UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
| |
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 1-33168
|
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. |
(Exact name of Registrant as specified in its charter) |
|
Central North Airport Group |
(Translation of Registrant’s name into English) |
|
United Mexican States |
(Jurisdiction of incorporation or organization) |
|
Plaza Metrópoli Patriotismo, Piso 5 Av. Patriotismo 201 Col. San Pedro de los Pinos, Benito Juárez Ciudad de México, México |
(Address of principal executive offices) |
|
Ruffo Pérez Pliego del Castillo Plaza Metrópoli Patriotismo, Piso 5 Av. Patriotismo 201 Col. San Pedro de los Pinos, Benito Juárez Ciudad de México, México + 52 81 8625 4300 rperezpliego@oma.aero |
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| | |
Title of each class: | Trading Symbol(s) | Name of each exchange on which registered |
American Depositary Shares (ADSs) each representing 8 Series B shares | OMAB | The NASDAQ Stock Market LLC |
Series B shares | OMAB | The NASDAQ Stock Market LLC* |
* | Not for trading, but only in connection with the registration of ADSs, pursuant to the requirements of the Securities and Exchange Commission. |
*Not for trading, but only in connection with the registration of ADSs, pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
|
None |
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
|
N/A |
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
| | |
Title of each class: | | Number of Shares |
Series B shares | |
|
Series BB shares | | 49,766,000 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒ ⌧Yes ☐◻ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934.
☐ ◻Yes ☒⌧ No
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
☒ ⌧Yes ☐◻ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☐ ◻Yes ☒⌧ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer | Non-accelerated filer | Emerging growth company |
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | IFRS | Other |
Indicate by check mark which financial statement item the registrant has elected to follow:
☐◻ Item 17 ☒⌧ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
☐ ◻Yes ☒⌧ No
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (§ 15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒ ⌧Yes ☐◻ No
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MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | | 165 | |
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PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT AND NON-AUDIT FEES | | 169 | |
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PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | | 169 | |
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PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Our consolidated financial statements included in this annual report are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB. We publish our consolidated financial statements in thousands of Mexican pesos.
References in this annual report on Form 20‑F to “dollars,” “U.S. dollars” or “U.S.$” are to the lawful currency of the United States. References in this annual report on Form 20‑F to “pesos” or “Ps.” are to the lawful currency of Mexico. This Form 20‑F contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps.18.8727 to U.S.$1.00, the exchange rate as reported by the Mexican Central Bank (Banco de México) on December 31, 2019.
This annual report on Form 20‑F contains references to “workload units,” which are units measuring an airport’s passenger traffic volume and cargo volume. A workload unit currently is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.
The financial information included in this report for the fiscal year ended December 31, 2019 has not been approved by the Company's shareholders at a meeting of such shareholders. The annual meeting for the Company's shareholders is scheduled to take place on June 19, 2020.
The discussion in this annual report of aeronautical and non‑aeronautical revenues in relation to our total revenues is not in accordance with IFRS because it excludes our construction revenues from such amounts. Therefore, in reviewing this annual report, you should be aware that in several sections of this annual report we take into account only revenues that resulted in actual cash inflows for the year (which we categorize as aeronautical and non‑aeronautical revenues) for ratios or comparative calculations. Both of these categories of revenues are dependent, either directly or indirectly, on passenger traffic, while revenues from construction services under IFRS Interpretations Committee (“IFRIC”) 12, “Service Concession Arrangements,” are not dependent upon passenger traffic, but from the level of capital expenditures carried out at each airport. Information reported using only revenues that generated cash inflows may be more useful for readers of this annual report because those revenues are driven by the key elements of our business: passenger traffic and our maximum tariffs. The use of aeronautical and non‑aeronautical revenues is more common in our industry, as they represent the revenues generated from our core operations, which are services provided to passengers, airlines and other third parties based on passenger traffic at our airports. Additionally, management regularly reviews our aeronautical and non‑aeronautical revenues as they provide representative information regarding our passenger traffic and cash flows, which allows us to compare such revenues over comparative periods as well as make projections about our expected future cash flows. Finally, management reviews non‑aeronautical revenues per terminal passenger excluding hotel and industrial park services because hotel and industrial park services are not necessarily driven by passenger traffic and therefore may not provide representative information with respect to passenger traffic. This metric is not considered to be an IFRS metric, given its exclusion of certain revenues. We indicate each instance in which we use only aeronautical and non‑aeronautical revenues and non‑aeronautical revenues excluding hotel services by indicating the category of revenues used.
1
The following tables present a reconciliation of our aeronautical and non-aeronautical revenues to our total revenues per our consolidated statement of income and other comprehensive income:
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| For the Year Ended December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
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| Total |
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| Aeronautical and |
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| Total |
| Non-Aeronautical |
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| Non- |
| Aeronautical and |
| Revenues as a |
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| Aeronautical |
| Aeronautical |
| Non-Aeronautical |
| Percentage of |
| Construction |
| Total | |||||||||||||||||||||||||||||||||||||||
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| Revenues |
| Revenues |
| Revenues |
| Total Revenues |
| Revenues |
| Revenues | |||||||||||||||||||||||||||||||||||||||
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| (in thousands of pesos) | |||||||||||||||||||||||||||||||||||||||||||||||||
Metropolitan |
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Monterrey |
| Ps. | 2,641,052 |
| Ps. | 726,685 |
| Ps. | 3,367,737 |
| 91.2 | % | Ps. | 323,035 |
| Ps. | 3,690,772 | ||||||||||||||||||||||||||||||||||
Tourist |
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Acapulco |
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| 227,954 |
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| 40,241 |
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| 268,195 |
| 81.0 | % |
| 63,102 |
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| 331,297 | ||||||||||||||||||||||||||||||||||
Mazatlán |
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| 321,313 |
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| 52,857 |
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| 374,170 |
| 91.5 | % |
| 34,573 |
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| 408,743 | ||||||||||||||||||||||||||||||||||
Zihuatanejo |
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| 191,512 |
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| 25,596 |
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| 217,108 |
| 90.5 | % |
| 22,876 |
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| 239,984 | ||||||||||||||||||||||||||||||||||
Regional |
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Chihuahua |
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| 411,393 |
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| 67,021 |
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| 478,414 |
| 79.3 | % |
| 124,701 |
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| 603,115 | ||||||||||||||||||||||||||||||||||
Culiacán |
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| 617,979 |
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| 66,286 |
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| 684,265 |
| 90.8 | % |
| 68,960 |
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| 753,225 | ||||||||||||||||||||||||||||||||||
Durango |
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| 150,130 |
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| 13,433 |
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| 163,563 |
| 81.7 | % |
| 36,677 |
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| 200,240 | ||||||||||||||||||||||||||||||||||
San Luis Potosí |
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| 174,340 |
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| 35,631 |
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| 209,971 |
| 65.5 | % |
| 110,743 |
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| 320,714 | ||||||||||||||||||||||||||||||||||
Tampico |
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| 197,160 |
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| 28,057 |
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| 225,217 |
| 78.5 | % |
| 61,823 |
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| 287,040 | ||||||||||||||||||||||||||||||||||
Torreón |
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| 201,446 |
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| 23,683 |
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| 225,129 |
| 92.5 | % |
| 18,343 |
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| 243,472 | ||||||||||||||||||||||||||||||||||
Zacatecas |
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| 141,500 |
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| 13,945 |
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| 155,445 |
| 95.8 | % |
| 6,842 |
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| 162,287 | ||||||||||||||||||||||||||||||||||
Border |
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Ciudad Juárez |
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| 380,271 |
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| 55,990 |
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| 436,261 |
| 96.1 | % |
| 17,650 |
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| 453,911 | ||||||||||||||||||||||||||||||||||
Reynosa |
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| 113,515 |
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| 18,240 |
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| 131,755 |
| 54.0 | % |
| 112,031 |
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| 243,786 | ||||||||||||||||||||||||||||||||||
Terminal 2 NH Collection Hotel |
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| — |
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| 255,393 |
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| 255,393 |
| 100.0 | % |
| — |
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| 255,393 | ||||||||||||||||||||||||||||||||||
Hilton Garden Inn Hotel |
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| — |
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| 103,474 |
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| 103,474 |
| 100.0 | % |
| — |
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| 103,474 | ||||||||||||||||||||||||||||||||||
OMA Vynmsa Aero Industrial Park |
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| — |
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| 41,981 |
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| 41,981 |
| 100.0 | % |
| — |
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| 41,981 | ||||||||||||||||||||||||||||||||||
Other(1) |
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| — |
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| 5,651,607 |
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| 5,651,607 |
| 100.0 | % |
| — |
|
| 5,651,607 | ||||||||||||||||||||||||||||||||||
Total |
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| 5,769,565 |
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| 7,220,120 |
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| 12,989,685 |
| 92.8 | % |
| 1,001,356 |
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| 13,991,041 | ||||||||||||||||||||||||||||||||||
Eliminations(2) |
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| (16,903) |
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| (5,400,515) |
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| (5,417,418) |
| N/A | % |
| (46,522) |
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| (5,463,940) | ||||||||||||||||||||||||||||||||||
Total Revenues |
| Ps. | 5,752,662 |
| Ps. | 1,819,605 |
| Ps. | 7,572,267 |
| 88.8 | % | Ps. | 954,834 |
| Ps. | 8,527,101 |
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2
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| For the Year Ended December 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||
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| Total |
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| Aeronautical and |
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| Total |
| Non-Aeronautical |
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| Non- |
| Aeronautical and |
| Revenues as a |
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| Aeronautical |
| Aeronautical |
| Non-Aeronautical |
| Percentage of |
| Construction |
| Total | ||||||||||||||||||||||||||||||||||
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| Revenues |
| Revenues |
| Revenues |
| Total Revenues |
| Revenues |
| Revenues | ||||||||||||||||||||||||||||||||||
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| (in thousands of pesos) | ||||||||||||||||||||||||||||||||||||||||||||
Metropolitan |
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Monterrey |
| Ps. | 2,447,993 |
| Ps. | 649,393 |
| Ps. | 3,097,386 |
| 93.0 | % | Ps. | 232,698 |
| Ps. | 3,330,084 | |||||||||||||||||||||||||||||
Tourist |
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Acapulco |
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| 182,663 |
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| 34,279 |
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| 216,942 |
| 43.7 | % |
| 279,099 |
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| 496,041 | |||||||||||||||||||||||||||||
Mazatlán |
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| 276,126 |
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| 46,754 |
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| 322,880 |
| 91.2 | % |
| 31,308 |
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| 354,188 | |||||||||||||||||||||||||||||
Zihuatanejo |
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| 167,578 |
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| 22,934 |
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| 190,512 |
| 93.4 | % |
| 13,534 |
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| 204,046 | |||||||||||||||||||||||||||||
Regional |
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Chihuahua |
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| 364,755 |
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| 56,128 |
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| 420,883 |
| 74.8 | % |
| 141,546 |
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| 562,429 | |||||||||||||||||||||||||||||
Culiacán |
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| 539,540 |
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| 57,313 |
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| 596,853 |
| 94.6 | % |
| 33,888 |
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| 630,741 | |||||||||||||||||||||||||||||
Durango |
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| 112,310 |
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| 10,822 |
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| 123,132 |
| 89.9 | % |
| 13,788 |
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| 136,920 | |||||||||||||||||||||||||||||
San Luis Potosí |
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| 167,030 |
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| 30,275 |
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| 197,305 |
| 46.0 | % |
| 231,726 |
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| 429,031 | |||||||||||||||||||||||||||||
Tampico |
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| 190,502 |
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| 26,891 |
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| 217,393 |
| 89.3 | % |
| 26,169 |
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| 243,562 | |||||||||||||||||||||||||||||
Torreón |
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| 184,396 |
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| 22,655 |
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| 207,051 |
| 91.2 | % |
| 19,990 |
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| 227,041 | |||||||||||||||||||||||||||||
Zacatecas |
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| 105,626 |
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| 11,935 |
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| 117,561 |
| 92.4 | % |
| 9,655 |
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| 127,216 | |||||||||||||||||||||||||||||
Border |
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Ciudad Juárez |
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| 310,892 |
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| 45,287 |
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| 356,179 |
| 97.5 | % |
| 9,096 |
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| 365,275 | |||||||||||||||||||||||||||||
Reynosa |
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| 106,867 |
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| 14,810 |
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| 121,677 |
| 45.7 | % |
| 144,830 |
|
| 266,507 | |||||||||||||||||||||||||||||
Terminal 2 NH Collection Hotel |
|
| — |
|
| 246,065 |
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| 246,065 |
| 100.0 | % |
| — |
|
| 246,065 | |||||||||||||||||||||||||||||
Hilton Garden Inn Hotel |
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| — |
|
| 100,051 |
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| 100,051 |
| 100.0 | % |
| — |
|
| 100,051 | |||||||||||||||||||||||||||||
OMA Vynmsa Aero Industrial Park |
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| — |
|
| 28,190 |
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| 28,190 |
| 100.0 | % |
| — |
|
| 28,190 | |||||||||||||||||||||||||||||
Other(1) |
|
| — |
|
| 4,433,390 |
|
| 4,433,390 |
| 100.0 | % |
| — |
|
| 4,433,390 | |||||||||||||||||||||||||||||
Total |
|
| 5,156,278 |
|
| 5,837,172 |
|
| 10,993,450 |
| 90.3 | % |
| 1,187,327 |
|
| 12,180,777 | |||||||||||||||||||||||||||||
Eliminations(2) |
|
| (16,226) |
|
| (4,211,675) |
|
| (4,227,901) |
| N/A |
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| (45,822) |
|
| (4,273,723) | |||||||||||||||||||||||||||||
Total Revenues |
| Ps. | 5,140,052 |
| Ps. | 1,625,497 |
| Ps. | 6,765,549 |
| 85.6 | % | Ps. | 1,141,505 |
| Ps. | 7,907,054 |
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3
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| For the Year Ended December 31, 2017 | |||||||||||||||
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| Total |
