Enrique Beltranena, President and CEO of Volaris, says that new technologies, clean aviation, and meritocracy remain the dream despite the challenges for low-cost operators
Airport costs in Mexico continue to affect the market, but for low-cost carriers the impact is amplified. For airlines to succeed and flourish, all stakeholders in the aviation value chain must recognise the benefits of air transport to local economies and communities, as Volaris CEO Enrique Beltranena explains.
What do you see as the main challenges and opportunities in the Mexican and Central American markets?
Looking at the main challenges facing the aviation industry in the region, I would single out operating costs. In our main market Mexico, we are faced with a combination of high airport costs and above average fuel prices, caused by inefficiencies. Furthermore, the lack of clarity on the future development of airports for the capital city are issues that permanently occupy us.
In Central America, governments still do not understand the importance of keeping their respective aviation regulators up to date. This can lead to issues with the US authorities, creating a lack of supervision, and out-of-date regulations. An underfunded regulator cannot properly perform the necessary oversight, potentially leading to a downgrade by the US Federal Aviation Administration. This represents a real obstacle to the proper growth of the industry in the region.
Last, but not least, I would add that the concessionaries running some of the airports in the region pass on costs to air operators indiscriminately. A perfect example is Costa Rica. This situation can increase costs up to 400%.
How is the confusion over the new Mexico City Airport affecting your plans?
Volaris never had the opportunity to establish an equitable and competitive treatment at Mexico City’s existing International Airport.
As a result, although we carry more passengers in total—and in the domestic market, we are 40% above our next competitor—we represent only 14% of the total seat capacity from the airport.
Our growth and development plans for the next five years were never fundamentally made with the metropolitan area in mind. Secondary airports like Toluca cannot be considered as an alternative due to their high costs, so we had to develop an aviation strategy outside of Mexico City. The current lack of clarity surrounding the development of airports in Mexico City is impacting airlines’ long-term investment in new aircraft. Our fleet planning for 2019–2026 was made without taking major changes to the airport situation in the capital city into account. We need an urgent decision by the government on how the airport situation will develop so we can plan our fleet accordingly.
Does the government understand the value of aviation?
I believe there are governments that understand it and others that don’t. Needless to say, the understanding of the role that low-cost airlines play in a country’s economic development is even more lacking.
Today, over half of the air traffic in Mexico is operated by low-cost airlines. At the same time, the country continues to generate an annual bus traffic of over three billion passengers. As disposable incomes rise and air travel continues to become more affordable, we see an enormous growth potential for an airline like Volaris, which has the third lowest cost structure of publicly-listed airlines in the world. We consider that 50% of the market growth in the last 10 years can be attributed to Volaris.
We need to do more to increase the awareness of the role aviation can play in economic development to ensure that governments or regulators do not take actions which could hamper our development.
Joint ventures have become popular. Is partnership the only way forward for airlines?
Not in all cases. If you are trying to expand your network reach, then collaboration can be a form of achieving this. In our case, I could only see this with an airline that has similar characteristics to ours. Otherwise, the model would cease to be successful in terms of growth and in responding to changes in market trends.
Mexico has seen the demise of 11 airline brands over the past few years as these airlines haven’t adapted to market realities. The low-cost airlines around the world are participating in the growth of aviation, but are largely staying away from forming partnerships, as this could harm the business model.
By offering modern aircraft, the highest level of safety, and a high degree of punctuality, low cost carriers can be successful
Can the low-cost model be combined with a great passenger experience?
I believe that a passenger’s experience is driven by expectations. Low-cost airlines will most likely never be able to meet the expectations of a consumer looking for a full-service product, since we fill a specific niche in the market.
However, by offering modern aircraft, the highest level of safety, a high degree of punctuality and clearly communicating our service offer to the customer, we can be successful. And Volaris is the proof of that.
I don’t think we can ever fully satisfy everyone, but by offering a clearly explained product at a price which is usually below what people expect, we surpass the needs of our clientele.
