Grupo Aeroportuario del Pacífico - Q4 2023

Transcript

Operator (participant)

Good morning and welcome to GAP's fourth quarter 2023 conference call. Thank you for joining us. Please note that all lines have been placed on mute to prevent any background noise during the presentation. At this time, I am pleased to turn the call over to GAP so that the presentation may begin. Please go ahead.

Speaker 11

Thank you and welcome to the Grupo Aeroportuario del Pacífico's fourth quarter 2023 conference call. I am pleased to have from the company today Mr. Raúl Revuelta, Chief Executive Officer, and Mr. Saúl Villarreal, Chief Financial Officer. Any forward-looking statements made during this conference call do not account for future economic circumstances, industry conditions, company performance, or financial results. Please keep in mind that any statements or assumptions made are based on current factors and information that could materially change, causing results to differ from current expectations. For a complete note on forward-looking statements, please refer to the quarterly report issued earlier this week. Thank you all for your attention. Mr. Revuelta, please begin with your opening remarks.

Raúl Revuelta Musalem (CEO)

Hello everyone and thank you for your attendance today. As we reflect on the year 2023, we reached the highest EBITDA level in the history of the company, even though we faced several challenges. In the end, we overcame them. The year started at a very encouraging rate as we reached historic levels in terms of passenger traffic numbers, revenues, and expansion for airport areas. However, the positive start was offset by two main macroeconomic factors. One was the exchange rate fluctuation, and second was the low inflation rate applicable to maximum tariffs. To begin, the appreciation of Mexican pesos impacted the American airport revenues, which are in US dollars. That percentage also affected certain commercial revenues in Mexico, as well as international passengers' fees. In total, this affected around 20% of our total consolidated revenue.

At the same time, the National Producer Price Index excluding petroleum, which is used to update tariffs in Mexico, remaining mainly flat throughout the year. It stayed firm at below a 1% increase for the previous year, compared to inflation rates of around 6% during 2022. Costs substantially increased during 2023, despite our greatest effort to remain within strict budget parameters. Mainly, we saw cost increases regarding maintenance, personnel, cleaning, and electricity. With passenger traffic at a record 64 million passengers, we had a high expense to maintain the quality level of service for that higher number of passengers. In addition, the Consumer Price Index in real terms has been sustainably increasing. Together with a higher minimum wage and changes in labor laws, consequently, we are facing a growing challenge concerning costs, thus directly impacting our profits.

By the end of 2023, we faced various challenges, starting with the passenger traffic deceleration due to the Pratt & Whitney engine inspections. In addition, the major challenge we faced was due to the regulatory changes and concessions fee adjustments, which affected our market value. Nevertheless, we have prioritized this issue and have engaged in strategic negotiations with other relevant regulatory bodies to navigate these changes and preserve shareholders' value to the best of our ability. It is important to mention that despite these considerable headwinds, we achieved remarkable milestones during 2023. Adjusted EBITDA reaches another record at MXN 17.7 billion, up 9.7% compared to 2022. Commercially, 2023 was a groundbreaking year and one in which we reached the highest commercial revenue in our history.

Our strategic focus in the area of food and beverage, parking, retail, and expansion projects is evidence of our commitment to improve the passenger experience and continue sustainable growth. We are constantly working to recognize market trends, adapt to them, and make them our own. Currently, we have several expansion projects underway as part of our strategic growth initiative. This includes new layouts in the Guadalajara, Los Cabos, and Puerto Vallarta airports, as well as the additional mixed-use building that includes a hotel, commercial spaces, and corporate office in the Guadalajara airport. Furthermore, we conclude the year with a strong balance sheet reaching MXN 10 billion in cash at the end of the year, as well as a comfortable debt maturity profile with a net debt-to-EBITDA ratio to 1.7x.

