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Transcript Summary

GAP delivered solid Q1 2026 results despite a 5.5% decline in passenger traffic. Revenue increased 2.8% and EBITDA grew 6.4% to MXN 6 billion, supported by the implementation of new maximum tariffs in Mexico and strong performance in the non-aeronautical segment. Growth in the bonded warehouse business, fueled by electronics manufacturing shifts to Guadalajara, helped offset traffic losses caused by Hurricane Melissa in Jamaica and security concerns in Jalisco. Management confirmed they are on track to consolidate the 25% acquisition of the Cross Border Xpress (CBX) in Q2 2026, having recently issued MXN 10.7 billion in bonds to fund the transaction and Master Development Plan (MDP) investments. While traffic was soft in early 2026 due to safety perceptions and airline engine issues, GAP maintained its 2% to 6% annual traffic growth guidance, citing expectations for a strong summer leisure season. The company is focusing capital allocation on airport hotels and operational efficiency following the cancellation of the Turks and Caicos project. A dividend of MXN 20.8 per share was proposed, reflecting a strong liquidity position with MXN 23.2 billion in cash.

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Full Earnings Call Transcript — Q1 • 2026-04-22

Operator: Good morning, everyone, and welcome to GAP's First Quarter 2026 Conference Call. [Operator Instructions] Now it's my pleasure to turn the call over to GAP's Investor Relations team. Please go ahead.
Maria Barona: Thank you, and welcome to GAP's First Quarter 2026 Conference Call. Prior to introducing GAP's management team, I'd like to take a few moments to mention the forward-looking statements as described in the financial disclosure statements. Please be advised that any statements made today may not account for future economic circumstances, industry conditions, the company's future performance or financial results. As such, any information discussed is based on several assumptions and factors that could change causing actual results to materially differ from current expectations. For a complete note on forward-looking statements, please refer to the quarterly report issued on Monday. Thank you for your attention. Our speakers today from GAP are Mr. Raul Revuelta, Chief Executive Officer; and Mr. Saul Villarreal, Chief Financial Officer. At this time, I'll turn the call over to Mr. Revuelta for his opening remarks.
Raul Musalem: Thank you, Maria. Good morning, everyone, and thank you for joining us today. I'm pleased to report that GAP delivered a solid start to the year on results as I discuss the company operational and financial highlights for the first quarter of 2026. Despite the challenging traffic environment, our performance remained strong, supported by the resilience of our aeronautical revenues as well as the continued growth of the non-aeronautical business, which helped to offset the more complex traffic environment. Let me begin by discussing passenger traffic. Total passenger traffic across GAP's 14 airports decreased by 5.5% in the first quarter compared to the same period of 2025. This decrease reflects various factors that impacted the Mexican as well as the Jamaican operations. In the Jamaican operations, we continue to face headwinds from the Hurricane Melissa. Despite this, the recovery of hotel capacity has been better than expected along the main TUA corridor. It is important to note that while as today, passengers volume have not yet reached pre-storm levels. Trends indicate that we will regain this level by the fourth quarter of this year. Traffic declines in Mexico were largely driven by temporary disruptions such as the security incident in Jalisco during the last week of February. This event negatively affected the perception of safety and key leisure destinations in Mexico, such as Puerto Vallarta and Los Cabos, thereby softening demand at these airports. These dynamics to the typical high season month of March affecting the spring break traffic and causing demand to decline. Tijuana was also impacted given its stronger reliance on cross-border travel as roughly 75% of CBX users are U.S.-based passengers accessing domestic flights to Mexican tourist destination. Additionally, global macroeconomic volatility impacted operations. This included geopolitical tension and fuel prices, which pressure airlines operation costs, prompting a realignment of capacity to maintain efficiency, as well as the possibility of economic downturn. Now moving on to the revenues. Total revenues increased by 2.8% compared to the first quarter of 2025. Aeronautical revenues for the group grew by 3.9%, but in Mexico, the increase was 9.3%, primarily driven by the implementation of the maximum tariff for the 2025-2029 regulatory period in Mexico, which are linked to the highest level of the CapEx investments in the history of the company. Aeronautical revenues increased by 6.1%, supported by strong performance in our Mexican operations, reaching 10.7%, particularly in business operated directly by GAP. This includes the bonded warehouse business, which represents around 21% of total non-aeronautical revenues. This performance underscores the resilience of our business model and the continued success of our increasingly