Good morning, everyone. Thank you for standing by and welcome to Volaris' Fourth Quarter 2017 Financial Results Conference Call. [Operator Instructions]. At this point, I would now like to turn the call over to Mr. Andres Pliego, Volaris' Financial Planning and Investor Relations Director. Please go ahead, sir. Andrés Pliego: Good morning, everyone, and thank you for joining the call. With me today we have our CEO, Enrique Beltranena and our EVP, Fernando Suarez and Holger Blankenstein. They will be discussing the company's fourth quarter 2017 results announced yesterday. Afterwards, we will move on to your questions. Please note that this call is for investors and analyst only. Any questions from the media will be taken on an individual basis. Before we begin, please let me remind everyone that some of the statements we will make on this call would constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements are subject to several factors that could cause company's actual results to differ materially from expectations for reasons described in company's filings with the U.S. Securities and Exchange Commission. Furthermore, Volaris undertakes no obligation to publicly update or revise any forward-looking statements. It is now my pleasure to turn the call over to our CEO, Enrique Beltranena.

Thank you, Andres. Good morning to everybody and thank you all for being with us today. Throughout 2017, Volaris faced a very challenging year with factors ranging from geopolitical and macro events like FX and fuel price pressure to softer demand environment in a transborder market. However in the past year, we continue to focus on achieving key milestones to build the foundations for a long-term success. The Mexican air travel market is changing with new customers flying for the first time more top point to point connectivity and such market has evolved to an environment where LCCs have more than half of the share of the market. During the past decade, domestic market grew from 20 million passengers to 44 million passengers, and Volaris was the driving force of about half of this market change. Volaris has developed a diversified network with little concentration in Mexico City, which is already constrained today and will remain so at least until 2022. We are fully dedicated to maintain the cost structure. The qualities and the long-term strategy to drive profitability growth in its markets. We are absolutely committed to be one of the lowest unit cost operators in Mexico and Americas, which enables us to offer the most competitive fares in the market. Let me give you some examples of what we achieved in 2017 to build a solid future for our business. First, we recently created a new fare category called the preferential fare that happening November a new completely unbundle fare which is our tool to provide a market, the lowest fares to stimulate demand. With these new fare, we will look to further stimulate demand, specifically in our core markets - the one and Guadalajara where our bus switching strategy has been very successful. We continue to expand…

Thank you, Fernando. In summary, let me start, that Volaris is the largest driver of the growth of the Mexican market during the last 10 years. Volaris is now the largest operator in the domestic market and will continue stimulating demand and converting bus travelers especially in our core markets Tijuana and Guadalajara. Volaris is committed to become one of the best-in-class ancillary revenue generators in the world. Volaris has and will continue working on a diversifying network that committed on growth with discipline capacity management. The Codeshare agreement greatly enhances the potential for international traffic, a low factor growth. Costa Rican certificate of operation is the ultra-low-cost model designed to capture the Central America international traffic to the U.S. The aircraft follow-on order is a driver for this company to become the long-term winner in low-cost and be within the top three lowest cost operators of the world. We are committed to be one of the lowest unit cost operators in Americas and we want to finish thanking our ambassadors and telling our ambassadors that despite the geopolitical conditions, Volaris management and the Board of Directors are fully committed to continue being successful in this business and always be the lowest cost unit operator in the market. Thank you for your attention. Operator, we are ready to open the call for questions.

[Operator Instructions]. And your first question comes from Michael Linenberg with Deutsche Bank.

I just have, I have a couple of questions here. Enrique, on your commentary about March quarter, you mentioned that some of the markets you felt a bit more constructive with respect to the fact that you were seeing better loads. And I know you did mention that you were shifting your strategy during the off-peak period and going after volume, arguably at the expense of pricing or yield. When we think about the off-peak periods with the higher loads, will those loads be sufficiently high that when you incorporate the impact of the lower yield that unit revenue will be positive in the March quarter or where is unit revenues trending, based on what you're seeing right now?

Okay. So Michael the - let me explain a little bit of what I'm trying to say. What I clearly see is the market has totally changed. Okay.

Okay.

And has changed, Michael in the fact that now Mexico's market has more than 50% of ultra-low-cost carrier share in the market. So a lot of the growth in the last years has been driven by ultra low-cost carrier kind of traffic. Visiting friends and relative traffic. That makes the traffic itself in Mexico to be much more pronounced on a per season basis. So what happens is, you have to manage the market very differently when it is high season versus what it is low season now. And the pronunciation of that impacts the market. So what happens is, you get into the high season and are able to yield and the yield goes up and you manage yields and ancillary in a very effective way and you produce a lot of profits during the high seasons. But in the low season comps and since the amount of the share of the visiting friends and relatives traffic is by far higher and we are seeing some depression in the way they are behaving because of the relationship with the U.S. specifically, we have to change completely them all and we have completely change the way we manage the season. And be much more focused on producing the load factors. You will see extremely higher load factors versus a year ago in the first quarter, but yes, in a cost of the base fare yield, somehow compensated with the ancillary revenues which because of the volume are generating much more ancillaries than where we used to be.

