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Volaris closes 2020 with profits and extends its dominance over the Mexican skies

2021-02-20T04:13:15.008Z

The low-cost airline loses 4,294 million pesos due to the pandemic hit but improves results in the fourth quarter of the year



A Volaris plane takes off from Mexico City airport.EFE

The Volaris quinceañera party has touched on disaster.

Nearing a decade and a half, the airline has had to navigate the biggest air travel earthquake in recent history.

Closed borders, empty beaches and travelers who prefer to stay at home: airlines have stumbled and some have saved their knees.

The

Mexican

low cost

is one of them.

Volaris has taken advantage of the decline of its competitors to consolidate itself as the largest in Mexico and has closed the last three months of 2020 with gains, after two quarters in the red.

However, the still uncertain duration of the crisis weighs on its future expansion.

The accounts of the airline, which is listed on the Mexican stock market and the New York stock market, have been shaken up.

Revenues in 2020 fell 36% compared to 2019 and reported losses of 4,294 million pesos, about 215 million dollars, compared to the gain of 2,639 million the previous year, according to a report released this Thursday by the company.

All in all, the fourth quarter shows a significant improvement.

The company earned 897 million pesos, after incurring losses of 2,175 million in the third quarter.

"Despite all the recovery that lies ahead, its financial structure already shows favorable results: an increase in rates and a reduction in expenses," says analyst Brian Rodríguez, of the Monex Group.

To explain Volaris' resistance to the crash, the airline's CEO, the Guatemalan Enrique Beltranena, points to its operating cost, "one of the three lowest in the world", he assures in an interview with this newspaper, and to its origins.

The

low cost

started in 2006 to compete with the bus companies, not with the airlines.

He wanted to convince travelers that leaving the rattle of the roads due to turbulence was convenient for the pocket.

Even today, 40% of its routes are designed to compete with the bus sector, an “ultra low cost” model that has helped it to get out of the current pothole relatively successfully.

With the crisis, the company has closed some routes, but has opened 12 new ones, some of them to the United States.

"These routes had a significant gap in capacity and, given our prices and the way we market, they are going better than expected," says Beltranena, in charge of the airline since it began operating.

The company acquired 38% of the domestic market by number of passengers in 2020, an increase of seven percentage points compared to 2019, according to preliminary figures from the Ministry of Communication and Transport.

It has lost travelers, but in a lower percentage than its competitors.

They are followed, several steps behind, by Aeroméxico and its subsidiary Connect, with 25% of the market between the two, and VivaAerobús, another

low cost

, with 24%.

In international flights, Volaris has had a similar rise, going from transporting 7% of passengers in 2019 to 11%, practically tied with Aeroméxico, the former undisputed leader.

That penetration may be consolidated in 2021, says analyst Brian Rodríguez.

“Aeromexico has not had the financial capacity to execute the routes it previously estimated.

It needs to have a fuller flight so as not to be harmed, ”he explains.

The expansion of the

low cost

has occurred on the backs of two competitors, Aeroméxico and Interjet.

The first is in a process of financial restructuring and has maintained a pulse with the unions to cut costs.

The second drags a lawsuit with the tax authorities for a millionaire debt and does not have enough credit to buy fuel.

Of the 319 narrow-body aircraft, those used on short trips, operating in Mexico at the end of 2019, the pandemic took about a third out of operation, according to Beltranena.

Volaris has sought to fill that gap.

An uncertain 2021

Despite the positive signs, the

low cost

does not trust.

The decision by the United States to force travelers to undergo a PCR test and the suspension of flights from Canada have complicated the start of the year and dampened expectations of a rapid recovery for the sector.

For this first quarter, the airline has "more conservative" plans: it expects a reduction in demand and plans to operate at 80% of capacity a year ago, after closing 2020 with a modest annual increase.

Even so, the airline has an additional air pocket of 164 million dollars, raised in a stock exchange in December.

With these resources, the company seeks to reinforce expansion with new routes in Mexico and the United States, add four aircraft to the fleet and explore the incorporation of between 10 and 14 more aircraft.

"I believe that we are going to be the airline with the highest growth in the market," closes Beltranena.

Source: elparis

All news articles on 2021-02-20

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