Executive Summary / Key Takeaways

• Emerging Market Resilience with Diversified Moats: Corporación América Airports, founded in 1998, operates 52 airports across Latin America, Europe, and Eurasia through long-term concessions, creating durable barriers to entry and cash flow stability despite regional volatility, with Q3 2025 adjusted EBITDA margins expanding to a record 41.2%.
• Commercial Revenue Engine Outpacing Traffic Growth: Non-aeronautical revenues grew 18% in Q3 2025, nearly double the 9.3% passenger traffic increase, driven by cargo model innovations, duty-free expansions, and VIP lounge enhancements, demonstrating pricing power and operational leverage that supports margin expansion across the portfolio.
• Argentina Concentration Presents Asymmetric Risk/Reward: While Argentina represents the largest traffic and revenue contributor, recent tariff adjustments, currency dynamics, and operational improvements drove a 68% adjusted EBITDA increase in Q3 2025, though persistent inflation and political volatility remain the primary risk to sustained performance.
• Strategic Expansion Pipeline De-Risks Growth: Environmental approvals for Florence's €425 million master plan, progress on Armenia's capacity expansion, and a non-binding award for Baghdad Airport provide visible organic and inorganic growth catalysts through 2028, funded by a strong balance sheet with $661 million in liquidity and net leverage at 0.9x.
• Valuation Reflects Quality but Demands Flawless Execution: Trading at 23.3x earnings versus a 14.8x industry average, the stock prices in continued margin expansion and successful project execution, leaving little room for missteps in Argentina's economic management or delays in the strategic development pipeline.

Setting the Scene: The Concession-Based Airport Operator

Corporación América Airports makes money by acquiring, developing, and operating airport concessions under long-term agreements, typically spanning 20 to 30 years. The company generates revenue through two primary channels: aeronautical fees from airlines and passengers, and commercial income from retail, parking, cargo, and other passenger services. This dual-revenue model creates natural operational leverage, as fixed costs associated with running airport infrastructure spread across growing passenger volumes while commercial activities capture incremental consumer spending.

The company sits at the intersection of infrastructure and consumer services, with its 52 airports serving as critical transportation hubs across regions with vastly different economic and regulatory environments. In Latin America, CAAP benefits from rising middle-class incomes and increasing air travel penetration rates, while its European and Eurasian assets provide geographic diversification and exposure to higher-margin international traffic. The concession model itself acts as a powerful moat, requiring massive upfront capital investment, deep regulatory relationships, and decades of operational expertise that few competitors can replicate.

Founded in 1998 and initially operating as A.C.I. Airports International, the company rebranded to Corporación América Airports in September 2017, reflecting its expanded global footprint. Recent strategic moves reveal a disciplined approach to portfolio optimization. The termination of the Natal Airport concession in Brazil, which generated a Q4 2023 indemnification payment and officially concluded in February 2024, allowed management to redeploy capital toward higher-return opportunities. Simultaneously, the $31 million acquisition of an indirect stake in its Argentine subsidiary AA2000 and the November 2024 domestic tariff increase demonstrate a commitment to strengthening core assets while extracting incremental value from mature concessions.

Technology, Products, and Strategic Differentiation

CAAP's competitive advantage stems from three interlocking moats: geographic diversification, concession expertise, and commercial revenue optimization capabilities. Geographic diversification reduces single-country risk, a critical feature for emerging market infrastructure. When Ecuador faces security-related traffic declines or Uruguay experiences planned runway closures, strong performance in Argentina, Brazil, and Italy offsets these headwinds. This diversification enabled Q3 2025 total revenue growth of 16.6% despite a 5.3% traffic decline in Uruguay and a 1% drop in Ecuador.

Concession expertise manifests in the company's ability to navigate complex regulatory environments and secure favorable terms. The Florence Airport master plan, which received environmental approval from Tuscany in April 2025 and the Environmental Impact Assessment Decree from the Italian government in mid-November 2025, represents a €425 million investment that will transform the airport's capacity and commercial potential. Similarly, the new cargo business model implemented in Argentina in mid-March 2025 contributed to 20% cargo revenue growth in Q3, demonstrating management's ability to innovate within existing concession frameworks.

