PAC

Business Context and Reporting Period

Company: Grupo Aeroportuario del Pacifico, S.A.B. de C.V. (GAP)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter ended September 30, 2008 (3Q08) and First Nine Months of 2008 (9M08)
Business Overview: GAP operates 12 airports in Mexico's Pacific region, including major hubs in Guadalajara and Tijuana, and tourist destinations such as Puerto Vallarta and Los Cabos. The company is listed on the NYSE (PAC) and BMV (GAP).
Accounting Standards: Figures are unaudited and prepared under Mexican Financial Reporting Standards (NIF). Notably, the company ceased recognizing inflation effects (NIF B-10) starting in 2008, impacting tax and cost comparisons with 2007.

Key Financial Metrics

Third Quarter 2008 (vs. 3Q07)

• Revenues: Ps. 831.4 million (Decrease of 6.8% or Ps. 60.3 million).
• Operating Income: Decreased 25.9%.
• EBITDA: Decreased 16.4%.
• Net Income: Ps. 381.3 million (Increase of 36.0% or Ps. 101.3 million). This increase is primarily driven by a Ps. 128.4 million reduction in deferred income taxes due to accounting standard changes, not operational performance.
• Operating Margin: 37.6% (Decrease of 980 basis points from 47.4%).
• Adjusted EBITDA Margin: 61.6% (Decrease of 720 basis points from 68.8%).
• Cash and Equivalents: Ps. 1,844.7 million as of September 30, 2008.
• CAPEX (9M08): Ps. 339.7 million invested.

First Nine Months 2008 (vs. 9M07)

• Revenues: Ps. 2,664.4 million (Increase of 2.3% or Ps. 58.9 million).
• Net Income: Increased 32.6% (Ps. 279.3 million higher) due largely to a Ps. 255.4 million tax benefit from accounting changes.
• Operating Margin: 43.4% (Decrease of 400 basis points).

Material Changes vs. Prior Period

Operational Traffic

• Total Terminal Passengers (3Q08): Decreased 13.4% year-over-year.
• Domestic Traffic: Declined 14.6%, driven by a net loss of 632.9 thousand passengers. Significant declines occurred at Tijuana (-328.8k) and Guadalajara (-133.0k) due to airline suspensions (Aerocalifornia, Avolar) and route reductions.
• International Traffic: Declined 10.3%, with a net loss of 185.8 thousand passengers. Major drops seen in Guadalajara (-96.3k) and Los Cabos (-30.7k) due to reduced operations by American Airlines, Delta, and Frontier.
• Exceptions: Puerto Vallarta and Los Cabos saw slight increases in domestic traffic, offsetting some declines elsewhere.

Revenue and Cost Drivers

• Aeronautical Revenue: Declined 9.2% (Ps. 66.8 million) despite lower traffic, as high-tariff airports (Puerto Vallarta, Los Cabos) maintained volume better than others.
• Non-Aeronautical Revenue: Increased 3.9% (Ps. 6.6 million), driven by vehicle parking (Tijuana facility), car rentals, and retail/food leasing.
• Cost of Services: Increased 24.9%. This was heavily influenced by a Ps. 29.6 million reserve for doubtful accounts. Excluding this reserve, costs would have risen only 10.1%.
• Tax Impact: The effective tax rate for 3Q08 was -7.7% due to the reversal of deferred tax assets related to inflation accounting changes. Without this, the rate would have been 28.4%.

Guidance, Outlook, and Risks

Outlook and Guidance

• 2008 Traffic Forecast: Management estimates total passenger traffic for 2008 will decline between 3.5% and 5.5% compared to 2007.
• Dividend Policy: GAP maintains its dividend policy despite the difficult economic environment.
• Capital Expenditure: The company remains committed to the Master Development Plan.

Risks and Contingencies

• Airline Suspensions: Aerocalifornia (6.1% of total traffic) was suspended in July 2008 and has not restarted. Avolar (5.1% of traffic) was suspended in August but resumed with reduced operations. These events significantly impacted traffic at Tijuana, La Paz, and Los Mochis.
• Economic Environment: Global economic variations are expected to negatively impact the air traffic industry, limiting development opportunities.
• Accounting Changes: The shift away from inflation accounting (NIF B-10) provides a temporary tax benefit that will reverse over time unless economic circumstances or tax laws change.
• Share Repurchase: The company completed repurchases of 560,000 shares (Ps. 16.5 million) in Q3 2008 under a Ps. 55.0 million plan approved in April.

Investor Verification Checklist

• Tax Benefit Sustainability: Verify the timeline for the reversal of the Ps. 128.4 million (3Q) and Ps. 255.4 million (9M) deferred tax benefits resulting from NIF B-10 changes.
• Airline Recovery: Monitor the extent to which new carriers (Volaris, Interjet) are filling the void left by suspended airlines (Aerocalifornia, Avolar) at key airports like Tijuana and La Paz.
• Cost Control: Assess whether the 10.1% organic cost increase (excluding doubtful accounts) aligns with long-term guidance, given rising electricity and maintenance costs from new terminal expansions.
• Liquidity Position: Confirm the utilization of the Ps. 440.3 million unused bank loan balance held for the Master Development Program.
• Non-Aeronautical Growth: Evaluate the sustainability of the 3.9% revenue growth in non-aeronautical services as a hedge against declining passenger traffic.