Grupo Aeroportuario Del Pacífico (GAP)

Khair Mirza


September 26, 2019

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Traffic Performance

Grupo Aeroportuario del Pacífico (“GAP”) is the largest private Mexican airport operator with a portfolio of 12 airports in Mexico, including Guadalajara (“GDL”) and Tijuana (“TIJ”), and one airport in Jamaica. The company is listed on the Mexican Stock Exchange and also on the New York Stock Exchange. It is 15% owned by Aeropuertos Mexicanos del Pacífico, a consortium made up of Controladora Mexicana de Aeropuertos (“CMA”) (66.7%) and AENA (33.3%) with the rest being a public float. System-wide, GAP served 45 million passengers in 2018. GAP’s traffic numbers for 1H2019 grew a respectable 7.5% relative to 1H2018 to 24.1 million passengers of which 42% is made up of international passengers, which is marginally higher than management’s forecast of 7%, mainly driven by healthy Y-o-Y growth in TIJ (+13.8%) and Guanajuato (“BJX”, 21.6%).  Although enviable, this strong single digit growth is coming off four straight years of double-digit progress, peaking in 2016 when traffic grew by 16.4%. The slow down can be attributed to the Mexican economy, which posted a 0% Y-o-Y GDP growth and has led the International Monetary Fund (“IMF”) to cut its full year forecast from 1.6% to 0.9% GDL, GAP’s prized asset, has felt the effects of the slowdown as it only grew 3.5% compared to an average of 13.2% Y-o-Y over the last five years. The reported 7.2 million passengers represent 29.7% of GAP’s total traffic for 1H2019 and remains the operator’s busiest airport, far ahead of TIJ, which served 4.3 million passengers. As Guadalajara is Mexico’s second largest municipality behind Mexico City, the general slowdown of the country’s economy was always expected to have an effect. The cancellation of the proposed New Mexico City Airport is a great opportunity for GAP and especially GDL. Overcapacity from the current Mexico City International Airport (“MEX”) is expected to spill-over to other airports and GAP is poised to take advantage as it currently operates five out of the 10 busiest airports in the country. GDL is well positioned to capitalize on opportunities in connecting traffic and cargo. Meanwhile, in Jamaica, GAP operated Montego Bay (“MBJ”) remains the busiest airport in the country, and one of the busiest airports in the Caribbean. It served 2.5 million passengers in 1H2019, a healthy 8.7% growth compared to 1H2018 and its best performance over the last five years. GAP’s presence in Jamaica will also be strengthened when it takes over the operations of Kingston (“KIN”) in 4Q2019 after winning the 25-year concession to operate the airport in late 2018.

Corporate Developments

GAP continues to be on the lookout for overseas expansion as it relies on a framework of key drivers to invest in, including target country, suitable regulatory framework, passenger traffic, investment required and a satisfactory risk/reward ratio. Currently eyeing opportunities in the region and is potentially targeting La Aurora Airport in Guatemala City as it’s next investment. Details remain vague as the tender process and RFP are yet to be public, but it is being reported that the investment required will be in the region of USD 117 million for the “modernization” of the airport. It’s operations at KIN in Jamaica are expected to begin in October 2019, after being awarded the 25-year concession by the Jamaican government a year earlier.  GAP beat out two other consortiums which comprised of Jamaican and other foreign investors. The operator will pay an upfront fee of USD 7.1 million, concession fee of 62% and spend USD 60 million over the first 36 months in CAPEX, including a 300-meter runway extension. In conclusion, despite a slowdown in growth in Mexico, GAP has ambitions to diversify its portfolio to include more international assets as in Jamaica and its potential bid in Guatemala City. Whilst international expansion will help to mitigate growth risks related to Mexico, the cancellation of the New Mexico City airport will provide opportunities for GAP. Management has also not provided any new guidance in terms of traffic and maintains its 7% growth target for FY2019.