My name is Josh and I will be your conference operator today. At this time, I would like to welcome everyone to the GAP's second quarter 2016 earnings conference call. All lines have been placed on mute to prevent any background noise. Thank you. I'll now turn the call over to Maria Barona of i-advize Corporate Communications. Ma'am, please go ahead.

Thank you and welcome to Grupo Aeroportuario del Pacifico's second quarter conference call. Today from the Company we have Mr. Fernando Bosque, Chief Executive Officer; and Mr. Saul Villarreal, Chief Financial Officer. Please be advised that forward-looking statements may be made during this conference call. They do not account for future economic circumstances, industry conditions, the Company's future performance or financial results. As such, statements made 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 statements please refer to the quarterly report which was issued yesterday. At this point, I'd like to turn the call over to Mr. Bosque for his opening remarks. Mr. Bosque, please begin, sir.

Good morning, everyone. We appreciate your participation here today and we look forward to discussing our results with you. Thank you for joining. I want to start my discussion with a review of our operating highlights before moving on to the commercial and financial discussion. For the second quarter, we continue to see passenger traffic growth at GAP with an increase of approximately 1.1 million passengers mainly driven by higher traffic in Tijuana, Guadalajara, Los Cabos and Puerto Vallarta in that order which jointly represent 80% of the increase. It is worth mentioning that 33% and 16% of this increase was respectively contributed by Volaris and Aeromexico. The domestic segment helps to draw a portion of the rise during the period with 876,000 additional passengers followed by 258,000 additional international passengers. Several factors drove this growth as we have discussed in previous quarter, the most important being global oil price which led to significant reduction in airline operating cost thereby causing lower ticket prices. Additionally there was an increase in the load factor, moving from 81.6% in June 2015 to 85.3% in June 2016. There were ongoing expansions to the various Mexican airline fleets, especially Volaris and VivaAerobus. Finally a strong U.S. dollar have made domestic destination more attractive and affordable for tourists from U.S. Tijuana was the airport that contributed the most to this amazing performance. Passengers all over Mexico have chosen Tijuana as the preferred favorite to Southern California as a result of this convenient location as well as the popularization of Cross Border Xpress. Not only are we seeing a large number of travelers from Mexico using this facility, but the popularity with Southern California resident is greatly increasing as well as you can see from our numbers. The most important advantage of this binational facility is…

Thank you, Fernando. Good morning everyone. I just want to mention that consolidated results for the first half of 2016 discussed today are in accordance with IFRS and figures may not be directly comparable with information for the first half of 2015. If you would like to review the pro forma consolidated results, please refer to report released yesterday. During the second quarter aeronautical services revenues increased by MXN266 million or about 19% mainly due to 21% higher revenues from the Mexican airports as a result of increases in passenger traffic and passenger fees. In the Montego Bay airport, revenues increased by MXN90 million, also generated by the increase in passenger traffic. For the six-month period aeronautical revenues increased MXN860 million or 34%. These figures accounts for the passenger traffic and fee increase in the Mexican airport as well as a consolidation of the Montego Bay airport. Non-aeronautical services increased by MXN93 million or 19% compared to the second quarter 2015 due to the Mexican Airport which contribute an increase of MXN71 million driven mainly by the higher revenue from business operated by third parties as well as revenues from business operated directly by the Company. Additionally, the Montego Bay airport report an increase in revenues of MXN22 million compared to second quarter 2015. Non-aeronautical services for the first six months includes high revenues from third party operations at the Mexican airports as well as the Montego Bay airport consolidation figures. Total operating cost during second quarter 2016 increased by MXN390 million or 35% compared to second quarter 2015. This was due to the increases from the Mexican airports of MXN288 million and MXN73 million from Montego Bay. For the six months, total operating cost rose by MXN994 million or 50% primarily due to the consolidation of the Montego Bay…

[Operator Instructions]. And we have our first question coming from Mauricio Martinez from GBM. Please go ahead.

