.33,775, respectively and the Company recognized an expense under this agreement of Ps.200,035 and Ps.168,337 for the years ended December 31, 2017 and 2016, respectively.

 

g)  SearchForce

 

SearchForce is a related party because William Dean Donovan, an alternate member of the board, is a director of the Company. Pursuant to this agreement, SearchForce provides consultation services, reports, findings, analysis or other deliverables to us regarding the software and the implementation of the internet marketing strategy developed for the Company at its request. As of December 31, 2016, the balance due under this agreement was Ps.620 and the Company recognized an expense under this agreement of Ps.1,946 and Ps.3,446 for the years ended December 31, 2017 and 2016, respectively.

 

h)  Directors and officers

 

During the years ended December 31, 2017, 2016 and 2015, all of the Company’s senior managers received an aggregate compensation of short and long-term benefits of Ps.134,370, Ps.160,762 and Ps.120,440, respectively.

 

For the years ended December 31, 2017, 2016 and 2015 the cost of the share-based payments transactions (MIP and LTIP) were Ps.13,508, Ps.7,816 and Ps.6,345, respectively. Cash-settled payments transactions MIP II and SARs were Ps.(25,498), Ps.86,100 and Ps.44,699, respectively (Note 17).

 

Starting 2015, the Company adopted a new short-term benefit plan for certain personnel whereby cash bonuses are awarded for meeting certain Company’s performance target. During the years ended December 31, 2017 and 2016, the Company recorded a provision in the amount of Ps.0 and Ps.53,738, respectively.

 

During the year ended December 31, 2017, 2016 and 2015, the chairman and the independent members of the Company’s board of directors received an aggregate compensation of approximately Ps.8,993, Ps.7,751 and Ps.5,480, respectively, and the rest of the directors received a compensation of Ps.7,834, Ps.7,308 and Ps.4,183, respectively.

v3.8.0.1
Other accounts receivable, net
12 Months Ended
Dec. 31, 2017
Other accounts receivable, net  
Other accounts receivable, net

 

8.  Other accounts receivable, net

 

An analysis of other accounts receivable at December 31, 2017 and 2016, is detailed below:

 

 

 

2017

 

2016

 

Credit cards

 

Ps.

191,322

 

Ps.

253,374

 

Other accounts receivable

 

117,582

 

26,236

 

Other points of sales

 

54,719

 

23,867

 

Affinity credit card

 

40,517

 

8,950

 

Cargo clients

 

34,655

 

29,901

 

Travel agencies and insurance commissions

 

27,925

 

20,477

 

Marketing services receivable

 

13,435

 

11,070

 

Airport services

 

5,898

 

9,479

 

Employees

 

8,878

 

7,551

 

Insurance claims

 

1,345

 

55,815

 

 

 

 

 

 

 

 

 

496,276

 

446,720

 

Allowance for credit losses

 

(17,809

)

(19,317

)

 

 

 

 

 

 

 

 

Ps.

478,467

 

Ps.

427,403

 

 

 

 

 

 

 

 

 

 

Accounts receivable have the following aging:

 

Days

 

2017
Impaired

 

2017
Not impaired

 

Total
2017

 

2016
Impaired

 

2016
Not impaired

 

Total
2016

 

0–30

 

Ps.

16,962

 

Ps.

415,847

 

Ps.

432,809

 

Ps.

15,723

 

Ps.

398,721

 

Ps.

414,444

 

31–60

 

 

38,705

 

38,705

 

 

11,231

 

11,231

 

61–90

 

 

17,918

 

17,918

 

 

14,492

 

14,492

 

91–120

 

847

 

5,997

 

6,844

 

3,594

 

2,959

 

6,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

17,809

 

Ps.

478,467

 

Ps.

496,276

 

Ps.

19,317

 

Ps.

427,403

 

Ps.

446,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The movement in the allowance for doubtful accounts from January 1, 2015 to December 31, 2017 is as follows:

 

Balance as of January 1, 2015

 

Ps.

(27,786

)

Write-offs

 

11,999

 

Increase in allowance

 

(8,825

)

 

 

 

 

Balance as of December 31, 2015

 

(24,612

)

Write-offs

 

14,459

 

Increase in allowance

 

(9,164

)

 

 

 

 

Balance as of December 31, 2016

 

(19,317

)

 

 

 

 

Write-offs

 

6,228

 

Increase in allowance

 

(4,720

)

 

 

 

 

Balance as of December 31, 2017

 

Ps.

(17,809

)

 

 

 

 

 

 

v3.8.0.1
Inventories
12 Months Ended
Dec. 31, 2017
Inventories  
Inventories

 

9.  Inventories

 

An analysis of inventories at December 31, 2017 and 2016 is as follows:

 

 

 

2017

 

2016

 

Spare parts and accessories of flight equipment

 

Ps.

285,185

 

Ps.

235,330

 

Miscellaneous supplies

 

9,665

 

8,554

 

 

 

 

 

 

 

 

 

Ps.

294,850

 

Ps.

243,884

 

 

 

 

 

 

 

 

 

 

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. During the years ended as of December 31, 2017, 2016 and 2015, the amount of consumption of inventories, recorded as an operating expense as part of maintenance expense was Ps.242,265, Ps.186,719 and Ps.143,992, respectively.

v3.8.0.1
Prepaid expenses and other current assets
12 Months Ended
Dec. 31, 2017
Prepaid expenses and other current assets  
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, 2017 and 2016 is as follows:

 

 

 

2017

 

2016

 

Advances to suppliers

 

Ps.

346,263

 

Ps.

705,105

 

Prepaid aircraft rent

 

215,784

 

668,306

 

Prepaid insurance

 

68,712

 

47,663

 

Other prepaid expenses

 

65,642

 

33,555

 

Sales commission to travel agencies

 

54,501

 

73,413

 

Advances for constructions of aircraft and engines

 

13,764

 

31,437

 

Loss on sale and leaseback transactions to be amortized (Note 14)

 

3,047

 

3,047

 

 

 

 

 

 

 

 

 

Ps.

767,713

 

Ps.

1,562,526

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Guarantee deposits
12 Months Ended
Dec. 31, 2017
Guarantee deposits  
Guarantee deposits

 

11.  Guarantee deposits

 

An analysis of this caption at December 31, 2017 and 2016 is as follows:

 

 

 

2017

 

2016

 

Current asset:

 

 

 

 

 

Aircraft maintenance deposits paid to lessors (Note 1j)

 

Ps.

1,317,663

 

Ps.

1,145,913

 

Deposits for rental of flight equipment

 

17,178

 

14,155

 

Other guarantee deposits

 

18,052

 

7,141

 

 

 

 

 

 

 

 

 

1,352,893

 

1,167,209

 

 

 

 

 

 

 

Non-current asset:

 

 

 

 

 

Aircraft maintenance deposits paid to lessors (Note 1j)

 

5,631,304

 

5,951,831

 

Deposits for rental of flight equipment

 

441,110

 

589,804

 

Other guarantee deposits

 

25,838

 

18,243

 

 

 

 

 

 

 

 

 

6,098,252

 

6,559,878

 

 

 

 

 

 

 

 

 

Ps.

7,451,145

 

Ps.

7,727,087

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Rotable spare parts, furniture and equipment, net
12 Months Ended
Dec. 31, 2017
Rotable spare parts, furniture and equipment, net  
Rotable spare parts, furniture and equipment, net

 

12.  Rotable spare parts, furniture and equipment, net

 

 

 

Gross value

 

Accumulated depreciation

 

Net carrying value

 

 

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2017

 

At December
31, 2016

 

Leasehold improvements to flight equipment

 

Ps.

2,382,687

 

Ps.

1,709,868

 

Ps.

(1,769,589

)

Ps.

(1,386,844

)

Ps.

613,098

 

Ps.

323,024

 

Pre-delivery payments

 

2,783,303

 

1,206,330

 

 

 

2,783,303

 

1,206,330

 

Aircraft parts and rotable spare parts

 

506,735

 

393,522

 

(181,091

)

(137,712

)

325,644

 

255,810

 

Aircraft spare engines

 

323,410

 

323,025

 

(18,132

)

(1,337

)

305,278

 

321,688

 

Construction and improvements in process

 

193,607

 

255,374

 

 

 

193,607

 

255,374

 

Standardization

 

192,808

 

176,975

 

(113,407

)

(94,864

)

79,401

 

82,111

 

Constructions and improvements

 

131,503

 

120,886

 

(106,335

)

(85,873

)

25,168

 

35,013

 

Computer equipment

 

30,113

 

24,172

 

(20,790

)

(16,972

)

9,323

 

7,200

 

Workshop tools

 

20,500

 

20,500

 

(18,229

)

(15,915

)

2,271

 

4,585

 

Electric power equipment

 

15,439

 

14,818

 

(9,185

)

(7,890

)

6,254

 

6,928

 

Communications equipment

 

11,229

 

9,261

 

(6,502

)

(5,706

)

4,727

 

3,555

 

Workshop machinery and equipment

 

8,405

 

7,240

 

(4,345

)

(3,622

)

4,060

 

3,618

 

Motorized transport equipment platform

 

5,587

 

5,703

 

(4,701

)

(4,346

)

886

 

1,357

 

Service carts on board

 

5,403

 

5,403

 

(5,021

)

(4,645

)

382

 

758

 

Office furniture and equipment

 

44,749

 

36,310

 

(22,454

)

(18,653

)

22,295

 

17,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Ps.

6,655,478

 

Ps.

4,309,387

 

Ps.

(2,279,781

)

Ps.

(1,784,379

)

Ps.

4,375,697

 

Ps.

2,525,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*During the years ended December 31, 2017 and 2016,  the Company capitalized borrowing costs of Ps.193,389 and Ps.95,445, respectively.  The amount of this line is net of disposals of capitalized borrowing costs related to sale and leaseback transactions of Ps.110,274 and Ps.84,936, respectively.

 

 

 

Aircraft parts
and rotable spare
parts

 

Aircraft spare
Engines

 

Constructions
and
improvements

 

Standardization

 

Computer
equipment

 

Office furniture
and equipment

 

Electric power
equipment

 

Workshop
Tools

 

Motorized
transport
equipment
platform

 

Communications
equipment

 

Workshop
machinery
and
equipment

 

Service
carts on
board

 

Pre-delivery
payments

 

Construction and
improvements
in process

 

Leasehold
improvements to
flight equipment

 

Total

 

Net book amount as of December 31, 2015

 

Ps.

179,947

 

Ps.

 

Ps.

18,202

 

Ps.

83,886

 

Ps.

4,195

 

Ps.

12,932

 

Ps.

9,033

 

Ps.

4,815

 

Ps.

1,326

 

Ps.

3,764

 

Ps.

4,179

 

Ps.

1,453

 

Ps.

1,583,835

 

Ps.

140,926

 

Ps.

501,157

 

Ps.

2,549,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

110,592

 

323,025

 

2,218

 

21,953

 

740

 

517

 

1,467

 

4,217

 

505

 

129

 

131

 

36

 

1,345,081

 

161,560

 

226,526

 

2,198,697

 

Disposals and transfers

 

(1,299

)

 

 

 

 

(110

)

(1,626

)

 

(49

)

 

 

 

(1,733,093

)

(2,132

)

 

(1,738,309

)

Borrowing costs, net*

 

 

 

 

 

 

 

 

 

 

 

 

 

10,507

 

 

 

10,507

 

Other movements

 

 

 

32,441

 

 

4,814

 

7,877

 

 

25

 

46

 

493

 

 

 

 

(44,980

)

 

716

 

Depreciation

 

(33,430

)

(1,337

)

(17,848

)

(23,728

)

(2,549

)

(3,559

)

(1,946

)

(4,472

)

(471

)

(831

)

(692

)

(731

)

 

 

(404,659

)

(496,253

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

255,810

 

321,688

 

35,013

 

82,111

 

7,200

 

17,657

 

6,928

 

4,585

 

1,357

 

3,555

 

3,618

 

758

 

1,206,330

 

255,374

 

323,024

 

2,525,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

393,522

 

323,025

 

120,886

 

176,975

 

24,172

 

36,310

 

14,818

 

20,500

 

5,703

 

9,261

 

7,240

 

5,403

 

1,206,330

 

255,374

 

1,709,868

 

4,309,387

 

Accumulated depreciation

 

(137,712

)

(1,337

)

(85,873

)

(94,864

)

(16,972

)

(18,653

)

(7,890

)

(15,915

)

(4,346

)

(5,706

)

(3,622

)

(4,645

)

 

 

(1,386,844

)

(1,784,379

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book amount as of December 31, 2016

 

Ps.

255,810

 

Ps.

321,688

 

Ps.

35,013

 

Ps.

82,111

 

Ps.

7,200

 

Ps.

17,657

 

Ps.

6,928

 

Ps.

4,585

 

Ps.

1,357

 

Ps.

3,555

 

Ps.

3,618

 

Ps.

758

 

Ps.

1,206,330

 

Ps.

255,374

 

Ps.

323,024

 

Ps.

2,525,008

 

Additions

 

115,173

 

385

 

 

15,833

 

1,845

 

6,805

 

 

 

 

 

123

 

 

1,707,805

 

206,932

 

529,331

 

2,584,232

 

Disposals and transfers

 

(930

)

 

 

 

 

(15

)

 

 

 

 

 

 

(213,947

)

(3,555

)

(101,224

)

(319,671

)

Borrowing costs, net*

 

 

 

 

 

 

 

 

 

 

 

 

 

83,115

 

 

 

83,115

 

Other movements

 

 

 

 

10,371

 

 

4,087

 

1,649

 

620

 

 

 

1,968

 

1,041

 

 

 

(265,144

)

244,712

 

(696

)

Depreciation

 

(44,409

)

(16,795

)

(20,216

)

(18,543

)

(3,809

)

(3,801

)

(1,294

)

(2,314

)

(471

)

(796

)

(722

)

(376

)

 

 

(382,745

)

(496,291

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017

 

325,644

 

305,278

 

25,168

 

79,401

 

9,323

 

22,295

 

6,254

 

2,271

 

886

 

4,727

 

4,060

 

382

 

2,783,303

 

193,607

 

613,098

 

4,375,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

506,735

 

323,410

 

131,503

 

192,808

 

30,113

 

44,749

 

15,439

 

20,500

 

5,587

 

11,229

 

8,405

 

5,403

 

2,783,303

 

193,607

 

2,382,687

 

6,655,478

 

Accumulated depreciation

 

(181,091

)

(18,132

)

(106,335

)

(113,407

)

(20,790

)

(22,454

)

(9,185

)

(18,229

)

(4,701

)

(6,502

)

(4,345

)

(5,021

)

 

 

(1,769,589

)

(2,279,781

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book amount as of December 31, 2017

 

Ps.

325,644

 

Ps.

305,278

 

Ps.

25,168

 

Ps.

79,401

 

Ps.

9,323

 

Ps.

22,295

 

Ps.

6,254

 

Ps.

2,271

 

Ps.

886

 

Ps.

4,727

 

Ps.

4,060

 

Ps.

382

 

Ps.

2,783,303

 

Ps.

193,607

 

Ps.

613,098

 

Ps.

4,375,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

a) Depreciation expense for the years ended December 31, 2017, 2016 and 2015, was Ps.496,291, Ps.496,253 and Ps.425,439, respectively. Depreciation charges for the year are recognized as a component of operating expenses in the consolidated statements of operations.

 

b) 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 and 30 A320NEO.

 

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 2020. 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 2020. 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.

 

As part of the total support agreement with P&W, the Company received credit notes in December 2017 of Ps.58,530 (US$3.06 million), which are being amortized on a straight line basis, prospectively during the term of the agreement. As of December 31, 2017, the Company amortized a corresponding benefit from these credit notes of Ps.1,219, which is recognized as an offset to maintenance expenses in the consolidated statements of operations.

 

In December 2017, the Company amended the agreement with Airbus to reschedule the delivery of 29 aircrafts between 2018 and 2021.

 

Additionally, during December 2017, the Company amended the agreement with Airbus for the purchase of 80 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.

 

During the years ended December 31, 2017 and 2016, the amounts paid for aircraft and spare engine pre-delivery payments were of Ps.1,707,805 (US$90.0 million), and Ps.1,345,081 (US$82.7 million), respectively.

 

The current purchase agreement with Airbus requires the Company to accept delivery of 109 Airbus A320 family aircraft during nine years (from January 2018 to November 2026). The agreement provides for the addition of 109 A320NEO to its fleet as follows: four in 2018, seven in 2019, 12 in 2020, six in 2021, 13 in 2022, eighteen in 2023, nine in 2024, fifteen in 2025 and twenty-five in 2026.

 

Commitments to acquisitions of property and equipment are disclosed in Note 23.

 

c) On August 27, 2012, the Company entered into a total support agreement with Lufthansa Technik AG (“LHT”) for a five year term. This agreement includes a total component support agreement (power-by-the hour) and guarantees the availability of aircraft components for the Company’s fleet when they are required. The cost of the total component support agreement is recognized as maintenance expenses in the consolidated statement of operations.

 

Additionally, the total support agreement included a sale and leaseback agreement of certain components. As part of the original total support agreement with LHT, the Company received credit notes of Ps.46,461 (US$3.5 million), which were amortized on a straight line basis, during the term of the agreement. As of December 31, 2017, 2016 and 2015, the Company amortized a corresponding benefit from these credit notes of Ps.6,580, Ps.9,292 and Ps.9,292, respectively, which is recognized as an offset to maintenance expenses in the consolidated statements of operations.

 

During December 2016, the Company entered into a new total support agreement with Lufthansa for 66 months, with an effective date on July 1, 2017. This agreement includes similar terms and conditions as the original agreement.

 

As part of the new agreement, the Company received credit notes of Ps.28,110 (US$1.5 million), which are being amortized on a straight line basis, prospectively during the term of the agreement. As of December 31, 2017, the Company amortized a corresponding benefit from these credit notes of Ps.1,961, which is recognized as an offset to maintenance expenses in the consolidated statements of operations.

 

d) On October 12, 2016 and December 12, 2016, the Company acquired two aircraft spare engines, which were accounted for at cost for a total amount of Ps.323,025. The assets contain two major components which are assumed to have different useful lives, the limited life parts (LLPs) have an estimated useful life of 12 years, and the rest of the aircraft engine has an estimated useful life of 25 years. The Company had identified the major components as separate parts at their respective cost. These major components of the spare engines are presented as part of the spare aircraft engines and depreciated over their useful life.

v3.8.0.1
Intangible assets, net
12 Months Ended
Dec. 31, 2017
Intangible assets, net  
Intangible assets, net

 

13.  Intangible assets, net

 

The composition and movement of intangible assets is as follows:

 

 

 

 

 

Gross value

 

Accumulated amortization

 

Net carrying amount

 

 

 

Useful

 

At December 31,

 

 

 

life

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

Software

 

1 – 4 years

 

Ps.

441,803

 

Ps.

313,028

 

Ps.

(251,383

)

Ps.

(198,987

)

Ps.

190,420

 

Ps.

114,041

 

 

Balance as of January 1, 2016

 

Ps.

94,649

 

Additions

 

60,792

 

Disposals

 

(1,277

)

Amortization

 

(40,290

)

Exchange differences

 

167

 

 

 

 

 

Balance as of December 31, 2016

 

114,041

 

 

 

 

 

Additions

 

130,908

 

Disposals

 

(1,976

)

Amortization

 

(52,396

)

Exchange differences

 

(157

)

 

 

 

 

Balance as of December 31, 2017

 

Ps.

190,420

 

 

 

 

 

 

 

Software amortization expense for the years ended December 31, 2017, 2016 and 2015 was Ps.52,396, Ps.40,290 and Ps.31,278, respectively. These amounts were recognized in depreciation and amortization in the consolidated statements of operations.

v3.8.0.1
Operating leases
12 Months Ended
Dec. 31, 2017
Operating leases  
Operating leases

 

14.  Operating leases

 

The most significant operating leases are as follows:

 

a) Aircraft and engine rent. At December 31, 2017, the Company leases 71 aircraft (69 as of December 31, 2016) and 8 spare engines under operating leases (11 as of December 31, 2016) that have maximum terms through 2031. Rents are guaranteed by deposits in cash or letters of credit. The aircraft lease agreements contain certain covenants to which the Company is bound. The most significant covenants include the following:

 

(i)

Maintain the records, licenses and authorizations required by the competent aviation authorities and make the corresponding payments.

(ii)

Provide maintenance services to the equipment based on the approved maintenance program.

(iii)

Maintain insurance policies on the equipment for the amounts and risks stipulated in each agreement.

(iv)

Periodic submission of financial and operating information to the lessors.

(v)

Comply with the technical conditions relative to the return of aircraft.

 

As of December 31, 2017 and 2016, the Company was in compliance with the covenants under the above mentioned aircraft lease agreements.

 

Composition of the fleet and spare engines, operating leases*:

 

Aircraft
Type

 

Model

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2015

 

A319

 

132

 

6

 

6

 

6

 

A319

 

133

 

6

 

9

 

12

 

A320

 

233

 

39

 

39

 

32

 

A320

 

232

 

4

 

4

 

4

 

A320NEO

 

271N

 

6

 

1

 

 

A321

 

231

 

10

 

10

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

71

 

69

 

56

 

 

 

 

 

 

 

 

 

 

 

 

Engine
Type

 

Model

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2015

 

V2500

 

V2527M-A5

 

3

 

3

 

3

 

V2500

 

V2527E-A5

 

3

 

4

 

3

 

V2500

 

V2527-A5

 

2

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

11

 

6

 

 

 

 

 

 

 

 

 

 

 

 

* Certain of the Company’s aircraft and engine lease agreements include an option to extend the lease term period. Terms and conditions are subject to market conditions at the time of renewal.

 

During the year ended December 31, 2017, the Company incorporated five aircraft to its fleet (one of them based on the terms of the Airbus purchase agreement and four from a lessors order book). These new aircraft lease agreements were accounted for as operating leases. Also, the Company returned three aircraft to their respective lessors. All the aircraft incorporated through the lessors aircraft order book were not subject to sale and leaseback transactions.

 

Additionally, during 2017 the Company extended the lease term of three aircraft (effective from 2018) and two spare engines (effective from July 2017 and September 2017 respectively). Such leases were accounted for as operating leases and were not subject to sale and leaseback transactions.

 

During the year ended December 31, 2016, the Company incorporated 17 aircraft to its fleet (eight of them based on the terms of the Airbus purchase agreement and 9 from a lessor’s aircraft order book). These new aircraft lease agreements were accounted for as operating leases. Also, the Company returned four aircraft to their respective lessors. All the aircraft incorporated through the lessor’s aircraft order book were not subject to sale and leaseback transactions.

 

Additionally, during 2016 the Company extended the lease term of two aircraft effective from 2016 and entered into certain agreements with different lessors to lease five spare engines which were received during the same period. Such leases were accounted for as operating leases and were not subject to sale and leaseback transactions.

 

During 2016, the Company purchase two spare engines, which were accounted as part of the property, plant and equipment (See Note 12).

 

During the year ended December 31, 2015, the Company incorporated seven aircraft to its fleet (five of them based on the terms of the Airbus purchase agreement and two from a lessor’s aircraft order book) and returned one aircraft to a lessor. These new aircraft lease agreements were accounted for as operating leases. Additionally, during August 2015 the Company extended the lease term of three A319CEO, one effective from 2015 and the other two effective from 2016.

 

As of December 31, 2017, 2016 and 2015, all of the Company’s aircraft and spare engines lease agreements were accounted for as operating leases.

 

Provided below is an analysis of future minimum aircraft and engine lease payments in U.S. dollars and its equivalent in Mexican pesos:

 

 

 

Aircraft operating leases

 

Engine operating leases

 

 

 

in U.S. dollars

 

in Mexican 
pesos(1)

 

in U.S. dollars

 

in Mexican
pesos(1)

 

2018

 

US$

257,681

 

Ps.

5,085,438

 

US$

4,336

 

Ps.

85,573

 

2019

 

244,264

 

4,820,648

 

3,986

 

78,665

 

2020

 

238,837

 

4,713,544

 

3,366

 

66,429

 

2021

 

233,002

 

4,598,388

 

3,209

 

63,331

 

2022 and thereafter

 

863,604

 

17,043,570

 

4,624

 

91,256

 

 

 

 

 

 

 

 

 

 

 

Total

 

US$

1,837,388

 

Ps.

36,261,588

 

US$

19,521

 

Ps.

385,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Using the exchange rate as of December 31, 2017 of Ps. 19.7354.

 

Such amounts are determined based on the stipulated rent contained within the agreements without considering renewals and using the prevailing exchange rate and interest rates at December 31, 2017.

 

b) Rental of land and buildings. The Company has entered into land and property lease agreements with third parties for the premises where it provides its services and where its offices are located. These leases are recognized as operating leases.

 

Provided below is an analysis of future minimum land and building lease payments denominated in U.S. dollars or Mexican pesos as stablished in the lease agreement:

 

 

 

Operating 
leases 
denominated in
U.S. dollars

 

Equivalent in
Mexican
pesos*

 

Operating leases 
denominated in 
Mexican pesos

 

2018

 

US$

6,718

 

Ps.

132,582

 

Ps.

66,243

 

2019

 

4,563

 

90,053

 

52,575

 

2020

 

4,548

 

89,757

 

42,335

 

2021

 

1,672

 

32,998

 

9,168

 

2022 and thereafter

 

702

 

13,854

 

53,194

 

 

 

 

 

 

 

 

 

Total

 

US$

18,203

 

Ps.

359,244

 

Ps.

223,515

 

 

 

 

 

 

 

 

 

 

 

 

 

*Convenience translation to U.S. dollars (Ps.19.7354).

 

c)  Rental expense charged to results of operations is as follows:

 

 

 

2017

 

2016

 

2015

 

Aircraft and engine (Note 1p)

 

Ps.

6,072,502

 

Ps.

5,590,058

 

Ps.

3,525,336

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

Airports facilities

 

44,251

 

40,591

 

39,993

 

Offices, maintenance warehouse and hangar (Note 20)

 

30,544

 

33,517

 

25,889

 

 

 

 

 

 

 

 

 

Total rental expenses on real estate

 

74,795

 

74,108

 

65,882

 

 

 

 

 

 

 

 

 

Total cost of operating leases

 

Ps.

6,147,297

 

Ps.

5,664,166

 

Ps.

3,591,218

 

 

 

 

 

 

 

 

 

 

 

 

 

During the years ended December 31, 2017, 2016 and 2015 the Company entered into aircraft and spare engines sale and leaseback transactions, resulting in a gain of Ps.65,886, Ps.484,827 and Ps.181,736, respectively, that was recorded under the caption other income in the consolidated statement of operations (Note 20).

 

During the year ended December 31, 2011, the Company entered into aircraft and spare engines sale and leaseback transactions, which resulted in a loss of Ps.30,706. This loss was deferred on the consolidated statements of financial position and is being amortized over the contractual lease term. As of December 31, 2017 and 2016, the current portion of the loss on sale amounts to Ps.3,047 and Ps.3,047, respectively, which is recorded in the caption of prepaid expenses and other current assets (Note 10), and the non-current portion amounts to Ps.11,413 and Ps.14,460, respectively, which is recorded in the caption of other assets in the consolidated statements of financial position.

 

For each of the years ended December 31, 2017, 2016 and 2015, the Company amortized a loss of Ps.3,047,  as additional aircraft rental expense.

v3.8.0.1
Accrued liabilities
12 Months Ended
Dec. 31, 2017
Accrued liabilities  
Accrued liabilities

 

15.  Accrued liabilities

 

a)  An analysis of accrued liabilities at December 31, 2017 and 2016 is as follows:

 

 

 

2017

 

2016

 

Fuel and traffic accrued expenses

 

Ps.

1,106,913

 

Ps.

922,607

 

Maintenance and aircraft parts accrued expenses

 

194,366

 

130,897

 

Sales, marketing and distribution accrued expenses

 

143,758

 

102,880

 

Maintenance deposits

 

132,519

 

179,288

 

Salaries and benefits

 

114,781

 

170,994

 

Accrued administrative expenses

 

90,459

 

80,981

 

Aircraft and engine lease extension benefit (Note 1j)

 

83,047

 

85,124

 

Deferred revenue from VClub membership

 

76,261

 

32,771

 

Information and communication accrued expenses

 

44,638

 

32,950

 

Supplier services agreement

 

10,634

 

6,333

 

Depositary services benefit

 

1,473

 

2,068

 

Advances from travel agencies

 

650

 

1,536

 

Others

 

51,474

 

37,010

 

 

 

 

 

 

 

 

 

Ps.

2,050,973

 

Ps.

1,785,439

 

 

 

 

 

 

 

 

 

 

b)  Accrued liabilities long-term:

 

 

 

2017

 

2016

 

Aircraft and engine lease extension benefit (Note 1j)

 

Ps.

107,400

 

Ps.

127,831

 

Supplier services agreement

 

77,174

 

4,350

 

Depositary services benefit

 

 

1,473

 

Other

 

15,274

 

36,154

 

 

 

 

 

 

 

 

 

Ps.

199,848

 

Ps.

169,808

 

 

 

 

 

 

 

 

 

 

c)  An analysis of other liabilities is as follows:

 

 

 

Balance as of
January 1,
2017

 

Increase for
the year

 

Payments

 

Unwinding 
discount*

 

Balance as of
December 31,
 2017

 

Aircraft lease return obligation

 

Ps.

