Grupo Aeroportuario Del Pacifico, S.A. B. de C.V.

Good morning, and welcome to GAP's second quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the presentation, we will open the floor for questions, and at that time, instructions will be given if you would like to ask a question. It is now a pleasure to turn the conference over to GAP's investor relations team. Please go ahead.

Thank you, and welcome to the Grupo Reportuario del Pacifico second quarter 2024 conference call. Presenting from the company today, we welcome Mr. Raul de Vuelta, GAP's Chief Executive Officer, and Mr. Saúl Villarreal, Chief Financial Officer. Please be advised that forward-looking statements may be made during this conference call. These do not account for future economic circumstances, industry conditions, the company's performance, or financial results. As such... Statements made are based on several assumptions and factors that could change, causing actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the quarterly report. At this point, I'd like to turn the call over to Mr. Revuelta for his opening remarks. Please begin, sir.

Thank you, Maria, and thank you to our audience for joining us today. As always, we appreciate your continued support and interest in GAP. I will briefly review operational and financial figures before taking your questions. During this quarter, the total number of passengers reached 15.3 million, which was 3.9% decrease compared to 2023. The continued passenger traffic deceleration was due to the preventive inspection carried out by on the A320neo and A321neo airplane engines. This is a process that began in September of last year and is expected to continue for the remainder of this year into 2025. Despite this setback, we have continued to expand our strength of our network. During the second quarter, we added three international and two domestic routes, bringing the total number of routes added to our network to 13, just during the first half of this year. We anticipate adding around 11 international routes during the second half of this year, including the rest of the resume Tijuana to Virginia route, which restarts on July 12th. These efforts align with our air development and strategies. As you're probably aware, last Friday morning on July 19th, air travel all over the world experienced an eruption related to a Microsoft object for the customer of the 365 app, which includes many major airlines. While GAPS airport has non-internal system complications, as a result of the airline system outage, we have 274 delays and 23 cancellations in our Mexican network. Moving on to the financial performance, we experienced a convenient revenue decrease for aeronautical and non-aeronautical services of 213 million pesos, or 3.3 lower compared to last year. Lower aeronautical revenues were attributed to the decline of passenger traffic and reaching only 95% of the maximum traffic. However, there was an almost 11% increase in commercial revenues driven mainly by the food and beverage, car rentals, and VIP lounges. A little further detail of these commercial revenues I just mentioned, in terms of the car rental increase, these were mainly driven by the new bidding process carried out in Guadalajara and Los Campos. Futambara stood out at the Guadalajara airport mainly due to the opening of the new terrace and the layout renovation carried out that resulted in a better brand mix offer. Furthermore, the priority pass fees for the use of the VIP lounges increases leading to a rise in the business line, specifically in the Guadalajara and Los Cabos airports, which experience the best performance related to a VIP lounge revenue. On July 9th, we opened a second VIP lounge at the Guadalajara airport. This will help us in the more adequate meeting in the high demand in this airport. Additionally, the hotel at the Guadalajara airport during this quarantine generates 18.6 million pesos with an occupancy rate of 51% as of June. We are expecting to close this year a percentage of 62% occupancy. New commercial opportunities and partnerships to reap the further commercial revenue growth are always top in the mind for us and we continue exploring options. Regarding the acquisition of the cargo company GWTC, we expect to begin to consolidate the results starting in the third quarter of 2024. In 2023, GWTC generated revenue above one billion pesos with an evident margin of around 40% and without financial debt. On the other hand, the purchase plus allocation will be done in the second half of the year. As for the cost of service, this increases by 179 million pesos, or 17.3%, mainly due to the higher operational expenses, such as employee costs, security, insurance, and maintenance. While these rising costs do bring challenge, They also indicate our continued dedication to upholding high services standards and operational excellence. Besides enforcing strict cost controls, we do anticipate higher expenses related to expansion and inflationary effects to continue. Evidence decreased 378.7 million pesos or 8.3% as a result of the higher cost and slightly lower revenue. Looking ahead, we remain committed to delivering growth and delivery value to our stakeholders. Our focus will continue to be on enhancing operational efficiency while at the same time optimizing our services to meet the evolving needs of our customers. Moving onto the balance sheet, cash and cash equivalents decreased by 15.7% reaching 12.6 billion pesos. On the debt front, this figure reached 41.8 billion pesos. We continue keeping healthy labor levels, reaching a net debt-to-ebitda ratio of 1.7 times for the 12 months, thereby complying with all our debt covenants. CAPEX continued to follow the community master development program, reaching approximately 3.1 billion pesos in the first half of the year. This position also well to the compliance with the current and challenging MDP goals we have in place. I want to mention that yesterday, we opened the second runway at the Guadalajara airport, which was one of the key projects for this ingenium. This second runway will offer us the capacity to have between 50 to 70% of additional operation in the long term and give us more flexibility to continue developing routes and connectivity throughout the region. This is another important step in meeting the growing needs of this airport, as I mentioned before. Regarding distributions, yesterday GAAP paid the first portion of the capital reduction for a total of 3.5 billion pesos per the resolution made at our extraordinary shareholders meeting. The second portion will be paid later in the year. Now, just an update on the Turks and Caicos airport bidding process. As you know, we are committed to exploring new markets and revenue streams in an effort to further diversify our network. Therefore, as we announced before, we were pre-qualified to bid for the Turks and Caicos airport, an airport mainly focused on international leisure traffic which handled 1.4 million passengers in 2023. Most of the revenues come from the aeronautical side, but there is room for improvements in terms of non-aeronautical activity. At this point in the bidding process, we are analyzing capital investment needs. The criteria for devaluation of the authors will be 70% for technical proposal and investment plan and 30% financial evolution. evaluation based on proposed revenue share. The tender submission deadline is October 23, 2024, and the process is expected to be concluded in December of this year. Before I finish, I want to provide revised guidance for 2024. Passenger traffic and aeronautical revenue remain as was originally stated at the beginning of the year. whereas non-aeronautical revenues are updated with the performance of the commercial activities and the continuation of GWTC. On the other hand, the EBITDA and EBITDA margin consider the aforementioned issue and the capitalization of the 40% of the concession fee to be paid over Mexican airports due to the recent change in law. With that, I conclude my comments and ask the operator to open the call for new questions.