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

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

Thank you, and welcome to GAP's Second Quarter 2026 Conference Call. Prior to introducing GAP's management team, I'd like to take a few moments to mention the 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 future 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 report issued previously. . Thank you for your attention. It is my pleasure to turn -- introduce our speakers from GAP today, who will be discussing with you the operational and financial highlights for the second quarter of 2026. These are 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. The second quarter of 2026 has a resilience of GAP's business model. passenger traffic declined by 5.6% compared with the second quarter of 2025. Nevertheless, revenue, excluding construction services, increased by 4.9% and EBITDA grew by 8.4% and EBITDA margin expanded by 230 basis points to 69.3%. The reserves reflect the combined strength of our diversified airport portfolio. The continued growth of business operated directly by GAP, the initial contribution from the cross-border express, the rate implementation of approved tariffs and the interaction of technical system services. While we are not satisfied with the current traffic performance, this quarter demonstrate that GAP is increasingly capable of protecting earnings and generating growth through multiple complementary revenue streams. Let me begin with passenger traffic. During the second quarter, total passenger traffic across GAP's network of our tenets declined by 5.6% versus the second quarter of 2025, reflecting a combination of factors affecting both our Mexican and Jamaican operations. India Marica, will continue to experience the impact of races while the recovery of hotel capacity along the main tourist corridor gradually continues, it has not yet returned to the pre-term levels. However, with the hotel opening points to stand recovery throughout the second half of this year. If this continues, we expect passenger traffic will continue to strengthen in the coming months. The operating environment in Mexico remains challenging throughout the period. While airlines practice manage capacity in response to the current economic environment, pricing jet fuel costs continue to pressure airfare prices. In addition, international issue, demand for some of our destination are affected by security concerns, including the security incident Puerto Vallarta during the previous quarter as well as various travel and battery issued by the U.S. government as a result. International traffic drove the quarter decline highlighted by the 27% reduction in international passengers at Puerto Vallarta. We are actively partnering with airlines and regular tourist stakeholders to rebuild work connectivity and boost traveler confidence in this area. In the month of June, the Guadalajara hosted 4-5 FIFA World Cup matches. We are proud to highlight that this demonstrate the operational strength of the Waha. Throughout the tournament, the airport successfully handled additional charter flight as well as the arrival of national teams, official delegations on time. Despite heightened security protocols, operations remain normal preserving excellent standard service level for both daily passengers and airline partners. As a result, traffic were higher, airport rose by 6%. This was partially offset by a temporary softening business and leisure travel at the gate per the World Cup. We expect this demand to normalize in July following the competition of the target. We believe that a significant portion of the headwinds affecting traffic is temporary. Although the pace of normalization will vary by market. Our revised guidance does not assume an immediate of complete recovery. Instead, it refers a gradual improvement but supported by 19 new routes launched during the quarter, the contribution of new frequencies that began operation in June, the gradual restoration of hotel capacity in Jamaica and more favorable year-over-year comparison during the second half. During the financial results, Aeronautical revenue decreased by 3.2%, primarily due to the lower passenger traffic both in Mexico and America, as well as a 10.9% appreciation of Mexican peso, which negatively affect the translation of revenue generation in U.S. dollars as well as international passenger charges. It is important to highlight that those effects were partially offset by the gradual implementation and maximum tariff approval for the 204-2029 regulatory period in Mexico. Aeronautical revenues increased by 23.9%, supported by continued growth across the business lines operated directly by cap as well as the consolidation of the cross-border experience beginning of the first of May of this year. Without considering the consolidation of the CBX, revenue from the business lines operated regularly cap once again delivered strong growth, increasing by 17% despite lower passenger traffic. The caravan bonded warehouse operations grew by 22%, advertising by 58%, hotel operation by 27%, convenience store by 11% and parking by 9%. Let's just take a pause here because this demonstrate that GAP's commercial strategies not solidly depend on passengers volume. The commercial strategy we have in place increasingly reflects our ability to improve monetization, expand directly operated platform and capture a greater share of passengers and logistic-related spend. Thus, this means are becoming a more significant source of recurring earnings and central to our strategy of building a more diversified infrastructure platform. At the same time, business that are more directly exposed to international issue traffic and for exchange, including duty-free and VIP lounge remain under pressure. We expect these categories to improve as international traffic rather than records. In terms of CBX, this operation generated revenue of MXN 168 million during the month of May and June, when we experienced over 626,000 batteries using the facility going in both directions. This generated an average revenue of $42.8 per passenger, which is aligned with the GAP expectations. Our total CBX traffic figures remain below those of the proved year, this an initial financial contribution demonstrates the strength of reference of price and commercial cost. We continue to see opportunities in dynamic pricing ancillary services, partner experience and improved connectivity between Juana and Southern California. Moving on total operating costs, deal remain relatively stable compared to the same period of the last year. The result includes the positive effect of the reversal of the technical system fee provision due to the internalization. It also includes 2 months of CBX operation expenses and the one-off merger net expenses. Excluding these effects, operating expenses increased by 3% compared to the second quarter of 2025. Cost of service partner increased due to the higher personnel expenses, maintenance costs and security expenses across our airports network. As a result, EBITDA increased by 8.4%, reaching MXN 6 billion during the quarter, and EBITDA margin was 69.3%. In terms of our financial position, we continue to maintain a solid liquidity profile. The business combination contributed by MXN 5.4 billion in cash and cash equivalents and further strengthen scale and diversification of our asset base. Moving on to the CapEx, we continue to execute our investment program on the '25, 2029 master development plan in Mexico and our capital development programs in Jaman. Our investment remains focused on expanding airport capacity, improving our passenger infrastructure, enhancing passenger experience too, all while supporting the long-term growth of our airport network. Let me now turn on the revised 2026 growth guidance. Considering the consolidation of CBX, interdiction of technical assistance services, current passengers traffic trends and the progress of the company investment projects we have updated our annual expectations. Currently, we expect marketer traffic to land at a range of between minus 3% and flat growth. As Glanto mention that this or reflects a gradual improving during the second half, but not assume that all airports return to the world at the same time or that Puerto Vallarta's and Montego Bay achieved a complete recovery during 2026. Aeronautical revenues are expected to increase between 1% and 4% supported by the implementation of tariffs approved by the authority for our airports mix. Nonaeronautical revenue are expected to grow between 21% and 24% driven by the performance of GAP operator business as well as the consolidation of CBX. Aviation is expected to grow between 10% to 12%. This would yield an EBITDA margin of approximately 67% plus or minus 1%. This reflects among other factors, the internalization of technical systems and technological transfer service. Finally, CapEx is expected to be around $14 billion. This includes $9 billion for committed investment at airports in Mexico under the master development program, $2 billion for investment at airports in Jamaica and $1 billion for commercial investments. As follow-up, we continue to undergo to the approval of process with the relevant authorities to incorporate Fibra with the objective of subscriber and minority equity interest in the 12 Mexican airport concessionary. We expect this to go to during the third quarter of this year, and we will give you information of any update on this process. Before concluding, I would like to emphasize 3 points. First, despite the 5.6% overall decline in passenger traffic, the stronger airport business protect the company earnings capacity. Note the reported EBITDA increased by 8.4% and the EBITDA margin expanded to 69.3%. Second, our diversification strategy is already producing measurable results, excluding CBX, business operated directly by GAP grew by 17%, while CBS contributed to MXN 16 million in EBITDA during the first 2 months of the consolidation. Third, our long-term strategy remains unchanged. We continue investing in airport capacity, commercial platform, logistics and across border mobility while maintaining disciplined capital allocation. This quarter demonstrates that GAP is no longer dependent on a single growth driver. Traffic remains fundamental to our business, but approval directly operated commercial business, logistics, CBX and internalization of technical assistance service provides complementary source of earnings and residents. Thank you again for your time. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Rodolfo Ramos of Bradesco BBI.

