Corporacion America Airports S.A. 2026 Q2 Earnings Call

Good morning, everyone, and thank you for joining us today. Speaking during today's call will be Martín Eurnekian, our Chief Executive Officer, and Jorge Arruda, our Chief Financial Officer. Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Please note that throughout this call, all references to revenues, costs, adjusted EBITDA, and margin, we refer to figures excluding IFRIC 12. Also, all comparisons discussed are year-over-year, unless otherwise noted. I will now turn the call over to our CEO, Martín Eurnekian.

Thank you, Iñaki, and good morning to everyone joining us today. Our second quarter adjusted EBITDA ex IFRIC 12 was down 4.5%, primarily driven by our cargo business in Argentina, lower seat capacity in the domestic market in Argentina, and non-recurring costs and expenses in Uruguay. Our cargo business in Argentina was primarily affected by an extraordinarily bad year-over-year comparison base. Labor disruptions at customs in April 2025 resulted in longer cargo storage periods and consequently, exceptionally high storage revenues. Seat capacity in Argentina was largely affected by Flybondi's significantly reduced operating fleet and higher fuel prices. Non-recurring costs and expenses in Uruguay, including costs associated with the implementation of the new ILS system, as well as maintenance and other expenses, also weighted on adjusted EBITDA during the quarter.

Despite these headwinds, our business remains strong, and the diversification and quality of our portfolio continue to support our overall performance with four of our six segments delivering double-digit EBITDA growth. We observed healthy international demand and passenger growth across most of our markets in the second quarter. We also continued to deliver strong revenue performance. Growth in both our aeronautical and commercial businesses enabled revenues to increase faster than passenger volumes. We were particularly pleased with the continued improvement in the revenue per passenger throughout the portfolio, including Argentina. Our financial position remains strong, supported by healthy liquidity, continued cash generation, and low leverage. This gives us the capacity to invest in our existing operations, pursue our acquisition strategy, and return capital to shareholders while preserving financial flexibility. In that context, our board approved a cash dividend distribution for 2026.

This represents an important milestone in our capital allocation strategy, and I would like to discuss the dividend and its underlying principles in greater detail in my closing remarks. I would also like to highlight that our first half revenue and EBITDA remained ahead of the prior year period. With that, let me turn to the traffic trends across our markets. Moving on into traffic on slide 4. Approximately 21 million passengers traveled through our airports during the quarter, leaving total traffic broadly stable year-over-year. International traffic remained positive, increasing nearly 6%, with double-digit growth in Armenia and positive contributions across the board, including Argentina. Domestic traffic declined approximately 8%, primarily due to lower seat capacity in Argentina. Excluding Argentina, total passenger traffic increased across all of our markets.

Looking at the main markets, in Argentina, international traffic was up 4%, supported by strong seat capacity growth during April and May, while overall passenger traffic declined approximately 6%, as growth in international travel was more than offset by weaker domestic volumes. In fact, Argentina recorded the strongest increase in international seat capacity among South American markets during the first half of the year, driven by several airlines announcing new routes and additional frequencies. Domestic traffic declined close to 12%, mainly reflecting lower airline capacity, while underlying demand remained resilient. Seat offer was largely affected by Flybondi's significantly reduced operating fleet and higher fuel prices. July traffic showed a sequential improvement from June, with domestic traffic declining 10% and international traffic growing 5% year-over-year.

In Italy, traffic increased just over 5%, driven mainly by international passengers, which represented more than 80% of total traffic and grew 6.4%. Both Pisa and Florence airports contributed positively, with domestic traffic also modestly higher. This positive trend continued into July, with international passenger traffic increasing by more than 6%, while domestic traffic remained relatively stable. In Brazil, traffic increased approximately 4%, reflecting continued year-over-year growth. Domestic traffic was slightly lower, but this was more than offset by a 14% increase in transit passengers. Brasilia continued to benefit from its position as an important connecting hub within Brazil's domestic network. Traffic in July remained solid, up 8% year-over-year. Passenger traffic in Uruguay increased 2%, despite the calendar shift of the Easter holidays, supported by additional connectivity, including Azul's new service between Montevideo and Belo Horizonte.

