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TRANSCRIPT
November 2018
Investor Day
2
Disclaimer
The material that follows comprises information about Avianca Holdings S.A. (the “Company”) and its subsidiaries, as of the date of the presentation. It has been prepared solely for informational purposes and is not
to be construed as a solicitation or an offer to buy or sell any securities and should not be treated as giving legal, tax, investment or other advice to potential investors. The information presented or contained herein is
in summary form and does not purport to be complete.
No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness, or completeness of this information. Neither the Company nor any of its affiliates,
advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation. The information presented or contained in this
presentation is current as of the date hereof and is subject to change without notice, and its accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives makes any
undertaking to update any such information subsequent to the date hereof.
This presentation contains forward-looking statements, which are based upon the Company and/or its management’s current expectations and projections about future events. When used in this presentation, the
words “believe,” “anticipate,” “intend,” “estimate,” “expect,” “should,” “may” and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not
all forward-looking statements contain such words or expressions. Additionally, all information, other than historical facts included in this presentation is forward-looking information. Such statements and information
are subject to a number of risks, uncertainties and assumptions. Forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated due to many
factors. As for forward-looking statements that relate to future financial results and other projections, actual results may be different due to the inherent uncertainty of estimates, forecasts and projections. Because of
these uncertainties, potential investors should not rely on these forward-looking statements. Neither the Company nor any of its affiliates, directors, officers, agents or employees, nor any of the shareholders or initial
purchasers shall be liable, in any event, before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this
presentation or for any consequential, special or similar damages.
Certain data in this presentation was obtained from various external sources, and neither the Company nor its affiliates, advisers or representatives has verified such data with independent sources. Accordingly,
neither the Company nor any of its affiliates, advisers or representatives makes any representations as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to
change based on various factors.
In addition to IFRS financials, this presentation includes certain non-IFRS financial measures, including Adjusted EBITDAR, which is commonly used in the airline industry to view operating results before depreciation,
amortization and aircraft operating lease charges, as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other asset acquisitions. However, Adjusted
EBITDAR should not be considered as an alternative measure to operating profit, as an indicator of operating performance, as an alternative to operating cash flows or as a measure of the Company’s liquidity.
Adjusted EBITDAR as calculated by the Company and as presented in this document may differ materially from similarly titled measures reported by other companies due to differences in the way these measures are
calculated. Adjusted EBITDAR has important limitations as an analytical tool and should not be considered in isolation from, or as a substitute for an analysis of, the Company’s operating results as reported under
IFRS.
The trademarks included herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of the products or services of the Company or
this proposed offering.
Hernán Rincon
Chief Executive Officer
■ Longstanding trajectory in the technology and
telecommunications sectors, holding leadership
positions at Microsoft, Ferag Americas, Cocelco
and Grupo Unysis
■ Previously served as CEO of Microsoft Latin
America
Silvia Mosquera
Chief Commercial Officer
■ Over 12 years experience in Aviation industry
■ Previously served as Chief Commercial Officer of
Iberia express
■ Served as Director of Strategy, Network and
Revenue Management at Vueling
Santiago Aldana
Chief Digital and Technology Officer
■ Extensive experience in the transformation of
the companies and the use of mobile and digital
technologies
■ Founding Partner and CEO of UFF Mobile before
joining AV
Gerardo Grajales
Executive of Strategic Business Units
■ With Avianca since 2002
■ 25+ years of management experience
■ Previously served as CEO for two thermal power
plants in Colombia operated by AES and as CFO
for Baxter Pharmaceutical
Roberto Held
Chief Financial Officer
■ Served as CFO of Juan Valdez prior to joining
Avianca
■ Extensive experience in Banking and Capital
Markets
■ Worked at Colombian Stock Exchange on the
development of the value markets
Todays speakers
Agenda
Avianca – 100 years of operation
Pax – The backbone of Avianca
Digitalizing Avianca
1
2
3
Deleveraging and Cash generation5
Non-Passenger Businesses Proven Value Creation4
Hernan Rincon CEOAvianca 100 yearsThe longest f l ight in the world
6Source: Company.
