Volaris to expand Mexico City operation

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Mexican low-cost carrier Volaris is planning to further expand its Mexico City operation as it takes delivery of six additional Airbus A319s over the next few months.

Volaris chief commercial officer Holger Blankenstein says the carrier is taking an additional A319 this month and two more A319s next month, giving it a fleet of 24 A319s and two A320s.

Blankenstein says Volaris also has committed to lease three additional A319s for delivery in the first part of 2011. He told ATI and Flightglobal at last week's ALTA 2010 Airline Leadership Forum these aircraft will all be delivered "early in the year but we haven't fixed a date yet".

All six aircraft are used A319s that are being acquired to supplement the aircraft Volaris already has on order with Airbus. Blankenstein says the three A319s being placed into service in the current quarter were all previously operated in Europe.

Volaris as part of its outstanding order book with Airbus has four new A319 delivery slots next year. Blankenstein says three of these aircraft are now slated to be delivered in June and July, and Volaris hopes to take the fourth in November, giving it a fleet of 33 aircraft by the end of 2011.

Volaris was originally planning to end 2011 with 27 aircraft but decided to lease an additional six aircraft to meet growing demand in the domestic market in the aftermath of Mexicana suspending operations.

Mexicana suspended operations in late August, prompting Volaris and other Mexican carriers to add capacity in the domestic markets, resulting in a significant improvement in load factors across the Mexican industry. In September, the first full month after Mexicana's collapse, Volaris' domestic passenger traffic was up 29% versus the year prior to 313,000 passengers.

Volaris in recent months has bolstered frequencies on some of its domestic routes and launched seven new routes from Mexico City International.

Volaris began serving Mexico International early last year after a change in government policy opened up the slot-controlled airport to new entrants. It was initially limited to operating one daily flight at Mexico City from its Tijuana base. But after Mexicana suspended operations in late August, Volaris was given several additional slots at Mexico City. Blankenstein says Volaris is now operating the equivalent of 11.5 flights per day from Mexico City to nine domestic destinations.

He says Volaris expects to secure enough additional slots to operate about 20 daily flights from Mexico City during the upcoming peak winter season. The additional slots will allow Volaris to add a second frequency on several of its Mexico City routes.

The government-owned company which operates Mexico City International Airport (AICM), has still not permanently reallocated any of slots held by Grupo Mexicana or Aviacsa, which ceased operations last year. But small groups of slots are gradually being made available to other carriers. "We're pretty comfortable we'll get what we want for the high season," Blankenstein says.

He adds after the winter peak season Volaris may reduce its Mexico City operation rather than expand it beyond the expected 20 daily flights. "We don't have a major strategy to go into AICM," Blankenstein says.

He explains Mexico City alternative airport Toluca and Tijuana will continue to serve as "cores" for the airline. Blankenstein says Toluca is now offering new incentive packages in attempt to retain airlines. He says the incentives include reimbursing to passengers the 204 pesos ($16) each passenger pays in airport fees. Toluca also covers the cost of Volaris' shuttle bus from downtown Mexico City to the airport.

Volaris now has an 18% share of the domestic market, based on passengers carried in September 2010, compared to a 13% share one year ago. Aeromexico has a 47% share followed by Interjet with a 21% share. But Blankenstein points out that Volaris is significantly larger than Interjet on an RPK basis since Volaris' average stage length is about double compared to Interjet.

Recent data shows nearly all the domestic traffic previously carried by Grupo Mexicana, which one year ago had a 30% share of the market, has already been picked up by Aeromexico, Volaris, Interjet and low-cost carrier VivaAerobus.

"There was a massive amount of overcapacity. Now the business is more sustainable," Blankenstein says.

Volaris is currently unable to expand its US operation because Mexico currently falls under Category 2 in the FAA's international aviation safety assessment (IASA) programme.

The airline expects Mexico to regain Category 2 status late this year or early next year. This would allow Volaris to direct some of its 2011 capacity expansion to US markets although in the meantime Volaris sees plenty of domestic opportunities.

Volaris executives say the carrier may also further accelerate fleet expansion, depending on what happens with Mexicana's proposed re-launch and Category 2. Mexicana is hoping to resume operations next month, focusing on US routes.