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Earnings call: GAP reports steady Q1 2024 results amid engine inspections

EditorNatashya Angelica
Published 04/25/2024, 12:49 PM
© Reuters.
PAC
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Grupo Aeroportuario del Pacifico (NYSE:PAC) (GAP) has disclosed its financial and operational performance for the first quarter of 2024. The company experienced a nearly flat passenger count compared to the same period last year, with total passengers reaching nearly 16 million.

This stagnation is attributed to ongoing preventive inspections of Pratt & Whitney engines which are expected to persist throughout the year. Despite this, GAP saw a robust growth in the international market and has announced plans for expansion into Europe and Asia.

Financially, revenue remained steady, while non-aeronautical revenue saw a significant increase. The company is also in the midst of negotiating new concessions and has a substantial master development plan in the works.

Key Takeaways

  • Passenger traffic for GAP remained nearly unchanged year-over-year at approximately 16 million in Q1 2024.
  • Preventive inspections of Pratt & Whitney engines are affecting passenger traffic, expected to continue throughout 2024.
  • International market growth is strong, with plans to open new routes to Europe and Asia and at least 11 new international routes in 2024.
  • Total revenue was flat, but non-aeronautical revenue increased by 15.2%.
  • Expenses rose by 10.3% due to changes in labor law and expansion costs.
  • EBITDA reached MXN4.6 billion, with a margin of 69.8%.
  • Total debt stood at MXN4.5 billion, with MXN3 billion in labeled debt bonds issued.
  • Net debt-to-EBITDA ratio was 1.7 times.
  • Expected increase in maximum tariff between 5% and 10%.
  • Investment of MXN110 per passenger planned for airport expansions and new terminals.
  • Direct flight from China to Tijuana anticipated by year-end.

Company Outlook

  • GAP forecasts a gradual recovery in air travel with traffic expected to normalize by 2025.
  • The company remains committed to its capital expenditure and passenger forecast, signaling confidence in long-term growth.

Bearish Highlights

  • The COVID-19 pandemic continues to impact operations with the worst part of the supply crisis expected in the summer months.
  • Engine inspections have led to a stagnation in passenger numbers, with a full recovery not anticipated until 2025.

Bullish Highlights

  • Expansion in international markets, with double-digit growth and new routes planned, indicates a strong position for future revenue.
  • Non-aeronautical revenue streams, such as food and beverage and retail, are bolstered by terminal expansions and commercial space openings.

Misses

  • Despite steady revenues, the company has not seen passenger growth in the domestic market.
  • Higher expenses have been incurred due to legislative changes and ongoing expansion efforts.

Q&A Highlights

  • GAP is finalizing a detailed 2,000-page master development plan for future expansion.
  • Negotiations with Jamaican authorities are progressing well, with a final proposal in place.
  • No expected impact from the amendment to concession rights legislation, as initial concerns about double charges have been clarified.

Grupo Aeroportuario del Pacifico (ticker: GAP) has navigated through a challenging quarter marked by external pressures on passenger traffic but remains optimistic about its expansion plans and revenue streams.

With new international routes on the horizon and a direct flight from China to Tijuana in the pipeline, GAP is positioning itself for a more connected and profitable future. The company's strategic investments and negotiations are set to enhance its infrastructure and service offerings, despite the short-term headwinds faced due to the global pandemic and engine inspection requirements.

InvestingPro Insights

Grupo Aeroportuario del Pacifico (GAP) continues to make strategic moves in the face of a challenging quarter, and the real-time data from InvestingPro offers additional insights into the company's financial health and stock performance. With a focus on the most relevant metrics and tips, here's how GAP stands currently:

InvestingPro Data:

  • Market Cap (Adjusted): $8.92 billion USD, reflecting the company's substantial size within the Transportation Infrastructure industry.
  • P/E Ratio (Adjusted) last twelve months as of Q1 2024: 16.04, indicating the stock is trading at a multiple that could be seen as reasonable given its consistent profitability over the last year.
  • Gross Profit Margin last twelve months as of Q1 2024: 84.01%, showcasing GAP's impressive ability to retain a large portion of its revenue as gross profit.

