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Morningstar | Pacifico Begins to Navigate a Flight Path Through a Turbulent Political World

Grupo Aeroportuario del Pacifico operates 12 airports near the Pacific coastline in Mexico and a set of Jamaican airports after its recent purchase of Jamaica’s concessionaire. We contend it boasts the most balanced travel network among the Mexican airport operators, capitalizing on robust domestic demand in Guadalajara, Mexico’s second-largest metro area, and Tijuana, which boasts high exposure to international tourist traffic. Owning and operating one of the five busiest airports in Mexico (Guadalajara), Pacifico commands the greatest percentage of Mexican air travel at 27%. Pacifico has more than doubled traffic capacity by investing across its system and enhancing offerings to both Mexico’s budding middle class but also its ever-growing tourism market.According to its government-granted concession, each airport must adhere to regulated fees charged to customers, and rates are adjusted periodically for inflation. Through its aeronautical activity, Pacifico assigns charges to airlines and passengers in exchange for facility use and landing at its airports. Conversely, on the nonaeronautical side, the operator reaps benefits from highly lucrative commercial activities.In addition to its operations in Mexico, Pacifico acquired a 74.5% stake in Desarrollo de Concessiones Aeroportuarias in 2015, the entity that holds the concession (until 2033) to operate Jamaica’s Montego Bay International Airport and recently won the right to operate the Kingston airport in Jamaica as well. Jamaican airports account for roughly 20% of Pacifico's revenue and represents the company's only airports outside Mexico. We view Pacifico's ownership of DCA favorably, provided the tariff framework instituted resembles regulations and conditions implemented in Mexico. The government in Jamaica works with concessionaires to set maximum rates and negotiate capital development plans in order to maximize passenger traffic at Jamaican airports. Montego Bay is Jamaica’s primary airport, essentially all passengers are international, and the U.S. dollar is the functional currency, lessening Pacifico's dependence on the peso.