410,060

 

Ps.

960,548

 

Ps.

859,659

 

Ps.

22,566

 

Ps.

488,383

 

Employee profit sharing (Note 16)

 

10,695

 

8,342

 

9,974

 

 

9,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

420,755

 

Ps.

968,890

 

Ps.

869,633

 

Ps.

22,566

 

Ps.

497,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term maturities

 

 

 

 

 

 

 

 

 

Ps.

280,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

Ps.

216,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Discount rate adjustment

 

 

 

Balance as of
January 1,
2016

 

Increase for
the year

 

Payments

 

Unwinding 
discount*

 

Balance as of
December 31,
 2016

 

Aircraft lease return obligation

 

Ps.

149,326

 

Ps.

1,038,764

 

Ps.

765,023

 

Ps.

13,007

 

Ps.

410,060

 

Employee profit sharing (Note 16)

 

10,173

 

9,967

 

9,445

 

 

10,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

159,499

 

Ps.

1,048,731

 

Ps.

774,468

 

Ps.

13,007

 

Ps.

420,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term maturities

 

 

 

 

 

 

 

 

 

Ps.

284,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

Ps.

136,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Discount rate adjustment

 

During the years ended December 31, 2017, 2016 and 2015 no cancellations, or write-offs related to these liabilities were recorded.

v3.8.0.1
Employee benefits
12 Months Ended
Dec. 31, 2017
Employee benefits  
Employee benefits

 

16.  Employee benefits

 

The components of net period cost recognized in the consolidated statement of operations and the obligations for seniority premium for the years ended December 31, 2017, 2016 and 2015, are as follows:

 

 

 

2017

 

2016

 

2015

 

Analysis of net period cost:

 

 

 

 

 

 

 

Current service cost

 

Ps.

3,657

 

Ps.

2,421

 

Ps.

2,012

 

Interest cost on benefit obligation

 

1,000

 

701

 

537

 

 

 

 

 

 

 

 

 

Net period cost

 

Ps.

4,657

 

Ps.

3,122

 

Ps.

2,549

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in the defined benefit obligation are as follows:

 

 

 

2017

 

2016

 

2015

 

Defined benefit obligation at January 1,

 

Ps.

13,438

 

Ps.

10,056

 

Ps.

7,737

 

Net period cost charged to profit or loss:

 

 

 

 

 

 

 

Current service cost

 

3,657

 

2,421

 

2,012

 

Interest cost on benefit obligation

 

1,000

 

701

 

537

 

Remeasurement losses in other comprehensive income:

 

 

 

 

 

 

 

Actuarial changes arising from changes in assumptions

 

1,776

 

442

 

1,174

 

Payments made

 

(582

)

(182

)

(1,404

)

 

 

 

 

 

 

 

 

Defined benefit obligation at December 31,

 

Ps.

19,289

 

Ps.

13,438

 

Ps.

10,056

 

 

 

 

 

 

 

 

 

 

 

 

 

The significant assumptions used in the computation of the seniority premium obligations are shown below:

 

 

 

2017

 

2016

 

2015

 

Financial:

 

 

 

 

 

 

 

Discount rate

 

7.72

%

7.78

%

7.29

%

Expected rate of salary increases

 

5.50

%

5.50

%

5.50

%

Annual increase in minimum salary

 

4.00

%

4.00

%

4.00

%

 

 

 

 

 

 

 

 

Biometric:

 

 

 

 

 

 

 

Mortality (1)

 

EMSSA 09

 

EMSSA 09

 

EMSSA 09

 

Disability (2)

 

IMSS-97

 

IMSS-97

 

IMSS-97

 

 

(1)

Mexican Experience of social security (EMSSA).

(2)

Mexican Experience of Instituto Mexicano del Seguro Social (IMSS).

 

Accruals for short-term employee benefits at December 31, 2017 and 2016, respectively, are as follows:

 

 

 

2017

 

2016

 

Employee profit-sharing (Note 15c)

 

Ps.

9,063

 

Ps.

10,695

 

 

 

 

 

 

 

 

 

 

The key management personnel of the Company include the members of the Board of Directors (Note 7).

v3.8.0.1
Share-based payments
12 Months Ended
Dec. 31, 2017
Share-based payments  
Share-based payments

 

17.  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).

 

b)  LTIP

 

Share purchase plan (equity-settled)

 

Under the share purchase plan (equity- settled), in November 2014 certain key employees of the Company were granted with a special bonus by an amount of Ps.10,831, to be used to purchase Company’s shares. The plan consisted in:

 

(i)

Servicios Corporativos granted a bonus to each key executive;

 

(ii)

The bonus amount by Ps.7,059, net of withheld taxes, was transferred on November 11, 2014, as per the written instructions of each key employees, to the Administrative Trust for the acquisition of Series A shares of the Company through an intermediary authorized by the BMV based on the Administration Trust’s Technical Committee instructions;

 

(iii)

Subject to specified terms and conditions set forth in the Administrative Trust, the acquired shares were in escrow under the Administrative Trust for its administration until the vesting period date for each key executive, date as of which the key executive can fully dispose of the shares and instruct as desired.

 

(iv)

The share purchase plan provides that if the terms and conditions are not met by the vesting period date, then the shares would be sold in the BMV, and Servicios Corporativos would be entitled to receive the proceeds of the sale of shares.

 

(v)

The key employees’ account balance will be tracked by the Administrative Trust. The Administrative Trust’s objectives are to acquire Series A shares on behalf of the key employees and to manage the shares granted to such key executive based on instructions set forth by the Technical Committee.

 

As the Administrative Trust is controlled and therefore consolidated by Controladora, shares purchased in the market and held within the Administrative Trust are presented for accounting purposes as treasury stock in the consolidated statement of changes in equity.

 

In November 2017, April and October 2016, extensions to the LTIP were approved by the Company’s shareholder’s and Company’s Board of Directors, respectively. The total cost of the extensions approved were Ps.15,765 (Ps.10,108 net of withheld taxes), Ps.14,532 (Ps.9,466 net of withheld taxes) and Ps.11,599 (Ps.7,559 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, 2017 and 2016, the number of shares into the Administrative Trust associated with the Company’s share purchase payment plans is as follows:

 

 

 

Number of Series A
 shares

 

Outstanding as of December 31, 2015

 

617,001

 

Purchased during the year

 

513,002

 

Granted during the year

 

 

Exercised/vested during the year

 

(425,536

)

Forfeited during the year

 

(86,419

)

 

 

 

 

Outstanding as of December 31, 2016

 

618,048

*

Purchased during the year

 

547,310

 

Granted during the year

 

 

Exercised/vested during the year

 

(345,270

)

Forfeited during the year

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

820,088

*

 

 

 

 

 

*These shares are presented as treasury shares in the consolidated statement of financial position as of December 31, 2017 and 2016.

 

The vesting period of the shares granted under the Company’s share purchase plans is as follows:

 

Number of Series A
 shares

 

Vesting period

 

353,457

 

November 2017 – 2018

 

284,200

 

November 2018 – 2019

 

182,431

 

November 2019 – 2020

 

 

 

 

 

820,088

 

 

 

 

 

 

 

 

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, 2017, 2016 and 2015, the compensation expense recorded in the consolidated statement of operations amounted to Ps.13,508, Ps.7,816 and Ps.6,018, respectively.

 

All shares held in the Administrative Trust are considered outstanding for both basic and diluted (loss) earnings per share purposes, since the shares are entitled to a dividend if and when declared by the Company.

 

During 2016, 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, 2016 were (86,419).

 

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 3 year period. The total amount of the appreciation rights granted under this plan at the grant date was Ps.10,831 at such date.

 

Under the LTIP extensions, the number of SARs granted to certain key executives of the Company were 3,965,351, 2,044,604 and 1,793,459, which amounts to Ps.15,765, Ps.14,532 and Ps.11,599, for the years ended December 31, 2017, 2016 and 2015, respectively. The SARs vest as long as the employee continues to be employed by the Company at the end of each anniversary, during a 3 years period.

 

Fair value of the SARs is measured at each reporting date. The carrying amount of the liability relating to the SARs as of December 31, 2017 and 2016 was Ps.723 and Ps.15,744, 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, 2017, 2016 and 2015, the Company recorded a (benefit) expense of Ps.(8,999), Ps.31,743 and Ps.44,699, respectively, in the consolidated statement of operations.

 

The fair value of these SARs is 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 (vesting schedule in tables below).

 

Number of SARs

 

Exercisable date

 

2,766,811

 

November 2018

 

1,649,493

 

November 2019

 

941,749

 

November 2020

 

 

 

 

 

5,358,053

 

 

 

 

 

 

 

 

During the years ended December 31, 2017, 2016 and 2015, the Company made a cash payment to key employees related to the SARs plan in the amount of Ps.6,021, Ps.31,261 and Ps.31,090, respectively. Such payments were determined based on the increase in the share price of the Company from the grant date to the exercisable date.

 

c)  MIP

 

MIP I

 

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 has to 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. During 2015, the Company recorded Ps.327, as the final cost of the MIP related to the vested shares, in the consolidated statements of operations.

 

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:

 

 

 

2012

 

Dividend yield (%)

 

0.00

%

Volatility (%)

 

37.00

%

Risk—free interest rate (%)

 

5.96

%

Expected life of share options (years)

 

8.8

 

Exercise share price (in Mexican pesos Ps.)

 

5.31

 

Exercise multiple

 

1.1

 

Fair value of the stock at grant date

 

1.73

 

 

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 2017, the key employees exercised 120,000 Series A shares. In 2016, the key employees exercised 3,299,999 Series A shares. As a result, the key employees paid Ps.638 and Ps.17,536, for the years ended December 31, 2017 and 2016, respectively, to the Management Trust corresponding to the exercised shares. Thereafter, the Company 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 year:

 

 

 

Number of share 
options

 

Exercise price
in Mexican pesos

 

Total in
thousands of 
Mexican pesos

 

Outstanding as of December 31, 2015

 

15,857,856

 

Ps.

5.31

 

Ps.

84,269

 

Granted during the year

 

 

 

 

Forfeited during the year

 

 

 

 

Exercised during the year

 

(3,299,999

)

5.31

 

(17,536

)

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2016

 

12,557,857

 

Ps.

5.31

 

Ps.

66,733

 

Granted during the year

 

 

 

 

Forfeited during the year

 

 

 

 

Exercised during the year

 

(120,000

)

5.31

 

(638

)

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

12,437,857

 

Ps.

5.31

 

Ps.

66,095

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2017 and 2016, 12,437,857 and 12,557,857 share options pending to exercise were considered as treasury shares, respectively.

 

 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, 2017 and 2016 was Ps.37,858 and Ps.54,357, 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, 2017 and 2016, the Company recorded a (benefit) expense of Ps.(16,499) and Ps.54,357, respectively, in the consolidated statement of operations. No SARs were exercised during 2017. The vesting schedule is summarized in the table below:

 

Number of SARs

 

Exercisable date

 

2,030,540

 

February 2017

 

2,030,540

 

February 2018

 

2,030,540

 

February 2019

 

3,384,240

 

February 2020

 

4,061,100

 

February 2021

 

 

 

 

 

13,536,960

 

 

 

 

 

 

 

 

d) The (benefit) expense recognized for the Company’s retention plans during the year is shown in the following table:

 

 

 

2017

 

2016

 

2015

 

(Benefit) expense arising from cash-settled share-based payments transactions

 

Ps.

(25,498

)

Ps.

86,100

 

Ps.

44,699

 

Expense arising from equity-settled share-based payments transactions

 

13,508

 

7,816

 

6,345

 

 

 

 

 

 

 

 

 

Total expense arising from share-based payments transactions

 

Ps.

(11,990

)

Ps.

93,916

 

Ps.

51,044

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Equity
12 Months Ended
Dec. 31, 2017
Equity  
Equity

 

18.  Equity

 

As of December 31, 2017, the total number of authorized shares was 1,011,876,677; represented by common registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:

 

 

 

Shares

 

 

 

 

 

Fixed
Class I

 

Variable
Class II

 

Total shares

 

Series A shares

 

3,224

 

877,852,982

 

877,856,206

 

Series B shares

 

20,956

 

133,999,515

 

134,020, 471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,180

 

1,011,852,497

 

1,011,876,677

 

Treasury shares (Note 17)

 

 

(13,257,945

)

(13,257,945

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,180

 

998,594,552

 

998,618,732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016, the total number of authorized shares was 1,011,876,677; represented by common registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:

 

 

 

Shares

 

 

 

 

 

Fixed
Class I

 

Variable
Class II

 

Total shares

 

Series A shares

 

3,224

 

877,852,982

 

877,856,206

 

Series B shares

 

20,956

 

133,999,515

 

134,020,471

 

 

 

 

 

 

 

 

 

 

 

24,180

 

1,011,852,497

 

1,011,876,677

 

Treasury shares (Note 17)

 

 

(13,175,905

)

(13,175,905

)

 

 

 

 

 

 

 

 

 

 

24,180

 

998,676,592

 

998,700,772

 

 

 

 

 

 

 

 

 

 

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 in the event that the Company fails to comply with the payment terms thereunder.

 

During the years ended December 31, 2017, 2016 and 2015, the Company did not declare any dividends.

 

a)Secondary follow-on equity offering

 

On November 16, 2015, the Company completed a secondary follow-on equity offering, in which certain shareholders sold 108,900,000 of the Company’s CPOs, in the form of American Depositary Shares, or ADSs. No CPOs or ADSs were sold by the Company and the selling shareholders received all of the proceeds from this offering. The Company recorded the related transaction costs in the consolidated statement of operations in the amount of Ps.22,955.

 

b)(Loss) Earnings per share

 

Basic (loss) earnings per share (“LPS or EPS”) amounts are calculated by dividing the net (loss) income for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

 

Diluted LPS or EPS amounts are calculated by dividing the (loss) profit 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 (loss) earnings per share for the years ended December 31, 2017, 2016 and 2015.

 

 

 

At December 31,

 

 

 

2017

 

2016

 

2015

 

Net (loss) income for the period

 

Ps.

(594,599

)

Ps.

3,519,489

 

Ps.

2,463,870

 

Weighted average number of shares outstanding (in thousands):

 

 

 

 

 

 

 

Basic

 

1,011,877

 

1,011,877

 

1,011,877

 

Diluted

 

1,011,877

 

1,011,877

 

1,011,877

 

LPS -EPS:

 

 

 

 

 

 

 

Basic

 

(0.588

)

3.478

 

2.435

 

Diluted

 

(0.588

)

3.478

 

2.435

 

 

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.

 

c) 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, 2017, the Company’s legal reserve was Ps.291,178 or 9.8% of our capital stock.

 

At an ordinary general shareholders’ meeting held on April 19, 2017 the shareholders approved to increase the Company´s legal reserve in the amount of Ps.252,928.  As of December 31, 2017 and 2016, the Company’s legal reserve has not reached the 20% of its capital stock.

 

d) 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.

 

e) 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 has to be authorized.

v3.8.0.1
Income tax
12 Months Ended
Dec. 31, 2017
Income tax  
Income tax

 

19.  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 restated assets values. Taxable income is increased or reduced by the effects of inflation on certain monetary assets and liabilities through the annual inflation adjustment.

 

(i)

Based on the approved law corporate income tax rate for 2017 and thereafter is 30%.

 

(ii)

The tax rules include limits in the deductions of the exempt compensation amount certain items, as follows: Wages and benefits paid to workers 47% of income paid to workers and in certain cases up to 53% (holiday bonus, savings fund, employee profit sharing, seniority premiums) will be deductible for employers. As a result, certain wage and salary provisions have difference between tax and book values at year-end.

 

(iii)

The MITL sets forth criteria and limits for applying some deductions, such as: the deduction of payments which, in turn, are exempt income for workers, contributions for creating or increasing provisions for pension funds, contributions to the Mexican Institute of Social Security payable by the worker that are paid by the employer, as well as the possible non-deduction of payments made to related parties in the event of failing to meet certain requirements.

 

(iv)

Taxable income for purposes of the employee profit sharing is the same used for the Corporate Income Tax except for certain items.

 

(v)

A 10% withholding tax is imposed on dividends distributions to individuals and foreign shareholders from earnings generated starting January 1, 2014.

 

The income tax rates for 2017 and 2016 in Guatemala and Costa Rica are 25% and 30%, respectively.

 

b) For the years ended December 31, 2017, 2016 and 2015, the Company reported on a consolidated basis taxable income of Ps.171,046, Ps.2,702,355 and Ps.2,751,813, respectively, which was partially offset by tax losses from prior years.

 

In accordance with the MITL and CRITL, tax losses may be carried forward against taxable income generated in the succeeding ten and three years, respectively. Carryforward tax losses are restated based on inflation.

 

c) An analysis of consolidated income tax expense for the years ended December 31, 2017, 2016 and 2015 is as follows:

 

Consolidated statements of operations

 

 

 

2017

 

2016

 

2015

 

Current year income tax expense

 

Ps.

(51,313

)

Ps.

(706,244

)

Ps.

(337,997

)

Deferred income tax benefit (expense)

 

212,488

*

(750,938

)**

(700,351

)

 

 

 

 

 

 

 

 

Total income tax benefit (expense)

 

Ps.

161,175

 

Ps.

(1,457,182

)

Ps.

(1,038,348

)

 

 

 

 

 

 

 

 

 

 

 

 

*Includes translation effect by Ps.1,008

**Includes translation effect by Ps.1,242

 

Consolidated statements of OCI

 

 

 

2017

 

2016

 

2015

 

Deferred tax related to items recognized in OCI during the year

 

 

 

 

 

 

 

Net gain (loss) on cash flow hedges

 

Ps.

12,017

 

Ps.

(187,408

)

Ps.

58,161

 

Remeasurement gain of employee benefits

 

533

 

132

 

352

 

 

 

 

 

 

 

 

 

Deferred tax charged to OCI

 

Ps.

12,550

 

Ps.

(187,276

)

Ps.

58,513

 

 

 

 

 

 

 

 

 

 

 

 

 

d) A reconciliation of the statutory corporate income tax rate to the Company’s effective tax rate for financial reporting purposes is as follows:

 

 

 

2017

 

2016

 

2015

 

Statutory income tax rate

 

30.00

%

30.00

%

30.00

%

Non-deductible expenses

 

(3.90

%)

0.28

%

0.66

%

Unrecorded deferred taxes on tax losses

 

(14.55

%)

0.09

%

 

Foreign countries difference with Mexican statutory rate

 

(0.32

%)

0.04

%

 

Inflation of tax losses

 

1.50

%

(0.01

%)

(0.02

%)

Amendment tax return effects and other tax adjustments

 

(0.31

%)

(0.11

%)

(0.42

%)

Inflation on furniture, intangible and equipment

 

4.91

%

(0.38

%)

(0.34

%)

Annual inflation adjustment

 

4.00

%

(0.63

%)

(0.23

%)

 

 

 

 

 

 

 

 

 

 

21.33

%

29.28

%

29.65

%

 

 

 

 

 

 

 

 

 

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 and Costa Rica)

 

According to Guatemala Corporate Income tax law, under the regime on profits from business activities, net operating losses cannot offset taxable income in prior or future years. For the year ended December 31, 2017, the Company obtained a net operating loss which has not been recognized as a deferred tax asset.

 

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, 2017 and 2016, the Company generated net operating losses for an amount of Ps.300,613 and Ps.57,414, respectively, for which no deferred tax asset has been recognized.

 

e)  An analysis of consolidated deferred taxes is as follows:

 

 

 

Consolidated
statement of
financial
position

 

Consolidated
statement of
operations

 

Consolidated
statement of
financial position

 

Consolidated
statement of
operations

 

Deferred income tax assets:

 

 

 

 

 

 

 

 

 

Intangible

 

Ps.

463,211

 

Ps.

(18,415

)

Ps.

481,626

 

Ps.

(16,637

)

Provisions

 

351,989

 

8,695

 

343,294

 

56,727

 

Tax losses available for offsetting against future taxable income

 

343,082

 

309,758

 

33,324

 

(25,030

)

Extension lease agreement

 

143,135

 

41,411

 

101,724

 

25,405

 

Unearned transportation revenue

 

35,941

 

(29,814

)

65,755

 

7,039

 

Allowance for doubtful accounts

 

7,324

 

433

 

6,891

 

(2,179

)

Employee benefits

 

5,786

 

1,222

 

4,031

 

886

 

Employee profit sharing

 

2,716

 

(490

)

3,206

 

158

 

 

 

 

 

 

 

 

 

 

 

 

 

1,353,184

 

312,800

 

1,039,851

 

46,369

 

Deferred income tax liabilities:

 

 

 

 

 

 

 

 

 

Supplemental rent

 

1,563,363

 

223,753

 

1,339,610

 

363,783

 

Rotable spare parts, furniture and equipment, net

 

476,917

 

108,890

 

368,027

 

103,926

 

Prepaid expenses and other assets

 

196,152

 

(239,586

)

435,738

 

280,660

 

Inventories

 

88,169

 

15,286

 

72,883

 

23,979

 

Financial instruments

 

49,151

 

 

61,168

 

 

Other prepayments

 

33,269

 

(7,023

)

40,292

 

23,717

 

 

 

 

 

 

 

 

 

 

 

 

 

2,407,021

 

101,320

 

2,317,718

 

796,065

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

(1,053,837

)

Ps.

211,480

 

Ps.

(1,277,867

)

Ps.

(749,696

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

2016

 

Reflected in the consolidated statement of financial position as follows:

 

 

 

 

 

Deferred tax assets

 

Ps.

562,445

 

Ps.

559,083

 

Deferred tax liabilities

 

(1,616,282

)

(1,836,950

)

 

 

 

 

 

 

Deferred tax liability, net

 

Ps.

(1,053,837

)

Ps.

(1,277,867

)

 

 

 

 

 

 

 

 

 

A reconciliation of deferred tax liability, net is as follows:

 

 

 

2017

 

2016

 

Opening balance as of January 1,

 

Ps.

(1,277,867

)

Ps.

(340,895

)

Deferred income tax benefit (expense) during the current year recorded on profits

 

211,480

 

(749,696

)

Deferred income tax benefit (expense) during the current year recorded in accumulated other comprehensive income (loss)

 

12,550

 

(187,276

)

 

 

 

 

 

 

Closing balance as of December 31,

 

Ps.

(1,053,837

)

Ps.

(1,277,867

)

 

 

 

 

 

 

 

 

 

At December 31, 2017 and 2016, the table shown above includes deferred income tax asset recognized by Concesionaria and Operaciones Volaris (2017), Comercializadora (2016) 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 carryforward 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 this regards the Company has recognized at December 31, 2017, 2016 and 2015 a deferred tax asset for tax losses of Ps.343,082, Ps.33,324 and Ps.58,354 respectively.

 

During 2017, the Company recognized a deferred tax asset for the carryforward of available tax losses of Concesionaria, Comercializadora and Operaciones Volaris, 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 year, increase in flight frequencies, and routes, inside and outside of Mexico; the profit of Comercializadora and Operaciones Volaris, respectively, is detrived directly from Concesionaria’s operations.

 

An analysis of the available tax losses carry-forward of the Company at December 31, 2017 is as follows:

 

Year
of loss

 

Historical
Loss

 

Restated
tax loss

 

Utilized

 

Total remaining 
amount

 

Year of 
expiration

 

2016

 

57,414

 

57,414

 

 

57,414

 

2019

 

2016

 

52,221

 

56,573

 

16,378

 

40,195

 

2026

 

2017

 

300,613

 

300,613

 

 

300,613

 

2020

 

2017

 

1,068,498

 

1,103,408

 

 

1,103,408

 

2027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

1,478,746

 

Ps.

1,518,008

 

Ps.

16,378

 

Ps.

1,501,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A breakdown of available tax loss carry-forward of Controladora and its subsidiaries at December 31, 2017 is as follows:

 

 

 

Historical
loss

 

Restated
tax loss

 

 

 

Total
remaining amount

 

 

 

 

 

Utilized

 

 

Comercializadora

 

Ps.

52,221

 

Ps.

56,573

 

Ps.

16,378

 

Ps.

40,195

 

Concesionaria

 

1,067,836

 

1,102,726

 

 

1,102,726

 

Operaciones Volaris

 

662

 

682

 

 

682

 

Vuela Aviación

 

358,027

 

358,027

 

 

358,027

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

1,478,746

 

Ps.

1,518,008

 

Ps.

16,378

 

Ps.

1,501,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

f)  At December 31, 2017 the Company had the following tax balances:

 

 

 

2017

 

Restated contributed capital account (Cuenta de capital de aportación or “CUCA”)

 

Ps.

3,737,048

 

CUFIN*

 

2,558,378

 

 

*The calculation comprises all the subsidiaries of the Company.

v3.8.0.1
Other operating income and expenses
12 Months Ended
Dec. 31, 2017
Other operating income and expenses  
Other operating income and expenses

 

20.  Other operating income and expenses

 

An analysis of other operating income is as follows:

 

 

 

2017

 

2016

 

2015

 

Gain on sale and leaseback (Note 14c)

 

Ps.

65,886

 

Ps.

484,827

 

Ps.

181,736

 

Administrative benefits

 

27,180

 

9,072

 

 

Other income

 

3,699

 

2,843

 

11,419

 

 

 

 

 

 

 

 

 

 

 

Ps.

96,765

 

Ps.

496,742

 

Ps.

193,155

 

 

 

 

 

 

 

 

 

 

 

 

 

An analysis of other operating expenses is as follows:

 

 

 

2017

 

2016

 

2015

 

Administrative and operational support expenses

 

Ps.

562,739

 

Ps.

541,826

 

Ps.

383,805

 

Technology and communications

 

373,394

 

266,898

 

173,078

 

Passenger services

 

59,261

 

45,439

 

23,195

 

Insurance

 

54,569

 

56,414

 

54,609

 

Rents of offices, maintenance warehouse and hangar (Note 14c)

 

30,544

 

33,517

 

25,889

 

Disposal of intangible, rotable spare parts, furniture and equipment

 

11

 

436

 

632

 

Equity transaction costs (Note 18)

 

 

 

22,955

 

Others

 

7,922

 

7,922

 

13,623

 

 

 

 

 

 

 

 

 

 

 

Ps.

1,088,440

 

Ps.

952,452

 

Ps.

697,786

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Finance income and cost
12 Months Ended
Dec. 31, 2017
Finance income and cost  
Finance income and cost

 

21.  Finance income and cost

 

An analysis of finance income is as follows:

 

 

 

2017

 

2016

 

2015

 

Interest on cash and equivalents

 

Ps.

105,151

 

Ps.

78,793

 

Ps.

47,029

 

Interest on recovery of guarantee deposits

 

644

 

23,792

 

 

Others

 

 

6

 

5

 

 

 

 

 

 

 

 

 

 

 

Ps.

105,795

 

Ps.

102,591

 

Ps.

47,034

 

 

 

 

 

 

 

 

 

 

 

 

 

An analysis of finance cost is as follows:

 

 

 

2017

 

2016

 

2015

 

Cost of letter credit notes

 

Ps.

42,294

 

Ps.

28,067

 

Ps.

18,279

 

Interest on debts and borrowings*

 

37,565

 

1,245

 

 

Bank fees and others

 

5,279

 

5,804

 

3,424

 

Other finance costs

 

1,219

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

86,357

 

Ps.

35,116

 

Ps.

21,703

 

 

 

 

 

 

 

 

 

 

 

 

 

* 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..

 

 

 

2017

 

2016

 

2015

 

Interest on debts and borrowings

 

Ps.

230,954

 

Ps.

96,690

 

Ps.

90,057

 

Capitalized interest (Note 12)

 

(193,389

)

(95,445

)

(90,057

)

 

 

 

 

 

 

 

 

Net interest on debts and borrowing in the consolidated statements of operations

 

Ps.

37,565

 

Ps.

1,245

 

Ps.

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Components of other comprehensive income (loss)
12 Months Ended
Dec. 31, 2017
Components of other comprehensive income (loss)  
Components of other comprehensive income (loss)

 

22.  Components of other comprehensive income (loss)

 

 

 

2017

 

2016

 

2015

 

Derivative financial instruments:

 

 

 

 

 

 

 

Reclassification during the year to profit or loss

 

Ps.

52,097

 

Ps.

353,943

 

Ps.

287,550

 

Extrinsic value of changes on jet fuel Asian call options

 

(81,182

)

277,899

 

(450,768

)

Loss of the not-yet matured fuel swap contracts

 

 

 

(11,828

)

Gain (loss) of the matured foreign currency forward contracts

 

(13,380

)

 

 

Gain (loss) of the not-yet matured interest rate swap contracts

 

317

 

(7,148

)

(18,823

)

 

 

 

 

 

 

 

 

Total

 

Ps.

(42,148

)

Ps.

624,694

 

Ps.

(193,869

)

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Commitments and contingencies
12 Months Ended
Dec. 31, 2017
Commitments and contingencies  
Commitments and contingencies

 

23.  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:

 

 

 

Commitment 
expenditures in U.S. 
dollars

 

Commitment 
expenditures 
equivalent in 
Mexican pesos(1)

 

2018

 

US$

76,194

 

Ps.

1,503,719

 

2019

 

130,013

 

2,565,859

 

2020

 

101,585

 

2,004,821

 

2021

 

145,683

 

2,875,112

 

2022 and thereafter

 

669,902

 

13,220,784

 

 

 

 

 

 

 

 

 

US$

1,123,377

 

Ps.

