GAP boosts air traffic with help from lower oil prices

Mexican airport operator GAP has increased its air traffic with the help of new strategies from airlines, lower oil prices and new investments to improve its 12 airports.         

CFO Saúl Villareal García about sat down with BNamericas to also discuss the group's bet on Jamaica and how it will be affected by the new Mexico City international airport project.

BNamericas: How is GAP in terms of air traffic, expansion, and growth?

Villarreal: The stock's performance has been extraordinary. We attribute it to several factors: Air traffic has grown 8% in Q3 and by the end of the year we expect a 10% increase. Besides, GAP has approved all business plans and maximum rates for the 2015-19 period, so investors have a lot of certainty about growing income levels.

The third factor is the expansion undertaken by acquiring the airport in Montego Bay, Jamaica. The acquisition was made at a great price and Montego tariffs were increased in April.

BNamericas: How much will GAP invest to improve its 12 airports?

Villarreal: GAP will invest 5.47bn pesos (US$331mn) in the 2015-19 period to improve our airports, including 3.25bn pesos in 2015-16. The investments will be used to expand the 12 airports, improve security and renew equipment, as well as for major maintenance works.

BNamericas: Why has air traffic risen in Mexico?

Villarreal: One of the reasons is the airlines, which are seeking to maximize performance and are taking advantage of the low oil prices. This allows them to lower costs and open up new routes, and provide more accessible ticket fares to passengers.

BNamericas: What is GAP's position on the government's 'open skies' plan?

Villarreal: From the point of view of the airports, I would say yes; from the point of view of airlines, you have to worry about being more efficient because there will be competition. I hope there is no price war, because in a price war no one wins. The ultimate winner should be the passenger.

BNamericas:  Why did GAP invest in Jamaica?

Villarreal: We began to look at the assets in Jamaica in June-July 2013. When GAP acquired Spanish firm Desarrollo de Concesiones Aeroportuarias (DCA), and DCA only had Jamaica and Santiago de Chile airports, we ended up acquiring Montego Bay airport at a reasonable price.

Jamaica traffic is very mature and it's growing, and it's 39% foreign. In 2008, after the worst economic crisis, Montego Bay lost less than 4% of its air traffic, so it's a pretty solid and mature asset.

BNamericas: How do you see the development of Mexico City's new international airport?

Villarreal: It's a motivating and much needed project that will boost the economy of Mexico. For us, instead of feeling threatened or concerned, we support it because we depend on connectivity to Mexico City. The busiest route is Guadalajara-Mexico City, so our Guadalajara airport will be much more empowered with this project.