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Transcript of ABC Aerolíneas, S. A. de C. V., and Subsidiaries Aerolíneas, S.A. de C.V. and subsidiaries as of...
ABC Aerolíneas, S. A. de C. V.,
and Subsidiaries
Consolidated Financial Statements for
the Years Ended December 31, 2013
and 2012, and Independent Auditors’
Report Dated April 30, 2014
ABC Aerolíneas, S. A. de C. V. and Subsidiaries
Independent Auditors’ Report and Consolidated
Financial Statements for 2013 and 2012
Table of contents Page
Independent Auditors’ Report 1
Consolidated Statements of Financial Position 3
Consolidated Statements of Income 4
Consolidated Statements of Comprehensive Income 5
Consolidated Statements of Changes in Stockholders’ Equity 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Galaz, Yamazaki,
Ruiz Urquiza, S.C. Paseo de la Reforma 489
piso 6
Colonia Cuauhtémoc
06500 México, D. F.
México
Tel: +52 (55) 5080 6000
Fax:+52 (55) 5080 6001
www.deloitte.com/mx
Independent Auditors’ Report to the Board
of Directors and Stockholders of
ABC Aerolíneas, S. A. de C. V.
We have audited the accompanying consolidated financial statements of ABC Aerolíneas, S. A. de C. V. and
subsidiaries (the “Entity”) which comprise the consolidated statements of financial position as of December 31, 2013
and 2012, and the the consolidated statements of income and other comprehensive income, consolidated statement
changes in stockholders’ equity and consolidated statements of cash flows for the years ended December 31, 2013
and 2012, and a summary of the significant accounting policies and other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with accounting International Financial Reporting Standards, as issued by the International Accounting
Standards Board, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with International Standards on Auditing. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the Entity’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Deloitte se refiere a Deloitte Touche Tohmatsu Limited, sociedad privada de responsabilidad limitada en el Reino Unido, y a su red
de firmas miembro, cada una de ellas como una entidad legal única e independiente. Conozca en www.deloitte.com/mx/conozcanos
la descripción detallada de la estructura legal de Deloitte Touche Tohmatsu Limited y sus firmas miembro.
2
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
ABC Aerolíneas, S.A. de C.V. and subsidiaries as of December 31, 2013 and 2012, and its financial performance and
its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
Galaz, Yamazaki, Ruiz Urquiza, S. C.
Member of Deloitte Touche Tohmatsu Limited
C. P. C. Miguel Ángel del Barrio Burgos
April 30, 2014
3
ABC Aerolíneas, S. A. d e C. V. and Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 2013 and 2012
(In thousands of Mexican pesos)
Assets Note 2013 2012
Current assets:
Cash and cash equivalents 6 $ 2,622,495 $ 1,483,955
Accounts receivable 7 413,436 290,387
Due from related parties 19 11,207 11,207
Recoverable taxes, mainly business flat tax and value-
added tax
226,986 225,050
Inventories 190,812 119,603
Prepaid expenses 8 406,983 422,192
Total current assets 3,871,919 2,552,394
Prepaid expenses 8 1,192,760 996,809
Flight equipment, leasehold improvements, and furniture
and equipment - Net (Note 10)
10
8,688,307 8,137,098
Prepaid maintenance 2,355,717 1,652,835
Other assets 11 141,380 141,380
Concession 43,797 43,797
Deposits on aircraft leases 12 461,739 467,369
Total $ 16,755,619 $ 13,991,682
Liabilities and stockholders’ equity Note 2013 2012
Current liabilities:
Notes payable to financial institutions 13 $ 5,204,175 $ 2,497,209
Provision of maintenance and retirement conditions
332,160 300,908
Accounts payable 599,285 442,280
Other accounts payable and accrued expenses 345,341 210,513
Payable taxes other than income taxes 92,711 58,676
Air traffic liability 526,245 512,208
Total current liabilities 7,099,917 4,021,794
Long-term debt 13 5,253,503 6,248,487
Deferred income taxes 20 116,177 51,380
Employee benefits and other deferred liabilities 15 4,300 2,672
Provision of maintenance and retirement conditions 16 1,112,013 818,724
Total liabilities 13,585,910 11,143,057
Stockholders’ equity:
Capital stock 17 900,000 900,000
Contributions for future capital increases 5 5
Translation effects of foreign operations 12,105 11,516
Retained earnings 2,235,320 1,924,355
Controlling interest 3,147,430 2,835,876
Noncontrolling interest 22,279 12,749
Total Stockholders’ equity 3,169,709 2,848,625
Total $ 16,755,619 $ 13,991,682
See accompanying notes to consolidated financial statements.
4
ABC Aerolíneas, S. A. de C. V. and Subsidiaries
Consolidated Statements of Profit For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Note 2013 2012
Operating revenues:
Passengers $ 10,943,221 $ 9,795,819
Ancillary revenues 453,133 342,135
Cargo 27,420 50,843
Other 155,885 158,398
11,579,659 10,347,195
Operating expenses:
Aircraft fuel 4,063,198 3,645,096
Maintenance and return conditions 1,155,311 1,071,972
Airport operating and landing fees 1,369,788 1,115,221
Wages, salaries and benefits 762,368 491,152
Insurance and passenger service 126,276 127,546
Selling 920,753 854,801
Administrative and other 770,560 638,863
Flight equipment rentals 21 1,276,261 1,084,095
Depreciation and amortization 445,279 282,731
10,889,794 9,311,477
Income from operations 689,865 1,035,718
Interest income 40,082 11,373
Interest expense (317,221) (287,616)
Exchange loss - Net (27,434) (135,793)
(304,573) (412,036)
Income before income taxes 385,292 623,682
Income taxes 20 64,797 123,282
Net income 320,495 500,400
Attributable to:
Controlling interest 310,965 498,349
Noncontrolling interest 9,530 2,051
Consolidated net income $ 320,495 $ 500,400
See accompanying notes to consolidated financial statements
5
ABC Aerolíneas, S. A. de C. V. and Subsidiaries
Consolidated Statements of Comprehensive Income For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Note 2013 2012
Consolidated net income $ 320,495 $ 500,400
Other comprehensive income:
Translation effects of foreign operations 589 (39,284)
Consolidated comprehensive income of the year $ 321,084 $ 461,116
Attributable to:
Controlling interest $ 310,965 $ 459,065
Noncontrolling interest 9,530 2,051
Consolidated net comprehensive income of the year $ 320,495 $ 461,116
See accompanying notes to consolidated financial statements
6
ABC Aerolíneas, S. A. de C. V. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Contributions Translation effects
Capital for future of foreign Retained Non-controlling
stock capital increases operations earnings interest Total
Balances as of January 1 , 2012 (transition
date) $ 900,000 $ 5 $ 50,800 $ 1,426,006 $ 10,698 $ 2,387,509
Comprehensive Income:
Translation effects of foreign
operations - - (39,284) - - (39,284)
Net income for the year - - - 498,349 2,051 500,400
Comprehensive income - - (39,284) 498,349 2,051 461,116
Balances as of December 31, 2012 900,000 5 11,516 1,924,355 12,749 2,848,625
Comprehensive Income:
Translation effects of foreign
operations - - 589 - - 589
Net income for the year - - - 310,965 9,530 320,495
Comprehensive income - - 589 310,965 9,530 321,084
Balances as of December 31, 2013 $ 900,000 $ 5 $ 12,105 $ 2,235,320 $ 22,279 $ 3,169,709
See accompanying notes to consolidated financial statements.
7
ABC Aerolíneas, S. A. de C. V. and Subsidiaries
Consolidated Statements of Cash Flows For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
Note 2013 2012
Operating activities:
Income before income taxes $ 320,495 $ 500,400
Items related to investing activities
Income tax 64,797 123,282
Depreciation and amortization 445,279 282,731
Provision for maintenance and retirement conditions 324,541 139,500
Interest expense 317,221 287,616
1,472,333 1,333,529
(Increase) decrease in:
Accounts receivable (123,049) 404,467
Due from related parties - (42)
Recoverable taxes, mainly business flat tax and value-
added tax (1,936) (99,512)
Inventories (71,209) (34,769)
Prepaid expenses 15,209 155,022
Deposits on aircraft leases 5,630 (184,057)
Increase (decrease) in:
Accounts payable 157,005 27,893
Other accounts payable and accrued expenses 134,828 70,133
Income taxes paid 34,035 (49,973)
Due to related parties - (53,849)
Air traffic liability 14,037 192,003
Employee benefits and other deferred liabilities 1,628 2,314
Net cash provided by (used in) operating activities 1,638,511 1,763,159
Investing activities:
Flight equipment, leasehold improvements, and furniture and
equipment (996,488) (1,569,508)
Amortizable maintenance and repair costs (195,951) (630,807)
Prepaid maintenance (702,882) (533,300)
Net cash used in investing activities (1,895,321) (2,733,615)
Financing activities:
Repayment of loans received 4,070,828 3,931,643
Paid of loans (2,384,352) (1,861,603)
Interest paid (308,072) (281,914)
Net cash (used in) provided by financing activities 1,378,404 1,788,126
Effects from exchange rates 16,946 (38,921)
Net increase in cash and cash equivalents 1,138,540 778,749
Cash and cash equivalents at beginning of period 1,483,955 705,206
Cash and cash equivalents at end of period $ 2,622,495 $ 1,483,955
See accompanying notes to consolidated financial statements.