During 2023, we raised funds for capital expenditures mainly aimed at the airport expansion and infrastructure improvement, as well as for refinancing of the debt maturity. A maturity payment of MXN 3 billion will be due during the first quarter of 2024, corresponding to the GAP19 bond certificate, which will be refinanced through Sustainable Linked Bond issuance in the coming weeks. Throughout 2023, we continued to focus on our long-term 2030 sustainability strategy. The terminal processor building at the Tijuana Airport obtained a Gold LEED certification, which was the first time one of our airports was granted with this distinction. We also participated in the EDGE Certification for gender equality and hosted our first-ever gala to benefit our educational foundation, Fundación GAP. During the year, we raised around MXN 9.3 million to benefit our schools.

In line with that, we extend our education program to the high school grades in Guadalajara under our Tec de Monterrey program, committing to provide excellent education to our students. Moving ahead in our 2025 guidance, we anticipate a 3%-5% slowdown in passenger traffic across our airport network due to the challenge brought on by the review of the P&W engines. We base these figures in our view of the aircraft that is scheduled to ground it due to the accelerated preventive inspection, as well as the flight frequencies and seats offerings on the various airlines. This decrease in passenger traffic will directly lead to lower aeronautical revenues. Thus, we foresee a decrease from 2%-4% versus 2023. However, on a more positive note, non-aeronautical revenues are expected to grow from 12%-14%.

Despite the passenger traffic decrease, we are considering the development of additional business areas, such as the start of operation of the mixed-use building in Guadalajara. The building includes a hotel, corporate office, and commercial spaces. This is in addition to the opening of around 1,100 parking spots, the terrace in Guadalajara, additional commercial spaces in Los Cabos and in Puerto Vallarta, and the changes in the terms of the existing contracts. We expect a 65% EBITDA margin ±1%. The contractions come mainly from higher concession fees in Mexican airports, 5%-9%, beginning January 2024, plus labor cost increase in Mexico of around 20% and 40% for Jamaica. In terms of Capex, we expect to reach around MXN 9 billion in the coming year.

Along with the annual commitment investment in Mexico of MXN 3.8 billion, we are also allocating MXN 1.5 billion for the commercial projects, including the final phase of the mixed-use building in Guadalajara, parking lot expansions, and the opening of additional business lines operated directly by GAP. Additionally, we will purchase additional lines in Guadalajara to be allocated to our future expansions, which will cost approximately MXN 1.5 billion. We also have around MXN 700 million of CapEx deployed in 2023, but that will be paid in 2024.

Lastly, we plan to invest around MXN 1.5 billion in the projects related to the Jamaican airports. I would like to conclude by emphasizing that despite the challenge, we remain steadfast in our commitment to manage regulatory changes and sustain growth, ensuring our continued success and value creation for all stakeholders.We at GAP remain confident that the underlying fundamentals of our business remain strong. With this, I want to thank you all for your attention. We are now ready to answer your questions. Operator, please open the line for questions.

Operator (participant)

Certainly. At this time, if you would like to ask a question, please press star one now on your telephone keypad. To withdraw yourself from the queue, you may press the pound key. Once again, to ask a question, press star one now on your telephone keypad. We'll take our first question from Juan Pons of Bradesco BBI.

Juan Ponce (Equity Strategy Analyst)

Hi GAP team. Thank you for taking my question. I have a question, two questions actually, on traffic and on the MDP. The first one on traffic, how are you seeing the airlines cope with this revision of Pratt & Whitney engines, at least in January, December? And also, what do you think is the impact from the slot reduction in Mexico City on your airports? And on the international side, are you seeing bookings strong from the U.S. and Mexico, or have you seen a moderation in this market? That's my first question. The second question would be on the MDP negotiation. I mean, I know you can't share a lot. It's still in progress, but is there any chance that it gets completed ahead of schedule because of the transition in administration? Thank you very much.

Raúl Revuelta Musalem (CEO)

Thank you, Juan. This is Raúl. I mean, in terms of the traffic, one of the things that we are seeing just for these changes on the available seats due to the inspections of engines is that the airlines are looking for the more profitable routes. What we are seeing in all our airports and in all the country is, in some way, that they are moving some of the operations from domestic market to international markets. For instance, if you see Guadalajara Airport, for instance, on the international side, we are seeing a really remarkable increase in passengers in January that, in a big part, is related with better yields and, for sure, I would say, smarter allocation of the fleet of airlines, taking account of the lack of seats.