InvestingPro Tips:

  • GAP has shown a commitment to returning value to shareholders with a high shareholder yield and has raised its dividend for 3 consecutive years.
  • The stock has experienced a significant return over the last week, indicating strong recent performance that may interest investors looking for momentum.

For those considering an investment in Grupo Aeroportuario del Pacifico, there are 14 additional InvestingPro Tips available, which could provide deeper insights into the company's financials and stock performance. To explore these tips and gain a more comprehensive understanding of GAP's investment potential, visit: https://www.investing.com/pro/GAP

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Full transcript - Grupo Aeroportuario del Pacifico (PAC) Q1 2024:

Operator: Good morning, and welcome to GAP's Conference Call. All lines have been placed on muted to prevent any background noise. After the presentation, we will open the floor for questions and at that time, instructions will be given if you would like to ask a question. It is now my pleasure to turn the conference over to GAP's Investor Relations team. Please go ahead.

Alejandra Soto: Thank you, and welcome to the first quarter 2024 conference call for Grupo Aeroportuario del Pacifico. Presenting from the company today, we welcome Mr. Raul Revuelta, GAP's Chief Executive Officer; and Mr. Saul Villarreal, Chief Financial Officer. Please be advised that forward-looking statements may be made during this conference call. These do not account for future economic circumstances, industry conditions, the company's future performance or financial results. As such, statements made are based on several assumptions and factors that could cause actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the quarterly report issued earlier this week. At this point, I'd like to turn the call over to Mr. Revuelta for his opening remarks. Please begin, sir.

Raul Revuelta: Thank you, and good morning. As always, it is a pleasure to be reviewing another quarter with you. We appreciate you taking the time to join us today. I'm going to briefly review operational and financial figures before taking your questions. During this quarter, the total number of passengers reached nearly 16 million, which was almost flat compared to the first Q 2023. As many of you are aware, we have experienced a slight deceleration in passengers traffic since the fourth quarter of 2023, due to the preventive inspections of the Pratt & Whitney engines. These inspections will continue throughout 2024. As of today, Volaris, the airline that handles most of our passengers traffic has the highest number of grounded aircraft. As 2024 progresses, we will continue to monitor the availability of seats and passengers traffic trends in order to keep the market updated of any changes. Despite the slowdown of the domestic market, the international market has been growing in double-digits. As we look ahead to the rest of the year, we will expand our market beyond the U.S. and Canada with the new routes to Europe and Asia. As of today, we expect to initiate at least 11 new international routes during 2024, nine of them to North America and two of them to Europe, which include Frankfurt to Los Cabos and Prague to Puerto Vallarta. Moving on to financial performance. On the top line, total revenue remained almost flat compared to the first Q '23. Aeronautical revenues decreased by 1.3%, mainly due to discounts to passenger charges that are in place at nine of the 12 airports in Mexico. As a result, we reached 97% of the maximum tariffs approved, while in the first quarter '23, it was 99% of the maximum tariffs. Despite this, non-aeronautical revenue continued strong, achieving a 15.2% increase to reach MXN1.7 billion. For the first time in the history of the company, we have reached MXN109 per passenger. As we have previously discussed, we renegotiated several of the tenant contracts, which resulted in more than positive financial conditions for the company. The main revenue generated for commercial revenues was additional capacity at the airports with expansion in terms of square meters. This includes the new terrace with a huge food and beverage area in Guadalajara, which is surrounded by top restaurants and offers stunning view of the runway. Those of you who attended the GAP Day had the opportunity to walk through this new area. There are several other strategies of the commercial side that are being worked, in addition to large sale areas. This includes new business lines such as the mixed-use building, which can also be found in the Guadalajara Airport, with the opening of a new hotel in March of 2024. On the expenses side, this increased by 10.3% compared to the first Q '23. While we remain focused on maintaining strict cost control, the current changes in labor law affected all major cost lines. The salary costs have been greatly impacted as well as other major personnel contracts such as cleaning, security and maintenance. Down the line, we spent (ph) higher costs that correlate with airfield and terminal expansion, in addition to an inflationary effect. Regarding the concession fee in Mexico, which is the amount that concession holders such as GAP must pay for the use of federal airports, you may remember that in January, these fees increased from 5% to 9%. In accordance with the new rules for tariff regulation, the payment made over those included in the last tariff review will be added to the reference value during the next review of the maximum tariff. However, this only applies for the regulated revenues. In line with this, the 4% difference paid over aeronautical revenue in the first quarter in '24 was recognized as an intangible asset under the IAS 38 and will begin its amortization in January 2025, and will continue until the end of the concession period. The amount recognized as intangible asset in the airport concession during the first quarter '24 was MXN175.5 million. On the other hand, the 4% additional payment over the non-aero revenue was recognized as an expense. As a result, EBITDA reached MXN4.6 billion with an EBITDA margin of 69.8%. This differs from our guidance released in January, mainly due to the recognition of the intangible asset I just mentioned. On the debt front, total debt reached MXN4.5 billion during the first quarter '24. In March, we issued another two tranches of labeled debt bonds of the Mexican market for a total MXN3 billion. The proceeds were used to pay down the GAP 19 bond matured in March for the same issue amount. These were on the fifth and sixth labeled bonds that are sustainability-linked and directed towards reducing carbon emission, thus further demonstration of our commitment to enhancing sustainability at the company. We look forward to continue to update the market of these initiatives, and we will continue integrating this philosophy into our operations and infrastructure projects. Along with these figures, we continue to maintain healthy leverage levels, reaching a net debt-to-EBITDA ratio of 1.7 times for the trailing 12 months, thus compliant with all our debt covenants. Moving on to the CapEx. During the quarter, capital to the capital expenditure reached approximately MXN1.4 billion. This positioned us well to comply with the challenging Master Development Program that is in place. Before I conclude, I want to mention that our ordinary and extraordinary shareholders' meeting will take place tomorrow, and we will be proposing a capital reduction of MXN13.86 per outstanding share. I would like to express my gratitude to all who attended our GAP Day at Guadalajara Airport on April 10. It was a great event where we were able to tour the newly expanded commercial and passengers' area, the airport fire station, and even a stay at the new Hilton Garden Inn hotel that is just steps away from the main entrance of the airport. I hope that all who were able to join us left with a sense of all the hard work and commitment we have for our markets and for the growth of our company. With that, I would like to open the floor for questions.

