Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (GAPB) Earnings Call Transcript

Good morning, and welcome to GAP's Third Quarter 2026 Conference Call. [Operator Instructions] Now it's my pleasure to turn the call over to GAP's Investor Relations team. Please go ahead.

Thank you, and welcome to GAP's Third Quarter 2026 Conference Call. Prior to introducing the management team, I would like to take a few moments to mention forward-looking statements as described in the financial report. Please be advised that any comments made today may not account for future economic circumstances, industry conditions, the company's performance or financial results. As such, any information discussed is based on several assumptions and factors that could change causing actual results to materially differ from current expectations. For a complete note on forward-looking statements, please refer to the quarterly release issued yesterday. Thank you for your attention. It is my pleasure to introduce our speakers from GAP who will be discussing with you the operational and financial results for the third quarter of 2026. Here Mr. Raul Revuelta, Chief Executive Officer; and Mr. Saul Villarreal, Chief Financial Officer. Mr. Revuelta, please proceed with your opening remarks.

Thank you, Maria. Good morning, everyone, and thank you for joining us today. I want to start with the fact that GAP delivered a solid financial performance in the third quarter 2026. Despite persistent challenge across our airport network, demonstrating the value [indiscernible] increasing the contribution of our diversified business model. Passenger traffic declined by 1.4% compared to the third quarter 2025, which was a significant improvement versus the 5.6% decline experienced in the second quarter of 2026. At the same time, revenues, excluding construction services, increased by 13.2%, EBITDA grew by 19.2%, reaching MXN 6.1 billion, and the EBITDA margins expand by 350 basis points to 67.8%. These results are the result of 3 distinct drivers: First, the consolidation of cross-border spreads; second, the structural benefit from the internal -- internalizing of GAP technical assistant services; and thirdly, the grow in directly operated business together with the [indiscernible] implementation of the approved maximum tariff. Excluding CBX, revenues from aeronautical and non-aeronautical services increased by 3.4%, while EBITDA grew by approximately 8.3%. While this field highlights the strength of our operating model, they also indicate that underlying passenger demand remains challenging. We are prioritizing working on the factors we can [indiscernible] such as strengthening our airport network, while at the same time building complementary business that diversify earnings and expand our capacity to create long-term value. However, we are aware that international leisure traffic is recovering at a consistent pace due to several external factors. Let me begin with the passenger traffic. During the third quarter, GAP's [indiscernible] handled approximately 18.4 million passengers, representing a 1.4% decrease compared to the same period last year. Our [indiscernible] traffic has stayed below 2025 levels, the third quarter decline is lowest as compared to the previous quarter. However, we do not view [indiscernible] as a sign of broader base recovery across all our markets as of yet. Domestic traffic increased by 0.6%, while international traffic declined by 4.5%, primarily reflecting the continued [indiscernible] successful issue destination from Mexico and Jamaica. Guadalajara, on the other hand, remain as a primary performance driver with an 8% passenger traffic increase [indiscernible] by growth in both domestic and international volume. It is worth nothing that international passengers [indiscernible] Guadalajara grew by 13.1%, reflecting the resilience of the airport diversified passenger mix across visiting France and [indiscernible] business and leisure segments. During the quarter, traffic in Guadalajara has declined driven slightly 0.5%, while CBX users increased by 8.4%, reaching approximately 1 million partners during this period. Additional CBX capture rate improved from 29.7% in the third quarter of '25 to 32.4% in the third quarter of '26. These results highlight the growing importance of cross-border connectivity and the strategic benefits of integration CBX into GAP's airport network. Puerto Vallarta, Los Cabos, however, continued to experience softer demand with passenger traffic declined by 11% and 6.8%, respectively. International traffic at Puerto Vallarta remained weak declined by 24.8%, primarily due to the secured concerns following [indiscernible]. To counter this, we are actively collecting with airlines to its stakeholders to promote connectivity and passenger demand in the region. Montego Bay continues to navigate the