Good morning, and welcome to GAP's Second Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. After the presentation, we will open the floor for questions, and at that time instructions will be given if you would like to ask a question. It is now my pleasure to turn the call over to GAP's investor relations team. Please go ahead.
Thank you, and welcome to the Grupo Aeroportuario del Pacífico Second Quarter 2022 Conference Call. Presenting from the company today, we welcome Mr. Raúl Revuelta, Chief Executive Officer, Mr. Saúl Villarreal, Chief Financial Officer. Please be advised that forward-looking statements may be made during this conference call. These 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. At this point, I'd like to turn the call over to Mr. Revuelta for his opening remarks. Please go ahead, sir.
Thank you, Maria, and thank you all for joining us today as we discuss one of the most solid and most outstanding quarters in our history. The remarkable traffic, as well as the recovery performance of so many of our airports and business lines, make us very optimistic for the near future, and we look forward to sharing some of these details with you today. Let me begin with a discussion on passenger traffic, which for the first half of the year, reached almost 27 million passengers, an increase of 10.7% compared to 2019. If we look at the tourist destination airports, especially traffic at this location continued to benefit from domestic markets traffic. Los Cabos, Puerto Vallarta, and La Paz had increases of 18.9%, 11.5%, and 11.3% respectively, when we compare this to 2019 figures.
On the business-driven locations, the Guadalajara Airport is showing improvements in the passenger traffic trends. However, we have not reached 2019 levels as of yet. This is mainly because the route to Mexico City has not yet rebounded to 2019 levels, given that business travelers are not back to the normal travel levels. The available seats in our network, on the other hand, have grown above our expectation at the beginning of the year, which is evidence of airlines' confidence in our airport destinations. Additionally, the load factor was higher than expected, despite being lower than in 2019. All these factors have generated a positive change in our guidance for this year.
I just want to back to Los Cabos for a moment to mention that this recovery was mainly driven by the cities of Tijuana and Mexico City, with traffic increase of 156% and 30% respectively. The extraordinary contribution from Tijuana is directly driven by the boom in international travelers using the Cross Border Xpress. On the international travel front, Los Cabos main destination during the period under review were Phoenix, Dallas, and Los Angeles, with growth of 38.4%, 29.4%, and 15.7% respectively. In Puerto Vallarta, the main domestic destinations were Tijuana, with an increase of 163.7%, Guadalajara with 78.7%, and Monterrey with 40.7% compared to the first half of 2019.
If we break it down by international travelers, in Puerto Vallarta, the flights to and from Phoenix experienced an increase of 70.3% in the first half of 2022 versus the same period of 2019. Los Angeles rose by 22.3% and Dallas by 13.7%. With regards to Canada, this market has seen a global recovery. However, we expect to see a lot more happening here in terms of returning to the pre-pandemic levels. In the first half of 2019, this market represented 21.4% of their full traffic. However, as of the close of this quarter, Canada only represented 10.1% of the total share of Puerto Vallarta. We are optimistic given the improvements in the other markets, and we expect to continue trending upwards.
Let's look at the Guadalajara and Tijuana Airport. In Guadalajara, most of the recovery is from the domestic travelers, specifically from Tijuana and Cancún. The business travelers market, however, as we previously mentioned, continues to lag. This brings me to the demand to and from Mexico City Airport. It does show a certain recovery. However, it has been a complicated situation compared to 2019, since Interjet, which is, ceased operations in December 2020, used to operate this route. Viva, Volaris, and Aeroméxico have taken over many of these frequencies to and from Mexico City and have experienced growth of approximately 72%, 8% and 5% respectively. In Tijuana, our second largest airport, the two airports far surpassed 2019 traffic figures.
The most important destinations, Cancún, Mazatlán, Los Cabos, and Puerto Vallarta, experienced growth of 721%, 176.2%, 159.5%, and 155.2% respectively, compared to the first half of 2019. These were mainly benefited by the U.S. use of the CBX. Regarding the VFR business market in Tijuana, the routes that grew the most compared to the first half of 2019 were Morelia by 62.9%, Monterrey by 20.1%, and Mexico City by 18.4%, and Guadalajara by 17.1%. Moving on to Montego Bay, in the second quarter, there was a solid recovery from the pandemic, representing an increase of only 1.8% compared to the second quarter of 2019.