Operator: [Operator Instructions] We'll take our first question from Rodolfo Ramos with Bradesco BBI. Please go ahead.

Rodolfo Ramos: Good morning, everybody. Thank you for taking my questions and congratulations on the results. One question on my side, and it's a two-part question. And just wanted to get a sense of how your MDP negotiations are going through, are coming along with the authorities. If you can comment on the tariff side and also on the CapEx side. And on the CapEx side, just want to understand, I mean, you have airports that are well above the 10 million passenger threshold per year. You also have Cabo that is close to 10 million. So just wanted to see -- it seems like the new name of the game is the CapEx side. We saw that in ASUR's MDP. So just wanted to get a sense of what your CapEx needs could be going forward, if you see any major projects at these main three airports that could help you out in this negotiation. So that would be my question. Thank you.

Raul Revuelta: Thank you, Rodolfo. This is Raul. We have talked -- I mean, we are still working with authorities. We have I mean, present the first draft of our master plan, and we are just in the process of the visits with the authority or the physical visits of all the airports and review of all the different investments that we are proposing to the authority. As we have said in the last conference calls, we are expecting an increase of the maximum tariff around 5% to -- 0% to 5%. But what is important to have in mind is, we could not assure completely which going to be the result. We need to see how the -- mainly the discount rate will change in the coming months. And after that, we could have the number. As you remember, in terms of the airport law, the authority have until the last day of the year, December 31, to have an authorization, we are working with them, trying to make as fast as possible this authorization, and we are working just on that. In terms of the CapEx that we are expecting, we are maintaining the same level of investment per passenger that we have in the last -- or in this period of master plan, that is around MXN110 per passenger. We are expecting to have the same level of investment per passenger. To have in mind is, some of the airports that should need some additional spaces or additional terminals or big investments or in some way for attend the increase of passengers will be Tijuana. For sure, in Guadalajara, we are proposing to authority a completely new brand terminal, the Terminal 2 for the airport. For the case of Cabos, we also know that we need to expand our terminal building on the second terminal building, the international terminal building, and the Terminal 1, the domestic terminal building in Cabo. And for the case of Vallarta, as you know, on this master plan, we are developing the second terminal of Puerto Vallarta. We will continue the expansion of that on part of the coming year but will not be included as an additional investment for the new master plan. So, in general terms of concluding, the biggest investment that we will see on our bigger airports will be expansion of terminal in Tijuana, a new terminal in Guadalajara and expansions on Terminal 2 and 1 on Cabo. For sure, for other airports, we'll have some expansions, but the main expansions talking about terminal buildings will be on those airports.

