Grupo Aeroportuario del Pacifico SAB de CV (PAC) 2012 Q4 法說會逐字稿

Good morning, everyone. My name is Jeff and I will be your conference operator today. At this time, I would like to welcome everyone to GAP's fourth quarter 2012 earnings conference call. All lines have been placed on mute to prevent any background noise. Thank you.

I will now turn the call over to Maria Barona of i-advize Corporate Communications. Please go ahead.

Welcome to Grupo Aeroportuario del Pacifico's fourth quarter conference call. Good morning to everyone. Today from the Company we have Mr. Fernando Bosque, Chief Executive Officer; Mr. Rodrigo Guzman, Chief Financial Officer; Mr. Miguel Aliaga, Institutional and Public Relations Officer; and Mr. Raul Revuelta, Chief Commercial Officer.

Please be advised that any forward-looking statements made today or during this conference call do not account for future economic circumstances, industry conditions, the Company's future performance or financial results. As such, these statements are based on several assumptions and factors that could change, causing actual results to materially differ from the current expectations. For a complete note on forward-looking results, please refer to the Quarterly Report, which was issued yesterday.

At this point, I would like to turn the call over to Mr. Bosque for his remark. Mr. Bosque, please begin, sir.

Good morning. We appreciate your interest in GAP and we thank you for joining us today. If I had to summarize in just the few minutes that we have GAP's performance for the full year 2013, firstly, I should remark that our goals was surpassed. Let me begin by pointing out the important strengthening in the traffic figures, which was reflected in the quarterly changes compared to four quarter '11, but were clearly evident in the annual results.

As you can see on pages 4 and 5 of the report for the quarter, total domestic passenger traffic rose 5.3%. Total international passenger traffic rose 1.6% and total traffic increased 4%. On an annual basis, however, the recovery is more pronounced. Domestic traffic rose 7% and international 2.2%. If you recall, we had upped our original traffic guidance last year to an increase of 3% to 4%. We surpassed that by almost 50%, reaching a total traffic of 5.3% for full year 2012, increasing by 1,080,000 passengers.

We can attribute this strengthening to several factors, but mainly comparing 2011, we are just seeing better comparisons -- in 2011 when we were still [reliant] from the effect of the exit of Mexicana. In 2012 we also saw a better operating environment for the industry overall, with improved international traffic in some airports, more and more routes and frequencies each quarter and to some extent, improving security in the country that leads to a better perception of travel to Mexico.

We also cannot discount the improved scenario for business overall in Mexico, particularly to the non-tourist destination such as Guadalajara and Guanajuato that are enjoying stronger domestic travel in the form of business travelers, which tend to be more stable and less seasonal than tourist travelers.

And as we have been mentioning, we are expecting added growth, particularly in the airports of Tijuana, Los Cabos, Guanajuato, Morelia and Guadalajara. In Guadalajara, specifically, we have already begun working on projects to increase capacity in terminals and aprons to accommodate the expected growth in the coming year and beyond.

Thus, we are putting our money where our mouth is, by investing in new facilities, because we see that the growth and the potential is there and it is already begin pouring in traffic as well as in commercial revenues.

That leads me to the issue of aeronautical and non-aeronautical revenues, which, for the quarter, reached a 7.3% increase and for the year was 12%, higher again, beating out our original estimate of 7.5% to 8.5%.

Looking at this figure more closely, let me discuss aeronautical revenues, which grew 5.6% for the quarter and 9.4% for the full year, again slightly surpassing our original guidance of plus 8% to 9% for the year.

We are encouraged by all the increases in routes as well as new routes that were added to the 16 schedules. So let's discuss commercial revenue briefly. Overall, non-aeronautical revenues for the quarter increased over 13.4% and 22.3% for the year. In our annual guidance, we project a non-aeronautical revenue growth of between 5% to 7%.

Overall, we experienced higher revenues from the leasing of the space and as well as from the operation now managed by the Company, such as advertising, VIP lounges and car parking.

As always, Raul, our Commercial Director, will elaborate more on this topic, but I want to highlight that. Terminal 2 in the Los Cabos airport, which we have been talking about for a while now, is finally complete and in full operation since November 1, 2012. The improvements aims to make the visit more comfortable for passengers, while providing the airlines with better service. This in turn creates opportunities to develop added commercial revenues.

