Equity Analysis /

Volaris: Flash: Strong demand and increased capacity boost passengers in May

  • In May total passenger traffic increased by 17.5% y/y boosted by strong demand and higher capacity

  • Higher fares and strong demand will continue to boost revenues, partially offsetting the cost impact

  • Although VOLAR will continue to benefit from its leadership in the sector, we remain attentive to oil prices performance

Jose Itzamna Espitia Hernandez
Jose Itzamna Espitia Hernandez

Senior Equity Research Analyst, Infrastructure, Materials and Transportation

Marissa Garza Ostos
Marissa Garza Ostos

Head of Equity Research

2 June 2022
Published byBanorte

Volaris recorded an annual increase of 17.5% y/y in total passenger traffic during May, transporting a total of 2.5 million, with a rose in domestic passengers of 21.5% y/y, while the advance in international passengers was 1.9% y/y. Capacity measured in terms of Available Seats Miles (ASMs), showed a growth of 12.4% y/y, considering an increase in the fleet to 110 aircrafts vs. 87 in May 2021. Meanwhile, demand measured in Revenue Passengers Miles (RPMs), showed a rise of 12.3% y/y. In this way, the load factor remains unchanged, standing at 87.8%.

The airline announced last month a point-to-point network plan to offer around one million seats per month out of the three airports in Mexico City´s metropolitan area, namely Mexico City International Airport, Felipe Ángeles International Airport (where it will open 10 additional routes), and Toluca International Airport (where it will resume operations with 6 new routes). This is due to the potential market of 30 million passengers which this geographic area represents. Further, it will reinforce operations in Puebla and Queretaro.

Neutral implication: Volaris’ May figures continued to show solid performance, so we consider the strong demand, coupled with a favorable fares environment will continue to boost revenues and help partially offset the cost impact.  However, it should be noted the significant increase in the economic jet fuel price per gallon of 107.5% y/y to US$4.40 in the month. Although, in our opinion, the airline will continue to leverage its leadership in the sector, and will implement initiatives to strengthen its market position, such as the announced plan to take advantage of growth opportunities in central Mexico, we will remain attentive to the oil prices performance which could continue to affect profitability.