The Sociedad Colombo
Alemana de Transporte
Aéreo (“SCADTA”) is
founded in Barranquilla,
Colombia on December 5,
1919
1919
SCADTA and SACO
merge into Aerovías
Nacionales de Colombia
S.A. (Avianca)
1940Avianca System is
created as result of a
strategic alliance
between Avianca,
SAM and HELICOL
1994Avianca and SAM,
along with Aerolíneas
Centrales de Colombia
(ACES), merge into
Alianza Summa
2002 Synergy Aerospace
becomes Avianca’s major
shareholder. Avianca
establishes a new strategic
north and renews its
image, initiating a new era
of consolidation and
expansion
2004 – 2005
Avianca acquires Tampa
Cargo, a freighter
operation with 35 years of
experience in the
Colombian market
2008The Avianca and Taca
combination
strengthens their
strategic position in the
region and enhances
their growth potential
2010
Avianca executes its IPO
in the Colombian
Stock Exchange and
establishment of Life
Miles as a separate
entity
2011
Avianca joins Star
Alliance
2012
Avianca acquires
100% of Ecuador’s
AeroGal and 25% of
Mexican freight
specialist,
AeroUnion
2011 – 2014
Avianca launches its
new image and
unifies all member
airlines under the
single Avianca
commercial brand
2013
Avianca prices its
IPO of ADR listed
on the NYSE
(“AVH”)
2013
Advent acquires
minority stake in
LifeMiles
2015
Avianca is the world's second oldest operating airline
AVH begins
negotiations of
strategic alliance
2017
6
56
A customer-centric focus throughout the organization drives our success
7
Avianca's best in class product is tailored to customer preferences
Avianca's full service product and focus on impeccable customer service… The latest additions to Avianca's expanding network
8
…make Avianca our customers' undisputed preference for travel within the Americas
“Best Latam Airline ”
“Best Economy Class”
“Best Airlines in Latam”
“Best Regional Airline in Latam”
Intra-Home Markets(2)
64.1% Market Share
Home Markets to Spain
Home Marketsto N. America
#1
23.1% Market Share
Home Markets To S. America
33.3% Market Share 32.6% Market Share
#1 #1 #1
“Best Airlines in Latam”
78,8%78,1%
83,5% 83,8%
81,9%82,0%
84,6% 84,2%83,6%
82,3%
9,0%7,4%
3,1%4,6%
5,9%
9,0%
3,5%
-7,3%
4,5%2,6%
8,7%6,5% 5,9%
10,0% 10,1%
14,5%
4,9%
6,9%
6,8%
3,0%
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Load Factor Total Total ASK Var% Total RPK Var%
7.132 7.073
7.609 7.6667.521
7.706 7.617
6.615
7.421 7.351
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
Total Pax (Thousands)
▪ Thoughtful capacity deployment ensured that RPKs
outgrew ASK by 2.1% since 2016
▪ On average, transported passengers grew by 5.2% year
over year until the pilot strike
▪ Avianca quickly adapted to the strike by streamlining its
operations, enabling the company to:
• Reconfigure its crew schedule
• Substitute small seat capacity Aircraft with high seat
capacity Aircraft
• Optimize its network
▪ Avianca estimates that it transported approximately 1.8
million fewer passengers due to the pilot's strike
(-11% YoY)
Strong RPK trends ensure improving load factors
Post Strike passenger numbers have not fully recovered
9
Avianca was quick to adapt to the 2017 pilot strike- however, this significantly but temporarily disrupted important positive operational trends
7,2%
2,6%
7,9%
7,0%6,4%
5,7%
9,2%
5,0% 6,5%
1,7%
8,7
8,2
8,8
8,6 8,6
8,5
8,9
9,3
9,1 9,3
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
EBIT % Yield
10
