Controladora Vuela Compania de Aviacion SAB de CV ADR Class A ((VLRS)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for Controladora Vuela Compania de Aviacion SAB de CV ADR Class A, commonly known as Volaris, revealed a balanced sentiment. The company celebrated significant achievements in financial performance, ancillary revenue growth, and operational reliability. However, challenges such as engine inspections, geopolitical factors, and cost pressures were also acknowledged.
Strong Financial Performance
Volaris reported a robust financial performance with a net profit in each quarter of 2024 and an impressive full-year EBITDAR margin of 36%. The airline generated over $300 million in operating cash flow and increased its year-ending liquidity to $954 million, showcasing its financial resilience.
Ancillary Revenue Growth
The company saw record levels of ancillary revenues, which accounted for more than 50% of total revenues. Ancillaries per passenger increased by 15%, driven by successful programs like V.pass and V.club, highlighting Volaris’s ability to enhance revenue streams beyond traditional ticket sales.
Operational Reliability and Customer Satisfaction
Volaris achieved a 99.5% scheduled reliability and an 83% on-time performance rate. The company also received a Net Promoter Score of 37.4%, outperforming low-cost carriers in the United States, indicating strong customer satisfaction and operational efficiency.
Sustainability Achievements
Despite facing challenges, Volaris managed to keep fuel consumption increases below 3%, and CO2 emissions per RPK remained consistent. The airline was recognized in the Dow Jones best-in-class for the third consecutive year, underscoring its commitment to sustainability.
Fleet Expansion and Efficiency
In Q4 2024, Volaris took delivery of six aircraft and plans for 90% of its fleet to operate with NEO technology by 2030. This strategic move aims to reduce ownership costs and improve fuel efficiency, positioning the airline for future growth.
Impact of GTF Engine Inspections
The GTF engine inspections led to a significant reduction in fleet capacity by more than 30%, affecting operational efficiency. Volaris has implemented a mitigation plan to manage this situation and minimize disruptions.
Revenue and RASM Pressures
Total operating revenues for Q4 2024 were $835 million, marking a 7% decline compared to the previous year. Additionally, TRASM for Q1 2025 is expected to decline by 15% year-over-year due to geopolitical factors and FX headwinds.
Geopolitical and Economic Challenges
US-Mexico VFR traffic showed softness due to geopolitical uncertainty following the US Presidential Elections. The Mexican peso’s depreciation by 20% against the US dollar further impacted costs and revenues, posing economic challenges for Volaris.
Cost Pressures and Redelivery Expenses
CASM ex-fuel increased by 17% in Q4 2024 due to maintenance events and redelivery expenses. A one-time cost of approximately $100 million is expected in 2025 related to redelivery accruals, adding to the financial pressures.
Forward-Looking Guidance
Looking ahead, Volaris anticipates a 13% growth in ASMs for 2025 and expects an EBITDAR margin between 34% and 36%. The company plans to continue optimizing aircraft returns, managing new aircraft arrivals, and balancing scheduled engine removals to sustain fleet availability. Volaris projects a $0.003 impact on CASM ex-fuel due to a one-time cost of approximately $100 million for redelivery accruals and related maintenance in 2025.
In summary, the earnings call for Volaris highlighted a balanced sentiment, with notable achievements in financial performance and ancillary revenue growth. Despite challenges such as engine inspections and geopolitical factors, the company remains optimistic about its future, with plans for fleet expansion and efficiency improvements. Investors and stakeholders can look forward to Volaris’s continued commitment to operational reliability and sustainability.