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: Fourth Quarter ended December 31, 2009 (Full Year 2009 also summarized)
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. Figures are unaudited and prepared under Mexican Financial Reporting Standards (NIF).
Key Financial Metrics
Fourth Quarter 2009 Performance
- Revenues: Ps. 832.3 million (Increase of 0.7% or Ps. 6.0 million vs. 4Q08).
- Operating Income: Increased 12.9%.
- EBITDA: Ps. 538.8 million (Increase of 7.0% or Ps. 35.4 million vs. 4Q08).
- EBITDA Margin: 64.7% (Increase of 380 basis points vs. 60.9% in 4Q08).
- Net Income: Decreased 18.3% (Ps. 74.4 million lower than 4Q08).
- Cost of Services: Decreased 12.4% (Ps. 31.7 million); cost per workload unit dropped 11.7% to Ps. 42.4.
- Liquidity: Cash and cash equivalents totaled approximately Ps. 2,100.8 million as of December 31, 2009.
Full Year 2009 Performance
- Revenues: Ps. 3,266.2 million (Decrease of 6.4% vs. 2008).
- Net Income: Decreased 22.2% (Ps. 341.4 million lower than 2008).
- EBITDA Margin: 65.0% (Increase of 70 basis points vs. 64.3% in 2008).
- CAPEX: Total investments paid during 2009 were Ps. 542.2 million.
Material Changes vs. Prior Period
Revenue Drivers
- 4Q09: Aeronautical revenues rose 1.9% due to higher landing and parking fees, offsetting a 1.6% decline in passenger charges caused by a 2.3% drop in passenger traffic. Non-aeronautical revenues fell 3.5% due to lower advertising and time-share leasing, partially offset by gains in retail and rental car services.
- Full Year 2009: Aeronautical revenues dropped 8.1% due to airline suspensions (Aviacsa, Aerocalifornia, etc.) and the A/H1N1 health alert. Non-aeronautical revenues remained virtually flat (+0.1%).
Cost and Profitability
- Cost Reductions: Significant cost savings were achieved through corporate restructuring (employee costs down 20.7% in 4Q09) and energy efficiency measures (electricity expenses down). Total operating costs declined 9.1% in 4Q09 and 8.1% for the full year.
- Financing Impact: Net income declined primarily due to a reduction in comprehensive financing results. In 4Q08, the Mexican peso devalued 26% against the USD, creating significant exchange gains. In 4Q09, the peso appreciated 4.1%, eliminating these gains and reducing net income by Ps. 115.7 million compared to the prior year.
Operational Traffic
- Total terminal passengers decreased 2.3% in 4Q09 (117,000 fewer passengers) compared to 4Q08.
- Domestic traffic fell 1.3% and international traffic fell 4.3%, attributed to the global economic crisis and lingering effects of the A/H1N1 virus.
- Tijuana and Guadalajara airports saw increases in international traffic due to new routes by Volaris, while Puerto Vallarta and Los Cabos experienced declines.
- Recovery Expectations: Management expects the gradual recovery of operations suspended due to the A/H1N1 virus to continue throughout 2010.
- Tax Regulation: A new fiscal regulation effective January 1, 2010, increased the income tax rate (ISR) from 28% to 30%. While GAP does not consolidate for fiscal purposes, this will impact cash flow for provisional payments and net income.
- Debt Facility: On December 9, 2009, GAP secured an unsecured credit line of Ps. 651.4 million (Ps. 325.7 million each from Banamex and HSBC) for capital expenditures at Guadalajara, Puerto Vallarta, Guanajuato, and Hermosillo. The loan has a 7-year term with a variable rate of TIIE + 350 basis points.
- Hedging: An interest rate CAP was acquired to fix the interest rate at 10.50% for the outstanding loan amount starting December 31, 2012.
- Baggage Inspection: A trust was established with an initial payment of Ps. 352.4 million for a "turn-key" baggage inspection system project with Rapiscan Systems.
- Forward-Looking Statements: Future results depend on economic conditions, industry trends, and the successful recovery of suspended routes.
- Regulatory Compliance: The Ministry of Communications and Transportation reviews compliance with maximum aeronautical rates annually; the 2009 review had not yet been initiated at the time of filing.
- Verify the impact of the 2% increase in the Mexican income tax rate (ISR) on 2010 cash flows and net income.
- Monitor the recovery of international passenger traffic at Puerto Vallarta and Los Cabos, which were heavily impacted by the A/H1N1 virus and airline suspensions.
- Assess the effectiveness of the new Ps. 651.4 million debt facility and the associated interest rate hedging strategy.
- Review the status of the Ministry of Communications and Transportation's compliance review for 2009 regarding maximum aeronautical rates.
- Confirm the timeline for the full implementation of the baggage inspection system funded by the Ps. 352.4 million trust.