aftermath of [indiscernible] with a 23% decline in passenger traffic during the quarter. While hotel capacity and tourist activity recovery, the normalization that remains high [indiscernible] reopening an international arena connectivity. Looking ahead, we remain cautious about how quickly traffic will recover. We anticipate that airline capacity, passenger demand and the recreation of tourist infrastructure will return at different speeds across our destinations. The traffic disruption caused by [indiscernible] should be as conditions normalize. However, airlines capacity limits and weak leisure demand may persist longer. We are addressing this challenge by working closely with airline partners and touristic stakeholders to strengthen [indiscernible] words, enhance connectivity and support sustainable traffic growth. Turning now to our financial performance. Aeronautical services increased by 2.6% compared to the third quarter of 2025. At our Mexican airports, aeronautical revenue grew by 5.3%, primarily due to the [indiscernible] implementation of the maximum tariff occurred for the 2025-2029 regulatory period. This growth was partially offset by the 7.5% appreciation of the Mexican peso versus the U.S. dollar, which negatively affect dollar-denominated international tariffs. In the America, aeronautical revenues declined by 12.7%, reflecting lower passenger traffic and the negative translation effect resulting from the stronger Mexican peso. [indiscernible] regulated tariff framework contributes to the revenue resilience during periods of softer passenger traffic. However, it does not completely offset the impact from lower volumes or exchange rate movements. Non-aeronautical revenues increased by 37% compared to the third quarter of last year. This performance was largely supported by the consolidation of CBX as well as the continued growth in the several business line operator help. Excluding CBX, revenues from directly operated business increased by approximately 13.7%. Cargo operations above the warehouse business grew by 20.7% reaching approximately MXN 674 million in quarterly revenues. This performance deserves particular attention because cargo logistics represents an important growth platform beyond passenger-related activities. Advertising grew 18.2%, [indiscernible] stores 11.6% and VIP lounges just 5.6%. The results show that our diversed strategy is producing [indiscernible] contribution. We see opportunities to expand our logistic services and our directly operated business subject to disciplined investment decisions and execution. Meanwhile, third-party business faced a more challenging environment, particularly those categories pose to the international tourist and foreign exchange pledges. For example, duty free revenues declined by 12.2%, reflecting the continued national passenger traffic weakness, especially at certain destinations. Despite a temporary setback, we anticipate that business lines will benefit from the gradual recovery of international traffic. Let me now provide an update on the cross-border Express. During the third quarter, CBX generated revenues of MXN 775 million, with approximately 1 million passengers using the facility in both directions. Average revenue per passenger reached $43 compared to the $42.8 during the second quarter of '26. Therefore, CBX contributed to MXN 558 million to our consolidated EBITDA during the quarter. [indiscernible] media financial contribution, CBX is an important cross-border mobility platform user growth by 8.4% despite a [indiscernible] contraction in traffic at [indiscernible] Airport, driving the capital rate of from 29.7% in third quarter of '25 to 32.4% in the third quarter of '26. These positive trends underscore clear opportunities to deepen customer penetration [indiscernible] commercial integration, optimized pricing strategies and expand complementary passenger services. This is still the early stage of CBX integration. As such, our priority is to convert these opportunities into sustainable revenue growth while maintaining the operational discipline and strong passing experience that we value at GAP. Moving on to the operating costs and profitability. Excluding the effect of the [indiscernible] 12, total operating expenses increased by 3.8% compared to the third quarter of 2025. Cost of service increased by 12.6%, excluding the contribution from CBX operation, primarily driven by personnel, maintaining and security experience across our airport network. Personnel expenses increased mainly due to additional operating staff, the integration of technical assistance employees, state adjustment and benefits. This increased together with the consolidation of CBX were partially offset by a significant reduction of [indiscernible] systems fees followed with the internalization of the services as well as lower concession fees in