PAC

Business Context and Reporting Period

Company: Grupo Aeroportuario del Pacifico, S.A.B. de C.V. (Pacific Airport Group or GAP)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: First Quarter 2007 (ended March 31, 2007)
Business Overview: GAP operates twelve airports in Mexico's Pacific region, including major hubs in Guadalajara and Tijuana, and tourist destinations such as Puerto Vallarta and Los Cabos. The company lists on the NYSE (PAC) and BMV (GAP).

Key Financial Metrics

Note: Figures are in constant Mexican pesos (Ps.) with purchasing power as of March 31, 2007. EBITDA is calculated under Mexican GAAP.

Material Changes vs. Prior Period

• Revenue Growth: Driven by an 11.8% increase in total revenues. Aeronautical services rose 9.5% (Ps. 58.1 million), primarily due to a 10.5% increase in passenger charges. Non-aeronautical services surged 22.8% (Ps. 28.0 million), largely due to leasing commercial space to time-share developers.
• Traffic Trends: Total passenger traffic increased 8.1% and Workload Units (WLU) increased 8.2%. Domestic traffic grew 20.5%, fueled by low-cost carriers (LCCs) adding routes and frequencies. Conversely, international traffic declined by 159.2 thousand passengers, attributed to route suspensions (e.g., Los Mochis-Los Angeles) and a "substitution effect" where passengers flew via Tijuana to the U.S. instead of direct flights from other airports.
• Cost Management: Cost of services increased only 2.4% in real terms, decreasing as a percentage of revenue by 8.4%. Employee costs decreased 2.7% due to lower severance payments. However, government concession fees rose 11.9% and technical assistance fees rose 14.7% due to higher revenue bases.
• Tax Impact: The effective tax rate dropped from 40.4% to 32.1%, contributing significantly to the 35.8% jump in net income. This was due to a favorable 4Q06 court ruling on asset tax treatment for several airports.

Outlook, Risks, and Management Commentary

• 2007 Outlook: Management anticipates domestic passenger traffic growth to exceed historical averages, driven by expanded LCC coverage, new routes, and increased frequencies. Success depends on LCCs securing aircraft purchases as planned.
• Leadership Change: CEO Carlos Del Rio tendered his resignation, effective July 1, 2007. Jorge Sales Martinez is named as the successor.
• Regulatory & Operational Risks:
  • Airline Suspension: The Mexican Ministry of Communications and Transportation suspended Lineas Aereas Azteca on March 27, 2007. Management expects minimal impact as routes are not dominated by this carrier.
  • Tax Refunds: While a favorable ruling was obtained for asset tax calculations, the local tax office in Aguascalientes rejected the refund request for 2002-2006 (Ps. 27.1 million). The company is appealing this decision, which may delay recovery.
  • Route Recovery: The Los Mochis-Los Angeles route, suspended in 1Q07, is expected to be re-initiated by Delta Airlines in 2Q07.
• Liquidity: The company maintains a healthy cash position of Ps. 1,364.7 million to fund Master Development Program goals.

Investor Verification Checklist

• Tax Refund Status: Verify the timeline and probability of recovering the Ps. 27.1 million tax refund from Aguascalientes and pending amounts from other airports.
• LCC Fleet Expansion: Monitor whether low-cost carriers (Volaris, Interjet, etc.) successfully acquire the aircraft necessary to sustain the projected 2007 traffic growth.
• International Traffic Recovery: Track the re-initiation of the Los Mochis-Los Angeles route and the impact of the "substitution effect" on international volumes at Guadalajara and other hubs.
• Regulatory Compliance: Confirm the final notification of compliance with maximum aeronautical rates for 2006 from the Mexican Ministry of Communications and Transportation.
• CEO Transition: Assess the strategic continuity and operational impact of the leadership change effective July 1, 2007.