diversified revenue base. Cost of service increased by 6.5% compared to the same period last year, mainly due to the higher personnel costs, increased security and maintenance expenses and the expansion of operational areas. We work hard to offset this pressure by maintaining rigorous cost control throughout the organization. As a result, EBITDA increased by 6.4%, reaching MXN 6 billion with an EBITDA margin of 68.3%, reflecting both revenue growth and operational efficiency. This despite the reduction of additional concession fee in Montego Bay Airport due to the decrease in passenger traffic and revenues, which is a temporary effect. Regarding our financial position, GAP maintains a strong liquidity position with a cash and cash equivalents of MXN 23.2 billion during the first quarter of 2026, mainly due to the historic bond issuance of MXN 10.7 billion on March 31. The proceeds we allocate towards our strategic acquisition of 25% of CBX, as well as capital expenditures. Furthermore, during the quarter, we refinanced existing debt, optimizing our balance sheet and strengthening our overall financial flexibility. In terms of CapEx, we continue to advance our investment program under the current Master Development Plan, deploying during the quarter MXN 1.8 billion, focusing on enhancing capacity as well as the passenger experience across all of our airports. I would like to briefly update you on our strategic initiatives. As you know, in December 2025, our shareholder approved the business combination related to the CBX as well as internalization of the technical assistance services. This transaction is still in the process of being formalized. Once completed, it will be consolidated in our financial statements, and we expect the conclusion of this process to take place during the second quarter of this year. We believe this initiative will strengthen our long-term growth platform, specifically by promoting our market cross-border passenger profile as well as unlocking additional commercial opportunities. As we move into the rest of the year, we remain mindful of the macroeconomic environment and short-term traffic volatility. Despite this, we believe structural demand remains strong, supported by the solid fundamentals of our market. We remain confident that our diversified asset portfolio, strong financial position and disciplined execution to strategically position GAP well to navigate near-term challenges while continuing to generate long-term shareholder value. Later today, we will hold our ordinary shareholders' meeting, in which we will propose a dividend payment of MXN 20.8 per outstanding share during the following 12 months, among others. Thank you again for your time. Operator, please open the line for questions.
Operator: [Operator Instructions] Our first question over the telephone comes from Rodolfo Ramos of Bradesco BBI.
Rodolfo Ramos: My question is on the aeronautical part of the business, perhaps a 2-parter here. After this tariff implementation, can you let us know what your current maximum tariff compliance is? And how should we think about it towards year-end? And secondly, on the traffic outlook that you have, there's a host of domestic global factors at play negatively impacting demand for air travel. Just can you frame it a little bit in terms of your 2% to 6% guidance? I mean, how you think about it? And when do you think we could see a more meaningful recovery there?
Raul Musalem: Thank you, Rodolfo. First, related with maximum tariff, we are between 92% and 93% of the fulfillment. We are still having to implement additional passenger fee changes for the summer in 2 of our airports, Vallarta and Cabos. So we're still on the track of what we said originally will be close to 95% for the end of the year. For sure, what is related with maximum tariff, we need to take in account the churn rate that at the end of the day, an important part of that of the revenues are denominated in dollars for the case of passenger tour. The other part related with traffic, I would say that today is difficult to what could happen on the traffic in terms of the Iran war and the fuel prices. I would say that it's difficult to have today a more clear view of what could happen in the coming months and how big could be the decrease or the possible decrease of the adjustment on offer seats in the market. But the other part that at least we are still seeing is a summer that will come at least on the leisure with some additional seats. While we are expecting that on past years during some of this kind of geopolitical crisis, the U.S. passengers tend to fly more over the neighbor in the area of the neighbor could be Cabos or Vallarta rather to go to Europe or other kind of more long-haul travel. So what we are expecting in some way is some additional seats for the summer on those markets. But in general terms, for the moment, we keep without variance what we saw in the pretty first moment as our guidance for the year. we think that some of the temporary effect that could the security could bring in terms of decrease of passengers will be completely behind for the summer. And also, we are seeing better than we expected recovery of Montego Bay hotel capacity. But for sure, for the second quarter, we will review if that is the case, our guidance for the traffic.
