Volaris, in its recent earnings call, disclosed a robust third-quarter performance with increased total operating revenue, EBIT, and EBITDAR compared to last year's corresponding period. Despite ongoing challenges related to Pratt & Whitney GTF engines inspections and Mexico City International Airport slot restructuring, the company remains focused on strategic initiatives and cost management to offset potential impacts on its growth plans.
Key takeaways from the call include:
- Volaris is diligently following all preventive airworthiness directives related to the Pratt & Whitney GTF engines inspections and is negotiating with Pratt & Whitney for financial support. The company expects capacity deployment to be limited until the inspections are completed in 2026.
- The company is preparing for a reduction in aircraft slots at Mexico City Airport, planning to redeploy aircraft to other domestic stations.
- Volaris reported solid performance in the third quarter, with robust growth in RPMs, increased load factors, and higher ancillary revenue per passenger.
- The company is optimistic about solid bookings for the fourth quarter and plans to prioritize profitable routes while scaling back certain trunk routes.
- Volaris experienced rapid growth in ancillary revenues, reaching $49 per passenger, setting a new quarterly record and accounting for 50% of total operating revenues.
- The company is exploring the Japanese Operating Leases with Call Options (JOLCO) market, having recently executed a transaction for engines.
Volaris reported an increase in total operating revenues for the third quarter at $848 million, up by 10% compared to the previous year. EBITDAR totaled $207 million, an 18% increase, with an EBITDAR margin of 24.4%. The company posted an EBIT of $39 million, up 11%, and a net loss of $39 million. It ended the quarter with a liquidity position of $764 million.
The company is also planning to cut non-profitable capacity by 10% to 15% to improve revenue per available seat mile (RASM) by 5% to 8%. Volaris is considering shifting some domestic capacity to the international market due to issues with Pratt & Whitney engines affecting two major Mexican airlines. The company's year-end forecast already includes the downtime of aircraft due to engine issues.
Volaris is extending the leases on 18 aircraft that were originally set to be returned in 2024 and 2025. The new lease agreements will range from 24 to 48 months and the rents will be lower than the neo fleet currently in use. The company is also in conversation with lessors to secure additional aircraft for the first half of next year.
Volaris CEO Enrique Beltranena mentioned that the company is now the only public airline company in Mexico, which means they cannot publish capacity that hasn't been approved by the Authority or legally authorized for the routes. Volaris executives stated that they are not introducing new routes but adding capacity to existing markets with high demand.
The company has also shown interest in the Japanese Operating Lease with a Call Option (JOLCO) market, having recently executed a transaction on engines. They are optimistic about the potential for more JOLCO transactions in the future. Volaris expressed gratitude to its employees and stakeholders for their support and remains positive about managing the current situation.
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