Currently, travel restrictions in Jamaica have been lifted, and we are seeing Canadian and U.S. traffic start to rebound to this market once again. In terms of airport development, in the first half of the year, six national and 12 international routes opened, representing 271,000 additional seats. For the second half of the year, we expect the opening of 17 new routes, which is an additional offer of 355,000 seats. The three main Mexican airlines continue adding new fleets to their operations. As of July of 2022 compared to the beginning of 2020, we've seen an approximate increase of 65 aircraft, which represent about 9,000 additional seats of installed capacity.
As a result of passenger traffic performance, aeronautical revenues increased by almost MXN 1.7 billion, or about 68% versus the second quarter of 2019. For the six months period, aeronautical revenues increased by almost MXN 3 billion or about 57% compared to the first half of 2019. Non-aeronautical revenues rose by 38% during the second quarter compared to 2019. For the six-month periods, this revenue increased by 34%. Most of the increase was driven by food and beverages, retail operations, as well as duty free. Food and beverages had its best performing period in Los Cabos, Guadalajara, and Tijuana airports, while retail operations and duty free performed particularly strongly in Los Cabos Airport and Montego Bay Airport. EBITDA was MXN 4 billion for the quarter, with an EBITDA margin of around 72%.
For the six-month period, EBITDA reached MXN 7.8 billion with an EBITDA margin of around 73%. This was the result of the outstanding passenger traffic recovery, higher maximum tariff, and solid commercial revenues that were partially offset by the 27% increase in cost of service versus 2019. This was due to the consolidation of Kingston Airport, additional headcount in most of our airports, changes in labor law, increased cost of electricity, and a significant impact on inflation. While we do have a strict cost control policy, higher costs have been inevitable in accordance with infrastructure expansion and the effect of the global economy. Moving on to the balance sheet, cash and cash equivalents increased in the first half of 2022 by 13% over 2021, reaching a total of MXN 13.5 billion.
On the debt front, this figure reached MXN 31.1 billion in the first half of 2022, with a mix of 79% fixed rate and 21% of floating rate, 84% denominated in pesos and 16% in U.S. dollars. As of June of 2022, we reached a net debt to EBITDA ratio to the trailing twelve months of 1.2x . The company continues to employ a strategy of still leveraging 100% of CapEx and refinancing 100% of maturities, reaching healthy leverage levels, as well as complying with all debt covenants. CapEx continue in accordance with the Master Development Program commitments and the deployment has been and will be our biggest challenge this past year period because of the size of the investments and high inflation.
The improvements include the expansion and remodeling of the airport terminal buildings in Los Cabos Airport, the second terminal in Puerto Vallarta, as well as the second runway in Guadalajara. In terms of Jamaica, the renegotiation process will take place in the coming months, and we will share with you the developments when these become available. Before we move to the Q&A, I just want to point out that we update our guidance for the remainder of 2022 per the earnings reports. With that, I conclude my comments, and I ask the operator to please open the call for your questions.
If you would like to ask a question, please press the star and one on your touchtone phone. You may withdraw your question at any time by pressing the pound key. Once again, to ask a question, please press the star and one on your touchtone phone. We'll take our first question from Stephen Trent with Citi. Please go ahead. Your line is open.
Hi, good morning, everybody, and thanks very much for taking my question. Just two quick ones from me, if I may. Can you remind me to what extent GAP might be shifting more towards alternative energy, maybe looking at using more solar panels in some places as opposed to traditional electric grid sourcing?
Hi, Steve. Good morning. This is Saúl Villarreal.
Hi, Saúl.
Thank you for your question. We have already implemented different systems in our 14 airports, and we are now generating 12% of the total energy needed in the airports. In Mexico, as you may know, we have some changes in some regulations. For now, we are still waiting for the next steps for our airports in Mexico. However, in the Jamaican airports, we are working in a second phase, and the idea is just to get onto that 30%-40% of the electricity needed in those airports. For now, only 12% of the total energy is generated by solar panels.
Okay. Very helpful, Saúl. Just one really quick follow-up question. I know that you guys were looking at the airport auction in Barbados, which has been, you know, on and off. Could you just refresh my memory, you know, what's the latest with that one? Thank you.
Yes, Steve. We are still in the process. We are waiting for the final RFP. We received some communication from the government that they are still reviewing in order to send that, the final RFP. For now, there is nothing new. We will continue in the process, but we are waiting for that.
Okay, very helpful. Appreciate that, guys.
Thank you.
We will move next with Alejandro Zamacona with Credit Suisse. Please go ahead.