Rodolfo Ramos: All right. Thank you, Raul. And just a follow-up on that. And you mentioned that they have -- authorities have until the last day of this year. So I'm assuming that you will be concluding your negotiations with the next administration. Is that correct?

Raul Revuelta: At that moment, Rodolfo, we could not assure it's going to be with this administration or the coming administration. We are working on all the technical approach of the master plan. Just think for a second that a master plan is document that for the case of GAP will be around, I don't know, 2,000 pages that will have a lot of blueprints and a lot of technical work. So for sure, we are working today with the technicians of the AFAC. And at the end of the day, we will try to close this negotiation as soon as possible. But today, I could not assure it's going to be with this administration or the coming administration. What for sure, it's in the table, that we are working and have all the technical approach and studies for the capacity and the new investments on the master plan. And we will have it on the table of the authority, and we will expect the correct timing for the authorization.

Rodolfo Ramos: Great. Very helpful, Raul. Thank you very much and congrats on the results.

Operator: Thank you. And we will move next with Stephen Trent with Citi. Please go ahead.

Stephen Trent: Good morning, everybody and thanks for taking my questions. The first, if you could give us some indication on the Jamaican airports and the timing of the regulatory reviews, and what chance do you see that maybe authorities could possibly extend those concessions when the review is done.

Saul Villarreal: Hi, Steve. This is Saul. Thank you for your questions. We have been working very well with the authorities. Indeed, in the GAP Day, we had the Minister of the Transportation in Jamaica. And the communication -- the relationship is very good. We have been working and we have a final proposal. However, we haven't achieved the final document signed to be applied. So we are -- we have a good news, but we cannot disclose yet because it's not possible because we don't have the official document from the authorities of Jamaica. But we feel very comfortable with both results in the negotiations for both airports. So we are fine for now, but we cannot disclose yet the result of the negotiation.

Stephen Trent: Okay. Appreciate the color, Saul. Thank you. And just a follow-up with something you mentioned in the prepared remarks. I believe you mentioned nine new routes to North America and two new routes to Europe, if I'm not mistaken. And just, one, if I got that right. And two, what potential you might see for new Asian routes?

Raul Revuelta: Yeah. This is Raul. I mean, the tariff of Asia, what we are expecting for the end of the year is the operation of -- we are not sure today it's going to be two or going to be one destinations to China from Tijuana. We're really close to have some announcements. But what we are expecting for the end of the year is at least one direct flight from China to Tijuana.

Stephen Trent: Okay. Perfect. Thanks, Raul. Appreciate that.

Operator: Thank you. And we will move next with Guilherme Mendes with JPMorgan. Please go ahead.

Guilherme Mendes: Thank you and good morning, Raul and Saul. And Alejandra, thanks for taking the question. My first question is on the guidance. Raul, you mentioned at the beginning about the effect of the -- of how the concession fee was accounted. So clearly, there was some upside on the EBITDA margin reported in the first quarter. But just wondering, if you see some kind of upside for your full year guidance, if you should expect any kind of changes from here? And the second question is regarding the bidding process for the Turks and Caicos Airport. You mentioned in the fourth quarter earnings that you were participating in the process. Just wonder if there's any kind of updates on this. Thank you very much.

