Grupo Aeroportuario del Pacifico Announces Amendments to the Concession Agreement of Jamaican Airports

Rhea-AI Summary

Grupo Aeroportuario del Pacífico (NYSE: PAC) has announced significant amendments to its Concession Agreement with the Airports Authority of Jamaica for the Montego Bay and Kingston Airports. These changes come as a response to the impact of the COVID-19 pandemic on airport operations.

Key amendments include:

• Montego Bay Airport: Concession Period extended by one year, now expiring in March 2034
• Kingston Airport: Concession Fee reduced from 62.01% to 53.22% of Gross Revenues, effective September 11, 2023

The reduction in Kingston's Concession Fee will be applied retroactively, with excess payments reimbursed once the runway extension project begins. This change will be reflected in GAP's 2024 Income Statement.

Positive

• Extension of Montego Bay Airport concession period by one year
• Reduction of Kingston Airport concession fee from 62.01% to 53.22% of Gross Revenues
• Retroactive application of fee reduction, potentially improving 2024 financial results

Negative

• None.

Financial Analyst

The amendments to GAP's concession agreements for Jamaican airports are financially significant. For Montego Bay, the one-year extension to 2034 provides additional revenue potential. More impactfully, the 8.79% reduction in Kingston's concession fee (from 62.01% to 53.22%) will substantially boost GAP's profitability from this asset.

The retroactive application of the fee reduction to September 2023 will result in a one-time earnings boost in 2024 when the reimbursement is recognized. This could significantly inflate GAP's 2024 earnings, potentially misleading investors who don't account for this non-recurring item.

Long-term, the reduced fees will enhance the Kingston airport's contribution to GAP's bottom line. Given that GAP operates 14 airports across Mexico and Jamaica, the impact on overall earnings will be notable but not transformative. Investors should view this as a positive development that enhances GAP's Caribbean operations and demonstrates its ability to negotiate favorable terms with regulatory bodies.

Market Research Analyst

These amendments reflect the broader industry trend of airports and governments renegotiating concession agreements post-COVID. The pandemic's severe impact on air travel forced many airports to seek financial relief and more sustainable operating models.

For GAP, these changes improve its competitive position in the Caribbean market. The extended concession in Montego Bay and reduced fees in Kingston enhance GAP's ability to invest in these assets and potentially attract more airlines and routes. This could lead to increased passenger traffic and higher non-aeronautical revenues, which typically have higher margins.

Investors should note that while these amendments are positive for GAP, they also highlight the ongoing challenges in the aviation sector. The need for these adjustments four years after the pandemic's onset underscores the industry's slow recovery and the persistent pressure on airport operators. It's important to monitor whether similar renegotiations occur at GAP's Mexican airports, which could have a more substantial impact on the company's overall financial health.

GUADALAJARA, Mexico, July 26, 2024 (GLOBE NEWSWIRE) -- Grupo Aeroportuario del Pacífico, S.A.B. de C.V., (NYSE: PAC; BMV: GAP) (“the Company” or “GAP”) announces that it has signed amendments to the Concession Agreement with the Airports Authority of Jamaica (“AAJ”) associated with the Montego Bay and Kingston Airports, derived from the effects suffered by the Concessionaires during the COVID-19 pandemic. The main amendments were the following:

Montego Bay Airport: The Concession Period will expire thirty-one (31) years after the commencement date, in March 2034. This represents one additional year to the original Concession Period.

Kingston Airport: Concession Fee changes from 62.01% of the Gross Revenues to 53.22%, from the Effective Date, which is September 11, 2023. Accordingly, the amounts paid to the owner (AAJ) in excess from the Effective Date will be reimbursed to the Concessionaire once the Extension of the Runway begins (the main project of the Capital Works), with the handover of the site to the contractor will being the trigger. The benefit of this change will be recognized retroactively in our Income Statement of 2024.

Company Description

Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (GAP) operates 12 airports throughout Mexico’s Pacific region, including the major cities of Guadalajara and Tijuana, the four tourist destinations of Puerto Vallarta, Los Cabos, La Paz and Manzanillo, and six other mid-sized cities: Hermosillo, Guanajuato, Morelia, Aguascalientes, Mexicali, and Los Mochis. In February 2006, GAP’s shares were listed on the New York Stock Exchange under the ticker symbol “PAC” and on the Mexican Stock Exchange under the ticker symbol “GAP”. In April 2015, GAP acquired 100% of Desarrollo de Concessioner Aeroportuarias, S.L., which owns a majority stake in MBJ Airports Limited, a company operating Sangster International Airport in Montego Bay, Jamaica. In October 2018, GAP entered into a concession agreement for the Norman Manley International Airport operation in Kingston, Jamaica, and took control of the operation in October 2019.

This press release may contain forward-looking statements. These statements are statements that are not historical facts and are based on management’s current view and estimates of future economic circumstances, industry conditions, company performance, and financial results. The words “anticipates”, “believes”, “estimates”, “expects”, “plans” and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations, and the factors or trends affecting financial condition, liquidity, or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends, or results will occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.

In accordance with Section 806 of the Sarbanes-Oxley Act of 2002 and Article 42 of the “Ley del Mercado de Valores”, GAP has implemented a “whistleblower” program, which allows complainants to anonymously and confidentially report suspected activities that involve criminal conduct or violations. The telephone number in Mexico, facilitated by a third party responsible for collecting these complaints, is 800 04 ETICA (38422) or WhatsApp +52 55 6538 5504. The website is www.lineadedenunciagap.com or by email at denuncia@lineadedenunciagap.com. GAP’s Audit Committee will be notified of all complaints for immediate investigation.

Alejandra Soto, Investor Relations and Social Responsibility Officer	asoto@aeropuertosgap.com.mx
Gisela Murillo, Investor Relations	gmurillo@aeropuertosgap.com.mx/+52 33 3880 1100 ext. 20294

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Instagram: @aeropuertosgap

FAQ

What changes were made to GAP's concession agreement for Jamaican airports?

GAP extended the Montego Bay Airport concession by one year to March 2034 and reduced the Kingston Airport concession fee from 62.01% to 53.22% of Gross Revenues, effective September 11, 2023.

How will the concession agreement changes affect GAP's (PAC) financial performance?

The reduction in Kingston Airport's concession fee will be applied retroactively and recognized in GAP's 2024 Income Statement, potentially improving financial results for that year.

When will GAP (PAC) receive reimbursement for excess concession fee payments at Kingston Airport?

GAP will be reimbursed for excess concession fee payments once the runway extension project at Kingston Airport begins, with the handover of the site to the contractor serving as the trigger.

What prompted the amendments to GAP's (PAC) concession agreement for Jamaican airports?

The amendments were made in response to the effects suffered by the airport concessionaires during the COVID-19 pandemic, aiming to provide relief and support recovery.