A Conversation With the CEO of Mexico’s GAP Airports

Airports

Let’s start with the obvious. I did not talk to the CEO of clothing-company GAP. That, however, is a far more familiar GAP than this one. You may not know the GAP name, and that’s ok. What the company would rather have is you using its 12 airports throughout México. I spoke with CEO Raúl Revuelta Musalem via video chat from his company’s headquarters in Guadalajara to learn more about what’s going on south of the border.

The official name of the company — Grupo Aeroportuario del Pacífico — should give you an idea of where the airports are located. The 12 airports range along the country’s western half, from Tijuana and Mexicali up on the US border to Manzanillo and Morelia at the southernmost point. Here’s a map of the airports under GAP’s purview.

Click to open the map of GAP Airports

The company has divided its airports into three types on its website. There’s Guadalajara and Tijuana as bigger airports in larger metro areas; Mexicali, Hermosillo, Los Mochis, Aguascalientes, Guanajuato and Morelia in mid-size cities; and La Paz, Los Cabos, Puerto Vallarta and Manzanillo in tourist destinations.

According to Raúl, he really thinks about it based upon the three types of passengers that the airports serve. There’s “Don Pepe,” the Mexican-American traveling back and forth for friends and family, “Paulina” the businessperson, and “William” the American traveling for vacation.

Right now, these people are traveling with varying frequency. Paulina lags behind as business travel has suffered, but Don Pepe and William are traveling a great deal.

Considering México has been open for Americans during the entire pandemic, it has become higher up on the list for US-based travelers like William going on vacation. The proximity, Raúl noted, is also a plus. Even though it requires crossing a border, people feel more comfortable knowing that — in the case of LA to Cabo — that they are only 2 hours from home. This choppy recovery has meant very different fortunes for different GAP airports.

I dug into Cirium data to see how many seats were being offered over time from each of GAP’s 12 airports. I started with April 2021 and went through the end of the year, comparing to 2019’s pre-pandemic seats.

Some airports have gone off to the races with seats surging more than 20 percent vs 2019. And which airports are these? These are the places where William is going.

Biggest Gainers Yo2Y % Change in Departing Seats

Data via Cirium

Then we have those that are more middle of the road. These have seen growth, just not into the stratosphere the way the others have. These airports are more a mix of all types of travelers with some being heavy on visiting friends and relatives (VFR) while others like Tijuana are more business-centric. Tijuana is something I’ll talk about later.

Modest Gainers Yo2Y % Change in Departing Seats

Data via Cirium

Then lastly, we have the laggards which are still not projecting to be above 2019 levels. These are the more business-focused markets — excluding Tijuana — which just have to wait to see numbers return.

Biggest Losers Yo2Y % Change in Departing Seats

Data via Cirium

This creates a puzzle for GAP, but apparently the system is designed that way. As Raúl explains it, the government hands out airports to ensure that each operator has a mix of winners and losers… financially speaking. If a company wants to manage one of the rock stars, it’s likely going to also have to manage some money losers. In that way, the government can ensure stability.

Over the last year, this has been challenging for GAP since every airport became a loser in the very beginning. The company cut back its operational expenses as much as possible, but it has still continued to invest in capital expenditures, because it knows it will need the growth sooner rather than later.

Raúl outlined how before COVID, the company was at the beginning of “our biggest investment program, about US$1.5 billion in 5 years.” That included expanding the terminal at Los Cabos by nearly half, building a second runway at Guadalajara, and starting to work on a second terminal at Puerto Vallarta. These projects are all continuing.

But the most fascinating project of all is what’s happening in Tijuana. You might expect that Tijuana being a big, business-focused city might see similar seat losses to Guadalajara but it has not. And that has a lot to do with the fact that the airport sits right on the US border.

I’ve written about the Cross Border Xpress (CBX) before. This is a terminal that was built on the US side of the border that allows air travelers to use Tijuana’s airport by going through customs and immigration as they cross from one side to the other. CBX has fueled a rocket-like trajectory of growth for the airport and Raúl tells me that just before the pandemic, almost 38 percent of travelers flying out of Tijuana came from the US.

Tijuana finds itself in a sweet spot. Its largest airline, Volaris, has been one of the winners during the pandemic as Interjet shut down and Aeroméxico went bankrupt. As Volaris grows, more flights become available, and more people consider the airport as a valid option. It has always done well for that VFR traffic, but Raúl told me that even leisure markets like Puerto Vallarta and Los Cabos are seeing strong demand from people in San Diego. After all, it’s a whole lot cheaper to fly domestically from Tijuana than it is to fly from San Diego.

The US government gave CBX an added boost during the pandemic with all this negative COVID test requirement business. That rule applies for air travel, but guess what? The CBX border crossing upon arrival is considered a land crossing. No test is required. That’s quite an attractive loophole.

Now, GAP is building a new connections building in Tijuana that it hopes will help spur more international travel from the airport. Previously, if you flew in from a third country to Tijuana, you had to go through Mexican customs and immigration before going over CBX and passing through US customs and immigration. The new building — which opens in December — will now cross directly into the US without having to go through Mexican formalities. Unlike San Diego, Tijuana is a 24-hour airport, and that could be very attractive for international travel options, especially those that go down further into Latin America — where departures are preferred in the middle of the night — or to Asia.

GAP has been fairly lucky during the pandemic. It had limited exposure to Interjet, which had the vast majority of flying concentrated in Mexico City with Cancun the second largest. The same goes for Aeroméxico which had Mexico City as its number one followed by Monterrey as a distant number two.

The decision by the Mexican government to not close down to Americans has meant that GAP’s leisure-focused airports have performed like almost no other around the globe. Now the company hopes to continue to plow through the remainder of the pandemic by investing in growth and preparing for the day when traffic returns even to its weakest airports.

5 comments on “A Conversation With the CEO of Mexico’s GAP Airports

  1. Excellent insight – thank you CF.
    As a visitor to BJX for about 5 years now, I can confirm your thoughts – it’s an excellent and well-run airport that is a pleasure to use.
    I’ve also watched the terminal expansion – all well done, and it is not disruptive.
    I’ve also used PVR – and while there is work to do there, it’s getting better.
    Your comment about the Mexican government assigning good and poor performers was interesting.
    Thanks again

  2. The three passenger types are all U.S.-based, and the discussion is mostly centered on travel between the U.S. and Mexico. What about other types of travelers, like domestic Mexican or between Mexico and other countries? I assume the charts are for all departures: what portion of these have to do with the U.S.? How important is U.S.–Mexico travel for the patterns seen in the charts?

    1. Ron – Those charts are total departures, and the tourist destinations have much higher percentages of US departures. Meanwhile a place like Tijuana has none.

  3. I gather the x axis is actually 2020 in the graphs? How can you measure yoy 4-5 months into the future? Your data source has reliable projections? Huh? Headache

    1. Beto – As noted, this is Yo2Y, year over 2 years, or 2021 vs 2019. And you can easily measure the number of seats that are scheduled. Airline schedules go well into next year.

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