Saul Villarreal: Hi, Guilherme. This is Saul. For your first question, we have -- as you said, we have to revise our guidance. But we have -- we want to wait for a new idea of the Pratt & Whitney engines review and be monitoring the traffic trend in the following months. We expect if we have more visibility of the -- until the end of the year, we will release a new guidance, but we want to wait until the second quarter in order to update it. Regarding Turks and Caicos, we haven't -- we don't have any advance yet. We don't have any update from the authorities. We are very -- attending any kind of meetings with the government that we have any other advantages, but we released that we were selected as a bidder.

Guilherme Mendes: Okay. Very clear. Thanks, Saul.

Saul Villarreal: Thank you, Guilherme.

Operator: We will move next with Alejandro Fuchs with Itau Group. Please go ahead.

Alejandro Fuchs: Yes. Hello, Raul, Saul and Alejandra team. Thank you for taking question and congratulations on the results. Very quickly, two ones from my side. The first one is on aeronautical revenue. They were flat year-over-year, as Raul was mentioning, even though you mentioned that the TUA was still down for nine airports. So I wanted to get a sense on how the aeronautical revenue was flat year-over-year with flat passengers, also performance with the lower TUA. Is it that you're charging maybe a higher percentage of the maximum tariff? Maybe I wanted to understand that correctly. And then, I have a follow-up. Thank you.

Saul Villarreal: Hi, Alex. Well, regarding the TUA, we already applied the discounts. As we mentioned, we are applying for nine airports the 6% discount over the TUA. We have different factors as inflation and exchange rate in order to fulfill the maximum tariff. But we are expecting until the end of the year to be close to 97%, 98% of the maximum tariff. We are expecting acceleration or appreciation of the exchange rate. And if that happens, it will be a benefit for the fulfillment of the maximum tariff. We have another issue regarding the international passenger traffic, which is -- in U.S. dollars, it's higher tariffs. That provides a higher amount and more possibility to reach the 100% of the maximum tariff. But for now, our base approach is 97% at the end of the year.

Alejandro Fuchs: Thank you. That was very clear, Saul. And maybe just a quick follow-up. I wanted to see if I got this very clear, but on the concession tax, the MXN715 million that you paid this quarter, I wanted to make sure that this includes the 4% increase, even though this is going as an intangible asset as well. So we did see this through the P&L and it's included in the EBITDA. I got cut off a little bit on what Raul was explaining, so maybe you could re-explain for me. That would be very helpful. Thank you.

Saul Villarreal: Yes, Alex. The concession tax is mandatory to be paid to the government. It pays every two months. So we repaid the first two months of the year, but we have to make a provision for March. So what is in the financial statement, in the income statement is only the concession tax at 9% for the non-aeronautical revenues and 5% for the aeronautical revenues. The difference is recognized as a concession asset, as an intangible asset, as Raul explained. And as we disclosed in the press release, it was recognized according to the international standards. So, we will be -- the amortization of this asset during the period of concession. So just to be clear, it is a cash flow for the 9% full. But the recognition in the income statement is 9% for the non-aeronautical and 5% for the aeronautical just for 2024. In 2025, everything will be at 9%.

Alejandro Fuchs: Thank you very much. Very clear, so thank you.

Operator: Thank you. We will move next with Pablo Monsivais with Barclays. Please go ahead.

Pablo Monsivais: All right. Thanks for taking my questions. Just a quick one on the cost side. You have mentioned that the labor law is impacting your cost and that has been the case for this year. But do you see any extra pressures or headcount increase that could put a pressure on your cost side further in the year? Thank you.

Saul Villarreal: Hi, Pablo. [Technical Difficulty] just for the operation of the hotel. As you know, in the GAP Day, we have another business unit, and we need the headcount for the full operation. Obviously, the pressure on the labor -- from the labor law is clear in -- not only in Mexican airports, for Jamaican airports, we have an increase -- significant increase for the minimum wages, around 40%. It's not relevant because the participation of the Jamaican airports in the total EBITDA, but it, at the end, is relevant for the cost expense increase. But we want to be clear that the idea that we will follow as a company, as management is to maintain the cost control. We are not going to hire additional headcount just for the hotel. And in case we open additional business lines or more units, we will add additional headcount. If not, we are not going to hire additional headcount.

