Mexico has all but recovered its pre-pandemic traffic levels in 2022. In the first six months of the year, the country has had 50.2 million passengers, growing compared to 2019 levels. The three leading Mexican carriers, Volaris, Aeromexico, and Viva Aerobus, have also grown compared to 2019 levels (and in the case of Volaris and Viva, also compared to 2021 levels). Despite that, the three carriers posted net losses during the year’s first half, signaling the uncertainty the airline industry currently faces.
Economic crisis: Volaris, Viva Aerobus, and Aeromexico net losses
Both Volaris and Viva Aerobus had record operating revenues during the semester, while Aeromexico simply bounced back to its 2019 operating revenues. They all found strong demand in the domestic market, as well as the US-Mexico market.
Let’s take a look at these three airlines’ financial results so far:
|Airline||Operating revenue||Passengers (growth vs. 2019 or 2021)||Operating expenses||Net loss|
|Volaris||US$1.2 billion||14.45 million (38% vs. 2021)||US$1.3 billion||US$98 million|
|Aeromexico||US$1.5 billion||9.69 million (-6% vs. 2019)||US$1.5 billion||US$198 million|
|Viva Aerobus||US$630 million||9.43 million (46.5% vs. 2021)||US$624 million||US$26 million|
All three airlines faced heavy headwinds derived from higher fuel prices, intense inflation (despite the strength of the Mexican peso compared to other currencies), and Category 2 status constraining their growth to the United States.
What did the airline executives say?
The executives of the three leading Mexican airlines addressed the current economic environment in their results.
“Second quarter fuel expenses amounted to $8.4 billion pesos, an increase of 204.2% compared to the second quarter 2021. The latter was primarily driven by the increase in fuel price, which was 109% higher than the recorded on the same period of 2021.” The fuel price in 2021 was 10.59 pesos per liter. One year later, it was 22.17 pesos per liter.
“During the quarter, the Company passed on a portion of higher jet fuel prices through fare increases or, in certain cases, reallocated flights to more profitable routes while efficiently controlling ex-fuel costs. Volaris has always been disciplined about adding capacity to match passenger demand and has demonstrated flexibility to adapt capacity.”
Viva Aerobus stated,
“While we continue to rely on the strength and adaptability of our ultra-low-cost business model, our second quarter performance is a testament to Viva’s resilience. We cannot ignore the unprecedented times the world has been going through and, to a varying degree, the airline industry. We face significant external headwinds, with a 14-year record high jet fuel prices of US$4.40 per gallon and supply chain disruptions impacting new aircraft, engines, and spare parts deliveries. As we navigate through these headwinds, it is important to remain agile and disciplined, with a focus on driving operational excellence. Despite the challenges, we have been able to remain profitable, levered by our outstanding operational effort, and by strong demand in both domestic and international markets.
What can we expect going forward?
Mexico will fully recover in 2022 from the COVID-19 pandemic, at least in terms of passenger numbers. Despite the obvious challenges (the exit of a competitor – Interjet; FAA’s Category 2 status; economic uncertainty; challenges at Mexico City airports), the country seems poised to continue growing. Mexico has put itself at the top of the most appealing destinations in a post-COVID environment.
The airlines remain optimistic because despite global macroeconomic and geopolitical challenges.
Enrique Beltranena, Volaris’ CEO, said,
“We will continue with our strategy of disciplined growth and will remain nimble and respond decisively to any changes in market conditions in the coming months. We have grown quickly in the last two years allowing us to fill the void left by some of our competitors and, considering we have met our objectives, will return to our historical growth rate during 2023.”
Juan Carlos Zuazua, Viva Aerobus’ CEO, added,
“Looking ahead to the second half of the year, our team continues its focus on improving our customer experience, supporting our operations to meet growing demand during peak summer travel and protect profitability while maintaining a cautious approach towards external factors volatility. Also, we continue to strengthen our financial position, leading to a ratings upgrade by Verum of our short and long-term public bonds to 2/M and AA, respectively.”
Daniel Martínez Garbuno is a Mexican journalist. He has specialized in the air industry working mainly for A21, a Mexican media outlet focused entirely on the aviation world. He has also published on other sites like Simple Flying, Roads & Kingdoms, Proceso, El Economista, Buzos de la Noticia, Contenido, and Notimex.