At this airport, we also inaugurate a new VIP lounge area that is the state-of-the-art with free Wi-Fi, new seating areas, a full service bar and restaurant which is part of this expansion. And as mentioned in the press release, beside the spaces leased to airlines and credit card companies that offers VIP lounges services to the passengers or card holders, in June 2011 GAP now operates 5 VIP lounges directly [in every way], which is already contributing to the growth in non-aeronautical revenues.

Moving on to the Puerto Vallarta airport, this operation also received important upgrades and expansion to accommodate extra capacity to manage passenger during peak hours with an extension of the international dock, including four new passenger walkways.

That brings to me the importance of the few cost cutting initiatives that we have implemented along with the revenue generating activities that will mean better margin for GAP. For examples, since November 2012, the service of Airbuses and runways that prior to November was given by GAP to the airlines is now operated by a third-party.

These decisions which we made as part of our cost cutting strategies has been beneficial for GAP since now. This third-party is completely responsible for the service, allowing us to reduce personnel by about 8.6% employees through the Company.

In the short-term, this may help generate higher employee costs as evident in the four quarter results due to severance payment, but in the long-term beginning as soon as the year end in 2013, we believe that this will translate into minimizing our employee cost.

Already at this point, GAP's operational cost is below 25% of our revenues. Thus, higher aeronautical and non-aeronautical revenues predicts an EBITDA increase when comparing four quarter '12 with four quarter '11 of over MXN10 million. For the year, EBITDA increased MXN361.7 million or 14%. An EBITDA margin without IFRIC 12, grow 110 basis points, growing from 66.1% to 67.2%.

So we are very pleased about surpassing our EBITDA growth target, as you will remember was 6% to 8.5%, and our EBITDA margin growth target of 66.3%. As well as growing EBITDA per passengers by almost 8% up to MXN138.15, an increase that is 51% higher than the traffic increase, 124% higher than the inflation in Mexican economy and roughly 67% higher than the Mexican interest rate. For the full year, net income increased MXN160.45 million or 10% compared to the previous year.

Just a quick update on Tijuana. The international gateway project is still under development and we expect that we will break ground in May of this year. If that goes according to plan, we will begin operating this project in the second half of 2014. However, we will announce via press release when this all comes into play.

Before I turn over the call to Mr. Raul Revuelta, I want to mention a very important event that we announced in the press release issued in October 4th, which was regarding the capital reduction as per the resolution of the Extraordinary Shareholders Meeting of September 25, 2012.

As per the release in October 3rd, the Company complied with the decision made at the Extraordinary Shareholders Meeting, making the dividend payment to Indeval for distribution to the shareholders. However, Grupo Mexico has requested that the execution of the resolution of the shareholders meeting be suspended and a judge of the Supreme Court has ruled in their favor. Therefore, at this point, the capital reduction is still at Indeval waiting distribution. We are working with the authorities and our legal team to ensure that this matter is resolved promptly. However, at this point this is all we know.

At this point, I will turn the call over to Raul Revuelta for these comments. Raul, please, go ahead.

Thank you, Fernando. Good morning, everyone. I'm pleased to have the opportunity to give additional color regarding the traffic and revenue figures mentioned by Mr. Bosque.

First, I will present a traffic analysis and then I will review the commercial business. During the fourth quarter of 2012, GAP has 4% more total passengers, reflect a growth of 209,000 passengers compared to the same quarter of 2011. This increase was a result of higher domestic and international passenger's traffic, which increased 5.3% and 1.6% respectively.

I would like to emphasis the important growth of domestic passengers in seven of our airports during this quarter, Guadalajara, Tijuana, Guanajuato, Puerto Vallarta, Manzanillo, Aguascalientes and Los Cabos airport that was driven mainly by the airlines of Volaris, Grupo Aeromexico and Interjet.

In terms of international passengers, the increase of this fourth quarter was mainly caused by the following; at Los Cabos and Puerto Vallarta airports by the growth of Canadian traffic mainly from passengers traveling from the cities of Edmonton, Calgary, and Vancouver. Additionally, two new routes opened in Los Cabos airport, Orange County and San Diego. It is very important to mention that the fourth quarter in 2012 was the best quarter in the history of Los Cabos in terms of number of international passengers.

