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Grupo Aeroportuario del Pacifico's Biggest Domestic Airports Pace Performance

By Asit Sharma – Updated Jul 31, 2017 at 3:49PM

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GAP, which runs 12 domestic airports in Mexico as well as an international airport in the Caribbean, recorded another quarter of double-digit revenue and earnings growth.

Mexican airport operator Grupo Aeroportuario del Pacifico S.A.B. de C.V. (PAC 0.02%), also known as "GAP," continues to enjoy serene skies at cruising altitude, thanks to robust terminal traffic and a plethora of new route openings. Below, we'll review earnings for the company's second quarter of 2017, released on July 26.

Grupo Aeroportuario del Pacifico: The raw numbers


Q2 2017

Q2 2016

Year-Over-Year Growth





Operating income




Net income attributable to controlling interest




Data source: Grupo Aeroportuario del Pacifico. All figures in thousands of Mexican pesos. At an exchange rate of 18.076 pesos per U.S. dollar on June 30, 2017: Q2 2017 revenue, operating income, and net income convert to $171.2 million, $88.9 million, and $55.2 million, respectively.

What happened with GAP this quarter?

  • Domestic terminal passengers increased by 14.2% to 5.7 million. International terminal passengers rose in tandem by 14.4%, to a total of 4.4 million.
  • The company's three biggest Mexican airports, at Guadalajara, Tijuana, and Los Cabos, led terminal traffic expansion during the quarter; they accounted for 73.5% of the domestic traffic increase and 67.9% of the international traffic increase.
  • GAP's covered pedestrian skybridge which connects Tijuana and San Diego -- the "Cross Border Xpress," or CBX -- saw a 48.9% increase in passengers versus the prior-year quarter, to 454,100. CBX functions as a U.S.-Mexico border crossing, and has become quite popular among international tourists transiting between the two countries since it opened in December 2015.
  • Aeronautical revenue, comprised principally of terminal passenger fees, advanced 23.5%. Non-aeronautical revenue, which includes car-parking charges, advertising, VIP lounges, convenience stores, and a host of third-party services (car rental, duty-free shops, retail operations, and so on), rose 18.4%.
  • EBITDA (earnings before interest, taxes, depreciation, and amortization) margin, excluding an adjustment related to airport concessions revenue required by International Financial Reporting Standards, rose 2.3 percentage points to 71.4%.
  • During the quarter, on June 19, the company was notified by the Jamaican government that it had received approval, based on its submission of interest in April 2017, to participate in the bidding process for the operation of Norman Manley International Airport in Kingston, Jamaica. The winning bidder among seven airport operators will be announced in the first quarter of 2018. Prevailing in the bidding process would give GAP its second international airport, after Sangster International Airport in Montego Bay, Jamaica, which the company began operating in 2015.
Empty airport ticket counters in greyscale

Image source: Getty Images.

What management had to say

During the company's earnings conference call with analysts, GAP CEO Fernando Bosque discussed one of the biggest factors behind the company's double-digit growth -- avid airline route expansion at its airports by both domestic and international carriers:

There was also significant network expansion from the airlines in our network this quarter. Interjet and Volaris, for example, were among the most active in new domestic route launchings internationally. Several new routes were launched by Swift Air out of Montego Bay, and Southwest and Alaska ran new routes out of Los Cabos.

Bosque outlined the importance of GAP's largest airports, describing the new airline capacity in terms of seats added in these markets:

During the quarter, for example, Volaris added 151,000 new seats for the Guadalajara market. Interjet opening six new routes, adding nearly 100,000 seats. And VivaAerobus added 75,000 new seats. ... Moving on to Tijuana, at this airport Volaris added 162,000 new passengers, followed by Aeromexico with 31,000, Interjet with 27,000, and VivaAerobus with 25,000.

The examples cited by Bosque underscore GAP's positioning in some of Mexico's most important cities, which positions it well for revenue growth as the Mexican economy continues to expand.

Looking forward

Grupo Aeroportuario released full-year guidance a week before its earnings release. With a range of plus or minus one percent, the company expects the following increases for 2017:

  • Traffic: 11%
  • Aeronautical revenue: 17%
  • Non-aeronautical revenue: 17%
  • Total revenue: 17%
  • EBITDA margin: 69%

So far, in the first half of 2017, GAP is exceeding all its targets. Traffic is up nearly 13%, and both aeronautical and non-aeronautical have increased more than 22% in the first six months of the year. The company has achieved an EBITDA margin of 71.1% in the first two quarters of 2017. GAP heads into the back half of the year with momentum, and a reasonably good chance of hitting its full-year 2017 benchmarks.

Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends Grupo Aeroportuario del Pacifico. The Motley Fool has a disclosure policy.

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