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| Aeronautical and |
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| Total |
| Non-Aeronautical |
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| Non- |
| Aeronautical and |
| Revenues as a |
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| Aeronautical |
| Aeronautical |
| Non-Aeronautical |
| Percentage of |
| Construction |
| Total | |||||
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| Revenues |
| Revenues |
| Revenues |
| Total Revenues |
| Revenues |
| Revenues | |||||
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| (in thousands of pesos) | |||||||||||||||
Metropolitan |
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Monterrey |
| Ps. | 2,046,097 |
| Ps. | 547,586 |
| Ps. | 2,593,683 |
| 87.6 | % | Ps. | 367,214 |
| Ps. | 2,960,897 |
Tourist |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acapulco |
|
| 158,448 |
|
| 34,089 |
|
| 192,537 |
| 34.1 | % |
| 372,253 |
|
| 564,790 |
Mazatlán |
|
| 249,479 |
|
| 47,819 |
|
| 297,298 |
| 90.8 | % |
| 30,205 |
|
| 327,503 |
Zihuatanejo |
|
| 167,550 |
|
| 27,334 |
|
| 194,884 |
| 87.4 | % |
| 28,039 |
|
| 222,923 |
Regional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chihuahua |
|
| 308,746 |
|
| 52,742 |
|
| 361,488 |
| 74.7 | % |
| 122,412 |
|
| 483,900 |
Culiacán |
|
| 409,399 |
|
| 53,296 |
|
| 462,695 |
| 91.4 | % |
| 43,362 |
|
| 506,057 |
Durango |
|
| 100,884 |
|
| 11,061 |
|
| 111,945 |
| 84.9 | % |
| 19,974 |
|
| 131,919 |
San Luis Potosí |
|
| 149,823 |
|
| 24,603 |
|
| 174,426 |
| 61.6 | % |
| 108,756 |
|
| 283,182 |
Tampico |
|
| 171,550 |
|
| 25,859 |
|
| 197,409 |
| 80.9 | % |
| 46,740 |
|
| 244,149 |
Torreón |
|
| 156,158 |
|
| 22,478 |
|
| 178,636 |
| 89.9 | % |
| 20,018 |
|
| 198,654 |
Zacatecas |
|
| 95,153 |
|
| 12,172 |
|
| 107,325 |
| 84.8 | % |
| 19,175 |
|
| 126,500 |
Border |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ciudad Juárez |
|
| 244,891 |
|
| 40,676 |
|
| 285,567 |
| 89.9 | % |
| 31,917 |
|
| 317,484 |
Reynosa |
|
| 104,311 |
|
| 15,094 |
|
| 119,405 |
| 48.4 | % |
| 127,353 |
|
| 246,758 |
Terminal 2 NH Collection Hotel |
|
| — |
|
| 250,777 |
|
| 250,777 |
| 100.0 | % |
| — |
|
| 250,777 |
Hilton Garden Inn Hotel |
|
| — |
|
| 90,875 |
|
| 90,875 |
| 100.0 | % |
| — |
|
| 90,875 |
OMA Vynmsa Aero Industrial Park |
|
| — |
|
| 12,914 |
|
| 12,914 |
| 100.0 | % |
| — |
|
| 12,914 |
Other(1) |
|
| — |
|
| 4,034,440 |
|
| 4,034,440 |
| 100.0 | % |
| — |
|
| 4,034,440 |
Total |
|
| 4,362,489 |
|
| 5,303,815 |
|
| 9,666,304 |
| 87.8 | % |
| 1,337,418 |
|
| 11,003,722 |
Eliminations(2) |
|
| (15,458) |
|
| (3,847,477) |
|
| (3,862,935) |
| N/A |
|
| (10,960) |
|
| (3,873,895) |
Total Revenues |
| Ps. | 4,347,031 |
| Ps. | 1,456,338 |
| Ps. | 5,803,369 |
| 81.4 | % | Ps. | 1,326,458 |
| Ps. | 7,129,827 |
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended December 31, 2016 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aeronautical and |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| Non-Aeronautical |
|
|
|
|
|
| |
|
|
|
|
| Non- |
| Aeronautical and |
| Revenues as a |
|
|
|
|
|
| ||
|
| Aeronautical |
| Aeronautical |
| Non-Aeronautical |
| Percentage of |
| Construction |
| Total | |||||
|
| Revenues |
| Revenues |
| Revenues |
| Total Revenues |
| Revenues |
| Revenues | |||||
|
| (in thousands of pesos) | |||||||||||||||
Metropolitan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monterrey |
| Ps. | 1,799,823 |
| Ps. | 560,016 |
| Ps. | 2,359,839 |
| 96.0 | % | Ps. | 97,631 |
| Ps. | 2,457,470 |
Tourist |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acapulco |
|
| 149,214 |
|
| 30,446 |
|
| 179,660 |
| 70.1 | % |
| 76,772 |
|
| 256,432 |
Mazatlán |
|
| 221,522 |
|
| 46,879 |
|
| 268,401 |
| 93.2 | % |
| 19,527 |
|
| 287,928 |
Zihuatanejo |
|
| 141,091 |
|
| 26,280 |
|
| 167,371 |
| 86.7 | % |
| 25,699 |
|
| 193,070 |
Regional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chihuahua |
|
| 272,921 |
|
| 48,374 |
|
| 321,295 |
| 95.2 | % |
| 16,061 |
|
| 337,356 |
Culiacán |
|
| 351,096 |
|
| 48,280 |
|
| 399,376 |
| 97.7 | % |
| 9,608 |
|
| 408,984 |
Durango |
|
| 98,550 |
|
| 11,026 |
|
| 109,576 |
| 96.2 | % |
| 4,381 |
|
| 113,957 |
San Luis Potosí |
|
| 130,337 |
|
| 23,666 |
|
| 154,003 |
| 86.3 | % |
| 24,456 |
|
| 178,459 |
Tampico |
|
| 162,389 |
|
| 22,735 |
|
| 185,124 |
| 85.2 | % |
| 32,053 |
|
| 217,177 |
Torreón |
|
| 151,251 |
|
| 20,087 |
|
| 171,338 |
| 96.8 | % |
| 5,722 |
|
| 177,060 |
Zacatecas |
|
| 87,616 |
|
| 10,120 |
|
| 97,736 |
| 92.7 | % |
| 7,677 |
|
| 105,413 |
Border |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ciudad Juárez |
|
| 208,042 |
|
| 34,351 |
|
| 242,393 |
| 96.1 | % |
| 9,905 |
|
| 252,298 |
Reynosa |
|
| 113,506 |
|
| 14,150 |
|
| 127,656 |
| 84.3 | % |
| 23,847 |
|
| 151,503 |
Terminal 2 NH Collection Hotel |
|
| — |
|
| 227,884 |
|
| 227,884 |
| 100.0 | % |
| — |
|
| 227,884 |
Hilton Garden Inn Hotel |
|
| — |
|
| 83,625 |
|
| 83,625 |
| 100.0 | % |
| — |
|
| 83,625 |
OMA Vynmsa Aero Industrial Park |
|
| — |
|
| 4,952 |
|
| 4,952 |
| 100.0 | % |
| — |
|
| 4,952 |
Other(1) |
|
| — |
|
| 4,847,425 |
|
| 4,847,425 |
| 100.0 | % |
| — |
|
| 4,847,425 |
Total |
|
| 3,887,358 |
|
| 6,060,296 |
|
| 9,947,654 |
| 96.6 | % |
| 353,339 |
|
| 10,300,993 |
Eliminations(2) |
|
| (14,623) |
|
| (4,727,534) |
|
| (4,742,157) |
| N/A |
|
| (8,567) |
|
| (4,750,724) |
Total Revenues |
| Ps. | 3,872,735 |
| Ps. | 1,332,762 |
| Ps. | 5,205,497 |
| 93.8 | % | Ps. | 344,772 |
| Ps. | 5,550,269 |
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended December 31, 2015 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Aeronautical and |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
| Non-Aeronautical |
|
|
|
|
|
| |
|
|
|
|
| Non- |
| Aeronautical and |
| Revenues as a |
|
|
|
|
|
| ||
|
| Aeronautical |
| Aeronautical |
| Non-Aeronautical |
| Percentage of |
| Construction |
| Total | |||||
|
| Revenues |
| Revenues |
| Revenues |
| Total Revenues |
| Revenues |
| Revenues | |||||
|
| (in thousands of pesos) | |||||||||||||||
Metropolitan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monterrey |
| Ps. | 1,443,311 |
| Ps. | 484,111 |
| Ps. | 1,927,422 |
| 96.4 | % | Ps. | 70,999 |
| Ps. | 1,998,421 |
Tourist |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acapulco |
|
| 138,309 |
|
| 27,864 |
|
| 166,173 |
| 67.0 | % |
| 81,869 |
|
| 248,042 |
Mazatlán |
|
| 168,703 |
|
| 40,820 |
|
| 209,523 |
| 83.5 | % |
| 41,487 |
|
| 251,010 |
Zihuatanejo |
|
| 118,736 |
|
| 23,751 |
|
| 142,487 |
| 71.1 | % |
| 57,943 |
|
| 200,430 |
Regional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chihuahua |
|
| 196,033 |
|
| 40,204 |
|
| 236,237 |
| 98.4 | % |
| 3,769 |
|
| 240,006 |
Culiacán |
|
| 255,921 |
|
| 39,981 |
|
| 295,902 |
| 89.7 | % |
| 34,058 |
|
| 329,960 |
Durango |
|
| 63,186 |
|
| 9,080 |
|
| 72,266 |
| 96.0 | % |
| 2,992 |
|
| 75,258 |
San Luis Potosí |
|
| 99,341 |
|
| 20,482 |
|
| 119,823 |
| 96.3 | % |
| 4,668 |
|
| 124,491 |
Tampico |
|
| 144,178 |
|
| 22,810 |
|
| 166,988 |
| 94.6 | % |
| 9,589 |
|
| 176,577 |
Torreón |
|
| 110,480 |
|
| 18,191 |
|
| 128,671 |
| 89.7 | % |
| 14,796 |
|
| 143,467 |
Zacatecas |
|
| 66,957 |
|
| 9,304 |
|
| 76,261 |
| 84.9 | % |
| 10,294 |
|
| 86,555 |
Border |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ciudad Juárez |
|
| 146,201 |
|
| 29,225 |
|
| 175,426 |
| 94.9 | % |
| 9,512 |
|
| 184,938 |
Reynosa |
|
| 95,742 |
|
| 12,557 |
|
| 108,299 |
| 94.7 | % |
| 6,012 |
|
| 114,311 |
Terminal 2 NH Collection Hotel |
|
| — |
|
| 212,488 |
|
| 212,488 |
| 100.0 | % |
| — |
|
| 212,488 |
Hilton Garden Inn Hotel |
|
| — |
|
| 16,882 |
|
| 16,882 |
| 100.0 | % |
| — |
|
| 16,882 |
Other(1) |
|
| — |
|
| 3,639,434 |
|
| 3,639,434 |
| 100.0 | % |
| — |
|
| 3,639,434 |
Total |
|
| 3,047,098 |
|
| 4,647,184 |
|
| 7,694,282 |
| 95.7 | % |
| 347,988 |
|
| 8,042,270 |
Eliminations(2) |
|
| (13,968) |
|
| (3,535,643) |
|
| (3,549,611) |
| N/A |
|
| — |
|
| (3,549,611) |
Total Revenues |
| Ps. | 3,033,130 |
| Ps. | 1,111,541 |
| Ps. | 4,144,671 |
| 92.3 | % | Ps. | 347,988 |
| Ps. | 4,492,659 |
|
|
|
|
6
The following tables present our selected consolidated financial information for or as of each of the periods or dates indicated, and have been derived in part from our audited consolidated financial statements. This information should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements, including the notes to our consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended December 31, | ||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||
|
| (in thousands of pesos, except per share and operating data) |
| (in thousands of dollars)(1) | ||||||||
Statements of Income and Other Comprehensive Income data: |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
Aeronautical services(2) |
| 3,033,130 |
| 3,872,735 |
| 4,347,031 |
| 5,140,052 |
| 5,752,662 |
| 304,814 |
Non-aeronautical services(3) |
| 1,111,541 |
| 1,332,762 |
| 1,456,338 |
| 1,625,497 |
| 1,819,605 |
| 96,415 |
Construction services |
| 347,988 |
| 344,772 |
| 1,326,458 |
| 1,141,505 |
| 954,834 |
| 50,593 |
Total revenues |
| 4,492,659 |
| 5,550,269 |
| 7,129,827 |
| 7,907,054 |
| 8,527,101 |
| 451,822 |
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Costs of services, excluding depreciation and amortization |
| 836,133 |
| 900,141 |
| 981,065 |
| 977,896 |
| 954,207 |
| 50,560 |
Major maintenance provision |
| 174,293 |
| 262,871 |
| 291,038 |
| 248,636 |
| 292,324 |
| 15,489 |
Cost of construction |
| 347,988 |
| 344,772 |
| 1,326,458 |
| 1,141,505 |
| 954,834 |
| 50,593 |
Administrative expenses |
| 558,222 |
| 642,345 |
| 587,917 |
| 563,151 |
| 542,664 |
| 28,754 |
Right to use airport facilities(4) |
| 209,771 |
| 244,215 |
| 271,331 |
| 319,180 |
| 363,561 |
| 19,264 |
Technical assistance fees(5) |
| 97,818 |
| 117,987 |
| 135,074 |
| 172,610 |
| 150,108 |
| 7,954 |
Depreciation and amortization(6) |
| 238,809 |
| 276,634 |
| 299,205 |
| 351,745 |
| 415,252 |
| 22,003 |
Other income, net |
| (6,930) |
| (22,250) |
| (1,380) |
| (205) |
| (1,155) |
| (61) |
Total operating costs and expenses |
| 2,456,104 |
| 2,766,715 |
| 3,890,708 |
| 3,774,518 |
| 3,671,795 |
| 194,556 |
Operating income |
| 2,036,555 |
| 2,783,554 |
| 3,239,119 |
| 4,132,536 |
| 4,855,306 |
| 257,266 |
Interest expense |
| (334,764) |
| (330,694) |
| (352,822) |
| (325,557) |
| (376,008) |
| (19,923) |
Interest income |
| 80,740 |
| 199,600 |
| 127,290 |
| 194,091 |
| 171,236 |
| 9,073 |
Exchange (loss) gain, net |
| (33,784) |
| (29,177) |
| (63,072) |
| (15,488) |
| (50,878) |
| (2,696) |
Income before income taxes |
| 1,748,747 |
| 2,623,283 |
| 2,950,515 |
| 3,985,582 |
| 4,599,656 |
| 243,720 |
Income tax (benefit) expense |
| 512,110 |
| 746,782 |
| 813,073 |
| 1,121,403 |
| 1,372,222 |
| 72,709 |
Consolidated net income for the year |
| 1,236,637 |
| 1,876,501 |
| 2,137,442 |
| 2,864,179 |
| 3,227,434 |
| 171,011 |
Items that will not be subsequently reclassified to income: |
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses on labor obligations |
| (1,286) |
| 3,533 |
| (4,199) |
| 24,173 |
| (12,834) |
| (680) |
Income tax relating to items that will not be subsequently reclassified to profit or loss |
| 386 |
| (1,060) |
| 1,260 |
| (4) |
| 3,850 |
| 204 |
Total comprehensive income for the year |
| 1,235,737 |
| 1,878,974 |
| 2,134,503 |
| 2,888,348 |
| 3,218,450 |
| 170,535 |
Consolidated net income attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Controlling interest |
| 1,233,772 |
| 1,870,187 |
| 2,127,576 |
| 2,851,822 |
| 3,219,798 |
| 170,606 |
Non-controlling interest |
| 2,865 |
| 6,314 |
| 9,866 |
| 12,357 |
| 7,636 |
| 405 |
Consolidated comprehensive income attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Controlling interest |
| 1,232,872 |
| 1,872,660 |
| 2,124,637 |
| 2,875,991 |
| 3,210,814 |
| 170,130 |
Non-controlling interest |
| 2,865 |
| 6,314 |
| 9,866 |
| 12,357 |
| 7,636 |
| 405 |
Basic and diluted earnings per share of controlling interest(7) |
| 3.1328 |
| 4.7614 |
| 5.4046 |
| 7.2483 |
| 8.1984 |
| 0.4344 |
Basic and diluted earnings per ADS(7) |
| 25.0623 |
| 38.0912 |
| 43.2368 |
| 57.9864 |
| 65.5872 |
| 3.4752 |
Dividend or reimbursement of capital per share(8) |
| 3.0000 |
| 3.5000 |
| 4.0000 |
| 4.0633 |
| 4.0633 |
| 0.2153 |
Other operating data: |
|
|
|
|
|
|
|
|
|
|
|
|
Total terminal passengers (thousands of passengers)(9) |
| 16,922 |
| 18,764 |
| 19,662 |
| 21,566 |
| 23,168 |
| N/A |
Total air traffic movements (thousands of movements) |
| 345 |
| 358 |
| 332 |
| 345 |
| 340 |
| N/A |
Aeronautical and non-aeronautical revenues per terminal passenger(10) |
| 245 |
| 277 |
| 295 |
| 314 |
| 327 |
| 17 |
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As of December 31, | ||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||
|
| (in thousands of pesos) |
| (in thousands of dollars)(1) | ||||||||
Statement of Financial Position data: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| 2,605,196 |
| 3,005,792 |
| 2,333,007 |
| 2,958,902 |
| 3,429,873 |
| 181,737 |
Other investments held to maturity |
| 60,445 |
| — |
| 49,338 |
| 19,657 |
| — |
| — |
Total current assets |
| 3,216,774 |
| 4,098,459 |
| 3,498,622 |
| 3,959,567 |
| 4,810,904 |
| 254,913 |
Property, leasehold improvements and equipment, net |
| 2,370,975 |
| 2,444,205 |
| 2,601,397 |
| 2,670,262 |
| 2,647,101 |
| 140,261 |
Investment in airport concessions |
| 6,348,605 |
| 6,513,514 |
| 7,648,417 |
| 8,566,656 |
| 9,267,111 |
| 491,033 |
Total assets |
| 12,510,336 |
| 13,545,323 |
| 14,200,800 |
| 15,590,484 |
| 17,276,961 |
| 915,447 |
Current liabilities |
| 968,782 |
| 1,108,331 |
| 1,104,273 |
| 1,224,716 |
| 1,235,293 |
| 65,454 |
Total liabilities |
| 6,559,809 |
| 6,858,343 |
| 6,971,485 |
| 7,078,557 |
| 7,389,466 |
| 391,543 |
Capital stock |
| 302,398 |
| 303,644 |
| 303,394 |
| 303,394 |
| 301,739 |
| 15,988 |
Total shareholders’ equity |
| 5,950,527 |
| 6,686,980 |
| 7,229,315 |
| 8,511,927 |
| 9,887,495 |
| 523,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended December 31, | ||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||
|
| (in thousands of pesos) |
| (in thousands of dollars)(1) | ||||||||
Statement of Cash Flows data: |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
| 2,069,331 |
| 2,386,146 |
| 2,921,333 |
| 3,709,346 |
| 3,716,524 |
| 196,926 |
Net cash flows used in investing activities |
| (493,235) |
| (471,357) |
| (1,542,776) |
| (1,088,373) |
| (952,227) |
| (50,455) |
Net cash flows (used in) from financing activities |
| (1,779,049) |
| (1,514,193) |
| (1,979,135) |
| (1,940,463) |
| (2,246,461) |
| (119,032) |
Increase (decrease) in cash and cash equivalents |
| (202,953) |
| 400,596 |
| (600,578) |
| 680,510 |
| 517,836 |
| 27,438 |
Effects of exchange rate changes on the foreign currency cash balance |
| — |
| — |
| (72,207) |
| (54,615) |
| (46,865) |
| (2,483) |
(1) Translated into dollars at the rate of Ps.18.8727 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2019. Per share dollar amounts are expressed in dollars (not thousands of dollars). Operating data is expressed in units indicated.
(2) Revenues from aeronautical services principally consist of a fee for each departing passenger, aircraft landing fees based on the aircraft’s weight and arrival time, an aircraft parking fee, passenger boarding bridge and airport bus charges, a security charge for each departing passenger and other sources of revenues subject to regulation under our maximum rates.
(3) Revenues from non‑aeronautical services represent sources of revenues not subject to regulation under our maximum rates and consist of: (i) revenues from commercial activities, such as, car parking charges, advertising, leasing of commercial space to tenants, food and beverage services, car rentals and retail; (ii) revenues from diversification activities, such as hotel services, revenues from OMA Carga and real estate services; and (iii) revenues from complementary activities, such as revenues from our checked baggage‑screening services, among other sources of revenues. Pursuant to our concessions and to the Mexican Airport Law (Ley de Aeropuertos) and the regulations thereunder, parking services are currently excluded from aeronautical services under our maximum rates, although the Mexican Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes) could decide to regulate such rates, and such rates may be regulated by other authorities.
(4) Each of our subsidiary concession holders is required to pay a concession tax to the Mexican government under the Mexican Federal Duties Law (Ley Federal de Derechos) for the use of public domain assets pursuant to the terms of its concession. The concession tax is currently equal to 5% of each concession holder’s gross annual revenues.
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(5) We pay Servicios de Tecnología Aeroportuaria, S.A. de C.V. (“SETA”) a technical assistance fee under the technical assistance agreement entered into with SETA providing for management and consulting services (the “Technical Assistance Agreement”), entered into in connection with SETA’s purchase of its Series BB shares. This fee is described in “Item 7. Major Shareholders and Related‑Party Transactions—Related‑Party Transactions—Arrangements with SETA.”
(6) Reflects depreciation of fixed assets and amortization of airport concessions and rights to use airport facilities.
(7) Based on net income attributable to controlling interest for each year and 393,826,266 weighted average common shares in 2015, 392,784,322 weighted average common shares in 2016, 393,660,889 weighted average common shares in 2017, 393,446,466 weighted average common shares in 2018 and 392,736,827 weighted average common shares in 2019. Earnings per ADS are based on the ratio of eight Series B shares per ADS.
(8) Declared dividends per share for the period from 2015 to 2017 based on 400,000,000 shares, and in 2018 and 2019 based on 393,770,973. Includes reimbursements of capital per share.
(9) Arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft). Excludes transit passengers (passengers who arrive at our airports but generally depart without changing aircraft).
(10) Aeronautical plus non‑aeronautical revenues divided by terminal passengers for the period. Expressed in pesos (not thousands of pesos).
Risks Related to Our Operations
The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.
The novel strain of coronavirus (“COVID-19”), first identified in Wuhan, China in December 2019, has now spread to nearly all regions around the world. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The outbreak, and measures taken to contain or mitigate it, have had dramatic adverse consequences for the global economy, including on demand, operations, supply chains and financial markets. COVID-19 has led to travel restrictions imposed by governments, flight cancellations, and a marked decline in passenger demand for air travel, domestically and worldwide.
On March 19, 2020, the United States issued a travel advisory recommending that travelers avoid all international travel. The following day, on March 20, 2020, the United States closed its land border with Mexico, except to essential travel and trade and commerce. As of April 22, 2021, the land border remains closed. On January 26, 2021, the United States issued a decree, requesting negative COVID-19 test results for all inbound passengers traveling by air. Beginning on January 7, 2021, Canada established similar testing requirements for passengers traveling by air to the country. Subsequently, the Canadian government suspended flights between Canada, Mexico and the Caribbean until April 30, 2021. The full effect of the travel advisories and restrictions in other countries is not yet known and could impact our international passenger levels even after formal advisories and restrictions have been lifted.
On March 31, 2020, Mexico’s Ministry of Health issued a decree suspending all non-essential activities in the country through April 30, and on April 21, such suspension was extended through May 30, 2020. The Mexican government has implemented various measures to control the spread of COVID-19, including extraordinary actions, such as school closures and the suspension of non-essential activities, in the regions most affected. For purposesAs a consequence of these measures, airports are considered essential and our airports remain operational.
