Equity Analysis /
Mexico

Volaris: Solid progress in passengers and sequential decline in fuel costs continues

  • In August, Volar recorded a solid 20.1% y/y increase in traffic passenger, bringing the load factor to 84.9% (+0.1pp)

  • Fuel costs surged 73.2% y/y, which will continue to be the key attention, although with a m/m downward trend

  • The long-term positive outlook remains, but the complex environment limits the significant revaluation in multiples

Jose Itzamna Espitia Hernandez
Jose Itzamna Espitia Hernandez

Senior Equity Research Analyst, Infrastructure, Materials and Transportation

Follow
Marissa Garza Ostos
Marissa Garza Ostos

Head of Equity Research

Follow
Banorte
8 September 2022
Published byBanorte

Volaris showed a 20.1% y/y growth in total passenger traffic in August, transporting 2.7 million passengers, with annual increments of 20.6% in domestic and 17.6% in international. Capacity recorded an increase, measured in terms of Available Seats Miles (ASMs) of 19.8% y/y, while demand, measured in Revenues Passengers Miles (RPMs) reported an advance of 20.0% y/y. In this way, the load factor rose slightly by 0.1pp, to stand at 84.9%. On the other hand, fuel cost per gallon stood out with an increase of 73.2% y/y to $3.81, even though it decreased 7.1% m/m.

Neutral implication: Although Volaris’ August figures continued to reflect a strong performance, we believe that the high fuel costs will continue to be the key attention, since, although it continued its month-over-month downward trend, additional pressures due to the complex global environment cannot be ruled out. Thus, while Volaris’ long-term outlook is favorable, leveraging on its sector leadership in Mexico and with an attractive valuation (FV/EBITDAR of 5.3x), the environment of higher interest rates and especially the volatility that the energy crisis could generate, limits in our view a significant revaluation in multiples.