The other part related with Mexico City Airport and the capacity, for sure, is an additional change that is an additional, I would say, ingredient or variable in all the things that are happening right now in the Mexican market. For sure, taking into account that some of the airlines, as Volaris or Viva Aerobus, are changing their biggest fleet or the fleet with the biggest number of seats in Mexico City Airport and changing some of the fleet of other airports. But what we are seeing right now in the airports of GAP is, for sure, a decrease in the capacity and in the passengers' number for the routes that come or go to Mexico City Airport. But on the other hand, we are seeing really interesting trends on Guadalajara Airport related with international passengers.

It is important to mention that, for instance, Volaris has their more important hub for international passengers and specifically the ones related with California markets, South California markets, from Guadalajara. So one of the things that we are seeing in Guadalajara is an increase in domestic passengers on connections to international flights in Guadalajara Airport, mainly from Volaris. So that is one of the things that we are seeing. So when we talk about international markets, the ones related with VFR markets are growing really at a great pace on this first quarter of the year. Also, on leisure markets as Vallarta and Cabos, we are beginning to see that some of the new routes will come for the second and third quarter. And in the first quarter, we are seeing more of a flatter increase in passengers.

Overall, I will remind you that, for instance, on the first month of the year, in January, we saw a 5.3% increase in international passengers. It was really important to note that Guadalajara Airport, in terms of international passengers, grew 20.5%. The last part of your question related with the Master Development Plan and the negotiation of the PMD, for sure, the Airport Law is really clear. The authority has until the last day of the year to give an answer.

We are working really together with the authority. We are working together with the airline to get their comments about our Master Plan. But we could not and we will make our best effort trying to get as fast as possible the authorization. But we could not assure that the authority will take all the time that the Airport Law gives them to release the authorization.So, I mean, we are working really close with them, but we don't have a complete assurance about how quick it could be that.

Juan Ponce (Equity Strategy Analyst)

Thank you, Raúl, for that detailed response.

Operator (participant)

We'll take our next question from Steven Trent of Citi.

Stephen Trent (Managing Director, Senior Equity Research Analyst)

Good morning, gentlemen, and thanks very much for taking my question. I was curious, given your experience with Jamaica, and I know you guys have a long knowledge in that market from your Spanish strategic investor, are you looking at any opportunities to invest outside of Mexico? Your competitor seems to be having a bit of trouble in the Dominican Republic. We'd just love to get your view on high-level opportunities, ex-Mexico. Thank you.

Saúl Villarreal García (CFO)

Hi, Steve. This is Saúl Villarreal. As you know, we are following opportunities, and we attend different meetings and conferences looking for opportunities. Right now, we're in the middle of one process for one airport in the Caicos Islands. We were already pre-qualified as a bidder, so we will compete with another four other airport operators. That's the only active opportunity that we are now in the middle of. We will be looking for other opportunities. We are really open to see and explore any kind of opportunity. Right now, it's only one.

Stephen Trent (Managing Director, Senior Equity Research Analyst)

Okay. Appreciate that, Saúl. And just one other question. Just to help get our arms around the new Mexican airport regulation, the way that we read the text back in October is that the government was potentially going to be more interventionist in terms of looking at tariffs and responding to concerns about tariffs. Have you seen any increased communication from the government at this juncture, or does it and I know it hasn't been that much time, but or does it seem that the amount of inquiries and communication that you receive from the SCT is about the same as it was before? Thank you.

Raúl Revuelta Musalem (CEO)

Thank you, Steve. This is Raúl. I mean, in general, I would say that the communication with the SCT is still here to be the same than in the past. And talking about, I would say, the tariffs, exactly as the same as the market, we could say that the SCT take for the first time the new amendment of the Annex 7 of tariffs, and they apply it just as the formula is right in the case of ASUR. So I would say that we are not seeing any kind of additional intervention or any kind of different change in the way that we communicate with the authority.

