Mexico stocks sink after government alters airport fees

Mexican stocks sank after the government unexpectedly moved to change concession agreements of airport operators, the latest challenge by President Andres Manuel Lopez Obrador to business interests. 

The benchmark stock index fell more than 4.4%, the most intraday since March 2020. Grupo Aeroportuario del Sureste SAB, Grupo Aeroportuario del Pacifico SAB, and Grupo Aeroportuario del Centro Norte SAB shares tumbled as much as 44%. For the latter, known GAP and OMA, respectively, it was the worst intraday drop on record. 

The national aviation agency “unilaterally and without prior communication” modified the fee structure related to its airports, GAP said in a statement sent to the local regulator after-hours on Wednesday. A large part of airport operators’ revenues in Mexico come from so-called TUAs, or passenger fees for airport use.

It wasn’t immediately clear what changes the government had made, and the companies didn’t elaborate. GAP, Asur and OMA said in filings that they are evaluating the effect of the changes on their operations. 

A spokesman for the infrastructure, communications and transport ministry didn’t reply to a request for comment.

Intervention fears

The unexpected move was the latest in a series of challenges to business interests. AMLO, as the president is known, had canceled a new airport upon taking office in 2018, limited the expansion of private investment in energy and seized part of billionaire German Larrea’s rail line. 

Authorities have in recent weeks increased their activity in the sector, with the government announcing the revival of state-run airline Mexicana de Aviacion and transferring the operation of Benito Juarez International Airport to the Navy following an announcement in June.

In August, Lopez Obrador railed against the high profits of airline groups but said he wouldn’t touch concessions. “Do you know how much they make?,” he asked at his daily press conference on Aug. 10.

“Fifty percent per year! We respect the agreements, and that is why we are not modifying those concessions, but we can no longer continue with that policy. The government must be to serve the people, not to be a committee serving a minority,” Lopez Obrador said at the time.

Spillover

Rodolfo Ramos, a strategist at Bradesco, said the measure could raise fears that Lopez Obrador will target other regulated industries and hit the wider Mexican stock market.

“This government measure has the potential to spillover to other areas,” Ramos wrote in a note. “Depending on the magnitude of these tariff adjustments, we could even see governments from other countries’ getting involved, mainly the US and Canada.”