Jamaica. Internalized technical assistance services represent a structural change in our cost base, allowing GAP to remain more of the value generated by its operations. As a result, consolidated EBITDA increased by 19.2%, reaching MXN 6.1 billion, while the EBITDA margin excluding IFRS 12 spanned from 64.2% in the third quarter of '25 to 67.8% in this quarter. At the net income level, the stronger operating performance was partially offset by higher financial expenses associated with our investment program and the CBX transaction. This said, we continue to closely monitor our cost of debt, maintaining our financial flexibility and cash flow generation while executing our capital program. Regarding our investment program and financial position, we remain committed to executing the constructed projects included in our 2025-2029 after development programs in Mexico and the capital development programs in Jamaica with a total expenditure of MXN 8.6 billion during the first 9 months of 2026. Our current investment like represent the largest infrastructure expansion program underpaid by GAP's concession framework. The results are designed to increase airport capacity, increased operational efficiency and support the long-term development of our network. Our contract growth below our additional 2026 expectation, our regulated infrastructure commitments are long-term capacity and service requirements. For discretionary growth projects, we continue to evaluate expected returns, execution risk and capital needs before committed resources. The expansion of the Guadalajara, Puerto Vallarta and Tijuana airport along with additional infrastructure improvements across our network will position GAP to accommodate future growth while improving passenger experience and service quality. We expect that this [indiscernible] projects will generate continued commercial opportunity as new terminal capacity comes online over the next few years. Our focus remain on disciplined capital allocation distinguish between nondiscretionary concession commitments and strategic growth opportunities. In this matter, we effectively on our infrastructure demand, financial structures and shareholder distributions. Regarding dividends, as approved at our annual shareholders meeting in April 2026, we intend to distribute a cash dividend of [ MXN 12 ] per share in a single installment. We are currently in the final stage of updating our outstanding share count within the bank. Once this process is completed, we will formally announce the payment date. Regarding our full year 2026 guidance, we are maintaining our previously announced passenger traffic range of negative 3 to 2, achieving this range regard to meaningful improvement in fourth quarter traffic relative to the year-to-date trend. And it goes without saying that our outlook remains subject to our capacity demand conditions and the pace of recovery in organizational markets. Before concluding, I would also like to provide an update on [indiscernible]. We continue advancing through the process required for the [indiscernible] of [indiscernible]. Based on the current progress, we expect a [indiscernible] to be completed during November. Fibra Gas is part of the long-term capital strategy. We view it as a potential to the broadened funding alternatives improve capital efficiency and preserve flexibility to finance our airport investment programs. The transaction remains subject to the applicable process and conditions, and we will communicate in definite terms when appropriate. We will continue to keep the market informed as the process at pace. Before opening the line for questions, I would like to emphasize 3 key messages: First, our third quarter results demonstrate financial resilient even while passenger traffic remained under pressure. We are not assuming that recovery will be during [indiscernible], and we remain focused on improving connectivity and content [indiscernible] across our airport network. Second, diversification delivery measured results. CBX cargo and logistics directly operated business and the organization of technical systems are contributing to a broader and more profitable earnings base. Third, our long-term vision remains unchanged. We continue to execute there for infrastructure investment, expanding our commercial capabilities and strengthening our position in cross mobility, all while maintaining disciplined capital allocation. Passenger traffic is fundamental to GAP. At the same time, our third quarter performance illustrates how a more diversified [indiscernible] and mobility platform is stable to strength profitability and reduce reliance of any single growth driver. Thus, our focus remains on execution, operational efficiency and the creation of long-term value for our shareholders. Thank you again for your time. Operator, please open the line for questions.