8
ABC Aerolíneas, S. A. de C. V. and Subsidiaries
Notes to Consolidated Financial Statements For the years ended December 31, 2013 and 2012
(In thousands of Mexican pesos)
1. Nature of business and significant events
a Nature of business - ABC Aerolíneas, S. A. de C. V. (“ABC”) and Subsidiaries (the “Entity” or
“Interjet”) are mainly engaged in providing domestic and international public air transportation
services for passengers, luggage, correspondence, cargo, parcels and mail, as well as operating flight
equipment. The Entity also develops and operates centers for aircraft maintenance and air and land
personnel training. Through its associate, it is also engaged in providing ground transportation services
from various locations to the airports at which it operates. At December 31, 2013, the Entity provided
services with a fleet of 45 aircraft of which seven are owned by the Entity, 12 are under financing
leases and 26 are under operating lease schemes.
The Entity provides air transportation services to the general public and cargo transportation mainly in
Mexico under a concession granted by the Mexican Government through the Secretaria de
Comunicaciones y Transportes (the Secretary of Communications and Transportation or “SCT”),
which was granted on August 8, 2005 and had an original term of five years. The Entity requested an
extension of the concession term subject to certain requirements of Law and Regulation of Civil
Aviation. On February 12, 2010, the SCT extended the concession granted to the Entity for an
additional 30 years, which took effect in August 2010.
The main offices of the Entity are located in Ignacio Longares 102 lote 2, Manzana 2, Parque industrial
Exportec 1, Colonia San Pedro Totoltepec Toluca from Mexico City.
2. Significant events and seasonality
Seasonality
The business is subject to seasonal fluctuations. Usually, air travel demand is highest during the summer
months and during the winter holiday season, particularly in international markets, because there are more
vacation trips during these periods. Busiest months in the year are July, August, in March or April (depending
on the date of Easter each year) and December, while the lower occupancy months in February, May and
September. The results of our operations generally reflect this seasonality, but can also be affected by factors
that are not necessarily seasonal, such as economic conditions, weather, delays in air traffic control and other
factors.
Acquisition of Airbus A320 NEO aircraft
On November 8, 2012, Interjet entered into with Airbus, a favorable amendment agreement to the aircraft
purchase contracts signed on October 18, 2005. Such amendment agreement establishes, among other things,
a firm commitment to purchase 40 Airbus A320 Neo aircraft, with scheduled deliveries between the second
half of 2018 and the second half of 2023. The A320 Neo aircraft incorporate the latest aeronautical
technology, providing a 15% saving in fuel consumption due to their greater range and load capacity. With
this purchase Interjet will gradually replace its current fleet with more efficient aircraft, improving its
operating profitability and maintaining a low average age for the whole fleet.
9
The commercial and financial conditions negotiated by Interjet with the manufacturer will enable it to access
different financing sources for the acquisition, including without limitation, export financing by export credit
agencies (ECA´s), long-term commercial bank loans, and sale and leaseback with lessors, or direct financing
from the manufacturer, all under convenient terms, which will help improve its financial profile. Furthermore,
as part of the same transaction Interjet convinced Airbus to reduce by approximately 10.89% the price of each
of the six A320 aircraft that received between November 2012 and december 2013, which represents a
significant direct benefit.
Strategic alliance with Payback
Interjet entered into a strategic alliance with Payback, a subsidiary of American Express Co., to significantly
expand its Club Interjet traveler’s program. As part of such alliance, Club Interjet members will enjoy the
benefits of a new and innovative loyalty program known as Payback, launched a few months ago, which at
the date of the accompanying consolidated financial statements has more than 2.8 million subscribers. Interjet
and Payback offer value-added to their customers and through a cutting-edge digital platform are hoping to
capture the most loyal customer base in the country. Such program is estimated to generate more than 4
million subscribers in the next six months, making it the largest loyalty program in Mexico.
New aircraft
On October 19, 2013, the Entity signed a contract with Superjet to acquire 20 SSJ100 model aircraft, whose
delivery is scheduled between 2013 and 2015. The four deliveries were between August and december, 2013.
New destinations
In 2013, the Entity began flights to Bogota, Zacatecas, La Paz, Aguascalientes, Torreon, Mazatlan,
Minatitlan, Manzanillo and Campeche.
3. Basis of presentation
a. Explanation for preparation in English
The accompanying consolidated financial statements have been prepared in English for use outside of
Mexico. These consolidated financial statements are presented on the basis of Mexican Financial
Reporting Standards (“MFRS”), which are comprised of accounting standards that are individually
referred to as Normas de Información Financiera, or “NIFs”). Certain accounting practices applied by
the Entity that conform with MFRS may not conform with accounting principles generally accepted in
the country of use.
b. Working capital
As of December 31, 2013 and 2012 the Entity has a negative working capital of $ 3,227,998 and
$1,469,400 respectively; however, management is making the necessary efforts to obtain the enough
resources to comply with its obligations. The Entity since the beginning of its operations decided to
enter into short-term loans agreements renewable every year to take advantage of lower interest rates
and to reduce the financial costs every year. In 2013, the Entity has been offered by the financial
institutions to ensure a better interest rate for a period greater than a year. The Entity is assessing the
convenience of renegotiating the short-term loans into long-term loans.
c. Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis.
10
i. Historical cost:
Historical cost is generally based on the fair value of the consideration given in exchange for
assets.
ii. Fair value:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Group takes into account the characteristics of the
asset or liability if market participants would take those characteristics into account when
pricing the asset or liability at the measurement date. Fair value for measurement and/or
disclosure purposes in these consolidated financial statements is determined on such a basis,
except for share-based payment transactions that are within the scope of IFRS 2, leasing
transactions that are within the scope of IAS 17, and measurements that have some similarities
to fair value but are not fair value, such as net realizable value in IAS 2 or value in use in IAS
36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level
1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable
and the significance of the inputs to the fair value measurement in its entirety, which are
described as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity can access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
observable for the asset or liability, either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
d. Consolidation of financial statements
The consolidated financial statements include the financial statements of ABC and those of its
subsidiaries in which it holds control.
Entity
Ownership
2013 and 2012
%
ABC Shuttle Transporte Terrestre, S. A. de C. V. (“ABC
Shuttle”) 99%
Compañía para la Capacitación y Adiestramiento Integral
para Pilotos, S. A de C. V. (“Capacitación y
Adiestramiento”) 99%
Servicios Administrativos Galem, S. A. de C. V.
(“Servicios Galem”) 95%
ABC Capacitación y Adiestramiento, S. A. de C. V. (“ABC
Capacitación”) 99%
11
Entity
Ownership
2013 and 2012
ABC Aerolíneas Mantenimiento Técnico Aeronáutico, S.
A. de C. V. (“ABC Mantenimiento”) 99%
ABC Servicios Terrestres, S. A de C. V. (“ABC Servicios
Terrestres”) 95%
AV Aerolíneas, S. A de C. V. y subsidiaria (“AV”) 99%
Grupo Aleve, S. A. de C. V. (“Aleve”) 99%
Taller de Reparación Aeronáutica IJ-TEK, SAPI, de
C. V. (“Taller”) 60%
IJ Cargo, S.A. de C.V. (IJ Cargo) 98%
(1) The 90% of these companies are controlled by the Entity directly and 9% indirectly through a
consolidated subsidiary.
Balances and transactions between consolidated companies have been eliminated.
The noncontrolling interests in the subsidiaries are identified separately in relation to the investments
that Entity has in them. The noncontrolling interests may be initially valued, either at fair value or at
the proportional interest in the noncontrolling interests over the fair value of the identifiable assets of
the entity acquired. The choice of the valuation basis is made individually for each transaction. After
the acquisition, the book value of the controlling interests represents the amount of such interests as of
the initial recognition, plus the portion of the subsequent noncontrolling interests of the statement of
changes in stockholders' equity. The comprehensive result is attributed to the noncontrolling interests
even if it gives rise to a deficit in them.
i. Subsidiaries – The subsidiaries are all the companies over which the Entity has the power to
govern their operating and financial policies, generally because it owns more than half of the
voting stock. The existence and effects of the potential voting rights which are currently
exercisable or convertible are considered when it is evaluated whether the Entity controls other
Entity. The subsidiaries are consolidated from the date on which their control is transferred to
Entity, and they cease to consolidate from the date on which control is lost.