Avianca has demonstrated its resilience despite short-term headwinds
Despite strike impact, unitary profit shows positive development
Profitability remains under pressure despite positive yield trend
0,6
0,3 0,7
0,8
0,6 0,5
1,1
1,5
0,8
0,4 0,6
0,2
0,7
0,6
0,6
0,5
0,9
0,5 0,6
0,2
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18Rask - CASK Spread Adj Rask - CASK Spread Lineal (Rask - CASK Spread Adj)
▪ Although yield reflects a strong upward trend, fuel
price increase and pilot strike effect have
impacted profitability
▪Margin impact of pilot strike US 245 million in the last
12 months
▪ Additional fuel costs were offset by ticket price
increase of 15% on average
▪ Avianca maintains EBIT margin guidance of 6-8% for
full year 2018
3Q 2018 2018 OUTLOOK
PA X
A S K
LF
4.6% 5.0% – 7.0%from 7.0% - 9.0%
2.6% - 5.0% 8.0% – 10.0%
82.3% 81.0% – 83.0%from 80.0% - 82.0%
6.0% – 8.0%EBIT ¹
EBIT11
6.0% - 8.0%
4.5 – 6.5%
(1) Estimated range adjusted for the Pilot Strike
14
Silvia MosqueraChief Commercial OfficerPA X – Av i a n ca ' s B a c k b o n e
Commercial Overview 2018
Revenuepremium to peers
Additionalgrowth in ancillaries
Increasedirectsales
Reduce cost ofsales
Enhancecustomer
preference
Launch12 new routes
1513
KPIs 1H- 2017
ASKs (M) 25,687.0
RPKs (M) 21,302.6
1H-2018
24,801.4
Var. YoY (%)
3.6%
20,317.3 4.8%
Passenger Revenues* (USD M) 1,964.41,737.4 13.1%
RASK* (¢) 7.67.0 9.2%
Yield (¢) 9.28.6 7.8%
LF 82.9%81.9% 1.2 pp
CASK sales & marketing** (¢) 0.820.85 -3,5%
*Includes: ticket sales, ancillaries, charters, write-offs and loyalty redemptions**Cask sales & marketing: direct costs of VP sales, marketing and revenue (distribution, commissions, etc.) + indirect costs (credit card fees, AV Tours, Fraud, etc.) excludes intercompany charges
27
Solid Revenue Performance
14
Optimize ancillaryportfolio
Growth productportfolio
Digital
Transformation
• Dynamic pricing
• Channel pricing
• Incentives
• Communications
• Upgrade your meal
• Fare lock AV.com
• WiFi
• Digital duty free
• Insurance portfolio
• Neighbor free seat
• Trip packages
• Omni channel approach
• Real time merchandising
• Online conversionoptimization
Expected Growth (2019 Vs 2017)
15%-20% Revenue/Pax
USD $30-$40M Ancillary Revenue 28
Ancillary revenue growth
15
AGY
49,4%
COM
22,4%
OTA
20,1%
OTH
8,0%
5,30%
11,40%
7,90%
2,10%
6,80%
AGY COM OTA OTH Total
Objective: increase share of direct channel sales, as well as revenue per pax
Fastestgrowingchannel
29
Channel Mix Strategy
Channel Distribution Mix * Channel Growth – Sales (1H18 vs 1H17)
16
*AGY: Agency, OTA: Online Travel Agency, COM: Avianca website, OTH: Others
Hub
Focus City
CAM13%
CAR2%
COL INTER27%
DOM CO15%
ECU2%
EUR9%
NAM12%
PER11%
SAM9%
31
San SalvadorCiudad de Guatemala
Medellín
Bogotá
Lima
AV Global Capacity Exposure
Capacity by region (ASK 2018 1H)
-0,5%
14,8%
8,8%
-8,3%
4,6%
10,4%
4,8%2,6% 3,8% 3,6%
CAM CAR COLINTER
DOM CO ECU EUR NAM PER SAM Newtork
Change in Capacity YoY (2018 vs 2017)
17
*SAM: South America, NAM: North America, CAM: Central America, CAR: Caribbean, PER: Peru, ECU: Equator, EUR: Europe, DOM DO: Colombia Domestic, COL Inter: Colombia International
20
Our brand promise
“Avianca has built its culture on a foundation of impeccable service and on investing in our client-facing team- focused on every aspect of our interactions to ensure our customers' satisfaction. ”
Makes me fall in love
