Mexican Airport Outlook Following Cartel Clash

This weekend wasn't too bad for the airports, but there's no rush to buy the dip, either

Summary

• Mexico’s government took out a top cartel boss this weekend. The cartel struck back, leading to some scary headlines this weekend.

• Much of the social media reaction was overblown, however. Many fake AI images were spread to incite terror. I separate the news from the noise.

• I expect a 10% drop in Puerto Vallarta traffic and low-to-mid single-digit decline at Guadalajara for 2026, these airports will return to traffic growth in 2027.

• I remain long-term bullish on the Mexican airports, though shares had been up a bunch prior to this weekend; there’s no particular rush to buy the dip.

Apparently, my publication now has an Economist or Barron’s effect. That is to say, those magazines are known for putting things (bull market, strong dollar, death of tech stocks, etc.) on their cover, and then the exact opposite market reaction occurs shortly thereafter.

Unfortunately, I published a piece on Friday talking about how cartel violence hasn’t been an issue for Mexican airport investors and then Sunday, we get the biggest counterexample to my argument in years. I apologize for that... terrible timing.

In any case, I was out at a remote mountain cabin, birdwatching and hiking with my family this weekend. Sunday afternoon, my phone came back into cell range, and I had all sorts of emails and direct messages hitting my phone. I thought something terrible must of happened.

And at first, it did seem rather grim. On Twitter, people posted that cartels had seized the Guadalajara airport. Airplanes were burning on the tarmac. There were shootouts in the terminal. Cartels were hunting down and kidnapping tourists. All hell had broken loose, apparently.

But that simply wasn’t true.

Every statement above was a lie -- and cartel-affiliated accounts and anti-government operatives were retweeting and using bots to amplify these phony messages. This was, in the literal sense of the word, terrorism.

AI-generated images like this (without the false tag) were circulated around social media and accumulated thousands of likes and retweets on Sunday.

People inside the Guadalajara airport saw these tweets and were sharing them via WhatsApp and other messaging channels, leading to widespread panic.

The truth of the matter was that there were:

• No shots or gunmen inside any Mexican airports.

• No airplanes were damaged.

• No tourists were killed, injured, or kidnapped. Not a single one.

• Within minute of the social panic beginning, the Mexican military and police had secured both the Puerto Vallarta and Guadalajara airports to ensure everyone’s safety.

• The president wasn’t flown to a navy plane for security; that photo was AI.

• No Costcos were “burned down.”

Pacifico Airports put out a communication calling the afternoon’s panic a mass “psychosis” and urged calm. Airport operations continued normally (though many airlines cancelled flights Sunday).

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As of this writing, all the airports are operating normally and most airlines have resumed regular service at full capacity. The Mexican government has full control over Puerto Vallarta, Guadalajara, and other areas along the Pacific Coast that had been subject of cartel activity on Sunday. The “crisis” situation from this weekend, has passed. The Costco that was burned down (in an AI image generator anyway) reopened for shopping on Wednesday morning.

With that context established, we can discuss the broader situation.

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Over the weekend, the Mexican government took out “El Mencho”, the leader of the Cartel de Jalisco Nueva Generación “CJNG”:

The CJNG is arguably the second-most powerful cartel in Mexico, and some even consider it on par with the Sinaloa Cartel in reach nowadays.

El Mencho was the most wanted man in Mexico, and his death is the most consequential hit to a Mexican cartel since the capture of El Chapo in 2016. To use an analogy, for Mexico, killing El Mencho would be roughly on par to the killing of Bin Laden in 2011.

A CJNG executive ordered a day of violence across Mexico Sunday as retaliation for the death of their leader. In all, more than 70 people died, with the primary victims being members of the Mexican police and military. A high-up CJNG official offered $1,200 bounties (20,000 MXN) for the death of each Mexican solider.

Social media stoked the fears that the CJNG would start hunting down civilians (including foreign tourists) in response to El Mencho’s death.

But that’s not what happened.

At all.

Rather, the Mexican military immediately hunted down and killed the man, “El Tuli” who was offering the bounties on Mexican soldiers:

By Tuesday, the CJNG had stopped its retaliation attacks, and life in Puerto Vallarta had returned to normal.

It remains to be seen what will become of the CJNG. Will leadership pass to a new Jefe? Will the cartel splinter into various factions? Will it slowly unravel as the Mexican government keeps taking out new replacements for their fallen boss? It’s too early to say; anyone that makes a definitive forecast here is merely speculating.

