Document and Entity Information |
12 Months Ended |
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Dec. 31, 2017
shares
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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 |
Consolidated Statements of Financial Position $ in Thousands, $ in Thousands |
Dec. 31, 2017
USD ($)
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Dec. 31, 2017
MXN ($)
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Dec. 31, 2016
MXN ($)
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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 |
Consolidated Statements of Financial Position (Parenthetical) |
Apr. 25, 2018
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2016
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Dec. 31, 2016
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Dec. 31, 2016
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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 |
Consolidated Statements of Operations $ in Thousands, $ in Thousands |
12 Months Ended | |||
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Dec. 31, 2017
USD ($)
$ / shares
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Dec. 31, 2017
MXN ($)
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Dec. 31, 2016
MXN ($)
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Dec. 31, 2015
MXN ($)
$ / shares
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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 |
Consolidated Statements of Operations (Parenthetical) |
Apr. 25, 2018
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2016
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Dec. 31, 2016
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Consolidated Statements of Operations | |||||||
Convenience translation to U.S. dollars | 18.8628 | 19.7354 | 7.3448 | 572.5600 | 20.6640 | 7.5221 | 561.1000 |
Consolidated Statements of Comprehensive Income $ in Thousands, $ in Thousands |
12 Months Ended | |||
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Dec. 31, 2017
USD ($)
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Dec. 31, 2017
MXN ($)
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Dec. 31, 2016
MXN ($)
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Dec. 31, 2015
MXN ($)
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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 |
Consolidated Statements of Comprehensive Income (Parenthetical) |
Apr. 25, 2018
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2016
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Dec. 31, 2016
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Dec. 31, 2016
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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 |
Consolidated Statements of Changes in Equity $ in Thousands, $ in Thousands |
Capital stock
USD ($)
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Capital stock
MXN ($)
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Treasury shares
USD ($)
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Treasury shares
MXN ($)
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Contribution for future capital increases
MXN ($)
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Legal reserve
USD ($)
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Legal reserve
MXN ($)
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Additional paid-in capital
USD ($)
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Additional paid-in capital
MXN ($)
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Retained earnings (Accumulated losses)
USD ($)
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Retained earnings (Accumulated losses)
MXN ($)
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Remeasurement of employee benefits
USD ($)
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Remeasurement of employee benefits
MXN ($)
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Cash flow hedges
USD ($)
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Cash flow hedges
MXN ($)
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Exchange differences on translation of foreign operations
USD ($)
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Exchange differences on translation of foreign operations
MXN ($)
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USD ($) |
MXN ($) |
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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 |
Consolidated Statements of Changes in Equity (Parenthetical) |
Apr. 25, 2018
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2016
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Dec. 31, 2016
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Dec. 31, 2016
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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 |
Consolidated Statements of Cash Flows (Parenthetical) |
Apr. 25, 2018
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2017
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Dec. 31, 2016
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Dec. 31, 2016
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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 |
Description of the business and summary of significant accounting policies |
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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:
*The Company has not started operations in Guatemala.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.
Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and only if, the Company has:
When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.
All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated in full.
On consolidation, 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:
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:
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:
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:
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:
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:
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:
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:
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. |
Significant accounting judgments, estimates and assumptions |
12 Months Ended |
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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). |
Financial instruments and risk management |
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Financial instruments and risk management |
3. Financial instruments and risk management
Financial risk management
The Company’s activities are exposed to different financial risks 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:
* US Gulf Coast Jet 54 as underlying asset ** Weighted average
* 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:
At April 25, 2018, date of issuance of these financial statements, the exchange rate was Ps.18.8628 per U.S. dollar.
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:
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). |
Fair value measurements |
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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:
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:
The following table summarizes the fair value measurements at December 31, 2017:
* 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:
* 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
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
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Financial assets and liabilities |
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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
b) Financial debt
(i)At December 31, 2017 and 2016, the Company’s short-term and long-term debt consists of the following:
TIIE: Mexican interbank rate
(ii) The following table provides a summary of the Company’s scheduled principal payments of financial debt and accrued interest at December 31, 2017:
(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:
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:
c) Other financial liabilities
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Cash and cash equivalents |
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Cash and cash equivalents |
6. Cash and cash equivalents
An analysis of this caption is as follows:
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Related parties |
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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:
b) During the years ended December 31, 2017, 2016 and 2015, the Company had the following transactions with related parties:
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. |
Other accounts receivable, net |
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Other accounts receivable, net |
8. Other accounts receivable, net
An analysis of other accounts receivable at December 31, 2017 and 2016, is detailed below:
Accounts receivable have the following aging:
The movement in the allowance for doubtful accounts from January 1, 2015 to December 31, 2017 is as follows:
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Inventories |
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Inventories |
9. Inventories
An analysis of inventories at December 31, 2017 and 2016 is as follows:
The inventory items are consumed during or used mainly in delivery of in-flight services and for maintenance services by the Company and are valued at the lower of cost or replacement value. 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. |
Prepaid expenses and other current assets |
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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:
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Guarantee deposits |
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Guarantee deposits |
11. Guarantee deposits
An analysis of this caption at December 31, 2017 and 2016 is as follows:
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Rotable spare parts, furniture and equipment, net |
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Rotable spare parts, furniture and equipment, net |
12. Rotable spare parts, furniture and equipment, net
*During the years ended December 31, 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.
