Tue | Jan 26, 2021

NMIA upgrade delay - US$100m fix on despite 70% traffic loss but new timeline sought

Published:Wednesday | November 25, 2020 | 12:15 AMHuntley Medley/Senior Business Writer
Norman Manley International Airport.
Norman Manley International Airport.
A section of the Norman Manley International Airport in Kingston.
A section of the Norman Manley International Airport in Kingston.

PAC Kingston Airport Limited, PACKAL, operator of the Norman Manley International Airport, NMIA, in Kingston is maintaining that its pre-COVID commitment to invest more than US$100 million to upgrade the airport will be honoured, even as its parent company is negotiating with the Jamaican Government to review the upgrade timetable and capital spend following a colossal fallout in passenger traffic and revenue caused by the COVID-19 pandemic.

Mexico’s Grupo Aeroportuario del Pacífico SAB, or GAP – which translates in English to Pacific Airport Group – took over the Kingston airport under concession a year ago, in October 2019.

“We have just started negotiations with the Government but I can share that PACKAL is committed to honouring all that we offered before COVID,” CEO Fernando Vistrain Lorence told the Financial Gleaner, while declining to disclose the precise nature of the revision being sought in the talks.

In its third quarter financials to September, GAP, which operates 12 airports in Mexico, as well as the NMIA and the Sangster International Airport in Montego Bay, reported that in the three months, passenger traffic plummeted by more than six million or 52 per cent across its 14 facilities compared to the corresponding period in 2019.

This resulted in a comprehensive loss of 1.2 billion pesos (US$60 million) or an earnings decline of more than 81 per cent over the quarter, even though for the nine months to September, total revenues were down by only 18 per cent. This included a 33 per cent drop in aeronautical revenues from airlines, while non-aeronautical revenues, such as income from airport shop rentals, decreased by US$50 million or 36 per cent.

Vistrain said that in the nine-month period, NMIA suffered a passenger loss of approximately 70 per cent compared to 2019.

“Taking into consideration that the concession started in October last year, we enjoyed only five months of positive passenger numbers. During the month of March 2020, we saw the start of passenger reduction with a loss of 47.8 per cent compared with 2019, and a total passenger count of 73,000. During April and May, and with the closure of the borders, our numbers fell 97.4 per cent for April and the 97.6 per cent for May compared to same months of 2019,” according to the PACKAL CEO.

Pre-pandemic passenger traffic at NMIA for January to March this year was 354,800.

Although NMIA contributed US$13.7 million in aeronautical revenues and US$5 million to non-aeronautical income, GAP’s total revenues declined by US$65 million or 29 per cent in the quarter, the published financials show.

Meanwhile, in the three months to September 2020, operating costs in Kingston were around US$8 million, down from US$9.2 million in the last quarter of 2019. The airports operator said this was made up mainly of concession fees of about US$4 million, cost of services US$910,000, security and insurance costs of US$875,000, other operating costs of US$870,000, employee costs of US$820,000, and maintenance expenses of US$470,000.

In the face of declining revenues, GAP executives said the company initiated several cost-cutting measures, including asking the Mexican Aviation Authority for an extraordinary review of the capital development programme in that country. A formal request, GAP reported, was also submitted to the Jamaican authorities for a review of capital spending here.

“At this time, there is no time frame defining how long the extraordinary tariff review will take; however, we expect a response by the end of 2020,” the company said at the release of its financials in October.

In response to questions from the Financial Gleaner, PACKAL CEO Vistrain said that in light of negotiations with the Jamaican Government having just started, the company was unable to share information about the precise request.

Vistrain declined to give specifics on the likely impact on the timetable for the US$101.4 million expansion plans at the airport, including a US$60-million runway extension project which was slated to start last year and last three years. He also would not say whether this was the mandatory capital expenditure commitment under the concession agreement and how much has been spent so far.

Meanwhile, other cost cutting is under way at NMIA.

“PACKAL had to reduce staff levels through a lay-off programme to reduce operational cost based on lower traffic numbers. We also did a deep review in all our service contracts to find important savings. In addition to that, we implemented an energy reduction programme,” said Vistrain.

GAP’s published figures show it reduced staff costs in Kingston from US$1.2 million in the last quarter of 2019 to US$820,000 at September this year.

PACKAL has also extended a 60 per discount on rent to tenants at the airport, its CEO said. The discount will be in place until December 2020, after which it will be reviewed.

The 2020 declines recorded by GAP reversed last year’s growth spurt. In the final quarter of last year, total terminal passengers at GAP’s 14 airports increased by 1.2 million or more than 11 per cent year on year. For the full year, 48.7 million passengers passed through GAP’s airports, up from 44.9 million in 2018. And yearly revenues were up nearly 15 per cent.