But what is important to, in some way, note is that on the first time that the new annex is in place, for the case of ASUR, the authority applied it and obtained an important increase in tariffs that was related with just the full application of the new formula. So I would say that that is the most important thing, that for the first time that the new formula is in use, the authority just respects it.

Stephen Trent (Managing Director, Senior Equity Research Analyst)

Okay. Appreciate that, Raúl. Thank you.

Raúl Revuelta Musalem (CEO)

Thank you, Steve.

Operator (participant)

We'll take our next question from Alberto Valerio of UBS.

Alberto Valerio (Analyst)

Hi. Thanks, Raúl, Saúl, for taking my question. I have two on my side. The first one about tariffs. We see a discount in November and December last year, 10% discount for all the three airports. Should we see these discounts removed from January on? And what should we expect in terms of tariffs for 2024? Taking inflation as a proxy would be okay. And my second question is about the MDP for the end of the year. We saw ASUR closing the gap of Capex per passenger to you guys and OMA to close to 100-110 MXN per passenger on Capex. What should we expect for GAP? Is there room to increase further the Capex per passenger, or should we see the same ratio that we saw in the past MDP? Thank you very much.

Raúl Revuelta Musalem (CEO)

Thank you, Alberto. First, in terms of the discounts for this year of 2024, what you're going to see is a 6% discount in nine of our airports that will continue. It's related with the package of discounts that we have for airlines. And we used to have it, but now we have made it more public. I would say that. But what we're going to see is a discount of 6% in nine of our airports in terms of the passenger fee. I

t is important to mention that the rest of our tariffs will increase in terms of the control. Will be applied from March 15th. That implies the rest of our tariffs in Mexico. In terms of the CapEx for the next MDP, I would say that we are in line with our historical CapEx. That will be around MXN 100 around MXN 100 per passenger.So our view today of the master plan for the coming period will be around that figure.

Alberto Valerio (Analyst)

Very clear. Can I consider these airports, the top tariff airports, the most expensive tariff airports, those ones that will remain with discounts?

Saúl Villarreal García (CFO)

Hi, Alberto. This is Saúl. We don't have the most expensive airport so far, and we are not expecting to have with the new tariff review that we will conclude at the end of the year. So we do not expect to have the most expensive airports, I think, in terms of maximum tariff or in terms of passenger charges.

Alberto Valerio (Analyst)

No, pardon me. I expressed myself wrongly. I was talking about inside within your airports, the airports of GAP, those ones that will remain with discounts should be the most expensive tariffs because you have different tariffs among your airports, right? So those ones with the highest tariffs inside GAP should be those ones with discounts that we'll keep for this year.

Raúl Revuelta Musalem (CEO)

Yeah. In terms of the discounts, I mean, on nine of the airports, we're going to have the 6% of the discount in the passenger fee. And the only ones that will not have any kind of discount will be Mexicali, Morelia, and Manzanillo.

Alberto Valerio (Analyst)

Perfect. That's it. Thank you very much for the clarification.

Raúl Revuelta Musalem (CEO)

Yeah. You're welcome.

Operator (participant)

We'll take our next question from Pablo Monsivais of Barclays.

Pablo Monsiváis (Analyst)

Hi. Thanks for taking my question. Kind of a follow-up on previous question. In summary, what is your expectations on how close you expect to be this year relative to your maximum tariffs? Are you expecting to be 97%, 96%, having in mind all the discounts that you are talking about? Thank you.

Saúl Villarreal García (CFO)

Hi, Pablo. This is Saúl. It's probably early to know. Obviously, the discounts offered in passenger charges will affect the fulfilling of the maximum tariff. It will depend also in terms of inflation regarding the tariffs, which is the producer price index plus petroleum. So we have a range of fulfilling between 94%-97% for this year. So it depends a lot also, Pablo. This is Saúl. And as Saúl mentioned, for sure, the inflation, but also the exchange rate.

Pablo Monsiváis (Analyst)

For international passengers.

