Uncertainty provoked by Trump’s administration and economic repercussions caused Volaris to adjust its seat offering for 2017. The airline changed its plans to grow 17 percent instead of 23, meaning five routes’ frequency were reduced and one cancelled altogether.
Enrique Beltranena, Volaris’ Director General labeled these measures as extraordinary because the sector has high potential for growth. The domestic Mexican market grew 14 percent in January 2017 and 11 percent globally but foreign policies impacted Volaris’ stock, which dropped to MX$22.84 from MX$31.37 on Feb. 23, 2017.
“As the migration issue tightened, demand fell and we had to reduce capacity a little in February and March,” said Beltranena. The drop in demand in February was attributed to the price of the dollar increasing and fuel costs.
The routes affected are those connecting Monterry with Dallas and Chihuahua, Guadalajara with Fort Lauderdale and Reynosa, Mexico City with Fort Lauderdale, Cancun to Reynosa and Oakland to Tijuana. The airline’s Durango to Mexico flight was cancelled. However, the airline announced today that it would open a new route to San José, Costa Rica from Manuagua, Nicaragua. The focus shift to Latin America is symptomatic of a country facing a need to turn away from the US market toward other countries that welcome aerospace growth.
“Stock values are tremendously important for us, but it is a derivative of the fundamentals of the airline. If Mexico’s situation stabilizes and uncertainty is removed, stocks will return to previous levels because the fundamentals remain the same,” Beltranena explained. His philosophy is: reduce when you have to reduce and grow when you have to grow, and the decision to limit growth was taken to avoid empty seats, and retain profitability. This reduces the number of planes using fuel and slots without full passenger capacity, and is an efficient use of resources.
The company generates 54 percent of sales on social media such that this advertising means is expected to be a focus going forward, to boost sales and convince Volaris’ investors to increase the seat offering further.
Data sources: El Economista, El Financiero, T21.