In July, traffic increased by 3% compared to the same month last year. Armenia reported the strongest traffic growth in our portfolio, up 13%. This strong performance was achieved despite flight cancellations and regional airspace restrictions related to the conflict in the Middle East. Strong demand from all other regions, together with the Wizz Air base launch at Zvartnots late last year, more than offset the disruptions caused by the conflict in the Middle East. This positive momentum continued into July, with traffic growing 17% year-over-year. In Ecuador, traffic increased approximately 2% despite continued security concerns. International traffic grew more than 8%, supported by strong demand on routes to the U.S., new services from Avianca, JetBlue, and LATAM, and additional frequencies from American Airlines. Domestic traffic remains softer as elevated airfares continue to constrain demand.

In July, traffic declined 1% year-over-year, as strong international traffic growth was more than offset by a decline in domestic traffic. In summary, international demand remained healthy and broad-based during the quarter, helping to mitigate the concentrated pressure on domestic traffic in Argentina. Moving on to cargo on Slide 5. Cargo revenues declined, primarily driven by Argentina. Such decline was caused by an extraordinarily bad year-over-year comparison base. As I explained earlier, labor disruptions at customs in the second quarter of last year extended cargo dwell times and resulted in exceptionally high storage revenues. In addition, normalized customs operations and more efficient clearance processes this year reduced dwell times and consequently, storage revenues. Various initiatives are already being implemented to enhance profitability in our cargo business in Argentina. Let me now turn over to Jorge, who will review our financial results.

Please go ahead. Thank you, Martín, and good day, everyone.

Starting with the top line on Slide 6, total revenues, excluding IFRIC 12, grew 8% year-over-year, once again, outpacing traffic figures. Armenia and Brazil delivered another quarter of double-digit growth. Consolidated revenue per passenger rose nearly 9% to $22.9 from $21 in the same quarter last year, reflecting stronger commercial performance with increases across every country, including Argentina. Aeronautical revenues increased 4%, supported by broad-based growth across the portfolio. Brazil, Italy, Armenia, Uruguay, and Ecuador delivered strong results, more than offsetting a decline in Argentina. Tariff increases in Brazil, Uruguay, and Ecuador provided further support. In Argentina, the increase in aeronautical revenues from higher international traffic was more than offset by lower domestic traffic and lower domestic passenger fees in USD terms following the depreciation of the Argentine peso during the period.

Commercial revenues were up 13%, well ahead of traffic performance, driven by growth across all countries of operation except Argentina. Performance was led by fuel-related revenues in Armenia, together with broad-based growth in passenger-driven revenue streams, including VIP lounges, space rentals, food and beverage, and duty-free. In Argentina, lower cargo, parking, and duty-free revenues more than offset growth across all other commercial revenue streams. Turning to Slide 7. Total costs and expenses, excluding IFRIC 12, increased 16% year-over-year, primarily driven by higher fuel costs in Armenia, non-recurring costs and expenses in Uruguay, and the real appreciation of local currency in Argentina and Uruguay against the USD. In Armenia, fuel costs increased, reflecting both higher costs and volumes associated with the growth of the fuel-related revenues. Excluding the fuel business, total costs and expenses increased 9%.

In Argentina, costs and expenses increased only 6%, despite a material increase in amortization, representing a containing freeze given the prevailing macro environment. Moving on to profitability on Slide 8. Adjusted EBITDA, excluding IFRIC 12, was $160 million, down 4.5%, with the decline concentrated in Argentina and Uruguay. Every other country of operation delivered double-digit growth. Starting with Argentina, adjusted EBITDA declined 21%, with the margin contracting 6.2 percentage points, primarily reflecting lower domestic passenger traffic and the extraordinary bad comparison base for cargo revenues I mentioned earlier. Italy posted a 19% increase or 11% when excluding construction service at Toscana Aeroporti, and margin expanding 3.1 percentage points on passenger growth and higher duty-free and VIP lounge revenues.

Brasilia Airport delivered another strong quarter, with adjusted EBITDA up 32% and the margin expanding 2.3 percentage points, driven by strong passenger growth together with higher VIP lounge, space rental, and food and beverage revenues. This was further supported by the appreciation of the BRL. In Uruguay, adjusted EBITDA declined 16% and the margin contracted 8.4 percentage points, primarily reflecting costs associated with the implementation of the new ILS system ahead of the related revenue, which began only in August, and the impact of non-recurring events I mentioned earlier. These were partially offset by passenger growth and stronger VIP lounge and duty-free revenues. Armenia also delivered a strong quarter with adjusted EBITDA up 21%. As in recent quarters, margin contraction reflected the continued expansion of the fuel business, which structurally carries lower margin than core airport operations.