Mexican and international airport operator Grupo Aeroportuario del Pacifico S.A.B. de C.V. (NYSE:PAC), or "GAP" as it refers to itself, managed double-digit increases in both terminal traffic and revenue during the final quarter of 2017, despite a recent easing in traffic trends. Let's review the details of the quarter after a glance at the headline numbers from the company's earnings report, released on Feb. 22. 

Grupo Aeroportuario del Pacifico: The raw numbers


Q4 2017

Q4 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 18.93 pesos per U.S. dollar on Dec. 31, 2017: Q4 2017 revenue, operating income, and net income convert to $162.1 million, $79.9 million, and $50.9 million, respectively.

What happened with GAP this quarter?

Modern airport seating area with warm architectural accents.

Image source: Getty Images.

  • Domestic terminal traffic in Grupo Aeroportuario's 12 Mexican airports and its single foreign airport -- Sangster International Airport in Montego Bay, Jamaica -- increased 10.6%, to 6.1 million passengers. Growth was propelled by double-digit increases in three of the company's largest airports: Guadalajara, Los Cabos, and Puerto Vallarta.

  • International terminal traffic rose 8.9% to 4.4 million passengers. GAP's largest airport, Guadalajara, reported its second consecutive quarter of a slight decline, dropping 2.5%. However, Tijuana continued to see a boom in traffic from the "Cross Border Xpress" (CBX), the pedestrian skybridge connecting San Diego and Tijuana, which also functions as a border crossing between the U.S. and Mexico. Tijuana airport's international traffic expanded nearly 22% during the quarter from the CBX. 

  • Total traffic rose 9.9%, off the pace of mid-teens expansion enjoyed during mid-2017, but falling within management expectations.

  • Aeronautical revenue, derived mostly of passenger fees, rose 12.4% in concert with the traffic boost.

  • Non-aeronautical revenue expanded 7.2%. The company reported that among domestic airports, a 6.8% improvement was split evenly between company-operated revenue streams such as VIP lounges, car parking charges, and advertising, and third-party services including duty-free shops, car rental, and retail operations. Montego Bay's non-aeronautical revenue rose 9.1%, which management attributed to growth in duty-free, retail, and food and beverage operations.

  • GAP chalked up a plethora of new routes at its airports in the fourth quarter, with positive implications for future terminal traffic and revenue. The organization added nine new domestic routes and 11 international routes, divided between six domestic and international air carriers.

  • Excluding an accounting adjustment under international financial reporting standards, or IFRS, related to the company's airport concessions renovations, operating margin decreased by 240 basis points from the prior-year quarter, to 53.9%. The margin decline was due to higher technical fees and maintenance costs at GAP's Mexican airports, and higher concessions taxes at Montego Bay.

  • Similarly, EBITDA margin decreased from 69.7% in the fourth quarter of 2016, to 67.6% last quarter, after the exclusion of the IFRS accounting adjustment. 

  • The company undertook a $40 million loan at the end of the quarter to finance capital improvements at Montego Bay airport.

  • On Feb. 22, GAP announced separately the retirement of CEO Ferando Bosque. He will be succeeded in April by Raul Revuelta, who is currently the CEO of CBX and has previously served as CFO of GAP.

Looking forward

In January, Grupo Aeroportuario issued full-year guidance for 2018 for the following items, each within a range of plus or minus 1%:  

  • Traffic: 8%.
  • Aeronautical revenue: 12%.
  • Non-aeronautical revenue: 16%.
  • Total revenue: 13%.
  • EBITDA margin: 69%.

The company made no changes to the targets in its earnings report last week. Note, however, that the terminal passenger goal is slightly reduced from the fervid pace of last year. Full-year 2017 traffic increased by 11.4%, versus an outlook of 8% for 2018. However, projected increases in non-aeronautical services should push this year's top-line growth rate beyond 2017's 11.3% mark by roughly two percentage points.

For those already looking ahead to next quarter, the current year is off to a good start. GAP's monthly traffic report reveals that January terminal traffic rose 9.1% over the prior year, in line with the full-year expectation of 8% -- give or take one percentage point.

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