The reduced demand for travel, domestically and worldwide, will likely result in significant lost revenue. As a result of these restrictions and other conditions beyond our control, our results of operations could be volatile and subject to rapid and unexpected change. The full effect of the travel advisories and restrictions is not yet known and could impact our passenger levels even after formal advisories and restrictions have been lifted. Oursuspensions, total passenger traffic in our airports experienced a sharp decline. In April and May, 2020, our total terminal passenger traffic decreased 4.9% in the first quarter of 2020 compared to the first quarter of 2019,92.8% and 92.1% between April 1, 2020 and April 22, 2020 as93.5%, respectively, compared to the same periodperiods of 2019. On May 29, 2020, Mexico’s Ministry of Health issued a decree establishing an epidemiological risk traffic light system by region, applicable both to municipalities and states which became effective on June 1, 2020 (and which remains in 2019. The impact of COVID-19 on our operational and financial performance for 2020 will depend on future developments, including the duration and spread of the outbreak and the impact of COVID-19 on overall demand for air travel going forward, all of which are highly uncertain and cannot be predicted. We expect passenger traffic to increase as travel restrictions are lifted and stay-at-home ordinances are repealed, but,place as of the date of this report,report) that determines the level of health risk and the type of activities authorized to take place. As a result, different states of the country are experiencing different reactivation levels and, consequently, different types of economic activities are being allowed. As a result of this gradual reactivation of economic activity by region, passenger traffic started to show signs of recovery, with monthly decreases from 84.6% in June 2020 to 41.5% in December 2020, compared to the same periods of 2019. Throughout the pandemic, airports have been considered essential and our airports have remained operational. Given that OMA operates in 9 states of Mexico, the economic reactivation level and the gradual recovery of passenger flows in our airports could vary significantly from state to state, depending on the risk level established in each of the states in which we cannot quantifyoperate, as well as those in our main destinations. In response to this material deterioration in air traffic, we have taken a number of actions to mitigate our business, operations and financial condition, including, among others, (a) the material adverse effect COVID-19 will havetemporary reduction of certain operating areas in terminal buildings, which resulted in electricity savings and optimization of our cleaning and security crew, (b) deferral of cost in minor maintenances based on our resultsthe current levels of operations, (c) headcount reduction of approximately 100 positions
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implemented in the third quarter of 2020, and (d) deferral and discount agreements with commercial and aeronautical clients. Most of our cost structure is fixed, and the impact from these measures is not expected to be significant vis a vis the potential decline in revenues resulting from the disruption in passenger traffic across the Company’s operations.
Due to measures implemented by Mexico and other countries such as “shelter in place” or quarantine requirements, international and domestic travel restrictions or advisories, limitations on public gatherings, social distancing recommendations, remote work arrangements and closures of tourist destinations and attractions, as well as passenger perceptions of the safety, ease and predictability of air travel, our main airline customers and our commercial tenants have experienced an adverse economic environment, which has led to halts of operations, restructuring processes and the interruption of commercial relationships with the Company. For example, on June 30, 2020, Aeromexico and its affiliates, which accounted for 20.3% of our total passenger traffic in 2020, filed voluntary Chapter 11 petitions in the United States to implement a financial performancerestructuring, while continuing to operate. In addition, since December 9, 2020, Interjet, which accounted for fiscal year 2020.5.6% of our total passenger traffic in 2020, stopped operating at our airports. We cannot measure the extent of the impact in our future operations and financial results as a consequence of these processes.
Historically, a substantial majority of our revenues have been derived from aeronautical services, and our principal source of aeronautical services revenues is passenger charges (Tarifa de Uso de Aeropuerto, TUA). Passenger charges are payable for each passenger (other than diplomats, infants, transfer and transit passengers) departing from the airport terminals we operate, collected by the airlines and paid to us. In 2017, 2018, 2019 and 2019,2020, passenger charges represented 52.2%56.2%, 56.2%58.5% and 58.5%44.7%, respectively, of our total revenues and 64.2%65.7%, 65.7%65.9% and 65.9%58.4%, respectively, of the sum of our aeronautical and non aeronautical revenues.
The full extent of the ongoing impact of COVID-19 on the Company’s longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty. Even where formal advisories and restrictions have been lifted or reduced, the increased spread or resurgence of COVID-19 could result in the reintroduction of or increase in such formal advisories and restrictions. We expect that the COVID-19 pandemic will continue to severely impact the countries and regions where we operate in 2021. Our total passenger traffic decreased 37.8% in the first quarter of 2021 compared to the first quarter of 2020. The sum of our aeronautical and non-aeronautical revenues for the first quarter of 2021 were Ps. 1,189,679 thousand, as compared to Ps.1,715,650 thousand in the first quarter of 2020. We have established health and safety protocols aimed at enhancing the well-being of passengers and essential operating personnel across the airports we operate. Protective gear is required for staff working on the premises, and sanitization practices in accordance with the guidelines of local health authorities are in place. We have also implemented a remote working policy for staff where possible. The COVID-19 pandemic has had a material impact on the Company, and the continuation of reduced air travel demand could have a material adverse effect on the Company’s business, operating results, financial condition and liquidity.
Because our revenues are largely dependent on the level of passenger traffic in our airports, any pandemics or outbreaks of health epidemics, such as SARS, Influenza A (H1N1),
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Ebola, Zika, Chikungunya and COVID-19, or other such international events or threats thereof (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry related to new regulatory procedures in order to preserve the health of the passengers and the airport community, which could not be recovered through our maximum tariffs and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition. For more information, see “Our operations could be adversely affected due to changes in the collection of passenger charges.”
Large scale international events, including acts of terrorism, or wars, could have a negative impact on international air travel and our revenues.
Events such as the conflicts in the Middle East and terrorist attacks worldwide have negatively affected in the past the frequency and pattern of air travel worldwide.
2
The terrorist attacks on the United States on September 11, 2001 had a severe adverse impact on the air travel industry, particularly on U.S. carriers and carriers operating international service to and from the United States. Airline traffic in the United States fell precipitously after the attacks. Our terminal passenger volumes declined 5.8% in 2002 as compared to 2001. Among other consequences, airport operations would be disrupted or suspended during the time necessary to conduct rescue operations, investigate the incident and repair or rebuild damaged or destroyed facilities, and our future insurance premiums would likely increase. In addition, our insurance policies do not cover all losses and liabilities resulting from terrorism. Any future terrorist attacks, whether or not involving aircraft, will likely adversely affect our results of operations and financial condition.
Any general increase of hostilities relating to terrorist organizations, reprisals thereof, further conflict in the Middle East, or other such international events or threats thereof, even if not made on or targeted directly at the air travel industry, or the fear of or the precautions taken in anticipation of such attack such as elevated national threat warnings, travel restrictions, selective cancellation or redirection of flights and new security regulations, among others, (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry as a result of new security requirements and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition. The COVID-19 outbreak has and is materially reducing demand for and availability of, worldwide air travel and could therefore continue to have a material adverse effect on our business and results of operations. For more information, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Our revenues are highly dependent on levels of air traffic, which depend on factors beyond our control.
Passenger and cargo traffic volumes and air traffic movements depend on many factors beyond our control, including the COVID-19 pandemic, seasonality, severe or extreme weather, economic conditions in Mexico, the United States or globally, the political situation in Mexico and elsewhere in the world, the attractiveness of the destinations of our airports relative to that of other competing destinations, fluctuations in fuel prices (which could cause airlines to increase tariffs and have a negative impact on traffic as a result of increased fuel costs), changes in regulatory policies applicable to the aviation industry and an increase or decrease in Mexican airlines’ fleets, among others. For more information on the effect COVID-19 has had on our passenger traffic, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Our revenues are closely linked to both passenger and cargo traffic volumes and to the number of air traffic movements at our airports. These factors directly determine our revenues from aeronautical services and indirectly determine our revenues from non-aeronautical services. Any decreases in passenger and cargo traffic volumes and the number of air traffic movements to or from our airports as a result of these factors could adversely affect our business, results of operations, prospects and financial condition.
Our business could be adversely affected by global political developments, particularly with regard to U.S. policies toward Mexico.
Changes in economic, political and regulatory conditions in the United States or in U.S. laws and policies governing foreign trade and foreign relations could create uncertainty in the international markets and could have a negative impact on the Mexican economy and public finances. This correlation is due, in part, to the high level of economic activity between the two countries generally, including the trade facilitated by the North American Free Trade Agreement (“NAFTA”), as well as physical proximity.
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Following the U.S. elections in November 2016 and the change in the U.S. administration for the four-year period from 2017 to 2020, there is uncertainty regarding future U.S. policies with respect to matters of importance to Mexico and its economy, particularly trade and migration. On October 1, 2018, Mexico announced that it had reached an agreement with Canada and the United States to modernize their free trade relationship and replace NAFTA. The new agreement, which is known as the United States Mexico Canada Agreement (USMCA), was formally signed on November 30, 2018. The USMCA has been ratified by the Mexican Senate, United States Congress2018 and by the Parliament of Canada. On April 24, 2020, all required procedures had been completed by the three countries and therefore the agreement will enterentered into force on July 1, 2020. We cannot predict the impact of the USMCA on particular industries or government policies and the changes to international trade that may result.
In addition,Following the U.S. elections in November 2020 and the change in the U.S. administration for the four-year period from 2021 to 2024, there is adopting stricter immigrationuncertainty regarding future U.S. policies with respect to matters of importance to Mexico and tax reforms thatits economy, particularly trade and migration. Policies adopted could create tension between the Mexican
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and U.S. governments or reduce economic activity between Mexico and the United States, thus affecting the travel of passengers between those countries. For more information on travel restrictions related to COVID-19, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Furthermore, in September 2017, the U.S. administration announced its plan to phase out the Deferred Action for Childhood Arrivals program (“DACA”), which allows certain individuals who entered the U.S. as undocumented minors to defer immediate deportation and to be eligible for a work permit. Because the majority of individuals who benefit from this program are from Mexico, terminating the program may affect relations between Mexico and the U.S., as well as transit between the two countries. On January 20, 2021, President Joe Biden issued a Memorandum for the Attorney General, and the Secretary of Homeland Security, to take action to preserve and fortify DACA, consistent with applicable law. There is still uncertainty about whether and when DACA will be phased out,ratified, and we cannot assess the impact it may have on particular industries or government policies that may result. If new federal immigration legislation is enacted in the U.S., such laws may contain provisions that could make it more difficult for Mexican citizens to travel between Mexico and the United States. Such restrictions could have a material adverse effect on our passenger traffic results. Also, the U.S. passed the Tax Cuts and Jobs Act on December 22, 2017, which, among others, reduces the U.S. corporate income tax rate from 35% to 21%, and implemented new import taxes on certain goods, approved on January 22, 2018. We cannot predict the impact that these measures may have on trade between the U.S. and Mexico or whether foreign direct investment from the U.S. to Mexico will decrease.
The foregoing factors and further policy changes could have an impact on Mexico’s gross domestic product (“GDP”) growth, the exchange rate between the U.S. dollar and the Mexican peso, levels of foreign direct investment and portfolio investment in Mexico, interest rates, inflation, and the Mexican economy generally; which in turn, may impact the level of passenger traffic in our airports and adversely affect our financial condition or results of operations.
Our business could be adversely affected by a downturn in the global economy, particularly with regard to the U.S. economy.
The outbreak of COVID-19 has adversely affected the economies and financial markets of many countries, including the United States and Mexico. The extent to which COVID-19 impacts these economies will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the outbreak and the actions taken to contain or treat the outbreak, within the United States, Mexico and around the world. As a result, it is possible that the United States and/or Mexico will experience a significant economic downturn or even another recession due to the effects of the COVID-19 outbreak. The United States and Mexico technically entered into a recession in 2020 following the COVID-19 outbreak. The extent and effect of this recession is difficult to predict, including whether such recession and any recovery thereof will be similar to past periods of recession and recovery.
Moreover, international events, such as decreases in oil prices and the slower growth in the Chinese economy, have led to volatility in the international markets and adversely affected the Mexican economy. As a result, Mexico has been forced to cut public expenses, since oil output is one of the main sources of revenue in Mexico. In recent years, however, the U.S. economy has improved, with the GDP increasing at an annualized rate in real terms of 2.3% in 2017, 3.1% in 2018, and 2.3% in 2019 and decreased 3.5% in 2020, and our international passenger traffic increasing 2.8%4.4%, 4.4%7.9% and 7.9%decreased 56.9%, respectively. In its April 2020 World Economic Outlook, the International Monetary Fund estimated Mexico’s GDP will decrease by 6.6% in 2020. In the event of an economic downturn, developing countries, which have largely rebounded from the economic and financial crisis in 2009, would be impacted through trade and financial channels.
Our business is particularly dependent on the condition of the U.S. economy and is particularly influenced by trends in the United States relating to leisure travel, consumer spending and international tourism. For more information
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on U.S. travel restrictions related to COVID-19, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.” According to the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía), in 2019,2020, exports from Mexico to the United States represented approximately 80.5%81.2% of Mexican exports, and 36.8%39.1 % of foreign direct investment in Mexico originated in the United States. According to the U.S. Bureau of Economic Analysis, in 2019,2020, secondary income received from the United States, which includes government and private transfers, was approximately U.S.$15.817.6 billion.
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Since the demand for aeronautical services in Mexico is substantially dependent on the performance of the Mexican economy, which is in turn highly dependent on the performance of the U.S. economy, a further downturn in the U.S. economy or a disruption in commercial activities among the U.S. and Mexico could cause a material adverse effect on our results of operations, prospects and financial condition. More generally, further downturns in the global economy and/or in the Mexican economy would also adversely affect our business, results of operations, prospects and financial condition. See also “—Risks Related to Mexico—The Company is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico could adversely affect its business and results of operations.”
Variations in international fuel prices could directly or indirectly adversely affect our business and results of operations.
International fuel prices, which represent a significant cost for airlines, have experienced significant volatility in recent years. In the past, increased costs were among the factors leading to cancellations of routes, decreases in frequencies of flights and, in some cases, even contributed to filings for bankruptcy by some airlines. Any substantial variation in fuel prices could have an adverse effect on our results of operations and financial condition.
Our business is highly dependent on the operations of Mexico City International Airport.
In 2017, 2018, 2019 and 2019,2020, approximately 45.4%42.9%, 42.9%43.0% and 43.0%40.0%, respectively, of our domestic passengers flew to or from our airports via Mexico City International Airport (Aeropuerto Internacional de la Ciudad de México, S.A. de C.V.) As a result, our domestic traffic is highly dependent upon the operations of Mexico City International Airport.
On July 3, 2017, the Mexican Federal Antitrust Commission (Comisión Federal de Competencia Económica, or the “Antitrust Commission”) issued Corrective Measures for the Mexico City International Airport to address the inefficiencies observed at the airport during congested hours, limiting operations between the hours of 7:00 and 22:00. In response, on September 29, 2017, the Ministry of Communications and Transportation announced in the Federal Official Gazette the General Guidelines for the allocation of slots at congested airports (see “Risk Factors⸻The Company cannot predict how the regulations governing the business will be applied.”). The indirect effect of the new regulation in 2017 was a decrease in the number of flights and an increase in the number of flight cancellations to and from Mexico City International Airport and other regional destinations.
To alleviate congestion at the Mexico City International Airport, a new Mexico City international airport was being built and was expected to start operations in 2022. The newcurrent Mexican federal administration that took office on December 1, 2018 cancelled the construction of the new Mexico City international airport. There is still uncertainty about what effect, if any, the cancellation of the new Mexico City international airport will have on our operations and passenger traffic results.
In addition, the newcurrent Mexican federal administration announced that it would seek to alleviate congestion at the existing airport by (i) converting a military airport approximately 40 kilometers (24.9 miles) outside of Mexico City (the “Santa Lucía Airport”) to a civil airport, which is expected to start operations in March 2022, (ii) expanding the Toluca International Airport, which is approximately 60 kilometers (37.3 miles) outside of Mexico City and (iii) expanding the boarding gate capacity at Terminal 2 of the existing Mexico City International Airport, which expansion plan was announced on September 24, 2019. There is still uncertainty about when these renovations will be completed and what impact congestion may have on the existing Mexico City International Airport. We cannot assure you that the airport’s operations will remain at existing levels or increase in the future or that the converted Santa Lucía Airport or expanded Mexico City and Toluca International Airports will start operations on time.
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Security enhancements have resulted in increased costs and may require additional investments in the future.
In 2019, 11.9%2020, 10.7% of the passengers served by our airports were international passengers, of which, 75.2%76.8% arrived or departed on flights originating in or departing to the United States. The air travel business is susceptible to increased costs resulting from enhanced security and higher insurance. Following the events of September 11, 2001, we reinforced
5
security at our airports, and our general liability insurance premiums increased substantially. For more information on the insurance policies we carry, see “Item 4. Information on the Company – Property, Plant and Equipment.”
Because a substantial majority of our international flights involve travel to and from the United States, we may be required to comply with security directives of the U.S. Federal Aviation Administration (“FAA”) in addition to the directives of Mexican aviation authorities. World events, such as the terrorist attacks worldwide attributed to the Islamic State of Iraq and Syria or any other organization, could lead to additional security measures taken by the FAA or the International Civil Aviation Organization (“ICAO”), an agency of the United Nations Organization, (“ICAO”), and could require us to incur in additional costs to comply with these measures. Similarly, our airport operations and passenger volume could be negatively impacted by terrorist attacks on aircrafts, such as those which occurred with international airlines’ aircraft operating over Egypt and the Ukraine in 2015.
While governments in other countries have agreed to indemnify airlines for liabilities they might incur resulting from terrorist attacks, the Mexican government has not done so and has given no indication of any intention to do the same. In addition, fuel prices and supplies, which constitute a significant cost for airlines using our airports, may be subject to increases resulting from any future terrorist attacks, a general increase in international hostilities or a reduction in output of fuel, voluntary or otherwise, by oil producing countries. Such increases in airlines’ costs have resulted in higher airline ticket prices and decreased demand for air travel generally, thereby having an adverse effect on our revenues and results of operations.
As a result of the COVID-19 pandemic, airlines and airports have had to implement additional security and compliance measures to comply with local health and safety regulations, which could increase costs. We have, among other things, installed disinfectant gel dispensers and air purifiers, mandated facemasks, installed preventive barriers, instituted spacing and flow of movement measures, and provided training to our employees. These enhanced measures have not resulted in a significant increase in our operating costs to date, but we may be required to adopt additional safety measures in the future. Security measures taken to comply with future security directives or in response to a terrorist attack or threat could reduce passenger capacity at our airports due to increased passenger screening and slower security checkpoints and increase our operating costs, which would have an adverse effect on our overall performance.
Furthermore, under the Mexican Airport Law, we are currently responsible for inspecting passengers and their carry‑carry-on luggage before they board any aircraft. Under Mexican law, we may be liable to third parties for personal injury or property damage resulting from the performance of such inspection. In addition, we may be required to adopt additional security measures in the future or undertake capital expenditures if security measures for carry‑oncarry-on luggage are enhanced, which could increase our liability or adversely affect our operating results.
The operation of baggage screening equipment could increase our expenses and may expose us to greater liability.
The ICAO’s security guidelines requires checked baggage on all international commercial flights and domestic commercial flights to undergo a comprehensive screening process for the detection of explosives. In some countries, such as the United States, the federal government (in the case of the United States, through the Transportation Security Administration (“TSA”)) is responsible for screening checked baggage. On May 1, 2014 and July 1, 2016, the Mexican Bureau of Civil Aviation (currently the Federal Civil Aviation Agency (Agencia Federal de Aviación Civil or “AFAC”)) published mandatory circulars CO SA‑SA-17.2/10 R3 and CO SA-17.9/16, respectively, which require that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines. We have purchased and installed screening equipment in all of our airports to facilitate compliance with the baggage screening guidelines, and our subsidiary, Servicios Complementarios del Centro Norte, S.A. de C.V., has operated the checked baggage screening system since March 1, 2012.