22,170,295

 

 

 

 

 

 

 

 

 

 

(1)

Using the exchange rate as of December 31, 2017 of Ps.19.7354.

 

All aircraft acquired by the Company through the Airbus purchase agreement through December 31, 2017 have been executed through sale and leaseback transactions.

 

Litigation

 

a) The Company and its CEO, CFO, certain of its current directors and certain of its former directors, as well as certain underwriters, were among the defendants in a putative class action commenced on February 24, 2015 in the United States District Court for the Southern District of New York brought on behalf of purchasers of ADSs in and/or traceable to the September 2013 IPO. The complaint, which also named as defendants the underwriters of the IPO, generally alleged that the registration statement and prospectus for the ADSs contained misstatements and omissions with respect to the recognition of non-ticket revenue in violation of the federal securities laws, and sought unspecified damages and rescission. The motion to dismiss requested by the Company and all defendants was granted with prejudice in their favor on July 6, 2016.  The plaintiff has not appealed the judge’s decision and the time to appeal has expired. Accordingly, any right of the plaintiff to pursue the litigation has ended.

 

b) The Company is a party to legal proceedings and claims that arise during the ordinary course of business. The Company believes the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

v3.8.0.1
Operating segments
12 Months Ended
Dec. 31, 2017
Operating segments  
Operating segments

 

24.  Operating segments

 

The Company is managed as a single business unit that provides air transportation services. The Company has two geographic segments identified below:

 

 

 

2017

 

2016

 

2015

 

Operating revenues:

 

 

 

 

 

 

 

Domestic (Mexico)

 

Ps.

17,313,740

 

Ps.

15,720,807

 

Ps.

12,579,806

 

International:

 

 

 

 

 

 

 

United States of America and Central America*

 

7,531,635

 

7,791,644

 

5,599,898

 

 

 

 

 

 

 

 

 

Total operating revenues

 

Ps.

24,845,375

 

Ps.

23,512,451

 

Ps.

18,179,704

 

 

 

 

 

 

 

 

 

 

 

 

 

*United States of America represents approximately 29%, 32% and 31% of total revenues from external customers in 2017, 2016 and 2015, respectively.

 

Revenues are allocated by geographic segments based upon the origin of each flight.

 

The Company does not have material non-current assets located in foreign countries.

v3.8.0.1
Subsequent events
12 Months Ended
Dec. 31, 2017
Subsequent events  
Subsequent events

 

25.  Subsequent events

 

Subsequent to December 31, 2017 and through April 25, 2018:

 

a)

On January 18, 2018, the Mexican antitrust authority, Comisión Federal de Competencia Económica (“COFECE”), served Volaris with a preliminary ruling of potential responsibility (Dictamen de Probable Responsabilidad or “DPR”) in which the investigating body of COFECE asserts certain allegations regarding antitrust activities in Mexico´s domestic commercial air passenger transportation market during the period from April 2008 up to February 2010 by different Mexican carriers, including Volaris. The DPR does not constitute a final ruling of culpability against Volaris. Since all the activities which were allegedly committed by the carriers were committed within the framework of the Mexican Federal Antitrust Law (Ley Federal de Competencia Económica) in effect during 2010, any applicable fines would be made pursuant to such 2010 law. The maximum fine contemplated by Article 35 section IV of such law is one million five hundred thousand times the minimum wage for Mexico City in effect during 2010. Therefore, in the event that the final ruling imposes a fine on Volaris, such fine is not expected to have a material adverse effect on the financial position or performance of the Company. Nevertheless, the COFECE proceedings are ongoing and the Company cannot predict the final outcome of such proceedings, and accordingly, the Company has not established a provision on the accompanying consolidated financial statements for a loss arising from this assessment.

 

b)

On January 16, 2018, the Company and Frontier Airlines (Frontier) signed the first codeshare agreement in history between two ultra-low-cost airlines, which is subject to governmental approvals in Mexico and the United States. Once implemented the Companys customers will gain access to new cities in the U.S. beyond the current destinations, and Frontier customers will gain first-time access to new destinations in Mexico.

 

c)

On February 16, 2018, one of the Company’s shareholders concluded the conversion of 45,968,598 Series B Shares for the equivalent number of Series A Shares. This conversion has no impact either on the total number of outstanding shares or on the earnings-per-share calculation.

v3.8.0.1
Description of the business and summary of significant accounting policies (Policies)
12 Months Ended
Dec. 31, 2017
Description of the business and summary of significant accounting policies  
Basis of preparation

 

Basis of preparation

 

Statement of compliance

 

These consolidated financial statements comprise the financial statements of the Company and its subsidiaries at December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017, 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 the entity operates (“functional currency”). The presentation currency of the Company’s consolidated financial statements is the Mexican peso, which is used also for compliance with its legal and tax 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. The consolidated financial statements 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 and investments in marketable securities measured at fair value through profit and loss (“FVTPL”). The preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from those estimates.

 

Basis of consolidation

 

Basis of consolidation

 

The accompanying consolidated financial statements comprise the financial statements of the Company and its subsidiaries. At December 31, 2017 and 2016, for accounting purposes the companies included in the consolidated financial statements are as follows:

 

 

 

Principal

 

 

 

% Equity interest

 

Name

 

Activities

 

Country

 

2017

 

2016

 

Concesionaria

 

Air transportation services for passengers, cargo and mail throughout Mexico and abroad

 

Mexico

 

100

%

100

%

Volaris Costa Rica

 

Air transportation services for passengers, cargo and mail in Costa Rica and abroad

 

Costa Rica

 

100

%

100

%

Vuela, S.A. (“Vuela”)*

 

Air transportation services for passengers, cargo and mail in Guatemala and abroad

 

Guatemala

 

100

%

100

%

Comercializadora Volaris, S.A. de C.V.

 

Merchandising of services

 

Mexico

 

100

%

100

%

Servicios Earhart, S.A.*

 

Recruitment and payroll

 

Guatemala

 

100

%

100

%

Servicios Corporativos Volaris, S.A. de C.V. (“Servicios Corporativos”)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Servicios Administrativos Volaris, S.A. de C.V (“Servicios Administrativos”)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Operaciones Volaris, S.A. de C.V (“Operaciones Volaris”)(1)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Deutsche Bank México, S.A., Trust 1710

 

Pre-delivery payments financing (Note 5)

 

Mexico

 

100

%

100

%

Deutsche Bank México, S.A., Trust 1711

 

Pre-delivery payments financing (Note 5)

 

Mexico

 

100

%

100

%

Irrevocable Administrative Trust number F/307750 “Administrative Trust”

 

Share administration trust (Note 17)

 

Mexico

 

100

%

100

%

Irrevocable Administrative Trust number F/745291

 

Share administration trust (Note 17)

 

Mexico

 

100

%

100

%

 

*The Company has not started operations in Guatemala.

(1)

With effect from August 3, 2016, the name of the Company was changed from Servicios Operativos Terrestres Volaris, S.A. de C.V. to Operaciones Volaris, S.A. de C.V.

 

The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.

 

Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and only if, the Company has:

 

(i)

Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).

(ii)

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

(iii)

The ability to use its power over the investee to affect its returns.

 

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

 

(i)

The contractual arrangement with the other vote holders of the investee.

(ii)

Rights arising from other contractual arrangements.

(iii)

The Company’s voting rights and potential voting rights.

 

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.

 

All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated in full.

 

On consolidation, the assets and liabilities of foreign operations are translated into Mexican pesos at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are recognized in other comprehensive income (“OCI”). On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognized in profit or loss.

Revenue recognition

 

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 liabilities under the caption unearned transportation revenue and, once the transportation service is provided by the Company or when the non-refundable ticket expires at the date of the scheduled travel, the earned revenue is recognized as passenger ticket revenues and the unearned transportation revenue is reduced by the same amount. All of the Company’s tickets are non-refundable and are subject to change upon a payment of a fee. Additionally, the Company does not operate a frequent flier program.

 

Non-ticket revenues:

 

The most significant non-ticket revenues include revenues generated from: (i) air travel-related services (ii) revenues from non-air travel-related services and (iii) cargo services.

 

Air travel-related services include but are not limited to fees charged for excess baggage, bookings through the call center or third-party agencies, advanced seat selection, itinerary changes, charters and airport passenger facility charges for no-show tickets. They are recognized as revenue when the related service is provided by the Company.

 

Revenues from non-air travel-related services include commissions charged to third parties for the sale of hotel rooms, trip insurance and rental cars. They are recognized as revenue at the time the service is provided. Additionally, services not directly related to air transportation include VClub membership fees and the sale of advertising to third parties. VClub membership fees are recognized as revenues over the term of the membership. Revenue from the sale of advertising is recognized over the period in which the service is provided.

 

Revenues from cargo services are recognized when the cargo transportation is provided (upon delivery of the cargo to the destination).

 

The breakdown of the Company’s non-ticket revenues for the years ended December 31, 2017, 2016 and 2015 is as follows:

 

 

 

For the years ended December 31,

 

 

 

2017

 

2016

 

2015

 

Air travel-related services

 

Ps.

6,293,747

 

Ps.

5,055,836

 

Ps.

3,418,654

 

Non-air travel-related services

 

589,338

 

494,864

 

441,393

 

Cargo

 

170,973

 

171,621

 

189,292

 

 

 

 

 

 

 

 

 

Total non-ticket revenues

 

Ps.

7,054,058

 

Ps.

5,722,321

 

Ps.

4,049,339

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

Cash and cash equivalents

 

Cash and cash equivalents are represented by bank deposits and highly liquid investments with maturities of 90 days or less at the original purchase date.

 

For the purpose of the consolidated statements of cash flows, cash and cash equivalents consist of cash and short-term investments as defined above.

Financial instruments

 

Financial instruments

 

A financial instrument is any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity. The Company early adopted IFRS 9.

 

Under IFRS 9 (2013), the FVTPL category used under IAS 39 remains permissible, although new categories of financial assets are introduced. These new categories are based on the characteristics of the instruments and the business model under which these are held, to either be measured at fair value or at amortized cost.

 

For financial liabilities, categories provided under IAS 39 are maintened. As a result, there was no difference in valuation and recognition of the financial assets under IFRS 9 (2013), since those financial assets categorized under IAS 39 as FVTPL remain in that same category under IFRS 9 (2013). In the case of trade receivables, these were not affected in terms of the valuation model under this version of IFRS 9 (2013), since they are carried at amortized cost and continued to be accounted for as such.

 

Also, the hedge accounting section of IFRS 9 (2013) requires, for options that qualify and are formally designated as hedging instruments, the intrinsic value of the option to be defined as the hedging instrument, thus allowing for the exclusion of changes in fair value attributable to extrinsic value (time value and volatility), to be accounted, under the transaction-related method, separately as a cost of hedging that needs to be initially recognized in OCI and accumulated in a separate component of equity, since the hedged item is a portion of the forecasted jet fuel consumption. The extrinsic value is recognized in the consolidated statement of operations when the hedged item is recognized in income.

 

IFRS 9 requires the Company to record expected credit losses on all trade receivables, either on a 12 month or lifetime basis. The Company recorded lifetime expected losses on all trade receivables.

 

i)  Financial assets

 

Classification of financial assets

 

The Company determines the classification and measurement of financial assets, in accordance with the categories in IFRS 9 (2013), which are based on both: the characteristics of the contractual cash flows of these assets and the business model objective for holding them.

 

Financial assets include those carried at FVTPL, whose objective to hold them is for trading purposes (short-term investments), or at amortized cost, for accounts receivables held to collect the contractual cash flows, which are characterized by solely payments of principal and interest (“SPPI”). Derivative financial instruments are also considered financial assets when these represent contractual rights to receive cash or another financial asset.

 

Initial recognition

 

All the Company’s financial assets are initially recognized at fair value, including derivative financial instruments.

 

Subsequent measurement

 

The subsequent measurement of financial assets depends on their initial classification, as is described below:

 

1.

Financial assets at FVTPL, which include financial assets held for trading.

2.

Financial assets at amortized cost, whose characteristics meet the SPPI criterion and were originated to be held to collect principal and interest in accordance with the Company’s business model.

3.

Derivative financial instruments are designated for hedging purposes under the cash flow hedge (“CFH”) accounting model and are measured at fair value.

 

Derecognition

 

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:

 

a)

The rights to receive cash flows from the asset have expired;

 

b)

The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (i) the Company has transferred substantially all the risks and rewards of the asset, or (ii) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; or

 

c)

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

 

ii)  Impairment of financial assets

 

The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events has occurred since the initial recognition of an asset (an incurred ‘loss event’), that has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.  Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in receivables, 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 2(vi) and Note 8.

 

For trade receivables, the Company records allowance for credit losses in accordance with the objective evidence of the incurred losses. Based on this evaluation, allowances are taken into account for the expected losses of these receivables.

 

For the years ended December 31, 2017, 2016 and 2015, the Company recorded an impairment on accounts receivable of Ps.4,720, Ps.9,164 and Ps.8,825, respectively (Note 8).

 

iii) Financial liabilities

 

Classification of financial liabilities

 

Financial liabilities under IFRS 9 (2013) are classified at amortized cost or at FVTPL.

 

Derivative financial instruments are also considered financial liabilities when these represent contractual obligations to deliver cash or another financial asset.

 

Initial recognition

 

The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value.

 

The Company’s financial liabilities include accounts payable to suppliers, unearned transportation revenue, other accounts payable, financial debt and financial instruments.

 

Subsequent measurement

 

The measurement of financial liabilities depends on their classification as described below:

 

Financial liabilities at amortized cost

 

Accounts payable are subsequently measured at amortized cost and do not bear interest or result in gains and losses due to their short-term nature.

 

After initial recognition at fair value (consideration received), interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.

 

Amortized cost is calculated by taking into account any discount or premium on issuance and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the consolidated statements of operations. This amortized cost category generally applies to interest-bearing loans and borrowings (Note 5).

 

Financial liabilities at FVTPL

 

FVTPL include financial liabilities designated upon initial recognition at fair value through profit or loss. Financial liabilities under the fair value option are classified as held for trading, if they are acquired for the purpose of selling them in the near future. This category includes derivative financial instruments that are not designated as hedging instruments in hedge relationships as defined by IFRS 9 (2013). During the years ended December 31, 2017, 2016 and 2015 the Company has not designated any financial liability as at FVTPL.

 

Derecognition

 

A financial liability is derecognized when the obligation under the liability is discharged or cancelled, or expires.

 

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or  modification is treated as the derecognition of the original liability and the recognition of a new liability.

 

The difference in the respective carrying amounts is recognized in the consolidated statements of operations.

 

Offsetting of financial instruments

 

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is:

 

(i)

A currently enforceable legal right to offset the recognized amounts, and

(ii)

An intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.

Other accounts receivable

 

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.

Inventories

 

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 their cost and their net realization value. The cost is determined on the basis of the method of specific identification, and expensed when used in operations.

Intangible assets

 

Intangible assets

 

Cost related to the purchase or development of computer software that is separable from an item of related hardware is capitalized separately and amortized over the period in which it will generate benefits not exceeding five years on a straight-line basis. The Company annually reviews the estimated useful lives and salvage values of intangible assets and any changes are accounted for prospectively.

 

The Company records impairment charges on intangible assets used in operations when events and circumstances indicate that the assets or related cash generating unit may be impaired and the carrying amount of a long-lived asset or cash generating unit exceeds its recoverable amount, which is the higher of (i) its fair value less cost to sell, and (ii) its value in use.

 

The value in use calculation is based on a discounted cash flow model, using our projections of operating results for the near future. The recoverable amount of long-lived assets is sensitive to the uncertainties inherent in the preparation of projections and the discount rate used in the calculation.

 

For the years ended December 31, 2017, 2016 and 2015, there were no indicators of impairment. No impairment charges were recorded in respect of the Company’s value of intangible assets.

Guarantee deposits

 

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).

 

Aircraft maintenance deposits paid to lessors

 

Most of the Company’s lease agreements require the Company to pay maintenance deposits to aircraft lessors to be held as collateral in advance of the Company’s performance of major maintenance activities. These lease agreements provide that maintenance deposits are reimbursable to the Company upon completion of the maintenance event in an amount equal to the lesser of (i) the amount of the maintenance deposits held by the lessor associated with the specific maintenance event, or (ii) the qualifying costs related to the specific maintenance event.

 

Substantially all of these maintenance deposits are calculated based on a utilization measure of the leased aircrafts and engines, such as flight hours or cycles, and are used solely to collateralize the lessor for maintenance time run off the aircraft and engines until the completion of the maintenance of the aircraft and engines.

 

Maintenance deposits expected to be recovered from lessors are reflected as guarantee deposits in the accompanying consolidated statement of financial position. The portion of prepaid maintenance deposits that is deemed unlikely to be recovered, primarily relating to the rate differential between the maintenance deposits and the expected cost for the next related maintenance event that the deposits serve to collateralize, is recognized as supplemental rent in the consolidated statements of operations. Thus, any excess of the required deposit over the expected cost of the major maintenance event is recognized as supplemental rent in the consolidated statements of operations starting from the period the determination is made.

 

For the years ended December 31, 2017, 2016 and 2015, the Company expensed as supplemental rent Ps.103,648, Ps.143,923 and Ps.73,258, respectively.

 

Any usage-based maintenance deposits to be paid to the lessor, related with a major maintenance event that (i) is not expected to be performed before the expiration of the lease agreement, (ii) is nonrefundable to the Company and (iii) is not substantively related to the maintenance of the leased asset, is accounted for as contingent rent in the consolidated statements of operations. The Company records lease payment as contingent rent when it becomes probable and reasonably estimable that the maintenance deposits payments will not be refunded.

 

During the year ended December 31 2017 and, 2016, the Company added five and 17 new net aircraft to its fleet, respectively. Some lease agreements of these aircraft do not require the obligation to pay maintenance deposits to lessors in advance in order to ensure major maintenance activities, so the Company does not record guarantee deposits regarding these aircraft. However, some lease agreements provide the obligation to make a maintenance adjustment payment to the lessors at the end of the contract period. This adjustment covers maintenance events that are not expected to be made before the termination of the contract.

 

The Company recognizes this cost as a contingent rent during the lease term of the related aircraft, in the consolidated statement of operations.

 

For the years ended December 31, 2017, 2016 and 2015, the Company expensed as contingent rent Ps.162,108, Ps.201,434 and Ps.290,857, respectively.

 

The Company makes certain assumptions at the inception of the lease and at each consolidated statement of financial position date to determine the recoverability of maintenance deposits. These assumptions are based on various factors such as the estimated time between the maintenance events, the date the aircraft is due to be returned to the lessor, and the number of flight hours the aircraft and engines is estimated to be utilized before it is returned to the lessor.

 

In the event that lease extensions are negotiated, any extension benefit is recognized as a deferred lease incentive. The aggregate benefit of extension is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

 

During the years ended December 31, 2017 and 2016, the Company extended the lease term of three and two aircraft agreements, respectively, and two engine agreements in 2017. These extensions made available to the Company maintenance deposits that were recognized in prior periods in the consolidated statements of operations as contingent rent of Ps.65,716 and Ps.92,528 during 2017 and 2016, respectively. The maintenance event for which the maintenance deposits were previously expensed was scheduled to occur after the original lease term and as such the contingent rental payments were expensed. However, when the leases were amended, the maintenance deposits amounts became probable of recovery due to the longer lease term and as such they are being recognized as an asset.

 

The effect of these lease extensions were recognized as a guarantee deposit and a deferred aircraft and engine lease extension benefit in the consolidated statements of financial position at the time of lease extension.

 

Because the lease extension benefits are considered lease incentives, the benefits are deferred in the statement of financial position and are being recognized on a straight-line basis over the remaining revised lease terms. For the years ended December 31, 2017, 2016 and 2015, the Company amortized Ps.88,224, Ps.74,748 and Ps.45,313, respectively, of lease incentives which was recognized as a reduction of rent expenses in the consolidated statements of operations.

Aircraft and engine maintenance

 

Aircraft and engine maintenance

 

The Company is required to conduct diverse levels of aircraft maintenance. Maintenance requirements depend on the type of aircraft, age and the route network over which it operates.

 

Fleet maintenance requirements may involve short cycle engineering checks, for example, component checks, monthly checks, annual airframe checks and periodic major maintenance and engine checks.

 

Aircraft maintenance and repair consists of routine and non-routine works, divided into three general categories: (i) routine maintenance, (ii) major maintenance and (iii) component service.

 

(i) Routine maintenance requirements 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. This type of maintenance events is currently serviced by the Company mechanics and are primarily completed at the main airports that the Company currently serves. All other maintenance activities are sub-contracted to qualified maintenance business partner, repair and overhaul organizations. Routine maintenance also includes scheduled tasks that can take from seven to 14 days to accomplish and typically are required approximately every 22 months. All routine maintenance costs are expensed as incurred.

 

(ii) Major maintenance consists of a series of more complex tasks that can take up to six weeks to accomplish and typically are required approximately every five to six years.

 

Major maintenance is accounted for under the deferral method, whereby the cost of major maintenance and major overhaul and repair is capitalized (leasehold improvements to flight equipment) and amortized over the shorter of the period to the next major maintenance event or the remaining contractual lease term. The next major maintenance event is estimated based on assumptions including estimated usage. The United States Federal Aviation Administration (“FAA”) and the Mexican Civil Aeronautic Authority (Dirección General de Aeronáutica Civil, or “DGAC”) mandate maintenance intervals and average removal times as suggested by the manufacturer.

 

These assumptions may change based on changes in the utilization of aircraft, changes in government regulations and suggested manufacturer maintenance intervals. In addition, these assumptions can be affected by unplanned incidents that could damage an airframe, engine, or major component to a level that would require a heavy maintenance event prior to a scheduled maintenance event. To the extent the planned usage increases, the estimated life would decrease before the next maintenance event, resulting in additional expense over a shorter period.

 

During the years ended December 31, 2017 and 2016, the Company capitalized major maintenance events as part of leasehold improvements to flight equipment for an amount of Ps.529,331 and Ps.226,526, respectively (Note 12).

 

For the years ended December 31, 2017, 2016 and 2015, the amortization of major maintenance leasehold improvement costs was Ps.382,745, Ps.404,659 and Ps.352,932, respectively (Note 12). 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 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.

Rotable spare parts, furniture and equipment, net

 

Rotable spare parts, furniture and equipment, net

 

Rotable spare parts, furniture and equipment, are recorded at cost and are depreciated to estimated residual values over their estimated useful lives using the straight-line method.

 

Aircraft spare engines have significant parts with different useful lives; therefore, they are accounted for as separate items (major components) of rotable spare parts (Note 12d).

 

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.

 

During the years ended December 31, 2017, 2016 and 2015, the Company capitalized borrowing costs which amounted to Ps.193,389, Ps.95,445 and Ps.90,057, respectively (Note 21). The rate used to determine the amount of borrowing cost was 3.30%, 2.88% and 2.80%, for the years ended December 31, 2017, 2016 and 2015, respectively.

 

Depreciation rates are as follows:

 

 

 

Annual
depreciation rate

 

Aircraft parts and rotable spare parts

 

8.3-16.7%

 

Aircraft spare engines

 

4.0-8.3%

 

Standardization

 

Remaining contractual lease term

 

Computer equipment

 

25%

 

Communications equipment

 

10%

 

Office furniture and equipment

 

10%

 

Electric power equipment

 

10%

 

Workshop machinery and equipment

 

10%

 

Service carts on board

 

20%

 

Leasehold improvements to flight equipment

 

The shorter of: (i) remaining contractual lease term, or (ii) the next major maintenance event

 

 

The Company reviews annually the useful lives and salvage values of these assets and any changes are accounted for prospectively.

 

The Company records impairment charges on rotable spare parts, furniture and equipment used in operations when events and circumstances indicate that the assets may be impaired or when the carrying amount of a long-lived asset or related cash generating unit exceeds its recoverable amount, which is the higher of (i) its fair value less cost to sell and (ii) its value in use.

 

The value in use calculation is based on a discounted cash flow model, using 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, 2017, 2016 and 2015, there were no indicators of impairment. No impairment charges were recorded in respect of the Company’s rotable spare parts, furniture and equipment.

Foreign currency transactions and exchange differences

 

Foreign currency transactions and exchange differences

 

The Company’s consolidated financial statements are presented in Mexican peso, which is the reporting and functional currency of the parent company. For each subsidiary, the Company determines the functional currency and items included in the financial statements of each entity are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”).

 

The financial statements of foreign subsidiaries prepared under IFRS and denominated in their respective local currencies, are translated into the functional currency as follows:

 

·

Transactions in foreign currencies are translated into the respective functional currencies at the exchange rates at the dates of the transactions.

 

·

All monetary assets and liabilities were translated at the exchange rate at the consolidated statement of financial position date.

 

·

All non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

 

·

Equity accounts are translated at the prevailing exchange rate at the time the capital contributions were made and the profits were generated.

 

·

Revenues, costs and expenses are translated at the average exchange rate during the applicable period.

 

Any differences resulting from the currency translation are recognized in the consolidated statements of operations.

 

For the year ended December 31, 2017 and 2016 the exchange rates of local currencies translated to functional currencies are as follows:

 

 

 

 

 

 

 

Exchange rates of local currencies
translated to functional currencies

 

Exchange rates of local currencies
translated to functional currencies

 

Country

 

Local
currency

 

Functional
currency

 

Average exchange
rate for 2017

 

Exchange rate
as of 2017

 

Average exchange
rate for 2016

 

Exchange rate
as of 2016

 

Costa Rica

 

Colon

 

U.S. dollar

 

₵.

572.2000

 

₵.

572.5600

 

₵.

564.3332

 

₵.

561.1000

 

Guatemala

 

Quetzal

 

U.S. dollar

 

Q.

7.3509

 

Q.

7.3448

 

Q.

7.4931

 

Q.

7.5221

 

 

The exchange rates used to translate the above amounts to Mexican pesos at December 31, 2017 and 2016 were Ps.19.7354 and Ps.20.6640, respectively, per U.S. dollar.

 

Foreign currency differences arising on translation into the presentation currency are recognized in OCI. Exchange differences on translation of foreign entities for the year ended December 31, 2017 and 2016 were Ps.7,178 and Ps.4,756, respectively. For the year ended December 31, 2015 exchange differences on translation of foreign entities were immaterial

Liabilities and provisions

 

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.

 

For the operating leases, the Company is contractually obligated to return the leased aircraft in a specific condition. The Company accrues for restitution costs related to aircraft held under operating leases throughout the term of the lease, based upon the estimated cost of satisfying the return condition criteria for each aircraft. These return obligations are related to the costs to be incurred in the reconfiguration of aircraft (interior and exterior), painting, carpeting and other costs, which are estimated based on current cost adjusted for inflation. The return obligation is estimated at the inception of each leasing arrangement and recognized over the term of the lease (Note 15c).

 

The Company records aircraft lease return obligation reserves based on the best estimate of the return obligation costs under each aircraft lease agreement.

 

The aircraft lease agreements of the Company also require that the aircraft and engines be returned to lessors under specific conditions of maintenance. The costs of return, which in no case are related to scheduled major maintenance, are estimated and recognized ratably as a provision from the time it becomes likely such costs will be incurred and can be estimated reliably. These return costs are recognized on a straight-line basis as a component of supplemental rent and the provision is included as part of other liabilities, through the remaining lease term. The Company estimates the provision related to airframe, engine overhaul and limited life parts using certain assumptions including the projected usage of the aircraft and the expected costs of maintenance tasks to be performed. For the years ended December 31, 2017, 2016 and 2015, the Company expensed as supplemental rent Ps.851,410, Ps.933,730 and Ps.91,698, respectively.

Employee benefits

 

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, 2017, 2016 and 2015, 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 who 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, 2017.

 

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 (Certificados de la Tesorería de la Federación, or “CETES” in Mexico), less the fair value of plan assets out of which the obligations are to be settled.

 

For entities in Costa Rica and Guatemala there is no obligation to pay seniority premium or other retirement benefits.

 

iv)  Incentives

 

The Company has a quarterly incentive plan for certain personnel whereby cash bonuses are awarded for meeting certain performance targets. These incentives are payable shortly after the end of each quarter and are accounted for as a short-term benefit under IAS 19, Employee Benefits. A provision is recognized based on the estimated amount of the incentive payment.

 

During the years ended December 31, 2017, 2016 and 2015 the Company expensed Ps.48,384, Ps.40,829 and Ps.50,558, respectively, as quarterly incentive bonuses, recorded under the caption salaries and benefits.

 

During the year ended December 31, 2015, the Company adopted a new short-term benefit plan for certain key personnel whereby cash bonuses are awarded when certain of the 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. During the years ended December 31, 2017, 2016 and 2015 the Company recorded an expense for an amount of Ps.0, Ps.53,738, and Ps.70,690, respectively, under the caption salaries and benefits.

 

v)  Long-term retention plan (“LTRP”)

 

The Company has adopted a Long-term incentive plan (“LTIP”). This plan consists of a share purchase plan (equity-settled) and a share appreciation rights “SARs” plan (cash settled), and is therefore accounted under IFRS 2 “Shared based payments”

 

vi)  Share-based payments

 

a)  LTIP

 

Share purchase plan (equity-settled)

 

Certain key employees of the Company receive additional benefits through a share purchase plan denominated in Restricted Stock Units (“RSUs”), which has been classified as an equity-settled share-based payment. The cost of the equity-settled share purchase plan is measured at the grant date, taking into account the terms and conditions on which the share options were granted. The equity-settled compensation cost is recognized in the consolidated statement of operations under the caption of salaries and benefits, over the requisite service period (Note 17).