Pablo Monsivais: Perfect. Very clear. Thank you very much.

Operator: Thank you. We will move next with Gabriel Himelfarb with Scotiabank. Please go ahead. Gabriel Himelfarb with Scotiabank, your line is open.

Gabriel Himelfarb: Hi. Good morning. Thanks for the call. Just a bit of an update about the issue of the Pratt & Whitney. Have you seen -- do you think that for this year, for the last quarters, capacity could be limited due to the engine failures, the engine maintenance? We saw about Volaris that -- yesterday said that most of -- the peak of the capacity will be on the third and the fourth quarter. So, do you see that this could affect the passenger traffic for the last two quarters of this year? Thank you.

Raul Revuelta: Thank you, Gabriel. It's Raul. I mean, when we present our original guidance, we consider around 200 days for the period of maintenance of each one of the grounded planes. As you mentioned, Volaris just said on the conference yesterday that they are expecting the worst part of this peak on decrease on capacity for the third and fourth quarter. We are in the same page. Our guidance expects that the worst part of this supply crisis will happen on summer. And after that, I would say that gradually, mainly in November and December, we will begin to see some of the comeback of the first planes that were granted in September of the last year. So I will say that in general terms, we stay in the same number that we originally presented in our guidance. And at that moment, we consider that, that part that -- the worst part of the decrease of grounded planes will be on the third and part of the fourth quarter.

Gabriel Himelfarb: Okay. And do you think that this supply shock could be somehow -- can be used for the next MDP for passengers like, compensated if the passengers decrease for the next MDP?

Raul Revuelta: The point here, Gabriel, is that in general terms, as we have mentioned, this is a supply side crisis. So, as soon as the fleet recover and fly again, we will have a recovery like in a hockey stick because the demand is still there. So this is not something that will not change the trends on the long term. And in that point, we are not considering to change our needs of CapEx of our forecasting for the long term, in terms of passengers in our airports. So what we are saying is, we expect a recovery during 2025 of the traffic. And for the long term and the mid-term, the increase on traffic will be really -- we are optimistic that growth will be strong. And in that way, our master plan reflects the needs of that demand, of the new capacity that we are expected to deploy in our airports.

Gabriel Himelfarb: Okay. Thank you very much.

Operator: Thank you. Our next question comes from Anton Mortenkotter with GBM. Please go ahead.

Ernst Mortenkotter: Hello, guys. Thank you for taking my question. I'm looking to understand if the increase in idle per packs was driven by the improvements in the commercial areas of your airports, or maybe if it had some relationship to the real estate investments. So I was wondering if this quarter's non-aero revenues had some contribution from the mixed-use facilities and the hotel, thinking maybe some advance payments from the mall or something similar.

Saul Villarreal: Hi, Anton. This is Saul. Well, the increase of revenues per passenger, I think you are referring for aeronautical and non-aeronautical, which indeed is around 2%. It is basically because the increase in the non-aero, you are right, is part of the new revenues, the new contract that arrived in the Guadalajara, the new commercial retail, and food and beverage area that was opened. The hotel was open in the -- around March 26, so it's not relevant in the figures. But it is the new areas in retail, the renovation of the contracts, the renewal of the contracts, also the opening of some commercial retail in Montego Bay. So at the end, the commercial revenue showed an extraordinary increase in this quarter, around 15%. But the passenger, it was around 2% in total for non -- in non-aeronautical and aeronautical revenues. If we are talking about aeronautical revenues, we had a decrease of around 1.5%. So it is because, as we mentioned, the discounts into the TUAs or passenger charges in nine of our Mexican airports.

Operator: Thank you. Your next question comes from Andressa Varotto with UBS. Please go ahead.

Andressa Varotto: Hi. Good morning, Raul and Saul. Thank you for taking my question. I just have a follow-up here on the non-aeronautical side. You mentioned both of the new projects that the company has been working for -- in the last few years and also the renegotiation of contracts with tenants. So I just wanted to know if you could break down how much each of these factors are contributing today for the non-aeronautical side, and what is your expectation going forward about the contribution of these two factors? Thank you very much.