We incur ongoing expenses to maintain and operate this equipment and expect to incur ongoing expenses to maintain any equipment purchased. In the future, we could be required to undertake significant additional capital expenditures for items such as a new screening technology or additional equipment if screening guidelines are expanded further and require that additional steps be taken to comply with the requirements. For instance, replacement of currentthe majority of our baggage screening equipment with new Computer Tomography X-ray (CTX) baggage screening equipment is scheduled for 2020-2025,2021-2025, although regulatory changes could force our airports to undertake this replacement sooner. In addition, the circular CO SA-17.9/16 established that airports must have alternative baggage screening methods in case the
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inspection technology currently used is no longer available. We believe that we comply
6
with the baggage screening guidelines, but AFAC may require additional investments. These additional expenses could restrict our liquidity and adversely affect our results of operations.
Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of equipment could increase our exposure to liability as a result of our involvement in the screening process.
Competition from other tourist destinations could adversely affect our business.
The principal factor affecting our results of operations and business is the number of passengers using our airports. The number of passengers using our airports (particularly the Acapulco, Mazatlán and Zihuatanejo airports) may vary as a result of factors beyond our control, including the level of tourism in Mexico. In addition, our passenger traffic volume may be adversely affected by the attractiveness, affordability and accessibility of competing tourist destinations in Mexico, such as Cancún, Puerto Vallarta and Los Cabos, or elsewhere, such as Florida, Puerto Rico, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America.
Tourism levels may decrease, and therefore the number of passengers using our airports in the future may not exceed or match current levels, which could have a direct and indirect impact on our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Our business is highly dependent upon revenues from seveneight of our thirteen airports and the Terminal 2 NH Collection Hotel and could be adversely impacted by any condition affecting those businesses.
In 2019,2020, approximately 80.4%80.6% of the sum of our aeronautical and non‑non-aeronautical revenues were generated from seveneight of our thirteen airports and the Terminal 2 NH Collection Hotel operations.airports. The Monterrey airport generated the most significant portion of our revenues. The following table lists the percentage of the sum of aeronautical and non‑aeronauticalnon-aeronautical revenues generated at our airports, including the percentage of total revenues generated by our hotel services:
| | | |
| For Year Ended | ||
Airport | |
| |
|
| ||
Monterrey | |
| % |
Culiacán | |
| % |
Chihuahua | |
| % |
Mazatlán | | 6.0 | % |
Ciudad Juárez | | 5.8 | % |
|
|
| |
Acapulco | | 3.5 | % |
| |
| % |
| |
| % |
| |
| % |
Total | | 100.0 | % |
(1) | OMA Logística includes revenues from Consorcio Hotelero Aeropuerto Monterrey, S.A.P.I. de C.V. and OMA-VYNMSA Aero Industrial Park, S.A. de C.V. |
As a result of the substantial contribution to our revenues from these seveneight airports, and the operation of the Terminal 2 NH Collection Hotel, any event or condition affecting these principal airports or the Terminal 2 NH Collection Hotel could have a material adverse effect on our business, results of operations, prospects and financial condition.
Lastly, we cannot predict theany future effect COVID-19 will have on our revenues. For more information on risks related to COVID-19 see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
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We are dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity risks.
We rely on a variety of information technology to manage our operations. The proper functioning of these systems is critical to the efficient operation and management of our business. In addition, these systems may require modifications or upgrades as a result of technological changes or growth in our business. These changes may be costly and disruptive to our operations, and could impose substantial demands on management time. Our systems may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break‑ins,break-ins, unauthorized access and cyber‑attacks.cyber-attacks. Currently, our information systems are protected with backup systems, including physical and software safeguards located outside of our offices for protection purposes, and a cold site on critical systems to recover information technology operations. Furthermore, we undertake other steps to secure our systems and electronic information from exogenous events. These safety components reduce the risk of disruptions, failures or security breaches of our information technology infrastructure and are reviewed periodically by external advisors. Any such disruption, failure or security breach of our information technology infrastructure, including our back‑upback-up systems, could have a negative impact on our operations.
Additionally, the security risks associated with information technology have increased in recent years due to an increase in more complex types of cyber-attacks. A failure of or attack to our information technology systems or those of our contractors could affect our business or result in the disclosure or misuse of confidential or personal information, which could cause significant interruptions in services or other operational difficulties and increases in costs, that could result in losses. Although actions are taken continuously to improve and monitor our information technology systems, these systems remain vulnerable to failures or unauthorized access, which could adversely affect our operations, financial condition and liquidity.
We face risks associated with our diversification activities, which could lead to our inability to recover our investment as planned.
We face risks associated with the nature of the diversification projects that we have developed and in which we participate as shareholders, which could impact our results of operations, prospects and financial condition. Our Terminal 2 NH Collection Hotel and our Hilton Garden Inn Hotel depend on passenger traffic travel to and from the Mexico City International Airport and the Monterrey airport, respectively, and any event that reduces passenger volume in these airports could adversely affect the results of operations of these hotels. The passenger traffic volume in such airports depends on factors beyond our control, such as the attractiveness of the commercial, industrial and tourist centers that the airports serve. Accordingly, there can be no assurance that the passenger traffic volume in such airports will increase or maintain the current level.
As a result of the various measures implemented to control the spread of COVID-19, such as the suspension of non-essential activities and the reduced demand for air travel and hotel services, the operation of our two hotels has experienced significant declines.declines in occupancy rates and in revenues. In the first quarter of 2020, the occupancy rates in our Terminal 2 NH Collection Hotel and our Hilton Garden Inn Hotel in the Monterrey airport were 11.642.4 and 15.441.6 percentage points lower, respectively, than in the comparable period of 2019. On April 6, 2020, we temporarily suspended services our Hilton Garden Inn Hotel through at least April 30,July 6, 2020 due to low occupancy. We expect to reopenoccupancy demand as a result of the Hilton hotel as soon as the suspension of non-essential activities in Mexico is lifted. COVID-19 outbreak.
Both of the hotels that we operate, our OMA‑OMA-VYNMSA industrial park and our OMA Carga bonded warehouses could face additional competition from third parties developing similar projects in areas adjacent to the Mexico City and the Monterrey airports.airport. Despite our efforts to retain clients, we cannot predict whether our clients will continue occupying our commercial spaces or cancel their contracts. Furthermore, the continued growth at our OMA-VYNMSA industrial park could also decline should there be a slowdown in the Mexican economy. All such factors could adversely affect the profitability of our non‑aeronauticalnon-aeronautical businesses and our ability to recover our investments in such projects.
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Our operations depend on certain key airline customers, and the loss or suspension of operations of one or more of them could result in a loss of a significant amount of our revenues.
Of the total aeronautical revenues generated at our airports in 2019,2020, VivaAerobus represented 22.4%28.0%, Volaris represented 23.5%, Aeroméxico and its affiliates represented 21.8%, Volaris represented 20.5%20.0% and Interjet represented 13.2%5.7%. None of our contracts with our airline customers obligatesobliges them to continue providing service from our airports and, if any of our key customers reduces their use of our airports, competing airlines may not add flights to their schedules to replace any flights no longer handled by our principal airline customers. On June 30, 2020, Aeromexico and its affiliates, which accounted for 20.3% of our total passenger traffic in 2020, filed voluntary Chapter 11 petitions in the United States to implement a financial restructuring while continuing to operate. In addition, as of December 9, 2020, Interjet, which accounted for 5.7% of our total passenger traffic in 2020, stopped operating at our airports due to the financial impact of the current outbreak of COVID-19 on their operations. Our business and results of operations could be adversely affected if we do not continue to generate comparable portions of our revenues from our key customers.
Due to increased competition, volatility in fuel prices and the general decrease in demand because of global volatility in the financial and exchange markets, and economic crises and the current COVID-19 related health crisis, many airlines are operating in adverse conditions. Should fuel prices increase or in the event of other adverse health or economic developments, one or more of our principal carriers could become insolvent, cancel routes, suspend operations or file for bankruptcy. All such events could have a material adverse effect on our results from operations. Furthermore, any accident, incident or any other event that affects the perception of safety standards of any of the major airlines may affect itstheir image and generate a public perception that it is less safe or reliable than other airlines. These events would affect consumer demand and the number of passengers serviced by the airline, thus affecting our business, results of operations, prospects and financial condition.
The global airline industry has recently experienced and continues to experience significant financial difficulties and recent warnings regarding industry profitability. In December 2019,2020, the International Air Transport Association, or IATA, issued its 20202021 financial forecast for the global commercial airline industry, estimating net post-tax profitsloss of about U.S.$29.338.7 billion, duegiven that airlines will continue to stable fuel prices and a slight increase in economic growth.have difficulty reducing their costs to offset lower revenues. The forecast also indicated that net profit margins were expected to slightly increase to 3.4%-8.4% in 2020. However, since the outbreak of COVID-19,2021. On February 21, 2021, the IATA has revised its expectations downward during February, March and April 2020announced that it did not expect the airline industry to account for the impact of COVID-19. On April 14, 2020, the IATA estimated that passenger revenues for the industry could decrease 55% in 2020 compared to 2019.be cash positive until 2022. The IATA may further reduce its forecasts, and the short-term and long-term effects of the COVID-19 outbreak on the global airline industry is still uncertain. It is possible that theThe economic shock from the COVID-19 outbreak, which has been felt more acutely by airlines, has and may continue to trigger insolvencies within the global airline industry.
Some of our airline and other clients and tenants have asked for assistance, either through discounts on payments owed to us or by an extension on those payments. During 2020, we provided payment extensions to our main airline customers, which allowed us to mitigate noncompliance risks. We also offered incentives to our commercial tenants through discounts or payment extensions. No such arrangement materially affected our financial condition or liquidity. As a result of the dateCOVID-19 pandemic, our reserve for doubtful accounts receivable increased by 231% to Ps.20.8 million as of this report, we are inDecember 31, 2020, which is mainly comprised of commercial discussions with those clients and tenants regarding their contracts.tenants. We expectcannot assure you whether the COVID-19 pandemic will continue to cause an increase in our reserve for doubtful accounts receivable in 2020.2021. For more information on the impact of COVID-19 on our business, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
In addition, Mexican law prohibits an international airline from transporting passengers from one Mexican location to another (unless the flight originated outside Mexico), which limits the number of airlines providing domestic service in Mexico. On December 18, 2015, the United States and Mexico entered into an Air Transport Agreement with the purpose of promoting and facilitating an international aviation system, based on competition among airlines, to facilitate the expansion of international air transport opportunities and ensure the highest degree of safety and security in air transport. The agreement, which replaced the agreement that had been in effect since 1960, became effective as of August 21, 2016, after approval by the Mexican Senate and the competent authorities in the United States. The agreement provides for an increase in services on existing routes between both nations, as well as the addition of new routes and an increase in the frequency of flights on existing routes. The agreement also grants Mexican airlines the ability to further penetrate international markets, as it permits airlines from both countries that operate flights between the United States and Mexico to pick up passengers and continue with the flights to a third country. This agreement may
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be modified in the future to provide for international airlines to operate domestic flights in our airports, but until then we expect to continue to generate a significant portion of our revenues from domestic travel from a limited number of airlines.
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Collective laborconflicts in Mexico could have an adverse impact on our results of operations.
A number of events, such as (i) the ratificationendorsement by the Mexican Senate of the International Labor Organization’s Convention C098, the “Right to Organize and Collective Bargaining Convention”, (ii) the potential replacement of existing NAFTA labor policies with those policies under the USMCA and (iii) the approval by Congress to modify the Mexican Federal Labor Law, and (iii) the adverse labor effect resulting from the COVID-19 crisis, have led and continue to cause labor conflicts in Mexico.
In addition, such conflicts have been exacerbated by (i) new labor unions created to negotiate and/or dispute existing collective bargaining agreements on behalf of the labor unions that currently hold such contracts, (ii) a 16.21% increase of the general minimum wage nationwide as of January 1, 2019, and a subsequent 20.0% increase of the general minimum wage as of January 1, 2020 , and a 15% increase as of January 1, 2021 and (iii) a 100% increase of the minimum wage in the municipalities near the northern border of Mexico on January 1, 2019, and an additional 5.0% increase as of January 1, 2020.2020, and a 15% increase as of January 1, 2021. These developments in recent monthsyears have led workers and labor unions to demand more significant benefits and higher salary increases than in prior years.
Moreover, the effects of the Mexican government's response to COVID-19, which include travel restrictions, and stay-at-home ordinances, restrictions on non-essential activities and other restrictions on the overall operation of businesses across Mexico may strain relationships by and between businesses, on the one hand, and labor unions and/or their employees, on the other. As of the date of this report, the Company has not experienced any material adverse effect as a result of the different labor related developments or those that have resulted from the evolution of the COVID-19 pandemic and cannot predict how COVID-19whether these will affect its labor force and relations therewith.going forward. For more information on the impact of COVID-19, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.” For more information on employee relations, see “If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.”operations” and “Changes to Mexican laws, regulations and decrees applicable to the Company could have a material adverse impact on the results of operations”.
The Company cannot predict how these developments may affect the Company’s results of operations or its financial condition. Any increased demands by the Company’s unionized workers may lead to higher labor costs, which could have a negative impact on its results of operations.
If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.
If any conflicts with our employees were to arise, including with our unionized employees (which accounted for 58.6%54.5% of our total employees as of December 31, 2019)2020), resulting events such as strikes or other disruptions that could arise with respect to our workforce could have a negative impact on our results of operations. As of the date of this report, the effects of the COVID-19 outbreak have not affected our relations with our labor force, but we cannot assure you that any further effects resulting from COVID-19 will not cause any disruptions in the future.
Our unionized employees are represented by a national union of airport workers that operates throughout Mexico. To the extent unionized airport workers seek material modifications to the conditions agreed with us and with other Mexican airport operators, our operations could be adversely affected by union activities, including organized strikes or other work stoppages.
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Our operations could be adversely affected due to changes in the collection of passenger charges.
Passenger charges are collected by the airlines and then paid to us on the basis of contracts entered into with each airline operating at our airports. We cannot guarantee that all airlines will continue collecting the passenger charges for us. Should one or more airlines stop collecting passenger charges for us, we would have to collect these charges directly ourselves, which would result in additional costs for us.
In recent years,Recently, some airlines have reported losses. In cases where we extend days of credit to airlines, substantially all cases,of our revenues from passenger charges and other aeronautical services are secured by a performance bond or other types of guarantees; however, guarantees may not fully cover the amount owed by an airline at a certain date. In the event of the insolvency of any of these airlines, we would not be certain of the collection of any amounts invoiced to that airline in respect of passenger charges. In cases where the airlines cannot provide adequate or sufficient performance bonds or other types of guarantees, the airlines operate under advance payment conditions.
In addition, the COVID-19 outbreak has and will likely continue to adversely affect the global airline industry. For more information on how COVID-19 has affected airlines, see “Our operations depend on certain key airline customers, and the loss or suspension of operations of one or more of them could result in a loss of a significant amount of our revenues.” Given the economic uncertainty for many airlines, it is possible that airlines will stop paying us the applicable passenger charges. Should one or more airlines stop paying us for passengers (other than diplomats, infants, transfer and transit passengers) departing from our terminals, our business and results of operation could be adversely affected. For more information on the impact of COVID-19 on our business, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
The main domestic airlines operating at our airports may refuse to pay certain increases in our specific prices for regulated aeronautical services.
In the past, we have entered into a series of agreements with the Mexican National Air Transportation Chamber of Commerce (Cámara Nacional de Aerotransportes) and the Ministry of Communications and Transportation (most recently in January 2013, covering the period from January 1, 2013 to December 31, 2015), pursuant to which we established specific prices for regulated aeronautical services applicable to our principal airline customers. Although this agreement has not been renewed as of April 30, 2020,22, 2021, all benefits continue to be provided on the same terms. Furthermore, we have expanded the benefits of the agreement to all domestic and international airlines operating at our airports, even to those airlines that are not affiliated to the Mexican National Air Transportation Chamber of Commerce. Historically, amounts paid under these agreements have not been material, and we do not expect any current agreement or any similar future agreements with the Mexican National Air Transportation Chamber of Commerce or any airline to have a material effect on our results of operations.
Although passenger traffic volume (and therefore overall revenues) may increase, any agreed incentives and/or discounts offered to airlines as a means to prevent or settle any potential dispute could reduce our aeronautical revenues per terminal passenger in the future. In addition, should any of our principal airline customers refuse to continue to make payment to us, or should they refuse to pay increases in our charges for aeronautical services in future years, our results of operations could be adversely impacted by decreased cash flows from operations.
Our operation depends on our management team for its knowledge and experience and the loss of capable executives could affect our operations.
The current and future performance of our operations depends significantly on the continuous contribution of managers and other key employees. In order to achieve the objectives of each manager or key position, the ability, experience, aptitude and knowledge of each candidate is taken into account for recruitment and personnel allocation purposes. We cannot guarantee that in the future our executive team will be maintained, or that if new executives are
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incorporated, they will have the same level of knowledge and experience. The potential lack of a capable management team could adversely affect the operations, financial situation and results of operations.
The operations of our airports may be affected by the actions of third parties, which are beyond our control.
As is the case with most airports, the operation of our airports is largely dependent on the services of third parties, such as air traffic control authorities, airlines, airline providers and ground transportation providers. We also depend upon the
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Mexican government or government entities for provision of services, such as electricity, supply of fuel to aircraft, air traffic control and immigration and customs services for our international passengers. The disruption or stoppage of taxi or bus services at one or more of our airports could also adversely affect our operations. We are not responsible for and cannot control the services provided by these parties. Any disruption in, or adverse consequence resulting from, their services, including a work stoppage or other similar event, may have a material adverse effect on the operation of our airports and on our results of operations.
In addition, if any service providers were to halt operations at any of our airports, we could be required to seek a new provider of these services or to provide these services ourselves, either of which may result in increased costs and have an adverse impact on our results of operations.
We may be liable for property taxes as a result of claims asserted against us by certain municipalities.
Various municipalities have assessed tax credits against us for the payment of property taxes with respect to the real estate on which we operate our airports in those cities. We have appealed all the administrative law proceedings, as well as the tax credits, assessed against us and, while some have been dismissed by the relevant administrative authority, some are still pending. We believe there are no legal grounds which enable the municipalities to collect such taxes and although we intend to defend our position vigorously, if procedures are brought by authorities, there can be no assurance that we will be successful in such defense. See “Item 8. Financial Information—Information—Legal Proceedings—Proceedings—Property Tax Claims” for a full discussion of these property tax proceedings. Some Mexican airport operators contesting the assessment of similar property tax claims have been required to post material surety bonds in connection with their challenge of those assessments. If we are required to post similar surety bonds in the future, the terms of the surety bonds may restrict our ability to pay dividends or otherwise limit our flexibility. In addition, if we are required to pay for additional state or municipal rights, we could face costs, limiting our liquidity, flexibility and our ability to pay dividends.
Furthermore, if the Mexican government changes the current laws or if we do not prevail in these proceedings, these tax liabilities could have an adverse effect on our financial condition and results of operations. In addition, any change in law which enables municipalities to request construction or operation permits may affect our ability to comply with investments required under our master development programs,Master Development Programs, which in turn may result in additional payments for governmental tariffs and affect our results of operations.
Inability to generate sufficient future taxable profits or adverse changes to tax laws, regulatory requirements or accounting standards could have a negative impact on the recoverability of certain deferred tax assets.
We recognize deferred tax assets relating to tax losses carried forward and deductible temporary differences only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the temporary differences can be utilized. Net deferred tax assets amounted to approximately Ps.94,287Ps.183,930 thousand at December 31, 2019.2020. The deferred tax assets are quantified on the basis of currently enacted tax rates and accounting standards and are subject to change as a result of future changes to tax laws or the rules for computing taxable profits and allowable losses. Failure to generate sufficient future taxable profits or changes in tax laws or accounting standards may reduce our estimated recoverable amount of net deferred tax assets. Such a reduction could have an adverse effect on our financial condition and results of operations. For further information on deferred tax assets, refer to Note 4.p. to our audited consolidated financial statements. See “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies—Deferred Income Taxes.”