We strive We listen We go to the extra mile We surprise
We are detail-oriented We innovateWe address mistakes
Means End
We giveeven more
3218
imagine experience & enjoy remember
• More space• Better ergonomics• 11,6” HD screens
Moment:
IN FLIGHT
• Chairs with greater angle of inclination
• Adjustable head-rest• 10,1” screens with USB port
Business Class
VIP LoungesTotal investment: 6,7MM USD
New and improved VIP Lounges in:• Bogotá (Diamond and Gold)• Cali (International)• Bucaramanga• Santa Marta
According to the category (premium, basic, medium) we offer a great variety of services: live-cooking, showers, connectivity, business centre, family rooms, Service staff and others
Moment:
VIP LOUNGES
Moment:
IN FLIGHT
Europe new Service StandardBusiness Class
New express menuWarm desserts
New menu designImproved food presentation
Moment:
IN FLIGHT
Entertainment
We improved our offering from 56 movies to 140, 146 TV episodes to 360 and 9 records to 288
This year we will begin offering Inflight Wi-Fi
33
Ongoing improvement of customer experience
Economy Class
19
Total Spontaneous Awareness
(TSA): 56% +7pp
*In EUR and NAM tracking was modified, we are now evaluating those individuals interested only in travel to Latin America
Source: Strategic Study 2018 - Brand Tracking Study. IPSOS 34
+14pp
+14pp
+5pp
+0pp+0pp
+7pp
+7pp
+18pp
+17pp
What have we achieved in Spontaneous Awareness (H1-2018)?
20
World travelAwardsSouth America’s Leading Airline Brand (2018)
APEXBest Airline in South America(2018)
SKYTRAXBest Airline in South America and BestEconomy Class in South America(2018)
Effie AwardsColombiaGold award in activations and services & Transport, tripsand tourism(2018)
Effie AwardsLatin AmericaGold award in transport, tripsand tourism & Corporatereputation(2018)
2018
Trip AdvisorIncluded as one of thebest Airlines in LatinAmerica and one of theBest Economy Class in Latin America(2018)
KAYAKIncluded as one ofthe best Airlines in Latin America withBest Boarding, BestComfort, Best Crew, Best Entertainmentand Best Food.(2018)
Consumer and User OrganizationSecond best airlinein the world(2017)
SKYTRAXBest South American Airline and bestregional Airline(2017)
Trip AdvisorBest airline in LatinAmerica(2017)
Business Traveller AwardsBest airline in South America(2017)
EcommerceAwardsBest mobile initiativefor Ecommerce(2017)
Effie AwardsColombiaSilver award in activations and services(2017)
Effie AwardsColombiaGold award in activations and services(2017)
2018
34
2017
Awards and Recognitions of Excellence
21
• Branded Fares/Personalization
• Dynamic pricing
• Expand Direct Connect Channel /NDC
• Keep growing ancillary revenue
• Continue optimizing cost of sales: direct sales, GDS, incentives
• New routes
• 100 year anniversary
36
2019 Focus
22
25
Santiago AldanaChief Digital andTechnology OfficerDigitizing Avianca
• Digital Technology will be used to:✓ Optimization and financial recovery
✓ TACA integration process
✓ Strong fleet management
✓ Competitive position
✓ Stock market participation
✓ Low investment in technology:
- Obsolete Architecture and applications- Null adoption of new technologies such as cloud- No ERP, no CRM
Improve customer experience
Increase team's productivity
2016
A look into Avianca's past...
24
Source: Leading Digital: Turning technology into bussinessSource: MIT SMR Article: Is your company ready for a digital future?
