Mexico’s Volaris raises 4Q profit guidance on rising yields

Following the December 2017 launch of eight international routes and subsequent indications of improving yields, Mexico City-based ultra LCC Volaris increased its profit guidance for fourth-quarter 2017 to 27%-29%, the airline said Jan. 5.

In its December 2017 preliminary traffic statement—which reported a 3.1% year-over-year (YOY) increase in passenger traffic for the month of December and 11.1% YOY traffic growth for the full year—Volaris said a “quarter-over-quarter yield improving environment” led the company to increase its fourth quarter adjusted EBITDAR margin guidance.

The increase reflects an actual average exchange rate of MXP19.16 per US dollar and average economic fuel price per gallon of $1.90, Volaris said. The airline did not provide specific revenue or yield figures for the month.

While a positive development for an airline that as of Sept. 30, 2017 was showing a MXP1.2 billion ($63 million) net loss for the first nine months of 2017 (compared to a MXP2.5 billion profit for the same period in 2016), Volaris’ new fourth-quarter guidance nonetheless shows a drop in adjusted EBITDAR by approximately six percentage points compared to the company’s 4Q 2016 34.1% adjusted EBITDAR margin.

Volaris CEO Enrique Beltranena said in the company’s 3Q 2017 financial report that the airline was operating in a “challenging environment” in 2017, citing competitive fares from rival LCCs, natural disasters, higher fuel prices and exchange rate volatility.

In December, Volaris introduced four new US-Central America international routes (Los Angeles-Guatemala City; Los Angeles-San Salvador, El Salvador; New York-San Salvador; and Washington, DC-San Salvador). Additionally, four California-Mexico routes (Fresno-Morelia; Los Angeles-Acapulco; San Jose-Morelia; and San Jose-Zacatecas) and one new domestic route (Morelia-Mexicali) began service during the month.

Volaris’ subsidiary Volaris Costa Rica is set to launch round-trip direct service to the US March 15, with sales for flights from San Jose, Costa Rica to Los Angeles International Airport (LAX), New York JFK and Washington Dulles (IAD) already underway.

Volaris is looking to grow its fleet significantly with 46 Airbus A320neos and 34 A321neos as part of the recent massive order for 430 A320neo family aircraft engineered by Phoenix-based private equity fund Indigo Partners, which was finalized Dec. 28, 2017. Volaris is one of four Indigo-affiliated airlines in the purchase, alongside fellow ultra LCCs Denver-based Frontier Airlines, Chile’s Jet SMART and Hungary’s Wizz Air.

Volaris’ new aircraft, worth $9.3 billion at list prices, are set to be delivered from 2022 to 2026. Volaris’ existing fleet of 70 all-Airbus aircraft will also be expanded by 41 A320neo family aircraft the airline is committed to receive through 2021.

(Mark Nensel - ATWOnline News)