Grupo Aeroportuario del Sureste SA de CV Q4 FY2024 earnings call

• Passenger traffic: Flat in Q4, with Colombia (+15%), Puerto Rico (+10%), and Mexico (-8%) year-on-year. International traffic declined from all regions, while domestic traffic in Mexico was constrained by Pratt & Whitney engine issues and Mexico City capacity constraints. Tulum Airport took 1.2 million passengers from Cancun in 2024 and is expected to take 1.7 million in 2025. • Financials: Revenue growth across regions, led by Colombia. Commercial revenue per passenger benefited from growth in all markets. Costs varied by region, with Mexico affected by concession fees and wages, but Colombia and Puerto Rico better. • Infrastructure: CapEx in Q4 was MXN 2.5 billion, half of 2024 total. Projects include Cancun Terminal 1 expansion, Oaxaca Airport expansion, and Puerto Rico Terminal B and runway remodeling.

Passenger traffic in Q4 2024 was 17.7 million, down 0.3% year-on-year, with full year 2024 at 71 million. Colombia had mid-teens passenger traffic growth, Puerto Rico up nearly 10%, and Mexico down 8%. Total revenues in Q4 were MXN 7.4 billion, up 19% year-on-year. Mexico accounted for 72% of revenues with mid-teen growth, Puerto Rico 15% with high 20% growth, and Colombia 12% with 31% growth. Commercial revenue per passenger was MXN 130, with high single-digit growth. Total expenses increased 13% year-on-year. Consolidated EBITDA was up 23% year-on-year to over MXN 5 billion, with adjusted EBITDA margin at 69.7%.

• Traffic trends to normalize in Q1 2025 towards 2023 levels. • Mexico traffic expected to normalize by 2026 as Pratt & Whitney effects reduce and Tulum's initial ramp-up concludes. • Colombia and Puerto Rico expected to continue positive trends but will normalize after recent boosts.

• Pratt & Whitney engine restrictions and Mexico City capacity constraints impacting Mexico traffic. • Tulum Airport cannibalizing some Cancun passengers. • International traffic declines from all regions. • Peso depreciation impacting costs in Puerto Rico and others.

Q: Can you share with us your traffic growth expectation for this year and whether you're seeing any pickup in route openings or network development by airlines, specifically on the Mexico side? And then the second question is on the commercial revenue per passenger...

A: Thank you, Rodolfo. Good morning. In the case of the Mexican traffic, we will continue suffering from the restriction in capacity of Mexico City and the problem of Pratt & Whitney... On commercial revenues, as I said during the initial remarks, we are still suffering in the case of Terminal 2...

Q: I have 2 questions. One is a follow-up to Rodolfo's. We have seen some press that the capacity of the Mexico City Airport should increase this year. I don't know if you heard something on that front. And the other one is on dividends...

A: In the case of the capacity of the restriction in the capacity of Mexico City Airport from 52 to 43 ATMs per hour. What I have seen in the news recently is that the Mexico City airport manager is open to eliminate this restriction and probably to go back to the 52... In the case of dividends, I have prepared my proposal, and it will be sent to the Board of Directors...

Q: I know that certainly, there's a lot of political rhetoric at the moment in North America. And we've, of course, seen some currency movements, which you've mentioned. Are you seeing any nuances in your international traffic flow, for example, Canadians visiting Mexico more frequently than you expected...

A: Well, I'm sure that you have heard my initial remarks. In the case of international traffic for the quarter, all the regions were negative. In the case of Canadians, they were negative 0.6%, which is almost flat, I would say...

Q: Just wanted to learn a little bit more if you had any conversations or feedback, particularly from U.S. carriers towards capacity expansion plans into Cancun for the second half of this year...

A: Well, we are in the process to receive the summer season schedule. So that should be received, I would say, in the coming weeks. So for the moment, we do not have visibility for the summer season...

