GAP's Regulated Infrastructure Play: Capturing Growth at Kingston Airport

The global infrastructure sector has long been a haven for investors seeking stable cash flows and inflation protection. Few companies exemplify this opportunity better than Grupo Aeroportuario del Pacífico (GAP), which is leveraging regulatory tailwinds and strategic investments to unlock value at its Jamaican airport asset, Norman Manley International Airport (NMIA), commonly known as Kingston Airport. With a 57% tariff increase approved through 2030, $85.2 million in front-loaded capital investments, and a 25-year concession agreement providing regulatory certainty, GAP is positioned to capitalize on Jamaica's tourism rebound while delivering predictable dividends. For income-focused investors, this presents a rare entry point into a high-quality, regulated asset with asymmetric upside.

The Tariff Hike: A Recipe for Steady Revenue Growth

The cornerstone of GAP's strategy at NMIA is a five-year tariff escalation plan that will boost passenger charges from $38.18 in 2026 to $60.10 by 2030. The largest single-year increase—47%—will occur in 2027, aligning with the peak of its capital expenditure cycle. This structure ensures that revenue growth outpaces costs as the airport undergoes upgrades, a critical feature for maintaining margins in regulated environments.

Importantly, the tariff hikes have already been pre-approved by regulators, removing execution risk and ensuring steady cash flow visibility. For context, Jamaica's tourism sector—responsible for 50% of NMIA's traffic—is rebounding strongly post-pandemic, with visitor numbers up 21% year-on-year in early 2025. As occupancy at all-inclusive resorts and cruise ship arrivals normalize, the airport's higher tariffs will directly translate to top-line growth, even if passenger volumes flatten.

Front-Loaded Investments: Unlocking Capacity and Market Share

GAP's $85.2 million capital program, front-loaded with $45.8 million in 2026, is designed to address NMIA's capacity constraints and position it as a regional hub. Key projects include terminal expansions, modernizing air traffic control systems, and enhancing cargo facilities—a critical differentiator for Jamaica's agricultural and logistics exports.

The timing is strategic. Jamaica's government has prioritized tourism infrastructure as part of its Vision 2030 economic plan, while cruise lines are expanding itineraries to the island's ports. By boosting NMIA's handling capacity and efficiency, GAP can capture a larger share of the growing air travel market, while mitigating congestion-related revenue losses.

Regulatory Certainty: A Shield Against Volatility

GAP's 25-year concession agreement (with a 5-year extension option) provides a robust framework for risk management. Key terms include:
- Revenue-sharing: 62.01% of gross revenues go to the Jamaican government, a structure common in regulated concessions.
- Termination protections: The agreement can only be voided under severe breaches (e.g., non-payment, insolvency), and penalties for compliance failures are clearly outlined.
- Fixed investment obligations: The $85.2 million capital program is non-negotiable, ensuring the airport's long-term competitiveness.

This regulatory clarity reduces the risk of arbitrary rate caps or asset seizures—a common concern in emerging markets. Meanwhile, GAP's whistleblower program and adherence to International Financial Reporting Standards (IFRS) underscore its commitment to governance, further insulating investors from operational missteps.

Valuation: An Undervalued Dividend Machine

GAP trades at 10.2x forward EV/EBITDA, a discount to its Mexican peers (averaging 12.5x) and global airport operators like Aeropuertos Españoles y Portugueses (ACP) at 14.1x. This undervaluation is puzzling given its 9.2% dividend yield—well above the 4.5% average for global infrastructure stocks—and its track record of 12% annual dividend growth since 2019.

The NMIA concession alone contributes ~7% of GAP's total revenues but offers outsized growth potential due to its lower base and regulatory tailwinds. Factoring in the tariff hikes and capital spending, we estimate NMIA's EBITDA could triple by 2030, providing a significant earnings catalyst.

Investment Thesis: A Rare Opportunity in Regulated Infrastructure

GAP's strategy at NMIA checks all the boxes for opportunistic growth in regulated assets:
1. Stable cash flows: Tariffs are locked in, and demand is buoyed by tourism recovery.
2. High returns on investment: The capital program's ~$85 million cost is dwarfed by the $1.2 billion annual passenger spend projected by 2030.
3. Low execution risk: The concession's fixed terms and pre-approved investments reduce uncertainty.

For investors, the entry point is compelling. With a dividend yield north of 9% and a price-to-book ratio of 0.8—below its 5-year average—GAP offers both income and capital appreciation potential.

Risks and Considerations

• Currency fluctuations: Jamaica's currency, the Jamaican dollar (JMD), is volatile, but NMIA's tariffs are denominated in USD, mitigating exposure.
• Overreliance on tourism: A downturn in travel could pressure passenger volumes, though Jamaica's diverse economy (including bauxite exports) provides some insulation.

Conclusion: Buy the Dip in a Regulated Growth Story

GAP's move at Kingston Airport exemplifies the power of regulated infrastructure investments: steady growth, low volatility, and dividend resilience. With its capital program and tariff hikes now baked into the financials, the stock is primed to deliver asymmetric returns as Jamaica's tourism machine revs up. For income investors, this is a rare chance to buy a high-quality asset at a discount—don't miss the runway.