53
Efficiency
IntegratedExperience
Digital Masters
Silos and complexity
Industrialized
Exp
eri
en
ce
Revenue Generation Efficiency
+6% +6%Fashionistas Digital Masters
Beginners Conservatives
-11% +26%
Why a digital transformation?
Dig
ital
Cap
abili
ty
Dig
ital
Cap
abili
ty
Leadership Capability Leadership Capability
Fashionistas Digital Masters
Beginners Conservatives
-4% -10% -24% +9%
Revenue Generation Efficiency ProfitabilityPath to digital mastery
25
DIGITIZED DIGITAL
Integration/Standardization of entreprise processes Digital Offerings
Centralized investments in programs and projects New offerings funded locally; Digital business unitfunding
Release managementFormalized QA
Customer co-creation;Test, learn, enhance or discard
Process owners Product or service owners
Process efficiencies, cost reductions New revenues from new value propositions
Organizing Principle
Funding
Quality control
Key role
Business case
OPERATIONAL EXCELLENCE RAPID BUSINESS INNOVATION
Source: Ross, Beath, Sebastian, “Digitized vs. Digital”, MIT, CISR Research briefing54
Avianca's challenge: building a digitized and digital organization
26
BEFORE
Imagine
Investigate
Plan
Purchase
Prepare
DURING AFTER
Leave
Get to airport
Flow from Lobby to Checkin
Baggage Registration
Security, Migration, Customs
VIP Lounges
Boarding
Flight
Claims
Return Remember
Agile, Consistent and Personalized
Supported by an Operational Digital Journey
55
The challenge is to transform the customer’s experience exponentially
27
KEY
ACHIEVEMENTS
6028
31
Status65
Key Elements to achieve DT
Data CenterOutsourcing/ User Access management
Process Management,
Corporate risks and Enterprise
Architecture
IT service andHelp Desk OutsourcingMAURO
Network, TELCO and security
transformation
Journey toCloud
SoftwareFactories
We defined and implemented projects to clean house, and take control of our operations
29
reflects an exponential change in Avianca´s culture
62
SFB – Conference Organizer SFB – Conference Participant
8mill.
7mill.
6mill.
5mill.
4mill.
3mill.
2mill.
1mill.
0mill.
2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018
0,5mill.0,0mill.
3,2mill.
0,0mill.
4,4mill.
0,1mill.
4,9mill.
0,1mill.
6,3mill.
0,1mill.
7,5mill.
0,1mill.
0,3mill.
$700.000,00
$600.000,00
$500.000,00
$400.000,00
$300.000,00
$200.000,00
$100.000,00
$-
2017-Q1 2017-Q2 2017-Q3 2017-Q4 2017-Q1 2017-Q2 2017-Q3
350
300
250
200
150
100
50
0
2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018 30
DIGITAL CUSTOMER
DIGITAL ENTERPRISE
DIGITAL OPERATIONSDIGITAL
TRANSFORMATION
DIGITAL CUSTOMER
DIGITAL OPERATIONS
DIGITAL ENTERPRISE
• CRM (Sales and customer care)• New App• New Website Av.com• Campaign Management• Direct Connect/ NDC• Irregular operations• New Website Av Cargo
• Fleet and crew management and optimization• App for Crew interaction• Fleet asset management• Electronic Flight Bag• Turn around management system
• Work2gether- 0365-Intranet• Success Factors• SAP-Ariba• Electronic Billing• Documentary Management• Project Online
66
Have also implemented important projects to enable our digital transformation
31
35
TECHNOLOGY SHOULD SHIFT FROM ENABLINGTRANSFORMATION…
…TO INSPIRING IT
6832
37
Gerardo GrajalesVP of Business UnitsProven Value Creation
25%(1)
Business Units will increase its contribution to AVH total revenues: From 18% in 2018 to 25% in 2022
(1) % of AVH forecasted revenues
2022New business
❑ Avianca Tours
❑ Simulators
❑ Academy
❑ Regions
1996-2015❑ Deprisa (1996)
❑ Avianca Services (2002)
❑ Avianca Cargo (2008)
❑ LifeMiles (2011)
❑ OneLink Getcom (2013)
❑ Sansa – La Costeña (2013)
❑ Aerounión (2014)
❑ Viajes Éxito (2015)
2017Servicios Aeroportuarios
Integrados SAI
Creation of Strategic Business Units