 

During the years ended December 31, 2017, 2016 and 2015, the Company expensed Ps.13,508, Ps.7,816 and Ps.6,018, respectively, related to RSUs. 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 17).

 

During the years ended December 31, 2017, 2016 and 2015, the Company recorded a (benefit) expense for Ps.(8,999), Ps.31,743, Ps.44,699, respectively, related to the SARs included in the LTIP. These amounts were recorded under the caption salaries and benefits.

 

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 requisite service period (Note 17).

 

During the year ended December 31, 2015, the Company recorded an expense by Ps.327 as cost of the MIP, related to the vested shares, the expense was recorded in the consolidated statement of operations under the caption salaries and benefits.

 

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 17).

 

During the years ended December 31, 2017 and 2016, the Company recorded a (benefit) expense for Ps.(16,499) and Ps.54,357, respectively, related to MIP II into the consolidated statement of operations.

 

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 2017, 2016 and 2015, the cost of employee profit sharing earned is Ps.8,342, Ps.9,967 and Ps.9,938, respectively, and is presented as an expense in the consolidated statements of operations. Subsidiaries in Central America do not have such profit sharing benefit, as it is not required by local regulation.

Leases

 

Leases

 

The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement at inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.

 

Property and equipment lease agreements are recognized as finance leases if the risks and benefits incidental to ownership of the leased assets have been transferred to the Company when (i) the ownership of the leased asset is transferred to the Company upon termination of the lease; (ii) the agreement includes an option to purchase the asset at a reduced price; (iii) the term of the lease is for the major part of the economic life of the leased asset; (iv) the present value of minimum lease payments is at least substantially all of the fair value of the leased asset; or (v) the leased asset is of a specialized nature for the Company.

 

When the risks and benefits incidental to the ownership of the leased asset remain mostly with the lessor, they are classified as operating leases and rental payments are charged to results of operations on a straight-line over the term of the lease. The Company’s lease contracts for aircraft, engines and components parts are classified as operating leases.

 

Sale and leaseback

 

The Company enters into sale and leaseback agreements whereby an aircraft or engine is sold to a lessor upon delivery and the lessor agrees to lease such aircraft or engine back to the Company. Leases under sale and leaseback agreements meet the conditions for treatment as operating leases.

 

Profit or loss related to a sale transaction followed by an operating lease, is accounted for as follows:

 

(i)

Profit or loss is recognized immediately when it is clear that the transaction is established at fair value.

 

(ii)

If the sale price is at or below fair value, any profit or loss is recognized immediately. However, if the loss is compensated for by future lease payments at below market price, such loss is recognized as an asset in the consolidated statements of financial position and amortized to the consolidated statements of operations in proportion to the lease payments over the contractual lease term.

 

(iii)

If the sale price is above fair value, the excess of the price above the fair value is deferred and amortized to the consolidated statements of operations over the asset’s expected lease term, including probable renewals, with the amortization recorded as a reduction of rent expense.

Other taxes and fees payable

 

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.

Income taxes

 

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 provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

 

Deferred tax liabilities are recognized for all taxable temporary differences, except, in respect of taxable temporary differences associated with investments in subsidiaries when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred tax assets are recognized for all deductible temporary differences, the carry-forward of unused tax credits and any available tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and available tax losses can be utilized, except, in respect of deductible temporary differences associated with investments in subsidiaries deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profits will be available against 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.

 

The charge for income taxes incurred is computed based on tax laws approved in Mexico, Costa Rica and Guatemala at the date of the consolidated statement of financial position.

Derivative financial instruments and hedge accounting

 

Derivative financial instruments and hedge accounting

 

The Company mitigates certain financial risks, such as volatility in the price of jet fuel, adverse changes in interest rates and exchange rate fluctuations, through a risk management program that includes the use of derivative financial instruments.

 

In accordance with IFRS 9 (2013), derivative financial instruments are recognized in the consolidated statement of financial position at fair value. At inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which it wishes to apply hedge accounting, as well as the risk management objective and strategy for undertaking the hedge. The documentation includes the hedging strategy and objective, identification of the hedging instrument, the hedged item or transaction, the nature of the risks being hedged and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk(s).

 

Only if such hedges are expected to be effective in achieving offsetting changes in fair value or cash flows of the hedge item(s) and are assessed on an ongoing basis to determine that they actually have been effective throughout the financial reporting periods for which they were designated, hedge accounting treatment can be used.

 

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. During the years ended December 31, 2017, 2016 and 2015, there was no ineffectiveness with respect to derivative financial instruments. The amounts recognized in OCI are transferred to earnings in the period in which the hedged transaction affects earnings.

 

The realized gain or loss of derivative financial instruments that qualify as CFH is recorded in the same caption of the hedged item in the consolidated statement of operations.

 

Accounting for the time value of options

 

The Company accounts for the time value of options in accordance with IFRS 9 (2013), which requires all derivative financial instruments to be initially recognized at fair value. Subsequent measurement for options purchased and designated as CFH requires that the option’s changes in fair value be segregated into its intrinsic value (which will be considered the hedging instrument’s effective portion in OCI) and its correspondent changes in extrinsic value (time value and volatility). The extrinsic value changes will be considered as a cost of hedging (recognized in OCI in a separate component of equity) and accounted for in income when the hedged item also is recognized in income.

Financial instruments - Disclosures

 

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).

Treasury shares

 

Treasury shares

 

The Company’s equity instruments that are reacquired (treasury shares), are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of treasury shares. Any difference between the carrying amount and the consideration received, if reissued, is recognized in additional paid in capital. Share-based payment options exercised during the reporting period are settled with treasury shares (Note 17).

Operating segments

 

Operating segments

 

The Company is managed as a single business unit that provides air transportation and related services and accordingly, it has only one operating segment.

 

The Company has two geographic areas identified as domestic (Mexico) and international (United States of America and Central America) (Note 24).

Current versus non-current classification

 

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.

Impact of new International Financial Reporting Standards

 

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, 2017. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

 

Although these new standards and amendments applied for the first time in 2017, they did not have a material impact on the annual consolidated financial statements of the Company. The nature and the impact of these changes to each new standard and amendment are described below:

 

Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative

 

The amendments require entities to provide disclosure of changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). The Company has provided the information for both the current and the comparative period in Note 5.

 

Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses

 

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of deductible temporary difference related to unrealized losses. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount. However, their application has no effect on the Company’s financial position and performance as there are no deductible temporary differences or assets that are in the scope of the amendments.

 

New and amended standards and interpretations not yet effective

 

Except for IFRS 9 adopted in 2014, the Company has not early adopted any of the following standards, interpretations or amendments that have been issued but is not yet effective.

 

IFRS 9 (2014) Financial Instruments

 

The Company adopted IFRS 9 (2013) in connection with its 2014 consolidated financial statements. IFRS 9 (2014) requires entities to apply an expected credit loss (ECL) model that replaces the IAS 39’s incurred loss model. The ECL model applies to debt instruments accounted for at amortized cost or at fair value through OCI, most loan commitments, financial guarantee contracts, contract assets under IFRS 15 Revenue from Contracts with Customers and lease receivables under IAS 17 Leases or IFRS 16 Leases.

 

IFRS 9 (2014) is effective for annual periods beginning on or after January 1, 2018, and since the Company early adopted IFRS 9 (2013), no additional impact is expected

 

IFRS 15 Revenue from Contracts with Customers

 

IFRS 15 was issued in May 2014 and amended in April 2016, and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard will supersede all current revenue recognition requirements under IFRS. IFRS 15 also requires additional disclosures about the nature, timing, and uncertainty of revenue cash flows arising from customer contracts, including significant judgments and changes in judgments.

 

The Company will adopt the new standard on the required effective date as of January 1, 2018, using the full retrospective method of adoption, in order to provide for comparative results in all periods presented, recognizing the effect in retained earnings as of January 1, 2016.

 

During 2016, the Company performed a preliminary assessment of IFRS 15, which was continued with a more detailed analysis completed in 2017. The Company expects that the main impact of IFRS 15 is the timing of recognition of certain air travel-related services (“ancillaries”). Under the current accounting policy, certain ancillaries are recognized as revenue at the time of the booking by customer (or when the service is provided); under the new standard, those ancillaries will be recognized when the air transportation service is rendered (at the time of the flight). This change arises primarily because those ancillaries do not constitute separate performance obligations or represent administrative tasks that do not represent a promised service and therefore should be accounted for together with the air fare as a single performance obligation of providing passenger transportation.  Also certain services provided to the Company’s customers that under the new standard qualify as variable considerations that will be recorded as reduction to revenues.  The Company considers this accounting change will not have a material impact on its results of operations and financial position.

 

The Company also expects that the classification of certain ancillary fees in the statement of operations, such as advanced seat selection, fees charges for excess baggage, itinerary changes and other air travel-related services, will change upon adoption of IFRS 15 since they are part of the single performance obligation of providing passenger transportation. The Company expects that these revenues currently classified as non-ticket revenues, approximately Ps.5,915,263 in 2017 and Ps.4,758,074 in 2016, will be reclassified to passenger revenues.

 

The Company also evaluated the principal versus agent considerations as it relates to certain non-air travel services arrangements with third party providers. The Company expects that there will be no changes on revenue.

 

The Company has also identified and implemented changes to its accounting policies and practices, systems and controls, as well as designed and implemented specific controls over its evaluation of the impact of the new guidance on the Company, including a calculation of the cumulative effects, disclosure requirements and the collection of relevant data into the reporting process. While the Company is substantially complete with the process of quantifying the impacts from applying the new guidance, final impact assessment will be finalized during the first quarter of 2018.

 

IFRS 16 Leases

 

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees — leases of low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less).

 

At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).

 

Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

 

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

 

IFRS 16 also requires lessees to make more extensive disclosures than under IAS 17.

 

IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Early application is permitted, but not before an entity applies IFRS 15. A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs.

 

The Company is in process of completing an assessment of the potential impact of adopting IFRS 16. The adoption of this standard will have a significant impact on the accounting for leased aircraft, engines and other lease agreements, requiring the presentation of those leases with durations of greater than twelve months on the consolidated statement of financial position. The Company anticipates adopting the new standard using the full retrospective method, see Note 14 for more information on the Company’s lease agreements.

 

IFRS 2 Classification and Measurement of Share-based Payment Transactions — Amendments to IFRS 2

 

In June 2016, the IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the measurement of a cash-settled, share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled.

 

On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after January 1, 2018, with early application permitted. The Company does not expect the amendments to have a significant effect on its consolidated financial statements.

 

IFRIC 23 — Uncertainty over Income Tax Treatments

 

IFRIC 23 clarifies the accounting for uncertainties in income taxes, the interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.

 

An entity has to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments, that it used or plans to use in its income tax filing; if the entity concludes that it is probable that a particular tax treatment is accepted, the entity has to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.

 

IFRIC 23 is effective for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted. The Company expects to adopt this interpretation at the effective date.

Convenience translation

 

Convenience translation

 

U.S. dollar amounts at December 31, 2017 shown in the consolidated financial statements have been included solely for the convenience of the reader and are translated from Mexican pesos, using an exchange rate of Ps.19.7354 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, 2017. Such translation should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollars at this or any other rate. The referred information in U.S. dollars is solely for information purposes and does not represent that the amounts are in accordance with IFRS or the equivalent in U.S. dollars in which the transactions were conducted or in which the amounts presented in Mexican pesos can be translated or realized.

v3.8.0.1
Description of the business and summary of significant accounting policies (Tables)
12 Months Ended
Dec. 31, 2017
Description of the business and summary of significant accounting policies  
Schedule of companies included in the consolidated financial statements

 

 

 

Principal

 

 

 

% Equity interest

 

Name

 

Activities

 

Country

 

2017

 

2016

 

Concesionaria

 

Air transportation services for passengers, cargo and mail throughout Mexico and abroad

 

Mexico

 

100

%

100

%

Volaris Costa Rica

 

Air transportation services for passengers, cargo and mail in Costa Rica and abroad

 

Costa Rica

 

100

%

100

%

Vuela, S.A. (“Vuela”)*

 

Air transportation services for passengers, cargo and mail in Guatemala and abroad

 

Guatemala

 

100

%

100

%

Comercializadora Volaris, S.A. de C.V.

 

Merchandising of services

 

Mexico

 

100

%

100

%

Servicios Earhart, S.A.*

 

Recruitment and payroll

 

Guatemala

 

100

%

100

%

Servicios Corporativos Volaris, S.A. de C.V. (“Servicios Corporativos”)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Servicios Administrativos Volaris, S.A. de C.V (“Servicios Administrativos”)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Operaciones Volaris, S.A. de C.V (“Operaciones Volaris”)(1)

 

Recruitment and payroll

 

Mexico

 

100

%

100

%

Deutsche Bank México, S.A., Trust 1710

 

Pre-delivery payments financing (Note 5)

 

Mexico

 

100

%

100

%

Deutsche Bank México, S.A., Trust 1711

 

Pre-delivery payments financing (Note 5)

 

Mexico

 

100

%

100

%

Irrevocable Administrative Trust number F/307750 “Administrative Trust”

 

Share administration trust (Note 17)

 

Mexico

 

100

%

100

%

Irrevocable Administrative Trust number F/745291

 

Share administration trust (Note 17)

 

Mexico

 

100

%

100

%

 

*The Company has not started operations in Guatemala.

(1)

With effect from August 3, 2016, the name of the Company was changed from Servicios Operativos Terrestres Volaris, S.A. de C.V. to Operaciones Volaris, S.A. de C.V.

Schedule of non-ticket revenues

 

 

 

For the years ended December 31,

 

 

 

2017

 

2016

 

2015

 

Air travel-related services

 

Ps.

6,293,747

 

Ps.

5,055,836

 

Ps.

3,418,654

 

Non-air travel-related services

 

589,338

 

494,864

 

441,393

 

Cargo

 

170,973

 

171,621

 

189,292

 

 

 

 

 

 

 

 

 

Total non-ticket revenues

 

Ps.

7,054,058

 

Ps.

5,722,321

 

Ps.

4,049,339

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of depreciation rates

 

 

 

Annual
depreciation rate

 

Aircraft parts and rotable spare parts

 

8.3-16.7%

 

Aircraft spare engines

 

4.0-8.3%

 

Standardization

 

Remaining contractual lease term

 

Computer equipment

 

25%

 

Communications equipment

 

10%

 

Office furniture and equipment

 

10%

 

Electric power equipment

 

10%

 

Workshop machinery and equipment

 

10%

 

Service carts on board

 

20%

 

Leasehold improvements to flight equipment

 

The shorter of: (i) remaining contractual lease term, or (ii) the next major maintenance event

 

 

Schedule of exchange rates of local currencies translated to functional currencies

 

 

 

 

 

 

 

Exchange rates of local currencies
translated to functional currencies

 

Exchange rates of local currencies
translated to functional currencies

 

Country

 

Local
currency

 

Functional
currency

 

Average exchange
rate for 2017

 

Exchange rate
as of 2017

 

Average exchange
rate for 2016

 

Exchange rate
as of 2016

 

Costa Rica

 

Colon

 

U.S. dollar

 

₵.

572.2000

 

₵.

572.5600

 

₵.

564.3332

 

₵.

561.1000

 

Guatemala

 

Quetzal

 

U.S. dollar

 

Q.

7.3509

 

Q.

7.3448

 

Q.

7.4931

 

Q.

7.5221

 

 

v3.8.0.1
Financial instruments and risk management (Tables)
12 Months Ended
Dec. 31, 2017
Financial instruments and risk management  
Schedule of notional amounts and strike prices of derivative financial instruments

 

 

 

Position as of December 31, 2017

 

 

 

Jet fuel Asian call option contracts maturities

 

 

 

1 Half 2018

 

2 Half 2018

 

2018 Total

 

Jet fuel risk

 

 

 

 

 

 

 

Notional volume in gallons (thousands)*

 

69,518

 

61,863

 

131,381

 

Strike price agreed rate per gallon (U.S. dollars)**

 

US$

1.6861

 

US$

1.8106

 

US$

1.7447

 

Approximate percentage of hedge (of expected consumption value)

 

60

%

50

%

55

%

 

* US Gulf Coast Jet 54 as underlying asset

** Weighted average

 

 

 

Position as of December 31, 2016

 

 

 

Jet fuel Asian call option contracts maturities

 

 

 

1 Half 2017

 

2 Half 2017

 

2017 Total

 

1 Half 2018

 

3Q 2018

 

2018 Total

 

Jet fuel risk

 

 

 

 

 

 

 

 

 

 

 

 

 

Notional volume in gallons (thousands)*

 

55,436

 

63,362

 

118,798

 

62,492

 

7,746

 

70,238

 

Strike price agreed rate per gallon (U.S. dollars)**

 

US$

1.6245

 

US$

1.4182

 

US$

1.5145

 

US$

1.6508

 

US$

1.5450

 

US$

1.6392

 

Approximate percentage of hedge (of expected consumption value)

 

51

%

53

%

52

%

45

%

10

%

24

%

 

* US Gulf Coast Jet 54 as underlying asset

** Weighted average

Schedule of foreign exchange on and off-balance sheet exposure

 

 

 

Thousands of U.S. dollars

 

 

 

2017

 

2016

 

Assets:

 

 

 

 

 

Cash and cash equivalents

 

US$

344,038

 

US$

297,565

 

Other accounts receivable

 

13,105

 

11,619

 

Aircraft maintenance deposits paid to lessors

 

352,142

 

343,787

 

Deposits for rental of flight equipment

 

25,343

 

30,025

 

Derivative financial instruments

 

25,204

 

41,996

 

 

 

 

 

 

 

Total assets

 

759,832

 

724,992

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Financial debt (Note 5)

 

128,296

 

76,789

 

Foreign suppliers

 

53,729

 

56,109

 

Taxes and fees payable

 

10,304

 

6,874

 

Derivative financial instruments

 

 

684

 

 

 

 

 

 

 

Total liabilities

 

192,329

 

140,456

 

 

 

 

 

 

 

Net foreign currency position

 

US$

567,503

 

US$

584,536

 

 

 

 

 

 

 

 

 

 

 

 

 

Thousands of U.S. dollars

 

 

 

2017

 

2016

 

Off-balance sheet transactions exposure:

 

 

 

 

 

Aircraft and engine operating lease payments (Note 14)

 

US$

1,856,909

 

US$

1,727,644

 

Aircraft and engine commitments (Note 23)

 

1,123,377

 

315,326

 

 

 

 

 

 

 

Total

 

US$

2,980,286

 

US$

2,042,970

 

 

 

 

 

 

 

 

 

 

Schedule of contractual principal payments required on financial liabilities and derivative instruments fair value

 

 

 

December 31, 2017

 

 

 

Within one
year

 

One to five
years

 

Total

 

Interest-bearing borrowings:

 

 

 

 

 

 

 

Pre-delivery payments facilities (Note 5)

 

Ps.

1,449,236

 

Ps.

1,079,152

 

Ps.

2,528,388

 

Short-term working capital facilities (Note 5)

 

948,354

 

 

948,354

 

 

 

 

 

 

 

 

 

Total

 

Ps.

2,397,590

 

Ps.

1,079,152

 

Ps.

3,476,742

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

 

Within one
year

 

One to five
years

 

Total

 

Interest-bearing borrowings:

 

 

 

 

 

 

 

Pre-delivery payments facilities (Note 5)

 

Ps.

328,845

 

Ps.

943,046

 

Ps.

1,271,891

 

Short-term working capital facilities (Note 5)

 

716,290

 

 

716,290

 

 

 

 

 

 

 

 

 

Derivative financial instruments:

 

 

 

 

 

 

 

Interest rate swaps contracts

 

14,144

 

 

14,144

 

 

 

 

 

 

 

 

 

Total

 

Ps.

1,059,279

 

Ps.

943,046

 

Ps.

2,002,325

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Fair value measurements (Tables)
12 Months Ended
Dec. 31, 2017
Fair value measurements  
Schedule of carrying amounts and fair values of financial instruments

 

 

 

Carrying amount

 

Fair value

 

 

 

2017

 

2016

 

2017

 

2016

 

Assets

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

Ps.

497,403

 

Ps.

867,809

 

Ps.

497,403

 

Ps.

867,809

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Financial debt

 

(3,476,742

)

(1,988,181

)

(3,481,741

)

(1,988,445

)

Derivative financial instruments

 

 

(14,144

)

 

(14,144

)

 

 

 

 

 

 

 

 

 

 

Total

 

Ps.

(2,979,339

)

Ps.

(1,134,516

)

Ps.

(2,984,338

)

Ps.

(1,134,780

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes the fair value measurements at December 31, 2017:

 

 

 

Fair value measurement

 

 

 

Quoted prices
in active
markets
Level 1

 

Significant
observable
inputs
Level 2

 

Significant
unobservable
inputs
Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Derivatives financial instruments:

 

 

 

 

 

 

 

 

 

Jet fuel Asian call options contracts*

 

Ps.

 

Ps.

497,403

 

Ps.

 

Ps.

497,403

 

Liabilities for which fair values are disclosed:

 

 

 

 

 

 

 

 

 

Interest-bearing loans and borrowings**

 

 

(3,481,741

)

 

(3,481,741

)

 

 

 

 

 

 

 

 

 

 

Net

 

Ps.

 

Ps.

(2,984,338

)

Ps.

 

Ps.

(2,984,338

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Jet fuel forwards levels and LIBOR curve.

** LIBOR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt.

There were no transfers between level 1 and level 2 during the period.

 

The following table summarizes the fair value measurements at December 31, 2016:

 

 

 

Fair value measurement

 

 

 

Quoted prices
in active
markets
Level 1

 

Significant
observable
inputs
Level 2

 

Significant
unobservable
inputs
Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Derivatives financial instruments:

 

 

 

 

 

 

 

 

 

Jet fuel Asian call options contracts*

 

Ps.

 

Ps.

867,809

 

Ps.

 

Ps.

867,809

 

Liabilities

 

 

 

 

 

 

 

 

 

Derivatives financial instruments:

 

 

 

 

 

 

 

 

 

Interest rate swap contracts**

 

 

(14,144

)

 

(14,144

)

Liabilities for which fair values are disclosed:

 

 

 

 

 

 

 

 

 

Interest-bearing loans and borrowings**

 

 

(1,988,445

)

 

(1,988,445

)

 

 

 

 

 

 

 

 

 

 

Net

 

Ps.

 

Ps.

(1,134,780

)

Ps.

 

Ps.

(1,134,780

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Jet fuel forwards levels and LIBOR curve.

** LIBOR curve and TIIE Mexican interbank rate. Includes short-term and long-term debt.

There were no transfers between level 1 and level 2 during the period.

Schedule of (loss) gain on derivatives recognized in consolidated statements of operations and comprehensive income

 

Consolidated statements of operations

 

Instrument

 

Financial statements line

 

2017

 

2016

 

2015

 

Jet fuel swap contracts

 

Fuel

 

Ps.

 

Ps.

 

Ps.

(128,330

)

Jet fuel Asian call options contracts

 

Fuel

 

(26,980

)

(305,166

)

(112,675

)

Foreign currency forward

 

Aircraft and engine rent expenses

 

(11,290

)

 

 

Interest rate swap contracts

 

Aircraft and engine rent expenses

 

(13,827

)

(48,777

)

(46,545

)

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Ps.

(52,097

)

Ps.

(353,943

)

Ps.

(287,550

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statements of other comprehensive (loss) income

 

Instrument

 

Financial statements
line

 

2017

 

2016

 

2015

 

Jet fuel Asian call options Contracts

 

OCI

 

Ps.

(54,202

)

Ps.

583,065

 

Ps.

(221,592

)

Interest rate swap contracts

 

OCI

 

14,144

 

41,629

 

27,723

 

Foreign currency forward

 

OCI

 

(2,090

)

 

 

 

 

 

 

 

 

 

 

 

 

Total (Note 22)

 

 

 

Ps.

(42,148

)

Ps.

624,694

 

Ps.

(193,869

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Financial assets and liabilities (Tables)
12 Months Ended
Dec. 31, 2017
Financial assets and liabilities  
Schedule of financial assets

 

 

 

2017

 

2016

 

Derivative financial instruments designated as cash flow hedges (effective portion recognized within OCI)

 

 

 

 

 

Jet fuel Asian call options

 

Ps.

497,403

 

Ps.

867,809

 

 

 

 

 

 

 

 

 

Total financial assets

 

Ps.

497,403

 

Ps.

867,809

 

 

 

 

 

 

 

 

 

Presented on the consolidated statements of financial position as follows:

 

 

 

 

 

Current

 

Ps.

497,403

 

Ps.

543,528

 

 

 

 

 

 

 

 

 

Non-current

 

Ps.

 

Ps.

324,281

 

 

 

 

 

 

 

 

 

 

Schedule of short-term and long-term debt

 

 

 

2017

 

2016

 

I.  Revolving line of credit with Banco Santander México, S.A., Institución de Banca Múltiple, Grupo Financiero Santander (“Santander”) and Banco Nacional de Comercio Exterior, S.N.C. (“Bancomext”), in U.S. dollars, to finance pre-delivery payments, maturing on November 30, 2021, bearing annual interest rate at the three-month LIBOR plus a spread according to the contractual conditions of each disbursement in a range of 199 to 225 basis points.

 

Ps.

2,528,388

 

Ps.

1,271,891

 

 

 

 

 

 

 

II. In December 2016, the Company entered into a short-term working capital facility with Banco Nacional de México S.A. (“Citibanamex”) in Mexican pesos, bearing annual interest rate at TIIE 28 days plus a spread according to the contractual conditions of each disbursement in a range of 20 to 80 basis points.

 

948,354

 

406,330

 

 

 

 

 

 

 

III. In December 2016, the Company entered into a U.S. dollar denominated short-term working capital facility with Bank of America México S.A. Institución de Banca Múltiple (“Bank of America”) in U.S. dollars, bearing annual interest rate at the one-month LIBOR plus 160 basis points.

 

 

309,960

 

IV. Accrued interest

 

5,972

 

6,102

 

 

 

 

 

 

 

 

 

3,482,714

 

1,994,283

 

Less: Short-term maturities

 

2,403,562

 

1,051,237

 

 

 

 

 

 

 

Long-term

 

Ps.

1,079,152

 

Ps.

943,046

 

 

 

 

 

 

 

 

 

 

Summary of scheduled principal payments of financial debt and accrued interest

 

 

 

2018

 

2019

 

2020

 

2021

 

Total

 

Finance debt denominated in foreign currency:

 

 

 

 

 

 

 

 

 

 

 

Santander/Bancomext

 

Ps.

1,452,826

 

Ps.

670,388

 

Ps.

333,303

 

Ps.

75,461

 

Ps.

2,531,978

 

Citibanamex

 

950,736

 

 

 

 

950,736

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Ps.

2,403,562

 

Ps.

670,388

 

Ps.

333,303

 

Ps.

75,461

 

Ps.

3,482,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of changes in liabilities from financing activities

 

 

 

January 1,
2017

 

Net cash
flows

 

Foreign exchange
movement

 

Current vs non 
current
reclassification and
other

 

December, 31,
2017

 

Current interest- bearing loans and borrowings

 

Ps.

1,051,237

 

Ps.

419,350

 

Ps.

25,924

 

Ps.

907,051

 

Ps.

2,403,562

 

Non-current interest - bearing loans and borrowings

 

943,046

 

1,093,808

 

(50,521

)

(907,181

)

1,079,152

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities from financing activities

 

Ps.

1,994,283

 

Ps.

1,513,158

 

Ps.

(24,597

)

Ps.

(130

)

Ps.

3,482,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1,
2016

 

Net cash
flows

 

Foreign exchange
movement

 

Current vs non
current
reclassification and
other

 

December, 31,
2016

 

Current interest- bearing loans and borrowings

 

Ps.

1,371,202

 

Ps.

(753,897

)

Ps.

121,271

 

Ps.

312,661

 

Ps.

1,051,237

 

Non-current interest - bearing loans and borrowings

 

219,817

 

938,681

 

98,450

 

(313,902

)

943,046

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities from financing activities

 

Ps.

1,591,019

 

Ps.

184,874

 

Ps.

219,721

 

Ps.

(1,241

)

Ps.

1,994,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of other financial liabilities

 

 

 

2017

 

2016

 

Derivative financial instruments designated as CFH (effective portion recognized within OCI):

 

 

 

 

 

Interest rate swap contracts

 

Ps.

 

Ps.

14,144

 

 

 

 

 

 

 

 

 

Total financial liabilities

 

Ps.

 

Ps.

14,144

 

 

 

 

 

 

 

 

 

Presented on the consolidated statements of financial position as follows:

 

 

 

 

 

Current

 

Ps.

 

Ps.

14,144

 

 

 

 

 

 

 

 

 

Non-current

 

Ps.

 

Ps.

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Cash and cash equivalents (Tables)
12 Months Ended
Dec. 31, 2017
Cash and cash equivalents  
Summary of cash and cash equivalents

 

 

 

2017

 

2016

 

Short-term investments

 

Ps.

