EconomyFinancialVolaris has been affected on 29 routes due to...

Volaris has been affected on 29 routes due to the downgrading to Category 2

The degradation to Category 2 of Mexican air safety has affected 29 Volaris routes , both due to flights that have not been able to open and additional frequencies that have not been able to be added, which has led the airline to place the 32 planes that it has added since May of last year in the domestic and Central American markets.

The airline is coming off a third quarter of higher revenues, but lower profits and a significant cost increase of 52% compared to the same period in 2021. Although Category 2 does not add to these costs incrementally, it does incur a cost of opportunity by not being able to add more flights to the United States, warns Enrique Beltranena, CEO of Volaris, about one of the direct consequences of the adjustment made by the Federal Aviation Administration ( FAA , for its acronym in English) in May of last year .

“Up to a certain point, with the departure of Interjet and the reduction of operations of another competitor in the market, we have had a place to place aircraft in the domestic market,” the manager explained to Expansión . “We have also made a growth in the Central American market , this has helped us to alleviate the issue of the category.”

Volaris is not the first airline affected by downgrading to Category 2, as it is a measure that has affected the entire Mexican air sector. Added to the case of the airline is that of Viva Aerobus , which has previously referred that the adjustment has cost seven routes to the United States. The National Tourist Business Council (CNET) has estimated that the loss of Category 1 has cost around 9,200 million pesos to the national air sector and around 2.3 million passengers.

Between the AICM and the AIFA

Another capacity adjustment that the airline has made has been a cut of around 15% in its operations at the Mexico City International Airport (AICM) , which has involved fewer frequencies and a relocation of capacity in other markets.

“We have reduced from 36 planes that we had in the AICM to 33-32 planes; With that capacity that was released, we have opened more frequencies in Tijuana , Guadalajara , Cancun , even at the Felipe Angeles International Airport ( AIFA ) and in Toluca ”, he says. On the contrary, among the routes with reduced frequencies are destinations in the north of the country, such as Mexicali and Culiacán .

Regarding his operation in the AIFA, the manager assured that “very good” occupancy levels are being registered; however, the airline is still keeping fares low to stimulate demand, which it expects will eventually normalize.

“The AIFA is a new market, it is not even an airport that existed; When you start operations in an existing airport, people already know how to get there, how to use it, etc. Here we see a double phenomenon, where we think that the maturation curves of the different routes can be a little longer than the normal ones, which are between six and nine months, and could be between six and 12 months . There are routes like Cancun, which has matured very well, we already have a second daily frequency, but not all routes mature in the same way or at the same pace”.

How to deal with rising fuel prices?

The airline has left behind three periods of losses by registering profits again , for 49 million pesos during the third quarter of the year; however, these are 47% lower than those registered in the same period of 2021, despite the fact that revenues increased 20%.

Behind this there is an increase in fuel prices that has been the headache of the industry in the last year, and that for Volaris has meant a 72.2% higher expense . To deal with the rise, the airline has opted to stimulate demand through lower rates in some markets to have a higher occupancy.

“All year we have tried, as far as possible, to compensate for the effect of fuel through a higher load factor. In August we had 84.7%, and in September we reached 87%, a monthly historical maximum . It has been through increasing passenger levels and with that, having a higher revenue that compensates for the increase in fuel costs”, says Beltranena.

At the moment, fuel hedges are not an option for the airline, since the manager considers that they are a long-term and expensive alternative at a time in the market like the current one. “If you go out to cover at this time, it is practically paying today’s price; the possibility in the opinion of analysts that this fuel will drop in the next six months is high. It was important to have done them before this phenomenon”.

#Chronicle: What is it like to fly at AIFA six months after its opening?

Although the AIFA constitutes a functional alternative to flying from the State of Mexico or Hidalgo, there is still a large gap for it to become an option that relieves the saturation of the AICM.

Aeromexico reports profit for the first time since the pandemic began

During the third quarter of the year, the airline registered 21,401 million pesos in income, which left a net profit of 210.8 million pesos.

The reduction of operations in the AICM for the winter will fall on Aeroméxico

While the 'slots' of some airlines were reduced according to the 15% cut in operations announced in August, others remained unchanged and even increased their schedules.

LAST MINUTE: AFAC changes director with a view to recovering Category 1

At the instruction of President Andrés Manuel López Obrador, General Miguel Enrique Vallín Osuna was appointed as the new director general of the Federal Civil Aviation Agency.

LAST MINUTE: Cofece authorizes the alliance between Viva Aerobus and the US airline Allegiant

The authorization contemplates an investment of 50 million dollars in the Mexican airline; however, approval from the US Department of Transportation is still pending.