Volaris began operations in the route Guanajuato-Chicago and Guadalajara-Sacramento during October and November respectively. Interjet starts operations on the route Guadalajara-Orange County during October. And WestJet began operations in the route Manzanillo-Vancouver in November.

It is important to mention that Los Cabos and Guadalajara airport experienced the best year in their history in terms of number of total passengers. Regarding non-aeronautical revenue, this grew 13.4% or MXN31.4 million during the fourth quarter in comparison with the fourth quarter of 2011. And commercial revenues grew 19.3% or MXN14.5 million, mainly caused of the commercial development, for example. Other revenue rose 254.2% or MXN8 million, mainly caused by a signing fee from various new operators of the new Terminal 2 in Los Cabos, such as car rental companies and special retailing stores.

Revenue from duty-free increased 39.5% or MXN7.3 million, driven mainly by the opening of the Terminal 2 in Los Cabos and the negotiations of the new contract.

Parking lots revenue rose 15% or MXN6.4 million compared for the fourth quarter of 2011 as a result of traffic increase as well as the new parking fee structure implemented at the beginning of 2012. This effect along with the new marketing strategy such as promotional package, tend to encourage more frequent and longer use of the parking lots.

The revenue from advertising and food and beverage increased 34.7% or MXN6.4 million and 15.4% or MXN2.9 million respectively. This increase was the result of the direct operation of all advertising at our airports with the only exception of the old Terminal 2 at Los Cabos airport, and because of the renegotiation of certain contracts of food and beverage.

The revenue from VIP lounges increased 108.7% or MXN2.7 million, driven mainly by the opening of the three VIP lounges; Los Cabos, Guadalajara and Puerto Vallarta in 2012, which are fully managed and operated by GAP, compared to the only VIP lounges opened in 2011 in Los Cabos. Additionally, GAP generated leasing revenues from the new (inaudible) lounge at Guadalajara airport.

We are foreseeing that this year will be full of opportunities and potential for the development of new business. We at GAP are working to provide the best possible results, so I would like to take this opportunity to share with you our main strategies for the upcoming months.

On the aeronautical side, during 2013, we expect increases in the domestic market, mainly driven by the new openings by VivaAerobus, Volaris and Interjet to several destinations, due to the increase in additional seats by Volaris in Aguascalientes and VivaAerobus in Guanajuato. For Tijuana we expect double-digit growth for the first half of this year in terms of domestic seats originating mainly by Volaris, Aeromexico (inaudible).

Regarding the Los Cabos Airport, we expect to continue the growth in international market boosted by Southwest operated by AirTran, Spirit Airlines, American Airlines and the growth in the Canadian market. At this rate, and if the trend continues to Los Cabos, we'll experience the best year in its history in terms of number of international as well as total passengers.

Also for 2013, we are expecting the continued increase of frequencies and opening of new routes by several of the airlines. Some examples are Southwest Airlines will begin to operate a second day of frequency to Las Cabos to Orange County and will open new routes from Denver and Austin, [Orange County]. Spirit Airlines announced that it will be opening a route from Los Cabos to Dallas.

WestJet is planning to expand its operation in Manzanillo airport. Currently, it's operating to Calgary and during November, it will start operations to Vancouver. Delta Airlines will increase frequency from Puerto Vallarta to Los Angeles this coming July. American Airlines will increase frequencies from Los Cabos to Chicago, Dallas and Los Angeles. VivaAerobus will open two new routes from Vallarta to Oaxaca and Bahia to Cancun.

Additionally, Spirit is expected to increase frequencies in Vallarta, Hermosillo, La Paz, and Puerto Vallarta airports. Finally, Aeromexico, Volaris and Interjet will expand their frequencies at the best airports in the GAP network.

Regarding aeronautical revenue for 2013, we expect that growth will be mainly originating in Los Cabos and Vallarta airports. In Los Cabos the new terminal commercial development quickly proved to be successful in the first two months of operation, faster than we expect in terms of sales per passenger. The terminal layout as well as the [portfolio of range] to a passenger is now a fully operational. We expect to achieve a ratio of MXN90 in revenues per passengers at Los Cabos airport, which will be the best ratio in the entire Mexican airport network.

