Volaris understands that some of its customers still need to travel, and so, in the wake of the Coronavirus (COVID-19) contingency, Volaris continues to operate to and from the following airports in the United States: Los Angeles (LAX), Oakland (OAK), San Jose (SJC), Chicago O’Hare (ORD), Chicago Midway (MDW), Portland (PDX) and Orlando (MCO).
However, the airline will put on hold temporarily its operation as of April 2 and until further notice at the following airports: Houston (IAH), Seattle (SEA), Phoenix (PHX), Denver (DEN), Dallas/Fort Worth (DFW), New York (JFK), Sacramento (SMF), Reno (RNO), Miami (MIA), Las Vegas (LAS), Fresno (FAT), Charlotte (CLT), San Antonio (SAT), Washington (IAD).
Volaris is offering flexibility to its clients traveling to or from these airports. Please click here to find out more about the flexible options available to you.
Volaris continues to be in close communication and coordination with the US authorities to ensure the highest standards of health and safety in its services and operations, and appreciates the support of its customers, suppliers, local governments, aviation authorities and international organizations in this extremely difficult time.
Volaris, the ultra-low-cost airline serving Mexico, the United States and Central America, announces that pursuant to a decree published in the Official Gazette of the Federation, the Government of the United Mexican States, acting through the General Health Council (Consejo de Salubridad General (GHC)) declared a health emergency due to force majeure, as a result of the disease epidemic caused by the virus SARS-CoV-2 (COVID-19), known as Coronavirus, which will be in effect until April 30, 2002 (the “Declaration of Emergency”)
The Declaration of Emergency and the health security measures announced by the GHC, such as the suspension of non-essential activities in the public, private and social sector, as well as the call to the population to comply with stay at home, will impact the demand for passenger air transportation whilst the Declaration of Emergency is in effect.
As a result, from the date hereof, Volaris will make an additional capacity reduction to that which was advised on March 24, 2020. Capacity measured by available seat miles (ASMs) for the month of April, 2020 will reduce to approximately 80% of total operation versus the schedule originally published.
Volaris will continue to provide relevant market updates should further capacity, governmental travel restrictions or other liquidity preserving measures need to be implemented.
Volaris has announced its financial results for the first quarter 2019.
The following financial information, unless otherwise indicated, is presented in accordance with International Financial Reporting Standards (IFRS).
First Quarter 2019 Highlights
Total operating revenues were Ps.7,192 million for the first quarter, an increase of 22.9% year over year.
Total ancillary revenues were Ps.2,563 million for the first quarter, an increase of 30.5% year over year. Total ancillary revenues per passenger for the first quarter reached Ps.517, increasing 12.1% year over year. Total ancillary revenues represented 35.6% of the total operating revenues for the first quarter 2019, increasing 2 percentage points with respect to the same period of last year.
Total operating revenues per available seat mile (TRASM) totaled Ps.126.1 cents for the first quarter, an increase of 9.0% year over year.
Operating expenses per available seat mile (CASM) were Ps.125.7 cents for the first quarter, a decrease of 0.7% year over year; with an average economic fuel cost per gallon of Ps.46.0 for the first quarter, an increase of 14.8% year over year.
Operating expenses excluding fuel, per available seat mile (CASM ex fuel) reached Ps.78.6 cents for the first quarter, a decrease of 5.8% year over year.
Operating income was Ps.26 million for the first quarter, an improvement compared with the operating loss of Ps.545 million for the same period of last year. Operating margin for the first quarter was 0.4%, an improvement in margin of 9.7 percentage points year over year.
Net income was Ps.519 million (Ps.0.51 per share / US$0.26 per ADS), with a net margin of 7.2% for the first quarter.
At the close of the first quarter, the Mexican peso had appreciated 1.5% against the U.S. dollar with respect to the end of period exchange rate of the previous quarter (Ps.19.68 per US dollar). The Company booked a foreign exchange gain of Ps.1,154 million as a consequence of our U.S. dollar net monetary liability position, as result of the adoption of IFRS16.