That said, we can and should credit Mexican president Claudia Sheinbaum. She has pivoted away from her predecessor’s “abrazos no balazos” (Hugs not bullets) strategy to a much firmer stance against cartel influence. Many right-wing critics have said that Sheinbaum would be spineless in front of the cartels, and yet she stood in there and kept hitting at CJNG after the initial wave of retaliation attacks.

In the bigger picture, the security situation has been and continues to improve.

The Mexican homicide rate has fallen every single year since 2019. (You won’t find many of the Mexico fearmongers repeating that stat). And, in the first full year of Sheinbaum’s administration (2025), the homicide rate plunged approximately 30%, greatly accelerating the safety push that had already been in the works under the previous government. Of note, Sheinbaum has accepted U.S. intelligence assistance and is working with her northern neighbor to improve drug interdiction while finding and eliminating cartel leaders. Trump has spoken admirably about Sheinbaum on various occasions; she’s delivering on the U.S. goals’... i.e. fewer undocumented Mexican migrants, less drugs coming into the U.S., and real meaningful strikes against cartel figures.

Sheinbaum remains incredibly popular (70% approval rating in Mexico) and her term runs through 2030. She has an opportunity to really start to stamp out cartel activity in Mexico.

To further support that view, I’d highlight a poll from Mexican research service De Las Heras out Wednesday:

The poll (translated) asks, from 0 to 10, how would you rate the government and armed forces’ operation carried out against the Jalisco cartel and its leader:

34% of Mexicans gave the operation a perfect 10 rating, and another 35% said it was an 8 or 9. Only 8% of Mexicans had an unfavorable (5 or less rating) and the average score came in at 8.3. Something to keep in mind, again, when you see social media folks claiming that Sheinbaum doesn’t have control of the situation or the backing of her people.

Mexico could be at a crossroads, in the similar way, to how the Colombian government killed Pablo Escobar in 1994 and violence started to dramatically decrease from that point onward. And, with the election of Uribe, a forceful anti-narcos president in 2002, that set the stage for the final Colombian military offensives that crushed the remaining organized narco forces. FARC began peace talks with the Colombian government in 2012 and the definitive peace treaty was reached in 2016. Medellin went from the world’s single most dangerous city in 1994 to one of the world’s fastest-growing tourism destinations by the late 2010s.

I don’t pretend to have a timeline for when Mexico can deescalate with the cartels in the same way that Peru crushed the Shining Path terrorists or Colombia neutralized the FARC. That said, Sheinbaum is making the right moves, and she has the mandate of the people to keep using overwhelming force rather than standing down or trying to coexist.

From a long-term Mexico perspective, you should be more bullish today than you were last week. This has been an impressive show of force and discipline by the Mexican government and military to take down the country’s most wanted man and his immediate replacement in short order at modest cost of life -- and then getting CJNG to stop the retaliation attacks within 48 hours.

Impact On And Outlook For Mexican Airports

Enough on the big picture, what’s this mean for Mexican airport stocks today?

Pacifico Airports (NYSE:PAC) was the most impacted, and understandably so. It operates both the Guadalajara and Puerto Vallarta airports, which were the two which were most affected by flight cancellations over the past few days. And Puerto Vallarta in particular got a lot of negative social media attention due to the burning of some vehicles in the city on Sunday. Pacifico also operates Cabos airport, on the other side of the Gulf of California from Puerto Vallarta, which could also conceivably be impacted if Pacific tourism cools off.

While PAC stock was down double-digits to start the week, however, shares are still up slightly year-to-date and are up more than 50% over the past 12 months:

Data by YCharts

I present this 5-year chart for context, since so many people have been asking if it’s time to buy the dip on the airports. PAC stock is barely down from the highs. If you bought the stock last week, I could understand being frustrated but on any longer timescale, PAC stock is up a lot recently. In fact, shares were approaching fair value (at least compared to Mexican airports’ historical EV/EBITDA ratios) prior to Monday.

The Mexican airports tend to be highly volatile. Since I’ve owned PAC stock, shares have dropped 40% (Trump wins 2016 election), more than 30% (AMLO wins Mexican presidency 2018), 70% (pandemic), and 50% (in a single day thanks to the 2023 contract kerfuffle). So no, I’m not going out pounding the table to buy a 12% dip off all-time highs on this sort of incident. If you own no positions in the airports and thought you’d missed the flight, this could be a decent place to start entering a position. But no, in the scale of how these things usually trade and where they’ve been historically, this is a reasonable entry point, nothing more than that.