The accounting policies of subsidiaries have been changed to the extent necessary to ensure that
there is consistency with the policies adopted by the Entity
e. Functional and reporting currency
To consolidate financial statements of foreign subsidiaries, the accounting policies of the foreign
entities are converted to IFRS using the currency in which transactions are recorded. The financial
statements are subsequently translated to Mexican pesos using the following methodologies:
Foreign operations whose functional currency is the same as the currency in which transactions are
recorded translate their financial statements using the following exchange rates: 1) the closing
exchange rate in effect at the balance sheet date for assets and liabilities; 2) historical exchange rates
for stockholders’ equity, and 3) the rate on the date of accrual of revenues, costs and expenses.
Translation effects are recorded to other comprehensive income beginning on the transition date to
IFRS.
12
The currency in which transactions are recorded and the functional currency of foreign operations and
the exchange rates used in the different translation processes are as follows:
Entity
Currency of
accounting
records
Functional
currency Mexican peso exchange rates
December 31,
2013
December 31,
2012
Inter-Jet Airlines Ldt. U.S. Dollar U.S. Dollar $ 13.0652 $ 12.9880
f. Statements of Comprehensive Income
Costs and expenses presented in the consolidated statements of income were classified according to
their nature because this is the practice of the sector to which the Entity belongs. We present a subtotal
for Income from operations in order to provide a better understanding of the economic and financial
performance, which is the result of subtracting service revenue, operating expenses.
g. Statements of Cash Flows
The Entity presents statements of cash flows under the indirect method. Cash inflows from interest
received are classified in operating activities while cash outflows related to interest expense are
presented in financing activities. Dividends are reported as financing activities.
h. New and revised IFRSs in issue but not yet effective
The Group has not applied the following new and revised IFRSs that have been issued but are not yet
effect
IFRS 9 Financial Instruments3
Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and
Transition Disclosures²
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities¹
Amendments to IAS 32 Offsetting Financial Assets and Financial
Liabilities¹
¹ Effective for annual periods beginning on or after January 1, 2014, with earlier application permitted.
² Effective for annual periods beginning on or after January 1, 2015, with earlier application permitted. 3 Effective for annual periods beginning on or after January 1, 2016, with earlier application permitted.
4. Summary of significant accounting policies
a. Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards released by IASB
b. Financial assets
Financial assets are recognized when the Entity becomes a party to the contractual provisions of the
instruments.
13
Financial assets are initially valued at fair value. The transaction costs directly attributable to the
acquisition or issuance of financial assets (other than financial assets at fair value through profit or
loss) are added to or deducted from the fair value of the financial assets, as the case may be, in the
initial recognition. The transaction costs directly attributable to the acquisition of financial assets at
fair value through profit or loss are recognized immediately in results
Financial assets are classified into the following specified categories: financial assets ‘at fair value
through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial
assets and ‘loans and receivables’. The classification depends on the nature and purpose of the
financial assets and is determined at the time of initial recognition. All regular way purchases or sales
of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument
and of allocating interest income over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash receipts (including all fees and points paid or
received that form an integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the debt instrument, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than those
financial assets classified as of FVTPL.
Financial assets at FVTPL
Financial assets are classified as of FVTPL when the financial asset is either held for trading or
it is designated as of FVTPL.
A financial asset is classified as held for trading if:
It has been acquired principally for the purpose of selling it in the near term; or
On initial recognition it is part of a portfolio of identified financial instruments that the
Group manages together and has a recent actual pattern of short-term profit-taking; or
It is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as of FVTPL
upon initial recognition if:
Such designation eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or
The financial asset forms part of a group of financial assets or financial liabilities or
both, which is managed and its performance is evaluated on a fair value basis, in
accordance with the Group’s documented risk management or investment strategy, and
information about the grouping is provided internally on that basis; or
It forms part of a contract containing one or more embedded derivatives, and IAS 39
permits the entire combined contract to be designated as of FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss
incorporates any dividend or interest earned on the financial asset and is included in the ‘other
income (expenses) - Net’ line item.
14
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Loans and receivables are measured at amortized cost
using the effective interest method, less any impairment.
Interest income is recognized by applying the effective interest rate, except for short-term
receivables when the effect of discounting is immaterial.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end
of each reporting period. Financial assets are considered to be impaired when there is objective
evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, the estimated future cash flows of the investment have been affected.
For AFS equity investments, a significant or prolonged decline in the fair value of the security
below its cost is considered to be objective evidence of impairment.
For all other financial assets, objective evidence of impairment could include:
Significant financial difficulty of the issuer or counterparty; or
Breach of contract, such as a default or delinquency in interest or principal payments; or
It becoming probable that the borrower will enter bankruptcy or financial re-
organization; or
The disappearance of an active market for that financial asset because of financial
difficulties.
For certain categories of financial assets, such as trade receivables, assets are assessed for
impairment on a collective basis even if they were assessed not to be impaired individually.
For financial assets carried at amortized cost, the amount of the impairment loss recognized is
the difference between the asset’s carrying amount and the present value of estimated future
cash flows, discounted at the financial asset’s original effective interest rate.
For financial assets that are carried at cost, the amount of the impairment loss is measured as
the difference between the asset’s carrying amount and the present value of the estimated future
cash flows discounted at the current market rate of return for a similar financial asset. Such
impairment loss will not be reversed in subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables, where the carrying amount is reduced
through the use of an allowance account. When a trade receivable is considered uncollectible, it
is written off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in the carrying amount of the
allowance account are recognized in profit or loss.
When an AFS financial asset is considered to be impaired, cumulative gains or losses
previously recognized in other comprehensive income are reclassified to profit or loss in the
period.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognized, the previously recognized impairment loss is reversed
through profit or loss to the extent that the carrying amount of the investment at the date the
impairment is reversed does not exceed what the amortized cost would have been had the
impairment not been recognized.
15
In respect of AFS equity securities, impairment losses previously recognized in profit or loss
are not reversed through profit or loss. Any increase in fair value subsequent to an impairment
loss is recognized in other comprehensive income and accumulated under the heading of
investments revaluation reserve. In respect of AFS debt securities, impairment losses are
subsequently reversed through profit or loss if an increase in the fair value of the investment
can be objectively related to an event occurring after the recognition of the impairment loss.
Derecognition of financial assets
The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss. On derecognition of a financial asset other than in its entirety, the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts
c. Inventories Inventories of expendable parts, accessories, materials and supplies are stated at the lower of their cost or net realizable values, using the average method. They are recognized in results as consumed, also based on their average cost.
d. Prepaid expenses The Entity makes advances for the purchase of aircraft to be recognized in the entity functional currency translated at the exchange rate of the payment date. When the financial effect is relevant, despite the advances that do not qualify as a financial asset, recognizing the implicit financing to accrue the discount interest rate implicit in the agreement. The item also includes prepayments additional minimum lease payments resulting from subtracting the payment of advances for maintenance, fair value, as described in accounting policy advances for maintenance.
e. Flight equipment, leasehold improvements and furniture and equipment
The flight equipment, adaptations, improvements and equipment are initially recorded at cost.
These assets are recorded at acquisition cost. Balances from acquisitions made through December 31,
2007 were restated for the effects of inflation by applying factors derived from the National Consumer
Price Index (“NCPI”) through that date as deemed cost in accordance with the transition elections to
IFRS applied by the Entity.
16
Land is not depreciated.
The furniture and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses.
Depreciation and amortization is recognized to lead to results of cost or valuation of assets (other than
land) less their residual values over their useful lives using the straight line method. The estimated
useful lives, residual values and depreciation method are reviewed at the end of each year, and the
effect of any changes in the estimate recorded is recognized on a prospective basis.
Average years
Flight equipment and simulator 20
Flight equipment – aircraft 19 (average)
Flight equipment – aircraft (1) 10
Leasehold improvements 20
Communication equipment 12
Airport operating equipment 10
Furniture 10
Transportation equipment 4
Computer equipment 3
Assets held under finance leases are depreciated based on their estimated useful life as owned assets
or, if life is lower, in the corresponding lease term.
The gain or loss arising from the sale or retirement of an item of flight equipment, leasehold
improvements, and furniture and equipment is calculated as the difference between the resources
received from sales and the carrying amount of the asset and is recognized in income.
The category includes aircraft engines, airframes, landing gear, major maintenance carryforwards and
repair costs, on owned aircraft and those obtained through leasing, which are amortized over the hours
or accumulated cycles of operation, as applicable. Considering a residual value of 15%.
(1) The limit is the physical condition of the “overhaul” (repaired replacement part). The reparable
spare parts and replacement parts whose substitution is expected in the short term are at values
similar to those existing in the market which consider the prevailing situation each year and are
estimated to be recoverable in the regular course of operations. No residual value is considered.
f. Leases
Leases are classified as finance leases when the terms of the lease transfer substantially all the Entity
risks and rewards of ownership. All other leases are classified as operating leases.
The assets held under finance leases are recognized as assets of the entity at fair value at inception of
the lease, or if lower, the present value of the minimum lease payments. The corresponding liability to
the lessor is included in the statement of financial position as a finance lease liability.