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. |
Intangible assets, net |
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Intangible assets, net |
13. Intangible assets, net
The composition and movement of intangible assets is as follows:
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. |
Operating leases |
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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:
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*:
* 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:
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:
*Convenience translation to U.S. dollars (Ps.19.7354).
c) Rental expense charged to results of operations is as follows:
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. |
Accrued liabilities |
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Accrued liabilities |
15. Accrued liabilities
a) An analysis of accrued liabilities at December 31, 2017 and 2016 is as follows:
b) Accrued liabilities long-term:
c) An analysis of other liabilities is as follows:
*Discount rate adjustment
*Discount rate adjustment
During the years ended December 31, 2017, 2016 and 2015 no cancellations, or write-offs related to these liabilities were recorded. |
Employee benefits |
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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:
Changes in the defined benefit obligation are as follows:
The significant assumptions used in the computation of the seniority premium obligations are shown below:
Accruals for short-term employee benefits at December 31, 2017 and 2016, respectively, are as follows:
The key management personnel of the Company include the members of the Board of Directors (Note 7). |
Share-based payments |
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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:
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:
*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:
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).
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:
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:
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:
d) The (benefit) expense recognized for the Company’s retention plans during the year is shown in the following table:
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Equity |
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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:
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:
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.
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. |
Income tax |
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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.
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
*Includes translation effect by Ps.1,008 **Includes translation effect by Ps.1,242
Consolidated statements of OCI
d) A reconciliation of the statutory corporate income tax rate to the Company’s effective tax rate for financial reporting purposes is as follows:
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:
A reconciliation of deferred tax liability, net is as follows:
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:
A breakdown of available tax loss carry-forward of Controladora and its subsidiaries at December 31, 2017 is as follows:
f) At December 31, 2017 the Company had the following tax balances:
*The calculation comprises all the subsidiaries of the Company. |
Other operating income and expenses |
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Other operating income and expenses |
20. Other operating income and expenses
An analysis of other operating income is as follows:
An analysis of other operating expenses is as follows:
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Finance income and cost |
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Finance income and cost |
21. Finance income and cost
An analysis of finance income is as follows:
An analysis of finance cost is as follows:
* The borrowing costs related to the acquisition or construction of qualifying assets are capitalized as part of the cost of the asset (Note 12) Interest expense not capitalized is related to the short term working capital facility from Citibanamex..
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Components of other comprehensive income (loss) |
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Components of other comprehensive income (loss) |
22. Components of other comprehensive income (loss)
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Commitments and contingencies |
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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:
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. |
Operating segments |
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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:
*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. |
Subsequent events |
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Subsequent events | |||||||||||||
Subsequent events |
25. Subsequent events
Subsequent to December 31, 2017 and through April 25, 2018:
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Description of the business and summary of significant accounting policies (Policies) |
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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.
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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:
*The Company has not started operations in Guatemala.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.
Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and only if, the Company has:
When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.
All intercompany balances, transactions, unrealized gains and losses resulting from intercompany transactions are eliminated in full.
On consolidation, 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. |
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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:
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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. |
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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:
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:
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:
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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. |
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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. |
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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. |
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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. |
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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. |
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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:
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. |
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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:
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:
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 |
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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. |
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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. |
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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:
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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. |
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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. |
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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. |
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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). |
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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). |
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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). |
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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. |
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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. |
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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. |
Description of the business and summary of significant accounting policies (Tables) |
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Schedule of companies included in the consolidated financial statements |
*The Company has not started operations in Guatemala.