[Operator Instructions] Our first question over the phone today comes from Rodolfo Ramos of Bradesco BBI.

Congrats on the results. I have a couple, if I may. The first one is on traffic. I mean, you talked about the challenges that the industry is facing. Just wanted to get a little bit more sense -- a little bit more color on how you feel within that guidance range that you just reiterated since as you mentioned, this implies an important uptick in traffic in the coming months. So just if you can talk a little bit about how you see perhaps the winter season shaping up this time around. And the second question is a bit on CBX. When you think about the pricing actions that you've taken there since taking control of the asset, how much more uplift you think you could see to the current $43 per user especially since you're also targeting to increase that capture rate. So it was useful to see how you see that panning out in 2027.

Talking about the traffic, what we are expecting for the winter season is, for sure, a really important increase on seats for the case of Jamaica, I think that just on the last week of October was in 1 year ago, Jamaica was hit by the [indiscernible]. So the recovery of the hotel infrastructure has doing pretty good. We are seeing an important comeback of seats for this winter season. So what we want to have for Jamaica is on 1 hand, a really important recovery, I would say, almost 90% of the total regional feedback that we used to have 1 year ago, will be in place for the winter. But sure also, you will have like a softer compare base as soon as you get on the last week of October. So that is 1 key driver for the recovery of the fourth quarter. And on the other hand, we are seeing that for Puerto Vallarta and for the case of Cabos and increase our numbers feet that are offering for the winter season just after the same [indiscernible] Day. So we are really optimistic about for the wood or really good winter season for the case of these both airports. Other efforts will be interested to talk about the new openings of fruits of international routes on Guadalajara, mainly from Volares, we just begin the -- just began the operation of Washington and [indiscernible]. So it's the beginning of something that would look like a really interesting wind and in some also for it. Going to CBX, we are still working on the pricing actions here. We are continually increasing the capture rate through marketing efforts in some specific routes. But also what we are seeing is that we will begin to work with different pricing strategies in terms of the low season and high season in the infrastructure, we know that all the services and the big difference that is crossing to the U.S. to CBX has a really important value for our passengers. And we also understand that in particularly high seasons, the demand will be more, I would say, we will have the chance to increase -- increase on strong dollars on that specific tariffs for the store. So what we are expecting is for the coming year, an increase on the revenue per passenger on CDX that will come for sure mainly from pricing actions, but also for commercial development. We are working in a new food and beverage area for CBX that it would be implied at the end of the coming year. But I will say that we are already working on that. So in general, we are still like high potential on the increase on the revenues for CBX, bringing some of the new developments on the commercial side in food and beverage mainly, but also in the price strategy.

Thank you, next question comes from Fernanda Recchia with BTG Pactual.

Just 2 follow-up here from my side. The first, talking about traffic, so maybe if you could elaborate a little bit further on the outlook for next year. You had provided an outlook for the winter season. But looking for next year, can we work with maybe mid-single digits of year-over-year growth? Is this feasible. And the second on the CBX, looking at the 9 months figure, we already saw that the division is running with close to 70% of EBITDA margin, which is above the high 60 when we will announce the transaction. So we already see some synergies from the integration, but maybe looking forward with this commercial activity that you mentioned, what is a running EBITDA margin that is feasible for us to assume looking to the medium to long term in CBX.

Thank you, Fernanda. This is Raul. I mean, talking about the 2027, we don't have like all the visibility because some of the ships, I mean, the airlines are still putting for sale. But I would say like in a third plan, we're expecting somewhere in the middle of mid-single digit for sure, and the numbers we're going to have like some effects on weaker comps. When we talk about the February of '26, for instance, for all the security matters of Mexico. And on the other hand, we're also going to have we say easy comps on Jamaica for almost all the years. So in our really first view, we will see something on the mid-single digits, for sure for coming years. For the case of CBX margin, yes, we are beginning to see some of the synergies that the group is bringing. What we are looking for the long term is something will be close to the 72% to 73% is what we think that it would be on the prefers moment achievable for CBX. For sure, it will be higher if we could deploy some of our commercial efforts in a really quick time, but I will say that this number between 72% to 73% will be like the natural number that we are expecting for CBX.

From JPMorgan, we have Guilherme Mendes.

I have a follow-up on the traffic for next year. Just wanted to understand how are you guys thinking about the Volaris and [indiscernible] potential M&A conclusion. If this is concluded by later this year, the mid-single-digit traffic that you were projecting at this point should be impacted by this? Or is it something that you already take into account when think about traffic into next year? And the second one is a follow-up on the initial remarks, Raul, you mentioned about the investments and the CapEx plan. You mentioned that you continue to evaluate the expected returns, execution risks. Just wondering if you have any flexibility on the investments, given the traffic has been relatively weaker than what it was expected when you signed the MDP plan.

