Executive Summary / Key Takeaways

• Corporación América Airports (CAAP) delivered an exceptional second quarter in 2025, marked by robust double-digit revenue and Adjusted EBITDA growth, alongside record passenger traffic across its geographically diversified portfolio.
• The company maintains a strong financial position, evidenced by a record-low net leverage ratio of 1.0x and a healthy liquidity of $595 million, providing ample flexibility for strategic investments and growth initiatives.
• Strategic expansion projects, including the environmental approval for the Florence Airport Master Plan and active pursuit of M&A opportunities in Montenegro and Angola, underscore CAAP's commitment to long-term value creation.
• Despite macroeconomic challenges in Argentina, CAAP has demonstrated resilience through effective tariff adjustments, cost controls, and strong international traffic growth, which is expected to offset domestic pressures.
• CAAP appears significantly undervalued compared to its industry peers, trading at a substantial discount despite its best-in-class operating margins and diversified asset base, suggesting a compelling re-rating potential.

A Global Gateway to Growth: CAAP's Strategic Foundation

Corporación América Airports S.A. (CAAP), established in 1998, has evolved into a leading private airport operator, managing a vast network of 52 airports spanning Latin America, Europe, and Eurasia. This extensive geographic footprint forms the bedrock of its overarching strategy: leveraging diversification, operational excellence, and a keen focus on enhancing non-aeronautical revenues to drive sustainable growth. CAAP's foundational strengths lie in its long-term concession agreements and deep expertise in navigating the unique dynamics of emerging markets, allowing it to adapt to diverse regulatory environments. The company's strategic positioning aligns with the increasing global demand for air travel, particularly in high-growth emerging regions.

While alternative transportation modes like high-speed rail and advancements in virtual communication present indirect competitive pressures, CAAP's strategic emphasis on emerging markets, where such alternatives are less developed, may mitigate some of these impacts. Furthermore, broader industry trends, such as the growth of AI-driven data centers, could indirectly boost air travel for tech-related logistics, potentially supporting CAAP's airport expansions and revenue opportunities.

Operational Excellence and Strategic Infrastructure: CAAP's Differentiated Approach

CAAP's competitive edge stems not from proprietary software or hardware, but from its sophisticated operational model and strategic approach to infrastructure development. This "operational technology" focuses on optimizing passenger flow, enhancing airport facilities, and maximizing commercial opportunities. The company's commitment to operational excellence is consistently recognized; Carrasco International Airport in Uruguay, for instance, has twice been named the best airport in Latin America and the Caribbean in its category by ACI's Airport Service Quality Awards. Similarly, Brasilia Airport earned recognition as the most punctual airport in Brazil and ranked second globally among medium-sized airports, achieving over 88% on-time departures. Guayaquil Airport in Ecuador also received a prestigious five-star rating for service quality.

These operational achievements translate into tangible benefits for CAAP. Strategic infrastructure projects are central to its growth, such as the Florence Airport Master Plan in Italy, which secured environmental approval in April 2025. This transformative project, with an estimated cost of EUR425 million, is expected to take two to three years to complete and includes the construction of a new runway and terminal. This new runway will be the first in Italy in many years and is projected to double Florence Airport's capacity, significantly increasing flights and destinations and realizing the full tourism potential of the region. In Armenia, CAAP is progressing with approvals for a $425 million CapEx program to expand Yerevan Airport, further strengthening its role as a regional hub.

Beyond aeronautical services, CAAP is aggressively enhancing non-aeronautical revenues, which typically carry higher margins. In Argentina, the duty-free arrivals area at Ezeiza Airport was expanded by over 50% to 1,100 square meters in May 2025, aiming to improve passenger experience and capture additional commercial opportunities. Brazil's Brasilia Airport is seeing the construction of a new shopping mall, slated to open in April 2026, alongside other initiatives to grow food and beverage, retail, and service offerings. A new covered parking facility at Montevideo Airport in Uruguay further exemplifies this focus on enhancing passenger services and non-aeronautical revenue streams. These strategic operational and infrastructure developments are critical to CAAP's competitive moat, directly contributing to its financial performance, market positioning, and long-term growth strategy.

Financial Momentum and Robust Capital Structure

CAAP's strategic execution translated into a strong financial performance in the second quarter of 2025. Total passenger traffic surged by almost 14% year-over-year, driving revenues up nearly 19%, significantly outpacing passenger growth. Revenue per passenger increased to $21, up from $20.1 in the prior year, a testament to robust contributions from cargo, parking, VIP lounges, and duty-free services. This top-line strength propelled Adjusted EBITDA to a 23% year-over-year increase, reaching $169 million, with the Adjusted EBITDA margin expanding by 1.4 percentage points to 38.6%. Argentina, Uruguay, and Armenia were notable contributors to this profitability expansion.

Looking at the full year 2024, CAAP reported annual revenue of $1.84 billion and a net income of $282.67 million. The company generated strong operating cash flow of $405.30 million and free cash flow of $393.08 million. CAAP's TTM Gross Profit Margin stands at 32.88%, Operating Profit Margin at 23.31%, and EBITDA Margin at 30.68%, reflecting efficient operations.

The company's liquidity position remains robust, closing Q2 2025 with $595 million in total liquidity, a 13% increase from year-end 2024. Net debt significantly decreased to $643 million from $718 million in December 2024, resulting in a record-low net leverage ratio of 1.0x. This strong balance sheet provides substantial flexibility for future growth initiatives. Notably, CAAP's Argentine subsidiary, AA2000, recently approved a $150 million dividend distribution, with $127.5 million slated for CAAP, highlighting the strong cash generation capabilities of its operations.