5,982,314

 

Ps.

4,433,559

 

Cash in banks

 

963,162

 

2,632,878

 

Cash on hand

 

5,403

 

4,814

 

 

 

 

 

 

 

Total cash and cash equivalents

 

Ps.

6,950,879

 

Ps.

7,071,251

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Related parties (Tables)
12 Months Ended
Dec. 31, 2017
Related parties  
Schedule of balances due from/to related parties

 

 

 

Type of transaction

 

Country
of origin

 

2017

 

2016

 

Terms

 

Due to:

 

 

 

 

 

 

 

 

 

 

 

One Link, S.A. de C.V. (“One Link”)

 

Call center fees

 

El Salvador

 

Ps.

24,980

 

Ps.

33,775

 

30 days

 

Aeromantenimiento, S.A. (“Aeroman”)

 

Aircraft and engine maintenance

 

El Salvador

 

15,951

 

30,627

 

30 days

 

SearchForce, Inc. (“SearchForce”)

 

Internet services

 

Mexico

 

 

620

 

30 days

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

40,931

 

Ps.

65,022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of transactions with related parties

 

Related party transactions

 

Country of origin

 

2017

 

2016

 

2015

 

Expenses:

 

 

 

 

 

 

 

 

 

Aircraft and engine maintenance

 

El Salvador/Guatemala

 

Ps.

249,266

 

Ps.

304,399

 

Ps.

111,641

 

Call center fees and other fees

 

Mexico/El Salvador

 

202,689

 

173,197

 

57,809

 

Other

 

Mexico/El Salvador/ Guatemala

 

8,088

 

8,105

 

2,516

 

 

v3.8.0.1
Other accounts receivable, net (Tables)
12 Months Ended
Dec. 31, 2017
Other accounts receivable, net  
Schedule of other accounts receivables

 

 

 

2017

 

2016

 

Credit cards

 

Ps.

191,322

 

Ps.

253,374

 

Other accounts receivable

 

117,582

 

26,236

 

Other points of sales

 

54,719

 

23,867

 

Affinity credit card

 

40,517

 

8,950

 

Cargo clients

 

34,655

 

29,901

 

Travel agencies and insurance commissions

 

27,925

 

20,477

 

Marketing services receivable

 

13,435

 

11,070

 

Airport services

 

5,898

 

9,479

 

Employees

 

8,878

 

7,551

 

Insurance claims

 

1,345

 

55,815

 

 

 

 

 

 

 

 

 

496,276

 

446,720

 

Allowance for credit losses

 

(17,809

)

(19,317

)

 

 

 

 

 

 

 

 

Ps.

478,467

 

Ps.

427,403

 

 

 

 

 

 

 

 

 

 

Schedule of aging of accounts receivable

 

Days

 

2017
Impaired

 

2017
Not impaired

 

Total
2017

 

2016
Impaired

 

2016
Not impaired

 

Total
2016

 

0–30

 

Ps.

16,962

 

Ps.

415,847

 

Ps.

432,809

 

Ps.

15,723

 

Ps.

398,721

 

Ps.

414,444

 

31–60

 

 

38,705

 

38,705

 

 

11,231

 

11,231

 

61–90

 

 

17,918

 

17,918

 

 

14,492

 

14,492

 

91–120

 

847

 

5,997

 

6,844

 

3,594

 

2,959

 

6,553

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

17,809

 

Ps.

478,467

 

Ps.

496,276

 

Ps.

19,317

 

Ps.

427,403

 

Ps.

446,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of movement in the allowance for doubtful accounts

 

Balance as of January 1, 2015

 

Ps.

(27,786

)

Write-offs

 

11,999

 

Increase in allowance

 

(8,825

)

 

 

 

 

Balance as of December 31, 2015

 

(24,612

)

Write-offs

 

14,459

 

Increase in allowance

 

(9,164

)

 

 

 

 

Balance as of December 31, 2016

 

(19,317

)

 

 

 

 

Write-offs

 

6,228

 

Increase in allowance

 

(4,720

)

 

 

 

 

Balance as of December 31, 2017

 

Ps.

(17,809

)

 

 

 

 

 

 

v3.8.0.1
Inventories (Tables)
12 Months Ended
Dec. 31, 2017
Inventories  
Schedule of inventories

 

 

 

2017

 

2016

 

Spare parts and accessories of flight equipment

 

Ps.

285,185

 

Ps.

235,330

 

Miscellaneous supplies

 

9,665

 

8,554

 

 

 

 

 

 

 

 

 

Ps.

294,850

 

Ps.

243,884

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Prepaid expenses and other current assets (Tables)
12 Months Ended
Dec. 31, 2017
Prepaid expenses and other current assets  
Summary of prepaid expenses and other current assets

 

 

 

2017

 

2016

 

Advances to suppliers

 

Ps.

346,263

 

Ps.

705,105

 

Prepaid aircraft rent

 

215,784

 

668,306

 

Prepaid insurance

 

68,712

 

47,663

 

Other prepaid expenses

 

65,642

 

33,555

 

Sales commission to travel agencies

 

54,501

 

73,413

 

Advances for constructions of aircraft and engines

 

13,764

 

31,437

 

Loss on sale and leaseback transactions to be amortized (Note 14)

 

3,047

 

3,047

 

 

 

 

 

 

 

 

 

Ps.

767,713

 

Ps.

1,562,526

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Guarantee deposits (Tables)
12 Months Ended
Dec. 31, 2017
Guarantee deposits  
Schedule of guarantee deposits

 

 

 

2017

 

2016

 

Current asset:

 

 

 

 

 

Aircraft maintenance deposits paid to lessors (Note 1j)

 

Ps.

1,317,663

 

Ps.

1,145,913

 

Deposits for rental of flight equipment

 

17,178

 

14,155

 

Other guarantee deposits

 

18,052

 

7,141

 

 

 

 

 

 

 

 

 

1,352,893

 

1,167,209

 

 

 

 

 

 

 

Non-current asset:

 

 

 

 

 

Aircraft maintenance deposits paid to lessors (Note 1j)

 

5,631,304

 

5,951,831

 

Deposits for rental of flight equipment

 

441,110

 

589,804

 

Other guarantee deposits

 

25,838

 

18,243

 

 

 

 

 

 

 

 

 

6,098,252

 

6,559,878

 

 

 

 

 

 

 

 

 

Ps.

7,451,145

 

Ps.

7,727,087

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Rotable spare parts, furniture and equipment, net (Tables)
12 Months Ended
Dec. 31, 2017
Rotable spare parts, furniture and equipment, net  
Summary of rotable spare parts, furniture and equipment, net

 

 

 

Gross value

 

Accumulated depreciation

 

Net carrying value

 

 

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2017

 

At December
31, 2016

 

Leasehold improvements to flight equipment

 

Ps.

2,382,687

 

Ps.

1,709,868

 

Ps.

(1,769,589

)

Ps.

(1,386,844

)

Ps.

613,098

 

Ps.

323,024

 

Pre-delivery payments

 

2,783,303

 

1,206,330

 

 

 

2,783,303

 

1,206,330

 

Aircraft parts and rotable spare parts

 

506,735

 

393,522

 

(181,091

)

(137,712

)

325,644

 

255,810

 

Aircraft spare engines

 

323,410

 

323,025

 

(18,132

)

(1,337

)

305,278

 

321,688

 

Construction and improvements in process

 

193,607

 

255,374

 

 

 

193,607

 

255,374

 

Standardization

 

192,808

 

176,975

 

(113,407

)

(94,864

)

79,401

 

82,111

 

Constructions and improvements

 

131,503

 

120,886

 

(106,335

)

(85,873

)

25,168

 

35,013

 

Computer equipment

 

30,113

 

24,172

 

(20,790

)

(16,972

)

9,323

 

7,200

 

Workshop tools

 

20,500

 

20,500

 

(18,229

)

(15,915

)

2,271

 

4,585

 

Electric power equipment

 

15,439

 

14,818

 

(9,185

)

(7,890

)

6,254

 

6,928

 

Communications equipment

 

11,229

 

9,261

 

(6,502

)

(5,706

)

4,727

 

3,555

 

Workshop machinery and equipment

 

8,405

 

7,240

 

(4,345

)

(3,622

)

4,060

 

3,618

 

Motorized transport equipment platform

 

5,587

 

5,703

 

(4,701

)

(4,346

)

886

 

1,357

 

Service carts on board

 

5,403

 

5,403

 

(5,021

)

(4,645

)

382

 

758

 

Office furniture and equipment

 

44,749

 

36,310

 

(22,454

)

(18,653

)

22,295

 

17,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

Ps.

6,655,478

 

Ps.

4,309,387

 

Ps.

(2,279,781

)

Ps.

(1,784,379

)

Ps.

4,375,697

 

Ps.

2,525,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*During the years ended December 31, 2017 and 2016,  the Company capitalized borrowing costs of Ps.193,389 and Ps.95,445, respectively.  The amount of this line is net of disposals of capitalized borrowing costs related to sale and leaseback transactions of Ps.110,274 and Ps.84,936, respectively.

 

 

 

Aircraft parts
and rotable spare
parts

 

Aircraft spare
Engines

 

Constructions
and
improvements

 

Standardization

 

Computer
equipment

 

Office furniture
and equipment

 

Electric power
equipment

 

Workshop
Tools

 

Motorized
transport
equipment
platform

 

Communications
equipment

 

Workshop
machinery
and
equipment

 

Service
carts on
board

 

Pre-delivery
payments

 

Construction and
improvements
in process

 

Leasehold
improvements to
flight equipment

 

Total

 

Net book amount as of December 31, 2015

 

Ps.

179,947

 

Ps.

 

Ps.

18,202

 

Ps.

83,886

 

Ps.

4,195

 

Ps.

12,932

 

Ps.

9,033

 

Ps.

4,815

 

Ps.

1,326

 

Ps.

3,764

 

Ps.

4,179

 

Ps.

1,453

 

Ps.

1,583,835

 

Ps.

140,926

 

Ps.

501,157

 

Ps.

2,549,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

110,592

 

323,025

 

2,218

 

21,953

 

740

 

517

 

1,467

 

4,217

 

505

 

129

 

131

 

36

 

1,345,081

 

161,560

 

226,526

 

2,198,697

 

Disposals and transfers

 

(1,299

)

 

 

 

 

(110

)

(1,626

)

 

(49

)

 

 

 

(1,733,093

)

(2,132

)

 

(1,738,309

)

Borrowing costs, net*

 

 

 

 

 

 

 

 

 

 

 

 

 

10,507

 

 

 

10,507

 

Other movements

 

 

 

32,441

 

 

4,814

 

7,877

 

 

25

 

46

 

493

 

 

 

 

(44,980

)

 

716

 

Depreciation

 

(33,430

)

(1,337

)

(17,848

)

(23,728

)

(2,549

)

(3,559

)

(1,946

)

(4,472

)

(471

)

(831

)

(692

)

(731

)

 

 

(404,659

)

(496,253

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016

 

255,810

 

321,688

 

35,013

 

82,111

 

7,200

 

17,657

 

6,928

 

4,585

 

1,357

 

3,555

 

3,618

 

758

 

1,206,330

 

255,374

 

323,024

 

2,525,008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

393,522

 

323,025

 

120,886

 

176,975

 

24,172

 

36,310

 

14,818

 

20,500

 

5,703

 

9,261

 

7,240

 

5,403

 

1,206,330

 

255,374

 

1,709,868

 

4,309,387

 

Accumulated depreciation

 

(137,712

)

(1,337

)

(85,873

)

(94,864

)

(16,972

)

(18,653

)

(7,890

)

(15,915

)

(4,346

)

(5,706

)

(3,622

)

(4,645

)

 

 

(1,386,844

)

(1,784,379

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book amount as of December 31, 2016

 

Ps.

255,810

 

Ps.

321,688

 

Ps.

35,013

 

Ps.

82,111

 

Ps.

7,200

 

Ps.

17,657

 

Ps.

6,928

 

Ps.

4,585

 

Ps.

1,357

 

Ps.

3,555

 

Ps.

3,618

 

Ps.

758

 

Ps.

1,206,330

 

Ps.

255,374

 

Ps.

323,024

 

Ps.

2,525,008

 

Additions

 

115,173

 

385

 

 

15,833

 

1,845

 

6,805

 

 

 

 

 

123

 

 

1,707,805

 

206,932

 

529,331

 

2,584,232

 

Disposals and transfers

 

(930

)

 

 

 

 

(15

)

 

 

 

 

 

 

(213,947

)

(3,555

)

(101,224

)

(319,671

)

Borrowing costs, net*

 

 

 

 

 

 

 

 

 

 

 

 

 

83,115

 

 

 

83,115

 

Other movements

 

 

 

 

10,371

 

 

4,087

 

1,649

 

620

 

 

 

1,968

 

1,041

 

 

 

(265,144

)

244,712

 

(696

)

Depreciation

 

(44,409

)

(16,795

)

(20,216

)

(18,543

)

(3,809

)

(3,801

)

(1,294

)

(2,314

)

(471

)

(796

)

(722

)

(376

)

 

 

(382,745

)

(496,291

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2017

 

325,644

 

305,278

 

25,168

 

79,401

 

9,323

 

22,295

 

6,254

 

2,271

 

886

 

4,727

 

4,060

 

382

 

2,783,303

 

193,607

 

613,098

 

4,375,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost

 

506,735

 

323,410

 

131,503

 

192,808

 

30,113

 

44,749

 

15,439

 

20,500

 

5,587

 

11,229

 

8,405

 

5,403

 

2,783,303

 

193,607

 

2,382,687

 

6,655,478

 

Accumulated depreciation

 

(181,091

)

(18,132

)

(106,335

)

(113,407

)

(20,790

)

(22,454

)

(9,185

)

(18,229

)

(4,701

)

(6,502

)

(4,345

)

(5,021

)

 

 

(1,769,589

)

(2,279,781

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net book amount as of December 31, 2017

 

Ps.

325,644

 

Ps.

305,278

 

Ps.

25,168

 

Ps.

79,401

 

Ps.

9,323

 

Ps.

22,295

 

Ps.

6,254

 

Ps.

2,271

 

Ps.

886

 

Ps.

4,727

 

Ps.

4,060

 

Ps.

382

 

Ps.

2,783,303

 

Ps.

193,607

 

Ps.

613,098

 

Ps.

4,375,697

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Intangible assets, net (Tables)
12 Months Ended
Dec. 31, 2017
Intangible assets, net  
Schedule of intangible assets, net

 

 

 

 

 

Gross value

 

Accumulated amortization

 

Net carrying amount

 

 

 

Useful

 

At December 31,

 

 

 

life

 

2017

 

2016

 

2017

 

2016

 

2017

 

2016

 

Software

 

1 – 4 years

 

Ps.

441,803

 

Ps.

313,028

 

Ps.

(251,383

)

Ps.

(198,987

)

Ps.

190,420

 

Ps.

114,041

 

 

Balance as of January 1, 2016

 

Ps.

94,649

 

Additions

 

60,792

 

Disposals

 

(1,277

)

Amortization

 

(40,290

)

Exchange differences

 

167

 

 

 

 

 

Balance as of December 31, 2016

 

114,041

 

 

 

 

 

Additions

 

130,908

 

Disposals

 

(1,976

)

Amortization

 

(52,396

)

Exchange differences

 

(157

)

 

 

 

 

Balance as of December 31, 2017

 

Ps.

190,420

 

 

 

 

 

 

 

v3.8.0.1
Operating leases (Tables)
12 Months Ended
Dec. 31, 2017
Operating leases  
Schedule of composition of fleet and spare engines, operating leases

 

Aircraft
Type

 

Model

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2015

 

A319

 

132

 

6

 

6

 

6

 

A319

 

133

 

6

 

9

 

12

 

A320

 

233

 

39

 

39

 

32

 

A320

 

232

 

4

 

4

 

4

 

A320NEO

 

271N

 

6

 

1

 

 

A321

 

231

 

10

 

10

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

71

 

69

 

56

 

 

 

 

 

 

 

 

 

 

 

 

Engine
Type

 

Model

 

At December
31, 2017

 

At December
31, 2016

 

At December
31, 2015

 

V2500

 

V2527M-A5

 

3

 

3

 

3

 

V2500

 

V2527E-A5

 

3

 

4

 

3

 

V2500

 

V2527-A5

 

2

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

11

 

6

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of rental expense charged to results of operations

 

 

 

2017

 

2016

 

2015

 

Aircraft and engine (Note 1p)

 

Ps.

6,072,502

 

Ps.

5,590,058

 

Ps.

3,525,336

 

 

 

 

 

 

 

 

 

 

 

 

Real estate:

 

 

 

 

 

 

 

Airports facilities

 

44,251

 

40,591

 

39,993

 

Offices, maintenance warehouse and hangar (Note 20)

 

30,544

 

33,517

 

25,889

 

 

 

 

 

 

 

 

 

Total rental expenses on real estate

 

74,795

 

74,108

 

65,882

 

 

 

 

 

 

 

 

 

Total cost of operating leases

 

Ps.

6,147,297

 

Ps.

5,664,166

 

Ps.

3,591,218

 

 

 

 

 

 

 

 

 

 

 

 

 

Aircraft and engines  
Operating leases  
Schedule of future minimum lease payments

 

 

 

Aircraft operating leases

 

Engine operating leases

 

 

 

in U.S. dollars

 

in Mexican 
pesos(1)

 

in U.S. dollars

 

in Mexican
pesos(1)

 

2018

 

US$

257,681

 

Ps.

5,085,438

 

US$

4,336

 

Ps.

85,573

 

2019

 

244,264

 

4,820,648

 

3,986

 

78,665

 

2020

 

238,837

 

4,713,544

 

3,366

 

66,429

 

2021

 

233,002

 

4,598,388

 

3,209

 

63,331

 

2022 and thereafter

 

863,604

 

17,043,570

 

4,624

 

91,256

 

 

 

 

 

 

 

 

 

 

 

Total

 

US$

1,837,388

 

Ps.

36,261,588

 

US$

19,521

 

Ps.

385,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Using the exchange rate as of December 31, 2017 of Ps. 19.7354.

Land and buildings  
Operating leases  
Schedule of future minimum lease payments

 

 

 

Operating 
leases 
denominated in
U.S. dollars

 

Equivalent in
Mexican
pesos*

 

Operating leases 
denominated in 
Mexican pesos

 

2018

 

US$

6,718

 

Ps.

132,582

 

Ps.

66,243

 

2019

 

4,563

 

90,053

 

52,575

 

2020

 

4,548

 

89,757

 

42,335

 

2021

 

1,672

 

32,998

 

9,168

 

2022 and thereafter

 

702

 

13,854

 

53,194

 

 

 

 

 

 

 

 

 

Total

 

US$

18,203

 

Ps.

359,244

 

Ps.

223,515

 

 

 

 

 

 

 

 

 

 

 

 

 

*Convenience translation to U.S. dollars (Ps.19.7354).

v3.8.0.1
Accrued liabilities (Tables)
12 Months Ended
Dec. 31, 2017
Accrued liabilities  
Schedule of analysis of accrued liabilities

 

 

 

2017

 

2016

 

Fuel and traffic accrued expenses

 

Ps.

1,106,913

 

Ps.

922,607

 

Maintenance and aircraft parts accrued expenses

 

194,366

 

130,897

 

Sales, marketing and distribution accrued expenses

 

143,758

 

102,880

 

Maintenance deposits

 

132,519

 

179,288

 

Salaries and benefits

 

114,781

 

170,994

 

Accrued administrative expenses

 

90,459

 

80,981

 

Aircraft and engine lease extension benefit (Note 1j)

 

83,047

 

85,124

 

Deferred revenue from VClub membership

 

76,261

 

32,771

 

Information and communication accrued expenses

 

44,638

 

32,950

 

Supplier services agreement

 

10,634

 

6,333

 

Depositary services benefit

 

1,473

 

2,068

 

Advances from travel agencies

 

650

 

1,536

 

Others

 

51,474

 

37,010

 

 

 

 

 

 

 

 

 

Ps.

2,050,973

 

Ps.

1,785,439

 

 

 

 

 

 

 

 

 

 

Schedule of accrued liabilities long term

 

 

 

2017

 

2016

 

Aircraft and engine lease extension benefit (Note 1j)

 

Ps.

107,400

 

Ps.

127,831

 

Supplier services agreement

 

77,174

 

4,350

 

Depositary services benefit

 

 

1,473

 

Other

 

15,274

 

36,154

 

 

 

 

 

 

 

 

 

Ps.

199,848

 

Ps.

169,808

 

 

 

 

 

 

 

 

 

 

Schedule of other liabilities

 

 

 

Balance as of
January 1,
2017

 

Increase for
the year

 

Payments

 

Unwinding 
discount*

 

Balance as of
December 31,
 2017

 

Aircraft lease return obligation

 

Ps.

410,060

 

Ps.

960,548

 

Ps.

859,659

 

Ps.

22,566

 

Ps.

488,383

 

Employee profit sharing (Note 16)

 

10,695

 

8,342

 

9,974

 

 

9,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

420,755

 

Ps.

968,890

 

Ps.

869,633

 

Ps.

22,566

 

Ps.

497,446

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term maturities

 

 

 

 

 

 

 

 

 

Ps.

280,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

Ps.

216,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Discount rate adjustment

 

 

 

Balance as of
January 1,
2016

 

Increase for
the year

 

Payments

 

Unwinding 
discount*

 

Balance as of
December 31,
 2016

 

Aircraft lease return obligation

 

Ps.

149,326

 

Ps.

1,038,764

 

Ps.

765,023

 

Ps.

13,007

 

Ps.

410,060

 

Employee profit sharing (Note 16)

 

10,173

 

9,967

 

9,445

 

 

10,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

159,499

 

Ps.

1,048,731

 

Ps.

774,468

 

Ps.

13,007

 

Ps.

420,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term maturities

 

 

 

 

 

 

 

 

 

Ps.

284,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term

 

 

 

 

 

 

 

 

 

Ps.

136,555

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Discount rate adjustment

v3.8.0.1
Employee benefits (Tables)
12 Months Ended
Dec. 31, 2017
Employee benefits  
Schedule of analysis of net period cost

 

 

 

2017

 

2016

 

2015

 

Analysis of net period cost:

 

 

 

 

 

 

 

Current service cost

 

Ps.

3,657

 

Ps.

2,421

 

Ps.

2,012

 

Interest cost on benefit obligation

 

1,000

 

701

 

537

 

 

 

 

 

 

 

 

 

Net period cost

 

Ps.

4,657

 

Ps.

3,122

 

Ps.

2,549

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of changes in defined benefit obligation

 

 

 

2017

 

2016

 

2015

 

Defined benefit obligation at January 1,

 

Ps.

13,438

 

Ps.

10,056

 

Ps.

7,737

 

Net period cost charged to profit or loss:

 

 

 

 

 

 

 

Current service cost

 

3,657

 

2,421

 

2,012

 

Interest cost on benefit obligation

 

1,000

 

701

 

537

 

Remeasurement losses in other comprehensive income:

 

 

 

 

 

 

 

Actuarial changes arising from changes in assumptions

 

1,776

 

442

 

1,174

 

Payments made

 

(582

)

(182

)

(1,404

)

 

 

 

 

 

 

 

 

Defined benefit obligation at December 31,

 

Ps.

19,289

 

Ps.

13,438

 

Ps.

10,056

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary of significant assumptions used in the computation of the seniority premium obligations

 

 

 

2017

 

2016

 

2015

 

Financial:

 

 

 

 

 

 

 

Discount rate

 

7.72

%

7.78

%

7.29

%

Expected rate of salary increases

 

5.50

%

5.50

%

5.50

%

Annual increase in minimum salary

 

4.00

%

4.00

%

4.00

%

 

 

 

 

 

 

 

 

Biometric:

 

 

 

 

 

 

 

Mortality (1)

 

EMSSA 09

 

EMSSA 09

 

EMSSA 09

 

Disability (2)

 

IMSS-97

 

IMSS-97

 

IMSS-97

 

 

(1)

Mexican Experience of social security (EMSSA).

(2)

Mexican Experience of Instituto Mexicano del Seguro Social (IMSS).

Schedule of accruals for short-term employee benefits

 

 

 

2017

 

2016

 

Employee profit-sharing (Note 15c)

 

Ps.

9,063

 

Ps.

10,695

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Share-based payments (Tables)
12 Months Ended
Dec. 31, 2017
Share-based payments  
Schedule of movement in number of shares under share purchase payment plans

 

 

 

Number of Series A
 shares

 

Outstanding as of December 31, 2015

 

617,001

 

Purchased during the year

 

513,002

 

Granted during the year

 

 

Exercised/vested during the year

 

(425,536

)

Forfeited during the year

 

(86,419

)

 

 

 

 

Outstanding as of December 31, 2016

 

618,048

*

Purchased during the year

 

547,310

 

Granted during the year

 

 

Exercised/vested during the year

 

(345,270

)

Forfeited during the year

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

820,088

*

 

 

 

 

 

*These shares are presented as treasury shares in the consolidated statement of financial position as of December 31, 2017 and 2016.

Schedule of weighted average assumptions used to estimate the fair market value of the MIP at the date of grant

 

 

 

2012

 

Dividend yield (%)

 

0.00

%

Volatility (%)

 

37.00

%

Risk—free interest rate (%)

 

5.96

%

Expected life of share options (years)

 

8.8

 

Exercise share price (in Mexican pesos Ps.)

 

5.31

 

Exercise multiple

 

1.1

 

Fair value of the stock at grant date

 

1.73

 

 

Schedule of movement in number of shares options and fixed exercise prices

 

 

 

Number of share 
options

 

Exercise price
in Mexican pesos

 

Total in
thousands of 
Mexican pesos

 

Outstanding as of December 31, 2015

 

15,857,856

 

Ps.

5.31

 

Ps.

84,269

 

Granted during the year

 

 

 

 

Forfeited during the year

 

 

 

 

Exercised during the year

 

(3,299,999

)

5.31

 

(17,536

)

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2016

 

12,557,857

 

Ps.

5.31

 

Ps.

66,733

 

Granted during the year

 

 

 

 

Forfeited during the year

 

 

 

 

Exercised during the year

 

(120,000

)

5.31

 

(638

)

 

 

 

 

 

 

 

 

Outstanding as of December 31, 2017

 

12,437,857

 

Ps.

5.31

 

Ps.

66,095

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of retention plan expenses recognized

 

 

 

2017

 

2016

 

2015

 

(Benefit) expense arising from cash-settled share-based payments transactions

 

Ps.

(25,498

)

Ps.

86,100

 

Ps.

44,699

 

Expense arising from equity-settled share-based payments transactions

 

13,508

 

7,816

 

6,345

 

 

 

 

 

 

 

 

 

Total expense arising from share-based payments transactions

 

Ps.

(11,990

)

Ps.

93,916

 

Ps.

51,044

 

 

 

 

 

 

 

 

 

 

 

 

 

Share purchase plan  
Share-based payments  
Schedule of vesting period of shares granted

 

Number of Series A
 shares

 

Vesting period

 

353,457

 

November 2017 – 2018

 

284,200

 

November 2018 – 2019

 

182,431

 

November 2019 – 2020

 

 

 

 

 

820,088

 

 

 

 

 

 

 

 

SARs - cash settled  
Share-based payments  
Schedule of vesting period of shares granted

 

Number of SARs

 

Exercisable date

 

2,766,811

 

November 2018

 

1,649,493

 

November 2019

 

941,749

 

November 2020

 

 

 

 

 

5,358,053

 

 

 

 

 

 

 

 

MIP II  
Share-based payments  
Schedule of vesting period of shares granted

 

Number of SARs

 

Exercisable date

 

2,030,540

 

February 2017

 

2,030,540

 

February 2018

 

2,030,540

 

February 2019

 

3,384,240

 

February 2020

 

4,061,100

 

February 2021

 

 

 

 

 

13,536,960

 

 

 

 

 

 

 

 

v3.8.0.1
Equity (Tables)
12 Months Ended
Dec. 31, 2017
Equity  
Schedule of authorized shares

 

As of December 31, 2017, the total number of authorized shares was 1,011,876,677; represented by common registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:

 

 

 

Shares

 

 

 

 

 

Fixed
Class I

 

Variable
Class II

 

Total shares

 

Series A shares

 

3,224

 

877,852,982

 

877,856,206

 

Series B shares

 

20,956

 

133,999,515

 

134,020, 471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,180

 

1,011,852,497

 

1,011,876,677

 

Treasury shares (Note 17)

 

 

(13,257,945

)

(13,257,945

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,180

 

998,594,552

 

998,618,732

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2016, the total number of authorized shares was 1,011,876,677; represented by common registered shares, issued and with no par value, fully subscribed and paid, comprised as follows:

 

 

 

Shares

 

 

 

 

 

Fixed
Class I

 

Variable
Class II

 

Total shares

 

Series A shares

 

3,224

 

877,852,982

 

877,856,206

 

Series B shares

 

20,956

 

133,999,515

 

134,020,471

 

 

 

 

 

 

 

 

 

 

 

24,180

 

1,011,852,497

 

1,011,876,677

 

Treasury shares (Note 17)

 

 

(13,175,905

)

(13,175,905

)

 

 

 

 

 

 

 

 

 

 

24,180

 

998,676,592

 

998,700,772

 

 

 

 

 

 

 

 

 

 

Schedule of basic and diluted (loss) earnings per share

 

 

 

At December 31,

 

 

 

2017

 

2016

 

2015

 

Net (loss) income for the period

 

Ps.

