Equity Analysis /
Mexico

Volaris: Flash: Record factor load, but relevant fuel pressures remain

  • Volaris’ total passengers in October increased 22.0% y/y, supported by domestic growth 21.6% and international 23.8%

  • Load factor (89.7%) reached a monthly record, but cost of fuel was above September’s figure

  • We expect an improvement in margins m/m, but the y/y comparison will be difficult for year-end

Jose Itzamna Espitia Hernandez
Jose Itzamna Espitia Hernandez

Senior Equity Research Analyst, Infrastructure, Materials and Transportation

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Marissa Garza Ostos
Marissa Garza Ostos

Head of Equity Research

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Banorte
7 November 2022
Published byBanorte

Volaris registered an annual increase of 22.0% in total passenger traffic during October, transporting 2.8 million, with domestic growth increasing 21.6% y/y, and international passengers climbing 23.8% y/y. Capacity showed an upsurge, measured in terms of Available Seats Miles (ASMs) of 17.4% y/y, while demand measured in Revenues Passengers Miles (RPMs) recorded a greater advance of 22.0% y/y. Thus, the load factor rose 3.4pp, standing at 89.7%, reaching a monthly record for the month of October. On the other hand, the 55.4% year-over-year increase in fuel cost per gallon to $4.01, up from September (+4.4%), was noteworthy.

Neutral implication: Although Volaris’s October figures continued to reflect a solid performance, we believe that the high cost of fuel will prevail to be the focus of attention due to the m/m increase. While our expectation is for less sequential pressure on the profitability, margins will continue to face a very complicated annual comparison, at least at the end of the year. Therefore, although the longer-term outlook for Volaris remains favorable, until there is a clearer picture of recovery, in our opinion, volatility in the stock price will continue, so we suggest caution.