I've got 2 questions, if I may. The first 1 is about your traffic guidance. I mean we're never too optimistic on the World Cup effect and -- but we were surprised by how weak performance was during the month of June, not just for you but for the system. Now looking at your guidance, it implies a better performance in the second half, as you mentioned, some of these factors. But can you elaborate how do you see them playing out in that recovery and perhaps some thoughts on your expectations for 2027. And second, if I may, can you update us on the FIBRA listing? And if you can, just to share a little bit of visibility and clarity on the rationale. Can you put a ballpark figure. I know it might be difficult, but how should we look at your effective tax rate post this FIBRA transaction?

Thank you, Rodolfo. This is Raul. In terms of our traffic guidance, what we saw with the workup in the molecule we saw a really important change on the airfare, but in some way, we accelerated the demand for mainly domestic travelers issue and business made that in a normal amount will come to some of the different airports. So what we saw is, I would say, a temporary effect of some passengers that did not fly during the World Cup, both efforts for sure. And we just see some kind, I would say, a substitution of it, let me put it this way. The business traffic that usually comes to Guadalajara or even Tijuana was in some way changed the seat change or taken by funds or by people coming for all for the matches. So what we are seeing for the coming months is we are seeing at July that will bring some of these lack of domestic passengers passenger that will come or will make leisure, domestic passing in Mexico. And in some way that they avoided to fly during June for the world cup, but we are seeing that will fly on July. For the rest of the months, what we are seeing is some additional seats coming for some of our mainly leisure destinations. We are seeing also different opening happening on domestic market mainly by Volaris. So in general terms, we will see that -- the end of the year is going to be, I would say, a flat result for the 12 months of the 2026.

