EconomyFinancialAirline revenues exceed 2019, but so do their costs

Airline revenues exceed 2019, but so do their costs

Airline revenues had a second quarter not only of recovery compared to pre-pandemic levels, but also of growth. The advance in the demand for flights – which not even the latest wave of covid-19 infections interrupted – left a good period of sales, although they were not enough to leave profits in all cases.

The recovery in income compared to last year is clear. Aeroméxico almost doubled its sales for the second quarter of 2021, reaching 19,175 million pesos, which meant a growth of 14% compared to the same period in 2019.

Similarly, Volaris revenues exceeded pre-pandemic levels by 58.9%, standing at 435 million dollars, while Viva Aerobus rebounded by more than 145% in the same indicator, according to the financial statements of the three airlines for the second quarter. of the year.

The growth in airline sales was driven by higher demand, in part by the recovery of passengers and by the absorption of the market left by Interjet after its exit from operations. However, this also led to an increase in costs that not only exceeded the levels of 2019, but also exceeded the increase in revenues.

For specialists, the main reason behind the rise in operating costs – which increased 84.1% on average compared to 2019 – was the price of aviation fuel , which has skyrocketed 74% in the last year alone, according to the Air Price Monitor. Air Fuel from the International Air Transport Association (IATA).

“One of the main components in the cost structure of airlines is fuel,” explains Jonathan Félix, an analyst at Verum Qualifier of Securities. “Actually, it depends on the airline; Viva Aerobus has done very well, with an Ebitda (or operating flow) higher than before the pandemic, also driven by the fact that the airline is larger. On the other hand, Aeroméxico is tighter”, he refers.

The relevance of the price of fuel in the financial results of the airlines is such that, without considering this item, the companies even reduced their costs.

An example of this is the cost per available seat kilometer (or CASK, for its acronym in English), an indicator that reflects the unit price per seat operated. In the case of Aeroméxico , while the CASK in dollars grew 4%, when excluding the cost of fuel it decreased 23%.

Similarly, Volaris ‘ cost per seat decreased 1% –against an increase of 35% when accounting for the effect of fuel– and Viva Aerobus managed to reduce its cost per seat by 17.8% without taking fuel into account, against an increase of 21.8%. % when incorporating it.

“We have a decrease in other expenses such as administration, operation, workforce, etc., which is less than what sales have increased,” says Brian Rodríguez, an analyst at Monex Grupo Financiero. “That’s certainly good news.”

The reduction of costs beyond fuel has been achieved by some adjustments that the airlines made in the face of the crisis that the covid-19 pandemic brought.

“Airlines had to buckle down. Although the pandemic continues, those improvements were maintained, and that is why we see progress in terms of costs,” adds Félix. “These improvements were agreements with suppliers, salary (adjustments) –some even have a variable component–, airport operations, etc.”

Going forward, the outlook is more encouraging than in previous periods, especially in terms of costs, as fuel prices have begun to stabilize. However, the airlines will still be at the expense of how these costs evolve, and other macroeconomic variables .

“To this we will have to add the issue of inflation , which is important because it impacts the consumer’s pocket,” says Rodríguez. “Among the first items that people would be removing due to the impact on their economic capacity, is that related to tourism,” he concludes.

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