Lease payments are apportioned between the finance charge and the reduction of the lease obligation
so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly against income, unless they can be directly attributable to qualifying assets, in which
case they are capitalized in accordance with the entity's accounting policy. Contingent rents are
recognized as expenses in the periods in which they are incurred.
17
g. Prepaid maintenance
The Entity records the amounts paid in advance for maintenance as a financial asset if it is required to
make the payment of maintenance, and has made advance payments for maintenance, that they may be
reimbursed by the lessor if the institution demonstrates that spending maintenance has been performed.
The resulting financial asset is recognized at fair value. Any difference between this and the amount
paid is considered part of the lease payments. A financial asset is classified as a receivable, and
therefore, it is recognized at amortized cost. For its part, the additional minimum lease payments are
recognized in the caption of prepayments.
When the amounts paid are not fully recoverable, the unrecoverable amounts are determined and
periodically reviewed and represent an impairment of the financial asset.
h. Other assets
Costs derived from development activities and which give rise to future economic benefits, as they
fulfill certain requirements for recognition as assets, are capitalized and amortized based on the
straight-line method over ten years. Expenses that do not meet these requirements, as well as research
costs, are recorded in operations in the year they are incurred.
On August 19, 2008, the Entity commenced operations at the Mexico City International Airport,
through a contract with Aerocalifornia, S. A. de C. V., under which the Entity acquired rights to space
and flight hours for takeoff and landing of aircraft, documentation counters for passengers and
baggage, passenger information desks on the general terminal, as well as parking facilities for short
stay and long stay, Aero cares services, baggage revision services, service corridors, telescopic mobile
service facilities, equipment and ground support services. The acquisition of these rights and other
services paid were recorded as an indefinite lived asset, which is not amortized, but is subject to
impairment testing annually. Presented in the balance sheet in the other assets line item.
i. Concession
On August 8, 2005, the Federal Government, through the SCT, granted the Entity the concession to
provide public services related to national air transportation of passengers, cargo and mail for a five-
year period. As mentioned in Note 1, in 2010, the Entity obtained an extension of the concession term
for 30 additional years.
The Entity considers that the grant qualifies as an intangible asset with an indefinite life and therefore
is not amortized and is subject to impairment tests at least annually.
j. Deposits on aircraft leases
Deposits on aircraft leases mainly represent deposits paid to lessors of the fleet rented by the Entity as
well as deposits with lessors of buildings and airport service providers. These amounts are presented
as current or non-current, based on their contractually established recovery date.
k. Impairment of long-lived assets in use
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any). When it is not possible to estimate the
recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-
generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be
identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
18
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested
for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset
for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating
unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would have been determined had no impairment loss
been recognized for the asset (or cash generating unit) in prior years. A reversal of an impairment loss
is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in
which case the reversal of the impairment loss is treated as a revaluation increase.
l. Financial liabilities
Financial liabilities are initially valued at fair value. The transaction costs which are directly
attributable to the acquisition or issuance of financial liabilities (other than financial liabilities valued
at fair value with changes recorded through results) are added or deducted, when applicable, from the
initially recognized fair value of financial liabilities. The transaction costs which are directly
attributable to financial liabilities at fair value with changes recorded through results are immediately
recognized in results.
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial
liabilities’. Note 13 describe the characteristics of loans received by the Entity from financial
institutions.
Financial liabilities at FVTPL
Financial liabilities are classified as of FVTPL when the financial liability is either held for
trading or it is designated as of FVTPL.
A financial liability is classified as held for trading if: • It has been incurred principally for the purpose of repurchasing it in the near term; or
• On initial recognition it is part of a portfolio of identified financial instruments that the
Group manages together and has a recent actual pattern of short-term profit-taking; or
• It is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as of FVTPL upon initial recognition if:
• Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
19
• It forms part of a contract containing one or more embedded derivatives, and IAS 39
permits the entire combined contract to be designated as of FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on
remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss
incorporates any interest paid on the financial liability and is included in the statement of profit
or loss.
Financial liabilities at FVTPL
Other financial liabilities (including borrowings and trade and other payables) are subsequently
measured at amortized cost using the effective interest method.
The effective interest method is a method of calculating the amortized cost of a financial liability and
of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments (including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and other premiums or discounts) through
the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying
amount on initial recognition.
The Entity only eliminates financial liabilities when its obligations are fulfilled, canceled or expire.
m. Derivative financial instruments
The Entity enters into derivative financial instruments contracts. These instruments are negotiated only
with institutions of recognized financial strength and trading limits have been established for each
institution. The Entity’s policy is not to carry out transactions with derivative financial instruments for
the purpose of speculation.
The Entity recognizes all assets or liabilities that arise from transactions with derivative financial
instruments at fair value in the statements of financial position, regardless of its intent for holding
them. Fair value is determined using prices quoted on recognized markets. If such instruments are not
traded, fair value is determined by applying valuation techniques recognized in the financial sector.
When derivatives are entered into to hedge risks, and such derivatives meet all hedging requirements,
their designation is documented at the beginning of the hedging transaction, describing the
transaction’s objective, characteristics, accounting treatment and how the effectiveness of the
instrument will be measured.
The Entity discontinues hedge accounting when the derivative instrument matures, is sold, cancelled or
exercised, when the derivative instrument does not reach a high percentage of effectiveness to
compensate for changes in fair value or cash flows of the hedged item, or when the Entity decides to
cancel its designation as a hedge.
While certain derivative financial instruments are contracted for hedging from an economic point of
view, they are not designated as hedges because they do not meet all of the requirements and are
instead classified as held-for-trading for accounting purposes. Changes in fair values are recognized in
comprehensive financing results.
n. Air traffic liability and service
Ticket sales are initially recognized as a liability under air traffic liability. When the transportation
service is provided or the right to use the ticket is lost, the earned revenues are recognized and the
liability account is reduced.
20
With respect to unused tickets, transportation revenues are recognized based on the itinerary date of
the last respective coupon. As a policy, the Entity does not reimburse sold tickets. Revenue from freight and excess baggage are recognized when the service is provided.
o. Frequent-flier program
The Entity maintains the Payback Program (formerly the Interjet Club Program) through which, in
exchange for an annual enrollment fee, program members can accrue 10% of their airfares (without
taxes or airport tax) to acquire tickets, pay excess baggage charges or itinerary change fees throughout
a 12-month period. The fair value attributed to these rewards is deferred as a liability and recognized
as income when the Entity has fulfilled its obligation, i.e., when rewards are utilized or expire,
whichever occurs first. The price is assigned to rewards at fair value, while the residual amount is
assigned to the ticket value.
At December 31, 2013 and 2012, the liability generated by this program is insignificant and is
presented under accrued expenses in the statement of changes in financial position.
p. Employee benefits from termination, retirement and statutory employee profit sharing (PTU)
Payments to defined contribution retirement benefit plans are recognized as an expense when
employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the
projected unit credit method, with actuarial valuations being carried out at the end of each annual
reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to
the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected
immediately in the statement of financial position with a charge or credit recognized in other
comprehensive income in the period in which they occur. Remeasurement recognized in other
comprehensive income is reflected immediately in retained earnings and will not be reclassified to
profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net
interest is calculated by applying the discount rate at the beginning of the period to the net defined
benefit liability or asset. Defined benefit costs are categorized as follows:
• Service cost (including current service cost, past service cost, as well as gains and losses on
curtailments and settlements).
• Net interest expense or income.
• Remeasurement.
The Group presents the first two components of defined benefit costs in profit or loss in the line item
employee benefits expense. Gains and losses for reduction of service are accounted for as past service
costs
The retirement benefit obligation recognized in the consolidated statement of financial position
represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from
this calculation is limited to the present value of any economic benefits available in the form of refunds
from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognized at the earlier of when the entity can no longer
withdraw the offer of the termination benefit and when the entity recognizes any related restructuring
costs.
Statutory employee profit sharing (PTU)
PTU is recorded in the results of the year in which it is incurred and presented under other income and
expenses in the Entity consolidated statements of operations..
21
q. Provision for maintenance and return conditions
When an operating lease establishes a future major maintenance obligation, the provision is calculated
by independent actuaries. In this case, the Entity records the best estimate of the future obligation if the
following assumptions are fulfilled:
I. A current obligation (whether legal or assumed) payable by the Entity exists as the result of a
past event;
II. The disbursement of economic resources as a means of settling this obligation is likely, and
III. The obligation can be fairly estimated.
The obligation established in lease contracts generally involves returning, in minimum performance
conditions, main components like engines, auxiliary power units (APU), major maintenance (1.e. C-
Checks), landing gear, repainting or shared maintenance costs (when usage exceeds a given level), as
detailed in each particular lease contract.
It is usually fairly clear whether a return obligation condition has been activated under the terms of the
lease contract for each component by matching return conditions with monthly aircraft condition
records.
