Grupo Aeroportuario del Pacífico SAB de CV Q1 FY2024 earnings call

• Passenger Traffic: Total passengers nearly 16 million, almost flat vs Q1 2023. International market growing double-digits. Plan to initiate at least 11 new international routes in 2024 (9 to North America, 2 to Europe).
• Financials: Top line almost flat. Aeronautical revenue down 1.3% due to discounts in 9 of 12 Mexican airports. Non-aeronautical revenue up 15.2% to MXN1.7B. Expenses up 10.3% due to labor law changes, inflation, etc. EBITDA MXN4.6B, margin 69.8%. Net debt-to-EBITDA ratio 1.7 times. CapEx approximately MXN1.4B.
• Developments: Renegotiated tenant contracts. Guadalajara airport has new terrace, food & beverage area, mixed-use building with new hotel opened in March 2024. Sustainability-linked debt bonds issued for carbon reduction.

Total passengers for the quarter reached nearly 16 million, nearly flat compared to Q1 2023. Aeronautical revenues decreased by 1.3%, reaching 97% of the maximum tariffs approved (compared to 99% in Q1 2023). Non-aeronautical revenue saw a 15.2% increase, reaching MXN1.7 billion, and the company achieved MXN109 per passenger for the first time. Total revenue was almost flat compared to Q1 2023. Aeronautical revenue contribution: Approximately 97% of total revenue (excluding non-aeronautical). Non-aeronautical revenue contribution: Approximately 3% of total revenue (approximate).

• Expect worst part of Pratt & Whitney engine supply crisis in third and part of fourth quarter. Guidance expects recovery in 2025. Will update full-year guidance in second quarter after more visibility on engine review and traffic trends. Expect non-aero revenue increase of 12%-14% in 2024. Plan to initiate at least 11 new international routes in 2024, including 9 to North America and 2 to Europe.

• Pratt & Whitney engine preventive inspections continuing in 2024, potentially limiting capacity in third and fourth quarters. Volaris has highest number of grounded aircraft.
• Labor law changes affecting major cost lines including salary, cleaning, security, maintenance. Inflationary effects and airfield/terminal expansion leading to higher costs.
• Uncertainty in master plan negotiations with authorities regarding tariff and CapEx, including timing of authorization for master plan updates.

Q: How are MDP negotiations going with authorities, specifically on tariff and CapEx?

A: Still working with authorities, presented first draft of master plan. Expect increase in maximum tariff around 0%-5%, but discount rate impact uncertain. CapEx around MXN110 per passenger, with major projects in Tijuana, Guadalajara, Cabo.

Q: Timing of regulatory reviews for Jamaican airports and chance of concession extensions?

A: Working well with Jamaican authorities, have final proposal but can't disclose yet as official document not signed.

Q: Guidance on full-year after concession fee accounting effect?

A: Will update full-year guidance in second quarter after more visibility on Pratt & Whitney review and traffic trends.

Q: Aeronautical revenue flat year-over-year with lower TUA?

A: Applied 6% discount on TUA for 9 airports, expecting to be close to 97%-98% of maximum tariff by end of year, influenced by exchange rate and international passenger traffic in dollars.

Q: Impact of labor law on costs and headcount?

A: Labor law impacts major cost lines, but management aims to maintain cost control; not hiring additional headcount unless new business lines open.

Q: Pratt & Whitney effect on passenger traffic in last two quarters?

A: Worst part of supply crisis expected in third and part of fourth quarter, but recovery expected in 2025.

Q: Contribution of non-aeronautical factors (renegotiated contracts, new projects)?

A: Non-aeronautical revenue growth due to terminal expansions, renegotiated contracts, food & beverage, retail; parking lots also contributed positively even with flat passenger numbers.

Q: Top line benefit from international vs domestic passenger mix?

A: Change in mix is positive, with international traffic potentially bringing more duty-free and other revenues than domestic traffic.

Q: Effect of concession rights legislation amendment on double charge?

A: Clarified in legislation, no expectation of double charge.