Hello, Raul, Saúl, thank you for taking my questions. My first question is on the aeronautical tariffs. During the quarter, we saw the aeronautical revenue per workload unit way above inflation. We were wondering what's behind this increase, as we understood that the real increases renegotiated in the last MDP was already implemented.
Hi, Alex. Good morning. Well, yes, we have seen an increase in inflation applied to the tariffs. In this quarter was stronger than in the previous quarter in 2021. Also, we have seen that the total reach of the maximum tariff is higher in this year than in 2021. That's why you can see a little increase in the revenue per workload unit. That's the main reason of this increase.
Thank you. My second question, if I may, on the commercial business. Amid all the recovery that we have seen in the commercial activity, have you seen any structural change in the passengers, consumer spending behavior, relative to what was pre-COVID?
Hi, Alejandro. This is Raúl. I mean, I would say that we are not seeing formally some kind of change of the trend of consumption. At least we are not seeing that yet. We are seeing that in some way there's some business lines, as could be advertising, that have been changed completely after the COVID. For instance, we are, I mean, suffering from all what is related with advertising because in the middle of the pandemic and all this crisis period, a lot of the announcement goes to the internet rather than the product advertising. In general terms, I would say that is the only big line that has some major change.
I would say that we are seeing that the consumption in the airports, if there's the correct offer and the correct layouts are doing great. I mean, you could see, for instance, the Food & Beverage area result on GAP, and it's related for sure to new layouts, mainly in Cabos, some renegotiation of contracts in the case of Puerto Vallarta. Mainly is that we refresh also some of the brands. The result is that the passengers will continue on going back to what used to be the trends before the pandemic.
We will take our next question from Lucila Gomez with Compass Group. Please go ahead.
Hi, good morning. My question is about the increases in cost of services that have been to catch up with the inflation, like maintenance and labor, that have been up quarter-over-quarter. My question is, during the next quarter, is it sustainable to maintain cost of services at this level? Or should we expect them to continue increasing? Thank you.
Hi, Lucila. This is Saúl. Well, the cost of service is increasing obviously in terms of labor, not only because the inflation, it is also because the headcount due to the ramp-up traffic in the dynamic that we have seen in the airports. We increased around 10% of our headcount, total headcount. Additionally, as you mentioned, the labor law changes represented a significant increase in terms of cost in the line of salaries. Obviously, we have to consider that the increase in salaries for the headcount, it is important, we have to pay above inflation. That represents also an increase, and that's why the change and the increase that you can see in that line.
In terms of maintenance, we are expecting in the second half of the year a significant increase as it's part of our economic trend year-over-year is part of the cycle of the company. In the first half we have less maintenance than in the second half. You will see in the second half an increase in maintenance. But at the end, what we look and we try to maintain is margins. According to our guidance that we are now changing, increasing due to the numbers is will be around 71%. If you consider that the previous EBITDA margins were around 69%, 70%. It is a very interesting number at the end.
Perfect. Thank you.
We'll take our next question from Rodolfo Ramos with Bradesco BBI. Please go ahead. Your line is open.
Good morning, Raúl, Saúl . Thanks for taking my question. My question is on. I have two questions. The first one is on if you can share with us the implicit traffic growth under your renegotiation of the MDP for this year and next year to see how it contrasts with your updated guidance. Second, my second question is whether you can share with us how the new international passenger handling facility in Tijuana has been operating, if you have a timeline for the future or the upcoming steps on whether to open this to new routes or eventually for it to be considered a domestic U.S. destination.
Any color there on upcoming steps would be helpful. Thank you.
Thank you, Rodolfo. Good to hear you. This is Saúl. In terms of the tariff, as you know, we negotiated with the government at the end of 2020 the new tariffs, which will be applicable for 2021, 2022, 2023 and 2024. There is no new negotiation about the maximum tariffs.
Sorry, Saúl, I meant traffic. Just to contrast how much above or below or on target you are versus what you renegotiated with the authorities.
I'm sorry. Understood. Well, in terms of traffic, we are above the negotiation. Obviously, the ramp-up of traffic and the acceleration of the recovery is very much better than we expected when we closed the negotiation. We are above that. We are expecting that the next tariff negotiation will have a different base of traffic, which will become more difficult in terms of the tariff we have. It will be a great challenge to see if more facilities or additional CapEx could be needed. It's interesting that for this period, we have the benefit of this additional traffic. I don't know if that answers your question.
Yes. Thank you, Saúl.