Thank you, Guilherme. In terms of the traffic, the traffic and the possible merger on the new group of [indiscernible] and Volaris, it was already taking account on the numbers that we say. Let me put it out this way. At least from the summer of this year with the beginning of different the price of the oil, and they were in year-end, what we have looked well important change on the offer of seats from Viva and Volaris. So what we are seeing is that part of the possible effect on decrease on the offer, it's already happening. So on the number that on the single digit that we are expecting, we already taking account some of that effect of the possible merge. In terms of the CapEx plan, I will say that we have flexibility for the case of not committed investment as it could be on commercial new services or a new hotel or these kind of things that we are, I would say, reviewing the correct moment and the correct profitability. But for the case of the committed investment we don't have, at least for the moment any change on the plan. Seeing that for instance, our concession contracts in Mexico, it gives us a chance to open the master plan for some [indiscernible], but one of that is a decrease of the GDP of Mexico of at least 5%. We are far away from that. So for the moment, we don't have like, I would say, any kind of option for change the original plan from -- of CapEx for the committed area of the master plants in Mexico.

Next, we have Jens Spiess of Morgan Stanley.

Yes. So my first question is on tariff increases in Mexico. So when do you expect to do the next implementation of an increase and by what amount? And what's your completion versus maximum tariff would increase to what level after such an increase?

Thank you, Jens. Well, we are expecting this to increase the tariff on the first week of January in the coming year. We are expecting around -- I mean each offer will change in different ways because the fulfillment of the tariff is -- it's airport by airport, but I will say that we will have a compound increase around 7% is what we are expecting with that put in place we are stepping a 95% improvement of the tariff for the coming year. But what is important to have in mind that the appreciation or the depreciation of the peso has really a really important weight on the final fulfillment on the maximum target. But at least what we are foreseeing today is that the coming year, we will be around 95% of fulfillment on the maximum tariff.

Okay. Perfect. And on your full year traffic guide, do you still feel comfortable with the minus 3% to 0% growth or is there some downside to that number, given like the year-to-date performance and how flight schedules are looking like?

Yes. Now we are still in the same guidance for this year. For sure, there are like a lot of noise and a lot of adjustments on the offer from offer seats of the airline. But at the moment, we are still comfortable with the same guidance on traffic.

Okay. Perfect. And just one last question, if I may. On the internalization of the technical assistance fee I mean, all else equal, when you're negotiating your MDP with the regulator, this results in a lower cost, right? So would it all else equal results in a lower tariffs? Just keeping everything?

Hi, Jens. This is -- Okay. This is Saul. You are correct. We have already the transition of the [indiscernible] is already included in the calculation of the maximum tariff in our -- if they will change and I'm referring to the authority [indiscernible] the reason for tariff regulation. We will continue including part of the calculation of the maximum tariff. So obviously, if this is not included. We won't be able to include as part of the maximum tariff and we won't be recovered through the maximum tariff. I also want to say that we won't be able to collect because we will continue providing the service. So it probably is going to be as part of the TA, but it will be part of the operational expenses of the airports. And we included as our operating expense.

So on next, we have Pablo Ricalde of Itau [indiscernible] Banco.

Maybe thinking about the synergies on the CBX. I don't know if you can provide an update on how much -- now that you have consolidated it, how much do you expect to achieve from synergies coming from the CBX and when do you think synergies will be tangible on the P&L.

Thank you, Pablo. I mean the [indiscernible] is have begin to pass to CBX. It will be a drag, I would say, for instance, the maintenance of elevators, we have like a common contract for all the net of GAP and will be included on that contract. But it will be gradually because you need to wait of the finalization of the contract that have in place to the CBA. But what we're expecting is to fully implement all the possible synergies on the coming 24 months, it will be like when we are thinking that everything will be, I would say, all the plants will be in place in the specific case of the synergies.