Equity Analysis /
Mexico

Volaris: Traffic maintains positive trend

  • Volaris’ total passengers in November increased 13.7% y/y, supported by domestic growth 9.5% and international 32.7%

  • Load factor decreased 0.6pp, although standing at a good level of 88.0%. In turn, the cost of fuel dropped 2.7% m/m

  • 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
8 December 2022
Published byBanorte

Traffic maintains positive trend, but attention remains on profitability pressures

Volaris registered an annual increase of 13.7% in total passenger traffic during November, transporting 2.7 million, with an increase of 9.5% y/y in the domestic market and, to a greater extent, 32.7% y/y in the international market. Capacity showed an upsurge, measured in terms of Available Seats Miles (ASMs), of 19.5% y/y, while demand measured in Revenues Passengers Miles (RPMs), registered a smaller growth of 18.8% y/y. Thus, the load factor rose 0.6pp, standing at good level of 88.0%. On the other hand, the 51.2% year-on-year increase in the cost of fuel per gallon to $3.9 stood out, but was below that recorded in October (-2.7%).

Neutral implication: Volaris’s November figures continued to reflect a solid demand and high load factor; however, the high cost of fuel continues to be the key attention, since, although it showed a decrease m/m, we do not rule out additional pressures in the face of the complex global environment. Thus, while we expect a sequential improvement in profitability, profitability will continue to face a very complicated annual comparison, at least at the end of the year. Therefore, although Volaris has a favorable long-term outlook, in our view, the stock price could continue to be volatile until there is a clearer picture of recovery.