Raul Revuelta: Hi, Andressa. This is Raul. In general terms, the non-aeronautical revenues was growing in the quarter mainly for the expansion of some areas in our terminals, was related with the food and beverage in Guadalajara and some special areas or additional areas of retail also in Guadalajara. But in general terms, I will say that in this quarter, what we have seen is an increase in some business lines as could be the food and beverage because in the last year, we renegotiated contracts, for instance, in Los Cabos, in Guadalajara, in Cabo and in Tijuana. So what we are seeing right now is the reflect of some new conditions, mainly in food and beverage, in retail, but also, we have seen the effect -- an interesting effect of the revenues that come from the business directly operated by GAP, as could be the parking lots, that increase even with a flat environment of passengers. That is important to say because one of the revenues that are more -- or have a direct correlation with the number of passengers are the parking lots. So through a new tariff strategy, we obtained positive numbers on the parking lots, even with a flat number of passengers in terms of total passengers in airport. So what is coming for sure with new conditions on some of our biggest contracts, what we are expecting as soon as the traffic recovers in the coming years will be a robust increase in terms of revenues because as soon as the consumption of the passengers arise, we already have the correct layouts, the correct contracts and the correct brands to bring the best possible results to the company. So for sure, on the '25, for instance, as soon as we have the traffic coming back to the airports, we will have -- or we will continue with a robust growth. But for the '24, as we mentioned on our guidance, we are expecting to increase the non-aero revenues from 12% to 14%, and we are -- we think that we are aligned with that original guidance.

Andressa Varotto: Perfect. Thank you very much. And if you just could provide an update on the operation of the hotel and the commercial space that you're doing with Guadalajara?

Saul Villarreal: Can you repeat? I lost you for a second.

Andressa Varotto: Sorry. So I just wanted to have -- to know if the hotel and the commercial space are already operating and at which stage? Thank you.

Saul Villarreal: Yes. We just began the operations in the last week of March. So we are just working on some of the new areas of Guadalajara, mainly all the hotels, and we will begin to recognize the revenues coming from the hotel in -- just in the second quarter of this year. On what is we call the mixed-use building, we expect that for the third quarter of the year, we will begin to have recognition of revenue related with new tenants of the office building. And also in the third quarter, we will have full recognition of revenue related with the new food and beverage mezzanine area on the building on the mixed-use building.

Andressa Varotto: Perfect. Thank you very much. Have a good day.

Operator: Thank you. And we will now take the webcast questions. I will turn the call over to management.

Alejandra Soto: Thank you. We have one question from Bernardo Malpica from Santander (BME:SAN). The increase in international passengers compensated for the fall in domestic passengers. Did you see any top line benefit coming from this change in mix?

Raul Revuelta: Yes, Bernardo. I mean, in general terms, the change of the mix, when we talk about aero revenues, bring us additional, I would say, tariff, for instance, the two Is (ph) related to dollars. But in general terms, I would say that depends the peso-dollar exchange rate. But in general terms, I would be -- that it's positive, the change on the mix, because also the non-aero business, you could get some consumptions on the duty-free, for instance, that in case of the domestic traffic, you could not have it. So I would say that in general terms, it's positive and it could have some additional benefit for the top line.

Alejandra Soto: Thank you, Raul. And the last one is from Areli Villeda from Invex. I would like to understand the amendment of the legislation related to the concession rights. If the government recognized a double charge, how this would affect you?

Saul Villarreal: Hi, Areli. This is Saul. At the beginning, when the amendment -- or the change to the 5% to 9%, there was a confusion. But again, it was clarified in the legislation. So we do not expect any double charge -- there is any possibility to have a double charge.

Alejandra Soto: Thank you, Saul. And those are the only questions that we have. We have other ones that are already answered with the Q&A. So thank you.

Saul Villarreal: Thank you.

Operator: Thank you. And we show no further questions over the phone at this time. I will turn the call back to Mr. Revuelta for closing remarks.

Raul Revuelta: Thank you once again for joining us today for our first quarter results conference. Our team is available to address any questions you may have. Have a great day. Thank you.

Operator: And this does conclude today's program. Thank you for your participation. You may disconnect at any time.

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Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
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