When the existing condition of a leased aircraft component does not meet the return conditions
stipulated in the lease contract, the Entity has the obligation to settle the major maintenance costs
incurred for the component or make a payment to the lessor. Accordingly, it must create a provision
for the obligation established for this purpose in lease contracts.
A provision is recorded for the minimum amount required for the next maintenance program to return
significant aircraft components to a performance level in compliance with return conditions. This is the
case because the minimum disbursement required for the next major maintenance program or the
minimum amount payable to the lessor is the only contractual obligation established for the Entity,
which is fulfilled (at least temporarily) by the next major maintenance program implemented to return
components to a performance level exceeding lease contract requirements. This provision is discounted
at current value if the effect is material and classified as short and long-term based on estimated
maintenance dates.
The related provision for maintenance and return conditions is computed by independent actuary on
the basis of the lease agreements.
r. Provisions
Provisions are recognized for current obligations that arise from a past event, that are probable to result
in the use of economic resources, and that can be reasonably estimated.
s. Income taxes
The expense for taxes on income represents the sum of current taxes on income and deferred taxes on
income.
Current taxes
Current income taxes, calculated as the higher of the regular Mexican income tax (“ISR”) or the
Business Flat Tax (“IETU”), are recorded in the results of the year in which they are incurred.
22
Deferred income taxes
Deferred income tax is recognized on temporary differences between the carrying amounts of
assets and liabilities in the consolidated financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred income tax liabilities are generally
recognized for all taxable temporary differences. Deferred income tax assets are generally
recognized for all deductible temporary differences to the extent that it is probable that taxable
profits will be available against which those deductible temporary differences can be utilized.
Such deferred income tax assets and liabilities are not recognized if the temporary difference
arises from the initial recognition (other than in a business combination) of assets and liabilities
in a transaction that affects neither the taxable profit nor the accounting profit. In addition,
deferred income tax liabilities are not recognized if the temporary difference arises from the
initial recognition of goodwill.
As a consequence of the 2014 Tax Reform , as of December 31, 2013 deferred IETU is no
longer recognized.
Deferred income tax liabilities are recognized for taxable temporary differences associated with
investments in subsidiaries and associates, and interests in joint ventures, except where the
Group is able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only
recognized to the extent that it is probable that there will be sufficient taxable profits against
which to utilize the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable profits will
be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred income tax liabilities and assets reflects the tax consequences that
would follow from the manner in which the Group expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities.
Current and deferred income taxes
Current and deferred income tax are recognized in profit or loss, except when they relate to
items that are recognized in other comprehensive income or directly in equity, in which case,
the current and deferred income tax are also recognized in other comprehensive income or
directly in equity respectively. Where current income tax or deferred income tax arises from the
initial accounting for a business combination, the tax effect is included in the accounting for the
business combination.
t. Transactions in foreign currency
The individual financial statements of each of the Entity's subsidiaries are prepared in the currency of
the primary economic environment in which the Entity operates (its functional currency). For the
purpose of the consolidated financial statements, results and the financial position of each entity are
expressed in Mexican pesos, the Entity's functional currency and also the presentation currency of the
consolidated financial statements.
23
In preparing the financial statements of each individual group entity, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange
prevailing at the dates of the transactions. At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined. Non-monetary items that are measured in
terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognized in profit or loss in the period in which they
arise except for:
Exchange differences on foreign currency borrowings relating to assets under construction for
future productive use, which are included in the cost of those assets when they are regarded as
an adjustment to interest costs on those foreign currency borrowings.
Exchange differences on monetary items receivable from or payable to a foreign operation for
which settlement is neither planned nor likely to occur (therefore forming part of the net
investment in the foreign operation), which are recognized initially in other comprehensive
income and reclassified from equity to profit or loss on repayment of the monetary items.
For the purposes of presenting these consolidated financial statements, the assets and liabilities of the
Group’s foreign operations are translated into Currency Units using exchange rates prevailing at the
end of each reporting period. Income and expense items are translated at the average exchange rates
for the period, unless exchange rates fluctuate significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are
recognized in other comprehensive income and accumulated in equity (and attributed to non-
controlling interests as appropriate).
u. Revenue recognition – The Entity recognizes sold, unused transportation as a liability and recognizes
the respective revenues when the transportation service is provided or the respective utilization right is
lost. In the case of the Club Interjet® Program, the Entity defers the estimated fair value of rewards (by
determining the fair value of the ticket in a residual manner) as a liability; but subsequently recognizes
this amount as revenue when rewards are utilized or expire, whichever occurs first.
5. Judgments and estimates
In the application of the Group’s accounting policies, which are described in Note 4, the Entity’s management
are required to make judgments, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that period,
or in the period of the revision and future periods if the revision affects both current and future periods:
a. Lease classification – For accounting purposes, lease contracts are classified as operating or capital
leases by considering the extent to which the Entity obtains the risks and rewards inherent to the
ownership of aircraft and other leased goods, and depending on the substance of the transaction rather
than its legal form. As this determination requires that management use its judgment, the Entity has
established internal evaluation criteria. For example, the Entity evaluates the lease contract period, the
economic life of the leased asset, the current value of minimum contract payments and the asset's
estimated fair value, among other items, as the key factors used to classify a lease contract as an
operating or finance lease. Note 13 indicates the obligations recognized for the finance leases executed
for flight equipment, while Note 21 discloses the obligations resulting from operating leases. Lease
classification modifications can have a significant impact on the Entity's financial position and results.
24
b. Advances, the maintenance provision and return conditions - Accounting for the obligations and
rights derived from operating lease contracts requires that management utilize its judgment and
prepare estimates. Provisions are only recorded when the Entity has a contractual obligation and when
the liability amount can be fairly estimated. Estimates are prepared based on maintenance projections,
which are also utilized to determine the payment of advances. The provision is discounted by utilizing
a pretax rate of 6.05%, which reflects the risk associated with the maintenance expense. While subject
to certain conditions that require the legal interpretation of contracts, advances are recognized as a
financial asset which accrues financial income. Finally, advances and the provision are presented on a
gross basis because IFRS require this presentation unless a given standard permits or requires a net
presentation and when it is considered that the conditions embodied in these standards are not fulfilled.
Changes to the above judgments and/or estimates could have a significant effect on the Entity's
financial position and results.
c. Estimated useful lives, residual values and depreciation methods - The Entity periodically reviews
the estimates prepared for the useful lives, residual values and depreciation methods used for flight
equipment components, adaptations, improvements and equipment. The effect of estimate changes is
recognized prospectively. Estimate changes can have a significant effect on the Entity's financial
position and results.
d. Impairment of long-lived assets in use - The Entity reviews the book values of long-lived assets in use
to determine indications of impairment. If indications of impairment are detected, it estimates the
recoverable amount, which includes the estimated fair value of the future cash flows generated by the
asset (or cash-generating unit) and their fair value. The fair value of future cash flows is based on
management's projection of future transactions, which are discounted by using a pretax interest rate
that reflects the evaluation of the amount that would be realized on the market given the value of
money over time and the specific risks related to the asset (or cash-generating unit). Management's
evaluations have not indicated any impairment of long-lived tangible and intangible assets. Changes to
these estimates or their underlying assumptions could result in asset impairment with a significant
effect on the Entity's financial position and results.
6. Cash and cash equivalents
2013 2012
Cash and bank deposits $ 1,995,543 $ 1,040,919
Cash equivalents - Investment funds 626,952 443,036
$ 2,622,495 $ 1,483,955
7. Accounts receivable
2013 2012
Trade accounts receivable $ 180,714 $ 150,337
Credit cards 86,252 93,399
Other 138,653 41,649
Officers and employees 7,817 5,002
$ 413,436 $ 290,387
25
8. Prepaid expenses
2013 2012
Aircraft fuel (1) $ 217,330 $ 291,119
Aircraft insurance 182,304 124,739
Prepaid insurance 5,666 4,586
Other 1,683 1,748
406,983 422,192
Prepaid expenses long term (2) 1,192,760 996,809
Total $ 1,599,743 $ 1,419,001
(1) The Entity modified its agreements for the acquisition of fuel by prepaying Aeropuertos y Servicios
Auxiliares, S. A., based on the previous months’ consumption.
(2) A subsidiary had a contractual obligation, for the acquisition of 20 aircraft, which are scheduled for
delivery from August 2013 to June 2015.
9. Derivative financial instruments
As part of the Entity’s risk management program, the Entity uses financial instruments, primarily fuel
options. The Entity does not hold or issue derivative financial instruments for speculative purposes.
The Entity is exposed to credit losses in the event of non-performance by counterparties to its financial
instruments, but it does not expect any of the counterparties to fail to meet their obligations. The credit
exposure related to these financial instruments is incorporated in the fair value of the derivatives, represented
by a positive fair value at the reporting date, reduced by the effects of master netting agreements.