In a market like Mexico, for a family to be able to travel, they need to have access to fares like ours. In addition, it is essential to offer additional “a la carte” services.
Volaris was founded as Vuela Airlines in 2005 as Mexico’s first low-cost carrier. The airline began operations in 2006, with its inaugural scheduled flight taking place on March 13 from Toluca to Tijuana.
How important is technology to your future operations and is there a technology that particularly excites you?
Volaris is the perfect example of what is happening in the world with technology. We provide traditional air transport through huge advances in the digital world.
Everything about technology excites me. It is important to understand that digitalization cannot depend on a single technology. We were founded in the digital age and depend on hundreds of applications along with big data, which have made us very efficient and customer-facing, facilitating the travel experience.
In the field of operations and maintenance, the technology of new engines excites me a lot, although we still need to place emphasis on models which further curb the level of emissions.
What is the airline doing to further diversity?
Volaris has been diverse since our founding. We recognized from the beginning that we had a monumental challenge in terms of having the best person in each position.
I surround myself with smart people, and I help them work as a team. That’s my recipe for success and I don’t discriminate against people, supporting meritocracy in every way.
For me, the key to a successful executive is emotional intelligence coupled with having intelligent and well-trained people. If I act along those lines, the company as a whole acts like it. I insist all the time on treating people with enormous appreciation and affection, even within an exemplary productivity environment.
As we have grown, we have found great talent and have incorporated women across the organization. However, what I will never agree on is quota systems for people as the company must be a clear example of meritocracy.
Is the environment a major issue in Mexico and how can the industry do more to mitigate its environmental impact?
There is much to be done on the environmental issue. Obviously, we have to focus from the big to the small because there is so much to do.
Replacing the fleet with one that burns less fuel, produces lower carbon emissions, lower nitrogen emissions and a smaller noise footprint has been our strategy. By 2022, we will have more than 50% of the fleet replaced with Airbus Neo aircraft. This brings us closer to our goal of reducing our environmental footprint. And we are working on the requirements for ISO14000 certification and have been certified to the standard for many years.
There is no end of things to do. It is at times quite a challenge for us to get our suppliers to arrive at reasonable costs for recycling or to be willing to reuse, but we are motivating them. By the end of 2019, Volaris will only use recyclable or reusable on-board service items.
But the proper management of waste at airports remains a major issue. There are some that still do not separate garbage, for example, and in the management of chemicals there is still much to be done.
Every day of my life I work on something that can help the environment. I push very hard for transformation, but I don’t think anyone in the industry can say that today we are where we want to be.
This year we sponsored the filming of a documentary called ‘Serpiente Emplumada’ (Feathered Serpent), which seeks to educate people about the importance of conserving
the region’s rain forests, a source of water and oxygen for our communities. I dream of clean aviation, and I believe positively that at Volaris we are the leaders in this matter in Mexico.
By 2022, we will have more than 50% of the fleet replaced with Airbus Neo aircraft. This brings us closer to our goal of reducing our carbon footprint
What skills and attributes does a modern airline leader need?
Surround yourself with the best people in every sense, coordinate them, and make them work as a team. Spend long hours supporting the details and understand that we manage four different generations with their own styles. For each of these styles, we need to adapt and understand the methods to increase productivity.
We must put technology at the top of the strategy, negotiate all the costs so that they go down... and down... and even further down. And we must motivate and set the example
with many hours dedicated to thinking about the business. Our strategy is to be the lowest unit cost company in the world. I don’t know any other way, unfortunately.
If you could change one thing about the industry tomorrow, what would it be and why?
I am not complacent at all in my life and I feel that I can improve in many ways. In relation to the industry, the most profound change will occur when all its actors work in an environment of equality, where it is not only the airports and the manufacturers who enrich themselves, but all the components of the aviation value chain, especially the airlines that carry the greatest weight of the business.