Earnings call: GAP's Q3 2023 results reveal passenger growth and potential regulatory impacts

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Earnings call: GAP's Q3 2023 results reveal passenger growth and potential regulatory impacts
During GAP's Third Quarter 2023 Conference Call, CEO Raul Revuelta presented the company's financial results and discussed the potential impact of recent regulatory changes and the GTF engine situation on the company's operations. He highlighted a 10.8% increase in passenger export for the quarter and growth in both aeronautical and non-aeronautical revenues. Key takeaways from the call include:
  • GAP exported 16.2 million passengers in the quarter, a 10.8% increase.
  • Aeronautical revenues increased by 8.2%, while non-aeronautical revenue grew by 14%.
  • EBITDA reached Ps. 4.3 billion with a margin of 67.5%.
  • The GTF engine situation could potentially impact total passengers for GAP by -5% to -7%.
  • The new tariff regulations and the MDP negotiation are not expected to result in any legal claims.
Revuelta also addressed the potential impact of the new regulatory framework on their business. While the exact effects are yet to be determined, the company believes that the new framework provides more clarity and certainty, which is seen as a positive for the market. The company is working on capacity reviews to determine the amount of CapEx needed in the coming years. Some of the CapEx has already been paid, particularly for the Guadalajara land reserve. The company regularly provides discounts on the Tarifa de Uso Aeroportuario (TUA) or aeronautical fees. This year, they will offer a 10% discount in nine of their airports during November and December. However, this discount does not change the maximum tariff established by the government, and that the TUA represents around 85% of their total aeronautical revenues. The company expects to achieve 98% to 99% of the maximum tariff in 2023 and 2024.The call concluded with remarks on the need for further analysis to determine the impact of the new regulations on the company's share price, attributing it to uncertainty and perception rather than a real change. The company also discussed the possibility of increasing the discount rate and the equilibrium between increasing the discount rate and leverage, explaining that a deeper analysis is needed to determine the best balance for the company and the impact on investors. The increase in tax from 5% to 9% applies to both aero and non-aero revenues. The company will analyze the sustained debt issuance and its impact on leverage. The WACC calculation is based on total debt to total capital.

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