The Entity has hedged the price delivering advances fuel supplier based on previous consumption.
10. Flight equipment, leasehold improvements and furniture and equipment
2013 2012
Flight equipment and simulator $ 4,329,463 $ 4,433,457
Leasehold improvements 422,091 317,316
Communication and airport operating equipment 231,786 203,571
Furniture and computer equipment 189,694 84,681
Transportation equipment 21,586 18,488
Land 5,111 4,806
5,199,731 5,062,319
Flight and other equipment in finance lease 4,848,914 3,989,838
Depreciation and amortization (1,360,338) (915,059)
$ 8,688,307 $ 8,137,098
26
a. 2013: January 1, 2013 Acquisitions Disposals December 31, 2013
Cost:
Flight equipment and
simulator $ 4,433,457 $ 984,439 (1,088,433) $ 4,329,463
Leasehold
improvements 317,316 104,775 - 422,091
Communication and
airport operating
equipment 203,571 28,215 - 231,786
Furniture and computer
equipment 84,681 105,013 - 189,694
Transportation
equipment 18,488 3,098 - 21,586
Finance lease 3,989,838 859,076 - 4,898,914
Land 4,806 305 - 5,111
Total $ 9,052,157 $ 2,084,921 $ (1,088,433) $ 10,048,645
January 1, 2013
Depreciation
expense Disposals December 31, 2013
Depreciation:
Flight equipment and
simulator $ (588,531) $ (204,650) $ - $ (793,181)
Leasehold
improvements (40,833) (8,575) - (49,408)
Communication and
airport operating
equipment (39,066) (25,402) - (64,468)
Furniture and computer
equipment (33,511) (20,178) - (53,689)
Finance lease (203,937) (181,067) - (385,004)
Transportation
equipment (9,181) (5,407) - (14,589)
Total $ (915,059) $ (445,279) $ - $ (1,360,338)
b. 2012:
January 1 , 2012 Acquisitions Disposals December 31, 013
Cost:
Flight equipment and
simulator $ 3,646,534 $ 786,923 $ - $ 4,433,457
Leasehold
improvements 232,395 84,921 - 317,316
Communication and
airport operating
equipment 108,056 95,515 - 203,571
Furniture and computer
equipment 54,251 30,430 - 84,681
Transportation
equipment 16,602 1,887 (1) 18,488
Finance lease 3,419,357 570,592 (111) 3,989,838
Land 4,806 - - 4,806
Total $ 7,482,001 $ 1,570,268 $ (112) $ 9,052,157
27
January 1 , 2012
Depreciation
expense Disposals December 31, 2013
Depreciatión:
Flight equipment and
simulator $ (458,588) $ (129,943) $ - $ (588,531)
Leasehold
improvements (35,388) (5,445) - (40,833)
Communication and
airport operating
equipment (22,937) (16,129) - (39,066)
Furniture and computer
equipment (20,699) (12,812) - (33,511)
Finance lease (88,968) (114,969) - (203,937)
Transportation
equipment (5,748) (3,433) - (9,181)
Total $ (632,328) $ (282,731) $ - $ (915,059)
11. Other assets
2013 2012
Payment of fees $ 141,380 $ 141,380
12. Deposits on aircraft leases
2013 2012
For rental of aircraft and engines $ 328,490 $ 447,784
For leases of buildings and other 133,249 19,585
$ 461,739 $ 467,369
13. Notes payable to financial institutions
2013 2012
Note payable Mexican pesos
Note payable in Mexican pesos, which bears interest payable
on a monthly basis at the Mexican interbank equilibrium
interest rate (TIIE) plus 2.70 basis (1) $ 800,000 $ 1,000,000
Note payable in Mexican pesos, which bears interest payable
on a monthly basis at the Mexican interbank equilibrium
interest rate (TIIE) plus 2.65 basis (2) 513,333 -
Note payable in Mexican pesos, which bears interest payable
on a monthly basis at the Mexican interbank equilibrium
interest rate (TIIE) plus 2.90 basis (3) 247,619 293,333
28
2013 2012
Note payable in Mexican pesos, which bears interest payable
on a monthly basis at the Mexican interbank equilibrium
interest rate (TIIE) plus 4.00 basis (4) 176,400 235,198
Note payable in Mexican pesos, which bears interest payable
on a monthly basis at the Mexican interbank equilibrium
interest rate (TIIE) plus 5.00 basis points in (5) 122,052 195,283
Note payable in Mexican pesos, which bears interest payable
on a monthly basis at the Mexican interbank equilibrium
interest rate (TIIE) plus 5.00 basis points in (5) 133,929 -
Note payable US dollars
Finance lease obligation for flight equipment accruing interest
at a fixed rate (7) 3,972,565 3,218,189
Note payable in U.S. dollars, which bears interest payable on
a quarterly basis at LIBOR rate plus 1.5 basis (8) 1,656,347 1,756,361
Bears interest payable on a monthly basis at LIBOR plus 0.95
points (8) 137,469 974,100
Bears interest payable on a monthly basis at LIBOR plus 0.95
points (9) 1,306,520 -
Note payable in U.S. Dollars, which bears interest payable on
a monthly basis at the LIBOR rate plus 6.00 (effective
weighted average interest rate of 6.26%) (10) 326,630 -
Note payable in U.S. Dollars, which bears interest payable on
a monthly basis at the LIBOR rate plus 6.00 (effective
weighted average interest rate of 6.26%) (11) 65,326 77,928
Note payable in U.S. Dollars, which bears interest payable
quarterly at LIBOR rate plus 0.5 basis (12) 999,488 995,304
Total notes payable to financial institutions 10,457,678 8,745,696
Less - Short-term portion 5,204,175 2,497,209
$ 5,253,503 $ 6,248,487
(1) On December 4, 2012, the Bank signed with Nacional Financiera, SNC, Banking Institution
Development, Directorate Trust (NAFIN), acting as trustee of Trust No. 80660, in the amount of $
1,000,000 payable in 60 monthly installments of $16.667 pesos from January 21, 2013.
(2) On August 10, 2012, the Bank signed with NAFIN, acting as trustee of Trust No. 80660, in the amount
of $ 550,000 payable in 60 monthly installments of $9,167 pesos from september 20, 2013.
(3) On May 18, 2012, the Entity executed an unsecured loan contract with Banco Nacional de Comercio
Exterior, S.N.C. (Bancomext) for the amount of $320,000 pesos, payable in 84monthly installments of
$3,180 from june 18, 2012.
29
With maturity on May 20, 2019 and which accrues interest at the TIIE rate plus 2.90 points.
(4) This loan contract was executed on December 14, 2011 with Banco Inbursa for the amount of
$293,998, payable in 60 monthly installments of $4,900 from January 2, 2012.
(5) The unsecured loan contract executed on August 28, 2009 with Bancomext, will be settled through 18
monthly payments of $16,667pesos as of March 2010. On August 12, 2012, the Entity executed a new
loan contract with Banco Nacional de Comercio Exterior, SNC, which will be settled through 48
monthly payments of $ 6,102 as of September 2011.
(6) At December 31, 2013, minimum payments derived from finance leases are as follows:
Total minimum lease obligations $ 3,579,581
Current portion of obligations 401,935
Current value of obligations $ 3,981,516
(7) On January 29, 2010, a loan contract was executed with JP Morgan for the approximate amount of
US$ 149,200,000, with short-term settlement. In 2012 two loan contracts were executed with JP
Morgan, one of them for US$70,015,469 within two years and US$64,054,811 within one year.
(8) On December 27, 2012 was signed note payable for $75,000 with JP Morgan with short-term
settlement.
(9) On December 28, 2012 was signed note payable for $100,000 with JP Morgan with short-term
settlement.
(10) On December 28, 2012 was signed note payable for $25,000 with CitiBank with short-term settlement.
(11) On October 4, 2010, a subsidiary contracted an unsecured loan with Banco Inbursa, S. A. Institución
de Banca Múltiple, Grupo Financiero Inbursa for the approximate amount of US$ 8,000,000; loan
principal will be settled through six annual payments of US$ 1,000,000, together with a payment of
US$ 2,000,000 when the loan matures on October 4, 2017.
(12) On December 15, 2010, a subsidiary executed a loan contract for six promissory notes with CitiBank,
N. A. for approximately US$ 48.5 million; this amount becomes payable when requested by the
financial institution. In addition this subsidiary executed a new loan contract for $28.0 million, payable
in May 2014.
Interest rates at 31 December 2013 and 2012 are as follows:
Rate Currency 2013 2012
TIIE (28 days) Pesos 4.80% 4.8462%
Libor (1 month) U.S. dollars 0.23% 0.2087%
14. Financial Instruments
a. Significant accounting polices
The details of the significant accounting policies and methods adopted (including recognition criteria,
valuation bases and the bases for recognition of revenues and expenses) for each class of financial
asset, financial liability and equity instruments are disclosed in Note 4.
