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 (Foreign Private Issuer)
Reporting Period: Fourth Quarter and Full Year ended December 31, 2008
Filing Date: February 26, 2009
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
Fourth Quarter 2008 vs. Fourth Quarter 2007
- Revenues: Ps. 826.4 million (Decrease of 5.2% or Ps. 45.4 million).
- Operating Income: Decreased 16.3%.
- EBITDA: Decreased 7.1%.
- Net Income: Decreased 25.8% (Ps. 141.2 million lower than prior year).
- Operating Margin: 35.4% (Decreased 470 basis points from 40.1%).
- EBITDA Margin: Decreased 124 basis points.
- Cash and Equivalents: Ps. 1,781.2 million as of December 31, 2008.
- CAPEX (Paid): Ps. 541.5 million for the full year 2008.
Full Year 2008 vs. Full Year 2007
- Revenues: Ps. 3,490.8 million (Increase of 0.4% or Ps. 13.5 million).
- Operating Income: Decreased due to higher operating expenses relative to revenue growth.
- Net Income: Increased 9.8% (Ps. 138.0 million higher than prior year).
- Operating Margin: 41.5% (Decreased 410 basis points from 45.6%).
- EBITDA Margin: 64.3% (Decreased 300 basis points from 67.3%).
- Effective Tax Rate: 7.8% (Significantly lower than 16.5% in 2007 due to accounting changes).
Material Changes and Drivers
Revenue and Traffic
- Passenger Traffic: Total terminal passengers declined 15.7% in 4Q08. Domestic traffic fell 18.2% and international traffic fell 10.6%.
- Aeronautical Revenues: Declined 8.8% in 4Q08 due to lower workload units (WLU) and reduced airline operations (landing fees, parking fees, walkway usage).
- Non-Aeronautical Revenues: Increased 9.9% in 4Q08, driven by advertising, time-share leasing, and vehicle parking. Revenue per passenger rose from Ps. 28.6 to Ps. 37.2.
- Airline Impact: Significant traffic reductions were attributed to the suspension of operations by carriers Aerocalifornia, Avolar, and Alma, and reduced frequencies by Aviacsa, Aeromexico, and Mexicana.
Costs and Expenses
- Cost of Services: Decreased 0.4% in 4Q08 but increased as a percentage of revenue (150 basis points) due to revenue decline. Per WLU cost increased from Ps. 40.5 to Ps. 48.1.
- Employee Costs: Decreased 4.4% in 4Q08 due to prior year restructuring, partially offset by a December 2008 reorganization (Ps. 15.0 million cost).
- Maintenance and Services: Maintenance costs rose 25.2% and service costs rose 26.7% in 4Q08 due to infrastructure expansions (e.g., CUTE system, terminal expansions) and higher electricity tariffs.
- Reserves: Full year 2008 operating costs were heavily impacted by a Ps. 45.3 million increase in reserves for doubtful accounts related to airline bankruptcies.
Accounting Changes
- NIF B-10 (Inflation): Beginning in 2008, the company no longer recognizes inflation effects in financial statements as cumulative inflation fell below the 26% threshold. This resulted in a Ps. 181.3 million benefit to deferred income taxes in 4Q08.
- IFRIC-12 (Concessions): Adopted in 2008, requiring reclassification of concession assets, though it had no effect on full-year results.
Outlook, Risks, and Contingencies
Management Commentary and Recent Events
- Share Repurchase: The company completed repurchases of 1,720,000 shares (Ps. 44.2 million) in 2008. Total repurchased shares now stand at 2,080,000.
- Debt Financing: On January 30, 2009, GAP disbursed the third installment of a Banamex credit line totaling Ps. 370.0 million across four airports (Guanajuato, Hermosillo, Puerto Vallarta, Los Cabos) at an 8.52% interest rate.
- Airline Bankruptcy: Aerolíneas Mesoamericanas (ALMA) suspended operations in November 2008. While other airlines are attempting to fill the void, the situation initially presented negative implications.
Risks and Contingencies
- Tax Dispute (Aguascalientes): The Mexican tax authority (SAT) notified GAP of an incorrect amortization rate for the Aguascalientes Airport concession, proposing a penalty exceeding Ps. 22.0 million. GAP intends to appeal in court but must post a bond to initiate proceedings. A negative ruling could adversely affect financial results.
- Forward-Looking Statements: Management notes that future results depend on economic conditions, industry trends, and airline operations, with no guarantee that expectations will be met.
Investor Verification Checklist
- Tax Litigation Outcome: Monitor the status of the SAT dispute regarding the Aguascalientes Airport amortization and the potential Ps. 22.0 million+ penalty.
- Airline Recovery: Verify the extent to which new airlines have replaced traffic lost from Aerocalifornia, Avolar, and Alma, particularly in 4Q08 and 1Q09.
- Margin Sustainability: Assess whether the decline in operating and EBITDA margins (470 and 124 basis points respectively in 4Q08) is a temporary anomaly or a structural shift due to lower traffic volumes.
- Accounting Normalization: Review future tax rates, as the 2008 effective rate (6.6% in 4Q, 7.8% full year) was artificially low due to the one-time NIF B-10 accounting change benefit.
- CAPEX Execution: Confirm the pace of infrastructure investments (Ps. 745.2 million total invested in 2008) and their impact on future revenue generation versus debt servicing costs.