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Grupo Aeroportuario del Pacifico Continues to Enjoy Robust Earnings Growth

By Asit Sharma - Oct 30, 2017 at 11:16AM

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The Mexican airport operator's passenger traffic slowed slightly versus recent quarters, but the company remained on track to meet its full-year financial goals.

Grupo Aeroportuario del Pacifico S.A.B. de C.V. (PAC 5.16%), which owns and operates 12 airports in Mexico as well as Sangster International Airport in Montego Bay, Jamaica, continued a string of impressive earnings results when it released its third-quarter 2017 report on Oct. 26. Let's look at the headline numbers for "GAP," as the company refers to itself in shorthand, and then dive into the finer print below.

Grupo Aeroportuario del Pacifico: The raw numbers


Q3 2017

Q3 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 18.148 pesos per U.S. dollar on Sept. 30, 2017: Q3 2017 revenue, operating income, and net income convert to $167.1 million, $84.0 million, and $62.9 million, respectively.

What happened with GAP this quarter?

Passengers walking through an airport boarding area; blurred photographic effect.

Image source: Getty Images.

  • While overall revenue nominally increased by 6.3%, this number is skewed by an accounting adjustment under International Financial Reporting Standards, or IFRS, related to the company's airport concessions renovations. After removing the non-cash adjustment, which affects both revenue and expense equally, total earned revenue increased 13%. 

  • Travel by domestic terminal passengers rose 9.6% to 6.1 million versus the prior year quarter. Roughly 80% of the 529 million additional passengers crossed through GAP's two biggest domestic airports: Guadalajara and Tijuana. 

  • International terminal traffic increased 11.1% to 4.1 million passengers. While GAP's largest airport, Guadalajara, reported an uncharacteristic decline of 1.4% in international passenger flow during the quarter, healthy traffic in Montego Bay, Tijuana, and the tourist destinations of Los Cabos and Puerto Vallarta more than compensated for the shortfall.

  • Tijuana in particular booked a steep increase in traffic of 31.9% due to the "Cross Border Xpress," (CBX) a pedestrian skybridge connecting Tijuana and San Diego, which functions as a convenient border crossing between the U.S. and Mexico. Since its opening in December 2015, CBX has provided the Tijuana airport with a significant passenger boost from international tourists transiting between the U.S. and Mexico.

  • Together, domestic and international traffic increased 10.2% in the third quarter, slightly lagging the 13% rise achieved in the first half of the year.
  • Aeronautical revenue, which is primarily made up of passenger fees, rose 13.4%, due to the traffic improvement and higher inflation-adjusted fees charged to passengers.

  • Non-aeronautical revenue, derived from advertising, VIP lounges, car parking charges, as well as third-party services (like duty-free shops, car rental, retail operations, etc.) improved by 12%. The company stated that the increase was mostly driven by growth in third-party services in its domestic airports.

  • Within non-aeronautical revenue, convenience store operations in some airports, which were outsourced in October 2016, have performed as expected. Revenue has decreased from this business line, but EBITDA jumped to 63% in the third quarter of 2017, against 32.2% in the third quarter of 2016.

  • Route expansion has played an important role in GAP's recent growth, and during the quarter, airlines added nine domestic and three international routes at the company's airports.

  • Operating income increased 15.8%, continuing a trend of healthy profitability. Total company EBITDA, excluding the IFRS concessions adjustment discussed above, decreased 10 basis points to 69.8% versus the prior year, remaining essentially flat. 

  • GAP is getting into the hotel business. The company announced that its board has approved the creation of a subsidiary which will construct and operate a hotel at the Guadalajara airport. The expected investment of 270 million pesos (roughly $15 million) is expected to attract an international hotel brand, and the organization projects that the hotel will begin operations in 2019.

Looking forward

Last quarter, Grupo Aeroportuario updated its full-year guidance, projecting increases as follows within a range of plus or minus one percentage point:

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

Through the first nine months of 2017, most of these targets are within the organization's reach. Traffic is up 11.9%, aeronautical revenue has improved by 19.6%, and non-aeronautical revenue has advanced by 18.9%. Total revenue has gained only 11.4% versus the first three quarters of 2016, but as discussed above, this is due to the concessions adjustment. EBITDA margin, excluding the concessions adjustment, sits at 70.7% for the year so far. As we head into the fourth quarter, if passenger traffic trends remain steady or show a bit of improvement, Grupo Aeroportuario should be able to reach its rather ambitious full-year goals.

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