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Natural disasters could adversely affect our business.
From time to time, the northern and central regions of Mexico experience torrential rains, hurricanes (particularly during the months of July through September) and, depending on the region, earthquakes and volcanic activity. In addition, the Mazatlán, Culiacán and Acapulco airports are susceptible to occasional flooding due to torrential rainfall.
Natural disasters may impede or cause the suspension of operations, damage infrastructure necessary to our operations or adversely affect the destinations served by our airports. For instance, on November 3, 2016, the Tampico airport flooded due to heavy rains, causing the collapse of part of the bordering fence. Although, the affected neighbors
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filed claims for damages against the Tampico airport, the insurance carrier rejected the neighbors’ claims alleging that the damage was caused by a natural disaster. In addition, the Terminal 2 NH Collection Hotel located in Terminal 2 of the Mexico City International Airport was temporarily closed after the earthquake on September 19, 2017. Although the Terminal 2 NH Collection Hotel did not suffer any structural damage, utilities of the hotel were interrupted and hotel operations were suspended until September 25, 2017.
Any of these events could reduce our passenger and cargo traffic volume in the airports and our guest volume in the Terminal 2 NH Collection Hotel. For example, our international passenger traffic decreased 1.2% during September 2017, partially due to the cancellation of flights caused by hurricanes Harvey and Max. The occurrence of natural disasters in the destinations that we serve could adversely affect our business, results of operations, prospects and financial condition.
We have insurance for the physical facilities at our airports against damage caused by natural disasters, accidents or other similar events, but we do not have insurance covering losses due to resulting business interruption. Moreover, should losses occur, losses caused by damages to the physical facilities may exceed the pre‑establishedpre-established limits on any of our insurance policies.
Our operations are at greater risk of disruption due to the dependence of several of our airports on a single commercial runway.
As is the case with many other domestic and international airports around the world, several of our airports, including the Monterrey, Culiacán, Ciudad Juárez and Mazatlán airports, have only one runway for most commercial flights. The operation of our runways may be disrupted due to required maintenance or repairs. In addition, our runways may require unscheduled repair or maintenance due to natural disasters, aircraft accidents and other factors that are beyond our control. The closure of any runway for a significant period of time could have a material adverse effect on our business, results of operations, prospects and financial condition.
We are exposed to risk related to construction projects.
The building requirements under our master development programsMaster Development Programs could encounter delays or cause us to exceed our budgeted costs for such projects, which could limit our ability to expand capacity at our airports, increase our operating or capital expenditures and could adversely affect our business, results of operations, prospects and financial condition. Such delays or budgetary overruns also could limit our ability to comply with our master development programs,Master Development Programs, which are established as a necessary requirement to our concessions.
From March 31, 2020 to June 1, 2020, we stopped most construction works, including those needed to comply with our Master Development Program, as a result of the restrictions imposed by the Mexican government on non-essential activity, including construction, in Mexico due to the COVID-19 outbreak. These restrictions generated delays in our scheduled works to comply with our Master Development Program commitments for 2020. Even though the delays were notified to and agreed upon with the regulator, should we experience any other delay that prevents us from complying with our Master Development Program commitments, there could be penalties which could adversely affect our business, results of operations, prospect and financial condition.
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We are exposed to certain risks inherently associated with the rental of real property.
We are exposed to risks generally associated with properties rented to third parties, such as a decline in rental market demand, occupancy rates or rent levels, non‑non-payment of minimum rent and royalties by tenants or a weakening of the real estate market. Moreover, our real estate assets are located on or adjacent to our airports and serve a particular sector of the rental market, thus exposing us to fluctuations in this specific market. Any of these risks could adversely affect the profitability of our real estate development activities and, consequently, our business, results of operations, prospects and financial position.
We are exposed to the risk of non-performance by our subcontractors.
We subcontract certain services (including security and surveillance services) necessary to conduct our operations. In the event that our subcontractors fail to perform their obligations under our agreements, we could incur extra costs in providing replacements and could be exposed to liability for operations that we may have to provide directly, which could adversely affect our business, results of operations, prospects and financial condition.
In accordance with applicable labor laws, subcontractors are required to register their employees with the Mexican Social Security Institute (Instituto Mexicano del Seguro Social), and anyone employing the services of subcontractors that has failed to comply with these laws is jointly liable for the payment of social security obligations as well as any applicable penalties. Therefore, if subcontractors providing services at our airports do not have their
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employees registered at the Mexican Social Security Institute, we could be held jointly liable for the payment of social security obligations that such contractors may have, as well as any applicable penalties.
Our ability to expand certain of our airports and to comply with applicable safety guidelines could be limited by difficulties we encounter in acquiring additional land on which to operate our airports.
Certain guidelines established by the ICAO require the maintenance of a perimeter surrounding the land used for airport operations. At several of our airports, we do not control portions of the land within the required perimeters. If portions of such land adjacent to certain of our airports are developed by third parties in a manner that encroaches on the required perimeters, our ability to comply with applicable guidelines of the ICAO or to expand our airport operations could be adversely affected. Also, the growth of certain cities in the proximity of our airports could limit our ability to expand our airports.
To allow the future expansion of the Monterrey airport, including the construction of a second commercial runway and the relocation of the control tower, in February and June 2007, March and May 2008, July and December 2009 and February, July and December 2010, we completed acquisitions of land surrounding the airport with an aggregate area of 777 hectares (3 square miles), for an aggregate price of Ps.1,559,381 thousand (U.S.$121.3 million). Improvements made to airport facilities at our expense may be recognized by AFAC as part of our investment in the airport concession. We received authorization from AFAC to reallocate Ps.386,538 thousand (amount expressed in nominal 2009 pesos) of our investment in this land to investments included in the 2011–2015 master development programMaster Development Program for the Monterrey airport. We are currently reviewing various possibilities for theThe recovery of the remaining investment with AFAC at a cost of Ps.695,759 thousand (amount expressed in nominal 2009 pesos), which was not recognized underis included in the 2016–2020 master development programindicative period of our current approved Master Development Program for the Monterrey airport.2026-2035. The remaining amount of the investments may not be recognized by the Ministry of Communications and Transportation in the future.
Our future profitability and growth will depend upon our ability to expand our airports in the future. Potential limitations on our possibility of expansion, such as those described above, could restrict any such expansion and thus have a material adverse effect on the future profitability and growth of our business.
We are exposed to risks inherent to the operation of airports.
We are obligated to protect the public at our airports and to reduce the risk of accidents at our airports. As with any company dealing with members of the public, we must implement certain measures for the protection of the public, such as fire safety in public spaces, design and maintenance of car parking facilities and access routes to meet road safety rules. We are also obligated to take certain measures related to aviation activities, such as maintenance,
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management and supervision of aviation facilities, rescue and fire‑fightingfire-fighting services for aircraft, measurement of runway friction coefficients, flood control at the Acapulco airport and measures to control the threat from birds and other wildlife on airport sites. These obligations may require us to incur additional costs and could increase our exposure to liability to third parties for personal injury or property damage resulting from our operations.
Our insurance policies may not provide sufficient coverage against all liabilities.
While we seek to insure all reasonable risks, our insurance policies may not cover all of our liabilities in the event of an accident, terrorist attack or any other incident. The markets for airport insurance and construction insurance are limited, and a change in coverage policy by the insurance companies involved could reduce our ability to obtain and maintain adequate or cost‑effectivecost-effective coverage. A certain number of our assets cannot, by their nature, be covered by property insurance (notably aircraft movement areas, and certain civil engineering works and infrastructure). In addition, we do not currently carry business‑interruptionbusiness-interruption insurance.
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We are exposed to risks related to handling cargo.
The air cargo system is a complex, multi‑facetedmulti-faceted network that handles a vast amount of freight, packages and mail carried aboard passenger and all‑all-cargo aircraft. The air cargo system is vulnerable to several security threats, including: potential plots to place explosives aboard aircraft; illegal shipments of hazardous materials; criminal activities, such as smuggling and theft; and potential hijackings and sabotage by persons with access to aircraft. Several procedural and technology initiatives to enhance air cargo security and detect terrorist and criminal threats have been put in place, such as an x‑rayx-ray machine certified by the TSA in the bonded OMA Carga area at the Monterrey airport, or are under consideration.
We may be subject to risks related to the integrity of our facilities or the reduction of our cargo traffic volume. The occurrence of such events could adversely affect our business, results of operations, prospects and financial condition.
We may not be able to detect money laundering operations and other illegal or improper activities, which could expose us to additional liabilities and adversely affect our operations and financial results.
We are required to comply with applicable anti-money laundering and anti-terrorism and other regulations in Mexico. Such laws require us to adopt and implement certain policies and procedures designed to detect and prevent transactions with third parties involved in money laundering or terrorist activities. Although we have adopted such policies and procedures, these procedures require services related to third parties that are not under our control, including third-party providers of complementary services or retailers, restaurants and other commercial tenants leasing spaces at the airport. To the extent that we may fail to fully comply with applicable laws and regulations or fail to detect illegal activities carried out by third parties, the competent authorities may impose certain fines on us and our reputation may also be adversely affected.
We could be exposed to additional risks if we pursue business opportunities in other countries.
From time to time, we may consider strategic participation in airport assets located in other countries. We may evaluate international expansion opportunities through capital investment in other concessions. Expansion into a market outside of Mexico could require significant capital expenditures. If we pursue an international expansion opportunity, we could face internal or external risks, including, without limitation: (i) a lack of market experience in the relevant country, (ii) foreign exchange and economic volatility, (iii) the dedication of significant management resources to execute the international operation and (iv) exposure to risks inherent to doing business in the relevant country. Our inability to successfully manage the risks and uncertainties related to such business opportunities could have a material adverse effect on our business, results of operations, prospects and financial condition, including our capital structure.
Discontinuation, reform or replacement of the London Interbank Offered Rate (or LIBOR) or other benchmark interest rates, or uncertainty related to the potential for any of the foregoing, may impact our business.
As of December 31, 2020, we had Ps. 13,503 thousand (U.S. $678,246 ) of variable rate indebtedness linked to LIBOR or other benchmark rates. In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR,
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announced its intention to phase out the use of LIBOR by the end of 2023. In addition, other regulators have suggested reforming or replacing other benchmark rates including peso-denominated rates. As there is not yet definitive information regarding the phase-out of LIBOR, we cannot currently predict the effect of the discontinuation, reform or replacement of LIBOR. However, the phase out of LIBOR and the discontinuation, reform or replacement of other benchmark rates may have an unpredictable impact on, or cause disruption to, the broader financial markets or borrowing costs to borrowers. These developments may in turn increase the cost of our variable rate indebtedness or otherwise have an adverse effect on our results of operations and financial condition.
Risks Related to the Regulation of Our Business
The Company provides a public service regulated by the Mexican government, and the flexibility in managing aeronautical activities is limited by the regulatory environment in which the Company operates.
The Company’s aeronautical fees charged to airlines and passengers are regulated, like most airports in other countries. In 2017, 2018, 2019 and 2019,2020, approximately 61.0%, 65.0%. 67.5% and 67.5%54.8%, respectively, of the Company’s total revenues, and approximately 74.9%76.0%, 76.0% and 76.0%71.5%, respectively, of the sum of its aeronautical and non‑aeronauticalnon-aeronautical revenues were earned from aeronautical services, which are subject to price regulation under the Company’s maximum rates. These regulations may limit the Company’s flexibility in operating its aeronautical activities, which could have a material adverse effect on its business, results of operations, prospects and financial condition. In addition, several of the regulations applicable to the Company’s operations that affect its profitability are authorized (as in the case of the master development programs)Master Development Programs) or established (as in the case of maximum rates) by the Ministry of Communications and Transportation for five‑yearfive-year terms. The Company generally does not have the ability to unilaterally change its obligations (such as the investment obligations under its master development programsMaster Development Programs or the obligation under its concessions to provide a public service) or increase our maximum rates applicable under those regulations should the passenger traffic or other assumptions on which the regulations were based change during the applicable term. In addition, this price regulation system may be amended in the future in a manner that would cause additional sources of the Company’s revenues to be regulated.
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The Company’s results of operations may be adversely affected by required efficiency adjustments to its maximum rates.
The Company’s maximum rates in Mexico are subject to annual efficiency adjustments, which have the effect of reducing the maximum rates for each year to reflect projected efficiency improvements. For the five year period ending December 31, 20152020 and December 31, 2020,2025, the maximum rates applicable to the Company’s airports reflectedreflect an annual efficiency improvement of 0.70%. Future annual efficiency adjustments will be determined by the Ministry of Communications and Transportation in connection with the setting of each Mexican airport’s maximum rates every five years. For a description of these efficiency adjustments, see “Item 4. Information on the Company—Regulatory Framework—Revenue Regulation—Methodology for Determining Future Maximum Rates.” We cannot provide assurance that we will achieve efficiency improvements sufficient to maintain or increase our operating income as a result of the progressive decrease in each of our airport’s maximum rate.
The Company cannot predict how the regulations governing the business will be applied.
Many of the laws, regulations and instruments that regulate the Company’s business were adopted or became effective in 1999, and there is only a limited history and examples that would allow the Company to predict the impact of these legal requirements on its future operations. Mexican law establishes ranges of sanctions that might be imposed should the Company fail to comply with the terms of one of its concessions, the Mexican Airport Law and its regulations or other applicable laws. The Company cannot predict the sanctions that are likely to be assessed for a given violation within these ranges. It may encounter difficulties in complying with these laws, regulations and instruments.
Although the master development programsMaster Development Programs and maximum rates through 20202025 have been set, the Company cannot predict what the master development programMaster Development Program for 20212026 and following years will establish. When determining the maximum rates for the next five year period (from 20212026 to 2025)2030), the Ministry of Communications and Transportation may be solicited by different entities (for example, the Antitrust Commission) and the carriers operating at our airports) to modify the maximum rates, thus reducing the Company’s profitability. The laws and regulations governing the business, including the rate‑settingrate-setting process and the Mexican Airport Law, may change in the future or be
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applied or interpreted in a way that could have a material adverse effect on the Company’s business, results of operations, prospects and financial condition.
Additionally, on October 16, 2019, the Ministry of Communications and Transportation established AFAC, an independent regulatory agency, that replaced the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil). AFAC is responsible for establishing, coordinating, overseeing and controlling international and national air transportation, as well as the airports, complementary services and generally all activities related to civil aviation. Even though AFAC has been formally established, its internal regulations and operation manuals are still pending as of the date of this report. As such, the Company cannot predict how this new agency will be organized, the scope of its authority, the actions that it will take in the future or the effect of any such actions on its business.
On February 20, 2014, a bill of the new Federal Antitrust Law (Ley Federal de Competencia Económica) was submitted to Mexico’s Congress in furtherance and as a result of certain amendments to Mexico’s Constitution passed in 2013. The bill was enacted and published on May 23, 2014. The law grants broader powers to the Antitrust Commission, including the authority to regulate essential facilities, order the divestment of assets and eliminate barriers to competition in order to promote access to the market. The newSuch law also sets forth important changes in connection with mergers and anti‑competitiveanti-competitive behavior, increases liabilities and the amount of fines that may be imposed for violations of the law and limits the availability of legal defenses against the application of the law. The Antitrust Commission may therefore determine that the services that the Company provides at its airports are essential and require it to implement significant changes to its business operations and thus generate a significant impact on its results of operations.
For example, pursuant to the new Federal Antitrust Law (Ley Federal de Competencia Económica), the Antitrust Commission determined that the slots allocated to air carriers at the Mexico City International Airport constitute an essential service. The Antitrust Commission found that the allocation of slots led to flight delays and cancellations and, among others, hindered entry to new competitors. On July 3, 2017, the Antitrust Commission issued a series of corrective measures (the “Corrective Measures”) for the Mexico City International Airport to address the inefficiencies and anticompetitive effects observed at such airport.
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In response to the Antitrust Commission’s findings, the Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes) published an amendment to the regulations of the Mexican Airport Law in the Federal Official Gazette on September 29, 2017, as well as general guidelines for the allocation of slots at congested airports (the “General Guidelines”). The Antitrust Commission found that the reforms issued by the Ministry of Communications and Transportation did not provide a solution to the issues the Antitrust Commission had addressed and that the General Guidelines directly contradicted the Corrective Measures. As a result, the Antitrust Commission filed an appeal (controversia constitucional) before the Mexican Supreme Court, arguing that the Antitrust Commission, not the Ministry of Communications and Transportation, has the authority to regulate the allocation of slots as a public essential service. On November 26, 2019 the Mexican Supreme Court ruled against the Antitrust Commission.
Even though none of its airports have been declared congested as of the date of this report, the Company cannot predict whether or when this will happen. Similarly, it cannot predict whether the Antitrust Commission will declare any of its airports, or any complementary or commercial service provided at the airports, as essential services, and consequently, establish rules, recommendations, guidelines or conditions that could limit or restrict the Company’s aeronautical and/or non-aeronautical revenues.
The regulations pursuant to which the maximum rates applicable to the aeronautical revenues are established donot guarantee that the consolidated results of operations, or the results of operations of any airport, will be profitable, or that the Company will realize the expected return on investment.
The regulations applicable to the Company’s aeronautical activities establish an annual maximum rate for each airport, which is the maximum annual amount of revenues per workload unit (which is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that the Company may earn at that airport from services subject to price regulation. For a discussion of the framework for establishing its maximum rates and the application of the rates, see “Item 4. Information on the Company—Regulatory Framework—Revenue Regulation.” On December 21, 2015,November 30, 2020, the Ministry of Communications and Transportation determined,approved, based on the terms of the Company’s concessions, the
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maximum rates for its airports from January 1, 20162021 through December 31, 2020.2025. Under the terms of the Company’s concessions, there is no guarantee that the results of operations of any airport will be profitable. The Company may not realize its expected return on investment from investments under the master development programs.Master Development Programs.
The Company’s concessions provide that an airport’s maximum rates will be adjusted periodically for inflation (determined by reference to the Mexican Producer Price Index (Índice Nacional de Precios Productor), excluding fuel). Although the Company is entitled to request additional adjustments to an airport’s maximum rates under certain circumstances including, among others, required capital investments not foreseen in the master development programs,Master Development Programs, decreases in capital investments attributable to Mexican economy‑relatedeconomy-related passenger traffic decreases or modifications of the concession tax payable by the Company, its concessions provide that such a request will be approved only if the Ministry of Communications and Transportation determines that certain limited events specified in the concessions have occurred. Therefore, such a request may not be granted in the future. If a request to increase an airport’s maximum rates is not granted, and the Company is impacted by the circumstances that led to the request, its results of operations and financial condition could be adversely affected, and the value of Series B shares and ADSs could decline.
The Company business is dependent upon international regulations that affect Mexican airlines.
The FAA evaluates the legal framework for civil aviation and issues related to the monitoring, staff training and inspection processes related to regulations issued by the ICAO.
On July 30, 2010, the FAA downgraded Mexico’s aviation safety rating from an ICAO Category 1 rating to an ICAO Category 2 rating, as a result of the FAA’s visit to the Mexican Bureau of Civil Aviation (currently AFAC) between January and July 2010. The downgrade was attributable to an insufficient number of flight inspectors and administrative and organizational elements in the Mexican Bureau of Civil Aviation (currently AFAC).