(594,599

)

Ps.

3,519,489

 

Ps.

2,463,870

 

Weighted average number of shares outstanding (in thousands):

 

 

 

 

 

 

 

Basic

 

1,011,877

 

1,011,877

 

1,011,877

 

Diluted

 

1,011,877

 

1,011,877

 

1,011,877

 

LPS -EPS:

 

 

 

 

 

 

 

Basic

 

(0.588

)

3.478

 

2.435

 

Diluted

 

(0.588

)

3.478

 

2.435

 

 

v3.8.0.1
Income tax (Tables)
12 Months Ended
Dec. 31, 2017
Income tax  
Schedule of income tax in consolidated statements of operations

 

 

 

2017

 

2016

 

2015

 

Current year income tax expense

 

Ps.

(51,313

)

Ps.

(706,244

)

Ps.

(337,997

)

Deferred income tax benefit (expense)

 

212,488

*

(750,938

)**

(700,351

)

 

 

 

 

 

 

 

 

Total income tax benefit (expense)

 

Ps.

161,175

 

Ps.

(1,457,182

)

Ps.

(1,038,348

)

 

 

 

 

 

 

 

 

 

 

 

 

*Includes translation effect by Ps.1,008

**Includes translation effect by Ps.1,242

Schedule of income tax in consolidated statements of OCI

 

 

 

2017

 

2016

 

2015

 

Deferred tax related to items recognized in OCI during the year

 

 

 

 

 

 

 

Net gain (loss) on cash flow hedges

 

Ps.

12,017

 

Ps.

(187,408

)

Ps.

58,161

 

Remeasurement gain of employee benefits

 

533

 

132

 

352

 

 

 

 

 

 

 

 

 

Deferred tax charged to OCI

 

Ps.

12,550

 

Ps.

(187,276

)

Ps.

58,513

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of reconciliation of corporate income tax rate to effective tax rate

 

 

 

2017

 

2016

 

2015

 

Statutory income tax rate

 

30.00

%

30.00

%

30.00

%

Non-deductible expenses

 

(3.90

%)

0.28

%

0.66

%

Unrecorded deferred taxes on tax losses

 

(14.55

%)

0.09

%

 

Foreign countries difference with Mexican statutory rate

 

(0.32

%)

0.04

%

 

Inflation of tax losses

 

1.50

%

(0.01

%)

(0.02

%)

Amendment tax return effects and other tax adjustments

 

(0.31

%)

(0.11

%)

(0.42

%)

Inflation on furniture, intangible and equipment

 

4.91

%

(0.38

%)

(0.34

%)

Annual inflation adjustment

 

4.00

%

(0.63

%)

(0.23

%)

 

 

 

 

 

 

 

 

 

 

21.33

%

29.28

%

29.65

%

 

 

 

 

 

 

 

 

 

Schedule of consolidated deferred taxes

 

 

 

Consolidated
statement of
financial
position

 

Consolidated
statement of
operations

 

Consolidated
statement of
financial position

 

Consolidated
statement of
operations

 

Deferred income tax assets:

 

 

 

 

 

 

 

 

 

Intangible

 

Ps.

463,211

 

Ps.

(18,415

)

Ps.

481,626

 

Ps.

(16,637

)

Provisions

 

351,989

 

8,695

 

343,294

 

56,727

 

Tax losses available for offsetting against future taxable income

 

343,082

 

309,758

 

33,324

 

(25,030

)

Extension lease agreement

 

143,135

 

41,411

 

101,724

 

25,405

 

Unearned transportation revenue

 

35,941

 

(29,814

)

65,755

 

7,039

 

Allowance for doubtful accounts

 

7,324

 

433

 

6,891

 

(2,179

)

Employee benefits

 

5,786

 

1,222

 

4,031

 

886

 

Employee profit sharing

 

2,716

 

(490

)

3,206

 

158

 

 

 

 

 

 

 

 

 

 

 

 

 

1,353,184

 

312,800

 

1,039,851

 

46,369

 

Deferred income tax liabilities:

 

 

 

 

 

 

 

 

 

Supplemental rent

 

1,563,363

 

223,753

 

1,339,610

 

363,783

 

Rotable spare parts, furniture and equipment, net

 

476,917

 

108,890

 

368,027

 

103,926

 

Prepaid expenses and other assets

 

196,152

 

(239,586

)

435,738

 

280,660

 

Inventories

 

88,169

 

15,286

 

72,883

 

23,979

 

Financial instruments

 

49,151

 

 

61,168

 

 

Other prepayments

 

33,269

 

(7,023

)

40,292

 

23,717

 

 

 

 

 

 

 

 

 

 

 

 

 

2,407,021

 

101,320

 

2,317,718

 

796,065

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

(1,053,837

)

Ps.

211,480

 

Ps.

(1,277,867

)

Ps.

(749,696

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of components of deferred taxes in the consolidated statement of financial position

 

 

 

2017

 

2016

 

Reflected in the consolidated statement of financial position as follows:

 

 

 

 

 

Deferred tax assets

 

Ps.

562,445

 

Ps.

559,083

 

Deferred tax liabilities

 

(1,616,282

)

(1,836,950

)

 

 

 

 

 

 

Deferred tax liability, net

 

Ps.

(1,053,837

)

Ps.

(1,277,867

)

 

 

 

 

 

 

 

 

 

Schedule of reconciliation of deferred tax liability, net

 

 

 

2017

 

2016

 

Opening balance as of January 1,

 

Ps.

(1,277,867

)

Ps.

(340,895

)

Deferred income tax benefit (expense) during the current year recorded on profits

 

211,480

 

(749,696

)

Deferred income tax benefit (expense) during the current year recorded in accumulated other comprehensive income (loss)

 

12,550

 

(187,276

)

 

 

 

 

 

 

Closing balance as of December 31,

 

Ps.

(1,053,837

)

Ps.

(1,277,867

)

 

 

 

 

 

 

 

 

 

Schedule of available tax carry-forwards

 

An analysis of the available tax losses carry-forward of the Company at December 31, 2017 is as follows:

 

Year
of loss

 

Historical
Loss

 

Restated
tax loss

 

Utilized

 

Total remaining 
amount

 

Year of 
expiration

 

2016

 

57,414

 

57,414

 

 

57,414

 

2019

 

2016

 

52,221

 

56,573

 

16,378

 

40,195

 

2026

 

2017

 

300,613

 

300,613

 

 

300,613

 

2020

 

2017

 

1,068,498

 

1,103,408

 

 

1,103,408

 

2027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

1,478,746

 

Ps.

1,518,008

 

Ps.

16,378

 

Ps.

1,501,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A breakdown of available tax loss carry-forward of Controladora and its subsidiaries at December 31, 2017 is as follows:

 

 

 

Historical
loss

 

Restated
tax loss

 

 

 

Total
remaining amount

 

 

 

 

 

Utilized

 

 

Comercializadora

 

Ps.

52,221

 

Ps.

56,573

 

Ps.

16,378

 

Ps.

40,195

 

Concesionaria

 

1,067,836

 

1,102,726

 

 

1,102,726

 

Operaciones Volaris

 

662

 

682

 

 

682

 

Vuela Aviación

 

358,027

 

358,027

 

 

358,027

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

1,478,746

 

Ps.

1,518,008

 

Ps.

16,378

 

Ps.

1,501,630

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of tax balances

 

 

 

2017

 

Restated contributed capital account (Cuenta de capital de aportación or “CUCA”)

 

Ps.

3,737,048

 

CUFIN*

 

2,558,378

 

 

*The calculation comprises all the subsidiaries of the Company.

v3.8.0.1
Other operating income and expenses (Tables)
12 Months Ended
Dec. 31, 2017
Other operating income and expenses  
Schedule of other operating income

 

 

 

2017

 

2016

 

2015

 

Gain on sale and leaseback (Note 14c)

 

Ps.

65,886

 

Ps.

484,827

 

Ps.

181,736

 

Administrative benefits

 

27,180

 

9,072

 

 

Other income

 

3,699

 

2,843

 

11,419

 

 

 

 

 

 

 

 

 

 

 

Ps.

96,765

 

Ps.

496,742

 

Ps.

193,155

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of other operating expenses

 

 

 

2017

 

2016

 

2015

 

Administrative and operational support expenses

 

Ps.

562,739

 

Ps.

541,826

 

Ps.

383,805

 

Technology and communications

 

373,394

 

266,898

 

173,078

 

Passenger services

 

59,261

 

45,439

 

23,195

 

Insurance

 

54,569

 

56,414

 

54,609

 

Rents of offices, maintenance warehouse and hangar (Note 14c)

 

30,544

 

33,517

 

25,889

 

Disposal of intangible, rotable spare parts, furniture and equipment

 

11

 

436

 

632

 

Equity transaction costs (Note 18)

 

 

 

22,955

 

Others

 

7,922

 

7,922

 

13,623

 

 

 

 

 

 

 

 

 

 

 

Ps.

1,088,440

 

Ps.

952,452

 

Ps.

697,786

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Finance income and cost (Tables)
12 Months Ended
Dec. 31, 2017
Finance income and cost  
Schedule of finance income

 

 

 

2017

 

2016

 

2015

 

Interest on cash and equivalents

 

Ps.

105,151

 

Ps.

78,793

 

Ps.

47,029

 

Interest on recovery of guarantee deposits

 

644

 

23,792

 

 

Others

 

 

6

 

5

 

 

 

 

 

 

 

 

 

 

 

Ps.

105,795

 

Ps.

102,591

 

Ps.

47,034

 

 

 

 

 

 

 

 

 

 

 

 

 

Schedule of finance cost

 

 

 

2017

 

2016

 

2015

 

Cost of letter credit notes

 

Ps.

42,294

 

Ps.

28,067

 

Ps.

18,279

 

Interest on debts and borrowings*

 

37,565

 

1,245

 

 

Bank fees and others

 

5,279

 

5,804

 

3,424

 

Other finance costs

 

1,219

 

 

 

 

 

 

 

 

 

 

 

 

 

Ps.

86,357

 

Ps.

35,116

 

Ps.

21,703

 

 

 

 

 

 

 

 

 

 

 

 

 

* 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..

Schedule of capitalized interest

 

 

 

2017

 

2016

 

2015

 

Interest on debts and borrowings

 

Ps.

230,954

 

Ps.

96,690

 

Ps.

90,057

 

Capitalized interest (Note 12)

 

(193,389

)

(95,445

)

(90,057

)

 

 

 

 

 

 

 

 

Net interest on debts and borrowing in the consolidated statements of operations

 

Ps.

37,565

 

Ps.

1,245

 

Ps.

 

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Components of other comprehensive income (loss) (Tables)
12 Months Ended
Dec. 31, 2017
Components of other comprehensive income (loss)  
Schedule of components of other comprehensive income (loss)

 

 

 

2017

 

2016

 

2015

 

Derivative financial instruments:

 

 

 

 

 

 

 

Reclassification during the year to profit or loss

 

Ps.

52,097

 

Ps.

353,943

 

Ps.

287,550

 

Extrinsic value of changes on jet fuel Asian call options

 

(81,182

)

277,899

 

(450,768

)

Loss of the not-yet matured fuel swap contracts

 

 

 

(11,828

)

Gain (loss) of the matured foreign currency forward contracts

 

(13,380

)

 

 

Gain (loss) of the not-yet matured interest rate swap contracts

 

317

 

(7,148

)

(18,823

)

 

 

 

 

 

 

 

 

Total

 

Ps.

(42,148

)

Ps.

624,694

 

Ps.

(193,869

)

 

 

 

 

 

 

 

 

 

 

 

 

v3.8.0.1
Commitments and contingencies (Tables)
12 Months Ended
Dec. 31, 2017
Commitments and contingencies  
Schedule of committed expenditures

 

 

 

Commitment 
expenditures in U.S. 
dollars

 

Commitment 
expenditures 
equivalent in 
Mexican pesos(1)

 

2018

 

US$

76,194

 

Ps.

1,503,719

 

2019

 

130,013

 

2,565,859

 

2020

 

101,585

 

2,004,821

 

2021

 

145,683

 

2,875,112

 

2022 and thereafter

 

669,902

 

13,220,784

 

 

 

 

 

 

 

 

 

US$

1,123,377

 

Ps.

22,170,295

 

 

 

 

 

 

 

 

 

 

(1)

Using the exchange rate as of December 31, 2017 of Ps.19.7354.

v3.8.0.1
Operating segments (Tables)
12 Months Ended
Dec. 31, 2017
Operating segments  
Schedule of geographic segments

 

 

 

2017

 

2016

 

2015

 

Operating revenues:

 

 

 

 

 

 

 

Domestic (Mexico)

 

Ps.

17,313,740

 

Ps.

15,720,807

 

Ps.

12,579,806

 

International:

 

 

 

 

 

 

 

United States of America and Central America*

 

7,531,635

 

7,791,644

 

5,599,898

 

 

 

 

 

 

 

 

 

Total operating revenues

 

Ps.

24,845,375

 

Ps.

23,512,451

 

Ps.

18,179,704

 

 

 

 

 

 

 

 

 

 

 

 

 

*United States of America represents approximately 29%, 32% and 31% of total revenues from external customers in 2017, 2016 and 2015, respectively.