Operator: Next, we'll move on to Alan Macias of Bank of America.
Alan Macias: Just a question on the CBX and TA transaction. What is pending for it to be completed? And I guess, should we expect it to be consolidated in May or in June?
Raul Musalem: Thank you, Alan. We are doing our best for consolidating the results during May. So yes, we are just in the middle of that but yes, that will be our target.
Operator: Next, we have Guilherme Mendes with JPMorgan.
Guilherme Mendes: Two questions, the first one being on the commercial front. First of all, congrats on the strong results during the first quarter of the year. Just wondering what is behind the very strong cargo performance, if there's anything in particular to GWTC or something else? And if we can assume these numbers as sustainable going forward? And the second question is on the capital allocation. So now following the upcoming conclusion of the CBX transaction, I understand the Turks and Caicos was put on hold as well, if there's anything else that you'll be evaluating on the inorganic side of growth opportunities?
Raul Musalem: Thank you, Guilherme. I mean related to the results and specific to the bonded warehouse business, is important to have in mind that this business is mainly moved by the cargo. And in the case of Guadalajara and all the central area of Mexico, we are seeing a really important more than 20% increase of cargo of high value on the area related mainly by electronics. Foxconn, for instance, has a really big movement on Guadalajara for additional plant. So what we are seeing for the last year is after the announcement of specific tariffs for China and for some different countries of Asia, we see like a shift on production on some electronic parts from Asia to Guadalajara area mainly. So we are seeing this really important increase in volumes of cargo but on real volumes, but value of the cargo. For this bonded warehouse business, you need to take into account that revenue comes from a mix of volume and value of the cargo that you are moving. So what we are seeing is that at the end of the day, all these change of tariffs bring some or shift some of the production from Asia to the Central Mexico and mainly to Jalisco and Guadalajara area.
Saúl García: Hi, Guilherme. In terms of capital allocation, as you know, we are looking for opportunities all the time. So far, we don't have nothing more important or relevant than CBX conclusion and integration to the consolidated financial statements. So for now, we don't have any other project or major projects. We will let know to the market as soon as we have something on the table. For Turks and Caicos, it was canceled by the government so we will not continue on that anymore. And so far, we don't have any other relevant project.
Raul Musalem: Yes. But complementing just the answer of Saul, for sure, we have an important focus on the development of new business in our airports. I will say we are working in 2 different projects for hotels in airports of Mexico of our efforts in our net. And for sure, the big focus on continue working on the efficiency of the margins in all of our directly operated by us business. So for sure, we will continue to see and review different kind of opportunities to M&A, but also we have like a big focus on how to increase the efficiency of our directly operated by us business.
Operator: From Itau Unibanco, we have Pablo Ricalde.
Pablo Ricalde Martinez: I have one question on the cost side. So we saw depreciation expense remained flattish year-over-year. So I just want to understand why despite all the CapEx you made last year, depreciation remains stable year-over-year.
Saúl García: Pablo, this is Saul. Well, basically, we are aligned. We don't have any other major projects capitalized and depreciated. Also, as you may know, we have more than 25 years of concession. So the major projects that were capitalized and were depreciated within the last years were interrupted due to the term of the depreciation period. That the net effect of the offset of the increase in depreciation, net of those assets that were already 100% depreciated.
Operator: Next, we have Gabriel Himelfarb of Scotiabank.
