Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.’s (OMAB) first quarter results of fiscal 2010 have reported an income of MXN$103.0 million, down 30.4% year over year based on a 16.2% increase in operating expenses. As a percentage of revenues operating expenses have increased by 430 basis points.
OMAB has reported an EPS of MXN$0.26 or 17 cents compared to MXN$0.38 or 24 cents in the year-ago quarter. The EPS has also missed the Zacks Consensus Estimate of 22 cents.
Total revenue grew 4.9% to MXN$510 million from MXN$486 million in the first quarter of 2009. The boost was attributable to a 21.6% increase in non-aeronautical revenue.
During the quarter, total passenger traffic decreased 8.2% with domestic traffic decreasing 9.3% and international traffic decreasing 4.2%.
The decrease is the after-effect of the global recession that took place in 2008, when oil prices reached their peak of $150 per barrel. H1N1 virus, which broke out in 2009, was another reason for the decline in passenger traffic for Mexican airlines such as OMAB.
However, currently the markets are picking up and oil prices have dipped to $85 per barrel, a favorable situation for the entire industry.
The industry has shown and is likely to show some improvements in 2010, but it will take years to recover the losses incurred in 2008 and 2009. Thus, the company will continue posting lower passenger traffic for the next couple of quarters.
Moreover, other Latin American and Chinese airline stocks will perform well in 2010 provided the overall economy continues to grow. Besides, the economic growth in emerging markets will be higher than in the developed markets. We reiterate our Neutral recommendation on the ADR.
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