Volotea locks in its market position
Quotes from Volotea's press room
This summer Volotea achieved a growth of 136% against its 2020 traffic levels in Greece
(es) Volotea ofrece más de 421.000 asientos a Baleares este verano y conecta 40 aeropuertos con el archipelago
(it) Volotea registra in italia ottime performance: durante i mesi estivi la capacità del vettore a livello nazionale è cresciuta del 65% rispetto all’estate 2020
(fr) Volotea a transporté plus de 3,2 millions de passagers cet été, soit une croissance de 5% de son trafic par rapport a 2019
English, Spanish, Italian, French; regardless of which language one use to access Volotea’s press room website, it’ll show incredible numbers from the 2021 Summer season. In most instances, passenger numbers are higher than 2019 figures, well ahead of other airline's recovery. A stellar fleet transition program, new bases and new routes - all during one of the most difficult years ever for the industry, and without a benevolent government granting it billions in state-aid.
The Barcelona-based carrier has shown that airlines can be sustainably managed and that the common thinking airlines are somehow incapable of operating as real businesses without government subsidies is simply untrue.
The question raised is: What’s different at Volotea?
First, it is important to recognise the airline’s position in 2019, before the crisis started. Volotea’s balance sheet as of 31 September, 2019. indicates a cash position of EUR 77 million, while its short- and long-term debt was at EUR 17 million.
Volotea’s network strategy focused on medium-sized cities. Its bases - in four different countries - were Asturias and Bilbao (Spain), Bordeaux, Marseille, Nantes, Strasbourg and Toulouse (France), Cagliari, Genoa, Palermo, Venice and Verona (Italy), and Athens in Greece. Since inception Volotea has avoided directly competing with the major network airlines and large low-cost carriers.
Volotea’s network cleverly focused on mid-sized centers, bypassing larger airlines. Bases in blue were opened during the pandemic.
The airline lost EUR 7.8 million on 441 million in revenues.in 2019, according to its CSR report of 2020. Despite the losses, it transitioned from a fleet of Boeing 717s to the more modern and efficient all-Airbus A319 fleet; the revenue growth over 2018 was 11%.
As COVID came along, Volotea was already in a good position. The management decided to double down on their success model.
As the airline indicated in its CSR report, “the operations halt of European airlines with more fragile business models over 2019 and the blocking of operations in the first quarter of 2020 will take [us] operators that maintain a more efficient and stable business model, close to the needs of the territories in which we operate, to reinforce its situation in the market during the subsequent phases of normalization of air operations, through the programming of more profitable services”.
By accelerating the fleet transition, Volotea retired the fourteen 717s it still operated two years earlier than planned. In parallel, Volotea exploited lower rates in the market, agreeing to lease 15 Airbus A320 and one A319 aircraft.
The rationale was simple; drive down unit costs, benefitting from cheaper aircraft.
While the number of aircraft grow by only two, the number of seats per aircraft grew from 125 in the Boeing 717 to 156 seats in the Airbus A319 and 180 seats in the A320.
This transition allows the airline to better serve the mid-sized cities it focusses on, while stimulating demand with its low fares and doing so profitably with lower unit costs.
Such a strategy was made possible by a loan of EUR 150 million, taken in the private market and secured by Spain’s Official Credit Institute.
The result was clear: over the Summer of 2020 and especially in this last Summer, Volotea could establish routes which seemed unlikely prior to the pandemic, including Nantes-Pisa and Catania-Olbia, all while keeping an eye on earnings and maintaining disciplined pricing. And by doing so Volotea locks in its market position for the future. A first mover advantage, while legacy carriers struggled to adjust, is critical for Volotea.
Volotea is a perfect example of how regional carriers can succeed by being nimble and agile. - Shakeel Adam, Aviado Partners Managing Director