Sorry, hi, Roberto. This is Raúl. In the case of the new building in Tijuana, as you know, we began operations there, and today the domestic traffic are the traffic that is flying into Mexico and coming from Mexico is using this building. It has been a great relief for our passengers' experience due to the fact that, as you know, we are growing in a really great and growing space in Tijuana. It has been, I mean, today it's in use. A big part of the building for sure is it could be used not only for international traffic, but for domestic traffic.
For the case of the international traffic, we are seeing that for the first quarter of the coming year, we could talk about the opening of the first international routes in the case of Tijuana. As we remember in the 2019, we used to have the routes to Asia, to Shanghai. In the past we also have Guatemala and Salvador from Volaris to Tijuana. We are thinking that the way that we are working together with the airlines for the announce of new routes over there is that at the first quarter of the coming year, we're gonna see the first routes happening there, international routes.
Thank you, Raúl.
We'll take our next question from Pablo Monsivais with Barclays. Please go ahead.
Hi, team. Thanks for taking my question. I have two quick questions. The first one is on your traffic outlook for Jamaica and to what extent the travel disruptions by staff shortages in the U.S. and Europe do you think can impact Jamaica's recovery in the third quarter? Then just out of curiosity, how is the ramp-up process of the new terminal facility in Tijuana? Remember we were there in March. How's the traffic going? How's the commercial layout and the commercial offering building up there? Thank you.
Hi, Pablo. This is Raúl. Thank you for your questions. Regarding the traffic outlook for Jamaica, well, what we have seen is that the traffic has been progressing very positive. If you look at the trend every month, it is much better. Obviously it depends on the pandemic, and it depends on the lockdowns and restrictions from the different countries. For now, we are very optimistic, and we believe that we could reach the 2018 levels sooner than expected one year ago. For now, our expectation is very positive for the traffic outlook for Jamaica.
For the case of Tijuana Airport facility, I would say that it has been a great success for the airport. As you remember, that new facility has, for instance, six additional security lines. They have almost double capacity for check-in counters. I would say that the great recovery of the market and the great growth in our passengers on Tijuana has been possible because the opening of this building. It has been completely impossible to manage this amount of passengers without this building.
I could say that this has been a complete success, but for sure, we are expecting that for the first quarter of coming year, we begin to see the international passengers or international routes that we expect and will be like the great additional upside for that airport. In the other terms, I will say that without this new facility, it could be completely impossible to manage the amount of passengers that we are receiving today in Tijuana. For me, it's a complete success.
Perfect. Thank you very much.
Thank you, Pablo.
We'll move next with Gabriel Himelfarb with Scotiabank. Please go ahead.
Hi. Good morning. Thanks for the call. Just two quick questions about the passenger profile. Have you seen a recovery on business travels related to industrial or agricultural clusters? Can you please give us a bit of color about the new Jamaican routes? Are they related to visiting family and friends, or have you seen more leisure travel related to Jamaica? Thank you.
Hi, Gabriel. This is Raúl. I would say that the first question related with the profile, what we are seeing is an international booming in leisure travelers and also VFRs coming from the U.S. I will say that the growth or the recovery in the business market is lower than the rest. We have seen mainly for Guadalajara, but in the coming months, we begin to see a more robust trend in the growth of traffic. Let me talk or give some additional colors for the Mexico City route, that is the biggest route, one to Guadalajara, and also is one of the biggest business routes in the country.
I would say that in the first stage, we clearly see in some review that there was some kind of lack of demand in the route because the COVID and because the home office and because all those trends of working from home. In the last months, what we are seeing is a lack in the offer side. We have a lack of seats. As we mentioned in the past, Interjet used to be the biggest competitor there. What we are seeing today is really high tariffs in the route, high levels of load factors, and I would say a lack of seats on that specific route.
Given that, I will say that the coming months, we're gonna see a recovery of number of seats on that specific route because some of the Mexican airlines, as Viva Aerobus, Aeroméxico, Volaris, are receiving additional fleets, additional planes, and for sure the demand is strong enough for capturing additional seats there. I think that in the coming months we're gonna see a great recovery in that specific market. I will say that even with that, there's gonna be some remnants of what could be some kind of effect of the home office and in some way, some kind of a structural change on the way that the people works and fly for business. I will say that today, the biggest problem in our.
The business routes are related with the offer of seats. For the case of Jamaica, I would say that the two airports have completely two different kind of passengers. For sure Montego Bay is mainly leisure traffic going back and forward to the mainly to the east coast of the U.S. and Canada. For the case of Kingston, it's more related to the diaspora for VFR Jamaicans, you know, flying back and forward to mainly New York and Miami as two of the most important areas of diaspora for Jamaicans. That will be mainly the difference on the two airport markets in Jamaica.