Commercial revenue optimization drives the most compelling part of the investment thesis. The expansion of Ezeiza Airport's duty-free arrivals area from 700 to 1,100 square meters in May 2025, coupled with the inauguration of Latin America's most modern VIP lounge, shows a relentless focus on extracting value from non-aeronautical sources. These initiatives delivered 19% commercial revenue growth in Argentina and 22% in Armenia during Q3, outpacing traffic growth by a wide margin. The cargo model innovation in Argentina, which improved pricing dynamics and operational efficiency, further diversifies revenue away from pure passenger volumes.

Financial Performance & Segment Dynamics

Q3 2025 results provide clear evidence that CAAP's strategy is working. Total revenues excluding IFRIC 12 increased 16.6%, nearly double the 9.3% passenger traffic growth, pushing revenue per passenger to $20.2, up 6.7% year-over-year. This top-line outperformance flowed directly to profitability, with adjusted EBITDA rising 34% to a record $194 million and margins expanding 5.2 percentage points to 41.2%. The key driver was commercial revenues, which grew 18% while aeronautical revenues increased 15.2%, both well ahead of traffic growth.

Segment performance reveals the geographic and operational drivers behind these numbers. Argentina delivered a 68% adjusted EBITDA increase, benefiting from easier comparisons after Q3 2024 absorbed significant inflation-driven cost increases, plus the faster pace of currency devaluation relative to inflation, which diluted peso-denominated costs when translated to U.S. dollars. This dynamic highlights both the opportunity and risk of Argentine operations: when currency and tariff adjustments align, profitability explodes, but misalignment can compress margins severely.

Brazil and Armenia posted double-digit revenue growth, with Brazil's 19% adjusted EBITDA increase reflecting healthy traffic growth and strong VIP lounge and cargo performance. Italy's 10% adjusted EBITDA gain (18% excluding construction services) came from higher passenger traffic and solid growth in duty-free, VIP lounges, and parking. Uruguay's 11% adjusted EBITDA decline stemmed from a six-day planned runway closure for a new Precision Instrument Landing System installation, a temporary operational impact that masks underlying strength.

Cost control remains a key differentiator. Total costs and expenses excluding IFRIC 12 increased just 7.9% in Q3, well below the 16.6% revenue growth, demonstrating operating leverage. In Argentina, total costs rose only 3.3% despite strong revenue growth, as the company benefited from favorable comparisons and continued focus on cost efficiency. This disciplined approach to expense management, combined with revenue diversification, supports margin expansion even in inflationary environments.

The balance sheet provides ample firepower for growth. Total liquidity reached $661 million at quarter-end, up 26% from year-end 2024, while net debt declined to $579 million from $718 million in December 2024. The net leverage ratio improved to 0.9x, giving management flexibility to fund the Florence master plan, Armenia's CapEx program, and potential M&A opportunities across Latin America, Africa, and Europe.

Outlook, Management Guidance, and Execution Risk

Management anticipates positive traffic trends continuing into Q4 2025, though with a more moderate pace of domestic traffic growth in Argentina. This guidance implies solid results in the fourth quarter, though without the easier comparisons that boosted Q3 performance. The commentary suggests confidence in underlying demand across key markets, supported by new routes, increased flight frequencies, and the establishment of new airline bases like Wizz Air (WIZZ) in Armenia.

Strategic initiatives provide multiple avenues for growth. The Florence Airport master plan, with environmental approvals now complete, positions Italy for a multi-year expansion phase. In Armenia, CapEx program approvals are underway to expand Yerevan Airport's capacity, while Wizz Air's new base adds eight European routes, strengthening the country's position as a growing regional hub. The Baghdad Airport non-binding award agreement offers exposure to a market with significant untapped potential, though execution risk remains high given regional instability.

Cargo revenue momentum appears sustainable, with management planning to enhance capabilities and leverage growth opportunities while maintaining a competitive cost structure. The new Argentine cargo business model, implemented in March 2025, is performing as planned and contributed to 23% cargo revenue growth in Argentina during Q3. This diversification reduces dependence on passenger traffic and creates a more resilient revenue mix.

