Volaris posts $40 million 3Q net profit despite natural disasters

Mexico City-based ultra LCC Volaris posted its first quarterly profit of 2017, reporting MXN731 million ($40.2 million) in third-quarter net income, down 27.6% from MXN1 billion in 3Q 2016.

“Demand and traffic patterns, despite a competitive fare environment, had been sequentially improving, but in September, natural disasters in Mexico and in the region temporarily interrupted such recovery,” Volaris CEO Enrique Beltranena said.

In September, the airline faced hurricanes Irma and Maria, plus two tropical storms in the Pacific, and two earthquakes that affected 11 Mexican states. Volaris canceled 50 flights in eight airports during the period, which triggered a decline in bookings, the airline said.

The airline posted third-quarter revenues of MXN6.6 billion, down 2.2% year-over-year, with non-ticket revenue increasing 18.6% to MXN1.8 billion, or 27% of Volaris’ total operating revenue. Non-ticket revenue included checked bag fees on international flights, ancillary-product combination packages and commission revenue form travel-related products, including hotel selection as a purchasing process option, cruise packages and car rentals.

Volaris’ operating expenses for the quarter increased 4.6% to MXN5.9 billion as sales and marketing, labor and fuel costs all rose significantly YOY (up 22.8%, 15.1%, and 7.9%, respectively). The resulting operating profit for the quarter came to MXN634 million, down 39.2% YOY, with an operation margin of 9.6%, down 5.9 points YOY.

Passenger traffic increased 7.9% YOY to 4.1 billion RPMs on 10.1% capacity growth for the quarter to 4.8 billion ASMs, producing an 86.2% passenger load factor, down 1.7 points YOY.

Yield declined 15% YOY to 6.4 US cents. TRASM was down 11.2% YOY to 7.6 cents. Non-ticket revenue per passenger increased 12.8% YOY to MXN434. CASM excluding fuel was down 6.2% YOY to 4.9 cents.

During the quarter, the airline launched two new international routes (Mexico City-San Antonio, Texas; and Mexico City-San Jose, Costa Rica) and incorporated its second Airbus A320neo into its all-Airbus fleet of 67 aircraft.

On Sept. 21, the US Department of Transportation granted approval for Volaris’ subsidiary Volaris Costa Rica to operate flights from Central America to the US, subject to operations and maintenance certifications from FAA.

“[In the third-quarter] we continued to drive non-ticket revenue growth, managed capacity prudently and reinforced our cost control discipline, reversing the negative cost trend,” Beltranena said. “These actions positions Volaris with a defendable and resilient business model in a challenging environment.”

At nine months, Volaris is showing a MXN1.2 billion net loss for the year, compared to its MXN2.5 billion net profit for the comparable period in 2016. 

(Mark Nensel - ATWOnline News)