That's very helpful. My second question is to Fernando. Fernando, you highlighted the fact that, now your collection in dollars is 40% of revenue and how you were really closing the FX gap, what percent now are we, when we think about dollar cost for Volaris. Where are you? Are you 55%, 60% maybe it's lower than that? Fernando Suárez: It's at around 60%, 65% depending on the quarter. Michael. But, as we stressed in the call, we're getting closer and closer to being FX-neutral to the degree that we continue diversifying the network that we continue to grow international operations not only the U.S. but now more recently Central America. We're getting closer and closing that gap on the FX mismatch side.

And I see just that--

Michael, let me explain you a little bit further on that. What Fernando is saying it's - I mean, obviously this is not the mathematical equation where you try to offset U.S. dollar revenues with U.S. dollar cost. There is also something in the middle of it, which is profitability of the domestic network. And so what's happening is once you get to 40%, 44% of U.S. dollar revenues, our domestic profitability routes are by far more profitable than a conversion of those routes into a U.S. dollar base. So we will never get into a clear mathematical match, but we will get to a better profitability, which is by far what we are trying to get at the end of the equation.

Okay, now that's very helpful. And then I would just add, just confirm. All of your Central American fares are either pegged to the U.S. dollar or priced in U.S. dollars, is that right? Fares you saw in Guatemala or Costa Rica.

That's right, everything we are doing in Costa Rica is U.S. dollar fare.

Okay. What about the other - what about El Salvador. And then El Salvador?

El Salvador operates in a U.S. dollar currency.

That's what I thought. Thanks for the very comprehensive answers, gentlemen.

And your next question comes from Helane Becker with Cowen.

Okay, I don't know if I'm going to able to ask smart questions, but I going to try. Do you have the quarterly aircraft delivery schedule, so that we can think about how to model in rent and capacity growth? Fernando Suárez: Helane, we have for calendar 2018, 12 growth deliveries and four re-deliveries. However, with recent developments on industrial delays and constraints from our aircraft and engine manufacturers, some of those aircraft might be pushed off to next year. That results in us decreasing our ASM guidance, down to 9% to 12%. So we'll get back to you on the specific aircraft count, but we expect anywhere between two shelfs to four shelfs, to maybe slip into next year, but we'll see if we make that up primarily via utilization.

Great. And then could you - on the redeliveries, can you extend any of those leases by far seven months to accommodate the schedule. If there are - if these either two shelfs to four shelfs don't deliver in time? Fernando Suárez: We can extend some of them, actually we are extending specifically two at this moment in the first half, and a potentially a third one in the third quarter that helps us offset part of the delays on the fleet side.

Okay. And my other question is with respect to bookings going into Holy Week, right, because I feel like Easter, this year comes into March, and that's a busy market for you, right, a busy time for you. So based on the comments that Enrique made with respect to the increase in seasonality with the VFR traffic. Should we be thinking that way, that first quarter exceeds second quarter this year or second quarter - I mean what are your - I mean, may be bottom line that's what your bookings looking like?

Helane, this is Holger. Good morning.

Hi, Holger.

Yes, we have the first part of Holy Week and Easter Week in the first quarter, which just touches the last couple of days of March. And we are seeing strong volumes for that season, that's typically one of the high seasons in the year. But please remember that, only partially the Holy Week touches the first quarter. With our low fares that we have been putting into the market, we have been able to stimulate demand both in February and March, and specifically in the Easter high season.

And is that continuing into April or are you thinking about starting to inch fares higher in April?

Well, in high seasons, we typically see higher fares. So you will see the second part of the Easter Holy Week high season in April and we should be able to have good yields and good volumes in those two weeks.

And your next question comes from Duane Pfennigwerth with Evercore IFI.

I think most of the intelligent questions have already been asked, but we'll give it a shot. Just with respect to Costa Rica, can you speak to the amount of gate availability, infrastructure availability that you have there. How large do you envision that operation being 3-5 years down the road, relative to what you have today?

