VL VLRS Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (Volaris) Loading... : Investor Sentiment and Bull/Bear Views

Volaris is a cheap Mexican low-cost carrier with multiple ways to win. It trades at about 3.5x standalone next-12-month earnings, and he sees standalone value around $10/share versus a $20-$25/share post-merger value on $2.50 pro-forma EPS at 8-10x, with downside around $7-$8 if the deal fails. The thesis rests on Mexico's structural air-travel growth, market consolidation, Viva merger synergies, Indigo Partners' aircraft procurement scale, Viva's bus-network customer funnel, and a Pratt & Whitney engine-grounding recovery that should lift the fleet from ~110 to ~150 planes by 2027.

Author argues Volaris is an ultra-low-cost airline whose real competition is Mexican long-distance buses, with over 40% of routes facing no airline competition, ancillary fees over half of revenue, and Indigo Partners backing. The investment mechanism is that negative GAAP EPS from Pratt & Whitney engine groundings masks strong operating cash flow, with P/OCF of 1.36 below historical norms and peer comparables. The catalyst is that engine groundings are temporary and the market has already begun to look through the losses, though no concrete time horizon is given. Main stated risk is that the model only works if planes stay full, turnarounds are fast, and costs are squeezed relentlessly, with the engine grounding having wrecked utilization and margins.