For Vallarta the growth will come from parking business which everyday attracts additional long-term users and will be complimented by other major increases in the commercial revenue of the airport, such as the VIP lounge, which has grown in terms of volume.

Now speaking in terms of business lines for the entire airport network, most of this year growth will be driven by duty-free loyalty services, the sales in our directly operated convenient stores in Los Cabos and the renegotiations in the timeshares contracts -- of the timeshare contract.

Additionally, at other airports, we will implement different strategies to improve commercial revenues per passengers. For example, we will work in the redesign of commercial areas in Puerto Vallarta to take advantage of the expansion in the satellite departures building. We expect to open at the end of the second quarter our six VIP lounge now in Tijuana, making GAP the largest VIP operator in Mexico.

Also in Tijuana, we're in the process of converting the old tenant spaces into recognized global brands in travel, retail and food and beverage. We will see the effect of the Hermosillo renovated commercial offering, which include new retail and food brands as well as the recently opened VIP lounge.

As you can see, these projects will take advantage of the huge potential of our airports and seek to further drive commercial revenues for the coming years.

Thank you again for your attention. And now Rodrigo Guzman, our CFO, will review the financial highlights.

Thank you, Raul. Good morning, everyone. This is Rodrigo Guzman, GAP's Chief Financial Officer. As Fernando mentioned, the sum of aeronautical and non-aeronautical revenues increased MXN77 million or 7% for the quarter. The increase was offset by a decline in revenues from improvements to concession assets, IFRIC 12, up MXN118 million or 57%, a result of adequate and committed investments for 2012, which was 0.5% lower than the one committed in the massive development program in 2011. As a result, total revenues in the fourth quarter 2012 decreased MXN41.5 million.

It is very important to remember that revenues from improvements to concession assets are recognized in accordance with IFRIC 12. But this recognition doesn't have a cash impact or an impact on the Company's operation results.

Breaking it down further, aeronautical services revenues increased MXN45 million or 6% in fourth quarter '12, due to a traffic increase of 4% as well as due to the fact that 62.3% of the total traffic growth occurred in the six airports with the highest maximum price.

Of the total increase in aeronautical services revenues, 77% was represented by passenger's charges and 20% by landing and aircraft parking revenue, which together grew MXN45 million.

On the other side, non-aeronautical services revenues increased MXN31 million or 13.4% in fourth quarter '12, which represent almost two-and-half times the traffic increase during the fourth quarter, again reaching the target we always have in terms of the growth of our non-aeronautical services revenue.

The increase in non-aeronautical revenues in the fourth quarter '12 with respect with fourth quarter '11 was due mainly to the opening of Terminal 2 in Los Cabos airport and the refurbishing of the main terminal in Tijuana. The increase in commercial revenue in those airports alone represents 57% and 20% of the consolidated total non-aeronautical revenues increase.

Finally, the importance of the profitability our investments. It is also important to remark that 52% of the total increase in non-aeronautical revenue is due to the lines of business that GAP operates directly, such as parking lots, advertising and VIP lounges, demonstrating that the objective of the Company is to seek business opportunities that can report incremental non-aeronautical revenue.

We aim to continue to deliver results as those business report increases in operating margins, EBITDA and an income that are material for the total profitability of the Company.

I want to remark that during the fourth quarter of '10 and fourth quarter of '11 the split between aeronautical and non-aeronautical revenues was 78%/22%. However, during the fourth quarter of '12, the split was 76% to 24%, representing an increase of 200 basis points in the percentage of non-aeronautical revenue versus the sum of aeronautical and non-aeronautical revenue. The ratio of non-aeronautical revenue per passenger increased 9% in fourth quarter of '12 when compared with fourth quarter '11, even with an increase of 4% in traffic.

Cost of service increased MXN52 million or 25.4%, mainly due to an increase of MXN25 million in maintenance cost, an increase of MXN15.5 million in personal cost, due to severance payments related with the service of [airbosses] and walkways service that previously has been operated and given by us to the airlines. And now, it's operated fully by a third-party assuming all the responsibility, which will drive significant personnel cost reductions during 2013 and going forward, as previously mentioned by Fernando.