Saúl Villarreal García (CFO)

For international passengers. In the other part that is important that also gives us a biggest fulfillment is in the case where the domestic market grows in a slower pace than the international market, we could get a better fulfillment because, as you remember, the passenger fees for international markets are higher than the domestic markets. So we are really early in the year to have all these macroeconomic trends in the blend. So for the moment, we are seeing the rents that Saúl mentioned. But, I mean, we should really keep an eye really close to these macro trends to see if the fulfillment could be higher than we expected.

Pablo Monsiváis (Analyst)

Okay. Just sort of a follow-up, can you tell us what is your inflation expectations that you are incorporating in the specific tariffs that are not from TUA?

Saúl Villarreal García (CFO)

Yes, Pablo. The inflation applicable for specific tariffs is, as Raúl explained, is Consumer Price Index, is 4%. For the maximum tariff that we are expecting is 1.5%.

Pablo Monsiváis (Analyst)

Okay. Awesome. Thank you very much.

Operator (participant)

Once again, to ask a question, please press star one now on your telephone keypad. One moment while we queue. We'll take our next question from Juan Macedo of GBM.

Juan Macedo (Analyst)

Hi guys. I'm sorry to interrupt my question. My first question is regarding capital allocation. You mentioned in the report that you will propose extraordinary capital reimbursement. Should we see this as the annual dividend, or is there room for a separate ordinary dividend? And also, buybacks, are you planning any buybacks for 2024?

Saúl Villarreal García (CFO)

Hi, Juan. This is Saúl. As we announced in our press release, the board of directors approved a payment of MXN 13.86 per share as a capital reduction in favor of our shareholders. It will be submitted to the approval of the extraordinary general shareholders' meeting that will be held in April 2024.

Juan Macedo (Analyst)

Yeah. Should we see this as the annual dividend, or is there room for maybe another dividend?

Saúl Villarreal García (CFO)

No, for now, it's the only amount approved by the Board of Directors, and that's the only payment to be distributed to the shareholders.

Juan Macedo (Analyst)

All right. That's very clear. Thank you. And just one quick question. We saw ASUR decrease the technical assistance fee along with the MDP. Has this been part of any of your conversations in any way so far?

Speaker 11

Sorry, Juan. We couldn't understand you. Can you repeat the question, please?

Juan Ponce (Equity Strategy Analyst)

Yeah. It was some noise.

Speaker 11

Yeah.

It was a lot of noise. Yeah.

Juan Macedo (Analyst)

Yeah. We saw ASUR decrease their technical assistance fee along with the MDP. Have you been in talks of this option in any way?

Raúl Revuelta Musalem (CEO)

Thank you, Juan. I mean, right now, as you know, we have an agreement with our strategic partner. For the moment, we will continue with that, with the agreement that we have. But for sure, we will continue evaluating which are the best options for the company. But for the moment, I could tell you that we are evaluating the options for the company.

Juan Macedo (Analyst)

All right. Good to hear. Thanks for the sorry.

Operator (participant)

We'll move next to Isabella Salazar with GBM.

Isabella Salazar (Analyst)

Hello. Thank you for taking my question. I was wondering if you could give us some details about the Jamaican concession regarding the economic rebalancing. Has it already been done? And also, in terms of commercial projects, are these contributing to the overall results, or when did they start contributing? Thank you.

Saúl Villarreal García (CFO)

Hi, Isabella. This is Saúl. Well, we are continuing with conversations with Jamaican authorities. We have a verbal agreement, but the process in Jamaica is very long. They will have to pass through the parliament for different approvals. So we are expecting to have this rebalancing process to conclude at the end of this year. They announced that probably in the second half of this year. That second half could be from July to December. So we don't have any certainty about this. So we will have to wait and to see if it's possible to pass through these approvals, pass through the parliament.

Well, regarding your second questions about commercial projects, as we mentioned, we will have the opening of the mixed-use building in Guadalajara, which is very interesting, integrating the hotel 180 rooms of a hotel, corporate offices, and a retail area, commercial area, integrate to the airport, to the terminal, and to the parking lot. We are also opening additional spaces, spots in the parking lot. So that will be ready; it will start in April 1st. On the other hand, we already have the terrace in the Guadalajara Airport, which is a very nice and very large area of commercial food and beverage that will contribute with the commercial revenue increase, as we announced in our guidance. Even though that decrease is expected in terms of passengers, we will have a relevant increase in terms of commercial revenues.