That's also very intelligent question. What we - how we see Costa Rica, Duane is - is an operation that keeps on growing, specifically in the U.S. There is - when you analyze the Central American market as I explained is, today based on the ASMs installed in that market, it's about 65% of ASMs are between Central America and the U.S. That's why for us it was, A, very important to have a certificate of operation in Costa Rica. That justifies itself. B, the Intra Central American operation gives us 5th and 6 freedoms. And those 5th and 6 freedoms allows us not only to fly from Costa Rica, but from the other countries connecting from Costa Rica into the U.S. In terms of capacity of - total capacity to be installed in the 3 to 4 plan - year plan for the region, we are talking about 18 aircraft to 22 aircraft, which we will be modulating in terms of capacity as we progress in the opening of the routes and we can maintain usage of aircraft with utilizations above 13 hours per day.

And your next question comes from Mauricio Martinez with GBM.

My question is regarding the competitive environment in Mexico in domestic traffic. We've seen pressure and yields for quite a whole year. So your thoughts would be very appreciative on this front, what are you seeing for 2018 and if you've seen any change in the competitor's - I mean actions - how about you looking first? Fernando Suárez: So Mauricio, so as Enrique already highlighted, there are some structural changes going on in the domestic market. We now have more than 50% of the seats offered by ultra-low-cost carriers. So that, in general, reduces the price environment in the long-term. We continue to see that the ultra-low-cost carriers are able to stimulate demand with very low fares, especially in the low seasons. And mostly in the larger airports, demand remains relatively strong in the domestic market. There are some exceptions to the lower fare environment in general, such as Mexico City, which is a slot restrained airport, so we've seen very stable pricing environment in Mexico City, and some of the niche Volaris markets, the smaller markets domestically. I want to underline that Volaris will continue to be the low-fare leader and continue to drive volume as per our ultra-low-cost model. So we are the drivers of the low fares in the market, which is very much in line with what we want to achieve, people that previously used the buses, we are able to convert them with these lower fares to our airplanes and we make up some of the base fare difference - reduction in base fare that we've seen through growing ancillaries. We've been very successful in generating more ancillaries by selling people optional products and services after they buy the low, low base fares.

And your next question comes from Rogerio Araujo with UBS. Rogério Araújo: I have a couple of questions. The first one, sorry, if already mentioned, some of those points, I think you already had. Just to wrap-up, do you expect TRASM to continue improving marginally in the first quarter of '18 and forward. Is there any margin guidance for 2018 and can we see further market depreciation in the beginning of the year before it gets better or not. So just to wrap-up your expectation in terms of TRASM improvement, the timing, the magnitude and if there is any margin guidance? This is the first question, thank you.

So the company has never provided a guidance on TRASM and we are not doing it at this moment. Saying that, it is important to say that we are expecting some little deterioration on TRASM in the first quarter. But we're expecting as the high seasons grew more and with the share of the visiting friends and relatives traffic in the market now, the TRASM should have a much better peak during high seasons. And that's what we are expecting. Fernando Suárez: And adding on to Enrique on guidance, specifically for profitability guidance for the full year, we're not in a position to give that nor do we customarily give that. But for first quarter and specific, what we are guiding to is an adjusted EBITDAR margin in the high-teens for the first quarter, assuming current spot in exchange rate prices and the hedges by the way are in the money. And we're also guiding an aircraft and engine rental expense in the first quarter to be in and around $87 million. With these environment, we expect to result in an operating margin increase year-over-year in the first quarter. That's what we can say on profitability guidance. Rogério Araújo: Just a follow-up here, can we look at your traffic data for January and see a prioritization of yields instead of volume growth. So in addition to your goals for the first quarter, can you think about some kind of ASM growth expected. Is it in decreasing versus Volaris previous expectation or not? So how can you look at these January traffic data? Fernando Suárez: So Rogerio, January has a very important high season component. And what we do in high-season is we prioritize yields and maybe to a lesser extent volume in the lower season February and March. What we typically do as an ultra-low-cost carrier is that we prioritize load. We are very load factor active. So what you will see is a significant volume for February and March. And then as we move into the high season in Easter and Holy Week, we are going to focus on generating the yields to generate profitability during the high season. And as Enrique mentioned, we currently see a much more pronounced difference between high and low season in the market. Rogério Araújo: So last question is we - it pop up some news saying that one of your major shareholders converted their B shares into A shares. Any thought on how could this change your board member's structure - your shareholder structure, if there is any potential change to that in your review? Fernando Suárez: The B share conversion into A share conversion should not affect this. And to the best of our knowledge, there are no changes expected in the board composition.

And your next question comes from Stephen Trent with Citi.

Most of my questions have been answered. I just have actually one follow-up. When I think about the last year or so, the northbound traffic for you guys has been, seems to be the - has been the Achilles Heel, and how do you think that this likely improves with your Codeshare with Frontier. Just wondered, if you could give us a little more color on how that alliance might beef up that corridor?