An increase of MXN7.9 million in other operation costs, due to the increase in the reserve for doubtful accounts related with arrears. But even when that account is granted by real estate asset, the legal proceeding to adjudicate that guarantee has been long.

An increase of MXN7.6 million in services due to the opening of Terminal 2 in Los Cabos, of the refurbished main terminal in Tijuana and the increase in the satellite building in Puerto Vallarta.

As a result of the increase in the sum of aeronautical and non-aeronautical revenues, government concession taxes increased MXN4.2 million and technical assistance fee increased MXN1 million. The increase in cost of service was offset by the decline in costs of improvement to concession assets related to the effect of IFRIC 12, which decreased MXN180 million due to a 45% decline in committed investments for 2012.

Total operating cost declined MXN49 million or 6% in fourth quarter of '12 compared with fourth quarter '11. Operating margins and EBITDA margin increased with the effect of IFRIC 12 by 200 and 280 basis points respectively. While without the effect of IFRIC 12, those margins reached 46% and 64.4%.

For the full year, the results were impressive. Aeronautical revenues increased MXN288.1 million or 9.4%, 4.4% of the higher range of our guidance. Non-aeronautical revenues increased MXN183.9 million or 22.3%, a 178.8% over the higher range of our original guidance. The sum of aeronautical and non-aeronautical revenues increased MXN471.9 million or 12.1%, 42% over the top of our original guidance.

Cost of service increased MXN73.1 million or 7.4%, 38% over the top of our original guidance. EBITDA increased MXN361.8 million or 14%; that in relation with our original guidance means a 64.7% more in relation with the higher range. EBITDA margin closed at 67.2% without the effect of IFRIC 12, meaning 1.36% over the top of our guidance.

Finally, I would like to mention that as we released on December 13th, in line with our leverage strategy, effective December 5th, 2012, we received the first disbursement of our line of credit for the Guadalajara, Los Cabos, Puerto Vallarta and Hermosillo and Guanajuato airports for a total of MXN287.8 million, with the objective of reducing the Company's long-term financial costs by reducing the interest rate differential by 15 basis points. The main objective of the abovementioned line of credit is to prepay without penalty the debt contracted with Banco Nacional de Mexico, BANAMEX, in 2011 that as of today, have been fully paid.

Thanks for your attention. I will now turn the call over to Miguel Aliaga for final comments.

Thank you very much, Rodrigo. This is Miguel Aliaga, Investor Relations officer.

In January of this year, we issued a guidance press release for the 2013 period. At this time the guidance remains unchanged as follows.

In terms of traffic, an increase of 4.5% to 5.5%; aeronautical revenue, an increase of 6% to 7%. Non-aeronautical revenue, an increase of 10.5% to 13.5%, with an increase in commercial revenues of 11.5% to 13%. As a result, a total revenue increase of 7% to 8.5%.

In terms of cost of services, we expect an increase of 8.5% to 9.5%. An EBITDA margin of 66.5% to 67.5%, an increase in EBITDA of 6% to 8.5%, a cash tax of 30% and finally a total CapEx of MXN655 million.

GAP's management will be participating in an Investor Conference in New York in March. If you are in this area and would like to arrange a meeting with us, please contact us. We are also hosting the GAP Day 2013 event in Los Cabos on March 21st and 22nd.

At this time, you should all have received an invitation with a little agenda of the activities, including management presentations and a few airport tours.

In the event that you didn't receive one and are interested in joining us, please contact me via e-mail and I will make sure that you receive all the pertinent information.

Thank you for your attention. Operator, we may proceed with Q&A.

[Bernardo Villas], GBM.

I like to ask you regarding the gateway bridge in Tijuana. What's the status of this and is there a still pending approval from the US authorities?

It's Fernando Bosque. Thank you, Bernardo. We have now signed an agreement with the secretary of communication and transportation to provide the tariff facility to do the investment to accommodate our international side of the Tijuana airport.

Also, in the other side, in the state, the investor obtained it some time ago. It is more than one year ago, the authorization of the -- presidential authorization for that. And now they are involved in all the permit that are required to do the construction of the facility in this side. And so we are very clear now how is the final construction project for the bridge. And also in two, three months, maximum, we will have as we -- as was comment, the initial works for the -- in our side.