The consequences of the downgrade from a Category 1 rating to a Category 2 rating were the suspension of the right to operate code‑sharedcode-shared flights and the restriction of Mexican airlines’ ability to increase the frequency of, or add
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new routes to, the United States and that the international routes of Mexicana de Aviación would not be flown by any Mexican carrier with a Category 2 rating.
Mexico regained its Category 1 safety rating on December 1, 2010; however, Mexico may be downgraded in the future, and the Company cannot be certain of how long this Category 1 rating will be maintained. We cannot predict what impact such a downgrade would have on our passenger traffic or results of operations, or on the public perception of the safety of our airports.
If the Company exceeds the maximum rate at any airport at the end of any year, it could be subject to sanctions.
Historically, the Company has set the tariffs it charges for aeronautical services at each airport in order to come as close as possible to its authorized maximum rate for that airport in any given year. For example, in 2019,2020, the revenues subject to maximum rate regulation represented approximately 99.0%99.3% of the amounts the Company was entitled to earn under the maximum rates for all of its airports. The Company may not be able to establish tariffs in the future that allows it to collect substantially all of the revenues it is entitled to earn from services subject to price regulation.
The specific tariffs the Company charges for aeronautical services are determined based on various factors, including projections of passenger traffic volumes, the Mexican Producer Price Index (excluding fuel), the Mexican Consumer Price Index and the value of the peso relative to the U.S. dollar. These variables are outside of the Company’s control. The Company’s projections could differ from the applicable actual data, and, if these differences occur at the end of any year, they could cause the Company to exceed the maximum rate at any one or more of its airports during that year.
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If the Company exceeds the maximum rate at any airport at the end of any year, the Ministry of Communications and Transportation may assess a fine and may reduce the maximum rate at that airport in the subsequent year. The imposition of sanctions for violations of certain terms of a concession, including for exceeding an airport’s maximum rate, can result in termination of the concession if the relevant term has been violated and sanctions have been imposed at least three times. In the event that any one of the Company’s concessions is terminated, its other concessions may also be terminated. For a discussion of events that may lead to a termination of a concession, see “Item 4. Information on the Company—Regulatory Framework—Penalties and Termination and Revocation of Concessions and Concession Assets.”
Depreciation of the peso may cause the Company to exceed the maximum rates.
The Company aims to charge prices that are as close as possible to its maximum chargeable rates, and it is entitled to adjust the specific tariffs only once every six months for inflation (or earlier upon a cumulative increase of 5% in the Mexican Producer Price Index (excluding fuel)). However, the Company generally collects passenger charges from airlines 30 to 60 days following the date of each flight. The tariffs for the services that it provides to international flights or international passengers are generally denominated in U.S. dollars but are paid in Mexican pesos based on the average exchange rate for the month prior to each flight. Accordingly, depreciation of the peso, particularly late in the year, could cause the Company to exceed the maximum rates at one or more of its airports, which could lead to the imposition of fines and the subsequent termination of one or more of its concessions.
The peso has historically experienced significant volatility. From December 31, 2017 to December 31, 2018, the peso remained the same at Ps.19.64 per U.S.$1.00. From December 31, 2018 to December 31, 2019, the peso appreciated by approximately 3.9%, from Ps.19.64 per U.S.$1.00 on December 31, 2018 to Ps.18.86 per U.S.$1.00 on December 31, 2019. From December 31, 2019 to December 31, 2020, the peso depreciated by approximately 5.5%, from Ps.18.86 per U.S.$1.00 on December 31, 2019 to Ps.19.89 per U.S.$1.00 on December 31, 2020. On April 22, 2020,2021, the exchange rate was Ps.24.59Ps.19.87 per U.S.$1.00.
The Mexican government may terminate or reacquire the concessions under various circumstances, some of which are beyond the control of the Company.
The Company’s concessions are its principal assets, and it would be unable to continue operations without them. A concession may be revoked by the Mexican government for certain prescribed reasons, including the failure to comply with the master development programs,Master Development Programs, a temporary or permanent halt in the Company’s operations, actions
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affecting the operations of other concession holders in Mexico, the failure to pay damages resulting from its operations, the failure to keep the rates from exceeding its maximum rates or the failure to comply with any other material term of its concessions. Violations of certain terms of a concession (including violations for exceeding the applicable maximum rate) can result in revocation of a concession only if sanctions have been imposed for violations of the relevant term at least three times. Violations of other terms of a concession can result in the immediate termination of the concession. The concessions may also be terminated upon the Company’s bankruptcy or insolvency. Violations of the Mexican Airport Law, its regulations or other federal regulations could result in similar sanctions. In the event that any one of the Company’s concessions is terminated, its other concessions may also be terminated. For a discussion of events that may lead to a termination of a concession, see “Item 4. Information on the Company—Regulatory Framework—Penalties and Termination and Revocation of Concessions and Concession Assets.”
Under applicable Mexican law and the terms of the Company’s concessions, its concessions may also be made subject to additional conditions, including under the renewed master development programs,Master Development Programs, which the Company may be unable to meet. Failure to meet these conditions may also result in fines, other sanctions and the termination of the concessions.
The Mexican government may also terminate one or more of the concessions at any time through reversion, if, in accordance with applicable Mexican law, it determines that it is in the public interest to do so. The Mexican government may also assume the operation of any airport in the event of war, public disturbance or a threat to national security. In addition, in the case of a force majeure event, the Mexican government may require the Company to implement certain changes in its operations. In the event of a reversion of the public domain assets that are the subject of the concessions, the Mexican government under Mexican law is required to compensate the Company for the value of the concessions or added costs based on the results of an audit performed by appraisers or, in the case of a mandated
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change in the Company’s operations, the cost of that change. Similarly, in the event of an assumption of the Company’s operations, other than in the event of war, the government is required to compensate it and any other affected parties for any resulting damages. The Company may not receive compensation equivalent to the value of its investment in or any additional damages related to its concessions and related assets in the event of such action.
In the event that any one of the Company’s concessions is terminated, whether through revocation or otherwise, its other concessions may also be terminated. Thus, the loss of any concession would have a material adverse effect on the business and results of operations.
The Mexican government could grant new concessions that compete with the airports operated by the Company.
The Mexican government could grant additional concessions to operate existing government‑managedgovernment-managed airports or authorize the construction of new airports, which could compete directly with the airports operated by the Company.
On February 5, 2014, the Mexican government announced in the Federal Official Gazette that the Ministry of Communications and Transportation granted to Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V., a concession for 20 years to construct, operate and exploit a civil‑aviationcivil-aviation airport in the municipality of Bocoyna, Chihuahua, located 250 kilometers (144 miles) from the city of Chihuahua, within an area of 95.5 hectares (0.4 square miles). The government of the state of Chihuahua owns 98% of the capital stock of Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V. The airport has an ICAO Category 3C rating and could present competition to the Company’s airport located in the municipality of Chihuahua, which has a higher ICAO Category 4D rating and is located 18 kilometers (11.2 miles) from the city of Chihuahua. The Ministry of Communications and Transportation has the capacity to upgrade the category of the airport depending on improvements to infrastructure made by the concessionaire or could downgrade the category if the concessionaire does not maintain adequate conditions in the airport. On February 21, 2020, the State of Chihuahua announced that the airport iswas expected to start operations in late 2020, with limited operations through late 2021. On January 15, 2021, the State of Chihuahua mentioned that the airport is expected to start operations in late 2021, due to constructions delays because of COVID-19. The airport is expected to be fully operational beginning in 2022 and will serve both commercial and general aviation flights. It will have an annual capacity to serve up to 450,000 passengers. As of the date of this report, the Company cannot predict whether the Chihuahua airport will materially affect its results of operations or financial performance.
In the future, the Company may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession. Historically, Aeropuerto del Norte has been used solely for general
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aviation operations. The state of Nuevo León has requested in the past that the Ministry of Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations. To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession. However, the Ministry of Communications and Transportation may authorize such an amendment and commercial aviation flights may operate from Aeropuerto del Norte in the future. Any competition from other such airports could have a material adverse effect on the Company’s business, results of operations, prospects and financial condition. Under certain circumstances, the grant of a concession for a new or existing airport must be made pursuant to a public bidding process. In the event that a competing concession is offered in a public bidding process, the Company may not participate in such a process, or it may not be successful if it were to participate. See “Item 4. Information on the Company—Regulatory Framework—Grants of New Concessions.”
The Ministry of Communications and Transportation could require the Company to monitor certain aircraft movements at its airports that the Company does not currently control, which could result in increased costs.
The Mexican Air Traffic Control Authority (Servicios a la Navegación en el Espacio Aéreo Mexicano) or “SENEAM”, could require the Company to monitor certain aircraft movements at its airports that the Company does not currently control, which could result in increased costs. SENEAM may require the Company to manage and control aircraft movements in and out of its arrival and departure gates and remote boarding locations at its airports. Should SENEAM require the Company to control, or if the Company, for efficiency purposes, requests to control, these aircraft movements directly at any or all of its other airports in the future, the Company’s results of operations could be negatively impacted by increased operating insurance and liability costs resulting from taking on these obligations.
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Changes to Mexican laws, regulations and decrees applicable to the Company could have a material adverse impact on the results of operations.
In recent years, the Mexican government has implemented changes to the tax laws applicable to Mexican companies, including the Company. The terms of the Company’s concessions do not exempt it from any changes to the Mexican tax laws. Should the Mexican government implement changes to the tax laws that result in the Company having significantly higher income tax, the Company will be required to pay higher amounts due pursuant to any such changes, which could have a material adverse impact on its results of operations. For example, the issuance of the Business Flat Tax (Impuesto Empresarial a Tasa Única), which was published on October 1, 2007 and repealed in 2013, adversely impacted the Company’s results of operations in each of the years from 2007 through 2013. In addition, changes to the Mexican constitution or to any other Mexican laws could also have a material adverse impact on the Company’s business, results of operations, prospects and financial condition.
On November 1, 2013, Mexico’s Congress approved several tax reforms that became effective at the beginning of 2014. These reforms included changes to the Income Tax Law (Ley del Impuesto Sobre la Renta), Value Added Tax Law (Ley del Impuesto al Valor Agregado) and the Tax Code (Código Fiscal de la Federación). The tax reforms also repealed the Business Flat Tax Law and the Tax on Cash Deposits Law (Ley del Impuesto a los Depósitos en Efectivo).
The main result of the tax reforms was the elimination of a previously recognized deferred Business Flat Tax liability and the recognition of deferred asset taxes based only on the Mexican corporate income tax at a number of the Company’s airports representing Ps.339,325 thousand. The Company cannot predict the impact that future federal tax legislation reforms in Mexico may have on its financial condition and results of operations.
On December 27, 2016, the Ministry of Finance and Public Credit announced an increase, effective January 1, 2017, in the maximum gasoline and diesel prices to be applied in certain regions of Mexico, which caused an increase of gasoline prices of up to 20% in those areas. Furthermore, in November 2017, the Mexican Government removed price controls on gasoline and diesel. The removal of price controls and the resulting price increases led to widespread protests across Mexico. The Company cannot predict the effect of changes in gasoline and diesel prices, and any related political and social unrest, on the Mexican economy or whether the Mexican Government may alter its strategy for price liberalization in the future.
On May 1, 2019, the Mexican Government published significant reforms in the Federal Official Gazette to the Mexican Federal Labor Law. These changes include the creation of new courts specializing in labor law and protections
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to the collective rights of workers and union rights. As a result of these reforms, employees cannot be forced to join a union and more than one union can exist in every workplace. Currently, all unionized Company employees are represented by a national union of airport workers that operates throughout Mexico. To the extent unionized airport workers seek to create or join new unions, and/or materially modify the conditions agreed with the Company and with other Mexican airport operators, the Company’s operations could be adversely affected by union activities, including organized strikes or other work stoppages. The Company cannot predict how these developments may affect the Company’s results of operations or its financial condition. Any increased demands by the Company’s unionized workers may lead to higher labor costs, which could have a negative impact on its results of operations. For more information, see “Collective labor conflicts in Mexico could have an adverse impact on our results of operations” and “If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.”
In December 2019, the Mexican government published several amendments to the Income Tax Law, Value Added Tax Law, Excise Tax Law and the Federal Tax Code, most of which became effective on January 1, 2020. This set of tax reforms is one of the most important in the past few years and its main purpose is to tackle tax evasion by strengthening tax authorities’ control mechanisms. These amendments imposed stringent restrictions on the deductibility of certain expenses, such as a new earnings-stripping rule applicable to net interest, and the non-deductibility of payments to related parties that are deemed subject to preferential tax regimes or by means of structured arrangements, introduced regulations regarding hybrid mismatches and added amendments to the tax treatment applicable to tax transparent foreign entities or arrangements, all of which could affect our operating results. None of these amendments significantly impacted our operating results in 2020.
The 2020 tax reform also introduced a new mandatory disclosure regime aimed at tax advisors, for purposes of reporting and monitoring specific tax schemes listed under article 199 of the Federal Tax Code.
On April 23, 2021, the Mexican government published a decree pursuant to which several amendments were made to the Federal Labor Law, Income Tax Law, VAT Law, among others, in order to prohibit outsourcing of personnel. The amendments became effective April 24, 2021, except for certain legal provisions that will become effective August 1, 2021. Among the most important amendments made are: (i) prohibition of outsourcing of personnel, which consists of an individual or legal entity providing or making available its own workers for the benefit of another, including those provided by companies within the same business group; (ii) the provision of specialized services or the execution of specialized works (through external providers or companies within the same business group), is still allowed, only to the extent the services provided are not part of the corporate purpose or the primary economic activity
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of the company receiving the services; (iii) companies that hire specialized services with a contractor who fails to comply with its labor obligations will be jointly and severally liable with such contractor; (iv) companies that provide specialized services will require to be registered with the Ministry of Labor and Social Welfare (STPS); (v) violation of the new rules will result in fines ranging from 2,000 to 50,000 UMAs (approximately between U.S.$9,003 to U.S.$225,077); and (vi) payments to subcontracting personnel will not have tax effects of income tax deduction or VAT accreditation; furthermore, irregularities will be prosecuted as a tax fraud offense. The Company is analyzing the effect that the amendments will have on its costs, which could have a negative impact on its results of operations.
On January 11, 2021, the Mexican Government published reforms to Article 311 of Mexican Federal Labor Law in the Federal Official Gazette, regulating remote working conditions. As a result of these reforms, employees that work more than 40% of their work hours from home or from any other place that is not the applicable company’s domicile without supervision or guidance from the employer have new rights and obligations. These new rules also sets forth new obligations for employers. For example, employers must now provide the necessary tools and services for employees to fulfill their jobs. This reform became effective as of January 12, 2021 and provides for the publication of a Mexican Official Norm (Norma Oficial Mexicana, or “NOM”) which will determine the conditions to be complied with by employers to protect the security and health of employees working under this modality. These developments may adversely affect the Company’s results of operations or financial condition.
On March 10, 2021, a decree amending certain terms of the Electric Industry Law (EIL) became effective. The amendments aim to strengthen the state-owned utility Comisión Federal de Electricidad (CFE). The amendment includes, among others, (a) modifications to the order of priority of dispatch to the national electric grid; (b) modifications to the granting of permits referred in the EIL, which will now be subject to the planning criteria issued by the Ministry of Energy; and (c) powers granted to the Energy Regulatory Commission (“CRE”, for its acronym in Spanish) to revoke vesting self-supply contracts. The Company entered in 2017 into a power purchase agreement (PPA) with a wind electricity generator, which expires in 2028. In 2020, approximately 78% of the total electricity consumption of the Company was supplied under this agreement. As of the date of this memorandum, we cannot predict how these amendments to the EIL will affect the PPA.
In addition, as part of the current Federal Administration’s effort to protect worker’s rights, on October 23, 2019, Mexican Official Norm (Norma Oficial Mexicana, or “NOM”) NOM-035-STPS-2018 became effective. This NOM seeks to identify and prevent psychosocial risk factors in the workplace and promote a favorable work environment. Some of the new obligations set forth in this NOM include the creation of internal policies to prevent psychosocial risks, such as workloads, excessive work hours and shift rotations, negative interference in family life, negative leaderships in the workplace and violence in the workplace. While the Company has complied with the NOM provisions, the Company cannot predict whether its employees will eventually claim that the Company violated any of the provisions under the NOM. Any claims against the Company filed by its employees may lead to higher labor costs, which could have a negative impact on our results of operations. For more information, see “If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.”
Risks Related to Mexico
The Company’s business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico could adversely affect its business and results of operations.
In 2017, 2018, 2019 and 2019,2020, domestic terminal passengers have represented approximately 87.6%88.2%, 88.2%88.1% and 88.1%89.3%, respectively, of the passenger traffic volume in the Company’s airports. In addition, all of its assets are located, and all of its operations are conducted, in Mexico. Accordingly, the Company’s financial conditions and results of operations are substantially dependent on economic conditions prevailing from time to time in Mexico. As a result, its business, financial condition and results of operations could be adversely affected by any deterioration of the general condition of the Mexican economy, by a devaluation of the peso, by inflation and high interest rates in Mexico or by other negative political, social and economic developments in Mexico.
In the past, Mexico has experienced economic crises, caused by internal and external factors, characterized by exchange‑rateexchange-rate instability (including large devaluations), high inflation, high domestic interest rates, economic
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contraction, a reduction of international capital flows, a reduction of liquidity in the banking sector and high unemployment rates.
The Mexican economy underwent an economic crisis that began in 2008 and continued in 2009 as a result of the impact of the global financial crisis, which affected many emerging economies. The Mexican economy’s link with the U.S. economy remains very important, and therefore, any downside to the economic outlook of the U.S. may hinder any recovery in Mexico. This correlation may have an impact on Mexico’s GDP growth and other macro-economic conditions. The Mexican economy achieved real GDP growth rates of -0.1%-8.5%, 2.0%-0.1% and 2.0% in 2020, 2019 2018 and 2017,2018, respectively, and is estimated to decreaseincrease by 6.6%4.3% in 20202021 and to grow by 3.0%2.5% in 2021,2022, according to the World Economic Outlook published by the International Monetary Fund in April 2020.January 2021.
During 2019,2020, average reference interest rates in Mexico increaseddecreased by 23253 basis points compared to 2018.2019. The annualized interest rates on 28‑day short‑term28-day short-term Mexican treasury bills, or Cetes (Certificados de la Tesorería de la Federación), averaged approximately 3.0%, 4.2%, 6.7%, 7.6%, 7.8% and 7.8%5.3% for 2015, 2016, 2017, 2018, 2019 and 2019,2020, respectively. To the extent that the Company incurs peso‑denominatedpeso-denominated debt in the future, it could be at high interest rates.
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If inflation or interest rates increase significantly or if the Mexican economy is otherwise further adversely impacted, the Company’s business, financial condition, prospects and results of operations could be materially and adversely affected because, among other things, demand for transportation services may decrease. Similar events may occur, and the recurrence of such events may adversely affect the Company’s business, results of operations, prospects and financial condition.
Political conditions in Mexico, including as a result of Mexico’s recent national presidential and legislative elections, could materially and adversely affect the Mexican economy and political climate and, in turn, the operations of the Company.
