Aeromexico and Volaris' different strategies in challenging market

Mexico's two largest airlines are approaching the weakness in the country's domestic market differently. The full service carrier Aeromexico has opted to slash its domestic capacity by 5% in 1Q2018, whereas its ULCC rival Volaris has no plans to cut its capacity growth, concluding that sustaining its aircraft utilisation and driving passenger volume are key to its leading cost and ancillary revenue performance.

Pricing pressure in Mexico's domestic market remains an overhang well into 2Q2018, and forward-looking schedules show domestic ASK growth will remain elevated through 3Q2018.

Both Aeromexico and Volaris are experiencing some signs of capacity rationalisation in the US transborder market after capacity jumped when Mexico and the US forged a new liberalised bilateral agreement a couple of years ago. Each airline believes yields in the market are improving as 2Q2018 is progressing.