So our plan is to finalize this process, taking for now approximately 15 months in order to open the new facility around July 2014.

Thank you. And do you have like any idea of how will this impact positively traffic and commercial revenues and how much will you be charging for the use of the bridge?

In our side, Bernardo, in the Tijuana airport, we will not increase the cost for the passengers. So our expectation, the project will trigger and increase in the demand of traffic to this airport. So that could be big -- or get in advance probably five to six year the increase in traffic.

So that will be gradually. That will depend of how the airlines will schedule increase in traffic to these airports in order to move passenger to one to other side of the border. Our expectation that is a very nice opportunity for the area of Tijuana and also for the big portion of the passenger that is using currently the facility in order to reduce time to go to the neighbor.

And in our case, initially, we will reduce transferring of our ground transportation revenues, but we have an arrangement, an agreement that would be very close, signed to our partner in the other side in order to compensate and increase our commercial flow in terms of the money.

In summarizing, our expectation is to take before that was said in our master plan the level of the traffic. We are looking to move on the current level that we are below 4 million, moving very quickly to 5 million.

Okay. So this investment is included in the development plan?

Yes. Now we have -- that was explained before, that the cost of the adjustment in our terminal in this international side is part of the master plan that was agreed in the last quarter of the last year with this secretaria de comunicaciones. So for the -- for Tijuana airport there are no risk in the commercial side because we have an agreement, a compensation with the other -- with the partner in the other side of the border, and also we have no risk in the aeronautical side one time that the cost of this investment is part of the master plan.

Got it. Thank you. And could I ask you just another question. You posted really different figures for -- starting from operating profit back a year ago, could you explain us what this difference? It's I think roughly MXN60 million.

Could you repeat the question again?

Yes. You posted a different operating profit figures for last year.

The one that --

I mean the basis --

In the quarter --

-- is changing. Yes, for the quarter?

So you are comparing our release in 2011 with our release in 2012 for the year 2011, right?

Exactly.

Okay.

I just want to know what's the change?

Yes, the change is the international financial reporting standards. As you know, beginning January 1st, 2012, the Company started reporting our figures on the international financial reporting standards. And the difference between those is that it's mainly the benefits to the employees that previously was under Mexican under MEX NIF. Those costs were reported under the operating margin and now they are reporting above of operating margin.

So the main difference is that. And also that there is another difference, that is the inflation. On the international financial reporting standards, the inflation doesn't exist because the economy is not under high inflationary environment. So that, the inflation in relation with the value of the concession disappear under -- in international financial reporting standards while under MEX NIF they remain. So the amortization of the concession for our concession with inflation is higher than the amortization of the concession without the inflation.

So those -- we can say that the inflation is the highest impact in terms of international financial reporting standards. But those figures and explanations are in our press release.

Okay, perfect. Thank you.

Benjamin Trevor, Barclays.

First of all, congratulations for results. I have actually two question, one is related -- we heard [Assuard] that they're looking for expansion of the Mexico City airport, et cetera. So the question is, would that be a project for you also to consider or do you say you're fine with the opportunities you're currently having with the portfolio of airports you're currently running?

And the second one is on the Grupo Mexico on the recent notification you send out that basically there was a -- well, an initial ruling that some of your by-laws would not be -- well, as standard as they should be. So the question is what's your -- what are your steps going forward and how do you see the current situation and what's the most likely outcome according to your opinion? Thanks

Okay, Benjamin. Thank you for the questions. Let me answer the first one. Is of course all the airport operators in Mexico, and also I believe that will be very important opportunity for many others outside, is the renew or the construction of a new airport for Mexico City. GAP also [expressed] -- state to the authorities that also we are interested in to participate in any opportunities or in construction or in operation. Of course we have the expertise. We know that will take a long time.

At this time, it's not clear how will be the strategy that the secretaria de comunicaciones of Mexico government will follow with that.

Yes.

It's critical for all the country the result, that a restriction that we have in the entire country with the traffic. So of course all the airports. And GAP also is well related to the -- what happened in Mexico City airport. So we will continue in contact and continue to state to the authorities that we want to participate in any kind of solution for that.