PresidentialLast presidential and federal congressional elections in Mexico were held on July 1, 2018. Mr. Andrés Manuel López Obrador, a member of the Movimiento Regeneración Nacional (National Regeneration Movement, or Morena), was elected President of Mexico and took office on December 1, 2018, replacing Mr. Enrique Peña Nieto, a member of the Partido Revolucionario Institucional (Institutional Revolutionary Party, or PRI). President López Obrador’s term will expire on September 30, 2024. Historically, the Mexican president has strongly influenced new policies and governmental actions that impact the Mexican economy. We cannot assure you that the current administration or any other future administration will maintain business-friendly and open-market economic policies and policies that stimulate economic growth and social stability. The newAny administration could implement substantial changes in law, policy and regulations in Mexico, which could adversely affect our business, financial condition, results of operations and prospects. In addition, any actions taken by the new administration may lead to riots, protests and looting that could adversely affect our operations. Our financial condition and results of operation may be adversely affected by changes in Mexico’s political climate, to the extent that such changes affect the nation’s economic policies, growth, stability, outlook or regulatory environment.
In addition, following the congressional elections on July 1, 2018, Morena obtained an absolute majority in the Mexican Chamber of Deputies and, together with its allied political parties (Partido del Trabajo and Partido Encuentro Social), obtained a majority in the Mexican Senate. The newly-electedcurrent members of the Mexican Congress took office on September 1, 2018. We cannot assure you that Morena and its political party allies or any future members will not introduce new legislative initiatives or modify existing legislation that could, in turn, result in economic or political conditions that could materially and adversely affect our business. On June 6, 2021, a number of electoral processes will take place including mid-term elections for the Mexican Chamber of Deputies as well as governor elections in fifty states, including six of the states in which we operate our airports, which could lead to changes in the composition of the Mexican Chamber of Deputies as well as of the governing party in those states in which where we operate. Changes in laws, public policies or regulations may affect the political and economic environment in Mexico and, consequently, contribute to economic uncertainty and heightened volatility of the Mexican capital markets and in securities issued by Mexican companies.
Furthermore, our business may be adversely affected by fluctuations in the value of the U.S. dollar as compared to the Mexican peso, inflation, interest rates, changes in laws and other political or social developments in Mexico over which we have no control. Any of the above may have an adverse effect on Mexico’s economic situation and, in turn, on our business, results of operations, financial condition and ability to repay our indebtedness.
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Adverse domestic events could negatively impact the Company’s business and results of operations.
The operations of our airports may be disrupted due to the actions of third parties, such as protestors or demonstrators, which are beyond our control. The new Mexican president took office on December 1, 2018 and any actions taken by the new administration or the opposition may lead to riots, protests, demonstrations and looting that could adversely affect our revenues and security at out airports and could restrict our ability to expand our operations. Any disruption in our operations, or adverse consequence resulting from protests or riots, including flight delays, a work stoppage or other similar event, may have a material adverse effect on the operation of our airports and on our results of operations.
Demonstrations and riots taking place in cities where our airports are located and where they are either a potential target or in the path of such demonstrations could generate flight cancellations and the suspension of our
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operations and could materially and adversely affect our business, results of operations, prospects and financial condition.
Depreciation of the peso relative to the U.S. dollar could adversely affect the results of operations and financial condition of the Company.
Following the devaluation of the peso and the economic crisis beginning in 1994, the aggregate passenger traffic volume in the Company’s airports in 1995 (then operated by its predecessor) decreased as compared to prior years, reflecting a decrease in Mexican passenger traffic volume. From December 31, 2017 to December 31, 2018, the peso remained the same at Ps.19.64 per U.S.$1.00. From December 31, 2018 to December 31, 2019, the peso appreciated from Ps.19.64 per U.S.$1.00 on December 31, 2018 to Ps.18.86 per U.S.$1.00 on December 31, 2019, an appreciation of 3.9%. From December 31, 2019 to December 31, 2020, the peso depreciated from Ps.18.86 per U.S.$1.00 on December 31, 2019 to Ps.19.89 per U.S.$1.00 on December 31, 2020 During the first months of 2020,2021, the peso depreciated, reaching Ps.24.59Ps.19.87 per U.S.$1.00 on April 22, 2020.2021.
A depreciation of the peso affects the Company’s business in the following ways: (i) international passengers and international flights pay tariffs reported in U.S. dollars; while these tariffs are generally collected in Mexican pesos up to 60 days following the date of each flight, any depreciation of the Mexican peso has a positive impact on the Company’s results from operations, which are reported in Mexican pesos; (ii) the Company has cash balances denominated in U.S. dollars; a depreciation in the Mexican peso would result in higher cash balances when converted to Mexican pesos, thus causing foreign exchange gains; and (iii) the Company has financial liabilities denominated in U.S. dollars; a depreciation in the Mexican peso results in higher debt balances when converted to Mexican pesos, thus causing foreign exchange losses. As of December 31, 2019,2020, the Company had U.S.$10.14.1 million of liabilities denominated in U.S. dollars, representing 4.2%1.1% of its consolidated debt. As of March 31, 2020,2021, U.S.$80.080.2 million of the Company’s cash balance was denominated in U.S. dollars.
Moreover, the depreciation of the peso also affects some of the Company’s airline customers transacting in U.S. dollars, including the purchases or leases of equipment, maintenance and fuel. Severe devaluation or depreciation of the peso may also result in the disruption of the international foreign exchange markets and may limit the Company’s ability to transfer or to convert pesos into U.S. dollars and other currencies.
High incidences of crime in Mexico, including extortion and drug trafficking, could adversely affect the Company’s business.
Higher incidences of crime throughout Mexico, including extortion and drug trafficking, could have an adverse effect on our business, results of operations, prospects and financial condition, as it may decrease the international and domestic passenger traffic directed to or within Mexico. The travel warning issued by the U.S. Department of State (Bureau of Consular Affairs) on December 17, 2019September 8, 2020 (the “Travel Advisory”) urges U.S. citizens not to travel to the states of Colima, Tamaulipas, Guerrero, Michoacán, and Sinaloa (except the city of Mazatlán)., and Tamaulipas. This Travel Advisory also urges U.S. citizens to defer non-essential travel to cities, states and other regions, such as Chihuahua, Coahuila, Durango, areas of the state of Jalisco that border the states of Michoacán, Mexico State, Morelos, Nayarit, Nuevo León (including the metropolitan area of Monterrey), San Luis Potosí, the eastern edge of Sonora which borders the state of Chihuahua, and Zacatecas. Drug‑relatedDrug-related violence and other incidents of organized crime may not be contained, which could have a material adverse effect on our business, results of operations, prospects and financial condition.
In January 2019, the Mexican government implemented measures to reduce the theft of fuel transported in pipelines operated by Mexican state-owned entity Petróleos Mexicanos (PEMEX) throughout Mexico. As a result of these measures, certain states in Mexico, such as Mexico, Hidalgo, Querétaro, Guanajuato, Jalisco, Tamaulipas and Nuevo León, were affected by a shortage of gasoline for automobile use. Even though there were no shortages of
24
aircraft fuel as a result of the actions implemented by the Mexican government, we cannot assure that future actions taken by the Mexican government against theft of fuel will not affect the availability of aircraft fuel in states where our airports are located, which, in turn, could have an adverse effect on our operations.
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The value and prices of securities issued by Mexican companies, including us, may be adversely affected by developments in other countries.
The market value of securities of Mexican companies, including us, may be, to varying degrees, affected by economic and market conditions in other countries. Although economic conditions in these countries may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers. In past years, prices of both Mexican debt and equity securities have been adversely affected by the sharp drop in Asian securities markets and the economic crises in Argentina, Brazil, Greece, Italy, Portugal, Russia, Spain, Venezuela and the United Arab Emirates.
In addition, economic conditions in Mexico have become increasingly correlated to economic conditions in the United States. Therefore, an economic downturn in the United States will significantly adversely impact the Mexican economy. Furthermore, on January 20, 2021 Mr. Joseph R. Biden became the 46th president of the United States. The Company cannot assure you that any policies adopted by the new U.S. administration will not have an impact in the market value of its securities, or that the market value of its securities will not be adversely affected by events elsewhere.
Delays in the process of obtaining necessary governmental approvals could affect the ability to expand the airports of the Company.
The expansion, development and growth of the Company’s airports from time to time may require governmental approvals, administrative proceedings or some other governmental action. Any delay or inability to obtain such approvals or favorable outcomes of such proceedings could have a negative impact on the expansion, development and growth of the Company’s airports.
Mexico’s environmental legislation could limit the growth of some of our airports.
The level of environmental regulation in Mexico is increasing and the enforcement of environmental laws has become more common. For instance, Mexico launched a new carbon dioxide (“CO2”) market in 2018. The market requires that industries that generate above a certain amount of CO2 emissions pay for rights to excess emissions. Starting in 2019, the legislation also requires that companies report their global emissions as verified by the Mexican Emissions Registry (Registro Nacional de Emisiones). In addition, new water quality standards are being discussed, which would require greater water quality for all of our wastewater disposal. There can be no assurance that environmental regulations or their enforcement will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition.
According to the Mexican Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) norm NOM‑SEMARNAT‑059‑NOM-SEMARNAT-059-2010, mangroves are protected species, and it is a criminal offense to remove such species. Within the grounds of our Acapulco and Zihuatanejo airports, we have extended areas with mangroves, which may limit our potential to expand such airports.
The Mexican National Water Commission (Comisión Nacional del Agua) has the authority to restrict water use in some of our airports due to water shortage in northern Mexico and has enhanced its mechanisms to verify compliance with the fiscal, administrative and technical requirements regarding the extraction and discharge of water. Concessionaires who fail to comply with any of these requirements may be subject to administrative procedures that may result in the cancellation of water extraction rights and /or the imposition of significant fines.
Furthermore, twelve of our airports have received the Environmental Quality Certification awarded by the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente). The rest of our airports areOur Monterrey airport is in the process of obtaining this certification, which we expectis expected to receivebe received in 2020.2021. However, compliance with current or future environmental regulations may require us to incur additional costs in order to bring our airports
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into compliance, and if we fail to comply with current or future environmental regulations, we may be subject to fines and other sanctions.
On August 11, 2014, the Mexican National Agency of Industrial Safety and Protection of the Environment of the Hydrocarbons Sector (Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector
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Hidrocarburos, or “ASEA”) was created. While initially taking a secondary role to the role of the Mexican Ministry of the Environment and Natural Resources, ASEA has recently started to enforce its legal powers. Our airport growth projects related to fuel supply must now be approved by ASEA, which may result in more burdensome proceedings for the approval of special projects related to hydrocarbons. As of the date of this report, there can be no assurance whether ASEA’s rules and regulations will materially affect our business or results of operations.
Minority shareholders may be less able to enforce their rights against the Company, its directors or controlling shareholders in Mexico.
Under Mexican law, the protections afforded to minority shareholders are different from those afforded to minority shareholders in the United States. For example, there are no precedent cases in which Mexican courts found that the directors violated their fiduciary duties. As a result, it may be difficult for minority shareholders to bring an action against directors for breach of these duties and achieve the same results as in most jurisdictions in the United States. Procedures for class‑actionclass-action lawsuits were incorporated into Mexican law and became effective in March 2012. However, these rules and procedures are different and more limited than those in place in the United States. Therefore, it may be more difficult for minority shareholders to enforce their rights against the Company, its directors or its controlling shareholders.
Enforcing civil liabilities against us or our directors, officers and controlling persons may be difficult.
We are organized under the laws of Mexico, and almost all of our directors, officers and controlling persons reside in Mexico. In addition, a substantial portion of our assets and the assets of our directors, officers and controlling persons are located in Mexico. As a result, it may be difficult for investors to effect service of process on such persons within the United States or elsewhere outside of Mexico or to enforce judgments against us or our directors, officers and controlling persons, including in any action based on civil liabilities under U.S. federal securities laws. There is doubt as to the enforceability in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts or other courts outside of Mexico, of liabilities based solely on U.S. federal securities laws.
Mexican law and the bylaws of the Company restrict the ability of non-Mexican shareholders to invoke the protection of their governments with respect to their rights as shareholders.
As required by Mexican law, the Company’s bylaws provide that non‑non-Mexican shareholders shall be considered as Mexicans in respect of their ownership interests in the Company and shall be deemed to have agreed not to invoke the protection of their governments in certain circumstances. Under this provision, a non‑Mexicannon-Mexican shareholder is deemed to have agreed not to invoke the protection of his own government by asking such government to interpose a diplomatic claim against the Mexican government with respect to the shareholder’s rights as a shareholder, but is not deemed to have waived any other rights it may have, including any rights under the U.S. securities laws, with respect to its investment in the Company. If you invoke such governmental protection in violation of this agreement, your shares could be forfeited to the Mexican government.
The Company is subject to different corporate disclosure standards than U.S. companies.
A principal objective of the securities laws of the United States is to promote full and fair disclosure of all material corporate information. However, there may be less publicly available information about foreign issuers of securities listed in the United States than is regularly published by or about U.S. issuers of listed securities.
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Risks Related to Our Shareholders
SETA controls our management, and its interests may differ from those of other shareholders.
As of the date of this report, ICA Tenedora, S.A. de C.V.Fintech Holdings, Inc., Bagual S.à r.l. (“ICATEN”Bagual”), Grenadier S.à r.l. (“Grenadier”), Pequod S.à r.l. (“Pequod”), Harpoon S.à r.l. (“Harpoon”), Expanse S.à r.l. (“Expanse”), together (“Fintech”), through itstheir direct subsidiary SETA, isare the beneficial ownerowners of 14.7% of our total capital stock. SETA directly owns Series B shares representing 1.9% of our total capital stock and owns Series BB shares that represent 12.8% of our capital stock. As long as SETA retains at least 7.65% of our capital stock in the form of Series BB, all of its special rights, including its right to nominate, appoint and remove certain directors and officers as holder of Series BB shares, will remain in place. The rights and obligations of
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SETA in our management are explained in “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders.”
The termination of the Technical Assistance Agreement would also trigger the conversion of SETA’s remaining Series BB shares into Series B shares, resulting in the termination of all of SETA’s special rights. SoAs long as the Technical Assistance Agreement remains in effect and SETA continues to hold anyat least 7.65% of our capital stock in the form of Series BB shares, it also has the obligationright to appoint and nominate the same number of directors and officers that it is currently is entitled to appoint under our bylaws. For further information on the Technical Assistance Agreement and its terms, see “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Arrangements Relating to SETA.”
SETA’s continuing veto rights as holder of at least 7.65% of our capital stock in the form of Series BB shares and its right to nominate, appoint and remove certain directors and officers as holder of Series BB shares, which will continue for as long as it owns at least one Series BB share and the Technical Assistance Agreement remains in effect, could adversely impact our operations and constitute an obstacle for us to bring in a new strategic shareholder and/or operator. With the right to nominate, appoint and remove certain members of our senior management, SETA directs the actions of our management in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses. Should SETA’s shares fall below this threshold, our management could change significantly, and our operations could be adversely affected as a result. In the event of termination of the Technical Assistance Agreement, SETA would cease to have the special rights of the Series BB shares, which may adversely affect and disrupt our operations.
Furthermore, in connection with a corporate and debt restructuring carried out byOn September 14, 2020, Empresas ICA, ICATEN was incorporated on March 14, 2017S.A.B. de C.V. and Empresas ICA transferred all the shares of its direct subsidiaries, including those of Controladora de Operaciones de Infraestructura, S.A. de C.V. (“CONOISA”) filed Amendment No. 9 amending the Schedule 13D filed with the SEC, informing that prior to June 12, 2020, SETA was a directwholly-owned subsidiary of ICATEN (which until December 2019 owned 99.99%ICA Tenedora,. S.A. de C.V. (“ICATEN”). On June 10, 2020, each of SETA’s capital stock)Bagual, Grenadier, Pequod, Harpoon and indirectly ours, to ICATEN. On August 25, 2017, Empresas ICA and certain of its subsidiaries, includingExpanse entered into a Stock Purchase Agreement with ICATEN and CONOISA, filedin the case of Bagual, a joint prepackaged concurso mercantil plan (the “ICA Concurso Plan”)Stock Purchase Agreement with the competent bankruptcy courteach of Mexico. PursuantICATEN and ICA Infraestructura, S.A. de. C.V. (a subsidiary of ICATEN), to the ICA Concurso Plan, allpurchase collectively 100% of the filing entities’ recognized unsecured debt was discharged and paid with shares representing up to 99.99% of ICATEN’s capital stock resulting in a change in our indirect holding structure. On March 1, 2018,of SETA. The transactions closed on June 12, 2020 and the competent bankruptcy court of Mexico approvedaggregate purchase price for the ICA Concurso Plan; the relevant judgmentSETA shares was published on March 2, 2018 and became effective as of March 23, 2018.Ps. 5.47 per share for 862,703,377 shares.
The interests of SETA, Fintech, or any new controlling shareholder, of ICATEN, may differ from those of our other shareholders and can be contrary to the preferences and expectations of our other shareholders. SETA and the officers nominated or appointed by it may not exercise their rights in ways that favor the interests of our other shareholders. Furthermore, as a result of our board’s decision-making process, officers appointed by SETA may influence decisions taken by the rest of our officers.
Risks Related to Our ADSs
You may not be entitled to participate in future preemptive rights offerings.
Under Mexican law, if we issue new shares for cash as part of a capital increase, we generally must grant our shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in the Company. Rights to purchase shares in these circumstances are known as preemptive rights. We may not legally be permitted to allow holders of ADSs in the United States to exercise any preemptive rights in any future capital increase,
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unless we file a registration statement with the SEC with respect to that future issuance of shares or the offering qualifies for an exemption from the registration requirements of the Securities Act of 1933, as amended.
At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC and any other factors that we consider important to determine whether we will file such a registration statement.
We may not file a registration statement with the SEC in the future to allow holders of ADSs or shares in the United States to participate in a preemptive rights offering. In addition, under current Mexican law, sales by the
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depository of preemptive rights and distribution of the proceeds from such sales to you, the ADS holders, is not possible. As a result, your equity interest in the Company may be diluted proportionately.
Holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary.
Under Mexican law, a shareholder is required to deposit its shares with the Secretary of the Company, S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V. (“Indeval”), a Mexican or foreign credit institution or a brokerage house in order to attend a shareholders’ meeting. A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to attend shareholders’ meetings. A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with the procedures provided for in the deposit agreement, but a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.
This Form 20-F contains forward-looking statements. We may from time to time make forward-looking statements in our annual and periodic reports to the SEC on Forms 20-F and 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others. Examples of such forward-looking statements include but are not limited to:
| projections of operating revenues, net comprehensive income (loss), net income (loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios, |
| statements of our plans, objectives or goals, |
| changes in our regulatory environment, |
| statements about our future economic performance or that of Mexico, and |
| statements of assumptions underlying such statements. |
Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from the projections, plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors, some of which are discussed above under “Risk Factors,” include material changes in the performance or terms of our concessions, developments in legal proceedings, economic and political conditions and government policies in Mexico or elsewhere, inflation rates, exchange rates, regulatory developments, customer demand and competition. We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties, including the duration and severity of the COVID-19 outbreak and its impacts on our business; may cause actual results to differ materially from those in forward-looking statements.
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Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments.
