Volaris Reports May 2024 Traffic Results: 86% Load Factor

Rhea-AI Summary

Volaris, an ultra-low-cost airline, reported its May 2024 traffic results. The airline's capacity, measured in available seat miles (ASM), dropped by 17.5% year-over-year due to accelerated Pratt & Whitney engine inspections and subsequent aircraft groundings. Despite this, the load factor improved by 1.6 percentage points to 86.1%, indicating efficient utilization of available seats. Revenue passenger miles (RPMs) saw a year-over-year decrease with domestic RPMs falling by 22.0% and international RPMs by 3.6%. Volaris transported 2.4 million passengers in May 2024, a 14.8% decline from the previous year. CEO Enrique Beltranena emphasized strategic adjustments to the domestic network and growth in the U.S.-Mexico market, noting that international operations now account for over 40% of total capacity. He also highlighted promising booking trends for the second quarter.

Positive

• Load factor increased by 1.6 percentage points YoY to 86.1%.
• International operations now represent over 40% of total capacity, enhancing US dollar sales.
• Strategic adjustments to the domestic network are yielding promising results.
• Booking trends for the remainder of Q2 are meeting expectations with robust performance.

Negative

• ASM capacity decreased by 17.5% YoY due to accelerated Pratt & Whitney engine inspections and aircraft groundings.
• Domestic RPMs decreased by 22.0% YoY.
• International RPMs decreased by 3.6% YoY.
• Total passengers transported in May 2024 fell by 14.8% YoY.

Insights

Financial Analyst

Volaris' May 2024 traffic results present a mixed picture. The load factor saw a modest increase to 86.1% despite a significant year-over-year decrease in ASM capacity by 17.5%. This suggests that the company managed to fill a higher percentage of its seats despite operating fewer flights, which is an achievement in capacity optimization.

However, the 2.4 million passengers transported indicates a 14.8% decline compared to the previous year. This reduction is largely due to the 22.0% drop in Mexican domestic RPMs, while international RPMs decreased by a more modest 3.6%. The grounding of aircraft for Pratt & Whitney engine inspections is a concerning operational hurdle, potentially impacting short-term revenue generation and increasing maintenance costs.

Strategically, Volaris has shifted more capacity to the U.S.-Mexico transborder market, which now represents over 40% of their total capacity. This move is likely aimed at capturing more US dollar-denominated sales, which can be advantageous in a volatile currency environment. While the shift shows initiative, the overall decrease in capacity and passengers could signal challenges in the domestic market which needs careful monitoring.

From a retail investor's perspective, it's important to note the company's efforts in network optimization and strategic market adjustments. However, the decreased overall capacity and RPM figures highlight underlying challenges that may affect financial performance in the short term.

Market Research Analyst

Volaris' strategic adjustments in the U.S.-Mexico market demonstrate a clear focus on expanding international operations, a response to limited domestic growth. By leveraging its international market, which now represents a significant portion of its capacity, Volaris is positioning itself to capitalize on higher revenue opportunities and market diversification.

The increased load factor to 86.1% despite capacity cuts indicates efficient route management and a solid demand for its services. This could help mitigate some of the financial impacts of grounded aircraft due to engine inspections. Furthermore, the company's statement about robust booking trends for the rest of the second quarter provides a positive outlook, suggesting that demand remains strong despite operational challenges.

For retail investors, it's worth considering how Volaris' focus on international markets and network optimization could translate into long-term growth. While current challenges are evident, the strategic redirection and strong booking trends could yield favorable outcomes if managed effectively.

MEXICO CITY, June 06, 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 May 2024 preliminary traffic results.

In May 2024, Volaris' ASM capacity decreased by 17.5% year-over-year due to the accelerated Pratt & Whitney engine inspections and the resulting aircraft groundings. However, load factor increased by 1.6 pp YoY to 86.1%, as RPMs decreased by less than capacity. Mexican domestic RPMs decreased by 22.0%, while international RPMs decreased by 3.6%. Volaris transported 2.4 million passengers during the month.

