Shares of Grupo Aeroportuario del Pacifico (NYSE:PAC) fell more than 10% on Monday, outpacing the broader market sell-off, on fears that the COVID-19 coronavirus would eat into vacation travel demand and ruin the key spring season for the airport operator.
Grupo Aeroportuario del Pacifico operates 12 airports in Mexico and two in Jamaica, catering to vacation travelers heading to sunny destinations. Until recently, the stock has held up much better than have shares of its airline customers, in part because volumes remained healthy through February.
The company reported that total terminal passengers at its airports grew by 17% year over year in February.
But as evidence continues to mount that travel demand is cratering as the COVID-19 coronavirus outbreak spreads, the impact seems sure to ripple to airport operators. Last week, United Airlines Holdings cut capacity by at least 10% across its network, and JetBlue Airways is also revising capacity downward. With airline demand falling, it seems unlikely 2020 will have a strong spring break season, a traditionally busy time for Grupo Aeroportuario's airports.
The situation with airlines is definitely material but does not appear to be permanent. That argument can be made for businesses that support airlines as well. Grupo Aeroportuario seems likely to report depressed traffic volumes during the months to come and could disappoint for the current quarter and beyond.
But this too shall pass, even if it does take time to get the outbreak under control. For those able to ignore the short-term noise and ride out this storm, the case for buying Grupo Aeroportuario remains as viable today as it did prior to the coronavirus-related sell-off.