This is all related to FIBRA. As you know, you see this is a different from that is our first came on this, we are in the process of the incorporation of the trust we are not really, really advanced. We are in the final process for meetings with the different investors. As you may know, as a new instrument for financing the MDP, there are several concerns on this. And obviously, we are trying to move forward, and we believe that the following weeks will be ready to launch the FIBRA. . On the other hand, related to the expected tax rate, this vehicle will be transferring for tax purposes, but it will be only at the Mexican airports. At the end, we will be transferring dividends directly to GAP without paying taxes at the airport level, but at the GAP level, we will be paying taxes as a regular company. So there will be any expected benefit on tax -- so what do we expect is the same tax rate, basically, we will have a period of transition probably during '26, '27 in which we could obtain a little decrease in terms of tax because the tax shield of the interest, but it will be only a temporary effect that won't be permanent. So in general terms, I would say there won't be any change in the effective tax rate for GAP.

Next, we have Julia Orsi of JPMorgan.

So we have 2 topics on our side. The first one, can you comment a bit on the tariff compliance level that reached on second quarter? And what do you expect to reach by year end? And the second one is a follow-up on traffic trends. So -- can you comment on 2027 trends? I know that it's still early, but it would be good to have your color on this. Thank you.

Thank you, Julia. This is Raul. I mean on the first next 6 months of the year, we have 90% of fulfillment of the maximum target we are expecting that for the end of the year will be something around 95%. We just changed on the 1st of July, again, tariff in cabo and for tolerant, mainly the passenger fee for domestic passengers will increase and from beginning of July 1. So what we are seeing in general terms is that we will be really close to this number of 95% together this year for sure, taking in account what will happen with the fixed rate with the dollar and peso with exchange rate. But in general terms, is our views on that. For the 2027, I will say that it's pretty early to have this kind of -- could have some kind of view on the number. I would say that we have like to big effects to have in mind. The first 1 is we made with the price and oil and the world and how would this continue past in some way the cost of the airline and that way, the possible available offer in the terrestrials. And the second one is related with the domestic market. We need to have some kind of additional visibility of what will happen with the merger transaction on Viva and Polaris that could affect in some way the growth for the coming year. I would say that in general terms, for sure, we are expecting some growth in the coming years, we will not have the effect of the new rise in the coming year but at least what we are seeing on the trend of the recovery of hotel capacity in Jamaica for the end of this year, everything is going to be normalized. So in general terms, we are seeing that the coming year will be positive, but today, it's difficult to see which is like a range of growth that we will see.

Next, we have Pablo Ricalde of Itau Unibanco.

I have 2 questions. The first 1 is an update on Jamaica. How are you seeing traffic trends only in Jamaica for second half of the year? I know you will face easier comps over around December, but maybe you can provide some color on how you're suing like hotels the airports and logistics in the Ireland. And the second 1 is on your guidance, which effect assumptions you are using for the construction of the new guidance? That's it on my side.

I will interrupt. In terms of the Jamaica, what we are seeing is the number of seats for the case for instance of MEG on the -- just on November of last year when the hurricane hit very relies decrease of sales of almost 80% bond by month, on '26 we will see a real robust economy, for July, we are seeing -- we are still buying at minus 20% in terms of seats versus 2025, July 2025. But what is interesting and we'll see when we see the loss and all the capacity that is today planned for the winter, we are at least in terms of ship a full recovery for November and December and all the winter season for Jamaica. So for sure, it will be interesting to see how the demand reacts but at least in terms of the offer, we are seeing a recovery, almost a full recovery for the other in terms of seat capacity.

Pablo, this is all related to guidance. Well, first of all, beginning with the passenger traffic. As Raul mentioned, we are expecting a second half much better than the first half. In front, we have a huge challenge moving from a minus 5.6% to our guidance that would be minus 3% to flat growth. It is very relevant to see that at the end, we are expecting a better help. In terms of the root revenues, you know that we have been gradually updated our aeronautical tariffs in Mexico. So we continue with that in January and we made another adjustment a little adjustment in July. So in the second half we will have that little effect that will be only for Puerto Vallarta and Cabos. And secondly, nonaeronautical revenues, the integration of CBX is very, very relevant for this business line and the consolidation from May support that comes for the second half of the year. So at the end, those are the major assumptions that are considered or were considered to build the guidance. So we are providing -- now we have more visibility about the CapEx and obviously is the number that we are providing and that we are expecting -- so that's basically the assumption for the guidance.

But maybe a follow-up on that, which effect assumption for the Mexican peso, it's embedded on the 10% to 12% EBITDA growth guided for 2026?

We are not seeing any change in that. We have seen very steady the exchange rate during the last months. We are expecting second half on average MXN 17.5 per dollar -- so it's nothing relevant on that.

So we are in a comparison base, it is important.

Yes, that will be basically the same in the changing just to consider in the guidance, right? .

[Operator Instructions] And we'll proceed with our next phone question from Enrique Cantu.