Grupo Aeroportuario Del Pacifico, S.A. de C.V. (PAC)

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Grupo Aeroportuario del Pacífico S.A.B de C.V. (PAC)

Q2 2008 Earnings Call

July 28, 2008 11:00 am ET


Maria Barona - Managing Partner, i-advize Corporate Communications

Jorge Sales Martínez - CEO

Carlos Criado Alonso - Director of Commercial Activity

Rodrigo Guzman Perera - CFO

Miguel Aliaga - IR Officer


Vanessa Quiroga - Credit Suisse

Steve Trent - Citigroup

Esteban Polidura - Merrill Lynch

Nick Sebrell - Morgan Stanley

Miguel Escobedo - Noriega y Escobedo

Vanessa Quiroga - Credit Suisse

Patricia Rivera



Good morning. My name is Pam, and I will be your conference operator today. At this time, I would like to welcome everyone to the GAP conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period.

Thank you. It is now my pleasure to turn the floor over to Maria Barona. Ma'am, you may begin your conference.

Maria Barona

Thank you, Pam. Good day everyone. I'm pleased to welcome you to the Grupo Aeroportuario del Pacífico, GAP's second quarter 2008 conference call.

Please note that statements made today may constitute forward-looking statements, which do not account for future economic circumstances, industry conditions, company performance and financial results. These are forward-looking and are subject to a number of risks and uncertainties. For a complete note on forward-looking statements, please refer to the quarterly release which was issued last week. If you did not receive a copy of the report on Friday and would like to be added to the mailing list, contact us at New York at 212-406-3690.

With us today from GAP are Mr. Jorge Sales, the company's Chief Executive Officer, Mr. Rodrigo Guzman, the company's Chief Financial Officer; Mr. Carlos Criado Alonso, Director of Commercial Activity; and Mr. Miguel Aliaga, Investor Relations Officer.

And now, without further ado, I will turn the call over to Mr. Jorge Sales, the company's CEO. Sir, please begin.

Jorge Sales

Thank you, Maria, and good morning, everyone. Thank you for joining us for our second quarter conference call for 2008.

This was a bit of a challenging quarter. For those of you who have been following the company in the past weeks, we have recently modified our guidance for the year, lowering our expectations in traffic growth, commercial revenue, EBITDA, CapEx, et cetera. The decline in our expectations was basically in response to the contraction of frequencies from the low-cost and legacy carriers, who have been affected by a worse economic conditions in the US, as well as high fuel costs.

We have responded to this situation in an aggressive manner. Basically, we have -- we are focused on controlling expenses, delaying projects that were scheduled for 2008 based on traffic growth and moving them to 2009, making adjustments in internal budgets such as the reduction in personnel cost of -- for 9 million pesos for the full year, as well as a reduction of 57 million pesos in maintenance, security, insurance, utility and other operating expenses, for a total cost of service reduction for the full year 2008 of 66 million pesos, or 6.6%.

To highlight that these adjustments do not comprise a reduction in the headcount or in those areas that affect safety, security and level of service, I want to reiterate that this guidance figures are just estimates for the market mean to manage expectations. We cannot guarantee any of these figures, nor will we be a big (inaudible).

In terms of CapEx, we have modified current projects to reach savings for the year of 171.3 million pesos, by deferring these projects to 2009. We have also cancelled certain projects to save 51 million pesos. The cancelled projects were outside of the commitment as per Master Development Plan, and are no longer a priority due to the lower passenger traffic levels.

Our goal with these measures is to take aggressive action in maintaining our margins, our cash flows and maintaining our bottom line during these challenging times. At the same time, we want to finish projects that have already begun, and that we consider important for the company in terms of generating returns.

The projects we have delayed for a year are: in Guadalajara, the Terminal 2 expansion and Airport City follow their projects to continue; in Tijuana, the expansion of checking counters and security points; and in Los Cabos, the new Terminal 4 building and the refurbishing of Terminal 3.

Also, we have been working to reduce our time [spent] for airport employees where possible, which was a result of the negotiations during the company reorganization at the beginning of the year. This effort resulted in a reduction in that line item during this quarter compared to second quarter of 2007.

We began taking additional cost-cutting initiatives during the last week of May and the first week of June. So, we expect to see more concrete results of these airports in the third quarter of 2008.

As can be expected from the aforementioned, we saw a decline in revenues from aeronautical services of 0.4%, mainly due to lower traffic. Non-aeronautical revenues, however, rose 6.7% in the quarter, mainly due to the car parking charges, which continued due to the increase of commercial revenues of 8.6 million pesos, as a consequence of the recovery of Tijuana car parking facility.

In terms of traffic, as of the June traffic report, the low-cost carriers decreased their weekly service by 48, for a total 878 frequencies, and a total of 50 air routes operated by this type of carriers.

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