As Mexicans Ditch Buses for Jets, These Operators Are Cashing In

  • Airport operators boost profits with assist from user fees
  • Air traffic rises to record as discounters vie for passengers

Mexican airport operators are posting some of the country’s best stock returns as air travel surges to a record, bolstered by cheap fuel, a domestic consumption boom and currency shifts that entice dollar-wielding foreign tourists.

The peso’s drop against the greenback has made it easier for U.S. tourists to afford sun-drenched holidays amid Mexico’s warm waters and soft sands. Domestic ticket sales are also increasing as discount carriers chop fares, increase flights and add new destinations in a bid to coax travelers onto modern jetliners instead of long-haul buses.

Rising passenger loads swell the coffers of Mexico’s three airport operators -- nicknamed OMA, GAP Airports and Asur -- because the companies receive a slice of a fee that’s paid by every customer buying an airline ticket. The number of fliers climbed by about half in five years to a record 74.8 million in 2015, according to government data, and Mexico’s on track to set an all-time high this year.

“Every time someone buys an airplane ticket, the airport operators’ cash register rings,” Marco Montanez, an analyst at Vector Casa de Bolsa who recommends buying shares in all three airport companies, said by telephone. Every five years, the operators negotiate with the government the possibility of raising the fees based on the companies’ planned infrastructure investments, Montanez said.

All three airport operators at least doubled the return of the benchmark IPC index this year through Wednesday, with OMA, or Grupo Aeroportuario del Centro Norte SAB, posting the index’s fourth-biggest gain among major Mexican stocks. OMA rose 0.3 percent at 12:25 p.m. in Mexico City. GAP, or Grupo Aeroportuario del Pacifico SAB, gained 0.9 percent and Asur, or Grupo Aeroportuario del Sureste SAB, was little changed.

Travel Boom

Air travel in Mexico has been booming since the global financial crisis in 2008 and the 2009 outbreak of the H1N1 flu virus, said Pablo Monsivais, an analyst at Barclays Plc. Airlines such as Grupo Aeromexico SAB, Volaris, Interjet and VivaAerobus have increased spending by investing in new fleets.

“After a series of perfect storms, airlines were able to heavily invest in increasing their flight and seat offerings,” said Monsivais. “This has generally benefited airport operators.”

GAP and Asur attributed the gains in their share prices to more passengers traveling through their airports, cheaper fuel and new routes. OMA didn’t respond to a request for comment.

Whether there’s room for additional gains is a matter of debate. GAP Airports has already surpassed its 12-month target price, according to the average of 14 analyst estimates compiled by Bloomberg. That implies that investors buying shares now may lose money. Based on the same yardstick, potential returns at OMA and Asur are measured in the single digits.

Currency Drop

But commercial aviation still has room to expand in Mexico with more flights per capita, Monsivais said. And with each ticket, the airport operators receive a slice of the airport tariff, known as TUA. The TUA accounts for over half of all three operators’ sales, according to the latest financial reports.

The peso’s 15 percent depreciation against the dollar in the last year has provided another tailwind by making Mexico cheaper for foreign tourists without stoking inflation that would erode domestic purchasing power. Montanez said he’d consider raising his target prices for all three airport operators after they report second-quarter results in the coming weeks.

The weaker currency “has made Mexican destinations more attractive to foreigners, particularly Americans,” he said. “The global macro economic environment has also been somewhat benign to consumer discretionary spending, some of which has been destined to travel.”

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