Mexican ultra-low-cost carrier (ULCC) Volaris reported a MXP1.4 billion ($72.7 million) net loss for the first quarter of 2017, reversed from a MXP602 million net profit in the year-ago quarter. 

Volaris CEO Enrique Beltranena said the company “faced a challenging market and geopolitical environment” during the quarter.

Fuel prices increased significantly compared to a year ago, Volaris reported, with the company’s average economic fuel cost per gallon rising 67.8% year-over-year (YOY) to MXP37.1 ($2) per gallon, versus MXP22.1 per gallon in 1Q2016. Volaris hedged 52% of its first-quarter 2017 fuel consumption, at an average strike price of $1.64 per gallon.

Volaris’ overall fuel expenses were up 86.7% YOY during the quarter to MXP1.9 billion, compared to MXP1 billion in 1Q2016.

“Volaris responded by managing capacity and executing its ULCC model to continue stimulating market demand and adapt rapidly to these conditions,” Beltranena said. “We remain cautiously optimistic of demand … we will continue prudently managing capacity based on market demand.”

Volaris’ first-quarter revenue was up 9.1% YOY to MXP5.7 billion, but the ULCC’s operating expenses ballooned to MXP6.4 billion, up 47.9% YOY. “US-dominated costs, such as aircraft and engine rent expenses, international airport costs and maintenance expenses [increased as] the Mexican peso [depreciated] by 13.2% year-over-year,” Volaris said. The carrier reported an operating loss of MXP772 million during the quarter, reversed from a MXP836 million operating profit in the year-ago quarter.

The carrier’s first-quarter traffic increased 14.4% YOY to 3.8 billion RPMs on a 16.8% rise in capacity to 4.5 billion ASMs, producing a load factor of 83.2%, down 1.8 points YOY. Unit revenue during the quarter, as measured in PRASM, was down 11.8% to MXP88.5 and yield fell 9.9% to MXP106.4.

At the end of the 2017 first quarter, Volaris had an all-Airbus fleet of 14 A319s, 44 A320s and 10 A321s with an average age of 4.4 years. With 68 aircraft, Volaris’ fleet has grown 15.3% since the year-ago quarter.

Mark Nensel