Equity Analysis /

AIRPORTS (March): Domestic passenger growth surprises

  • Passengers from airports in Mexico operated by Asur, Gap and Oma remained practically unchanged in March annually

  • Regarding total operations, Asur posted a 11.3% rise in passengers, while Oma recorded a -3.0% decrease and Gap -4.6%

  • From April onwards we would see significant increases in passengers due to an easy comparative basis and better demand

Jose Itzamna Espitia Hernandez
Jose Itzamna Espitia Hernandez

Senior Equity Research Analyst, Infrastructure, Materials and Transportation

9 April 2021
Published byBanorte
  • Passengers at the airports operated in Mexico by Asur, Gap and Oma remained practically unchanged in March in annual terms, highlighting the rise in domestic passengers

  • Regarding total operations (including those outside Mexico), Asur recorded a 11.3% growth in passenger traffic, while Oma recorded a -3.0% decrease and Gap -4.6%.

  • Being almost at the inflection point, from April onwards we would be observing significant increases in passengers due to an easy comparative basis and a better evolution in demand

Total passenger traffic for the 3 airport groups during March registered a marginal variation of -0.1% y/y (airports operated in Mexico), vs -51.3% in February. It is worth noting that passenger performance far exceeded our expectations of a -27.0%e contraction, supported by a more natural comparative base due to the onset of the pandemic in March 2020, as well as a favorable effect from the start of Easter vs. April of the previous year.

Outstanding was the domestic passengers (68.3% of total aggregate passengers), with a 8.6% y/y growth, while international passengers continued to be weak, with a 14.7% drop, impacted by the restrictions on travelers by the US and Canada.

Individually, Asur posted an 11.3% y/y jump, driven by a slight 0.2% y/y rise in passengers in Mexico, as well as higher increases of 42.9% in San Juan Puerto Rico and 22.0% in Colombia. On the other hand, Gap showed a 4.6% y/y reduction in total passengers in March. Passenger traffic at the airports it operates in Mexico, that is, excluding Montego Bay Airport in Jamaica (down 50.5%) and Kingston Airport (a 409.6% decline), was up 1.2% y/y. Finally, Oma showed a 3.0% y/y decline in total passengers.

Asur, Gap and Oma's total L12m passenger variations stood at -60.9%, -52.6% and -59.8% (April 2020 - March 2021), compared to L12m as of February 2021 of -62.7%, -53.6% and -60.6% (March 2020 - February 2021), respectively.

Corporate news  

·      Asur concluded the extraordinary review process of the maximum rates and investments for the airports it operates in Mexico for the period from 2021 to 2023. The new total amount of investments for such period is ⁓11.0% lower than initially expected and there was an increase in the maximum rates applicable to the airports. It is worth mentioning that both investments and tariffs were slightly higher than our estimates.

·      Gap noted that the volume of seats offered in March was down 22.7% y/y, but that the load factor during the month increased by 13.1pp from 57.1% in March 2020 to 70.2%.

·      Oma announced that, at the Shareholders' Meeting to be held on April 21, 2010, the Board of Directors will propose the payment of a cash dividend of up to MXN 2.0 billion, which we estimate to be equivalent to a ratio of MXN 5.13 per share and, therefore, a 3.8% yield at current prices.

Conclusion... March passengers at the airports operated by private groups in Mexico showed a much better performance than expected, practically reaching the inflection point we expected in April. Considering also operations outside Mexico, Asur stood out for showing a year-over-year increase, while Gap registered the largest decrease in the aggregate. For the coming months, we forecast strong growth in passengers due to a much lower comparative base and a better demand evolution, mainly on the domestic side, as the international traffic performance, although positive, will be somewhat limited by the restrictions on air travelers from the US and Canada. We mention as favorable the fact that companies are resuming strategies to return capital to shareholders, in this case, with Oma's proposal. From our point of view, it will be of vital importance to know any update on the outlook regarding demand dynamics, which the companies may disclose in their upcoming quarterly results. In our institutional portfolio we have exposure to Gap with a PT 2021 of MXN 233.00 per share and Oma with a PT 2021 of MXN 137.00, both with a Hold recommendation. On the other hand, for Asur our 2021 PT is MXN 403.00 per share with a Hold recommendation.

March Passenger Traffic

The following charts show total LTM passenger traffic performance (y/y) for the different airport groups and their share price returns vs. S&P/BMV IPC.

Sector comparison – Figures at March 2021