30
b. Categories of financial instruments
The main categories of financial instruments are:
2013 2012
Financial assets
Cash and cash equivalents $ 2,622,495 $ 1,483,739
Loans and receivables
Accounts receivable 413,436 290,387
Due from related parties 11,207 11,207
Prepaid maintenance 2,355,717 1,652,835
Deposits on aircraft leases 461,739 467,369
Financial liabilities
At amortized cost:
Notes payable to financial institutions 10,457,678 8,741,665
Accounts payable 599,285 442,280
Other accounts payable and accrued expenses 345,341 210,513
c. Financial risk management objetives
The Group’s Corporate Treasury function provides services to the business, co-ordinates access to
domestic and international financial markets, monitors and manages the financial risks relating to the
operations of the Group through internal risk reports which analyze exposures by degree and
magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other
price risk), credit risk.
The Group seeks to minimize the effects of these risks by using derivative financial instruments to
hedge risk exposures. The use of financial derivatives is governed by the Group’s policies approved by
the board of directors, which provide written principles on foreign exchange risk, interest rate risk,
credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment
of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors
on a continuous basis. The Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
The Corporate Treasury function reports quarterly to the Group’s risk management committee, an
independent body that monitors risks and policies implemented to mitigate risk exposures.
d. Price risk
As the Entity's main operating cost involves fuel, it is exposed to fluctuations affecting jet fuel prices.
The Entity's strategy focuses on seeking protection from significant and unexpected oil price increases,
while maintaining its competitiveness in the event of price decreases. To fulfill these objectives, it
evaluates the possibility of contracting derivative financial instruments, primarily fuel purchase
options however has hedged the price advances delivering fuel supplier based on previous
consumption.
Based on the decrease of open positions involving fuel purchase options at December 31, 2013 and
2012, the Entity's sensitivity to fluctuating oil prices does not have a significant effect on its results and
stockholders' equity .
31
e. Foreign currency risk
The Entity essentially obtains its revenues in Mexican pesos. However, given that it also performs
transactions in foreign currency, mainly US dollars, to finance and lease aircraft, engines, information
systems, airport services maintenance and insurance payments, among others, it is subject to
fluctuations in the peso-dollar exchange rate.
The strategy employed to manage this risk centers on monitoring active and passive positions
denominated in US dollars, while seeking the optimum level of exchange rate risk exposure
established by the Treasury area. Likewise, the Entity periodically evaluates the possibility of
contracting derivative financial instruments, while also analyzing hedge costs and the characteristics of
financial instruments which are regularly available on the market. The Entity does not currently have
hedges based on derivative financial instruments.
Note 18 indicates the Entity's foreign currency positions at December 31, 2013, and 2012, together
with the exchange rates in effect at those dates and the transactions performed during the year ended
December 31, 2013.
A devaluation/revaluation of 1 peso per dollar, which represents management's evaluation of the
possible change in the exchange rate of these currencies, would represent an increase/decrease in the
Entity 's results and stockholders' equity of approximately $102,000 for the year ended December 31,
2013 and 2012, respectively.
The above sensitivity analysis is performed based on the position of financial instruments denominated
in US dollars at December 31, 2013 and 2012; however, it may not represent the exchange rate risk of
the period due to the variance of the Entity's net position in that currency.
f. Interest rate risk
The Entity has limited its interest rate exposure because all its aircraft capital leases are contracted at a
fixed rate. Other loans contracted with financial institutions to acquire aircraft and working capital are
subject to variable interest rates. However, although the Entity maintains cash equivalents and
variable-rate instruments, given the low materiality of these amounts as regards its financial statement,
it considers the interest rate risk to be insignificant.
When contracting a financial liability, the Entity analyzes the possibility of contracting a fixed or
variable rate by considering contractual requirements, market rate trends and the cost of contracting
fixed rates, among other elements.
Note 13 details the loans contracted with financial instruments at December 31, 2013, December 31,
2012.
An increase/decrease of 100 TIIE rate basis points, which represents management's evaluation of the
possible change to this rate, would result in a decrease/increase of the Entity's results and stockholders'
equity of approximately $19,933 and $6,000 for the year ended December 31, 2013 and 2012,
respectively.
An increase/decrease of 50 LIBOR rate basis points, which represents management's evaluation of the
possible change to this rate, would result in a decrease/increase of the Entity's results and stockholders'
equity of approximately $42,322 and $14,000 for the year ended December 31, 2013 and 2012,
respectively.
32
The above sensitivity analyses are performed based on the portion of variable-rate financial
instruments at December 31, 2013 and 2012. However, they may not represent the Entity's interest rate
risk of the period due to the variance of balances subject to this exposure.
g. Crédit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk
of financial loss from defaults. The Group only transacts with entities that are rated the equivalent of
investment grade and above. This information is supplied by independent rating agencies where
available and, if not available, the Group uses other publicly available financial information and its
own trading records to rate its major customers. The Group’s exposure and the credit ratings of its
counterparties are continuously monitored and the aggregate value of transactions concluded is spread
amongst approved counterparties. Credit exposure is controlled by counterparty limits that are
reviewed and approved by the risk management committee annually.
The credit risk derived from cash and cash equivalents, credit card accounts receivable, maintenance
advances and guarantee deposits is limited because the Entity has the policy of only performing
transactions with parties with high credit ratings and acknowledged prestige.
Accounts receivable are mainly composed by accounts receivable from customers and credit cards. In
the case of customers, the Entity has implemented credit approval and follow-up processes. Credit card
transactions involve Visa, Master Card and American Express, all of which have high credit ratings. In
the case of Visa and Master Card, the Entity receives payment within 24 hours after the charge is
applied to the credit card. However, in the case of American Express, payment can take up to 14 days.
Interest is not charged on accounts receivable.
h. Liquidity risk
The Entity's main source of liquidity is the cash generated by its transactions. Furthermore, in the past,
it has also resorted to the capital contributions of its controlling stockholders and sales contracts
embodying lease obligations to finance aircraft.
As Finance Management is ultimately responsible for managing the Entity's liquidity, it establishes
working capital control and follow-up policies which enable it to administer short, medium and long-
term financing requirements. Cash flow statements are periodically prepared to manage risk and
maintain adequate reserves; likewise, the Entity also contracts credit lines and plans its investments.
Note 13 details the financing contracted by the Entity and its maturities. The following table indicates
the contractual maturities of the Entity's financial liabilities; it was prepared based on undiscounted
cash flows at the initial date on which payment could be requested. This table also includes principal
and interest payments, which were determined by using the TIIE and LIBOR spot rates in effect at
December 31, 2013.
December 31, 2013
More than 1
year
More than 1
year and less
than 3
More than 3
years and less
than 5
More than
5 years Total
Notes payable to
financial
institutions $ 5,436,857 $ 1,690,717 $ 1,105,722 $ 2,178,079 $ 10,411,375
Accounts payable 599,285 - - - 599,285
Other accounts
payable and
accrued expenses 345,341 - - - 345,341
33
i. Fair value of financial instruments
Fair value of financial instruments recorded at their applied cost
The Entity's main financial instruments are valued at their applied cost because they are
composed by accounts receivable and liabilities considered at their applied cost. With the
exception of loans contracted with financial institutions, management considers that the book
values of these financial assets and liabilities reflect their fair values given their nature and
short-term maturities. Furthermore, the Entity also considers that maintenance advances reflect
their fair value because the credit risk of the counterparties to which these advances were paid
has not changed.
At December 31, 2013 and 2012, respectively the fair value of loans contracted with financial
institutions is estimated at approximately $11,356,001 and $8,847,252, respectively.
Fair value valuation techniques and assumptions
The fair value of financial assets and liabilities is determined in the following manner:
The fair value of financial assets and liabilities with standard terms and conditions and
which are traded on liquid active markets are determined based on quoted market prices.
The fair value of other assets and liabilities is calculated by using generally accepted
price determination models based on the analysis of undiscounted cash flows.
The fair value of loans contracted with financial institutions was specifically determined by
utilizing a revenue approach and discounting the contractual cash flows of these liabilities at the
current rates estimated by the Entity. These current rates were calculated by considering the
loans most recently contracted by the Entity with financial institutions and which were adjusted
according to the specific conditions of each loan and the respective guarantees. Accordingly,
the Entity utilized the 5.12%, 7.7% rates for loans denominated in Mexican pesos, loans
denominated in US dollars guaranteed by aircraft and unsecured loans denominated in US
dollars, respectively. This valuation is considered as Level 3 according to the hierarchy
described below.
Fair value hierarchy
The Entity classifies the fair value valuations recognized in the statement of changes in
financial position by using three hierarchical levels based on valuation data. When a valuation
utilizes information from different levels, the overall valuation is classified at the lowest level
of the relevant data:
Level 1: fair value valuations are those derived from the prices (unadjusted) quoted on
active markets for liabilities or other identical assets;
Level 2: fair value valuations are those derived from indicators other than the quoted
prices included in Level 1, which are observable for the asset or liability, whether
directly (i.e., as prices) or indirectly (i.e., derived from prices); and
Level 3: fair value valuations are those generated by valuation techniques which include
indicators for assets and liabilities that are not based on observable market information
(unobservable indicators).
