• Total Passengers: 15.3 million, a 3.9% decrease compared to 2023.

• Revenue Decrease: MXN213 million or 3.3% lower compared to last year.

• Commercial Revenue Increase: Almost 11%, driven by food and beverage, car rentals, and VIP lounges.

• Hotel Revenue at Vallarta Airport: MXN18.6 million with an occupancy rate of 51% as of June.

• Cost of Service Increase: MXN179 million or 17.3% due to higher operational expenses.

• EBITDA Decrease: MXN378.7 million or 8.3% due to higher costs and slightly lower revenues.

• Cash and Cash Equivalents: Decreased by 15.7%, reaching MXN12.6 billion.

• Debt: Reached MXN41.8 billion with a net debt-to-EBITDA ratio of 1.7 times.

• CapEx: Approximately MXN3.1 billion in the first half of the year.

• Capital Reduction Distribution: First portion of MXN3.5 billion paid.

• Warning! GuruFocus has detected 3 Warning Signs with LSE:STEM.

Release Date: July 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Grupo Aeroportuario del Pacifico SAB de CV (NYSE:PAC) added three international and two domestic routes in the second quarter, with plans to add 11 more international routes in the second half of the year.

• Commercial revenues increased by almost 11%, driven by food and beverage, car rentals, and VIP lounges.

• The company opened a second VIP lounge at the Vallarta airport and reported strong performance in Guadalajara and Los Cabos airports.

• The acquisition of GWTC is expected to contribute significantly, with 2023 revenues above MXN1 billion and an EBITDA margin of around 40%.

• The second runway at Guadalajara Airport was opened, offering 50% to 70% additional operational capacity in the long term.

Negative Points

• Passenger traffic decreased by 3.9% compared to 2023, primarily due to issues with A320neo and A321neo airplane engines.

• Aeronautical and non-aeronautical revenues decreased by MXN213 million or 3.3% compared to last year.

• Cost of service increased by MXN179 million or 17.3%, driven by higher operational expenses such as employee costs, security, insurance, and maintenance.

• EBITDA decreased by MXN378.7 million or 8.3% due to higher costs and slightly lower revenues.

• Cash and cash equivalents decreased by 15.7%, reaching MXN12.6 billion, while debt reached MXN41.8 billion.

Q & A Highlights

Q: What is the latest update on the Master Development Program (MDP) negotiation, and is the upward revision in guidance only related to GWTC? A: The MDP negotiation is on track, and we expect to have authorization by September. The upward revision in guidance is primarily due to GWTC, which generated MXN1 billion in revenue with a 40% EBITDA margin last year. Additionally, the commercial performance and capitalization of the concession fee are included in the new guidance.

Q: What are your thoughts on the new team for the Ministry of Transportation and the Mexico City bottlenecks? A: The new minister has a strong background in infrastructure development. Currently, we are focused on the MDP negotiation with the current administration. Regarding Mexico City bottlenecks, Guadalajara is strengthening as a hub, with new routes to Canada, Spain, and Colombia, which could help bypass Mexico City's slot restrictions.

Q: How do you expect EBITDA to grow in the second half of the year despite the challenges faced in the first half? A: The consolidation of GWTC will contribute to EBITDA growth. Additionally, the increase in commercial revenues and the capitalization of the concession fee will support the improvement in the second half.

Q: Can you comment on the sustainability of commercial revenue growth and potential future acquisitions? A: We believe the double-digit growth trend in commercial revenues is sustainable, supported by new commercial areas and traffic performance. We are exploring opportunities like the Turks and Caicos airport and continuously reviewing potential acquisitions similar to GWTC.

Q: How are the Pratt & Whitney engine issues affecting traffic, and what are the expectations for GWTC's revenue growth? A: The engine issues have impacted traffic since September last year, with the worst expected in Q3 2024. We anticipate a gradual recovery through 2025, with full capacity by mid-2026. GWTC is expected to achieve a 10% revenue increase over 2023.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.