Volaris Eyes Further US Expansion

MEXICAN TURNAROUND

How times have changed in the last year for Volaris. Fifteen months ago Volaris was confined to Mexico City’s secondary airport of Toluca, and operating under the cloud of the swine-flu crisis and the global financial crisis that hit demand for Mexican labour in the US hard. This was compounded with the US removing its FAA category one status impeding future expansion to the US for Mexican carriers.

Since the restoration of FAA category one, status, Toluca based carrier Volaris has publically declared its intention to increase transborder service to the US. As revealed in last week’s ‘News from the Americas’, Volaris will commence new scheduled services to Chicago’s secondary airport of Midway (MDW) from Guadalajara effective December 13^th, taking its tally of services to the US of four destinations.

Volaris, however, will not stop its expansion there and plans to add at least two other cities in 2011, with Fort Lauderdale and Las Vegas set to be likely additions.

Since the demise of Mexicana, the chance to move into large markets has been largely unopposed.

THE US TO MEXICO MARKET

The US to Mexico market is a sizeable market with over 16 million O+D passengers travelling between the two countries during September 2009 to September 2010. The table below illustrates the passengers share by carrier.

Source IATA BSP data (September 2009-2010)

There is clear potential for additional non-stop service between the US and Mexico with just over 9 million passengers having travelled on non-stop service, leaving over 7 million passengers travelling via an intermediate point.

TRAFFIC TO FORT LAUDERDALE AND LAS VEGAS

During the period between September 2009 and September 2010, over 96,000 O+D passengers travelled between Mexico and Fort Lauderdale with the American low-cost carriers Spirit Airlines and JetBlue Airways accounting for 64% of this traffic. This low-cost penetration will have warmed up the low-cost sector and the large ethnic and Visit friends and Relatives (VFR) flows that exist and Fort Lauderdale will provide strong two-way traffic. Indeed, Florida as a whole saw 1.3 million O+D passengers travel to Mexico in the aforementioned time period.

Las Vegas is also a large market from Mexico, with 452,000 passengers travelling between September 2009 and September 2010, Bankrupt carrier, Mexicana, was the market leader with a 38% share of this traffic. Flag carrier Aeromexico began yesterday an increased schedule between Mexico City and Las Vegas increasing from a daily service to an eleven times weekly.

Guadalajara to Las Vegas was also a route operated by Mexicana, with over 64,000 O+D passengers travelling between the city pairs between September 2009 and 2010. Mexicana had a 61% share of this traffic, so Volaris would be stepping into a market that has been operated on a non-stop basis.

With Mexicana yet to re-emerge the domestic market remains priority for Volaris. However with category 1 status restored, Volaris has the green light for expansion in US markets which will allow it to increase its relationship with Southwest Airlines which has rebuilt its IT systems to handle international bookings. All the planets have lined up for Volaris, though a note of caution is the Mexican aviation market is nothing if not unpredictable.