2016
2018
36
18%
23%
Headquarters in 5 countries
Operation in 12 countries
Presence in 6 industries
11 operating companies
More than 10,000 workers
OperationHeadquarters
37
Airline industry growth requires innovative solutions and strategic geographicallocation
SBUs operation supported by Avianca’s entrenched position Key Highlights
38
NetworkBusiness Overiew
BOG
GYE
PTYSJO
MAO
LIM
MIA
UIO
SCL
VCP
CWB
ASU
SJU
MVD
LAX
GUA
MEX
MDE
GDL
GRU
GIG
SAL
EZE
is an affiliated company
Cargo and Passenger HUB
Passenger HUB
Cargo HUB
commercial agreementwith Ocean Air
• Cargo airline with a unique network in Latin America that offers a diverse portfolio of products and services based on freighters and bellies of the PAX airline
• Through 4 HUBS (Passenger and Cargo) serving 24 countries
• With 29 offline stations in Asia and Europe (GSAs), 92 Interline Agreements, we reach more than 400 destinations
• 143 points of sales in 52 countries
Live Animals & Pet Care
CoolCare & Pharma
Dangerous Goods
Perishable Goods
Valuables
Courier
Oversized & Overweight
Human Remains
Pro
ducts
Serv
ices
Premium Cargo Must Go
MUC
LPB
AUA, CUR
PUJ, SDQHAV
JFK
BOS
ORD
39
Avianca Cargo at a Glance
Product portfolio
Highlights
60%
4 A330-200F from Tampa
5 A300F from AeroUnion
2 B767-300F from AeroUnion
Avianca Cargo has a Hard Block Space Agreement in a freighter operated by Ocean Air under the brand Avianca Brazil.
Load Factor
Shanghai (PVG) – Santiago de Chile (SCL) operation twice a week, connecting in the MIA HUB, to increase Avianca Cargo’s participation in the Asian market
GSA for El Al in the MIA-TLV route and GHA service for the airlines in MIA
12 Freighter aircraft give AVH in the most modern mid-size freighter fleet in Latin America
1 A330-200F from Taca Peru
+150 Passenger aircraft (WB and NB)
*Jan-Aug 2018
2017 and 2017 Cargo Airlineof the Year by Miami Dade
Aviation Department
Jan-Sep 2018
1.0 bil RTK
1.7 bil ATK
+11.2% Revenue vs. 2017
40
Avianca Cargo leverages its diverse network and partnerships to connect Latin America with key European & Asian destinations
Market Share & Market Position* Performance
Fleet Strategic Partnerships
41
~8.3 Million Members
Gross Billings16.0% YoY Growth
+666K Active Co-branded
Credit Cards(+12.5% YoY Growth)
+359 Active
Commercial Partners(+12.2% YoY Growth)
Exclusive Loyalty Program for Avianca
(until 2040) Award Winning Program
1
Premier Airlines
Auto/Gas
Apparel
Renowned Restaurants
& Eateries
Best Hotels
Largest Banks
Note: data as of June 2018. 42
LifeMiles: Industry Leader at the Center of the Loyalty Ecosystem
New Booking Engine Credit Card on File Geolocation in LifeMiles App
Cardless
• Shorter redemption process
• Discount coupons for cobrands
• Improved visibility of LifeMiles + Money
• Simpler redemption summary
• Ability to store credit card information for future purchases
• Mapping of commercial partners and push notifications
• Option of automatic payment through application
• Accrual and redemption transactions using ID number only
• Rolled-out to POS terminals in Colombia & El Salvador
• Miles purchase subscription plans, enabling members to accumulate and save more miles over time
• Qualifying miles can be purchased when redeeming miles on sponsor airline (e.g. Avianca)
• Enables members to maintain and improve their Elite Status more quickly
43
Ongoing innovation enhancing our members’ experience
Roberto HeldCFOD e l e ve ra g i n g & C a s h G e n e rat i o n
Executing cost savings and efficiency initiatives since 2017 CASK Ex Fuel reduction target: 5% YoY
Technology
Business Units
General & Admin
Fleet Maintenance
Operations
Airports
Customer Experience
Sales & Marketing
US$121Min 2017
>80 initiativesin 2017