Raúl Revuelta Musalem (CEO)

Just about the timing of these openings, as I will mention, the hotel, the mixed-use building will begin operation on April 1st. But then the parking lots, we're going to have some opening in Guadalajara. We have an opening in the summer and a second stage for the end of the year. But at the end of the year, we will have at least 11,000 additional spots for Guadalajara. That means an increase of almost 100% of spots. So for sure, that will give us an important boost on the parking lot revenue, mainly for the coming year. But it is really something important to have in mind. And the last, in terms of the terrace. Today, we have an important number of food and beverage companies that are already operating. We did all the area, and all the different spots are already beginning to build.

Around 70% of the spaces are already operating from this January. But the area, all the new commercial layout of Guadalajara Airport will be fully put in place and fully deployed for August of this year. For that moment, we will begin to see in our revenues all the full impact or the full additional revenues that will come from that additional layout. But I would say that what we are expecting for the coming months is that the trend that we have of the last quarter of the year, that was an increase of commercial revenues in a high double-digit, will continue for the next quarters. And as we say on the call, our guidance for the full year of the non-aeronautical revenues will be to close with that increase of revenue from 12%-14%.

Isabella Salazar (Analyst)

Perfect. Thank you much for your answers.

Operator (participant)

We'll take our next question from Federico Galassi of TRG.

Federico Galassi (Analyst)

Hello guys. Saúl, Raúl, Alejandra. Congrats for the results. Just two questions. The first one is related, continue with the commercial revenues. In the line of car rentals, you have a big increase. This is a number, if you want, that should maintain. There is more room to grow here. This is a fair question.

Raúl Revuelta Musalem (CEO)

Thank you, Federico. I mean, for sure, we have a really interesting growth on commercial revenue in the line of the car rentals and was due mainly to the bidding process of Los Cabos Airport. But I would tell you that for this year, also, we have a possible excellent news that we are expecting an increase also related with the bidding process for Guadalajara Airport. So at the end of the year, we are expecting for that specific line that double-digit growth will continue for this 2024.

Stephen Trent (Managing Director, Senior Equity Research Analyst)

Great. Thanks, Saúl. And the second question is more related to the cost side, in particular, in the cost of employees and maintenance. That's, again, a big chunk year over year. And in particular, if we see against the revenues, what can we expect for this year? In particular, we have the increase in minimum wage since January. There are people or the government talking about an increase or a change in the labor hours. How is your view on these two topics?

Saúl Villarreal García (CFO)

Hi, Federico. This is Saúl. Obviously, we have faced a lot of pressure in terms of the increase in salaries, not only in our general airports in the middle of the country, but also in the border airports like Mexicali and Tijuana. The 20% increase in minimum wages is affecting, in general, the contributions, the social securities, and also in terms of benefits to the employees. So it also affects the security and cleaning that is related with the personnel, hired by the third-party suppliers. And it's also affecting in terms of maintenance. We will try to look for cost control in all the year in 2024, but there are some effects that will be impossible to control.

As you know, we try to maintain the cost per passenger very efficient, and we will try to maintain that considering that for this year, we are expecting a decrease or at least a decrease in passenger traffic between -3%-5%. So it is an important point. It is complicated. It will be worse in case that change in labor law in terms of the reduced jornada from 48 hours to 40 hours. That will represent around 20%-25% increase in terms of headcount for a company. So right now, we are facing certain troubles to hire people in all our airports, in all lines of the headcount. And if that change passed, we will have several problems for hiring additional people.

Federico Galassi (Analyst)

Okay. Changing the labor hours, if the project could go ahead, and what could be the impact for the operations?

Saúl Villarreal García (CFO)

The impact for operations? No, we do not estimate an impact of operations for this. What we will see is a significant increase in terms of cost.

