Zacks_Analysts' Blog : Pacifico's Traffic Declines - Analyst Blog

Mexican airport operator Grupo Aeroportuario del Pacifico S.A.B. de C.V. (PAC) recorded a 1.3% decrease in passenger traffic in November 2010 compared with the year-ago period. Domestic traffic and International traffic dropped 0.9% and 2.1%, respectively.

Decrease in domestic traffic was primarily attributable to the decline in passenger traffic at the Guanajuato, and Los Cabos airports. International traffic declined due to decrease in passenger traffic at Mexicali, Morelia, and Tijuana airports.

However, total passenger traffic from January to November 2010 shot up by 5.6% year over year, with a 4.8% increase in domestic traffic and 7.0% in International traffic.

Moreover, during the third quarter of fiscal 2010, passenger traffic increased 7.2% year over year with domestic traffic increasing 5.8% and International traffic rising 10.8% year over year.

Pacifico together with Grupo Aeroportuario del Sureste S.A.B. de C.V. (ASR), Aeroportuario del Centro Norte S.A.B. de C.V. (OMAB) has been experiencing an increase in total passenger traffic since the second quarter of fiscal 2010 compared with the huge drop in traffic during the comparable period in fiscal 2009.

The decrease in passenger traffic from the second quarter of fiscal 2009 through March 2010 was on account of the H1N1 flu, which broke out in April 2009, and the difficult business environment due to the economic instability since the second half of fiscal 2008.

However, markets are now gradually picking up and are expected to show some decent results in the coming years. Fuel prices have also reduced to their mid-80s from the peak of nearly $150 per barrel. The International Air Transport Association (IATA) expects the airline industry to make a profit of $2.5 billion in 2010.

However, the decrease in total traffic forces us to maintain our long-term Underperform recommendation on Pacifico. The ADS also currently retains its Zacks #4 Rank (equivalent to Sell rating).