Volaris Reports January 2024 Traffic Results: 88% Load Factor
Volaris, an ultra-low-cost carrier serving Mexico, the United States, Central, and South America, reports a 10.7% decrease in ASM capacity and an 8.9% decrease in RPMs in January 2024 compared to the previous year. The load factor increased by 1.8 pp YoY to 88.0%, and the airline transported 13.0% fewer passengers compared to January 2023. Despite a decrease in domestic RPMs, international RPMs increased by 15.1%. Volaris' President and CEO highlighted the reduction in ASM capacity within the Mexican domestic market and the increase in international capacity following Mexico’s Category 1 upgrade by the United States’ Federal Aviation Administration (FAA). The company's booking curves suggest a positive trend in unit revenue growth for the upcoming months, in line with their 2024 guidance.
The report from Volaris indicates a strategic shift in response to operational challenges and regulatory changes. The decrease in ASM capacity by 10.7% and RPMs by 8.9% year-over-year suggest a contraction in the company's operational size, likely due to the GTF engine inspections. However, the increased load factor to 88.0% is a positive indicator of efficiency, as it shows a higher percentage of seats filled per flight.
The domestic market in Mexico experienced a significant decrease in RPMs, which could be attributed to the engine inspections affecting domestic fleet availability. Conversely, the international RPMs increased, likely due to the reallocation of capacity following the FAA's Category 1 upgrade, which allows for expanded operations into the U.S. This strategic pivot to international routes could be a response to the more lucrative transborder traffic and less saturated markets.
These adjustments have implications for the company's revenue, as the shift in unit revenue growth suggests a potentially stronger financial performance. However, the reliance on international routes may expose Volaris to currency fluctuation risks and geopolitical events that could affect transborder travel.
From a financial perspective, the reported changes in Volaris' operations have several implications. The reduction in passenger count by 13.0% could initially signal a potential revenue drop. However, the sustained trend in total unit revenue growth and the positive load factor development are encouraging signs for revenue efficiency. The focus on unit revenue is critical, as it reflects the average amount of money earned per available seat mile, a key metric in the airline industry.
Investors should note that while the company's operational adjustments appear to be a strategic response to immediate challenges, the long-term sustainability of these changes warrants attention. The dependence on international markets, while currently beneficial, may introduce volatility in earnings due to factors such as exchange rate movements and international demand shifts.
It is also important to consider that the report explicitly states the information has not been audited and past performance is not necessarily indicative of future results. This highlights the importance of monitoring Volaris' operational and financial metrics closely in the coming quarters for a clearer picture of the company's trajectory.
Examining the market dynamics, Volaris' strategic reallocation of capacity to international markets is a response to the evolving competitive landscape. The airline industry is characterized by high fixed costs and price-sensitive demand, making load factors a critical measure of success. Volaris' improvement in load factors, despite a decrease in ASMs and RPMs, suggests effective market targeting and pricing strategies.
The shift towards international routes, especially the U.S.-Mexico transborder market, taps into a resilient demand for air travel between these regions. Market research would indicate that this segment has been historically robust and Volaris' move could be seizing the opportunities presented by the FAA's Category 1 upgrade.
However, the decline in the Mexican domestic market raises questions about the competitive positioning of Volaris within Mexico. The airline must balance its international expansion with maintaining a strong domestic presence to mitigate risks associated with over-reliance on any single market. Understanding consumer behavior and preferences will be key in adjusting to the decreased domestic capacity and ensuring long-term customer retention and market share.
02/05/2024 - 05:05 PM
MEXICO CITY, Feb. 05, 2024 (GLOBE NEWSWIRE) -- Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE: VLRS and BMV: VOLAR) (“Volaris” or “the Company”), the ultra-low-cost carrier (ULCC) serving Mexico, the United States, Central, and South America, reports its January 2024 preliminary traffic results.
In January 2024, Volaris' ASM capacity decreased by 10.7% year-over-year, while RPMs decreased by 8.9% ; the result was a load factor increase of 1.8 pp YoY to 88.0% . Volaris transported 2.5 million passengers during the month, a 13.0% decrease compared to January 2023. Mexican domestic RPMs decreased by 20.1% , while international RPMs increased by 15.1% .
Enrique Beltranena, Volaris' President and CEO said: “The GTF engine accelerated inspections have resulted in a significant reduction in ASMs, particularly within the Mexican domestic market. This reduction has been balanced by increased capacity in international markets following Mexico’s Category 1 upgrade by the United States’ Federal Aviation Administration (FAA). Consequently, the reallocation of capacity has led to improvements in load factors within the Mexican domestic market and robust transborder traffic between Mexico and the U.S.
As highlighted last month, unit revenue growth continues to show strong performance. The shift in trend in total unit revenue that started in the fourth quarter of 2023 was sustained in January 2024. Our booking curves suggest that this positive trend will continue for the upcoming months, in line with our 2024 guidance.”
January 2024 January 2023 Variance RPMs (million, scheduled & charter) Domestic 1,544 1,933 -20.1% International 1,045 908 15.1% Total 2,590 2,841 -8.9% ASMs (million, scheduled & charter) Domestic 1,722 2,271 -24.2% International 1,219 1,024 19.0% Total 2,941 3,295 -10.7% Load Factor (%, RPMs/ASMs) Domestic 89.7% 85.1% 4.6 pp International 85.7% 88.7% (2.9) pp Total 88.0 % 86.2 % 1.8 pp Passengers (thousand, scheduled & charter) Domestic 1,772 2,224 -20.3% International 719 639 12.6% Total 2,491 2,862 -13.0%
The information included in this report has not been audited and does not provide information on the Company’s future performance. Volaris’ future performance depends on several factors. It cannot be inferred that any period’s performance or its comparison year over year will indicate a similar performance in the future.
Glossary
Revenue passenger miles (RPMs): Number of seats flown by passengers multiplied by the number of miles the seats are flown.
Available seat miles (ASMs): Number of seats available for passengers multiplied by the number of miles the seats are flown.
Load factor: RPMs divided by ASMs and expressed as a percentage.
Passengers: The total number of passengers booked on all flight segments.
Investor Relations Contact ir@volaris.com
Media Contact Israel Álvarez / ialvarez@gcya.net
About Volaris ir.volaris.com
What is the ASM capacity decrease in January 2024?
Volaris reported a 10.7% decrease in ASM capacity in January 2024 compared to the previous year.
How much did the RPMs decrease by in January 2024?
RPMs decreased by 8.9% in January 2024 compared to January 2023.
What was the load factor in January 2024?
The load factor increased by 1.8 pp YoY to 88.0% in January 2024.
How many passengers did Volaris transport in January 2024?
Volaris transported 2.5 million passengers during January 2024, which is a 13.0% decrease compared to January 2023.
What was the change in domestic and international RPMs in January 2024?
In January 2024, domestic RPMs decreased by 20.1%, while international RPMs increased by 15.1%.
What factors led to the reallocation of capacity for Volaris?
The reduction in ASM capacity within the Mexican domestic market and the increase in international capacity following Mexico’s Category 1 upgrade by the United States’ Federal Aviation Administration (FAA) led to the reallocation of capacity for Volaris.
What do Volaris' booking curves suggest for the upcoming months?
Volaris' booking curves suggest a positive trend in unit revenue growth for the upcoming months, in line with their 2024 guidance.