Okay. Thank you.
Thank you Gabriel.
We'll take our next question from Anton Mortenkotter with GBM. Please go ahead.
Hello, guys. Thank you for taking my question, and congrats on your results. I have two questions. One is kind of like a follow-up to what you mentioned about opening new international routes by 2023. I was just wondering does this mean that in your talks with airlines, you're expecting to recover the category one safety rating from the FAA, or these routes can be open because it's a reopening and you already had them operating previously?
Hi, Anton. This is Raúl. I would say that I mean, first of all, in terms of the category, I mean, at least what is published from the AFAC, from the regulatory, the Mexican regulatory agency, is that they will recover at the end of this year the category. Usually that, I would say that we are seeing an increase of possible frequencies and routes on international side in the coming year, mainly in the leisure markets of, for the case of Cabos, Vallarta, Guadalajara mainly, in the case of our airports. That will come from U.S. carriers, because they are mainly leisure.
As you know, in the Mexican market, in the history of aviation, the leisure market has been almost, I would say, 100% operated by the U.S. carriers when the sale of the tickets originate in the U.S., and for the case of the VFR markets are mainly operated by Mexican carriers. That will be the history and that will continue. What we see in the coming years is that the growing for Cabos, Vallarta, Guadalajara, talking about leisure or business, will be completely covered by U.S. carriers. For the case of the VFR markets, it could be in some way jeopardize the additional growth of the Mexican markets.
Of the Mexican carriers in the VFR market if there is no recovery of the category. Saying that we have a great part in our airport that is in Tijuana and CBX Airport, because one of the things that we are seeing is that at least what is related to the Southern California market, Volaris, Viva Aerobus, and even Aeroméxico are absorbing part of the market that they could not attack from to Los Angeles or other of the Southern California market to Tijuana, to the CBX. In general terms, we could say that at least on the case of the VFR market that are generally in Southern California, we could see that it will be an additional capturing of markets, an additional capturing of passengers if the category is not recovered yet.
We expect that, this thing of the category could be solved for the Mexican government in the coming six months.
That's, that's pretty clear. My second question was kind of related to that, talking about the increasing capacity that you're seeing from airlines and all of these dynamics accelerating. In your talks with them, have you seen them also accelerating the orders for new aircraft or something like this?
I mean, both. In the case of Mexican airlines, for instance, the two main airlines are Volaris, Viva Aerobus, and Aeroméxico have made public their orders for additional planes. I would say that the three airlines have posted a really aggressive plans for the coming five years that will, in some of the cases, almost double their capacity in the coming five years. I would say that at least in terms of the plans are really aggressive for the coming years, and we are really positive about that. In the really short term, we are seeing also that some, for instance, Aerobus are having problems for recovering their capacity for production of planes. We just.
A couple of weeks ago, for instance, Viva Aerobus didn't receive in time one of the planes that have planned to receive from this year, on this month, and was due to the fact that, Aerobus have some delays on the manufacturing of the planes. I would say that in the long term, we are really optimistic about the new planes and the new fleet and the plans for mainly the Mexican airlines. I will say in the really, really short term, in next quarters, I would say, we will be seeing and struggling with some problems of the manufacturing planes and delays on the deliveries from mainly Aerobus and Boeing for some of the Mexican carriers.
That's perfect. Thanks a lot.
Thank you.
We'll take our next question from Hugo Becerra with GBM. Please go ahead.
Hello, good morning. Thanks for taking my question, and congratulations on the report. I have two questions regarding commercial revenue. I would like to understand how much of it comes from fixed and how much comes from variable incomes. My second question is regarding capital distribution deployment. How much went to non-aero and how much went to the MDP? Thank you.
Sorry, Hugo, can you please get close to the mic and repeat your question because the sound is not good. Sorry.
Sorry. I will repeat my question. Can you hear me better now?
Yes, please.
Yeah. Okay. I want to ask regarding the commercial revenue, how much of it comes from fixed and how much comes from variable income? My second question comes from capital distribution. How much went to non-aero and how much went to the MDP? Thank you.
