Is Volaris Experiencing A V-Shaped Recovery In Mexico?

The Mexican low-cost carrier Volaris seems to be having a V-Shaped recovery from the coronavirus pandemic. The company is one of the few airlines in the world claiming to excel during the current crisis. However, how does it look, compared with other carriers in Mexico and abroad? Let’s investigate further.

Volaris is having a V-shaped recovery from the coronavirus crisis. Photo: Getty Images

The numbers suggest a V-Shaped recovery

So far, Volaris has received over 8.5 million passengers during the whole of 2020. This number is a 40.7% decrease in comparison with last year’s performance. By August 2019, Volaris had already transported 14.5 million travelers across its routes. As expected, domestic traffic has outperformed international traffic, according to statistics presented by the airline.

Yet, why do we say that Volaris has a V-Shaped recovery? Let’s start with the domestic performance of the last few months.

In January, February, and March, Volaris had over one million passengers each month. The low-cost airline felt the first punches of the COVID-19 crisis in the last two weeks of March. By April, demand fell off a cliff. It went from having over a million passengers to 162 thousand in a matter of days. In May, the Mexican aviation industry hit rock bottom. Volaris transported 151,000 passengers, something that it didn’t see since 2007 (it was founded in 2005).

In June, Volaris rose to 441,000 passengers; in July, it increased to 764,000, and in August, it surpassed the one million milestone again.

Internationally, the recovery has been slower. In March, Volaris had 208,000 international passengers; in May, it had 16,144. By August, it has 187,000. It is not quite there but is bouncing back.

Volaris Getty
It already surpassed the one million passengers milestone in August. Photo: Getty Images

How is Volaris doing it?

Volaris has had an aggressive approach during these past months. Since March, it has launched five new domestic routes and five new international routes from Mexico City. The airline is taking advantage of the competitive dislocation in the market, said Kevin Wilson, one of the founders of Volaris.

The low-cost airline is already landing in 95% of the airports it operated before the pandemic. It also has restarted operations in 75% of the routes it had. Enrique Beltranena, Volaris’ CEO, said,

“While the domestic market is shrinking by a third due to other carriers’ reorganization processes, our ultra-low-cost model has allowed us to have a quicker recovery and strengthen our competitive position.”

Already, Volaris has increased its domestic market share in Mexico with 46% by July. At the start of the year, it had 33%.

In September, Volaris’ Board of Directors will decide if they raise additional capital. Photo: Daniel Martínez Garbuno/Simple Flying.

Still, Volaris will keep two eyes on its finances

This week, Volaris announced it will convene a Board of Directors meeting to decide on raising additional capital. The airline didn’t reveal more details regarding this meeting. Kevin Wilson said,

“I always think it is a good thing to shore up the balance sheet, and I have no doubt they will find very good and productive uses for the money. I also expect they will find the best combination of debt and equity to help minimize dilution.”

Between the first and second quarters, Volaris burned approximately $17 million of its cash and cash equivalents. It ended the first half of the year with $436 million in liquidity. As we said in July, despite its losses, Volaris will be a powerhouse in Mexico.

A quick comparison with other airlines?

To compare Volaris’ performance with other airlines, we have to make a distinction. In the first place, how is it doing against its direct competition, that is, other Mexican airlines? And then, how is it doing if you compare it with other low-cost carriers across the globe?

Grupo Aeromexico is in Chapter 11. While taking reasonable steps towards this, 38% of Aeromexico’s domestic passenger market (vs. 51% of Volaris) has recovered. Interjet, which is in crisis mode, has a 4% recovery by now. Viva Aerobus, the other low-cost carrier in Mexico, has a 36% recovery.

Internationally, Wilson compared the recovery rates of Volaris with four other low-cost carriers: Wizz Air, Ryanair, GOL, and Allegiant. By July, Volaris and Allegiant had a 51% recovery rate, while Wizz Air had a 47%, Ryanair a 30%, and GOL a 19%. By August, the recovery of Volaris was 69%, Wizz Air was 61%, and Ryanair 47% (the other two airlines have not posted their monthly figures).

Are you surprised by Volaris’ recovery? Let us know in the comments.