OMAB Announces 5-Year Plan - Analyst Blog

Mexican airport operator Grupo Aeroportuario del Centro Norte, S.A.B. de C.V (OMAB) announced a Master Development Program (MDP) investments for the next five years for a total consideration of MXN$2,745.2 million. The five years include the period between fiscal 2011 to fiscal 2015. An additional MXN404.3 million will be invested in airport security improvements, of which 70% will be carried out in the first two years.

The intension for such investments is to expand the entire airport infrastructure for modernizing airport facilities and increase passenger traffic. Centro Norte is planning to spend an extra MXN$404.3 million for domestic and international operating, safety, and security standards.

Recently, Centro Norte declared an investment of MXN$500 million for better handling of baggage in its 13 airports. A part of the investment will be financed by UPS Capital Business Credit.

As the market is gradually picking up, Centro Norte is coming up with new investments as well as routes.

During the third quarter of fiscal 2010, passenger traffic rose 4.3% year over year with 2.7% and 14.9% increases in Domestic and International traffic, respectively. In this context, we note that the second quarter saw a turnaround in traffic after a long hiatus, since the beginning of fiscal 2009, with traffic rising 6.5%.

The rebound in traffic during the second quarter was not specific to the company. Both Grupo Aeroportuario del Pacífico S.A.B. de C.V. (PAC) and Grupo Aeroportuario del Sureste, S.A.B. de C.V. (ASR) have experienced an increase in passenger traffic since the second quarter of fiscal 2010 compared with the huge drop suffered during the comparable period in fiscal 2009.

The traffic decline from the second quarter of fiscal 2009 through March 2010 was mainly due to the outbreak of the H1N1 flu in April 2009, aggravated by a difficult business environment as fallout of economic instability since the second half of fiscal 2008.

With the revival of the markets, the airline industry is expected to show some decent results in the coming years. Fuel prices have also settled down to the 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.

We maintain our long-term Neutral recommendation on Aeroportuario del Centro Norte. The ADS currently retains its Zacks #3 Rank, equivalent to a short-term Hold rating.