Mexican low-cost airline Volaris’ net profit plummeted in the fourth quarter of 2024, falling 59% to $46 million for the period.
The company said it is facing “continuous adversity” from Pratt & Whitney geared turbofan (GTF) engine inspections and aircraft groundings. For the quarter, the company had an average of 34 aircraft on ground (AOG) and an average of 32 AOG for the full year. The company has a total 143 aircraft in its fleet, including 53 A320neos and 33 A321neos.
Unit costs, excluding fuel, increased 16.8% to 5.68 cents as a result of the AOG. The results were also impacted by the Mexican peso’s depreciation against the US dollar.
Volaris president and CEO Enrique Beltranena said: “We anticipate the ongoing engine inspections to affect a significant portion of our fleet not only in 2025, but also in 2026 and 2027.”
AOG for 2025 is expected to be around 30 aircraft.
The company said it remains “focused on harmonising” three critical areas to “maximise return” through balancing of unscheduled engine removals, inspections, GTF engine returns; managing new aircraft arrivals from Airbus; and optimising aircraft returns and lease extensions.
“We signed the compensation agreement with Pratt & Whitney covering a significant portion of our fixed costs, but this agreement didn’t cover any of the revenue loss that the loss of engines.”
The company said is renegotiated its delivery schedule agreement with Airbus, staggering deliveries from now through 2031. Management said this will allow it to “integrate new aircraft into our operations without over extending capacity”. The company is also “conducting thorough market analysis” to determine number of aircraft returns and lease extensions.
“Our objective is to maintain equilibrium between supply and demand, thereby preserving stability and leadership in our core markets,” said management in the call. “This strategy will require elevated deliveries in 2026 as we balance capacity, but will create the one off cost pressure for 2025.”
Capacity is expected to grow 13% for 2025.
For the fourth quarter, capacity was down 2.2%, while up 10.3% for the full year.
Volaris’ fourth quarter operating revenues totalled $835 million, down 7.1% on the same period last year. For the full year, operating revenues were down 3.6% to $3.1bn. Total operating expenses were down 2.3% to $718 million for the quarter and down 10.1% to $2.7bn for the full year. Unit costs were up 2.9% in the quarter to 8.04 cents and up 2.8% to 8.03 cents for the full year.
Unit costs excluding fuel were up 16.8% to 5.68 cents for the quarter and up 12.2% for the year to 5.40 cents.
Fourth quarter operating income was down 28.7% to $117 million, while up 85.2% to $413 million for the full year. EBIT margin was down 4.2 percentage points to 14% for the fourth quarter, and up 6.3 percentage points to 13.2% in the full year.
Load factor for the quarter was down 0.8 percentage point to 87.3% and up 0.8 percentage point to 86.8%.
For the full year 2025, EBITDAR margin is expected to be 34-36% and capital expenditure, net of financed fleet predelivery payments, is expected to total around $250 million.
For the first quarter of 2025, capacity growth is expected to be around 7%, while TRASM is expected to be 7.9 to 8.0 cents. Unit costs excluding fuel are expected to be 5.5-5.6 cents. EBITDAR margin for the quarter was guided to around 28% to 29%.
Volaris management said in the call that bookings were “robust” in mid-January and early February despite “all the noise in the transborder relationship” amid Trump’s inauguration.
“However, we are currently hearing heightened concerns from our passengers as they try to understand the new immigration and travel controls that could be implemented by the new [Trump] administration,” management said in the call. Management said they expect this to be a temporary market condition and will “continue monitoring demand patterns closely”.
Net debt to EBITDAR was 2.6x as of the end of the year. Net debt was $810 million, increasing 24% year over year in the quarter due to pre-delivery payments related to 2026 aircraft deliveries and spare engine financing. Total lease liabilities stood at $3.1bn.