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: Third Quarter ended September 30, 2009 (3Q09) and First Nine Months of 2009 (9M09)
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. Financial figures are unaudited and prepared under Mexican Financial Reporting Standards (NIF).
Key Financial Metrics
Third Quarter 2009 (vs. 3Q08)
- Revenues: Ps. 791.2 million (Decrease of 4.8% or Ps. 40.2 million).
- Operating Income: Increased 1.8%.
- EBITDA: Increased 3.3%.
- Net Income: Decreased 18.0% (Ps. 68.8 million lower than 3Q08).
- Operating Margin: Increased 260 basis points to 40.2%.
- EBITDA Margin: Increased 530 basis points to 66.9%.
- Cash and Equivalents: Ps. 2,187.5 million as of September 30, 2009.
- CAPEX (9M09): Ps. 447.9 million invested.
First Nine Months 2009 (vs. 9M08)
- Revenues: Ps. 2,433.9 million (Decrease of 8.7% or Ps. 230.5 million).
- Net Income: Decreased 23.5% (Ps. 266.9 million lower).
- Operating Margin: Decreased 380 basis points to 39.6%.
- EBITDA Margin: Decreased 30 basis points to 65.1%.
Material Changes vs. Prior Period
Revenue Decline Drivers:
- Aeronautical Services: Declined 5.8% in 3Q09 due to a 9.8% drop in passenger traffic. Passenger charges fell Ps. 42.4 million, partially offset by increases in landing and parking fees.
- Non-Aeronautical Services: Declined 1.3% in 3Q09. Car parking and F&B leasing revenues dropped 9.7%, while retail and duty-free revenues increased 7.4%.
- Traffic Impact: Total terminal traffic fell 9.8% in 3Q09. Domestic traffic dropped 7.6% and international traffic dropped 14.9%.
Cost Reductions:
- Cost of Services: Declined 22.4% in 3Q09 (Ps. 56.1 million), driven by lower employee costs (corporate restructuring), reduced electricity fees, and a significant decrease in provisions for doubtful accounts (Ps. 29.0 million reduction vs. prior year).
- Other Operating Costs: Decreased 72.3% in 3Q09, largely due to the absence of a Ps. 37.6 million provision for Avolar recorded in 3Q08 and the cancellation of CUTE equipment rental fees.
Outlook, Risks, and Management Commentary
Impact of A/H1N1 Virus
The decline in traffic was primarily attributed to the A/H1N1 influenza health alert in April and May 2009, which caused temporary flight cancellations and severe reductions in operations from the U.S. and Canada. Management notes that while traffic stabilized in the latter half of the quarter, the effects persisted. Total traffic fell 23.5% in May, improving to a 9% decline by September.
Airline Operations
Domestic traffic declines were exacerbated by the suspension of operations by several airlines (Aerocalifornia, Avolar, Alma, Aladia, and Aviacsa). However, new operations by Mexicana Link, Interjet, Aeromexico, and Volaris are expected to support recovery.
Guidance and Expectations
Management expects a gradual recovery of frequencies and routes cancelled during the health alert during the fourth quarter of 2009, particularly at airports near tourist destinations during the winter vacation period.
Regulatory and Operational Changes
Effective November 1, 2009, passengers purchasing tickets from certain airlines must pay passenger charges directly at the airport rather than having them included in the ticket price. The Ministry of Communications and Transportation is reviewing compliance with maximum rates for 2008.
Investor Verification Checklist
- Verify the extent of traffic recovery in Q4 2009, specifically regarding international routes previously cancelled due to the A/H1N1 alert.
- Monitor the impact of the November 1, 2009 change in passenger charge collection procedures on operational efficiency and passenger volume.
- Assess the sustainability of cost reductions, particularly the one-time benefits from lower doubtful account provisions and the elimination of CUTE equipment rental fees.
- Review the progress of the Ministry of Communications and Transportation's compliance review for 2008 regarding maximum aeronautical rates.
- Track the performance of new airline entrants (Volaris, Mexicana Link) in offsetting the loss of suspended carriers.