Gabriel Himelfarb Mustri: Two quick questions. First, are you seeing any meaningful capacity movements from airlines, mainly domestic or perhaps low-cost U.S. airlines, given the rise of fuel prices and perhaps what happened in Jalisco in the past months? And my second question is about the CBX. I think it was financed 25% in pesos, Mexican pesos. Why was the logic of being financed in pesos rather than in U.S. dollars?
Saúl García: Thank you, Gabriel. First, the size of the seat capacity of airlines, it is important to separate the 2 possible effects. The first one related with the security concerns, I would say that we are not seeing any kind of a structural change on the seat capacity on that area. But related on the fuel cost and what would be the possible reaction of capacity movement of airlines, for sure, it's something that's still on the table in some way. For the moment, we are seeing some decrease in capacity, at least not so relevant today, but we are seeing the cut of some services. For instance, Interjet just announced the cut of some services on Guadalajara. We are seeing some decrease on services on Tijuana, also in Cancun. So I would say that it's early to have a perfect view of what could happen on this level of close to $110 per barrel of oil. I would say that if you see, for instance, the price on 2022, it was just close of the same level, and we don't see at that moment decrease on capacity. What's still happening is the openings of these different routes, for instance, Volaris announced the new routes to Guadalajara to Mazatlan or Guadalajara to Zacatecas, Guadalajara to San Luis. So we are still seeing additional capacity. But for sure, it's the moment of decrease of capacity due to the cost of the fuel is still on the table. We need to, in some way, understand how long could take to, in some way, normalize the price, the price of the fuel and on the other hand, how important could be the resilience and the demand for the pass-through of the price of this peak of fuel into the ticket, to the airfare. So yes, I mean, at least for the moment, we are not seeing an important decrease of capacity. I would say that we are still seeing an increase due to the fact of new routes.
Raul Musalem: Related to your second question, we decided to take advantage of the level of the exchange rate. As you may know, we are in the lowest levels in the exchange rate. The appreciation of the peso is playing out in our favor. So the idea is to take a long-term debt and trying to finance these assets in Mexican pesos. That avoids some volatility in our balance sheet in the long-term view. As you may know, the effects of this exchange rate will be affecting our P&L. So in this way, we have a little bit higher interest rate, but we have certainty about our long-term view balance sheet.
Operator: From Barclays, we have Pablo Monsivais.
Pablo Monsivais: Just one question in terms of the traffic expectations for next year, I know we're very early. But have you had any contact or new information of Viva and Volaris? Any color on that or how the potential merger will shape the domestic travel and especially on the routes they overlap, any intel there or something that you would like to share?
Raul Musalem: Thank you, Pablo. I would say in terms of the merger or the group of airlines with Viva and Volaris, for the moment, we are not seeing any particular change. We are still, I mean, in talks with them and having communication, direct communication with both airlines, they still talk about there will be 2 different companies. And for the moment, they are not talking about the overlapping. But once antitrust authorities in Mexico has a specific view about the transaction, we could have more color about how going to be this transaction in some way out. But at least with the communication that we are having with the airlines, at least for the moment, they are not communicating anything related with overlapping and they are just talking about the operations for these 2 different companies as still is today.
Operator: And we'll move on to Andres Aguirre of GBM.
Andrés Aguirre Campillo: Congrats on the results. We noticed that accounts payable increased sharply to around MXN 2 billion in the cash flow statement. Could you please elaborate on what is driving this increase?
Saúl García: Andres, yes, we have a significant increase in the effective cash position because the issuance bond at March 31 that was for the proceeds will be used for the acquisition of 25% of CDX, which will be in cash and additionally for CapEx committed into the MDP. So that's basically why we have this significant increase, it was MXN 10.7 billion more in cash that will be used for the CBX and MDP committed.
Operator: And we'll move on to Alberto Valerio of UBS.
Alberto Valerio: The first one a follow-up on CapEx. How should we be modeling the CapEx during the year? We know that seasonally, we start a little bit weaker and then increase the CapEx during the year. How should we expect that? And the second one about the jet fuel, anything that concern you guys? We know that different airlines, if I'm not mistaken, have not hedged their fuel. I know that it's not our usual year, but how do you see the supply of seats for Mexico during 2026, which is current price of oil price?
