Gap outlines new routes and tariff hikes while targeting 55% terminal expansion by 2029

Earnings Call Insights: Grupo Aeroportuario del Pacífico (PAC) Q3 2025

MANAGEMENT VIEW

* CEO Raul Musalem announced that despite a slowdown in international passenger traffic, GAP achieved growth in total passenger traffic across its 14 airports, increasing by 2.5% compared to the same period in 2024, reaching 15.8 million passengers. Musalem attributed international passenger declines to "the immigration-related challenge and a more restrictive perception under the current U.S. administration," and ongoing Pratt & Whitney engine issues affecting airline capacity.
* Musalem stated that "total revenues increased by 17.4% versus third quarter '24, driven by the solid performance of both the aeronautical and non-aeronautical business." Aeronautical revenue rose by 18.3%, with a new phased maximum tariff increase—first 15% in March and then an additional average 7.5% in September. Non-aeronautical revenues grew by 15.6%, underpinned by the expansion of commercial areas and the consolidation of cargo and bonded warehouse businesses.
* Musalem highlighted that "during the fourth quarter, 8 new international routes to Canada will be launched... which will enhance passenger traffic and support demand during the high winter season." Los Cabos will be connected directly to Panama for the first time, opening new access to Central America.
* Musalem reported that "EBITDA grew by 12.8%, reaching MXN 5.1 billion with an EBITDA margin of 64.3%, excluding IFRIC-12." Margin pressure was mainly due to concession fee increases for Mexican airports, from 5% to 9%.
* GAP ended the quarter with MXN 11.7 billion in cash and cash equivalents, completed a bond issuance of MXN 8.5 billion, and invested MXN 7 billion in CapEx for infrastructure projects. The company also refinanced a USD 40 million credit line, focusing on balance sheet strength and flexibility.
* Musalem shared that GAP is analyzing the potential acquisition of Motiva Airports and awaits the outcome of the Turks and Caicos tender, stating that "the process related to Turks and Caicos tender remains ongoing... no resolution has been announced yet."
* CFO Saúl García explained, "the level of costs that we will see in the following quarters is very important to understand that in the way we increase the facilities in the airports, we increase the headcount, security, cleaning, et cetera. So it is part of the business."

OUTLOOK

* Musalem stated, "for the coming year, we are thinking that on the early February of coming year, we will increase again our tariff," and expects for 2026, "we want to have in place the effect of 3 different moment of tariff." Management projects that by the end of 2026, tariff fulfillment will be "around between 93% to 97%."
* Musalem noted that macroeconomic uncertainty and exchange rate volatility may pose short-term challenges but expressed optimism due to a resilient domestic market and diversified airport portfolio.

FINANCIAL RESULTS

* GAP reported a 17.4% increase in total revenues versus the prior year quarter, with aeronautical and non-aeronautical revenues both showing double-digit growth. Revenue from business directly operated by GAP rose by 30.1% due to the cargo and bonded warehouse segment.
* EBITDA reached MXN 5.1 billion with a 64.3% margin, lower than the previous year due to higher concession fees. The company ended the quarter with MXN 11.7 billion in cash and executed MXN 7 billion in CapEx during the first nine months.
* The cost of services increased by 14.1%, largely because of taking direct control of operations like jet bridges and airport buses, which were previously outsourced.

Q&A

* Rodolfo Ramos, Banco Bradesco BBI, asked about traffic dynamics and guidance. Musalem responded that the VFR market is seeing a "deacceleration" due to U.S. immigration concerns but expects recovery beginning next year, citing announced seat capacity increases.
* Ramos also inquired about the duration of strong top-line growth in non-aeronautical business. Musalem indicated that "at least in the coming 3 to 4 years, we will grow in a faster pace than the other business operated by third parties," with new terminal openings and expanded FBO and hotel operations planned.
* Guilherme Mendes, JPMorgan, followed up on costs and EBITDA margin guidance. García stated that "we will see this level in the following quarters," and Musalem confirmed that guidance remains on track. Mendes also asked about tariff increases, with Musalem outlining the phased increases and their expected impact in 2026.
* Jens Spiess, Morgan Stanley, questioned the Motiva acquisition strategy. Musalem said GAP is "open for partnership or for going alone," and any funds for the acquisition would come from leverage.
* Gabriel Himelfarb Mustri, Scotiabank, asked about tariff increases and fulfillment. Musalem expects around 95% fulfillment by the end of 2026, subject to regulatory process.
* Jorge Vargas, GBM, asked about the Motiva acquisition timeline and rationale. Musalem projected a final decision by mid-November, emphasizing "diversification among our main business" as a strategic rationale.
* Edson Murguia asked about new routes from Los Cabos and cargo business expansion. Musalem and García highlighted the strategic importance of new routes and the intention to replicate the cargo bonded warehouse business in other airports.
* Maria Barona relayed a question about aeronautical tariff decline, to which García attributed the decrease to lower international traffic and peso appreciation.
* Alan Macias, BofA Securities, asked about international traffic at main airports, with Musalem noting a 5% decrease at Puerto Vallarta but expecting a rebound in the coming year due to increased Canadian and U.S. seat capacity.

SENTIMENT ANALYSIS

* Analysts pushed for clarity on traffic recovery, cost trends, and acquisition strategy, with a neutral to slightly negative tone regarding international traffic softness and margin pressure.
* Management maintained a cautiously optimistic stance, using language such as "we are still optimistic," and expressing confidence in recovery and execution of strategic plans.
* Compared to the previous quarter, analyst tone remains focused on headwinds and guidance sustainability, while management's confidence appears consistent, emphasizing resilience and growth opportunities.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter saw a continued focus on tariff implementation, cost management, and expansion of commercial operations, compared to last quarter's emphasis on traffic growth and new route announcements.
* Guidance language remains consistent, but management provided more detailed projections for tariff increases and fulfillment rates in 2026.
* Analysts shifted focus from general market trends to more pointed inquiries about acquisition timing, cost structure, and tariff realization.
* Key metric changes include a reduction in EBITDA margin due to concession fee increases and a slower growth rate in total passenger traffic compared to Q2.
* Management sentiment is steady, while analyst caution around international traffic has intensified.

RISKS AND CONCERNS

* Management identified ongoing risks from "macroeconomic uncertainty and exchange rate volatility," as well as continued pressure on international passenger numbers due to U.S. immigration policy and aircraft engine issues.
* Cost increases are being managed through operational discipline, but new regulations requiring direct operation of certain services have increased expenses.
* Analysts raised concerns about the sustainability of margins and the impact of external factors on traffic and tariff realization.

FINAL TAKEAWAY

GAP leadership underscored solid revenue and EBITDA growth for the third quarter, buoyed by tariff increases and expanding commercial operations, while acknowledging challenges from international traffic headwinds and cost pressures. Management reaffirmed its focus on network expansion—including new routes and significant terminal growth through 2029—and remains optimistic about long-term value creation, supported by robust liquidity and disciplined execution of its investment and strategic acquisition pipeline.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/pac/earnings/transcripts]

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