Volaris shares registered an 8% drop on Monday due to the uncertainty generated by the accelerated rise in interest rates from different central banks around the world that could affect the company’s multiples, despite a stable perspective on the rise in rates and an increase in passengers for the coming months.
In the Mexican Stock Exchange (BMV), the titles of the airline chaired by Enrique Beltranena fell 7.7% to 14.6 pesos, its lowest level since August 2020. So far this year, the airline has fallen 60.6% in what year to date and 68.4% from its peak, which represents a loss of 1,434 million pesos in market value.
“The main point of pressure for the airlines is that the possibilities of a recession in the United States have increased due to recent statements by Jerome Powell to control inflation. If the scenario crystallizes, it will tend to strongly slow down passenger demand, while fuel costs remain at high levels”, said Alejandra Marcos, Director of Analysis and Strategy at Intercam.
Analysts mentioned that the correction is generalized, all airlines worldwide have the same trend, and that is that, in annual terms, the cost of jet fuel has increased by about 80%.
“Although the long-term outlook is positive for the company, leveraging its leadership in the sector in Mexico, the environment of higher interest rates limits, in our opinion, a significant revaluation in the multiples,” said José in a report. Espitia, deputy director of stock market research at Banorte.
Other shares of the sector that presented significant falls in the world were Delta Air Lines with a fall of 3.55%; Qatar Airlines, with 2.92%; Emirates, with 0.79% and United Airlines, with 0.60%.
The last months of the year are considered, by experts in the aeronautical sector, the lowest season for aviation. And weak passenger traffic is expected despite the Day of the Dead festivities and the December holidays.
Volaris has proven to recover quickly from the blows to the aviation industry (it was the first airline to recover after the pandemic) and despite the beginning of a difficult season, the company will know better how to deal with the adverse scenario, Marcos said. “Although it is true that in the short term the perspective with several risks, the issuer continues to have solid fundamentals, and it seems to us that this turbulence (in which the issuer is going to be pressured) could be a buying opportunity for investors with a medium and long-term investment horizon.
Monex analysts consider that Aeroméxico and Volaris present a favorable passenger traffic expectation as they contemplate a faster recovery than expected at the local level. However, the important thing will be the evaluation of the effects derived from the recent degradation of Mexican aviation security to category 2, as well as the impact of the increase in the price of fuel on the operating margins of the companies.