34
15. Employee benefits
a. Net period cost for obligations resulting from the seniority premiums and retirement payments was
$1,628 and $2,314, in 2013 and 2012.
This plan also provides seniority premium benefits, which consist of a lump sum payment of12 days’
wage for each year worked, calculated using the most recent salary, not to exceed twice the minimum
wage established by law. The related liability and annual cost of such benefits are calculated by an
independent actuary on the basis on formulas defined in the plans using the projected unit credit
method.
Other disclosures are considered unimportant in terms of their nature and amount.
16. Provision of maintenance and retirement conditions
2 0 1 3
Balances as of
January 1 , 2013 Increase
Maintenance
realized (1)
Balances as of
December 31 ,
2013
Short
-term
Long
-term
$ 1,119,632 $ 324,541 $ - $ 1,444,173 $ 332,160 $ 1,112,013
2 0 1 2
Balances as of
January 1 , 2012 Increase
Maintenance
realized (1)
Balances as of
December 31 ,
2012
Short
-term
Long
-term
$ 980,132 $ 139,500 $ - $ 1,119,632 $ 300,908 $ 818,724
(1) Given the life and flight cycles and other conditions of aircraft and equipment subject to maintenance,
the Bank has not performed maintenance in the periods presented in accordance with the contractual
obligations of the leases.
17. Stockholders’ equity
a. Common stock is as follows:
Number of shares
December 2013 December 2012
Fixed capital
Serie I 10,000 10,000
Variable Capital
Serie II 628,230 628,230
Serie III 1,593,308 1,593,308
Serie IV 2,500,000 2,500,000
Serie V 5,868,900 5,868,900
Serie VI 14,305,082 14,305,082
Serie VII 6,226,380 6,226,380
Serie IX 474,090 474,090
Total 31,605,990 31,605,990
35
b. Capital stock is as follows:
December 2013 December 2012
Fixed capital
Serie I $ 10,000 $ 10,000
Variable capital
Serie II - -
Serie III - -
Serie IV 100,000 100,000
Serie V 92,545 92,545
Serie VI 94,875 94,875
Serie VII 592,580 592,580
Serie IX 10,000 10,000
Total $ 900,000 $ 900,000
c. Common stock is composed by shares at no par value; variable capital is unlimited.
d. Stockholders' equity, except restated paid-in capital and tax retained earnings, will be subject to
income tax at the rate in effect when the dividend is distributed. Any tax paid on this distribution may
be credited against annual and estimated income taxes of the year in which the tax on dividends is paid
and the following two fiscal years.
18. Foreign currency balances and transactions
a. As of December 31, the foreign currency monetary position is as follows:
2013 2012
U.S. dollars:
Monetary assets US 370,600 US 250,535 Monetary liabilities (702,945) (459,195)
Net monetary asset position US (332,345) US (208,660)
Equivalent in Mexican pesos $ (4,342,155) $ (2,710,080)
b. Transactions denominated in foreign currency were as follows:
2013 2012
Aircraft leasing US 162,966 US 83,229
Information systems US 15,707 US 9,538
Airport services US 16,310 US 9,797
Maintenance US 69,395 US 68,556
Insurance payment US 5,004 US 4,964
Jet fuel US 27,196 US 15,280
Publicity US 7,158 US 6,237
Personnel training US 2,663 US 1,087
Sales comisión US 3,165 US 1,602
Freight US 7,748 US 5,991
Honorarium US 1,762 US 1,825
Divers US 6,343 US 1,832
36
c. Mexican peso exchange rates in effect at the dates of the consolidated financial position and at the date
of issuance of these consolidated financial statements were as follows:
2013 2012 April 30, 2014
U.S. dollar $ 13.0652 $ 12.3546 $ 13.1039
19. Balances with related parties
a. Balances with related parties are as follows:
2013 2012
Due from related parties:
Grupo Galem, S. A. de C. V. $ 11,207 $ 11,140
Stockholders - -
$ 11,207 $ 11,140
Compensation management perssonel
Compensation to directors and other key management during the period was as follows:
2013 2012
Short term benefits $ - $ 67,382
20. Income taxes
The Entity is subject to ISR and through December 31, 2012, to ISR and IETU.
ISR -The rate was 30% in 2013 and 2012 and as a result of the new 2014 ISR law (2014Tax Law), the rate
will remain at 30% in 2014 and thereafter.
IETU – IETU was eliminated as of 2014; therefore, up to December 31, 2013, this tax was incurred both on
revenues and deductions and certain tax credits based on cash flows from each year. The respective rate was
17.5%.
The current income tax is the greater of ISR and IETU up to 2013.
Based on financial projections the Entity identified that essentially it will take ISR, for which reason it only
recognizes deferred ISR.
a. The income tax is as follows:
2013 2012
Income tax $ 64,797 $ 123,282
b. The effective tax rate differs from the statutory rate the, primarily for permanent differences such as
nondeductible expenses.
37
c. The main items that give rise to a deferred ISR asset are:
2013 2012
Deferred tax assets:
Tax loss carry forwards $ 555,559 $ 503,172
Provision of maintenance and retirement conditions 433,252 337,017
Air traffic liability 157,874 153,662
Other accounts payable 65,450 34,569
Employee benefits and other deferred liabilities 1,290 748
Deferred tax assets 1,213,425 1,029,168
Deferred tax assets (liabilities):
Inventories (357,828) (375,411)
Other assets (39,191) (36,682)
Prepaid maintenance (706,715) (496,794)
Flight equipment, leasehold improvements (223,802) (169,391)
Concession (2,067) (2,270)
Deferred tax (liabilities) (1,329,603) (1,080,548)
Deferred tax liabilities $ (116,178) $ (51,380)
d. The benefits of restated tax loss carryforwards for which the deferred ISR asset has been fully
reserved as of December 31, 2013.
Year of expiration 2013
2017 $ 365,981
2018 997,786
2019 115,336
2022 372,762
$ 1,851,865
21. Operating leases
a. The Entity has entered into leasing contracts for 26 aircraft and 12 engines as of December 31, 2013,
with different lease periods. The maximum maturity will be in 2021. In some cases, the Entity has the
right to exercise the option to extend the terms of the leases.
The lease agreements are secured by collateral cash deposits, and establish certain requirements for
the Entity, the most important are:
1. Keep records, licenses and permits required by the competent aviation authority, making the
related payments.
2. Maintain the equipment according to the respective program.
3. Insure the equipment in accordance with the amounts and risks set forth in each lease.
4. Provide financial information.
5. Meet the technical conditions for the return of aircraft. The Entity also leases the land on which the maintenance base and other facilities are built, which are
in federal areas. The contract has no maturity date.
38
b. The spaces at airports are leased to different airport groups.
The future minimum payments for operating leases are:
Year Real estate leases Aircraft Engines
2014 $ 43,822 $ 1,180,117 $ 232,239
2015 43,822 1,026,553 232,239
2016 43,822 932,071 232,239
2017 43,822 870,596 219,783
2018 43,822 855,743 202,346
$ 219,110 $ 4,865,080 $ 1,118,846
These amounts are determined based on the lease amounts and exchange rates known as of December
31, 2013 and 2012 and as of January 1, 2012 (transition date).
The total lease expense is as follows: 2013 2012
Aircraft $ 1,100,174 $ 936,045
Engines 208,129 148,050
1,308,303 1,084,095
Real estate 59,519 55,702
$ 1,367,822 $ 1,139,797
22. Segment information
The Entity assigns resources and evaluates profitability as a single business unit. While the governance entity
with the maximum authority for making the Entity's operating decisions reviews income information based on
different groups (such as national and foreign transactions, routes, etc.), the Entity's operating expenses and
assets are fully reported, meaning that it only has one operating segment for reporting purposes according to
IFRS 8, Operating segments.
The income received from foreign customers in specific countries is insignificant. Income is classified as
generated abroad based on the point of departure or arrival of the route in question. Noncurrent assets (other
than financial assets, deferred income taxes and employee benefits) are primarily located in Mexico, while
those located abroad are insignificant.
23. Subsequent Events
In March 2014, the Entity made a disposal of the debt that held with Bancomext for an amount of $150,000 to
the 28-day TIIE rate plus 2.35%.
In March 2014, the Entity enters with a financial institution on a leasing contract for the temporary use and
benefits of the ground equipment; the operation amount is $170,000.
24. Authorization of the issuance of the financial statements
On april 30, 2014, the issuance of the consolidated financial statements was authorized by Lic. Luis Alejandro
Beristaín Mercado, Chief Finance officer of the Entity. These consolidated financial statements are subject to
approval at the ordinary stockholders’ meeting, where they may be modified, based on provisions set forth by
Mexican General Corporate Law.
* * * * * *