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 Business News | January 2008 
Fly High with Grupo Aeroportuario del Pacific
 BloggingStocks
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Grupo Aeroportuario del Pacifico (NYSE: PAC) owns a valuable 50-year concession to operate 12 airports in Mexico, mainly along the Pacific coast and in the central region of the country. This includes major markets like Guadalajara, Tijuana, Los Cabos and Puerto Vallarta.
The company makes money in two ways. One is by charging simple per passenger fees that are regulated by the government - the more traffic that flows through PAC's airports, the more revenues it receives. In addition, the company manages some airport-related services, such as operating parking lots and leasing space to retail outlets.
When analyzing this stock, the key number to watch for is growth in traffic through its airports. The higher traffic is, the more PAC receives in take-off and landing fees. In addition, higher traffic benefits retailers at the airport, translating into the potential for higher sales.
PAC announced that its December passenger traffic was up a solid 11.1% over the same month one year ago. That growth was driven by a 16% surge in domestic air travel. Also helping traffic was the addition of another 20 routes by low-cost carriers (LCC) at PAC's airports; LCCs offer simple point-to-point air travel usually at a lower cost than traditional carriers.
The strong domestic traffic gains suggest that economic growth in Latin America has not yet been scuttled by weakness in the U.S. economy. And growth in the LCC segment should remain strong even if overall traffic growth slows since LCCs offer the cheapest ticket prices.
Trading at 17 times 2008 earnings and with a growth rate of 22%, PAC represents a cheap way to play continued strong growth in Latin America.
If you are interested in more analysis from Paul Tracy, you can find it at StreetAuthority.com.
Paul Tracy owns shares of Grupo Aeroportuario del Pacific (PAC) |
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