I was wondering if you can give us more color about the main drivers for your traffic expectations you announced yesterday and more specifically your expectation about Tijuana's traffic during the second half of the year. And my second question will be about advertising income as we saw practically flat performance this quarter, maybe if you can share your thoughts about this performance and what are you expecting going forward for this brand?

About the Tijuana issue, it's not easy to give total color how will be the reaction in the second half of the year. Of course now we have [indiscernible] about projected capacity in terms of seats. And however it could be changed in the last part of the last quarter of the year. Our view during this quarter that is coming, the third, is to continue with the same pace of growth that was seen over the current quarter. That is because when you compare with the previous year, the strong increase in the capacity of this airport appear in the last quarter. So third quarter could be showing the same behavior that was during the second one and the last one behavior could be growth in the pace lower than now we're looking to be below of course of 20%, to be in between the 15% and 20%. And Saul, could you answer the second question of Mauricio please?

Yes. Mauricio, our revenues in the line of advertising is a little delayed because we have some negotiations with our clients in that line. However, we believe that at the end of the year will be normalized at the level of our revenue of around MXN142 million. So it will be recovered in the second half of the year.

It's true that the pace of the growth of the digital advertising is not running in the same pace that was in the plan before. But this phenomenon also is happening in other airports, in Europe also the advertising, the spend for advertising is lower than it was initially shared.

[Operator Instructions]. Our next question comes from Augusto Ensiki from HSBC Global Research.

Just really quickly on the new routes that were opened this quarter, are there any incentives or discounts associated with them? And then secondly, were there any routes that were closed? I didn't see that in the release.

Could you please repeat again, Augusto, about what is your question about the routes?

I was just wondering if there is any incentives or discounts for the airlines related to the new routes that were open, whether it's in a lower fees or something. And then secondly if there were any routes that were closed during the quarter?

There was during the second quarter an important discount for passengers, to us the tariff that was for passengers gradually used in many of our airports during the second quarter. And now as we we'll start 1st of August during another three months, August, September and October, important discount in the -- for the domestic and for the international. It's in around 15% to 30% depending on the airport. And that is something that we will announce and the airlines is in the application to that reduction. So that could have some support, economic support for airlines. The other kind of economic support dedicated to the airlines is the -- is part of the general policy that we're doing along of the year, there are no changes during these next quarters.

And were there any routes closed -- that was very clear, thank you for the clarification. And were there any routes that were closed during the second quarter?

No, no. Saul, I don't remember now that there are new closed any routes, important routes--

No, you are correct, Fernando, there are no any routes that we have closed. We have routes opening and we don't have any closed.

Our next question comes from Pablo Barroso from Credit Suisse.

Just a quick question, could you provide us any color regarding amusement park in Puerto Vallarta. What impact in terms of passenger do you see and when it should be finished?

Vallarta, as I mentioned in my presentation, is one of the destination that is growing during the last two years continually. The load factor was very high, that show that it could be possible to increase frequencies or to increase the caliber of the aircraft to provide more capacity to the destination. And, however at this time our expectation is that we will continue growing at same pace that was during the second quarter. Vallarta will experience most important increase one time that will be opened the dramatic part that I mentioned, but that we have another two-and-a-half years to know that. The growing in terms of rooms, of hotel capacity continue growing, there are more rooms that will be opened next year. However, for the end of the year I think it's fair we're in record figures and the increase will follow as mentioned as was seen during the second quarter.

And one quick follow up. Is there any runway constrain in Puerto Vallarta or do you see any runway constrain in 2017 or 2018?