Raúl Revuelta Musalem (CEO)

Yeah. The pressure is going to be the cost, not necessarily the operation. As Saúl says, there's a change in a labor law in the table of the Congress related with today, we have 48 hours labor week in Mexico. The proposal on the Congress is to bring it to 40 hours per week. If that happens, if that change in labor law happens, for sure, it will have an important impact in the number of the headcount of our airports that we will need for continuing our operations. But again, in some of the different changes that the Congress might have in the table, we don't know or we don't have the assurance that this will happen or not.

But for sure, it's, I would say, a change of the structural cost of the company, not just for GAP, but for all the companies in Mexico, if that law is approved by the Congress. So we're going to keep an eye on how this law could move. But as Saúl says, there will not be impact on the operations, but for sure, it will be additional pressure for our cost on the terms of personnel. Perfect. Thank you so much, guys.

Saúl Villarreal García (CFO)

Thank you.

Operator (participant)

At this time, I would be happy to turn the call over to Alejandra Soto.

Alejandra Soto (IRO and Corporate Finance Director)

Thank you, Leo. We have a question from Itaú, from Alex Fuchs, in the webcast, and he is asking two different questions. First, what is the company's strategy to try to mitigate some of the pressures in salaries, if you can?

Raúl Revuelta Musalem (CEO)

Yeah. Thank you, Alejandra. I mean, for sure, we are, as you know, some of the DNAs of GAP has been to be really disciplined on the management of our costs. We are working to continue, giving the best possible services to our passengers and taking or bringing to the company additional technology that will give us the opportunity to bring additional efficiencies to the company and to the operations. So one of the big or the key points that we are trying to deploy on this year is that we will not hire additional headcount, with the exception of the new business lines directly operated by us, as could be the hotel. That will be, for sure, a first effort in some way to freeze the growth on headcount for the company.

For sure, as soon as the passengers, after all these Pratt & Whitney problem, will continue to grow in the future, our idea will be to try to freeze all that headcount and, in some way, bring additional efficiencies to the company and, for sure, to the margins of the company. The first idea and the way that we are working right now is to try to bring additional technology to the company to try to avoid any additional increase on the headcount for the coming years.

Alejandra Soto (IRO and Corporate Finance Director)

Thank you, Raúl. The second question from Alex Fuchs also, if you can share your expectation for the tariff and the Capex for this renegotiation of the MDP.

Raúl Revuelta Musalem (CEO)

Yeah. I mean, we will continue on the same line that we have talked in the past that we think that the negotiation will be 0%-5%. For sure, there are a lot of things moving in the middle. All the pressure on cost of salaries, in some way, should be necessary to reflect in the projections of the master plan. But also, we really need to have a full understanding what's going to happen in terms of the passengers, how long, in some way, the full recovery of the market from the P&W engines problem. So I would say that we keep our original target of 0%-5% in terms of the increase of the maximum tariff for the company.

Alejandra Soto (IRO and Corporate Finance Director)

Thank you, Raúl. This is the only question that we have at the webcast.

Operator (participant)

Very well. We'll return to a follow-up question from Juan Pons of Bradesco BBI.

Juan Ponce (Equity Strategy Analyst)

Yeah. Thank you for the follow-up question. It's just on the 6% discounts in the nine airports. Just wanted to confirm, how long will these discounts be in place?

Raúl Revuelta Musalem (CEO)

For all the 12 months of this year, Juan.

Juan Ponce (Equity Strategy Analyst)

Gracias.

Operator (participant)

There are no further questions at this time.

Raúl Revuelta Musalem (CEO)

Great. Thank you very much for your attention. Before I conclude, I want to mention that the GAP Day 2024 event is coming up and will be held at the Guadalajara Airport on April 10th, 2024. We hope you can join us for a morning of management presentation and a guided tour for all our renovations and expansions taking place in the airport. Please contact our investor relations team for more details. Thank you. Have a wonderful day.

Operator (participant)

This does conclude GAP's fourth quarter 2023 conference call. You may now disconnect. Everyone, have a great day.