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Controladora Vuela Compañía de Aviación, S.A.B. de C.V. VLRS, popularly known as Volaris, reported a 3.7% year-over-year decline in consolidated available seat miles (ASMs: a measure of capacity) for the month of November. The capacity decline at this Mexican ultra-low-cost carrier was due to Pratt & Whitney engine inspections. Due to the engine inspections, domestic ASMs declined 9.6% year over year. International ASMs increased 6% in the month.
On a consolidated basis, revenue passenger miles (RPMs: a measure of traffic) were down 6.9%, with domestic RPMs falling 10.5%, while international RPMs were flat. With consolidated traffic declining more than capacity, the consolidated load factor (% of seats filled by passengers) decreased by 3 percentage points to 86.8% in the month. Since operations were impacted in 2023 by accelerating engine inspections, the year-over-year comparisons of RPMs and load factor remain unfavorable.
With a considerable part of its Pratt & Whitney-powered narrowbody fleet out of service, consolidated capacity has been reduced by 13.4% year to date. With the Mexican carrier gradually adding capacity as engines and aircraft return, the scenario with respect to December capacity might improve. As a result, the company’s expectation of a 13% capacity decline for full-year 2024 is less than the year-to-date reduction.
Holiday Season Likely to Aid VLRS Revenues
Despite the massive capacity reduction due to the engine inspections, the Mexican airline expects total revenues for 2024 to be close to 2023. The top line is being aided by an increase in base fares and ancillary revenue per passenger. In November, 2.6 million passengers were transported through various VLRS flights. Passenger volume increased 4% month over month.
Demand is likely to swell further in December during the peak holiday season. Management stated that booking trends remain robust for the peak holiday season. To meet the anticipated demand swell, VLRS is boosting transborder capacity.
To boost winter travel, VLRS has expanded its network, having launched seven new routes from Monterrey in November. Out of the seven routes, three routes are to the United States, thereby offering more travel options for passengers apart from strengthening the Mexican city’s connectivity. The new routes are being served by Volaris’ fuel-efficient A320neo aircraft, equipped with all modern comforts.
Impressive Performance of VLRS Stock
Driven by the strong demand scenario across its network, shares of Volaris have performed well over the past month, outperforming the industry and ultra-low-cost carriers like Allegiant Travel Company ALGT and Frontier Group ULCC .