EUR 850.00 For Business Accounts Only

Morningstar | Centro Norte Looks to Capitalize on Resilient Mexican Air Travel Market

Grupo Aeroportuario del Centro Norte serves about 15% of the Mexican air travel market, and total passengers transported in 2018 increased about 10%, to 21.6 million. Even though it manages the most domestic airports among the three premier operators, it still services the smallest portion of total travelers due to materially fewer international travelers. Centro Norte serves smaller tourist destinations, but lacks a major hub for leisure traffic. Its airports serve areas and populations centered around economic activity, including mining, manufacturing, agriculture, and other industrial activities. Due to the lack of international travelers, which are generally higher margin, Centro Norte draws less of its revenue from non-aeronautical or unregulated revenue and its operating margins generally lag competitors, but the total still came in above 60% during the latest fiscal year.According to Centro Norte's government-granted concession, each airport must adhere to regulated fees charged to customers, and rates are adjusted periodically for inflation. The airport operators must comply with the Master Development Program, or MDP--a plan constructed to lay out maximum rates and required minimum expenditures every five years. In the past, few direct routes were offered to passengers, as Mexico City served as the central station and ultimate connector between ports. However, enhanced infrastructure and greater consumer spending power has increased routes throughout Mexico and lessened the dependence on Mexico City, allowing Centro Norte to lessen its dependence on the major hub. That said, because of its higher dependence on more regionally focused airports, Mexico City remains vital to Centro Norte's traffic flow. To boost nonaeronautical revenue, Centro Norte expanded into other commercial activities, including hotels, warehouses, and other complementary services. Centro Norte's team has strung together several years of consistent non-aeronautical or unregulated revenue growth, and we believe management will continue seeking opportunities outside of traditional airport assets to bolster its unregulated income.