v3.8.0.1
Description of the business and summary of significant accounting policies - Relevant events (Details)
Dec. 28, 2017
aircraft
Nov. 10, 2016
Nov. 16, 2015
shares
Feb. 17, 2010
May 09, 2005
Description of the business and summary of significant accounting policies          
Number of aircraft purchased | aircraft 80        
Concesionaria          
Description of the business and summary of significant accounting policies          
Term of authorization to provide air transportation services       10 years 5 years
Volaris Costa Rica          
Description of the business and summary of significant accounting policies          
Term of authorization to provide air transportation services   5 years      
Ordinary Participation Certificates          
Description of the business and summary of significant accounting policies          
Number of shares sold by shareholders     108,900,000    
Number of shares sold by the Company     0    
v3.8.0.1
Description of the business and summary of significant accounting policies - Subsidiaries (Details)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Concesionaria    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Volaris Costa Rica    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Vuela, S.A.    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Comercializadora Volaris, S.A. de C.V.    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Servicios Earhart, S.A.    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Servicios Corporativos    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Servicios Administrativos    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Operaciones Volaris    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Deutsche Bank Mxico, S.A., Trust 1710    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Deutsche Bank Mxico, S.A., Trust 1711    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Irrevocable Administrative Trust number F/307750    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
Irrevocable Administrative Trust number F/745291    
Subsidiaries    
Proportion of ownership interest in subsidiary 100.00% 100.00%
v3.8.0.1
Description of the business and summary of significant accounting policies - Revenue recognition and financial instruments (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Non-ticket revenues        
Air travel-related services   $ 6,293,747 $ 5,055,836 $ 3,418,654
Non-air travel-related services   589,338 494,864 441,393
Cargo   170,973 171,621 189,292
Total non-ticket revenues $ 357,431 7,054,058 5,722,321 4,049,339
Impairment on accounts receivable   $ 4,720 $ 9,164 $ 8,825
v3.8.0.1
Description of the business and summary of significant accounting policies - Intangible assets (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Intangible assets      
Impairment on intangible assets $ 0 $ 0 $ 0
Software      
Intangible assets      
Useful life of intangible assets 5 years    
v3.8.0.1
Description of the business and summary of significant accounting policies - Aircraft, rotable spare parts, furniture and equipment, net (Details)
$ in Thousands
1 Months Ended 12 Months Ended
Aug. 31, 2015
aircraft
Dec. 31, 2017
MXN ($)
agreement
aircraft
Dec. 31, 2016
MXN ($)
aircraft
Dec. 31, 2015
MXN ($)
aircraft
Aircraft, rotable spare parts, furniture and equipment, net        
Maintenance deposits expensed as supplemental rent   $ 103,648 $ 143,923 $ 73,258
Number of aircraft added to fleet | aircraft   5 17 7
Maintenance adjustment payments expensed as contingent rent   $ 162,108 $ 201,434 $ 290,857
Number of aircraft with lease term extended | aircraft 3 3 2  
Number of engine agreements for which lease term extended | agreement   2    
Maintenance deposits expensed to contingent rent prior to lease extensions   $ 65,716 $ 92,528  
Amortization of lease incentives   $ 88,224 74,748 45,313
Length of time before routine aircraft and engine maintenance is required   22 months    
Additions   $ 2,584,232 2,198,697  
Depreciation   496,291 496,253 425,439
Capitalized borrowing costs   $ 193,389 $ 95,445 $ 90,057
Rate used to determine amount of borrowing cost   3.30% 2.88% 2.80%
Impairment charges on rotable spare parts, furniture and equipment   $ 0 $ 0 $ 0
Aircraft parts and rotable spare parts        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions   115,173 110,592  
Depreciation   44,409 33,430  
Aircraft spare engines        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions   385 323,025  
Depreciation   16,795 1,337  
Standardization        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions   15,833 21,953  
Depreciation   $ 18,543 23,728  
Annual depreciation rate   Remaining contractual lease term    
Computer equipment        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions   $ 1,845 740  
Depreciation   $ 3,809 2,549  
Annual depreciation rate   25.00%    
Communications equipment        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions     129  
Depreciation   $ 796 831  
Annual depreciation rate   10.00%    
Office furniture and equipment        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions   $ 6,805 517  
Depreciation   $ 3,801 3,559  
Annual depreciation rate   10.00%    
Electric power equipment        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions     1,467  
Depreciation   $ 1,294 1,946  
Annual depreciation rate   10.00%    
Workshop machinery and equipment        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions   $ 123 131  
Depreciation   $ 722 692  
Annual depreciation rate   10.00%    
Service carts on board        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions     36  
Depreciation   $ 376 731  
Annual depreciation rate   20.00%    
Leasehold improvements to flight equipment        
Aircraft, rotable spare parts, furniture and equipment, net        
Additions   $ 529,331 226,526  
Depreciation   $ 382,745 $ 404,659 $ 352,932
Annual depreciation rate   The shorter of: (i) remaining contractual lease term, or (ii) the next major maintenance event    
Minimum        
Aircraft, rotable spare parts, furniture and equipment, net        
Duration of routine aircraft and engine maintenance   7 days    
Length of time before major aircraft and engine maintenance is required   5 years    
Minimum | Aircraft parts and rotable spare parts        
Aircraft, rotable spare parts, furniture and equipment, net        
Annual depreciation rate   8.30%    
Minimum | Aircraft spare engines        
Aircraft, rotable spare parts, furniture and equipment, net        
Annual depreciation rate   4.00%    
Maximum        
Aircraft, rotable spare parts, furniture and equipment, net        
Duration of routine aircraft and engine maintenance   14 days    
Duration of major aircraft and engine maintenance   42 days    
Length of time before major aircraft and engine maintenance is required   6 years    
Maximum | Aircraft parts and rotable spare parts        
Aircraft, rotable spare parts, furniture and equipment, net        
Annual depreciation rate   16.70%    
Maximum | Aircraft spare engines        
Aircraft, rotable spare parts, furniture and equipment, net        
Annual depreciation rate   8.30%    
v3.8.0.1
Description of the business and summary of significant accounting policies - Foreign currency exchange differences and liabilities and provisions (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
$ / $
Q / $
Dec. 31, 2017
$ / $
₡ / $
Dec. 31, 2017
USD ($)
$ / $
Dec. 31, 2017
MXN ($)
$ / $
Dec. 31, 2016
$ / $
Q / $
Dec. 31, 2016
$ / $
₡ / $
Dec. 31, 2016
MXN ($)
$ / $
Dec. 31, 2015
MXN ($)
Apr. 25, 2018
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Description of the business and summary of significant accounting policies                          
Average exchange rate for year 7.3509 572.2000     7.4931 564.3332              
Exchange rate as of end of the year 19.7354 19.7354 19.7354 19.7354 20.6640 20.6640 20.6640   18.8628 7.3448 572.5600 7.5221 561.1000
Exchange differences on translation of foreign entities     $ 364 $ 7,178     $ 4,756            
Cost of return of aircraft to lessors expensed as supplemental rent       $ 851,410     $ 933,730 $ 91,698          
v3.8.0.1
Description of the business and summary of significant accounting policies - Employee benefits (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Share-based payments        
Termination benefits provision   $ 0 $ 0 $ 0
Number of days' wages for each year of service provided as seniority premium benefits 12 days 12 days    
Minimum years of service to receive seniority premium benefits 15 years 15 years    
Salaries and benefits $ 143,075 $ 2,823,647 2,419,537 1,902,748
Quarterly incentive bonuses        
Share-based payments        
Salaries and benefits   48,384 40,829 50,558
Short-term benefit plan for certain key personnel        
Share-based payments        
Salaries and benefits   0 53,738 70,690
Restricted Stock Units        
Share-based payments        
Salaries and benefits   13,508 7,816 6,018
SARs - cash settled        
Share-based payments        
Salaries and benefits     31,743 44,699
Salaries and benefits   (8,999)    
MIP I        
Share-based payments        
Salaries and benefits       327
MIP II        
Share-based payments        
Salaries and benefits     54,357  
Salaries and benefits   (16,499)    
Employee profit sharing        
Share-based payments        
Salaries and benefits   $ 8,342 $ 9,967 $ 9,938
v3.8.0.1
Description of the business and summary of significant accounting policies - Operating segments (Details) - segment
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Description of the business and summary of significant accounting policies      
Number of operating segments 1    
Number of geographic segments 2 2 2
v3.8.0.1
Description of the business and summary of significant accounting policies - IFRS 15 Revenue from Contracts with Customers (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Reclassification from non-ticket revenues to passenger revenues | Application of IFRS 15    
Reclassifications    
Amount reclassified $ 5,915,263 $ 4,758,074
v3.8.0.1
Significant accounting judgments, estimates and assumptions (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Deferred taxes      
Available tax loss carry-forwards $ 1,501,630 $ 111,083  
Tax loss carry-forwards used $ 16,378 $ 195,116 $ 1,618,850
Mexico      
Deferred taxes      
Period in which tax losses can be carried forward 10 years    
Costa Rica      
Deferred taxes      
Period in which tax losses can be carried forward 3 years    
v3.8.0.1
Financial instruments and risk management - Jet fuel price risk (Details)
item in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
item
$ / gal
Dec. 31, 2016
MXN ($)
item
$ / gal
Dec. 31, 2015
MXN ($)
Jet fuel      
Jet fuel price risk      
Percentage of operating expenses 29.00% 28.00% 30.00%
Jet fuel Asian call options      
Jet fuel price risk      
Notional volume (in gallons) 61,100 134,300  
Projected term of hedged consumption 9 months 21 months  
Fair value of derivative financial assets | $ $ 497,403 $ 867,809  
Cost of hedging recognized in other comprehensive income | $ 163,836 218,038  
Extrinsic value of options recycled to cost | $ $ 26,980 $ 305,166 $ 112,675
Within one year | Jet fuel Asian call options      
Jet fuel price risk      
Notional volume (in gallons) 131,381 118,798  
Strike price agreed rate | $ / gal 1.7447 1.5145  
Approximate percentage of hedge (of expected consumption value) 55.00% 52.00%  
Within six months | Jet fuel Asian call options      
Jet fuel price risk      
Notional volume (in gallons) 69,518 55,436  
Strike price agreed rate | $ / gal 1.6861 1.6245  
Approximate percentage of hedge (of expected consumption value) 60.00% 51.00%  
Between six months and one year | Jet fuel Asian call options      
Jet fuel price risk      
Notional volume (in gallons) 61,863 63,362  
Strike price agreed rate | $ / gal 1.8106 1.4182  
Approximate percentage of hedge (of expected consumption value) 50.00% 53.00%  
Between one year and two years | Jet fuel Asian call options      
Jet fuel price risk      
Notional volume (in gallons)   70,238  
Strike price agreed rate | $ / gal   1.6392  
Approximate percentage of hedge (of expected consumption value)   24.00%  
Between one year and eighteen months | Jet fuel Asian call options      
Jet fuel price risk      
Notional volume (in gallons)   62,492  
Strike price agreed rate | $ / gal   1.6508  
Approximate percentage of hedge (of expected consumption value)   45.00%  
Between eighteen months and two years | Jet fuel Asian call options      
Jet fuel price risk      
Notional volume (in gallons)   7,746  
Strike price agreed rate | $ / gal   1.5450  
Approximate percentage of hedge (of expected consumption value)   10.00%  
v3.8.0.1
Financial instruments and risk management - Foreign currency risk (Details)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Foreign currency risk    
Percentage of total collections denominated in U.S. dollars 40.00% 38.00%
United States of America and Central America    
Foreign currency risk    
Percentage of revenues 30.00% 33.00%
v3.8.0.1
Financial instruments and risk management - Foreign exchange on and off-balance sheet exposure (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
$ / $
Apr. 25, 2018
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
contract
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Dec. 31, 2016
USD ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2014
MXN ($)
Assets                            
Cash and cash equivalents         $ 352,204 $ 6,950,879         $ 358,303 $ 7,071,251 $ 5,157,313 $ 2,264,857
Other accounts receivable         24,244 478,467           427,403    
Total assets         1,148,509 22,666,267           21,781,771    
Liabilities                            
Financial debt           3,482,714           1,994,283 $ 1,591,019  
Foreign suppliers         54,594 1,077,438           861,805    
Derivative financial instruments                       14,144    
Total liabilities         633,538 12,503,096           $ 10,987,695    
Exchange rate 19.7354 18.8628 7.3448 572.5600       20.6640 7.5221 561.1000        
Aircraft and engine commitments         1,123,377 $ 22,170,295                
Foreign currency forward contract                            
Liabilities                            
Net loss on foreign currency forward contract $ 11,290                          
Number of foreign currency forward contracts | contract             0              
Foreign exchange and off-balance sheet exposure                            
Assets                            
Cash and cash equivalents         344,038           297,565      
Other accounts receivable         13,105           11,619      
Aircraft maintenance deposits paid to lessors         352,142           343,787      
Deposits for rental of flight equipment         25,343           30,025      
Derivative financial instruments         25,204           41,996      
Total assets         759,832           724,992      
Liabilities                            
Financial debt         128,296           76,789      
Foreign suppliers         53,729           56,109      
Taxes and fees payable         10,304           6,874      
Derivative financial instruments                     684      
Total liabilities         192,329           140,456      
Net foreign currency position         567,503           584,536      
Aircraft and engine operating lease payments         1,856,909           1,727,644      
Aircraft and engine commitments         1,123,377           315,326      
Total off-balance sheet transactions exposure         $ 2,980,286           $ 2,042,970      
Aircraft rental expense | Foreign currency forward contract                            
Liabilities                            
Percentage of expense hedged 9.00%                          
v3.8.0.1
Financial instruments and risk management - Interest rate risk (Details)
$ in Thousands, item in Millions
12 Months Ended
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
item
Dec. 31, 2015
MXN ($)
Interest rate risk      
Derivative financial liabilities   $ 14,144  
Loss on cash flow hedges $ 52,097 $ 353,943 $ 287,550
Interest rate swap contracts      
Interest rate risk      
Notional amount (in USD) | item   70  
Derivative financial liabilities   $ 14,144  
Loss on cash flow hedges $ 13,827 $ 48,777 $ 46,545
v3.8.0.1
Financial instruments and risk management - Maturity analysis for financial liabilities (Details) - MXN ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments $ 3,476,742 $ 2,002,325
Within one year    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments 2,397,590 1,059,279
Between one year and five years    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments 1,079,152 943,046
Interest rate swap contracts    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments   14,144
Interest rate swap contracts | Within one year    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments   14,144
Revolving line of credit    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments 2,528,388 1,271,891
Revolving line of credit | Within one year    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments 1,449,236 328,845
Revolving line of credit | Between one year and five years    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments 1,079,152 943,046
Short-term working capital facilities    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments 948,354 716,290
Short-term working capital facilities | Within one year    
Liquidity risk    
Contractual principal payments on financial liabilities and derivative financial instruments $ 948,354 $ 716,290
v3.8.0.1
Fair value measurements - Carrying amount and fair value (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Fair value measurements    
Carrying amount of derivative financial assets $ 497,403 $ 867,809
Fair value of derivative financial assets 497,403 867,809
Net carrying amount (2,979,339) (1,134,516)
Net fair value (2,984,338) (1,134,780)
Transfers of assets from level 1 to level 2 0 0
Transfers of assets from level 2 to level 1 0 0
Transfers of liabilities from level 1 to level 2 0 0
Transfers of liabilities from level 2 to level 1 0 0
Financial debt    
Fair value measurements    
Carrying amount of financial liabilities (3,476,742) (1,988,181)
Fair value of financial liabilities (3,481,741) (1,988,445)
Interest-bearing loans and borrowings    
Fair value measurements    
Fair value of financial liabilities (3,481,741) (1,988,445)
Derivative financial instruments    
Fair value measurements    
Carrying amount of financial liabilities   (14,144)
Fair value of financial liabilities   (14,144)
Jet fuel Asian call options    
Fair value measurements    
Carrying amount of derivative financial assets 497,403 867,809
Fair value of derivative financial assets 497,403 867,809
Interest rate swap contracts    
Fair value measurements    
Fair value of financial liabilities   (14,144)
Level 2    
Fair value measurements    
Net fair value (2,984,338) (1,134,780)
Level 2 | Interest-bearing loans and borrowings    
Fair value measurements    
Fair value of financial liabilities (3,481,741) (1,988,445)
Level 2 | Jet fuel Asian call options    
Fair value measurements    
Fair value of derivative financial assets $ 497,403 867,809
Level 2 | Interest rate swap contracts    
Fair value measurements    
Fair value of financial liabilities   $ (14,144)
v3.8.0.1
Fair value measurements - Loss gain from financial instruments (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
(Loss) gain on financial instruments        
Loss from derivatives financial instruments recognized in consolidated statements of operations   $ (52,097) $ (353,943) $ (287,550)
Net (loss) gain on cash flow hedges recognized in consolidated statements of comprehensive income $ (2,136) (42,148) 624,694 (193,869)
Foreign currency forward contract        
(Loss) gain on financial instruments        
Loss from derivatives financial instruments recognized in consolidated statements of operations   (11,290)    
Net (loss) gain on cash flow hedges recognized in consolidated statements of comprehensive income   (2,090)    
Jet fuel swap contracts        
(Loss) gain on financial instruments        
Loss from derivatives financial instruments recognized in consolidated statements of operations       (128,330)
Jet fuel Asian call options        
(Loss) gain on financial instruments        
Loss from derivatives financial instruments recognized in consolidated statements of operations   (26,980) (305,166) (112,675)
Net (loss) gain on cash flow hedges recognized in consolidated statements of comprehensive income   (54,202) 583,065 (221,592)
Interest rate swap contracts        
(Loss) gain on financial instruments        
Loss from derivatives financial instruments recognized in consolidated statements of operations   (13,827) (48,777) (46,545)
Net (loss) gain on cash flow hedges recognized in consolidated statements of comprehensive income   $ 14,144 $ 41,629 $ 27,723
v3.8.0.1
Financial assets and liabilities - Financial assets (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Financial assets      
Total financial assets   $ 497,403 $ 867,809
Current $ 25,204 497,403 543,528
Non-current     324,281
Jet fuel Asian call options      
Financial assets      
Total financial assets   $ 497,403 $ 867,809
v3.8.0.1
Financial assets and liabilities - Short-term and long-term debt (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2015
MXN ($)
Short-term and long-term debt        
Accrued interest   $ 6,102 $ 5,972  
Total financial debt   1,994,283 3,482,714 $ 1,591,019
Less: Short-term maturities $ 121,789 1,051,237 2,403,562 1,371,202
Long-term $ 54,681 943,046 1,079,152 $ 219,817
Within one year        
Short-term and long-term debt        
Total financial debt     2,403,562  
Between one year and two years        
Short-term and long-term debt        
Total financial debt     670,388  
Between two and three years        
Short-term and long-term debt        
Total financial debt     333,303  
Between three and four years        
Short-term and long-term debt        
Total financial debt     75,461  
Revolving line of credit        
Short-term and long-term debt        
Financial debt excluding accrued interest   $ 1,271,891 2,528,388  
Total financial debt     2,531,978  
Interest rate basis three-month LIBOR three-month LIBOR    
Revolving line of credit | Within one year        
Short-term and long-term debt        
Total financial debt     1,452,826  
Revolving line of credit | Between one year and two years        
Short-term and long-term debt        
Total financial debt     670,388  
Revolving line of credit | Between two and three years        
Short-term and long-term debt        
Total financial debt     333,303  
Revolving line of credit | Between three and four years        
Short-term and long-term debt        
Total financial debt     75,461  
Short-term working capital facility with Citibanamex        
Short-term and long-term debt        
Financial debt excluding accrued interest   $ 406,330 948,354  
Total financial debt     950,736  
Interest rate basis TIIE 28 TIIE 28    
Short-term working capital facility with Citibanamex | Within one year        
Short-term and long-term debt        
Total financial debt     $ 950,736  
Short-term working capital facility with Bank of America        
Short-term and long-term debt        
Financial debt excluding accrued interest   $ 309,960    
Interest rate basis   one-month LIBOR    
Spread on interest rate basis   1.60%    
Minimum | Revolving line of credit        
Short-term and long-term debt        
Spread on interest rate basis 1.99% 1.99% 1.99%  
Minimum | Short-term working capital facility with Citibanamex        
Short-term and long-term debt        
Spread on interest rate basis 0.20% 0.20% 0.20%  
Maximum | Revolving line of credit        
Short-term and long-term debt        
Spread on interest rate basis 2.25% 2.25% 2.25%  
Maximum | Short-term working capital facility with Citibanamex        
Short-term and long-term debt        
Spread on interest rate basis 0.80% 0.80% 0.80%  
v3.8.0.1
Financial assets and liabilities - Aircraft financing (Details) - aircraft
12 Months Ended
Nov. 30, 2016
Aug. 25, 2015
Nov. 27, 2014
Feb. 28, 2014
Aug. 01, 2013
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2014
Aircraft financing                  
Number of aircraft incorporated to fleet           5 17 7  
Revolving line of credit                  
Aircraft financing                  
Number of aircraft financed 22 8 4 2 8 1      
Number of aircraft delivered             5   1
Number of aircraft incorporated to fleet           1      
Number of aircraft with rescheduled delivery dates 22 7              
v3.8.0.1
Financial assets and liabilities - Line of credit (Details) - MXN ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Financial assets and liabilities    
Total available credit lines $ 7,368,346 $ 6,936,237
Available credit lines related to financial debt 4,616,861 5,048,477
Available credit lines related to letters of credit 2,751,485 1,887,760
Undrawn credit $ 1,739,775 $ 3,703,184
v3.8.0.1
Financial assets and liabilities - Changes in liabilities arising from financing activities (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Financial assets and liabilities      
Current interest-bearing loans and borrowings, beginning of the year   $ 1,051,237 $ 1,371,202
Non-current interest-bearing loans and borrowings, beginning of the year   943,046 219,817
Total liabilities from financing activities, beginning of the year   1,994,283 1,591,019
Net cash flows, current   419,350 (753,897)
Net cash flows, non-current   1,093,808 938,681
Net cash flows, total   1,513,158 184,874
Foreign exchange movement, current   25,924 121,271
Foreign exchange movement, non-current   (50,521) 98,450
Foreign exchange movement, total   (24,597) 219,721
Reclassification and other, current   907,051 312,661
Reclassification and other, non-current   (907,181) (313,902)
Reclassification and other, total   (130) (1,241)
Current interest-bearing loans and borrowings, end of the year $ 121,789 2,403,562 1,051,237
Non-current interest-bearing loans and borrowings, end of the year $ 54,681 1,079,152 943,046
Total liabilities from financing activities, end of the year   $ 3,482,714 $ 1,994,283
v3.8.0.1
Financial assets and liabilities - Other financial liabilities (Details)
$ in Thousands
Dec. 31, 2016
MXN ($)
Other financial liabilities  
Total financial liabilities $ 14,144
Current 14,144
Interest rate swap contracts  
Other financial liabilities  
Total financial liabilities $ 14,144
v3.8.0.1
Cash and cash equivalents (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
USD ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2014
MXN ($)
Cash and cash equivalents            
Short-term investments   $ 5,982,314   $ 4,433,559    
Cash in banks   963,162   2,632,878    
Cash on hand   5,403   4,814    
Total cash and cash equivalents $ 352,204 $ 6,950,879 $ 358,303 $ 7,071,251 $ 5,157,313 $ 2,264,857
v3.8.0.1
Related parties - Analysis of balances due from/to related parties (Details) - MXN ($)
$ in Thousands
12 Months Ended 24 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2017
Disclosure of transactions between related parties      
Due to related parties $ 40,931 $ 65,022 $ 40,931
One Link, S.A. de C.V.      
Disclosure of transactions between related parties      
Due to related parties $ 24,980 $ 33,775 24,980
Term 30 days 30 days  
Aeromantenimiento, S.A.      
Disclosure of transactions between related parties      
Due to related parties $ 15,951 $ 30,627 $ 15,951
Term 30 days 30 days  
SearchForce, Inc.      
Disclosure of transactions between related parties      
Due to related parties   $ 620  
Term     30 days
v3.8.0.1
Related parties - Transactions with related parties (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Related parties      
Aircraft and engine maintenance $ 249,266 $ 304,399 $ 111,641
Call center fees and other fees 202,689 173,197 57,809
Other $ 8,088 $ 8,105 $ 2,516
v3.8.0.1
Related parties - Other information (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Disclosure of transactions between related parties        
Balances due under the agreement   $ 40,931 $ 65,022  
Aggregate compensation of short and long-term benefits $ 143,075 2,823,647 2,419,537 $ 1,902,748
(Benefit) arising from cash-settled share-based payments transactions   (25,498)    
Expense arising from cash-settled share-based payments transactions     86,100 44,699
Servprot S.A. de C.V.        
Disclosure of transactions between related parties        
Security services expenses   $ 1,838 1,733 768
Aeromantenimiento, S.A.        
Disclosure of transactions between related parties        
Agreement term 10 years 10 years    
Balances due under the agreement   $ 15,951 30,627  
Aircraft, engine maintenance and technical support   251,731 308,731 114,157
Human Capital International        
Disclosure of transactions between related parties        
Professional services expenses   816 3,127  
One Link, S.A. de C.V.        
Disclosure of transactions between related parties        
Balances due under the agreement   24,980 33,775  
Expenses under the agreement   200,035 168,337  
SearchForce, Inc.        
Disclosure of transactions between related parties        
Balances due under the agreement     620  
Expenses under the agreement   1,946 3,446  
Directors and officers        
Disclosure of transactions between related parties        
Share-based payments transactions   13,508 7,816 6,345
(Benefit) arising from cash-settled share-based payments transactions   (25,498)    
Expense arising from cash-settled share-based payments transactions     86,100 44,699
Provision for cash bonuses   0 53,738  
Senior managers        
Disclosure of transactions between related parties        
Aggregate compensation of short and long-term benefits   134,370 160,762 120,440
Chairman and independent members of the board of directors        
Disclosure of transactions between related parties        
Compensation   8,993 7,751 5,480
Rest of the directors        
Disclosure of transactions between related parties        
Compensation   $ 7,834 $ 7,308 $ 4,183
v3.8.0.1
Other accounts receivable, net (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2014
MXN ($)
Other accounts receivable, net          
Credit cards   $ 191,322 $ 253,374    
Other accounts receivable   117,582 26,236    
Other points of sales   54,719 23,867    
Affinity credit card   40,517 8,950    
Cargo clients   34,655 29,901    
Travel agencies and insurance commissions   27,925 20,477    
Marketing services receivable   13,435 11,070    
Airport services   5,898 9,479    
Employees   8,878 7,551    
Insurance claims   1,345 55,815    
Other accounts receivable, gross   496,276 446,720    
Allowance for credit losses   (17,809) (19,317) $ (24,612) $ (27,786)
Other accounts receivable, net $ 24,244 $ 478,467 $ 427,403    
v3.8.0.1
Other accounts receivable, net - Aging of accounts receivable (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2014
MXN ($)
Accounts receivable aging          
Impaired accounts receivable   $ 17,809 $ 19,317 $ 24,612 $ 27,786
Not impaired accounts receivable $ 24,244 478,467 427,403    
Total accounts receivable   496,276 446,720    
0-30 Days          
Accounts receivable aging          
Impaired accounts receivable   16,962 15,723    
Not impaired accounts receivable   415,847 398,721    
Total accounts receivable   432,809 414,444    
31-60 Days          
Accounts receivable aging          
Not impaired accounts receivable   38,705 11,231    
Total accounts receivable   38,705 11,231    
61-90 Days          
Accounts receivable aging          
Not impaired accounts receivable   17,918 14,492    
Total accounts receivable   17,918 14,492    
91-120 Days          
Accounts receivable aging          
Impaired accounts receivable   847 3,594    
Not impaired accounts receivable   5,997 2,959    
Total accounts receivable   $ 6,844 $ 6,553    
v3.8.0.1
Other accounts receivable, net - Movement in the allowance for doubtful accounts (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Other accounts receivable, net      
Balance as of beginning of the year $ (19,317) $ (24,612) $ (27,786)
Write-offs 6,228 14,459 11,999
Increase in allowance (4,720) (9,164) (8,825)
Balance as of end of the year $ (17,809) $ (19,317) $ (24,612)
v3.8.0.1
Inventories (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Inventories          
Spare parts and accessories of flight equipment   $ 235,330     $ 285,185
Miscellaneous supplies   8,554     9,665
Total   243,884   $ 14,940 $ 294,850
Consumption of inventories included in maintenance expense $ 242,265 $ 186,719 $ 143,992    
v3.8.0.1
Prepaid expenses and other current assets (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Prepaid expenses and other current assets      
Advances to suppliers   $ 346,263 $ 705,105
Prepaid aircraft rent   215,784 668,306
Prepaid insurance   68,712 47,663
Other prepaid expenses   65,642 33,555
Sales commission to travel agencies   54,501 73,413
Advances for constructions of aircraft and engines   13,764 31,437
Loss on sale and leaseback transactions to be amortized   3,047 3,047
Total $ 38,900 $ 767,713 $ 1,562,526
v3.8.0.1
Guarantee deposits (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Current assets:      
Aircraft maintenance deposits paid to lessors   $ 1,317,663 $ 1,145,913
Deposits for rental of flight equipment   17,178 14,155
Other guarantee deposits   18,052 7,141
Total $ 68,552 1,352,893 1,167,209
Non-current assets:      
Aircraft maintenance deposits paid to lessors   5,631,304 5,951,831
Deposits for rental of flight equipment   441,110 589,804
Other guarantee deposits   25,838 18,243
Total $ 309,001 6,098,252 6,559,878
Total guarantee deposits   $ 7,451,145 $ 7,727,087
v3.8.0.1
Rotable spare parts, furniture and equipment, net - Net carrying value (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   $ 2,525,008 $ 2,549,650 $ 221,718 $ 4,375,697
Capitalized borrowing costs $ 193,389 95,445 90,057    
Disposals of capitalized borrowing costs $ 110,274 84,936      
Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   4,309,387     6,655,478
Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (1,784,379)     (2,279,781)
Leasehold improvements to flight equipment          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   323,024 501,157   613,098
Leasehold improvements to flight equipment | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   1,709,868     2,382,687
Leasehold improvements to flight equipment | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (1,386,844)     (1,769,589)
Pre-delivery payments          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   1,206,330 1,583,835   2,783,303
Pre-delivery payments | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   1,206,330     2,783,303
Aircraft parts and rotable spare parts          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   255,810 179,947   325,644
Aircraft parts and rotable spare parts | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   393,522     506,735
Aircraft parts and rotable spare parts | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (137,712)     (181,091)
Aircraft spare engines          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   321,688     305,278
Aircraft spare engines | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   323,025     323,410
Aircraft spare engines | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (1,337)     (18,132)
Construction and improvements in process          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   255,374 140,926   193,607
Construction and improvements in process | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   255,374     193,607
Standardization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   82,111 83,886   79,401
Standardization | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   176,975     192,808
Standardization | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (94,864)     (113,407)
Constructions and improvements          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   35,013 18,202   25,168
Constructions and improvements | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   120,886     131,503
Constructions and improvements | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (85,873)     (106,335)
Computer equipment          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   7,200 4,195   9,323
Computer equipment | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   24,172     30,113
Computer equipment | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (16,972)     (20,790)
Workshop tools          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   4,585 4,815   2,271
Workshop tools | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   20,500     20,500
Workshop tools | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (15,915)     (18,229)
Electric power equipment          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   6,928 9,033   6,254
Electric power equipment | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   14,818     15,439
Electric power equipment | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (7,890)     (9,185)
Communications equipment          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   3,555 3,764   4,727
Communications equipment | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   9,261     11,229
Communications equipment | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (5,706)     (6,502)
Workshop machinery and equipment          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   3,618 4,179   4,060
Workshop machinery and equipment | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   7,240     8,405
Workshop machinery and equipment | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (3,622)     (4,345)
Motorized transport equipment platform          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   1,357 1,326   886
Motorized transport equipment platform | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   5,703     5,587
Motorized transport equipment platform | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (4,346)     (4,701)
Service carts on board          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   758 1,453   382
Service carts on board | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   5,403     5,403
Service carts on board | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   (4,645)     (5,021)
Office furniture and equipment          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   17,657 $ 12,932   22,295
Office furniture and equipment | Gross value          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   36,310     44,749
Office furniture and equipment | Accumulated depreciation / amortization          
Rotable spare parts, furniture and equipment, net          
Rotable spare parts, furniture and equipment, net   $ (18,653)     $ (22,454)
v3.8.0.1
Rotable spare parts, furniture and equipment, net - Reconciliation of changes (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   $ 2,525,008 $ 2,549,650  
Additions   2,584,232 2,198,697  
Disposals and transfers   (319,671) (1,738,309)  
Borrowing costs, net   83,115 10,507  
Other movements   (696) 716  
Depreciation   (496,291) (496,253) $ (425,439)
Balance at end of the year $ 221,718 4,375,697 2,525,008 2,549,650
Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   4,309,387    
Balance at end of the year   6,655,478 4,309,387  
Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (1,784,379)    
Balance at end of the year   (2,279,781) (1,784,379)  
Aircraft parts and rotable spare parts        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   255,810 179,947  
Additions   115,173 110,592  
Disposals and transfers   (930) (1,299)  
Depreciation   (44,409) (33,430)  
Balance at end of the year   325,644 255,810 179,947
Aircraft parts and rotable spare parts | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   393,522    
Balance at end of the year   506,735 393,522  
Aircraft parts and rotable spare parts | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (137,712)    
Balance at end of the year   (181,091) (137,712)  
Aircraft spare engines        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   321,688    
Additions   385 323,025  
Depreciation   (16,795) (1,337)  
Balance at end of the year   305,278 321,688  
Aircraft spare engines | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   323,025    
Balance at end of the year   323,410 323,025  
Aircraft spare engines | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (1,337)    
Balance at end of the year   (18,132) (1,337)  
Constructions and improvements        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   35,013 18,202  
Additions     2,218  
Other movements   10,371 32,441  
Depreciation   (20,216) (17,848)  
Balance at end of the year   25,168 35,013 18,202
Constructions and improvements | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   120,886    
Balance at end of the year   131,503 120,886  
Constructions and improvements | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (85,873)    
Balance at end of the year   (106,335) (85,873)  
Standardization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   82,111 83,886  
Additions   15,833 21,953  
Depreciation   (18,543) (23,728)  
Balance at end of the year   79,401 82,111 83,886
Standardization | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   176,975    
Balance at end of the year   192,808 176,975  
Standardization | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (94,864)    
Balance at end of the year   (113,407) (94,864)  
Computer equipment        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   7,200 4,195  
Additions   1,845 740  
Other movements   4,087 4,814  
Depreciation   (3,809) (2,549)  
Balance at end of the year   9,323 7,200 4,195
Computer equipment | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   24,172    
Balance at end of the year   30,113 24,172  
Computer equipment | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (16,972)    
Balance at end of the year   (20,790) (16,972)  
Office furniture and equipment        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   17,657 12,932  
Additions   6,805 517  
Disposals and transfers   (15) (110)  
Other movements   1,649 7,877  
Depreciation   (3,801) (3,559)  
Balance at end of the year   22,295 17,657 12,932
Office furniture and equipment | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   36,310    
Balance at end of the year   44,749 36,310  
Office furniture and equipment | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (18,653)    
Balance at end of the year   (22,454) (18,653)  
Electric power equipment        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   6,928 9,033  
Additions     1,467  
Disposals and transfers     (1,626)  
Other movements   620    
Depreciation   (1,294) (1,946)  
Balance at end of the year   6,254 6,928 9,033
Electric power equipment | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   14,818    
Balance at end of the year   15,439 14,818  
Electric power equipment | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (7,890)    
Balance at end of the year   (9,185) (7,890)  
Workshop tools        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   4,585 4,815  
Additions     4,217  
Other movements     25  
Depreciation   (2,314) (4,472)  
Balance at end of the year   2,271 4,585 4,815
Workshop tools | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   20,500    
Balance at end of the year   20,500 20,500  
Workshop tools | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (15,915)    
Balance at end of the year   (18,229) (15,915)  
Motorized transport equipment platform        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   1,357 1,326  
Additions     505  
