Mexican low-cost airline Controladora Vuela Compania de Aviacion SAB de CV (VLRS -0.39%), commonly known as Volaris, reported an unexpected first-quarter profit. Investors reacted by initially sending Volaris shares up by as much as 19% before the stock settled at up 4% as of 2 p.m. ET.

Unexpected strength

Volaris connects 44 cities in Mexico and 29 in the U.S., Central America, and South America via more than 450 daily flights. Like most of the airline industry, the company was hit hard by the pandemic, but it has been slowly making its way back thanks to strong leisure demand.

The airline earned $0.03 per share in the first quarter on revenue of $768 million, significantly ahead of Wall Street's forecast for a $0.14 per share loss on sales of $694.6 million. The company enjoyed strong pricing power, growing revenue by 5% year over year despite a 13% decrease in capacity.

Operating expenses also fell by 13%, helping Volaris to post a 4.3% net income margin.

"We are pleased with our business performance as our Volaris team delivered strong first quarter 2024 results," CEO Enrique Beltranena said in a statement. "Over the last six months, our primary focus has been directing operations to enhance our customer service and continuing our emphasis on obsessive cost control."

Is Volaris a buy after its strong first-quarter result?

The first three months of the year are typically the slow season for a leisure-focused airline. This was Volaris' first first-quarter profit since before the pandemic, and the airline sees continued strong demand up ahead.

Investors should be aware that there are a lot of risks here. A slowdown in the U.S. economy will likely hit international tourism particularly hard, and Volaris has currency risk to go along with all the typical risks associated with the airline business. The company also has a lot of debt, though it did reduce its leverage to 3.1 times earnings before interest, taxes, depreciation, and amortization (EBITDA), down from 3.8 times EBITDA a year ago.

But for now, Volaris' business model is working, and the stock still trades below its pre-pandemic levels. Should the economy continue to hold up, Volaris shares can gain altitude from here.