Stephen, yes. The Codeshare with Frontier is definitely one driver to improve our U.S. traffic and what I can tell you about what we see with the Codeshare is that we expect our network to add around 20 new destinations in the U.S. operated by Frontier. Some of the interesting markets are DFR niches that are too small for us to service directly, like Salt Lake City and Minneapolis for example. In terms of our passengers that we see from the partnership, as we achieve full potential, full maturity, we expect it to be in the range of 1% to 2% of our annual traffic of the total annual traffic that we have. This will be around 2% to 3% of our U.S. traffic. One important thing with this agreement is that it also includes the possibility, not only to sell connecting flights but also to have Frontier act as a point of sale of Volaris flights in the U.S. So we effectively add a sales channel, a point of sale via Frontier for our flights to Mexico and in the future also to Central America. So it has those two components, more connecting traffic and also a point of sale through the Frontier distribution channels for our flights - transporter flights. So we are very optimistic about this Codeshare with Frontier.

And on a related subject, where several months in or so with this relaxed regulations between the U.S. and Mexico on aviation regulation test. As a result of that, have you guys seen any competition adjustments on those international routes you serve. So at least from U.S. carriers into Mexico, has it really moved the needle for you guys on those international routes or are you seeing competition kind of roughly where it was before?

Well, Stephen, what we have seen is - there has been an increase in capacity from U.S. carriers to the beach markets, servicing U.S. originated leisure traffic to the Mexican leisure destinations on the one hand. On the other hand, we've seen capacity increases to Mexico City from the large U.S. metropolitan areas and we do observe a short-term excess in capacity in those large U.S. metropolitan markets to Mexico City, which we see some adjustments in the near-term future, but we believe that there is still some adjusting that needs to be done in those large U.S. markets to Mexico City, specifically. That is a direct result of the flexing of the bilateral agreements.

And your next question comes from Josh Milberg with Morgan Stanley.

Just a couple quick ones. The first is that I just wanted to confirm that the MXN78 million that was recognized in your other operating income line, this quarter all sale leaseback gains. And also related to that, we're just hoping you guys could update us on what the outlook is in 2018 for sale leaseback gains. I know that that's something that's tied to how many aircraft you take off your own order book. Fernando Suárez: Josh, regarding the MXN78 million that you see in other operating income, we did not have any sale leasebacks in - we do not have any in the first quarter of this year expected. We did have one in the fourth quarter of last year. And in calendar 2018, what we have on schedule is four sale leasebacks out of our order book. Now that might slip - some of them might slip into 2018, depending on the industrial delays that might slip into 2019. I'm sorry, but we'll see if the manufacturer closes the gap. And see all of the 4 or 3 out of 4 still happen this year.

But you said that none of those four expected in the first quarter and therefore not incorporated in that EBITDA margin guidance you provided. Fernando Suárez: No, we did have an spare engine scheduled for the first quarter that is slipping into the second quarter. So first quarter, you should not see any gains on sale leasebacks on aircraft nor on spare engines.

And then my second question is if you could just elaborate a little bit further on your initiatives to reduce costs and also on the [indiscernible] shaved your cost competitiveness versus Viva. Obviously Viva is the player that's been pushing hardest on the growth front today and I know they operate with a somewhat higher seat density and also are more focused on the domestic market. So I think the cost figures that we see aren't entirely apples-to-apples but if you could provide a little perspective there that would be helpful. And also I just like to understand, you know in some measure, maybe you're moving in their direction and in terms of how they operate in the market. Fernando Suárez: Josh, on the cost initiatives, as stated by Enrique, we have over 100 of initiatives that we expect to achieve savings over MXN1 billion in savings for calendar 2018. There are wide variety of initiatives across the board companywide, obviously many of them are coming from the fleet side and our fleet cost. We've done important inroads in reducing the fleet cost with follow-on order, also I've mentioned not only did we aggressively negotiate the price on the 2020 to 2026 deliveries. But we are also repricing the backlog that - that's a benefit in the cost as early as this year in the backlog deliveries that we already have in place. So that obviously is an important driver on that. And in terms of cost comparison, it's important to bear in mind that we already have a third of our operation into the international and specifically into the U.S., in which airport costs are substantially higher to operate than your average Mexican airport and that's a very important piece of the cost. If you were to strip that out or control for that or just to look at domestic unit costs, it's pretty much a apples-to-apples comparison.

Meaning that you guys are pretty much at the same level? Fernando Suárez: Correct.

And there appears to be no further questions at this time. I would like to turn the floor back over to Mr. Enrique Beltranena for any closing remarks.

Well, thank you very much to everybody. I think this conference is now over. And I would like to again thank you the Volaris ambassadors for all their efforts in this last quarter and for the entire year of 2017. Thank you very much for your confidence and we'll keep on doing what we're doing which we think it's in the right track.

And that concludes today's conference call. You may now disconnect.