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Cancun Remains the Story at Grupo Aeroportuario del Sureste SAB CV

Aerial view of Cancun. Image source: Getty Images.

According to TripAdvisor, Cancun is the second most popular destination in Mexico. That certainly shows when looking at passenger traffic at Mexican airport operator Grupo Aeroportuario del Sureste SAB CV (NYSE: ASR), or ASUR, which continued to benefit from strong traffic growth at its Cancun Airport during the second quarter. Its crown jewel airport was once again nearly the sole driver of passenger traffic growth across its nine Mexican airports, which meant it was once again the biggest contributor to earnings growth.

ASUR's results: The raw numbers

Metric

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Total Passenger Traffic

6.9 million

6.6 million

5.4%

Total Commercial Revenue Per Passenger

$97.18

$81.76

18.9%

EP ADS in US$

$1.56

$1.32

18.3%

Data source: Grupo Aeroportuario del Sureste, S.A.B. de C.V.

What happened with ASUR this quarter? 

ASUR's quarter would have been lousy without Cancun:

  • While domestic traffic grew at seven of ASUR's airports and was up 5.7% year over year to 2.75 million passengers, Cancun drove the bulk of that traffic. Not only did it account for 53% of domestic traffic, but it grew traffic by 7.4% to 1.6 million passengers. That helped offset a decline in traffic at Minatitlan and Villahermosa, which, along with weak growth at Veracruz and Huatulco, weighed on domestic traffic growth.
  • Internationally, traffic growth was 5.1%. Here, Cancun is even more important because it accounted for 95% of traffic last quarter, and as a result, its 5.9% traffic growth did all the heavy lifting, more than offsetting declining traffic at more than half of ASUR's airports.
  • ASUR's other big earnings driver was its ability to capture more revenue per passenger. Last quarter, this key metric increased 18.8% thanks to 25.2% improvement in commercial revenue. Driving this was 30%+ revenue growth in food and beverage operations, car rental revenues, and teleservices.
  • Total operating costs and expenses, meanwhile, declined 6.4% because of a decrease in construction costs resulting from lower capital expenditures and fewer investments in concessions. That said, costs of services increased 11% because of the Terminal 3 expansion at Cancun.

What's driving this growth?

Because Cancun continues to be one of Mexico's top tourist destinations, ASUR is investing to increase its capacity to handle this traffic. This includes the recently opened Terminal 3, which should increase its international passenger traffic capacity by 4 million. In addition to that, the company will soon open Terminal 4 to further boost capacity.

While the focus of those terminals is international passenger traffic, Cancun continues to be a major destination domestically. That is why Aeromexico, for example, recently launched a new route from Guadalajara to Cancun. That route should also provide a boost to Grupo Aeroportuario Del Pacífico (NYSE: PAC), which operates Guadalajara. In fact, traffic at Groupo Aeroportuario Del Pacifico's principal domestic airport is up 15.3% in the first six months of this year, partially because of passengers heading to Cancun.

Looking forward 

As long as Cancun remains one of Mexico's top vacation destinations, it should continue to drive traffic to ASUR's airport. That's what the company is betting on, with it adding two additional terminals to that airport so that it can meet future demand. Needless to say, that airport will likely remain the key growth story at ASUR for quite some time.

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Matt DiLallo owns shares of TripAdvisor. The Motley Fool owns shares of and recommends TripAdvisor. The Motley Fool recommends Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Sureste. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.