Mexico’s domestic air travel market has seen a stronger than expected recovery since the end of 2020, helped in large part by stronger domestic tourism and “visiting friends and relatives” (or VFR) demand. That, in turn, has helped Grupo Aeroportuario del Pacifico (PAC) (“Pacifico”) shares to a roughly 20% upward move since my last update, even with recent weakness in the market weighing on the shares.
As I said in that last piece, Pacifico offers a sort of “middle ground” between the more tourist-focused Grupo Aeroportuario del Sureste (ASR) (“Sureste”) and the more domestic and business-driven Grupo Aeroportuario del Centro Norte (OMAB) (“OMA”), and the share price performance since then reflects that – OMA has had the weakest traffic and earnings recovery so far of the three, while ASR has had the strongest.
Particularly given the selloff on Russia’s invasion of Ukraine, I think these shares still hold some appeal. Not only can leisure and business recoveries go further, but I see Pacifico as a potential beneficiary of a restructuring of air travel within Mexico. I’d like to see better operating leverage, though, and that is one watch item for investors to consider.
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