Enrique Beltranena, President & CEO, Volaris • Interview

How did you develop your innovative business plan that sees you competing with a different model of transportation?

When we look at the transportation market in Mexico, air trips per capita were only around 0.3-0.4 in 2019, while 40 years ago it was 0.22. It has not shown much growth. In reality, Mexico is one of the largest bus transportation markets in the world. When we analyzed the market, we concluded that the purchasing capacity of our customers was generally limited because airfares were high in Mexico. We decided to develop a model of aviation under which we could offer extremely low fares so that we could compete against buses. Today, 41% of our routes do not compete with other airlines but instead against buses. We focused on certain niches, and this allowed us to capitalize on these markets. Women are now working far more and incorporating themselves into the equation, and this means we must target women as well as men. Additionally, the vast majority of the people we are targeting are young people, who travel frequently and want certain things. For example, we have to communicate with them through digital channels. Part of what we have done is move into these channels faster than other airlines. We earn only a small percentage of our total revenues through travel agencies, including online travel agencies. Everything else is sold either through our webpage or the mobile application.

“We earn only a small percentage of our total revenues through travel agencies, including online travel agencies. Everything else is sold either through our webpage or the mobile application.”

How does your business model protect itself from going out of business, which has been the fate of many other Mexican airlines?

It is driven by cost. Volaris has the lowest operating unit cost in the Western hemisphere. Our costs are so low that we can produce far lower prices for customers. Most of the time, our total revenue per available seat mile, which is our unit measure for revenue, is below the cost of the entire global industry.

What kind of strategy does Volaris use to expand both nationally and internationally?

It is important to stick to what we are doing here. In reality, we are a pointto-point operation, and this eliminates the fact that we have to pass through the Mexico City Airport. It is also important to understand that bus transportation is the base of this business. We can expand to wherever we like, though it has to be point-to-point and where we can do bus switching. Further, it has to be somewhere where we have a price advantage over our competitors. ✖

How is Air France strengthening its market share of the air traffic between Cancún and Paris?

With direct flights between the two destinations, Air France controls a large part of that market. We made the decision to increase the number of weekly flights from three to five in November 2019, and we will soon operate one daily flight. This route represents a leisure market for us as Europeans prefer traveling to Cancún to further explore southern Mexico rather than only staying in a resort in Cancún. We will continue to invest in Cancún in the coming years. Demand is high for daily flights during winter due to the cold weather in Europe. Between November and March, many Europeans are looking for holiday destinations that have good weather and plenty of sun, and Cancún fits perfectly in this category. We have plans to further connect Mexico with Europe. The Cancún airport is one of the best in Mexico and Latin America. We also operate an Air France daily flight from Paris to Mexico City. Notably, 20% of the passengers flying to Mexico with us connect to other destinations.

How does Air France-KLM plan to collaborate with the new administration to fulfill its vision for the aviation industry?

First, we have always had a good business relationship with the Mexican authorities. Mexico is a popular destination. We are operating the A380 plane in Mexico, which is quite challenging due to its size and the equipment needed to handle it. This is an example of the good working relationship that we have with the authorities, especially the airport authorities. It is critical to make sure the country can develop, and people can travel for business or pleasure. We have a close relationship with all the stakeholders and are open

We are in Mexico with joint ventures through Alitalia and Delta. It is a strategic organization between the North Atlantic and Europe. We represent 30% of flights between Europe and Mexico and have been the market leaders for five years in a row. Our strong position is based on a good product; we operate flights from Amsterdam, Paris, and Rome. In terms of customer experience and service we have one of the best products you can find in Mexico. We are above 50 in terms of NPS in Mexico. On top of that, we have a strong identity; KLM celebrated its 100th anniversary in 2019 and became the first airline in the world to do so without changing its original name. Air France and KLM are airlines with histories and identities. For example, Air France is the only airline that offers champagne in all of its cabins. When you travel with Air France, you taste France.

What do you think differentiates the market in Mexico in comparison to other Latin American markets?

Cuba, for example, is special; it is a leisure market with great potential and Air France-KLM is already operating flights to Cuba. Brazil and Mexico are quite similar in terms of market characteristics, but Brazil has a broader market due to the size of the country. There is a huge business and corporate potential as well as big leisure potential in both countries. There is intense competition between airlines in these two countries. All major European airlines are operating in these countries and by the end of the year the competition will grow stronger with the entrance of Turkish Airlines and Emirates. Therefore, the company needs to offer the best product to maintain its leading position. We are investing heavily in Mexico in terms of customer experience. For example, we worked with a top local chef to design meals for the KLM business menu. Similarly, we will soon announce a similar initiative with a local chef for Air France. ✖

“We have a close relationship with all the stakeholders and are open to sharing our views on what we think will make sense for the future.”