Net cash flow provided by operating activities was Ps.3,731 million, in conjunction with cash flow used in investing activities of Ps.379 million and in financing activities of Ps. 2,063 million. The negative net foreign exchange difference was Ps.82 million, with net cash generation in the first quarter of Ps.1,208 million. As of March 31, 2019, cash and cash equivalents were Ps.7,071 million.
Resilient Macroeconomics, Domestic Consumer Demand with Peso Depreciation and Fuel Price Pressures
Resilient macroeconomics and domestic consumer demand: The macroeconomic indicators in Mexico during the first quarter were stable, with same store sales increasing 2.1% year over year; remittances increased 6.4% year over year during first two months of the year; and the Mexican Consumer Confidence Balance Indicator (BCC)  increasing in the first quarter 36% year over year.
Air traffic volume increase: The Mexican DGAC reported overall passenger volume growth for Mexican carriers of 5.6% year over year for the first two months of 2019; domestic overall passenger volume increased 5.3%, while international overall passenger volume remained at the same level.
Exchange rate volatility: The Mexican peso depreciated 2.4% year over year against the US dollar, from an average exchange rate of Ps.18.76 pesos per US dollar in the first quarter 2018 to Ps.19.22 pesos per US dollar during the first quarter 2019. At the end of the first quarter, the Mexican peso appreciated 1.5% with respect to the end of period exchange rate of the previous quarter. The Company booked a foreign exchange gain of Ps.1,154 million as a consequence of our US dollar net monetary liability position, resulting from the adoption of IFRS16.
Higher fuel prices: The average economic fuel cost per gallon increased 14.8% to Ps.46.0 per gallon (US$2.4) in the first quarter 2019, year over year.
Passenger Traffic Stimulation, Further Ancillary Revenue Expansion, and Positive TRASM Growth
Passenger traffic stimulation: Volaris booked 5.0 million passengers in the first quarter 2019, up 16.4% year over year. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 14.2% year over year. System load factor during the first quarter increased 1.0 percentage point to 83.2% year over year.
Positive TRASM growth: For the first quarter 2019, TRASM increased 9.0% year over year. During the first quarter 2019, the total capacity, in terms of ASMs, increased 12.8% year over year.
Total ancillary revenue growth: For the first quarter 2019, total ancillary revenues increased 30.5% year over year. Total ancillary revenues per passenger for the first quarter of 2019 increased 12.1% year over year. The total ancillary revenue generation continues to grow with new and matured products, appealing to customers’ needs, representing 35.6% of total operating revenues for the first quarter, up 2 percentage points year over year.
New routes: Volaris began operations in 16 new domestic routes from or to its focus cities Mexico City, Guadalajara, Tijuana and others. Additionally, Volaris launched 17 routes, 10 domestic (Mexico to Ciudad Juarez, Puerto Escondido and Durango; Queretaro to Chihuahua and Puerto Vallarta; Guadalajara to Durango and Queretaro; Monterrey to Oaxaca and Los Cabos; Ciudad Juarez to Chihuahua) and 7 international (Mexico and Guadalajara to El Salvador; Durango to Dallas; Puerto Vallarta to Phoenix; Queretaro to Chicago; Aguascalientesto Chicago (Midway); and Chihuahua to Albuquerque.
The Cost Control Discipline Offset Fuel Price Pressure and Peso Depreciation
CASM and CASM ex fuel for the first quarter 2019 reached Ps.125.7 (US$6.5 cents) and Ps.78.6 cents (US$4.1 cents), respectively. This represented a decrease of 0.7% and 5.8%, respectively; mainly driven by tightening cost control discipline, despite the higher average economic fuel cost per gallon of 14.8% and an average exchange rate depreciation of 2.4%.
Young and Fuel-efficient Fleet
During first quarter 2019, the Company incorporated one aircraft (A321neo) to its fleet; during this quarter no redeliveries were registered. As of March 31, 2019, Volaris’ fleet was composed of 78 aircraft (8 A319s, 55 A320s and 15 A321s), with an average age of 4.8 years. At the end of the first quarter 2019, Volaris’ fleet had an average of 186 seats, 74% of which were in sharklet-equipped aircraft, and 22% were NEO.