+US$190MBeyond 2018
>50 initiativesbeyond 2018
IMPACTCost Performance Improvement Program (CPI)
45
AVH Fleet Plan, decelerate aircraft incorporation optimizing level of indebtedness
• A-Check & Maintenance Optimization: fewer new aircraft required to support operations
• Young fleet enables new strategy: current average fleet age (6.7 years) enables a deceleration of new aircraft incorporation and of lease extensions
• Fleet incorporation pace reduction: currently negotiating Avianca’s proposed* deferral of up to 50 aircraft, reviewing and reassessing status of 50 additional aircraft
• Targeted Net aircraft growth from 2018 to 2022: 13
• Reduce ASK growth rates: network deployment allows a reduced pace of ASKs growth rate to levels of 6.3% in 2018-2022
• Target PDPs reduction of +$500M from 2019 to 2022
• Proposed reduction/reorganization of current order would reduce indebtedness requirements and enhance cash optimization by more than US$1bn in the immediate term (subsequent three years)
Target Fleet Plan AVH 2018 2019 2020 2021 2022
Total Fleet 188 187 193 198 201
Narrow Body 126 129 134 137 138
Wide Body 21 20 21 23 25
Other 41 38 38 38 38
Target Fleet Plan
46
*currently under negotiation, final plan may differ from target plan
24
MRO: Capturing efficiencies at our maintenance facility
47
• MRO Slot Optimization: planning and utilization based on airline operational requirements, passenger/cargo seasonality.
• Labor Costs: efficiency due to low-cost, highly technically skilled labor force, creating an aviation cluster in Colombia
• Strategically Located: conveniently located within the José María Córdova International Airport, centrally located within the Americas
• Cost optimization: two consecutive years of MRO operation has resulted in $25M-$30M in cost reduction
• MRO capacity: Increased to six narrow body aircraft bays. 787 heavy checks rating also granted by FAA.
• Reduction of Turn Around Time (TAT): 6Y/12Y checks on A320 fleets reduced to 3 days, increasing aircraft available for commercial operation.
(360)
122
2016 2017 2018* 2019 2020 2022
Note: Graphical representations for future years are to be considered as approximate estimates only 20
The targeted fleet plan will accelerate debt reduction…
48
Net Debt additions and repayments
Fleet and engines…
Other Fixed Assets Capex
9,9%Rotables
8,0%Intangibles
6,6%
Overhaul42,2%
Fleet and engines16,4%
Other Fixed Assets Capex
7,9%
Rotables7,5%
Intangibles4,5%
Overhaul63,7%
21
…and significantly reduce future fleet CAPEX requirements
49
2018 2022
* Other: Includes overhaul capex, intangible and other; Average Fleet Age only includes Jets, 2018, 2019 and 2020 are estimated numbers** Adjusted information by TransAsia transaction. YTD information. Note: Graphical representations for future years are to be considered as approximate estimates only
889
503
47
303
69 109
147
154
113
241
27
147
6,25,4
5,8
6,9 6,7 6,8
6,80 8,40
10,0
2014 2015 2016 2017 1Q18** 2Q18** 2018 2020 2022
Fleet Capex Other* Average Fleet Age*
8,8
10,8
16
Avianca's strong ongoing focus on capital structure improvement
15%
85%
Short
Term
Debt
Long
Term
Debt 21%
79%
Variable
Fixed
81%
14%
5%
COPUSD
EUR
183,6300,7 291,9 272,5
1.333
139
148 148 148
359,6
29,8
30,6
549,9
2018 2019 2020 2021 2022+
AIRCRAFT CORPORATE DEBT BONDS
Type Currency Avg. Rate
Aircraft Debt USD 3.93%
Bonds COP 10.58%
Bonds USD 7.95%
Corporate Debt USD 6.52%
Total 5.26%
Debt Profile2Q18 Debt Amortization Schedule (US$MM)
Debt Term Debt Rate Debt Currency
352.4480
990
420.5
1,693
50
Note: Graphical representations for future years are to be considered as approximate estimates only
Aircraft Debt Structure
61%15%
24%
Aircraft
Debt
62%10%
28%
ECA &
EXIM
Priv.