Data by YCharts

As recently as 2024, all three Mexican airport stocks were trading below 10x EBITDA. Now they are at 15, 13, and 11x respectively. Not bad prices, but much of the recent gains were from multiples coming up off depressed levels. Keep in mind 2025 was a poor year of Mexican air travel growth due to the engine issues and thus reduced available seat miles -- 2026 was supposed to be an above-trend growth year, but who knows how that will go now with this weekend’s bad optics.

My guess, if you forced me to project, would be that Puerto Vallarta traffic will be off about 10% for 2026, Guadalajara down low-to-mid single digits and rest of PAC’s airport package largely unchanged from their prior trajectory. That’s still rough for PAC, though, as GDL is their #1 concession, and Puerto Vallarta is #4 (#2 holding Tijuana is not a tourist destination and thus is unaffected by negative English-language headlines, #3 is Cabos, mentioned above).

I think any negative headline effect from this passes by 2027 and Pacifico returns to normal growth next year. And figure 12-15% annualized compounded EBITDA growth from there; not hard to justify paying 15x EBITDA for that. However, it was selling at 10x not that long ago, and we will have some negative traffic figures for the next few months thanks to all the folks that kneejerk cancelled their Spring Break and Summer vacations around the negative headlines this weekend.

And, there’s also the other reason for caution on Mexican stocks generally in 2026. That would be the upcoming review period for the US Mexico Canada “USMCA” free trade deal. I’ve written about this extensively recently so no need to rehash today.

Long story short, though, is that Trump has an opportunity to put pressure on Mexico and Canada (and he’s super pissed at Canada lately in particular) by threatening to leave USMCA. I’m not sure how much the market cares about tariffs anymore (it is a super played out issue at this point), but it’s not inconceivable we could get a big kneejerk sell-off on Mexican stocks and the Peso (the Peso is quietly up 20% vs. USD recently) if it appears that Mexico’s free trade is in doubt. Recall that Mexico is now heavily reliant on exports and 80% of its exports go to the U.S. Leaving USMCA would be an existential risk to Mexico’s economy.

The Mexican ETF is up 60% over the past year and has tripled off the pandemic lows. While I think Mexico is still reasonably valued and can go up a lot more over the longer-term, some chopping around or even a decent correction wouldn’t surprise me as the market digests such a large move. Be it cartel violence, USMCA talks breaking down, or any other sort of catalyst, Mexican stocks (including the airports) had gotten short-term overbought and I’m not surprised some traders hit the sell button this week to lock in profits on any uncertainty. Reasonable reaction, in fact.

We had trimmed our Mexican airport position in the aggressive portfolio earlier this month, not because I had any inkling of incoming cartel headlines, but simply because the stocks had gone up a long way in a hurry. Now we have some capital ready to redeploy into a much steeper selloff, should one materialize. But no, I’m not rushing to put that money back to work on a garden variety 10% dip. My stance remains long-term bullish on the airports (PAC, OMAB, and CAAP are all among my personal top six overall holdings at the moment) but in the shorter-term I’m closer to neutral on everything except CAAP (CAAP is going to $45 fairly soon, I’m strongly bullish there on all time frames.)

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And specifically, I’m calling for a roughly 10% drop in Puerto Vallarta traffic this year, a low-to-mid single digits drop at Guadalajara, and no other meaningful impacts at other Mexican airports (that includes Cancun, by the way. Cancun is 1,200 miles from Puerto Vallarta. The people freaking out in Cancun on Sunday were the equivalent of Europeans on vacation at Disney in Orlando fretting about violence in Minnesota.)

I’ll leave you with a comment from Centro Norte Airports (Monterrey, Culiacan, Juarez) (NASDAQ:OMAB) which so happened to have an earnings release and conference call on Tuesday. Here’s OMAB CEO Ricardo Duenas responding to an analyst question on this weekend’s incident and future impacts:

“All our 13 airports are operating normally. We did see on Sunday during the event, a few cancellations from Guadalajara and Puerto Vallarta Airports. There were some yesterday, but today is operating normally, and it is not something that -- it’s not a thing that we believe will have an impact in our numbers.”

That’s a good place to leave this piece.

This will modestly hit Pacifico’s 2026 results, and not materially matter to the other two Mexican airport operators. But the stocks were up a long way, so this is as good as excuse as any for a short-term consolidation in the share prices. And Mexican assets are going to be on edge through this summer anyway until we see how the USMCA trade talks progress. So, for now, I’m holding my Mexican airport stocks but not tempted to add to them.