Earnings call: GAP's Q3 2023 call reveals growth, regulatory changes, and future projections

In its Third Quarter 2023 Conference Call, Grupo Aeroportuario del Pacífico (GAP) reported solid financial results and discussed regulatory changes and projections. CEO Raul Revuelta highlighted a 10.8% increase in exported passengers, a rise in aeronautical and non-aeronautical revenues, and an EBITDA of Ps. 4.3 billion. The call also touched on the potential impact of Pratt & Whitney's engine inspections and changes in Mexican government regulations.Key takeaways from the call include:

• GAP reported a 10.8% increase in exported passengers, with aeronautical revenues up 8.2% and non-aeronautical revenues growing by 14%.

• The company's EBITDA reached Ps. 4.3 billion for the quarter, rising 4.5% with an EBITDA margin of 67.5%.

• GAP estimated a potential impact of -5% to -7% on total passengers in 2024 and 2025 due to Pratt & Whitney's engine inspections.

• Mexican government regulations have changed, with the House of Representatives passing a bill increasing concession fees from 5% to 9%, effective January 1, 2024.

• The Civil Aviation Agency introduced amended rules for tariff regulations, including changes to the discount rate and terminal value calculations.

• GAP confirmed the company's guidance figure for 2023 and expects to complete the MDP negotiation by the end of 2024.

• The company regularly provides incentives and discounts to the market, including a 10% discount on TUA (Tarifa de Uso de Aeropuerto, or airport usage fee) at nine of its airports during November and December, which will continue in 2024.

During the call, Revuelta also discussed the new regulatory framework and its potential impact on tariffs and concessions. Although the effects are still uncertain, the clarity and certainty provided by the framework are seen as positive for the market. The government is expected to release the new master development plan (MDP) and tariffs by the last quarter of 2024.Revuelta also addressed the short-term reduction in the airport tax (TUA) and clarified that it is a regular practice to provide such discounts. He emphasized that this discount does not change the maximum tariff, which remains the same as negotiated four years ago.The company also discussed the impact of new regulations on tariffs and fees. They clarified that the concession tax will be calculated on gross sales and that the tax increase from 5% to 9% will be included in the maximum tariff. The company will analyze the impact of the new regulations on leverage and debt issuance in the coming months.In terms of future capital expenditures (CapEx), the company noted that the impact of Airbus320 and 321 engines is uncertain. They are currently reviewing their capacity and quality services to determine the amount of CapEx required.The call concluded with a commitment to conducting a deeper analysis of the effects on the discount rate, including the new tariff, CapEx, leverage, and dividend policy over the next year. The company plans to maximize returns for investors and confirmed that the team would be available to answer any further questions.

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