Currently the total passenger is just below 4 million passengers in Vallarta, similar figure that we have in Montego Bay and Cabos. The capacity of the runway of the airfield is there are no restrictions. The problem that we have in some of these airport is peak hours, a problem usually seen in all the tourist destination, hotel rotation usually is ended same days of the week, usually on Friday, Saturday and also the time is usually between 12:00 to 3:00 in the afternoon. That mean that a lot of concentration in the operations also in the terminal and puts on a level of saturation in the areas of immigration, custom and also in the run transportation areas. But however the capacity of these three airports including Vallarta of course is enough to attend the growth that will come with increase of the hotel capacity. The next two-three months will be edited the new regulation, the civil aviation authority of Mexico that will commit to the airport administration to put more strong rules to manage the capacity of the slot. What happened usually the airlines especially in Cabos and Vallarta start back to the slot allocation. So that mean that they are arriving or departing at different times as was originally scheduled and that put the pressure over the capacity of airport. However, these two airports has enough capacity if we implement these new regulation approved by the civil aviation authority.

Our next question comes from Ulises Argote from Santander.

Real quick, just regarding your new guidance, do you have any breakdown regarding your expectations for EBITDA margin for Mexican airports and for Montego Bay separately?

Yes, we have the break down. As you know the level of EBITDA margin in Montego Bay is lower than in Mexico. We're expecting at the end of 2016 around 51% of EBITDA margin in Montego Bay. Therefore our Mexican airports will be in the line of 71%.

[Operator Instructions]. Our next question comes from [indiscernible] from JPMorgan.

Quick one as a follow up. For Montego Bay I didn't get it, the margin you are expecting is 61% or 51%? And if you could give us more color on the traffic expectation for this airport would be great.

I have with me the CEO of Montego Bay airport, Rafael Echevarne. I will ask him to give some color about expectation of the traffic for the second half of the year.

We expect the traffic to continue along the same lines of what we're seeing right now. As you very well know during the first half of the year, particularly February and March were not -- were slower than we expected, but now we're picking up again. We're -- the first figures that we have -- well, June actually ended up with 4% growth and 3% growth, sorry. We're back on track on our budget. Looking into the future, as mentioned by the Chairman, we don't really see any cancellations in terms of routes in other words, on the contrary we actually are seeing the potential for new routes. We're, the government of Jamaica, the tourism board and ourselves, we're talking to a number of airlines and we actually are very encouraged by what we're seeing. So we're on track and yes, that's basically what it is, we're on track.

Regarding your question about the EBITDA margin for Montego Bay, Federo, the EBITDA margin would be 51% roughly.

Our next question comes from [indiscernible] from Citigroup.

I just have two. The first one is what was the idea behind the change in your external auditor after 14 years with the same auditors? Should we now expect this change to be made more frequently? And the second one is on new projects, any sense as to whether GAP is interested in overseas airport opportunities, if so, where?

Could you repeat the second one about the projects?

Sure. Yes. The second one was on new -- about new projects, any sense as to whether GAP is interested in overseas airport opportunities and where?

Okay. I will answer your second question and Saul will answer your first about the auditors. Of course we're all the time looking any opportunity in our industry, of course mainly in Latin America. There are not many opportunities, but however we're looking of course how they are in new in Brazil or in any other country. At this time we're only looking figures, understanding the condition, understanding how is the expectation from the different governments. However we have not taken any decision about new investment in the region.

Regarding your question of the rotation of our external auditor, Magdalena, it is change that is a recommendation of our corporate governance best practices. It was discussed with our audit committee and it was approved by our Board of Directors. It is something that happens in many of the public companies and we believe that is a very good practice. We were with Deloitte for 14 years, with any -- with a very good relationship indeed. We will still work in another project with Deloitte but not as an auditor. And KPMG is one of the best auditor firms. So we're very glad to, with this change and we will work hard because it will be the first year of the change.

Thank you. At this time we have no further questions. I like to turn the call back over to Mr. Bosque for any closing remarks.

Thank you once again for your attention and your participation here today. As always it was a great pleasure to share with you our perspective of the results and we hope our comments were helpful to you. Have a happy rest of the day. Thank you.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.