June 26, 2010 Flying Forward

Volume 13 | Issue 3

After getting its start in 1998, Grupo Aeroportuario del Pacífico, S.A.B. de C.V., a company that operates 12 airports in the pacific region

Airline passengers flying to the pacific region of Mexico will most likely land at an airport operated by Grupo Aeroportuario del Pacífico (GAP), a company that operates 12 airports in Mexico. “Our airports are located in the Pacific and the Baja California regions,” explains Miguel Aliaga, investor relations officer at the company. “The majority of the airports in these areas are run by GAP.”

Since its beginning in 1998, the company has continuously improved and expanded the airports it operates. It currently operates the third largest airport in the country, located in Guadalajara. “We have airports in tourist areas such as Puerto Vallarta, Los Cabos, Manzanillo and La Paz,” notes Aliaga. In addition, GAP operates airports in the cities of Hermosillo, Aguascalientes, Guanajuato, Los Mochis and Morelia. Along the border U.S. border, it runs two airports, in Tijuana and Mexicali.

PRIVATIZATION OF AIRPORTS IN MEXICO
For many years, the Mexican government oversaw operations at airports throughout the country. In the late 1990s, however, due to the increasing needs of the airports, the idea to privatize some of the operations developed. By 1998 the Mexican federal government privatized the majority of the country’s airport operations.

Three new companies were formed: GAP, Grupo Aeroportuario del Sureste and Grupo Aeroportuario del Centro Norte. “Of these three, GAP is the largest,” Aliaga points out. When GAP was first formed, the government retained an 85 percent share in the company. The other 15 percent was held by Aeropuertos Mexicanos del Pacífico (AMP), which is comprised of three companies: Corporación Mexicana de Aeropuertos, Desarrollo de Concesiones Aeroportuarias and AENA Internacional.

On February 24, 2006, the Mexican government sold its share of the company. Today, company’s shares are listed on both the New York Stock Exchange and the Mexican Stock Exchange. AMP continues to have a 15 percent share of the company. “The remaining 85 percent is diluted in stock markets in various countries,” says Aliaga.

INCREASE IN TRAFFIC
In 2005, low-cost carriers entered the Mexican market, and airports throughout Mexico felt the effects. “Traffic increased so quickly that some years we experienced double digit growth,” Aliaga notes. “In 2007, GAP grew nearly 15 percent.”

This jump in traffic was followed by a 2008 dip, when global oil prices skyrocketed. During that year, four Mexican airlines dropped out of the market. These events led to a decrease in passengers traveling, resulting in a 5.6 percent drop in traffic for GAP.

At the end of 2008 and the beginning of 2009, the world’s economic crisis affected air traffic in Mexico. Also, in 2009, news related to the H1N1 virus caused flights to Mexico to decline. During this time, another airline dropped out of the Mexican market. GAP ended the year with a 13.3 percent drop in traffic.

Despite the recent decline in traffic, GAP is expecting a turnaround in flights. “Our guidance is expecting to see a 4 to 6 percent increase in traffic,” says Aliaga. Company officials expect this pattern to continue in the coming years, thereby recovering lost traffic.

Even with fewer passengers flying, GAP continues to serve airlines and travelers in the airports it operates. Last year, it moved 19.3 million passengers, notes Aliaga. Its largest airport, located in Guadalajara, moved 33 percent of GAP’s total passenger traffic. Tijuana’s airport moved 18 percent, while Puerto Vallarta’s airport moved 14 percent and the airport in Los Cabos moved 13 percent. “Nearly 80 percent of our total traffic came from our four largest airports,” says Aliaga.

The majority of passengers traveling through GAP airports come from other areas of Mexico. Domestic travel counts for 66 percent of the traffic going through GAP locations. For international travel, nearly 95 percent comes from the United States. “We have some direct flights from Canada. We even have some traffic from Shanghai and Tokyo. These flights stop in Tijuana and then go on to Mexico City,” says Aliaga, “but the majority of our international traffic consists of passengers coming from the United States.”

AIRPORT IMPROVEMENTS
Although GAP was founded more than 10 years ago, it has been a publicly held company for just four years. Today it has both ISO 9001 and ISO 14001 certification and has been recognized as one of the best employers in Mexico. “We have all the certifications and requirements listed for international airports,” explains Aliaga. “All of our airports have the facilities and equipment to receive international flights.”

High standards have attracted a growing number of airlines to use GAP airports. “Practically all Mexican airlines fly to our airports,” says Aliaga. Most of the main airlines in the United States also travel to and from GAP locations.

According to Aliaga, the company focuses on efficiency in all of its operations. “We look for the best providers in the world in terms of quality and price, and we establish long-term relationships with them.” It also builds long-term relationships with its clients, both the airlines it works with and the commercial spaces it rents in its airports. “We’re always looking for ways to improve our processes and bring more passengers to their destinations.”

INVESTING IN THE FUTURE
GAP has two main sources of revenue: aeronautical and commercial. “The bigger of the two is aeronautical,” says Aliaga.

Airlines pay landing and parking, among others fees. Departing passengers pay passenger fees and all the specific tariffs, among others. Every five years the Communication and Transportation Secretary negotiates with GAP a maximum rate for each airport

The passenger charge represented approximately 82.4 percent of the total airline revenue in 2009, notes Aliaga. The remaining aeronautical revenue comes aircraft space rental agreements, catering companies, and ground handling companies.

The remaining percentage of the company’s income comes from commercial spaces rented in the airports. “We use a model that is very similar to the setup for commercial centers around the world,” says Aliaga. “We have duty-free stores, food and beverage shops, convenience stores, luxury stores, VIP lounges, cafeterias and fast food places. On the exterior we have convenience stores, gas stations and terminals for private jets and flights.”

During its years of operations, GAP has continually invested in its airports. “Each airport has a minimum amount of money it needs to invest to meet government requirements,” say Aliaga.

The five-year agreement (January 2010-December 2015) that GAP has with the Mexican government involves investing 3.1 billion pesos. “We need to invest this amount, which is nearly 300 million dollars, in order to maintain our airports. If we don’t, we could be in danger of losing our concession to run the airports,” explains Aliaga.

The company has already made dramatic improvements in many of its facilities. In Guadalajara, for example, in 2000 the company had 20,000 square meters of terminal buildings. By the end of 2009, it had 47,000 square meters. GAP also has plans to develop hotels, build more terminals, add gates, build new runways, and expand commercial areas in its other airports.

Since it first began, GAP has sought ways to improve the airports it operates. “We’re always looking for ways to keep growing and developing. We know there are many opportunities, and we’re making the most of what we have,” says Aliaga.

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