Q: Two quick follow-ups on my side. Actually, a new one on -- we see that you have some rebalancement in Colombia and Puerto Rico. If you could provide a little bit of the details on this rebalancement? And also from your expectation, how Tulum has been operating so far? How has been the traffic in Tulum versus your expectations so far...

A: Well, in the case of Colombia and Puerto Rico, I would say they are working and they are giving great results. I'm really surprised of the resilience of Puerto Rico... In the case of Tulum, what I can say to you is as we expected basically, probably not so strong...

Q: So just one question on capacity in Cancun. Like under a hypothetical scenario where international remains weak and there's an increase in capacity that the local -- the domestic airlines want to increase to Cancun. Are there any constraints in the terminals where you service the national carriers? Or would you be able to allocate or would you need to reallocate basically your operations there? Any color on that?

A: Absolutely. Well, today, we do not have restrictions in terms of operational capacity in Terminal 2. What we have is restrictions in the non-aeronautical side...

Q: Just a question on Mexican tariffs. Were you able to implement the increase last year? And is there any spillover that we might see for this year?

A: Alan, I cannot hear you. Your line is cutting. So if you can repeat your question, please?... It was basically implemented last year...

Q: My question is actually related to passenger growth. It's a bit of a double click on some things you mentioned. As you referred to Volaris, they stated in the earnings call that they expect GTF issues to affect a significant portion of their fleet all throughout 2025, '26, '27...

A: Enrique, again, could you repeat your question, please. Operator: Sorry. It seems that we've lost Enrique...

Q: A question on Tulum. Is there any somehow updating mechanisms or compensating mechanisms for the traffic that has been taken from the Tulum Airport from Cancun?

A: Gabriel, I will not call it compensation because at the end of the day, if you go back to the regulatory regime that was published on October 19, 2023, the formula is looking forward, it's not looking backward. Of course, the effects of Tulum Airport were included in those calculations...

Q: Congrats on the results. I'm sorry if this has already been asked. I had some issues with my line. But my question is related to the commercial side. I mean, we saw a really good performance on the non-idle per pax growth. I was wondering, I mean, is this a result of the mix from having maybe a stronger U.S. dollar and maybe some pent-up demand or something? Or also if there has been any strategic shift in how you renew your contracts, maybe a little bit of pricing power on that side...

A: Absolutely. Well, it has to do with the FX. You can see it very clear during the fourth quarter results, and partially on the third quarter last year results, because we saw some kind of peso devaluation since the third quarter...

Q: And also, a little bit of a follow-up there, Adolfo. Roughly, what amount of your commercial contracts are due each year? And are you able to renew them with, I mean, maybe open terms? Or are those getting renewed with maybe fixed terms or an automatic plus or something like that?

A: Well, there is not a way to say that this year 20% of the contracts will expire. Every business line has its own term...

Q: First one, it's a follow-up on Tulum. You said it was included on the MDP. But can you share how it's trending when compared to your expectations, it's going in line or not? And the second one, in terms of capital allocation, there was some news on the Dominican Republican asset last year. I understand it's still on hold. And if there's anything else that the company would be considering outside Mexico?

A: Yes. In the case of Tulum, what I can say to you is as we expected basically, probably not so strong... In the case of Dominican Republic, we do not have any update. We continue with the legal process there...

Q: Apologies, my line dropped. Were you able to listen to me?

A: Now I can hear you... My question is actually kind of a double click on some things you mentioned, more specifically Volaris, as you mentioned yesterday during the earnings call that you're going to have GTF engines for this year, next year, and possibly 2027. And they have moreover renegotiated the aircraft deliveries with Airbus to further slow down capacity increases. Do you believe that this new information significantly hinders growth in the short to medium term? Do you think it may be indicative of a more weak domestic market and players?

A: Yes, Enrique. Well, what is important for us is the additional capacity they are including as we speak, not just Volaris, also in the case of Viva and the case of Aeromexico...