The AA2000 rebalancing process in Argentina remains a key variable. Management maintains a constructive view, expecting positive news during 2025 supported by new regulatory tools, though they acknowledge the confidential nature of the review limits public commentary. Successful rebalancing could unlock additional value from the company's largest asset, while delays or unfavorable terms would pressure margins.

Risks and Asymmetries

Argentina concentration represents the most material risk to the investment thesis. The country accounts for the majority of traffic and EBITDA, exposing CAAP to currency volatility, inflation, and political instability. While Q3 2025 benefited from favorable currency dynamics, a reversal could quickly compress margins. The government's fiscal health and willingness to approve tariff adjustments directly impact profitability, creating uncertainty that diversified peers like Aena (AENA) and ADP (ADP) avoid.

Execution risk on large capital projects could derail growth. The Florence master plan requires €425 million of investment and faces potential construction delays, cost overruns, and regulatory hurdles. Similarly, the Baghdad project, while promising, operates in a high-risk environment where security concerns could limit traffic growth. Management's track record of completing Durazno International Airport on time provides confidence, but each new project adds complexity.

Competitive pressure intensifies as global airport operators expand in Latin America. Aena's growing presence in Brazil through Aena Brasil and ADP's international diversification strategy create more formidable competitors with greater scale and lower cost of capital. While CAAP's local expertise and concession moats provide defensible positions, larger rivals can outbid for new concessions and invest more heavily in technology and passenger experience.

Uruguay and Ecuador's recent traffic declines highlight vulnerability to external shocks. Uruguay's six-day runway closure and Ecuador's security environment demonstrate how quickly local issues can impact performance. While diversification mitigates concentration risk, these markets remain important contributors where operational disruptions carry financial consequences.

Valuation Context

Trading at $25.56 per share, CAAP commands a 23.45x trailing P/E ratio, significantly above the 14.8x industry average and its own historical norms. The enterprise trades at 6.95x EBITDA and 2.41x revenue, multiples that reflect expectations of continued margin expansion and successful project execution. These valuations price in flawless operational performance and favorable regulatory outcomes, particularly in Argentina.

Relative to key competitors, CAAP's multiples sit between emerging market and developed market peers. Aena SME trades at 10.84x earnings with superior 60% EBITDA margins, reflecting its mature European network and scale advantages. Grupo Aeroportuario del Pacífico (PAC) commands 21.64x earnings with 43% operating margins, showing the premium assigned to stable Mexican operations. CAAP's valuation implies investors expect margin convergence toward these levels through successful commercial initiatives and cost control.

Balance sheet strength supports the premium. With $661 million in liquidity, net leverage of 0.9x, and all operating subsidiaries generating positive cash flow, CAAP maintains financial flexibility that many emerging market peers lack. The debt-to-equity ratio of 0.75x provides capacity for accretive M&A or accelerated capital investment if opportunities arise. However, the 23.3x earnings multiple leaves minimal margin for safety if Argentina's economic situation deteriorates or if traffic growth disappoints.

Conclusion

Corporación América Airports has engineered a compelling combination of emerging market exposure with developed market financial discipline, creating a resilient infrastructure platform that generates accelerating returns. The company's ability to grow commercial revenues at nearly double the pace of passenger traffic demonstrates pricing power and operational leverage that support margin expansion toward peer levels. With record Q3 2025 EBITDA margins of 41.2% and a robust development pipeline spanning Italy, Armenia, and potentially Iraq, CAAP offers multiple paths to sustained earnings growth.

The investment thesis ultimately hinges on two variables: Argentina's economic stability and management's execution on large-scale capital projects. If the government maintains rational tariff policies and currency dynamics remain favorable, Argentine operations can continue delivering outsized profit growth. Simultaneously, successful completion of the Florence master plan and prudent development of new concessions will determine whether CAAP can diversify away from its Argentine concentration while maintaining its competitive edge. Trading at a premium valuation, the stock offers meaningful upside for investors confident in management's ability to navigate these challenges, but demands conviction in both macro stability and operational excellence.