Placement
Comm
Priv.
Placement
Comm
2Q17 2Q18
Debt Type Aircraft Debt Structure
2Q18
18
Corp.
Debt
BondsECA & EXIM
JOLCO
48%
20%
24%9%
Innovative financing solutions are a key strategic pillar
Corporate Debt
▪ COMMERCIAL DEAL (Deutsche Bank) AVH seeks only highly competitive financing terms in
the commercial financing markets
Aircraft Debt
▪ RCF AVH closed USD 80 MM in one transaction with competitive rates in the range of 5-7%
▪ JOLCO Since same quarter last year AVH increased it’s portion of JOLCOs (Japanese
Operating Lease with a Call Option) from 0% to 9% as part of it’s financing solutions with
competitive low rates.
▪ BANKS COMMERCIAL ARRENGEMENTS AVH continually finds competitive deals in the
commercial banks market
Corporate Bonds
▪ Avianca’s local currency bond (COP) matures in August 2019, will not be rolled over
▪ The company remains focused on evaluating market opportunities to optimize its capital
structure 51
Note: Graphical representations for future years are to be considered as approximate estimates only
5.265
5.696
5.476
5.704
5.882
2014 2015 2016 2017 1Q18 2018 2020 2022
5,886,69
5,98 5,79 5,86 6,16
2014 2015 2016 2017 1Q18 2Q18 2018 2020 2022
54
Debt Indicators
53
Adjusted Net Debt / EBITDAR (X)
Adjusted Debt (USD $000)
Note: Graphical representations for future years are to be considered as approximate estimates only
Cash % Revenue & Revenue Sources
14,8%
12,9%
10,5%
12,9%
13,8%
10,4%
2014 2015 2016 2017 1Q18 2Q18 2018 2020 2022
Cash % Revenue Company Goal
3.837 3.452 3.291 3.566 3.675 3.783
760 782 783
880 886 874
2014 2015 2016 2017 1Q18 2Q18 2018 2020 2022
Passenger Revenue Cargo and Other
4.597 4.234 4.074
4.446 4.561 4.657
2252
Cash % Revenue
Total Revenue by Source
Note: Graphical representations for future years are to be considered as approximate estimates only
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
WTI USDCOP
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
WTI USDARS USDBRL
54
Correlation between WTI and EM Currencies:has it been disrupted?
Note: Graphical representations for future years are to be considered as approximate estimates only
55
EBIT Margin Perspectives
• Widebody operation: 787-8 fleet 100% fully operational since September 1, 2018 – No more wet leases required
• Pilot Training: Staff requirements fully covered
• Fuel impact: Fares & Pricing have absorbed oil & jet fuel price increases
• High Load Factors: Record high load factors (~83%) are delivering strong results
• Optimization Program: Capturing and delivering efficienciesthroughout our operations
• Network planning: focused on moving towards more profitable routes
• Technology driving efficiencies: Digitalization of processes
• Strong Business Unit Results: Value creation across the holding organization
7,2%
2,6%
7,9%
7,0%6,4%
5,7%
9,2%
5,0% 6,5%
1,7%
8,7
8,2
8,8
8,6 8,6
8,5
8,9
9,3
9,1 9,3
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18
EBIT % Yield
Note: Graphical representations for future years are to be considered as approximate estimates only
60
Thank YouInvestor [email protected] T: (57) 1 – 5877700 www.aviancaholdings.com
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