Solid Balance Sheet and Good Liquidity
Net cash flow provided by operating activities was Ps.3,731 million, in conjunction with cash flow used in investing activities of Ps.379 million and in financing activities of Ps. 2,063 million; negative net foreign exchange difference was Ps.82 million, while the net cash generation in the first quarter was Ps.1,208 million. As of March 31, 2019, cash and cash equivalents were Ps.7,071 million, representing 24.7% of last twelve months operating revenues. Volaris registered negative net debt (or a positive net cash position) of Ps.4,018 million (excluding lease liability recognized under IFRS16 adoption) and total equity of Ps.3,624 million.
Transition to IFRS 16
The Company adopted IFRS 16 as of January 1st, 2019, using the full retrospective method. The cumulative effect of adopting IFRS 16 has been recognized as an adjustment to the opening balance as of January 1st, 2017 as an increase in assets and liabilities and an adjustment in the retained earnings. The full disclosure of this initial adoption is included in the Company´s 2018 annual report.
This quarterly earnings release includes supplemental information for comparable purposes, with recast 2018 figures with the IFRS 16 adoption effects and were derived from unaudited financial statements included in the quarterly reports on Form 6-K during the year ended as of December 31, 2018.
Since all the aircraft and engine lease contracts are denominated in USDs, starting on March 25, 2019, the Company established a hedge on its USD denominated revenues using the lease liabilities denominated in USD as a hedge instrument. This hedging relationship is designated as a cash flow hedge of forecasted revenues to mitigate the volatility of the foreign exchange variation arising from the revaluation of its lease liabilities. The impact of this hedge will be presented as part of the total operating revenues; however, it was not material for the results of this first quarter.
Additionally, on the same date, the Company established a hedge on a portion of its forecasted fuel expense using as hedge instrument a portion of its USD denominated monetary assets. This hedging relationship is designated as a cash flow hedge of forecasted fuel expense to mitigate the volatility of the foreign exchange variation arising from the revaluation of this portion of USD denominated monetary asset. The impact of this hedge will be presented as part of the total fuel expense; however, it was not material for the results of this first quarter.
Top Copyright Photo: Volaris Airbus A321-271N WL N537VL (msn 8144) LAX (Michael B. Ing). Image: 944620.
Frontier Airlines (2nd) and Volaris announce a new codeshare agreement which will provide millions of people access to affordable fares between the U.S. and Mexico. This first-ever codeshare agreement between uniquely branded ULCCs will allow both carriers to sell tickets and connecting itineraries on the airlines’ combined networks.
Subject to regulatory approval by authorities in the United States and Mexico, the codeshare routes will be available for purchase this Spring. This agreement will allow Frontier to place and sell tickets with its code (F9) on Volaris operated flights and for Volaris to place its code (Y4) on Frontier operated flights. Once the codeshare is in place passengers will enjoy a seamless low-fare travel experience traveling on Frontier and Volaris.
Beginning in Spring 2018, flights will be available directly through Frontier on the company’s website flyfrontier.com, its mobile application and its call center. Flights will also be available through third party distributers including online travel agencies. Flights also will be available directly through Volaris’ website volaris.com and mobile application.
A natural fit between the carriers’ networks already exists with each serving more than 20 of the same markets. In addition, both carriers fly Airbus A320 aircraft. Frontier operates a fleet of 78 aircraft with 199 additional aircraft on order and Volaris operates a fleet of 71 with 128 additional aircraft on order.
Top Copyright Photo: Frontier Airlines (2nd) Airbus A320-251N WL N307FR (msn 7472) (Champ, the Bronco) DCA (Brian McDonough). Image: 937375.
Airbus has announced that it had finalized agreements with Indigo Partners and its four portfolio airlines for the purchase of 430 additional A320neo Family aircraft for ultra-low-cost airlines Frontier Airlines (United States), JetSMART (Chile), Volaris (Mexico) and Wizz Air (Hungary).
The signed purchase agreement follows a Memorandum of Understanding among the parties announced at the Dubai Air Show last month.
The 430-aircraft order is made up of 274 A320neos and 156 A321neos worth $49.5 billion at list prices.
Airlines in the Indigo Partners family had previous placed orders for a total of 427 A320 Family aircraft.