Disposals and transfers     (49)  
Other movements     46  
Depreciation   (471) (471)  
Balance at end of the year   886 1,357 1,326
Motorized transport equipment platform | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   5,703    
Balance at end of the year   5,587 5,703  
Motorized transport equipment platform | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (4,346)    
Balance at end of the year   (4,701) (4,346)  
Communications equipment        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   3,555 3,764  
Additions     129  
Other movements   1,968 493  
Depreciation   (796) (831)  
Balance at end of the year   4,727 3,555 3,764
Communications equipment | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   9,261    
Balance at end of the year   11,229 9,261  
Communications equipment | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (5,706)    
Balance at end of the year   (6,502) (5,706)  
Workshop machinery and equipment        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   3,618 4,179  
Additions   123 131  
Other movements   1,041    
Depreciation   (722) (692)  
Balance at end of the year   4,060 3,618 4,179
Workshop machinery and equipment | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   7,240    
Balance at end of the year   8,405 7,240  
Workshop machinery and equipment | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (3,622)    
Balance at end of the year   (4,345) (3,622)  
Service carts on board        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   758 1,453  
Additions     36  
Depreciation   (376) (731)  
Balance at end of the year   382 758 1,453
Service carts on board | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   5,403    
Balance at end of the year   5,403 5,403  
Service carts on board | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (4,645)    
Balance at end of the year   (5,021) (4,645)  
Pre-delivery payments        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   1,206,330 1,583,835  
Additions   1,707,805 1,345,081  
Disposals and transfers   (213,947) (1,733,093)  
Borrowing costs, net   83,115 10,507  
Balance at end of the year   2,783,303 1,206,330 1,583,835
Pre-delivery payments | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   1,206,330    
Balance at end of the year   2,783,303 1,206,330  
Construction and improvements in process        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   255,374 140,926  
Additions   206,932 161,560  
Disposals and transfers   (3,555) (2,132)  
Other movements   (265,144) (44,980)  
Balance at end of the year   193,607 255,374 140,926
Construction and improvements in process | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   255,374    
Balance at end of the year   193,607 255,374  
Leasehold improvements to flight equipment        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   323,024 501,157  
Additions   529,331 226,526  
Disposals and transfers   (101,224)    
Other movements   244,712    
Depreciation   (382,745) (404,659) (352,932)
Balance at end of the year   613,098 323,024 $ 501,157
Leasehold improvements to flight equipment | Gross value        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   1,709,868    
Balance at end of the year   2,382,687 1,709,868  
Leasehold improvements to flight equipment | Accumulated depreciation / amortization        
Rotable spare parts, furniture and equipment, net        
Balance at beginning of the year   (1,386,844)    
Balance at end of the year   $ (1,769,589) $ (1,386,844)  
v3.8.0.1
Rotable spare parts, furniture and equipment, net - Additional Information (Details)
$ in Thousands, $ in Thousands
1 Months Ended 3 Months Ended 12 Months Ended
Dec. 28, 2017
aircraft
Aug. 16, 2013
engine
Aug. 27, 2012
USD ($)
Aug. 27, 2012
MXN ($)
Dec. 31, 2017
USD ($)
aircraft
Dec. 31, 2017
MXN ($)
aircraft
Dec. 31, 2016
USD ($)
Dec. 31, 2016
MXN ($)
Nov. 30, 2015
engine
Dec. 31, 2016
MXN ($)
engine
item
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
aircraft
Dec. 31, 2016
USD ($)
engine
Dec. 31, 2016
MXN ($)
engine
Dec. 31, 2015
MXN ($)
Dec. 31, 2011
aircraft
Rotable spare parts, furniture and equipment, net                                
Depreciation expense | $                       $ 496,291   $ 496,253 $ 425,439  
Number of aircraft purchased 80                              
Number of spare engines purchased | engine                 3 2     2 2    
Number of aircraft engines to be provided maintenance services | engine                 16              
Credit notes received         $ 3,060 $ 58,530                    
Accumulated amortization of credit notes | $           $ 1,219           1,219        
Number of aircraft to be delivered         29 29                    
Amounts paid for aircraft and spare engines                     $ 127,778 $ 2,521,752   $ 2,198,697 1,403,863  
Total number of aircraft to be delivered           109           109        
Term of aircraft delivery agreement                     9 years 9 years        
Within one year                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           4           4        
Between one year and two years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           7           7        
Between two and three years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           12           12        
Between three and four years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           6           6        
Between four and five years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           13           13        
Between five and six years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           18           18        
Between six and seven years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           9           9        
Between seven and eight years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           15           15        
Between eight and nine years                                
Rotable spare parts, furniture and equipment, net                                
Total number of aircraft to be delivered           25           25        
Lufthansa Technik AG                                
Rotable spare parts, furniture and equipment, net                                
Credit notes received     $ 3,500 $ 46,461                        
Accumulated amortization of credit notes | $           $ 6,580   $ 9,292   $ 9,292   $ 6,580   9,292 $ 9,292  
Term of total support agreement     5 years 5 years                        
Lufthansa Technik AG - December 2016 Agreement                                
Rotable spare parts, furniture and equipment, net                                
Credit notes received             $ 1,500 $ 28,110                
Accumulated amortization of credit notes | $           $ 1,961           1,961        
Term of total support agreement             66 months 66 months                
A320 model                                
Rotable spare parts, furniture and equipment, net                                
Number of aircraft purchased                               44
A320CEO model                                
Rotable spare parts, furniture and equipment, net                                
Number of aircraft purchased                               14
Number of engines purchased | engine   14                            
Number of spare engines purchased | engine   1                            
A320NEO model                                
Rotable spare parts, furniture and equipment, net                                
Number of aircraft purchased 46                             30
Number of engines purchased | engine   30                            
Number of spare engines purchased | engine   6             2              
Number of aircraft engines to be provided maintenance services | engine                 10              
A321NEO model                                
Rotable spare parts, furniture and equipment, net                                
Number of aircraft purchased 34                              
Number of spare engines purchased | engine                 1              
Number of aircraft engines to be provided maintenance services | engine                 6              
Pre-delivery payments                                
Rotable spare parts, furniture and equipment, net                                
Amounts paid for aircraft and spare engines                     $ 90,000 1,707,805 $ 82,700 1,345,081    
Aircraft spare engines                                
Rotable spare parts, furniture and equipment, net                                
Depreciation expense | $                       $ 16,795   $ 1,337    
Amounts paid for aircraft and spare engines | $                   $ 323,025            
Number of major components | item                   2            
Estimated useful lives (in years)                   25 years            
Limited life parts                                
Rotable spare parts, furniture and equipment, net                                
Estimated useful lives (in years)                   12 years            
v3.8.0.1
Intangible assets, net (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Composition and movement of intangible assets        
Beginning balance   $ 114,041 $ 94,649  
Additions   130,908 60,792  
Disposals   (1,976) (1,277)  
Amortization   (52,396) (40,290)  
Exchange differences   (157) 167  
Ending balance $ 9,649 190,420 114,041 $ 94,649
Software        
Composition and movement of intangible assets        
Beginning balance   114,041    
Ending balance   190,420 114,041  
Amortization expense   52,396 40,290 $ 31,278
Software | Gross value        
Composition and movement of intangible assets        
Beginning balance   313,028    
Ending balance   441,803 313,028  
Software | Accumulated depreciation / amortization        
Composition and movement of intangible assets        
Beginning balance   (198,987)    
Ending balance   $ (251,383) $ (198,987)  
Software | Minimum        
Composition and movement of intangible assets        
Estimated useful lives (in years) 1 year 1 year 1 year  
Software | Maximum        
Composition and movement of intangible assets        
Estimated useful lives (in years) 4 years 4 years 4 years  
v3.8.0.1
Operating leases (Details)
1 Months Ended 3 Months Ended 12 Months Ended
Nov. 30, 2015
engine
Aug. 31, 2015
aircraft
Dec. 31, 2016
engine
aircraft
Dec. 31, 2017
engine
aircraft
Dec. 31, 2016
engine
aircraft
item
Dec. 31, 2015
engine
aircraft
Operating leases            
Number of aircraft leased     69 71 69 56
Number of spare engines leased | engine     11 8 11 6
Number of aircraft incorporated to fleet       5 17 7
Number of aircraft returned to respective lessors       3 4 1
Number of aircraft with lease term extended   3   3 2  
Number of aircraft spare engines with lease term extended | engine       2    
Number of aircraft spare engines to be leased | item         5  
Number of spare engines purchased | engine 3   2   2  
Airbus purchase agreement            
Operating leases            
Number of aircraft incorporated to fleet       1 8 5
Lessor's aircraft order book            
Operating leases            
Number of aircraft incorporated to fleet       4 9 2
Effective from 2015            
Operating leases            
Number of aircraft with lease term extended   1        
Effective from 2016            
Operating leases            
Number of aircraft with lease term extended   2        
A319 Model 132            
Operating leases            
Number of aircraft leased     6 6 6 6
A319 Model 133            
Operating leases            
Number of aircraft leased     9 6 9 12
A320 Model 233            
Operating leases            
Number of aircraft leased     39 39 39 32
A320 Model 232            
Operating leases            
Number of aircraft leased     4 4 4 4
A320NEO Model 271N            
Operating leases            
Number of aircraft leased     1 6 1  
A321 Model 231            
Operating leases            
Number of aircraft leased     10 10 10 2
V2500 Model V2527M-A5            
Operating leases            
Number of spare engines leased | engine     3 3 3 3
V2500 Model V2527E-A5            
Operating leases            
Number of spare engines leased | engine     4 3 4 3
V2500 Model V2527-A5            
Operating leases            
Number of spare engines leased | engine     4 2 4  
v3.8.0.1
Operating leases - Future minimum rent payments (Details)
$ in Thousands, $ in Thousands
Apr. 25, 2018
$ / $
Dec. 31, 2017
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Disclosure of maturity analysis of operating lease payments [line items]                  
Exchange rate 18.8628 19.7354 7.3448 572.5600     20.6640 7.5221 561.1000
Aircraft                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         $ 1,837,388 $ 36,261,588      
Aircraft spare engines                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         19,521 385,254      
Land and buildings | Denominated in U.S. dollars                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         18,203 359,244      
Land and buildings | Denominated in Mexican pesos                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments           223,515      
Within one year | Aircraft                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         257,681 5,085,438      
Within one year | Aircraft spare engines                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         4,336 85,573      
Within one year | Land and buildings | Denominated in U.S. dollars                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         6,718 132,582      
Within one year | Land and buildings | Denominated in Mexican pesos                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments           66,243      
Between one year and two years | Aircraft                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         244,264 4,820,648      
Between one year and two years | Aircraft spare engines                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         3,986 78,665      
Between one year and two years | Land and buildings | Denominated in U.S. dollars                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         4,563 90,053      
Between one year and two years | Land and buildings | Denominated in Mexican pesos                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments           52,575      
Between two and three years | Aircraft                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         238,837 4,713,544      
Between two and three years | Aircraft spare engines                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         3,366 66,429      
Between two and three years | Land and buildings | Denominated in U.S. dollars                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         4,548 89,757      
Between two and three years | Land and buildings | Denominated in Mexican pesos                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments           42,335      
Between three and four years | Aircraft                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         233,002 4,598,388      
Between three and four years | Aircraft spare engines                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         3,209 63,331      
Between three and four years | Land and buildings | Denominated in U.S. dollars                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         1,672 32,998      
Between three and four years | Land and buildings | Denominated in Mexican pesos                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments           9,168      
Later than four years | Aircraft                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         863,604 17,043,570      
Later than four years | Aircraft spare engines                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         4,624 91,256      
Later than four years | Land and buildings | Denominated in U.S. dollars                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments         $ 702 13,854      
Later than four years | Land and buildings | Denominated in Mexican pesos                  
Disclosure of maturity analysis of operating lease payments [line items]                  
Future minimum payments           $ 53,194      
v3.8.0.1
Operating leases - Rental expense and sale and leaseback transactions (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2011
MXN ($)
Operating leases          
Aircraft and engine $ 307,696 $ 6,072,502 $ 5,590,058 $ 3,525,336  
Airports facilities   44,251 40,591 39,993  
Offices, maintenance warehouse and hangar   30,544 33,517 25,889  
Total rental expenses on real estate   74,795 74,108 65,882  
Total cost of operating leases   6,147,297 5,664,166 3,591,218  
Gain on sale and leaseback transactions of aircraft and spare engines   65,886 484,827 181,736  
Deferred loss on sale and leaseback transactions of aircraft and spare engines         $ 30,706
Loss on sale and leaseback transactions to be amortized   3,047 3,047    
Non-current portion of loss on sale and leaseback transactions   11,413 14,460    
Amortized portion of loss on sale and leaseback transactions   $ 3,047 $ 3,047 $ 3,047  
v3.8.0.1
Accrued liabilities - Current (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Accrued liabilities      
Fuel and traffic accrued expenses   $ 1,106,913 $ 922,607
Maintenance and aircraft parts accrued expenses   194,366 130,897
Sales, marketing and distribution accrued expenses   143,758 102,880
Maintenance deposits   132,519 179,288
Salaries and benefits   114,781 170,994
Accrued administrative expenses   90,459 80,981
Aircraft and engine lease extension benefit   83,047 85,124
Deferred revenue from VClub membership   76,261 32,771
Information and communication accrued expenses   44,638 32,950
Supplier services agreement   10,634 6,333
Depositary services benefit   1,473 2,068
Advances from travel agencies   650 1,536
Others   51,474 37,010
Total accrued liabilities $ 103,924 $ 2,050,973 $ 1,785,439
v3.8.0.1
Accrued liabilities - Long-term (Details)
$ in Thousands, $ in Thousands
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Accrued liabilities      
Aircraft and engine lease extension benefit   $ 107,400 $ 127,831
Supplier services agreement   77,174 4,350
Depositary services benefit     1,473
Other   15,274 36,154
Total long-term accrued liabilities $ 10,126 $ 199,848 $ 169,808
v3.8.0.1
Accrued liabilities - Other liabilities (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Analysis of accrued liabilities    
Balance at beginning of the year $ 420,755 $ 159,499
Increase for the year 968,890 1,048,731
Payments 869,633 774,468
Unwinding discount 22,566 13,007
Balance at end of the year 497,446 420,755
Aircraft lease return obligation    
Analysis of accrued liabilities    
Balance at beginning of the year 410,060 149,326
Increase for the year 960,548 1,038,764
Payments 859,659 765,023
Unwinding discount 22,566 13,007
Balance at end of the year 488,383 410,060
Employee profit sharing    
Analysis of accrued liabilities    
Balance at beginning of the year 10,695 10,173
Increase for the year 8,342 9,967
Payments 9,974 9,445
Balance at end of the year $ 9,063 $ 10,695
v3.8.0.1
Accrued liabilities - Other liabilities, short-term and long-term (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Accrued liabilities          
Other liabilities   $ 420,755 $ 159,499   $ 497,446
Short-term maturities   284,200   $ 14,225 280,744
Long-term   136,555   $ 10,980 $ 216,702
Cancellations, or write off related to liabilities $ 0 $ 0 $ 0    
v3.8.0.1
Employee benefits - Analysis of net period cost (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Employee benefits      
Current service cost $ 3,657 $ 2,421 $ 2,012
Interest cost on benefit obligation 1,000 701 537
Net period cost $ 4,657 $ 3,122 $ 2,549
v3.8.0.1
Employee benefits - Changes in the defined benefit obligation and actuarial assumptions (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Defined benefit obligation and significant assumptions      
Defined benefit obligation at beginning of the year $ 13,438 $ 10,056 $ 7,737
Net period cost charged to profit or loss:      
Current service cost 3,657 2,421 2,012
Interest cost on benefit obligation 1,000 701 537
Remeasurement losses in other comprehensive income:      
Actuarial changes arising from changes in assumptions 1,776 442 1,174
Payments made (582) (182) (1,404)
Defined benefit obligation at end of the year $ 19,289 $ 13,438 $ 10,056
Discount rate 7.72% 7.78% 7.29%
Expected rate of salary increases 5.50% 5.50% 5.50%
Annual increase in minimum salary 4.00% 4.00% 4.00%
Salaries and benefits $ 114,781 $ 170,994  
Employee profit sharing      
Remeasurement losses in other comprehensive income:      
Salaries and benefits $ 9,063 $ 10,695  
v3.8.0.1
Share-based payments - Share purchase plan (Details) - Share purchase plan
$ in Thousands
1 Months Ended 12 Months Ended
Nov. 11, 2014
MXN ($)
Nov. 30, 2017
MXN ($)
Oct. 31, 2016
MXN ($)
Apr. 30, 2016
MXN ($)
Nov. 30, 2014
MXN ($)
Dec. 31, 2017
EquityInstruments
shares
Dec. 31, 2016
EquityInstruments
shares
Share purchase plan              
Special bonus granted | $         $ 10,831    
Special bonus net of withheld taxes | $ $ 7,059            
Cost of extensions to LTIP approved | $   $ 15,765 $ 11,599 $ 14,532      
Cost of extensions net of withheld taxes | $   $ 10,108 $ 7,559 $ 9,466      
Outstanding at beginning of the year | EquityInstruments           618,048 617,001
Purchased during the year | shares           547,310 513,002
Exercised/vested during the year | EquityInstruments           (345,270) (425,536)
Forfeited during the year | EquityInstruments             (86,419)
Outstanding at end of the year | EquityInstruments           820,088 618,048
v3.8.0.1
Share-based payments - Vesting period of shares granted under share purchase plan (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
EquityInstruments
Dec. 31, 2016
MXN ($)
EquityInstruments
Dec. 31, 2015
MXN ($)
EquityInstruments
Share-based payments      
Compensation expense recorded in the consolidated statement of operations | $ $ 13,508 $ 7,816 $ 6,345
Share purchase plan      
Share-based payments      
Shares outstanding 820,088 618,048 617,001
Compensation expense recorded in the consolidated statement of operations | $ $ 13,508 $ 7,816 $ 6,018
Forfeited during the year   (86,419)  
Share purchase plan | Vesting / Exercisable within one year      
Share-based payments      
Shares outstanding 353,457    
Share purchase plan | Vesting / Exercisable within two years      
Share-based payments      
Shares outstanding 284,200    
Share purchase plan | Vesting / Exercisable within three years      
Share-based payments      
Shares outstanding 182,431    
v3.8.0.1
Share-based payments - SARs (cash settled) (Details)
$ in Thousands
12 Months Ended
Nov. 06, 2014
MXN ($)
EquityInstruments
Dec. 31, 2017
MXN ($)
EquityInstruments
Dec. 31, 2016
MXN ($)
EquityInstruments
Dec. 31, 2015
MXN ($)
EquityInstruments
Share-based payments        
Compensation (benefit) recorded in the consolidated statement of operations   $ (25,498)    
Compensation expense recorded in the consolidated statement of operations     $ 86,100 $ 44,699
SARs - cash settled        
Share-based payments        
Granted | EquityInstruments 4,315,264 3,965,351 2,044,604 1,793,459
Vesting period 3 years 3 years 3 years 3 years
Total amount granted $ 10,831 $ 15,765 $ 14,532 $ 11,599
Carrying amount of the liability   723 15,744  
Compensation (benefit) recorded in the consolidated statement of operations   $ (8,999)    
Compensation expense recorded in the consolidated statement of operations     $ 31,743 $ 44,699
v3.8.0.1
Share-based payments - Vesting schedule of SARs (Details) - SARs - cash settled
$ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
EquityInstruments
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Share-based payments      
Shares outstanding 5,358,053    
Cash payment related to key employees related to SARs plan | $ $ 6,021 $ 31,261 $ 31,090
Vesting / Exercisable within one year      
Share-based payments      
Shares outstanding 2,766,811    
Vesting / Exercisable within two years      
Share-based payments      
Shares outstanding 1,649,493    
Vesting / Exercisable within three years      
Share-based payments      
Shares outstanding 941,749    
v3.8.0.1
Share-based payments - MIP I (Details)
12 Months Ended
Dec. 27, 2012
MXN ($)
Dec. 24, 2012
MXN ($)
Dec. 21, 2012
MXN ($)
EquityInstruments
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2017
MXN ($)
Share-based payments            
Cost of MIP related to the vested shares       $ 93,916,000 $ 51,044,000  
MIP I            
Share-based payments            
Exercise price of shares   $ 5.31        
Amount borrowed by trust $ 133,723,000          
Maximum term of share options   10 years        
Total cost of MIP determined           $ 2,722,000
Cost of MIP related to the vested shares         $ 327,000  
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     $ 5.31      
v3.8.0.1
Share-based payments - MIP I, assumptions (Details) - MIP I
12 Months Ended
Dec. 24, 2012
MXN ($)
Y
Dec. 31, 2017
MXN ($)
EquityInstruments
Dec. 31, 2016
MXN ($)
EquityInstruments
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 $ 5.31    
Exercise multiple 1.1    
Fair value of the stock at grant date $ 1.73    
Shares exercised | EquityInstruments   120,000 3,299,999
Series A shares      
Share-based payments      
Shares exercised | EquityInstruments   120,000 3,299,999
Amount paid to Management Trust corresponding to exercised shares   $ 638,000 $ 17,536,000
v3.8.0.1
Share-based payments - MIP I, movement in share options (Details) - MIP I
12 Months Ended
Dec. 31, 2017
MXN ($)
EquityInstruments
Dec. 31, 2016
MXN ($)
EquityInstruments
Share-based payments    
Outstanding at beginning of the year (shares) | EquityInstruments 12,557,857 15,857,856
Exercised during the year (shares) | EquityInstruments (120,000) (3,299,999)
Outstanding at end of the year (shares) | EquityInstruments 12,437,857 12,557,857
Outstanding at beginning of the year (Exercise price) $ 5.31 $ 5.31
Exercised during the year (Exercise price) 5.31 5.31
Outstanding at end of the year (Exercise price) 5.31 5.31
Outstanding at beginning of the year (Total) 66,733,000 84,269,000
Exercised during the year (Total) (638,000) (17,536,000)
Outstanding at end of the year (Total) $ 66,095,000 $ 66,733,000
v3.8.0.1
Share-based payments - MIP II (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2017
MXN ($)
EquityInstruments
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Share-based payments      
Compensation expense recorded in the consolidated statement of operations | $ $ 13,508 $ 7,816 $ 6,345
MIP II      
Share-based payments      
Vesting period 5 years    
Extension of vesting period 5 years    
Carrying amount of the liability | $ $ 37,858    
Compensation expense recorded in the consolidated statement of operations | $   $ 54,357  
Compensation (benefit) recorded in the consolidated statement of operations | $ $ (16,499)    
Exercised during the year (shares) 0    
Granted 13,536,960    
MIP II | Vesting / Exercisable within one year      
Share-based payments      
Granted 2,030,540    
MIP II | Vesting / Exercisable within two years      
Share-based payments      
Granted 2,030,540    
MIP II | Vesting / Exercisable within three years      
Share-based payments      
Granted 2,030,540    
MIP II | Vesting / Exercisable within four years      
Share-based payments      
Granted 3,384,240    
MIP II | Vesting / Exercisable within five years      
Share-based payments      
Granted 4,061,100    
v3.8.0.1
Share-based payments - (Benefit) expense recognized in retention plan (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Share-based payments      
(Benefit) arising from cash-settled share-based payments transactions $ (25,498)    
Expense arising from cash-settled share-based payments transactions   $ 86,100 $ 44,699
Expense arising from equity-settled share-based payments transactions 13,508 7,816 6,345
Total (benefit) arising from share-based payments transactions $ (11,990)    
Total expense arising from share-based payments transactions   $ 93,916 $ 51,044
v3.8.0.1
Equity - Authorized shares and secondary follow-on equity offering (Details) - MXN ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Nov. 16, 2015
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Equity        
Par value     $ 0 $ 0
Number of authorized shares     1,011,876,677 1,011,876,677
Treasury shares     (13,257,945) (13,175,905)
Shares fully subscribed and paid     998,618,732 998,700,772
Equity transaction costs   $ 22,955    
Series A shares        
Equity        
Number of authorized shares     877,856,206 877,856,206
Series B shares        
Equity        
Number of authorized shares     134,020,471 134,020,471
Ordinary Participation Certificates        
Equity        
Number of shares sold by shareholders 108,900,000      
Number of shares sold by the Company 0      
Fixed Class I        
Equity        
Number of authorized shares     24,180 24,180
Shares fully subscribed and paid     24,180 24,180
Fixed Class I | Series A shares        
Equity        
Number of authorized shares     3,224 3,224
Fixed Class I | Series B shares        
Equity        
Number of authorized shares     20,956 20,956
Variable Class II        
Equity        
Number of authorized shares     1,011,852,497 1,011,852,497
Treasury shares     (13,257,945) (13,175,905)
Shares fully subscribed and paid     998,594,552 998,676,592
Variable Class II | Series A shares        
Equity        
Number of authorized shares     877,852,982 877,852,982
Variable Class II | Series B shares        
Equity        
Number of authorized shares     133,999,515 133,999,515
v3.8.0.1
Equity - Earnings per share (Details)
$ / shares in Units, $ / shares in Units, shares in Thousands, $ in Thousands, $ in Thousands
12 Months Ended
Apr. 19, 2017
MXN ($)
Dec. 31, 2017
USD ($)
$ / shares
shares
Dec. 31, 2017
MXN ($)
$ / shares
shares
Dec. 31, 2016
MXN ($)
$ / shares
shares
Dec. 31, 2015
MXN ($)
$ / shares
shares
Dec. 31, 2017
MXN ($)
Equity            
Net (loss) income for the period   $ (30,129) $ (594,599) $ 3,519,489 $ 2,463,870  
Weighted average number of shares outstanding (in thousands):            
Basic   1,011,877 1,011,877 1,011,877 1,011,877  
Diluted   1,011,877 1,011,877 1,011,877 1,011,877  
LPS - EPS:            
Basic | (per share)   $ (0.030) $ (0.588) $ 3.478 $ 2.435  
Diluted | (per share)   $ (0.030) $ (0.588) $ 3.478 $ 2.435  
Legal reserve   $ 14,754   $ 38,250   $ 291,178
Legal reserve as a percent of capital stock   9.80%       9.80%
Amount allocated to legal reserve | $ $ 252,928          
Withholding tax on dividends distributions (as a percent)   10.00% 10.00%      
v3.8.0.1
Income tax - Income tax rates (Details) - MXN ($)
$ in Thousands
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
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 $ 171,046 $ 2,702,355 $ 2,751,813
Maximum      
Income tax      
Employee wages and benefits tax deductible (as a percent) 53.00%    
Guatemala      
Income tax      
Corporate income tax rate 25.00% 25.00%  
Costa Rica      
Income tax      
Corporate income tax rate 30.00% 30.00%  
Period in which tax losses can be carried forward 3 years    
Mexico      
Income tax      
Period in which tax losses can be carried forward 10 years    
v3.8.0.1
Income tax - Analysis of income tax expense (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Income tax        
Current year income tax expense   $ (51,313) $ (706,244) $ (337,997)
Deferred income tax benefit (expense)   212,488 (750,938) (700,351)
Total income tax benefit (expense) $ 8,167 161,175 (1,457,182) (1,038,348)
Deferred income tax expense, translation effect   1,008 1,242  
Deferred tax related to items recognized in OCI during the year        
Net gain (loss) on cash flow hedges   12,017 (187,408) 58,161
Remeasurement gain of employee benefits   533 132 352
Deferred tax charged to OCI   $ 12,550 $ (187,276) $ 58,513
v3.8.0.1
Income tax - Reconciliation of statutory corporate income tax rate to effective tax rate (Details)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Income tax      
Statutory income tax rate 30.00% 30.00% 30.00%
Non-deductible expenses   0.28% 0.66%
Non-deductible expenses (3.90%)    
Unrecorded deferred taxes on tax losses (14.55%) 0.09%  
Foreign countries difference with Mexican statutory rate (0.32%) 0.04%  
Inflation of tax losses 1.50% (0.01%) (0.02%)
Amendment tax return effects and other tax adjustments (0.31%) (0.11%) (0.42%)
Inflation on furniture, intangible and equipment 4.91% (0.38%) (0.34%)
Annual inflation adjustment 4.00% (0.63%) (0.23%)
Total effective tax rate 21.33% 29.28% 29.65%
v3.8.0.1
Income tax - Analysis of deferred taxes (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Analysis of consolidated deferred taxes              
Net operating loss $ (944) $ (18,642) $ (2,739,691) $ (2,510,333)      
Deferred income tax assets         $ 1,353,184 $ 1,039,851  
Deferred income tax liabilities         2,407,021 2,317,718  
Deferred tax liability, net   (1,277,867) (340,895) (340,895) (1,053,837) (1,277,867) $ (340,895)
Reflected in consolidated statement of financial position              
Deferred tax assets 28,499       562,445 559,083  
Deferred tax liabilities $ (81,901)       (1,616,282) (1,836,950)  
Deferred tax liability, net   (1,277,867) (340,895) (340,895) (1,053,837) (1,277,867) (340,895)
Reconciliation of deferred tax liability, net              
Deferred tax (liability) asset, net - beginning of the year   (1,277,867) (340,895)        
Deferred income tax benefit (expense) during the current year recorded on profits   211,480 (749,696)        
Deferred income benefit (expense) during the current year recorded in accumulated other comprehensive income (loss)   12,550 (187,276) 58,513      
Deferred tax (liability) asset, net - end of the year   (1,053,837) (1,277,867) $ (340,895)      
Deferred tax assets              
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   312,800 46,369        
Intangible              
Analysis of consolidated deferred taxes              
Deferred income tax assets         463,211 481,626  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   (18,415) (16,637)        
Provisions              
Analysis of consolidated deferred taxes              
Deferred income tax assets         351,989 343,294  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   8,695 56,727        
Tax losses available for offsetting against future taxable income              
Analysis of consolidated deferred taxes              
Deferred income tax assets         343,082 33,324 $ 58,354
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   309,758 (25,030)        
Extension lease agreement              
Analysis of consolidated deferred taxes              
Deferred income tax assets         143,135 101,724  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   41,411 25,405        
Unearned transportation revenue              
Analysis of consolidated deferred taxes              
Deferred income tax assets         35,941 65,755  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   (29,814) 7,039        
Allowance for doubtful accounts              
Analysis of consolidated deferred taxes              
Deferred income tax assets         7,324 6,891  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   433 (2,179)        
Employee benefits              
Analysis of consolidated deferred taxes              
Deferred income tax assets         5,786 4,031  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   1,222 886        
Employee profit sharing              
Analysis of consolidated deferred taxes              
Deferred income tax assets         2,716 3,206  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   (490) 158        
Deferred tax liabilities              
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   (101,320) (796,065)        
Supplemental rent              
Analysis of consolidated deferred taxes              
Deferred income tax liabilities         1,563,363 1,339,610  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   (223,753) (363,783)        
Rotable spare parts, furniture and equipment, net              
Analysis of consolidated deferred taxes              
Deferred income tax liabilities         476,917 368,027  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   (108,890) (103,926)        
Prepaid expenses and other assets              
Analysis of consolidated deferred taxes              
Deferred income tax liabilities         196,152 435,738  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   239,586 (280,660)        
Inventories              
Analysis of consolidated deferred taxes              
Deferred income tax liabilities         88,169 72,883  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   (15,286) (23,979)        
Financial instruments              
Analysis of consolidated deferred taxes              
Deferred income tax liabilities         49,151 61,168  
Other prepayments              
Analysis of consolidated deferred taxes              
Deferred income tax liabilities         33,269 40,292  
Reconciliation of deferred tax liability, net              
Deferred income tax benefit (expense) during the current year recorded on profits   7,023 (23,717)        
Costa Rica              
Analysis of consolidated deferred taxes              
Deferred income tax assets         $ 0 $ 0  
Costa Rica | Tax losses available for offsetting against future taxable income              
Analysis of consolidated deferred taxes              
Net operating loss   $ 300,613 $ 57,414        
v3.8.0.1
Income tax - Tax loss carry-forward (Details) - MXN ($)
$ in Thousands
Dec. 31, 2017
Dec. 31, 2016
Available tax loss carry-forward    
Historical Loss $ 1,478,746  
Restated tax loss 1,518,008  
Utilized 16,378  
Total remaining amount 1,501,630 $ 111,083
Tax balances    
Restated contributed capital account (CUCA) 3,737,048  
CUFIN 2,558,378  
Comercializadora Volaris, S.A. de C.V.    
Available tax loss carry-forward    
Historical Loss 52,221  
Restated tax loss 56,573  
Utilized 16,378  
Total remaining amount 40,195  
Concesionaria    
Available tax loss carry-forward    
Historical Loss 1,067,836  
Restated tax loss 1,102,726  
Total remaining amount 1,102,726  
Operaciones Volaris    
Available tax loss carry-forward    
Historical Loss 662  
Restated tax loss 682  
Total remaining amount 682  
Vuela, S.A.    
Available tax loss carry-forward    
Historical Loss 358,027  
Restated tax loss 358,027  
Total remaining amount 358,027  
2016, Expiration 2019    
Available tax loss carry-forward    
Historical Loss 57,414  
Restated tax loss 57,414  
Total remaining amount 57,414  
2016, Expiration 2026    
Available tax loss carry-forward    
Historical Loss 52,221  
Restated tax loss 56,573  
Utilized 16,378  
Total remaining amount 40,195  
2017, Expiration 2020    
Available tax loss carry-forward    
Historical Loss 300,613  
Restated tax loss 300,613  
Total remaining amount 300,613  
2017, Expiration 2027    
Available tax loss carry-forward    
Historical Loss 1,068,498  
Restated tax loss 1,103,408  
Total remaining amount $ 1,103,408  
v3.8.0.1
Other operating income and expenses (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Analysis of other operating income        
Gain on sale and leaseback   $ 65,886 $ 484,827 $ 181,736
Administrative benefits   27,180 9,072  
Other income   3,699 2,843 11,419
Other operating income $ 4,903 96,765 496,742 193,155
Analysis of other operating expenses        
Administrative and operational support expenses   562,739 541,826 383,805
Technology and communications   373,394 266,898 173,078
Passenger services   59,261 45,439 23,195
Insurance   54,569 56,414 54,609
Rents of offices, maintenance warehouse and hangar   30,544 33,517 25,889
Disposal of intangible, rotable spare parts, furniture and equipment   11 436 632
Equity transaction costs       22,955
Others   7,922 7,922 13,623
Other operating expenses $ 55,152 $ 1,088,440 $ 952,452 $ 697,786
v3.8.0.1
Finance income and cost (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Analysis of finance income        
Interest on cash and equivalents   $ 105,151 $ 78,793 $ 47,029
Interest on recovery of guarantee deposits   644 23,792  
Others     6 5
Total finance income $ 5,361 105,795 102,591 47,034
Analysis of finance cost        
Cost of letter credit notes   42,294 28,067 18,279
Interest on debts and borrowings   37,565 1,245  
Bank fees and others   5,279 5,804 3,424
Other finance costs   1,219    
Total finance costs $ 4,376 86,357 35,116 21,703
Capitalized borrowing costs        
Interest on debts and borrowings   230,954 96,690 90,057
Capitalized interest   (193,389) (95,445) $ (90,057)
Interest on debts and borrowing in the consolidated statements of operations   $ 37,565 $ 1,245  
v3.8.0.1
Components of other comprehensive income (loss) (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
MXN ($)
Dec. 31, 2015
MXN ($)
Derivative financial instruments:        
Reclassification during the year to profit or loss   $ 52,097 $ 353,943 $ 287,550
Net gain (loss) on cash flow hedges $ (2,136) (42,148) 624,694 (193,869)
Jet fuel Asian call options        
Derivative financial instruments:        
Gains (losses) on cash flow hedges, before tax   (81,182) 277,899 (450,768)
Net gain (loss) on cash flow hedges   (54,202) 583,065 (221,592)
Jet fuel swap contracts        
Derivative financial instruments:        
Gains (losses) on cash flow hedges, before tax       (11,828)
Foreign currency forward contract        
Derivative financial instruments:        
Gains (losses) on cash flow hedges, before tax   (13,380)    
Interest rate swap contracts        
Derivative financial instruments:        
Gains (losses) on cash flow hedges, before tax   317 (7,148) (18,823)
Net gain (loss) on cash flow hedges   $ 14,144 $ 41,629 $ 27,723
v3.8.0.1
Commitments and contingencies (Details)
$ in Thousands, $ in Thousands
Apr. 25, 2018
$ / $
Dec. 31, 2017
$ / $
Dec. 31, 2017
Q / $
Dec. 31, 2017
₡ / $
Dec. 31, 2017
USD ($)
Dec. 31, 2017
MXN ($)
Dec. 31, 2016
$ / $
Dec. 31, 2016
Q / $
Dec. 31, 2016
₡ / $
Commitments and contingencies                  
2018         $ 76,194 $ 1,503,719      
2019         130,013 2,565,859      
2020         101,585 2,004,821      
2021         145,683 2,875,112      
2022         669,902 13,220,784      
Total committed expenditures         $ 1,123,377 $ 22,170,295      
Exchange rate 18.8628 19.7354 7.3448 572.5600     20.6640 7.5221 561.1000
v3.8.0.1
Operating segments (Details)
$ in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
segment
Dec. 31, 2017
MXN ($)
segment
Dec. 31, 2016
MXN ($)
segment
Dec. 31, 2015
MXN ($)
segment
Operating segments        
Number of geographic segments | segment 2 2 2 2
Total operating revenues $ 1,258,924 $ 24,845,375 $ 23,512,451 $ 18,179,704
Domestic (Mexico)        
Operating segments        
Total operating revenues   17,313,740 15,720,807 12,579,806
United States of America and Central America        
Operating segments        
Total operating revenues   $ 7,531,635 $ 7,791,644 $ 5,599,898
United States of America        
Operating segments        
Percentage of total revenues from external customers 29.00% 29.00% 32.00% 31.00%
v3.8.0.1
Subsequent events (Details)
Feb. 16, 2018
shareholder
shares
Jan. 18, 2018
COFECE ruling of potential responsibility for antitrust actions    
Disclosure of non-adjusting events after reporting period [line items]    
Maximum fine as a multiple of minimum wage for Mexico City   1,500,000
Major ordinary share transactions    
Disclosure of non-adjusting events after reporting period [line items]    
Number of shareholders converting Class B shares to Class A shares | shareholder 1  
Number of Series B shares converted to Series A shares | shares 45,968,598