Pacific Airport Group (GAP) - Q3 2020 Financial Summary
Business Context and Reporting Period
This Form 6-K filing covers the consolidated results for the third quarter ended September 30, 2020 (3Q20), and the first nine months of 2020 (9M20). Pacific Airport Group (GAP) operates 14 airports across Mexico and Jamaica. The reporting period was significantly impacted by the COVID-19 pandemic, resulting in a sharp decline in passenger traffic. The company implemented cost-control measures, including closing non-essential operating areas and offering rent deferrals to commercial clients.
Key Financial Metrics (3Q20 vs. 3Q19)
| Metric | 3Q19 (Ps. Millions) | 3Q20 (Ps. Millions) | Change |
|---|---|---|---|
| Total Revenues | 4,315.4 | 3,068.1 | (28.9%) |
| EBITDA | 2,442.0 | 1,093.2 | (55.2%) |
| Net Income | 1,362.7 | 352.4 | (74.1%) |
| Operating Cash Flow | 2,388.6 | 163.8 | (93.1%) |
| Cash & Equivalents (End of Period) | 9,118.6 | 15,220.4 | +66.9% |
9M20 Highlights: Total revenues decreased 18.3% to Ps. 9.5 billion. EBITDA declined 45.0% to Ps. 4.1 billion. Net income fell 60.8% to Ps. 1.6 billion. Operating cash flow for the nine months decreased 56.5% to Ps. 2.8 billion.
Material Changes and Operational Impact
- Passenger Traffic: Total terminal passengers dropped 51.8% in 3Q20 to 5.7 million. International traffic fell 61.5%, while domestic traffic declined 45.7%. Montego Bay saw an 84.2% drop in total passengers.
- Revenue Composition: Aeronautical services revenue fell 40.5%, and non-aeronautical revenue fell 53.3%. These declines were partially offset by a 37.6% increase in "Improvements to concession assets" (IFRIC 12), a non-cash accounting item related to infrastructure commitments.
- Cost Management: Cost of services decreased 3.0% due to operational closures. However, total operating costs rose 7.3% primarily due to the non-cash IFRIC 12 costs and the consolidation of the Kingston airport.
- Liquidity: Despite lower cash generation, the company strengthened its cash position to Ps. 15.2 billion by drawing down on a US$30 million bank loan and issuing long-term bonds.
Outlook, Risks, and Management Commentary
- Pandemic Uncertainty: Management states it cannot estimate the full short, medium, or long-term impact of the pandemic. Recovery depends on containment efforts in Mexico, Jamaica, and the U.S.
- Tariff Review: GAP has requested an extraordinary review of the Master Development Program tariffs from the Mexican Aviation Authority and a review for Jamaican airports. A response is expected by the end of 2020.
- Asset Health: The company concluded that a significant deterioration of assets is not expected and does not foresee business interruption or airport closures.
- Credit Risk: A provision of Ps. 113.1 million was recognized for expected credit losses from airlines and commercial clients.
- Health Protocols: All 14 airports achieved Airport Health Accreditation from the Airports Council International (ACI).
Investor Verification Checklist
- Verify the sustainability of the Ps. 15.2 billion cash position given the 93% drop in quarterly operating cash flow.
- Monitor the outcome of the requested tariff reviews in Mexico and Jamaica, as these are critical for future revenue recovery.
- Assess the impact of the US$30 million new bank loan and existing debt levels on future interest expenses.
- Track the recovery rate of international passenger traffic, which declined more severely (61.5%) than domestic traffic.
- Review the non-cash nature of IFRIC 12 revenues to ensure accurate comparison of operating margins with peers.