And the second question related to Grupo Mexico, to mention that the event that was announced on Monday is similar that what happened one year ago when the judge dissolved in the decree that could be this two or some of that because of the by-law to be [news], when you compare with the regulation that was approved just in 2006.

Of course, that was announced by GAP we will continue in the process to go to the [Imperio], in order to obtain satisfaction because it's clear that the by-laws was prepared in according to the privatization process. There are some kind of restriction in order to who will control the operation of this airport.

So we have very clear understanding that we are in the process now in the next days. I think that we have 15 days more or less to prepare our Imperio. And after that, could be take more than one year.

That could be -- Miguel could explain something more about -- more details of that.

Yes. Benjamin, how are you? It's Miguel Aliaga. Yes, just to add to what Fernando mentioned and this is very important to mention. The decision as we stated in the release is not yet final, as Fernando mentioned. So we (inaudible) by GAP. This means that because there is another release that it is making some noise. So what is very important is, the consequences, the Company bylaws remains valid unless or until there is not a final decision.

So of course, as Fernando mentioned, we will be doing the process and of course there is some more time that will be used for the process. And then, finally, there maybe a final decision that not necessarily may need to be in the same way that the two decisions are taken because this is going to happen in more detail and of course the presentation of the documents will be of course more in depth. This is very important. The by-laws right now are valid.

Okay. Thank you very much, Miguel.

Neal Dihora, Morningstar.

I just had a quick question I guess on cost of services. I think you guys said in the press release the increase for 2012 was around 7% or so and next year you are looking for more of an increase. And I think you guys had a lot of projects in 2012; I mean the new international terminals in Los Cabos, a lot of the VIP lounges. So maybe I guess to try to help me understand why you think cost for service is going to increase more next year than this year and I don't know if you have the same number of projects planned? That's it.

Yes, Neal. Rodrigo Guzman speaking. Yes, of course the Company will increase in the next -- in 2013. As we said, we expect that the cost of service will increase also between 8.5% to 9.5%. It could appear that it's not a huge increase because, as we mentioned, we also did many things during 2012 in order to reduce our cost, for example, the issue in relation with airbosses and walkways.

So that thing will reduce our cost in terms of personnel, but of course the cost in relation with services are light, electricity and issues like that in the airports Las Cabos and Vallarta will increase. Of course there is another issue that is in relation with the baggage screening system. We expect that we can include in our -- include in the service some of the others that we don't really -- we don't have in this moment, those others that we are not giving them the service.

For example, we expect to include Interjet of course. We expect to include, if we can, Aeromexico and Volaris. So if finally those [all] we will include in the baggage screening system, we are going to give them the service and our cost will increase, but also our revenues will increase because we are charging a specific tariff, non-aeronautical tariff, in order to recover those costs.

So the issue is that perhaps the cost could seem very low -- I mean the increase in the cost of service will seem very low, but it's a reflection of the increase in some services and also the decrease in personnel as we took many strategies in the last year in order to decrease those costs.

Okay, that's all fine. I guess just one follow-up, in the press release I think you said in the fourth quarter there was some issue with I guess getting the money for the check baggage service that you did provide? I guess maybe I didn't really understand what you were saying, but--

Yes. The issue is that in the last quarter in '11, we had Volaris. We gave the service to Volaris. As you know, Volaris in those days represents 30% of our total traffic and we charge a tariff as per passenger -- as to review their baggage, we charge some amount of money to Volaris in relation with the baggage screening system.

But in the middle of the year, Volaris decided to go out of that service. They can sell the contract. So at the end of 2012, during the last quarter, we did not charge them nothing. So our revenues for baggage screening system declined and those revenues are included in the non-aeronautical.

Okay. Is that a permanent change, then, Volaris is out of the screening process?

No, we expect that during the year we could include them. But it's a matter of negotiation of course.

Right, of course. Yes, a big customer. Okay. It's helpful. Thanks a lot.

(Operator Instructions).

And, everyone, there appears to be no further questions in the queue. I would like to turn the call back over to Mr. Bosque.

Thank you all for your interest in GAP. We look forward to speaking with you again soon, to be in our GAP Day in next month. Have a good day, everybody.

Thank you. This does conclude our teleconference for the day. You may now disconnect.