Competitive Landscape: Strengths in Diversification

CAAP operates within a competitive global airport concessions market, facing rivals such as AENA , Fraport , Grupo Aeroportuario del Pacífico (GAP) (PAC), and Grupo Aeroportuario del Sureste (ASUR) (ASR). CAAP's primary differentiator is its extensive geographic diversification across Latin America, Europe, and Eurasia, which provides a broader exposure to emerging markets compared to AENA's predominantly European focus or Fraport's emphasis on established European hubs. This diversification offers resilience against regional economic downturns and provides access to faster-growing aviation markets.

While direct quantitative comparisons of all competitor financial metrics are challenging to ascertain, CAAP's TTM EBITDA margin of 30.68% demonstrates strong profitability within the sector. However, some larger, more established competitors like AENA (AENA) and Fraport (FRA), with their mature infrastructure and potentially more stable regulatory environments, may exhibit higher profitability margins and cash flow generation. CAAP's strategic adaptability and expertise in managing concession-based models in diverse regulatory landscapes allow for scalable entry into new markets, potentially giving it an edge in growth opportunities over rivals with more rigid operational footprints. The company's ability to secure long-term concession agreements further provides stability and pricing power, fostering recurring revenue streams.

Customer and supplier dynamics also play a crucial role. CAAP has successfully attracted new and expanded services from major carriers like JetSMART, GOL (GOL), SKY, Azul (AZUL), LATAM (LTMAQ), Avianca (AVH), and Air Europa in Argentina, and Wizz Air (WIZZ), China Southern (ZNH), Air Cairo, Salam Air, and Sky Express in Armenia. This strong airline interest underscores the attractiveness of CAAP's airport network and its ability to enhance connectivity, positioning it favorably against competitors.

Outlook and Strategic Initiatives: Paving the Way Forward

CAAP's management anticipates continued positive traffic momentum across its network, with strong summer seasons expected in Italy and Armenia, and sustained growth in Argentina. The positive consolidated traffic trends observed in early 2025 are expected to continue throughout the year. In Argentina, healthy demand, particularly for international travel, is projected to persist, fueled by the government's "Open Skies" agreements and internal regulatory reforms designed to unleash the aviation industry's growth potential. The recent adjustment of domestic tariffs to approximately $5.50 further supports revenue growth and operational resilience in this key market.

Strategic capital expenditure programs are central to CAAP's future. The environmental approval for the Florence Airport Master Plan in April 2025 is a significant milestone, paving the way for construction that will double the airport's capacity. Similarly, progress continues on the $425 million CapEx program approvals for Yerevan Airport in Armenia, aimed at expanding its infrastructure. On the commercial front, the construction of a shopping mall at Brasilia Airport is on track for an April 2026 opening, further diversifying non-aeronautical revenue streams.

CAAP is also actively pursuing inorganic growth opportunities. The company is awaiting an official resolution from the government of Montenegro regarding its proposal for two airports with a combined capacity of 3 million passengers, targeting mid-teens internal rates of return under an inflation-based tariff regime. A revised proposal for Angola is also in preparation, and CAAP is exploring other M&A initiatives across Latin America, Iraq, and other regions. These initiatives highlight a disciplined yet opportunistic approach to portfolio expansion. Analysts project CAAP to earn $1.94 per share for the fiscal year ending December 2025, representing a 10.2% year-over-year increase, with the Zacks Consensus Estimate rising 41.6% over the past three months.

Risks and Challenges

Despite its strong performance and strategic initiatives, CAAP faces several pertinent risks. Macroeconomic volatility in Argentina remains a key concern, with historical inflationary pressures outpacing currency devaluation impacting operating costs. While management anticipates a more normalized environment, this dynamic could still affect profitability. Domestic traffic in Argentina has also been impacted by the ongoing recession and the discontinuation of the "Previaje" government incentive program.

Operational challenges persist in some markets, such as Ecuador, where high airfare levels and a challenging security environment continue to weigh on travel demand. In Uruguay, traffic has occasionally been impacted by route removals and adverse weather conditions. Furthermore, the bureaucratic nature of government processes can lead to delays in critical initiatives, as seen with the ongoing concession rebalancing discussions in Argentina and the environmental approval processes for CapEx projects. While the potential closure of Aerolineas Argentinas (representing 6% of CAAP's revenues and 15% of integrated services) presents a risk, CAAP has demonstrated resilience in similar past scenarios.

Conclusion

Corporación América Airports stands as a compelling investment opportunity, underpinned by its robust operational performance, strategic geographic diversification, and disciplined capital allocation. The company's ability to deliver record passenger traffic and strong financial results across its varied portfolio, even amidst macroeconomic headwinds in key markets like Argentina, underscores the resilience of its business model. Strategic investments in infrastructure, such as the Florence Airport expansion, coupled with an aggressive pursuit of non-aeronautical revenue growth and a proactive M&A pipeline, position CAAP for sustained long-term value creation.

Despite these strengths and a clear growth trajectory, CAAP appears to be significantly undervalued by the market, trading at a substantial discount compared to its peers. This valuation gap, combined with a healthy balance sheet and a management team focused on operational excellence and strategic expansion, suggests a strong potential for a re-rating. For discerning investors, CAAP offers exposure to a growing global aviation market through a well-managed, diversified portfolio, making it a compelling consideration for long-term capital appreciation.