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Why Shares of Corporacion America Airports Are Soaring Today

By Lou Whiteman – Dec 1, 2020 at 12:40PM

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The airport operator signs an extension with Argentina.

What happened

Shares of Corporacion America Airports (CAAP 3.63%) gained more than 50% on Tuesday morning after the airport operator announced a 10-year extension to operate airports in Argentina. Airports in Argentina represent a significant portion of CAAP's overall portfolio, and investors are breathing a sigh of relief in sending the shares higher.

So what

Airports, like the airlines that use them, have been hit hard by the COVID-19 pandemic. With travel demand down, so too is airport revenue, leading airport owners and operators to rethink spending plans.

CAAP shares lost about 75% of their value in March as the pandemic intensified, and were still down about 50% for the year heading into Tuesday trading on uncertainty about what the future would look like for the airport operator.

Exterior of a crowded airport.

Image source: Getty Images.

The deal with Argentina removes a lot of the uncertainty. With the extension CAAP will now operate airports in the country through 2038. Argentina represents a substantial portion of CAAP's overall portfolio, accounting for 35 of its 52 airports and 49.7% of total 2019 passengers.

The deal also would eventually restart capital improvement projects in the country totaling about $500 million in total spending.

CAAP CEO Martin Eurnekian in a statement called the deal "a significant milestone for our company."

Now what

There's only so much airlines and airport operators can do during a pandemic. Argentina's decision earlier in the year to ban international travel might have been the right one from a public health perspective, but it makes life very difficult for a travel business.

The best CAAP can do is hunker down until the crisis is over and then look to grow after the pandemic. The agreement with Argentina is a reminder the company does have a future after COVID-19 is behind us, and that's enough to have investors excited about the stock on Tuesday.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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