Raul Musalem: Alberto, Related with the seats in Mexico, I mean, for sure, as you said, the hedging different routes have different levels of hedging. But I would say the important thing to see what's going to happen is the resilience and the specific demand for the pass-through of the tariffs of the cost of this fuel into the airfare. So that will be the first part. And second is going to be the kilometers that, that specific route could bring. So let me put it this way. I would say that in the first stage, we're going to see some kind of more or additional decrease on seats on some specific routes that have more kilometers when you talk about, for instance, domestic market. This is why we are expecting seeing some kind of effect on Tijuana, for instance, where their shorter flights has like 2.5 hours and their average time in the plane for a Tijuana flight is more around with 3 hours. So on the kind of routes where the demand is not enough resilience to get all the full impact of the fuel cost, we're going to see some decrease of passengers. But in the other hand, there are some specific routes that has like less than 2 hours of flying that could be Los Angeles to Cabo, 2.5 hours; Cabos to Vallarta, Vallarta to Los Angeles, Florida. All the short, really short routes could be Mexico to Guadalajara, Mexico to Vallarta, Mexico to Cabos, that will be interesting on the mix of the demand that we expect to be resilient on the increase on airfares and in some way, short flights or short kilometer -- short in terms of kilometer flight. So the mix of both parks and the expected of additional leisure passengers not flying long haul from the U.S. and flying or switching to Mexico beaches all these effects together make us think that our original guidance is still in place for the year. But for sure, it is difficult today to have like the complete crystal ball of what's going to happen in terms of the fuel. But if in general terms, the conditions on the price of the barrel is still, we could say that we're still seeing the same level of guidance for the end of the year.
Saúl García: Alberto, this is Saul. Related to your second or third question, the CapEx will be deployed during the following months. As you may know, our economic cycle in terms of CapEx is more concentrated in the last quarters of the year. In the first months, we are in the process of the bidding process for all these projects. So we are in the middle of that. So we would be more intensive in terms of deployment during the following months.
Operator: [Operator Instructions] Next, we have Abraham Fuentes of Santander.
Abraham Fuentes Salinas: Recently, we have seen some pressure in terms of traffic in Tijuana. I wonder if you can give us more color about what you expect going forward and maybe the main dynamics behind this expectation.
Raul Musalem: I mean in terms of Tijuana, what we are seeing, Abraham, is for sure, we have like a mix of different things happening over there. The first related that we still lack of capacity related of the Pratt & Whitney in Tijuana, mainly from Volaris are still being there. We think that for the summer, we will begin to see more of these planes flying. That is the first part. And second, what is related or what we thought that's going to be completely temporary that was related with all these security matters after the major capture operation that in some way going to be, I mean, in the past and we will, in some way, recover fully for that effect on the summer. In general terms, what we are seeing for Tijuana is that on the summer, we will see a more important revenue and recovery of traffic related for, first, additional seats coming back to the airport. And second, I would say, a softer base of comparison versus last year. But in general terms, I would say that we feel optimistic that Tijuana at the end of the year is going to have a positive result or it will grow in terms of passengers.
Operator: There are no further questions at this time. I'll turn the call back over to Mr. Raul Revuelta for closing remarks.
Raul Musalem: Thank you once again for joining us today. Before concluding, I would like to invite you all to join us on May 13 for GAP Day 2026. The event will start in San Diego at the CBX facilities and will continue at Tijuana International Airport and will include a series of strategic management presentations followed by a guided tool for our airports and the CBX facilities. We believe this is an excellent opportunity to learn more about our strategy, operations and long-term growth outlook. For registration and further details, please reach out to our Investor Relations team. Thank you, and we look forward to seeing you there. Have a great day.
Operator: Thank you. This concludes GAP's conference call for today. Thank you for your participation, and you may disconnect.