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Schedule of non-ticket revenues |
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Schedule of depreciation rates |
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Schedule of exchange rates of local currencies translated to functional currencies |
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Financial instruments and risk management (Tables) |
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Schedule of notional amounts and strike prices of derivative financial instruments |
* US Gulf Coast Jet 54 as underlying asset ** Weighted average
* US Gulf Coast Jet 54 as underlying asset ** Weighted average |
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Schedule of foreign exchange on and off-balance sheet exposure |
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Schedule of contractual principal payments required on financial liabilities and derivative instruments fair value |
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Fair value measurements (Tables) |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying amounts and fair values of financial instruments |
The following table summarizes the fair value measurements at December 31, 2017:
* 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:
* 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. |
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Schedule of (loss) gain on derivatives recognized in consolidated statements of operations and comprehensive income |
Consolidated statements of operations
Consolidated statements of other comprehensive (loss) income
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Financial assets and liabilities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial assets and liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of financial assets |
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Schedule of short-term and long-term debt |
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Summary of scheduled principal payments of financial debt and accrued interest |
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Schedule of changes in liabilities from financing activities |
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Schedule of other financial liabilities |
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Cash and cash equivalents (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of cash and cash equivalents |
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Related parties (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related parties | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of balances due from/to related parties |
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Schedule of transactions with related parties |
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Other accounts receivable, net (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other accounts receivable, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other accounts receivables |
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Schedule of aging of accounts receivable |
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Schedule of movement in the allowance for doubtful accounts |
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Inventories (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories |
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Prepaid expenses and other current assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and other current assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of prepaid expenses and other current assets |
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Guarantee deposits (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantee deposits | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of guarantee deposits |
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Rotable spare parts, furniture and equipment, net (Tables) |
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Rotable spare parts, furniture and equipment, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of rotable spare parts, furniture and equipment, net |
*During the years ended December 31, 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.
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Intangible assets, net (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets, net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets, net |
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Operating leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of composition of fleet and spare engines, operating leases |
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Schedule of rental expense charged to results of operations |
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Aircraft and engines | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum lease payments |
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Land and buildings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum lease payments |
*Convenience translation to U.S. dollars (Ps.19.7354). |
Accrued liabilities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of analysis of accrued liabilities |
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Schedule of accrued liabilities long term |
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Schedule of other liabilities |
*Discount rate adjustment
*Discount rate adjustment |
Employee benefits (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee benefits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of analysis of net period cost |
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Schedule of changes in defined benefit obligation |
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Summary of significant assumptions used in the computation of the seniority premium obligations |
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Schedule of accruals for short-term employee benefits |
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Share-based payments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based payments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of movement in number of shares under share purchase payment plans |
*These shares are presented as treasury shares in the consolidated statement of financial position as of December 31, 2017 and 2016. |
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Schedule of weighted average assumptions used to estimate the fair market value of the MIP at the date of grant |
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Schedule of movement in number of shares options and fixed exercise prices |
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Schedule of retention plan expenses recognized |
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Share purchase plan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based payments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of vesting period of shares granted |
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SARs - cash settled | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based payments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of vesting period of shares granted |
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MIP II | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based payments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of vesting period of shares granted |
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Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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:
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:
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Schedule of basic and diluted (loss) earnings per share |
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Income tax (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of income tax in consolidated statements of operations |
*Includes translation effect by Ps.1,008 **Includes translation effect by Ps.1,242 |
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Schedule of income tax in consolidated statements of OCI |
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Schedule of reconciliation of corporate income tax rate to effective tax rate |
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Schedule of consolidated deferred taxes |
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Schedule of components of deferred taxes in the consolidated statement of financial position |
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Schedule of reconciliation of deferred tax liability, net |
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Schedule of available tax carry-forwards |
An analysis of the available tax losses carry-forward of the Company at December 31, 2017 is as follows:
A breakdown of available tax loss carry-forward of Controladora and its subsidiaries at December 31, 2017 is as follows:
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Schedule of tax balances |
*The calculation comprises all the subsidiaries of the Company. |
Other operating income and expenses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other operating income and expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other operating income |
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Schedule of other operating expenses |
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Finance income and cost (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance income and cost | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of finance income |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of finance cost |
* 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 |
|
Components of other comprehensive income (loss) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of other comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of other comprehensive income (loss) |
|
Commitments and contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of committed expenditures |
|
Operating segments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of geographic segments |
*United States of America represents approximately 29%, 32% and 31% of total revenues from external customers in 2017, 2016 and 2015, respectively. |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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% |
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% |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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) |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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 |
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% |
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 |
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 |
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% |
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 |
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 |
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 |
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% |