Volaris: Expanding Mexico-U.S. flights is only part of its game plan
On Wednesday Aug. 24, Mexican airline Volaris announced it will expand service to the U.S. under new authority from the U.S. Transportation Department. Volaris, whose route system includes Merida, Cancun and Chetumal, hasn’t yet specified its new international flights, but said it will operate as many as 130 international routes. The Dallas Morning News sat down with Volaris’ chief financial officer and published this interview on the budget carrier’s strategy for the future:
For the last 10 years, Mexican airline Volaris has been trying to get travelers off of buses and onto its planes.
The budget carrier launched in 2006 with a focus on intra-Mexico travel — where buses still reign supreme — but over the last several years it has also been expanding its presence in the United States to cater to Mexican-Americans who want to visit friends and family south of the border.
The strategy seems to be paying off, with Volaris now serving 22 destinations in the United States, including four in Texas. Last month, the company inaugurated a new route from DFW International Airport to Monterrey, adding on to its existing service from North Texas to Guadalajara.
Now, with a revised air travel agreement taking effect this week that will lift restrictions on the flights between U.S. and Mexican cities, there’s even more room for Volaris to grow. But they’re sure to encounter stiff competition, as U.S. carriers like Southwest Airlines and other low-cost Mexican airlines look to grow their share of cross-border traffic.
The Dallas Morning News spoke with Volaris’s chief commercial officer Holger Blankenstein about the carrier’s plans for Texas, it’s ultra-low-cost model and how it plans to win over bus travelers:
Can you start with a bit of history on Volaris and how it’s grown over the last decade?
Historically in Mexico, there were only a few competitive airlines. There were two state-run airlines and some regional carriers that all had very high prices. Air traffic hadn’t grown very much and the market was about 20 million domestic passengers (in 2005).
If you compare that to the US, where we’re talking about 700 million domestic passengers, (Mexico) was a fraction of that, but the population is a third of the U.S. So we thought there was a great opportunity to build an intra-local carrier here in Mexico.
We started out very much as an all-inclusive airline and even had donuts on board for free at one point. The intention was really to get customers familiarized with the low-cost model. Remember, very few people knew what flying was all about.
In 2010 to 2011 we did make a change to the ultra-low-cost model where we lowered our fares even more and made it even more accessible to fly. We really unbundled.
What type of travelers is Volaris trying to attract?
Our target customer in general is the price-sensitive traveler, maybe a customer who has never used an airplane before who’s used to traveling by bus.
In Mexico, bus travel is really a very big form of transportation. If you look at the 2.8 billion bus travelers, if we just get one percent more of those people off the buses and onto planes, we would double the air market in Mexico. We’re really focused on that bus switching.
For our U.S. business, it’s the Mexican heritage population. We offer cheap, direct air service from the U.S. to Mexico.
Many people who travel to Mexico from the U.S. travel by bus. We’ve been able to offer low fares to those travelers that now have the same prices as going by bus but they travel much faster.
What’s Volaris’s presence like in Texas and the rest of the U.S.?
Texas is now our second most important state we serve in the U.S. after California with four destinations — Dallas, San Antonio, Houston and Austin. By comparison, in California we have eight destinations.
The Texas Mexican heritage population is a little bit different from California. They come more from the north of the country, so those routes are a little bit shorter, so you see a lot of markets from Monterrey, some from Guadalajara.
Our strategy is focused on finding niche markets that need direct connection.
We’re going to focus right now on the five markets we have in Texas and connecting them to other destinations in Mexico. Eventually, maybe there’s some opportunities in other (Texas) markets.
How has Volaris adapted the ultra-low-cost model to fit its needs?
We like to position ourselves as a little bit more friendly than other ultra-low-cost airlines. We like to be innovative, do things outside of the box and really be the disruptor of the airline industry in Mexico.
We’re going to give you a really attractive fare and you decide as a customer what you’d like to add. We call it ‘Tu decides’.
We give the first checked bag for free, but we do have a lot of the traditional things like (charging for) seat assignment. We have a fare club where you pay an annual membership fee and you get a guaranteed discount on top of the already low fares.
Lately we’ve been focused very much on commission-based products selling the customers their hotel, the rental car, their activities at the destination.
The new bilateral agreement will allow increased flying between the U.S. and Mexico. How is Volaris positioned to compete in that expanded market?
In general, we like competition. We definitely believe that more competitors stimulate demand, grow the airline industry as a whole and that has benefits for Volaris.
We’re very confident because we have the lowest operating costs of any airlines in the Americas. We have the most modern fleet in the Americas which means lower fuel burn on the aircraft, lower maintenance costs.
We have a higher seat density than many of our competitors, which lowers the cost for everybody on the airplane, and we do also have a labor cost advantage because we’re based in Mexico.
We are set up very well for the new bilateral agreement and we have a lot to benefit because we can now offer new routes that were previously restricted.
We’re looking at markets like Miami, JFK, even markets like Houston and Dallas from Mexico City.
That should lower the average fare between Mexico and the US, which is great for customers.