Enrique Beltranena, Volaris’ President, and CEO said: “Despite limitations in capacity growth due to fleet availability, we have successfully increased capacity in the U.S.-Mexico transborder market while optimizing our entire network. The international market now represents over 40% of our total capacity, leveraging our ability to generate US dollar sales. Further, our strategic adjustments to the domestic network are yielding promising results. Booking trends for the remainder of the second quarter are meeting our expectations and showing robust performance.”

	May 2024		May 2023		Variance		YTD May 2024		YTD May 2023		Variance
RPMs (million, scheduled & charter)
Domestic	1,469		1,883		-22.0%		7,211		9,395		-23.2%
International	890		924		-3.6%		4,538		4,330		4.8%
Total	2,360		2,807		-15.9%		11,749		13,725		-14.4%
ASMs (million, scheduled & charter)
Domestic	1,626		2,211		-26.5%		7,962		11,003		-27.6%
International	1,114		1,109		0.4%		5,642		5,130		10.0%
Total	2,739		3,320		-17.5%		13,604		16,133		-15.7%
Load Factor (%, scheduled, RPMs/ASMs)
Domestic	90.4%		85.2%		5.2 pp		90.6%		85.4%		5.2 pp
International	79.9%		83.3%		(3.4) pp		80.4%		84.4%		(4.0) pp
Total	86.1%		84.5%		1.6 pp		86.4%		85.1%		1.3 pp
Passengers (thousand, scheduled & charter)
Domestic	1,797		2,186		-17.8%		8,498		10,894		-22.0%
International	603		630		-4.3%		3,104		2,988		3.9%
Total	2,400		2,816		-14.8%		11,602		13,882		-16.4%

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 booked by passengers multiplied by the number of miles flown.

Available seat miles (ASMs): Number of seats available for passengers multiplied by the number of miles 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
Ricardo Martínez / ir@volaris.com

Media Contact

Israel Álvarez / ialvarez@gcya.net

About Volaris
*Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (“Volaris” or “the Company”) (NYSE: VLRS and BMV: VOLAR) is an ultra-low-cost carrier, with point-to-point operations, serving Mexico, the United States, Central, and South America. Volaris offers low base fares to build its market, providing quality service and extensive customer choice. Since the beginning of operations in March 2006, Volaris has increased its routes from 5 to more than 197 and its fleet from 4 to 134 aircraft. Volaris offers more than 460 daily flight segments on routes that connect 44 cities in Mexico and 29 cities in the United States, Central, and South America, with one of the youngest fleets in Mexico. Volaris targets passengers who are visiting friends and relatives, cost-conscious business and leisure travelers in Mexico, the United States, Central, and South America. Volaris has received the ESR Award for Social Corporate Responsibility for fifteen consecutive years. For more information, please visit ir.volaris.com. Volaris routinely posts information that may be important to investors on its investor relations website. The Company encourages investors and potential investors to consult the Volaris website regularly for important information about Volaris.

FAQ

What was the load factor for Volaris in May 2024?

The load factor for Volaris in May 2024 was 86.1%, a 1.6 percentage point increase year-over-year.

How did Volaris' ASM capacity change in May 2024?

Volaris' ASM capacity decreased by 17.5% year-over-year in May 2024.

What were Volaris' domestic RPMs in May 2024?

Domestic RPMs for Volaris in May 2024 decreased by 22.0% year-over-year.

How many passengers did Volaris transport in May 2024?

Volaris transported 2.4 million passengers in May 2024, a 14.8% decrease from the previous year.

What percentage of Volaris' total capacity is attributed to international operations?

International operations account for over 40% of Volaris' total capacity.

What impacted Volaris' capacity in May 2024?

Volaris' capacity in May 2024 was impacted by accelerated Pratt & Whitney engine inspections and resulting aircraft groundings.