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Grupo Aeroportuario del Pacifico's Growth Trends Remain Intact

By Asit Sharma – Mar 7, 2016 at 3:30PM

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The Mexican airport operator's fourth-quarter 2015 earnings reveal that it continues to enjoy rising passenger flows tied to the growing Mexican economy.

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Grupo Aeroportuario del Pacifico S.A.B. de C.V. (PAC 0.06%) closed out 2015 with continued revenue growth boosted by its April acquisition of airport operator Desarrollo de Concesiones Aeroportuarias, S.L. (DCA). Grupo Aeroportuario -- or GAP, as it refers to itself -- acquired 75% of Sangster International Airport, located in Montego Bay, Jamaica, through the deal. The company also attributed its results to vigorous activity in the 12 airports it operates throughout Mexico.

Grupo Aeroportuario del Pacifico: The raw numbers


Q4 2015 Actual

Q4 2014 Actual

Growth (YOY)





Operating Income




Net Income Attributable to Controlling Interest




Data source: Company SEC filing dated Feb. 25, 2016. All figures in thousands of Mexican pesos. At an exchange rate of 17.21 pesos per U.S. dollar at Dec. 31, 2015, Q4 2015 revenue, operating income, and net income convert to $119.9 million, $59.7 million, and $57.1 million, respectively.

What happened with GAP this quarter?

  • The addition of Montego Bay airport's financials again provided the foundation of GAP's revenue gains, with a total revenue contribution of 314.6 million Mexican pesos. This is the second complete quarter in which Montego Bay's results have been incorporated into GAP's profit and loss statement. Overall passenger traffic at Montego Bay, however, rose only 1.9% in Q4 2015.
  • Passenger traffic at GAP's Mexican airports continued to flourish. Domestic passenger traffic in the company's 12 operated airports rose 18.3% during the quarter. The number of international terminal travelers increased by 26.8%.
  • GAP's second-busiest location, Tijuana International Airport, enjoyed particularly strong growth trends. The airport's total traffic increase of 26.7% was attributed to a strong U.S. dollar, as Mexican travelers visiting the U.S. found it cheaper to fly into this border city than to take an international flight directly into the U.S.
  • The Tijuana airport is slated to rise in strategic importance to GAP in the coming years. December marked the opening of the long awaited Cross Border Xpress, or CBX, a covered pedestrian walkway which functions as a border crossing, connecting San Diego with the Tijuana airport. In the first 50 days of operation, GAP reported that over 130,000 passengers used this bridge.
  • The company received some relief in a ruling from Mexico's Supreme Court in February, in regards to a years-long legal battle with Grupo Mexico, which acquired 20% of the company's B Series capital stock in a hostile takeover bid in 2011. The takeover attempt has been stuck in the courts ever since GAP challenged the legal basis for the bid, since its bylaws prohibit any B shareholder from owning more than 10% of its outstanding stock. The Mexican Supreme Court ruled in favor of GAP, and will require to Grupo Mexico to sell its excess stock on the open market.

What management had to say
GAP CEO Fernando Bosque focused on the airport operator's rapid traffic expansion in prepared remarks to analysts. Bosque tied the positive trends to the dynamic Mexican economy, noting that "there is very high industrial and manufacturing activity in this area fueled by investments from major global and domestic companies. As such this has certainly increased demand for flights to business and leisure destinations." Bosque also pointed out that the company's traffic trends were outpacing the expansion in the Mexican economy in general.

Looking forward 
Grupo Aeroportuario has maintained passenger momentum into the first few weeks of 2016. On March 4, GAP released its February passenger traffic numbers, which showed an increase of 19.2% versus the prior year, an acceleration over January's 16.4% improvement. Traffic gains were led by the Tijuana Airport, which improved its statistics by 40.3% over February 2015.

While revenue growth will be supported by the increased passenger activity, management did note during the company's earnings call that the profit margins recorded by Montego Bay would trail off a bit this year as the effects of the acquisition become normalized.

Management projected that the airport's EBITDA (earnings before interest, taxes, depreciation, and amortization) margin would decline from the high-60% range to stabilize at around 50% on an annual basis. The company indicated that this would affect total EBITDA margin by 2 to 4 percentage points.

Shareholders can expect that this will translate into a similar impact on total operating margin. But a bit of deterioration in this area won't hurt GAP very much at all: The company booked a lofty operating income margin of 49.7% in the current quarter.

Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends Grupo Aeroportuario del Pacifico S.A.B (ADR). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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