Hi, Hugo. This is Saúl . Regarding the commercial revenue, as we have said, and we have mentioned, our general contract has a mix of minimum rate of fixed and the revenue share. Right now, after the pandemic we are almost back to the levels of 2019. At that time, we had around 95%-98% of the total revenues was over the variable and only 5% are fixed. However, due to the pandemic, this distribution changed, and right now it's around 80%-85% of the total revenues comes from the royalties that we receive from the commercial tenants. It is in general because we have also the
Regarding the contracts because, due to the business lines that we manage directly as advertising, parking lots, convenience stores, all those revenues are variable. All right? So, in general, regarding the contract, it's around 85% fixed. Sorry, variable and 15% fixed. In terms of the CapEx distribution, I would say that, according to the MXN 3 billion that we have deployed so far in 2022, so June, we have around 90% from the master plan and 10% only of commercials.
Thanks so much for th e question, for your answer.
We'll take our next question from Alan Macias with Bank of America. Please go ahead.
Hi, good morning, and thank you for the call. Just thank you for the update on the 2022 guidance. I just have a question on it. The driver for traffic growth between the lower range and the upper range, is that GDP growth assumptions behind that? Is that the main driver? Also, at this point in time, could you provide what you're thinking about traffic growth for 2023, given inflation headwinds, lower economic growth headwinds, strong peso headwinds, also strong U.S. dollar headwinds, meaning that U.S. tourists might prefer other destinations than Mexico. Thank you.
Okay. Thank you, Alan Macias. According to the guidance, we have the range of passenger traffic 14%-20%. We increased to 26%-30%, and it doesn't come from the GDP. It comes basically according to the seats available in the market, the load factors and the pipeline that the airlines have in terms of a fleet. According to that and the trend of growth in our airports, we are adjusting the guidance. It is not related with the GDP.
No, the question is in your new guidance, you have a traffic growth of 26%, the lower range, and 30% the upper range. What's driving the difference between that growth?
Mainly the opening of new routes, that is the key factor there. Because at the end of the day, I mean, we need to have some kind of range because, I mean, even that we have, we have the deals or announcements or with airlines of the opening, and sometimes if they don't have the plane or they don't have the delivery from the manufacturer or these kind of things, it could. It's not like, you know, an exact time of opening. So, we always need to work with some kind of range. Talking about your second question of how is our view of 2023, I would say that three factors.
In general, I can tell you sir that we are in general terms optimistic, but there are three factors to take into account for what could be the 2023. The first for sure is related with the oil price. That is, as you know, the biggest cost or the most important cost for an airline. That, if this keeps high or in the highest that we have seen in the last months, even that is decreasing in the last weeks. But if we are still seeing a really high cost of oil, we gonna see the airlines having to pass through the cost to the passengers, and in that case, the demand would suffer. The first and most important would be how we're having the oil cost for the coming year.
We also have the delivery of planes for the case of Mexico. It's really aggressive the plan for the three airlines, for Viva Aerobus and Aeroméxico and Volaris. If we see a complete fulfillment of the original plan, we are seeing, I mean, a great amount of seats in the market. Third is related to the opening of new key routes in the leisure destination as Cabo, Vallarta or even Nogales, we have that specific opening of new key routes, we're gonna see also a great, an interesting increase in passengers. I would say in general terms, we feel really, we are really optimistic on the coming year.
For sure we know that the GDP forecasting for the case of Mexico is not the more optimistic one, and I would say that it's still being more in the side of the slower growth. Even with that, we see that, the market has or is still having a lot of room to grow, to growth. If the cost of the oil is the correct one and we see the Mexican fleet arriving, we're gonna see a great 2023 year.
Understood. Very helpful. Just one other question. Do you have the percentage of traffic of Mexican airlines that fly to the U.S., just to determine the exposure, you know, if Mexico doesn't recover the Category 1? Thank you.
I mean, depending on the airline. For example, Aeroméxico have the international popular, so they have a long-haul and Canadian and South American markets. Talking about Viva Aerobu and Volaris, we are saying that the Mexican domestic market would be around 65% of the passengers. I mean, that is a little tricky because Tijuana airport, because a lot of that passengers are U.S. market, but flying from a Mexican market. In general terms, I would say that would be something around 65% on domestic market.
Thank you.
As a reminder, it is star and one to join the queue. Star and one. We will pause for another moment to allow questions to queue. Once again, it is star and one to join the queue. It appears that we have no further questions at this time. I will now turn the call back to the management team for their closing remarks.
Thank you everybody again for joining us today in our second quarter results conference. We want to remind you that we are always available to answer any question. On behalf of GAP, we wish you a great day.
This does conclude today's program. Thank you for your participation. You may now disconnect.