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.
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.
