Business Context and Reporting Period
This Form 6-K filing by Pacific Airport Group (GAP) is dated October 11, 2019. The report announces the formal initiation of operations at Norman Manley International Airport (KIN) in Kingston, Jamaica, following a transition period mandated by a concession contract signed in October 2018. GAP operates 12 airports in Mexico's Pacific region and holds a majority stake in Montego Bay, Jamaica.
Key Financial Metrics and Transaction Details
- Transaction Costs: GAP paid US$ 7.1 million for the assignment of the KIN contract.
- Capital Commitments: Mandatory works totaling approximately US$ 60.0 million must be executed within the first 36 months of operations.
- Concession Fee: GAP is required to pay authorities a fee of 62% over total aeronautical and commercial revenues.
- Historical Traffic (KIN): 1.7 million passengers in 2018; 1.4 million passengers in January-September 2019 (an 8.4% increase year-over-year).
- Full Year 2019 CAPEX Guidance: Ps. 1,900 million.
Material Changes and Revised Guidance
Due to the consolidation of KIN in the fourth quarter of 2019, GAP has issued revised full-year 2019 guidance. The filing notes a decline in the revised aeronautical revenue guidance compared to previous estimates, attributed to lower actual inflation to date versus original projections.
| Metric | Revised Full Year 2019 Guidance |
|---|---|
| Traffic Growth | 8% +/- 1% |
| Aeronautical Revenue Growth | 12% +/- 1% |
| Non-Aeronautical Revenue Growth | 20% +/- 1% |
| Total Revenue Growth | 14% +/- 1% |
| EBITDA Growth | 12% +/- 1% |
| EBITDA Margin | 68% +/- 1% |
Outlook, Risks, and Management Commentary
Management expects new tariffs scheduled for January 1, 2020, to improve operating results and aid in the recovery of committed investments with the Government of Jamaica. The current financial structure of KIN is based on existing service and commercial contracts, which may be renegotiated or bid out in the future to improve performance.
Risks and Contingencies:
- Forward-looking statements are subject to risks including airline activity, economic conditions, and government regulations.
- Actual results may differ materially from estimates due to factors outside the company's control.
- The filing includes a standard whistleblower program notice under the Sarbanes-Oxley Act.
Investor Verification Checklist
- Verify the impact of the 62% concession fee on net margins for the Kingston airport.
- Confirm the timeline and budget adherence for the US$ 60.0 million in mandatory capital works.
- Monitor the implementation of new tariffs effective January 1, 2020, and their effect on revenue recovery.
- Assess the potential for renegotiation of current service and commercial contracts at KIN.
- Review the 2018 Annual Report for a detailed list of risk factors affecting traffic and revenue.