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Item 4. Information on the Company
HISTORY AND DEVELOPMENT OF THE COMPANY
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., which we refer to by the acronym “GACN”, is a corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico. We were incorporated in 1998 as part of the Mexican government’s program for the opening of Mexico’s airports to private investment. The duration of our corporate existence is indefinite. We are a holding company and conduct substantially all of our operations through our subsidiaries. The terms “GACN”, “the Company”, “we”, “us” and “our” in this annual report refer to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., together with its subsidiaries, and to properties and assets that we own or operate, unless otherwise specified. Our registered office is located at Plaza Metrópoli Patriotismo, Piso 5, Av. Patriotismo 201, Col. San Pedro de los Pinos, Benito Juárez, Ciudad de México, México 03800, telephone +52.81.8625.4300. Our U.S. agent is Puglisi & Associates. Our U.S. agent’s address is 850 Library Avenue, Suite 204, Newark, Delaware 19711.
The SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports and information statements and other information regarding us. The reports and information statements and other information about us can also be downloaded from the SEC’s website or our website at http://www.oma.aero.
Investment by SETA and Its Affiliates
In 2000, as part of the first stage of our privatization, the Mexican government sold Series BB shares to SETA in a public bidding process. Pursuant to this transaction, SETA paid the Mexican government a total of Ps.864,055,578 (amount in nominal pesos, excluding interest) (U.S.$76.0 million based on the exchange rate in effect on the date of SETA’s bid) in exchange for:
| all of our Series BB shares, which in 2000 represented 15.0% of our outstanding capital stock; |
| an option to acquire from the Mexican government shares representing 36.0% of the capital stock in 2000. This option was subsequently assigned to and exercised by Aeroinvest (currently CONOISA); |
| an option to subscribe for up to 3% of newly issued Series B shares (1% of which expired unexercised on June 14, 2005, and 2% of which was exercised in September 2006); and |
| the right and obligation to enter into various agreements with us and the Mexican government, including a participation agreement setting forth the rights and obligations of each of the parties involved in the privatization (including SETA) (the “Participation Agreement”), a |
Currently, Series BB shares represent 12.8%12.8% of our capital stock and the remainder consist of Series B shares.
SETA’s current shareholders are:
● | Fintech, through its wholly-owned subsidiaries , which own directly 100% of SETA. Bagual owns 19.6% of the capital stock of SETA; Grenadier owns 21.5% of the capital stock of SETA; Pequod owns 21.5% of the capital stock of SETA; Harpoon owns 20.4% of the capital stock of SETA and Expanse owns 17.1% of the capital stock of SETA. On June 10, 2020, each of the wholly-owned subsidiaries previously mentioned entered into a Stock Purchase Agreement with ICATEN and in the |
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| case of Bagual, a Stock Purchase Agreement with each of ICATEN |
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|
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Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers industry expertise and technology to us in exchange for a fee, which in 20192020 amounted to approximately Ps.150,108Ps.81,164 thousand. This agreement is more fully described in “Item 7. Major Shareholders and Related‑PartyRelated-Party Transactions.”
Initial Public Offering
On November 29, 2006, a Mexican trust established by Nacional Financiera, S.N.C., or NAFIN (a Mexican national credit institution and development bank owned and controlled by the Mexican Government), acting pursuant to the instructions of the Ministry of Communications and Transportation, sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of ADSs and Series B shares, concurrently in the United States and Mexico. The net proceeds from the sale of the shares totaled approximately U.S.$432.2 million and were paid to the Mexican government.
Master Development Programs and Capital Expenditures
Master Development Program
Every five years, we are required to submit to the Ministry of Communications and Transportation for approval a master development programMaster Development Program for each of our concessions describing, among other matters, our traffic forecasts for the following 15 years, and detailed expansion, modernization and major and minor maintenance plans for the following five years. Each master development programMaster Development Program is required to be updated and resubmitted for approval to the Ministry of Communications and Transportation every five years. Upon such approval, the master development programMaster Development Program is binding for the following five years and deemed to constitute part of the relevant concession. Any major construction, renovation or expansion of an airport generally may only be made pursuant to a concession holder’s master development programMaster Development Program and upon approval by the Ministry of Communications and Transportation. In December 2015,November 2020, the Ministry of Communications and Transportation approved the master development programsMaster Development Programs for each of our subsidiary concession holders for the 20162021 to 20202025 period. These five‑year master development programsfive-year Master Development Programs, which were approved by the Ministry of Communications and Transportation, are in effect from January 1, 20162021 until December 31, 2020,2025, and we are required to comply with them on a year‑by‑yearyear-by-year basis. We will submit the new master development program to the Ministry of Communications and Transportation in 2020, which upon approval would be in effect from January 1, 2021 to December 31, 2025. We do not expect the COVID-19 pandemic to affect our committed investments under the current master development programs, which are in effect until December 31, 2020.
Master Development Programs.
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The following table sets forth our current committed investments, including major maintenance expenditures, under our master development programsMaster Development Programs by airport for 20162021 through 2020:2025. Figures are updated based on the Producer Price Index for the construction industry:
Committed Investments Under Master Development Programs by
Airport for 20162021 through 2020 2025 (1)
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| 2020 |
| 2016 - 2020 | ||||||||||||
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| (in thousands of pesos) | ||||||||||||||||||||||
| | (in thousands of pesos) | ||||||||||||||||||||||
Acapulco |
| 302,123 |
| 255,946 |
| 176,228 |
| 40,740 |
| 10,806 |
| 785,842 |
| 169,017 | | 54,220 | | 45,189 | | 19,988 | | 40,858 |
| 329,272 |
Ciudad Juárez |
| 53,671 |
| 18,411 |
| 30,669 |
| 94,797 |
| 20,971 |
| 218,519 |
| 233,915 | | 202,913 | | 313,188 | | 195,768 | | 62,014 |
| 1,007,799 |
Culiacán |
| 53,231 |
| 38,708 |
| 36,772 |
| 65,496 |
| 65,008 |
| 259,215 |
| 279,206 | | 301,991 | | 333,872 | | 72,891 | | 88,512 |
| 1,076,472 |
Chihuahua |
| 235,370 |
| 192,610 |
| 23,605 |
| 118,118 |
| 25,193 |
| 594,895 |
| 188,108 | | 166,830 | | 210,734 | | 116,083 | | 72,699 |
| 754,453 |
Durango |
| 41,434 |
| 24,721 |
| 28,452 |
| 88,389 |
| 3,226 |
| 186,221 |
| 73,650 | | 112,310 | | 82,069 | | 44,354 | | 24,791 |
| 337,173 |
Mazatlán |
| 34,655 |
| 43,640 |
| 42,494 |
| 32,505 |
| 14,030 |
| 167,324 |
| 79,162 | | 70,696 | | 131,412 | | 15,272 | | 40,001 |
| 336,542 |
Monterrey |
| 463,593 |
| 437,943 |
| 452,626 |
| 237,714 |
| 115,761 |
| 1,707,637 |
| 947,082 | | 1,336,164 | | 1,238,833 | | 1,871,495 | | 1,688,744 |
| 7,082,318 |
Reynosa |
| 232,367 |
| 191,044 |
| 22,208 |
| 12,028 |
| 11,245 |
| 468,891 |
| 104,664 | | 44,173 | | 44,805 | | 35,838 | | 28,960 |
| 258,440 |
San Luis Potosí |
| 41,795 |
| 225,338 |
| 225,028 |
| 19,831 |
| 2,514 |
| 514,507 |
| 154,519 | | 83,211 | | 90,005 | | 51,135 | | 29,798 |
| 408,668 |
Tampico |
| 79,028 |
| 131,169 |
| 147,202 |
| 15,911 |
| 18,491 |
| 391,800 |
| 104,325 | | 69,792 | | 54,446 | | 10,940 | | 51,502 |
| 291,004 |
Torreón |
| 42,204 |
| 27,619 |
| 19,428 |
| 21,106 |
| 65,052 |
| 175,409 |
| 82,090 | | 110,730 | | 38,894 | | 27,978 | | 33,258 |
| 292,950 |
Zacatecas |
| 36,058 |
| 10,932 |
| 41,250 |
| 7,808 |
| 32,059 |
| 128,106 |
| 71,296 | | 24,093 | | 18,759 | | 16,843 | | 22,386 |
| 153,377 |
Zihuatanejo |
| 133,060 |
| 78,529 |
| 29,546 |
| 29,634 |
| 130,328 |
| 401,097 |
| 78,468 | | 77,944 | | 18,534 | | 31,542 | | 51,943 |
| 258,432 |
Total |
| 1,748,589 |
| 1,676,610 |
| 1,275,507 |
| 784,076 |
| 514,682 |
| 5,999,465 |
| 2,565,502 |
| 2,655,068 |
| 2,620,741 |
| 2,510,125 |
| 2,235,465 |
| 12,586,901 |
(1) |
| In pesos with purchasing power as of December |
The following table sets forth our current committed investments, including major maintenance expenditures, under our master development programsMaster Development Programs by category for 20162021 through 2020:2025:
Committed Investments Under Master Development Programs by
Category for 20162021 through 2020 2025 (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended December 31, | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| 2016 - 2020 |
|
| (in thousands of pesos) | ||||||||||
Capacity and quality projects Terminals |
| 876,893 |
| 1,208,865 |
| 854,753 |
| 431,746 |
| 190,361 |
| 3,562,617 |
Projects to meet ICAO directives |
| 156,060 |
| 135,185 |
| 45,754 |
| 61,617 |
| 35,919 |
| 434,535 |
Facilities for disabled passengers |
| 6,632 |
| 5,002 |
| 1,478 |
| 3,477 |
| 660 |
| 17,249 |
Environmental projects |
| 38,942 |
| 8,681 |
| 6,216 |
| 3,589 |
| 1,822 |
| 59,249 |
Projects requested by competent authorities |
| 3,668 |
| 1,239 |
| 20,626 |
| 33,202 |
| — |
| 58,734 |
Runways and aprons |
| 183,374 |
| 81,975 |
| 133,183 |
| 150,334 |
| 121,728 |
| 670,594 |
Machinery and equipment |
| 27,548 |
| 4,479 |
| 9,832 |
| 7,813 |
| 5,194 |
| 54,866 |
Operative standards equipment |
| 121,867 |
| 46,586 |
| 22,020 |
| 19,892 |
| 13,191 |
| 223,557 |
Security — investments |
| 45,244 |
| 47,285 |
| 33,183 |
| 44,281 |
| 27,906 |
| 197,898 |
Information systems — investments |
| 99,661 |
| 38,514 |
| 108,059 |
| 8,256 |
| 3,711 |
| 258,201 |
Baggage-screening system — investments |
| 79,477 |
| 15,352 |
| 21,585 |
| 5,049 |
| 108,976 |
| 230,439 |
Other |
| 109,225 |
| 83,448 |
| 18,819 |
| 14,820 |
| 5,213 |
| 231,526 |
Total |
| 1,748,589 |
| 1,676,610 |
| 1,275,507 |
| 784,076 |
| 514,682 |
| 5,999,465 |
| | | | | | | | | | | | |
| | For the Year Ended December 31, | ||||||||||
|
| |
| |
| |
| |
| |
| Total |
| | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2021 - 2025 |
| | (in thousands of pesos) | ||||||||||
Terminal capacity expansions and quality projects |
| 610,054 | | 1,051,955 | | 1,295,208 | | 1,444,221 | | 1,438,497 |
| 5,839,936 |
Projects to meet ICAO directives |
| 236,096 | | 139,842 | | 14,053 | | 10,260 | | 9,502 |
| 409,753 |
Operational Infrastructure Expansion |
| 190,178 | | 176,799 | | 158,040 | | 209,535 | | 313,502 |
| 1,048,054 |
Runways and aprons |
| 371,483 | | 441,930 | | 348,335 | | 284,352 | | 135,296 |
| 1,581,395 |
Machinery and equipment |
| 437,868 | | 527,027 | | 198,793 | | 159,582 | | 217,715 |
| 1,540,984 |
Security, Safety and Information Technology Equipment |
| 388,412 | | 156,264 | | 544,285 | | 361,149 | | 81,534 |
| 1,531,644 |
Other |
| 331,412 | | 161,252 | | 62,027 | | 41,027 | | 39,418 |
| 635,135 |
Total |
| 2,565,502 |
| 2,655,068 |
| 2,620,741 |
| 2,510,125 |
| 2,235,465 |
| 12,586,901 |
(1) |
| In pesos with purchasing power as of December |
3731
Expenditures Under the Master Development Programs and Other Strategic Capital Expenditures
Expenditures incurred to comply with our obligations under the master development programsMaster Development Programs include expenditures associated with improvements to our concession assets, major maintenance costs and other items recorded as operating costs as incurred. Major maintenance expenditures are not subject to capitalization and reduce our major maintenance provision. See “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies—Major Maintenance Provision.” Thus, not all expenditures incurred to comply with our obligations under the master development programsMaster Development Programs will constitute capital expenditures.
In addition to investments in our master development programs,Master Development Programs, we have also invested in commercial, real estate and other business opportunities, including our investment in hotels in Terminal 2 of the Mexico City International Airport and in the Monterrey airport, as well as our industrial park in the Monterrey airport.
The following table sets forth our actual capital expenditures, including capital expenditures made pursuant to our master development programsMaster Development Programs and other strategic capital expenditures by airport for 2016 through 2019:2020:
Actual Capital Expenditures by Airport for 2016 through 20192020
| | | | | | | | | | | ||||||||
| | For the Year Ended December 31, | ||||||||||||||||
|
| 2016 | | 2017 |
| 2018 |
| 2019 | | 2020 | ||||||||
|
|
|
|
|
|
|
|
| ||||||||||
|
| For the Year Ended December 31, | ||||||||||||||||
|
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||||||||||
|
| (in thousands of pesos) | ||||||||||||||||
| | (in thousands of pesos) | ||||||||||||||||
Acapulco |
| 77,069 |
| 372,253 |
| 279,099 |
| 12,221 |
| 77,069 | | 372,253 |
| 279,099 |
| 12,221 | | 34,592 |
Ciudad Juárez |
| 10,005 |
| 33,404 |
| 9,096 |
| 29,839 |
| 10,005 | | 33,404 |
| 9,096 |
| 29,839 | | 78,794 |
Culiacán |
| 9,896 |
| 44,389 |
| 34,035 |
| 65,480 |
| 9,896 | | 44,389 |
| 34,035 |
| 65,480 | | 40,919 |
Chihuahua |
| 16,202 |
| 122,448 |
| 141,908 |
| 173,576 |
| 16,202 | | 122,448 |
| 141,908 |
| 173,576 | | 37,908 |
Durango |
| 4,478 |
| 19,991 |
| 13,788 |
| 48,932 |
| 4,478 | | 19,991 |
| 13,788 |
| 48,932 | | 47,209 |
Mazatlán |
| 19,632 |
| 30,222 |
| 31,306 |
| 37,812 |
| 19,632 | | 30,222 |
| 31,306 |
| 37,812 | | 23,805 |
Monterrey |
| 98,585 |
| 505,445 |
| 282,514 |
| 244,038 |
| 98,585 | | 505,445 |
| 282,514 |
| 244,038 | | 748,245 |
Reynosa |
| 23,944 |
| 127,353 |
| 153,562 |
| 63,443 |
| 23,944 | | 127,353 |
| 153,562 |
| 63,443 | | 30,191 |
San Luis Potosí |
| 24,553 |
| 108,757 |
| 231,726 |
| 71,716 |
| 24,553 | | 108,757 |
| 231,726 |
| 71,716 | | 53,596 |
Tampico |
| 32,157 |
| 46,742 |
| 26,169 |
| 111,210 |
| 32,157 | | 46,742 |
| 26,169 |
| 111,210 | | 50,152 |
Torreón |
| 5,834 |
| 20,017 |
| 19,990 |
| 9,105 |
| 5,834 | | 20,017 |
| 19,990 |
| 9,105 | | 29,400 |
Zacatecas |
| 7,789 |
| 19,174 |
| 9,656 |
| 17,555 |
| 7,789 | | 19,174 |
| 9,656 |
| 17,555 | | 29,443 |
Zihuatanejo |
| 25,822 |
| 28,138 |
| 13,587 |
| 105,374 |
| 25,822 | | 28,138 |
| 13,587 |
| 105,374 | | 74,516 |
Other |
| 173,427 |
| 103,626 |
| 67,927 |
| 58,625 |
| 173,427 | | 103,626 |
| 67,927 |
| 58,625 | | 122,714 |
Total |
| 529,393 |
| 1,581,959 |
| 1,314,363 |
| 1,048,926 |
| 529,393 | | 1,581,959 |
| 1,314,363 |
| 1,048,926 | | 1,401,483 |
3832
The following table sets forth our actual capital expenditures by category across all of our airports for 2016, 2017, 2018, 2019 and 2019:2020:
Actual Capital Expenditures by Category for 2016 through 20192020
| | | | | | | | | | | ||||||||
| | For the Year Ended | ||||||||||||||||
| | December 31, | ||||||||||||||||
| | 2016 | | 2017 |
| 2018 | | 2019 | | 2020 | ||||||||
|
|
|
|
|
|
|
|
| ||||||||||
|
| For the Year Ended | ||||||||||||||||
|
| December 31, | ||||||||||||||||
|
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||||||||||
|
| (in thousands of pesos) | ||||||||||||||||
| | (in thousands of pesos) | ||||||||||||||||
Capacity and quality project |
| 140,989 |
| 882,289 |
| 961,580 |
| 598,829 | | 140,989 |
| 882,289 | | 961,580 | | 598,829 | | 946,848 |
Projects to meet ICAO directives |
| 13,412 |
| 113,561 |
| 71,813 |
| 52,345 | | 13,412 |
| 113,561 | | 71,813 | | 52,345 | | 57,788 |
Facilities for disabled passengers |
| 820 |
| 628 |
| 7,289 |
| — | | 820 |
| 628 | | 7,289 | | — | | 591 |
Environmental projects |
| 6,616 |
| 12,429 |
| 6,655 |
| 3,350 | | 6,616 |
| 12,429 | | 6,655 | | 3,350 | | 4,279 |
Projects requested by competent authorities |
| 2,283 |
| 8,216 |
| 4,126 |
| 692 | | 2,283 |
| 8,216 | | 4,126 | | 692 | | 16,806 |
Runways and aprons |
| 12,552 |
| 1,735 |
| — |
| 220,647 | | 12,552 |
| 1,735 | | — | | 220,647 | | 95,033 |
Machinery and equipment |
| 11,657 |
| 2,863 |
| — |
| 15,413 | | 11,657 |
| 2,863 | | — | | 15,413 | | 8,672 |
Operative standards equipment |
| 19,669 |
| 78,735 |
| 25,804 |
| 10,027 | | 19,669 |
| 78,735 | | 25,804 | | 10,027 | | 33,475 |
Security — investments |
| 7,287 |
| 27,309 |
| 6,074 |
| 17,305 | | 7,287 |
| 27,309 | | 6,074 | | 17,305 | | 29,398 |
Information systems — investments |
| 5,565 |
| 58,545 |
| 43,738 |
| 16,972 | | 5,565 |
| 58,545 | | 43,738 | | 16,972 | | 14,432 |
Baggage-screening system — investments |
| 775 |
| 81,942 |
| 12,538 |
| 820 | | 775 |
| 81,942 | | 12,538 | | 820 | | 22,363 |
Other |
| 307,768 |
| 313,707 |
| 174,746 |
| 112,527 | | 307,768 |
| 313,707 | | 174,746 | | 112,527 | | 171,798 |
Total |
| 529,393 |
| 1,581,959 |
| 1,314,363 |
| 1,048,926 | | 529,393 |
| 1,581,959 | | 1,314,363 | | 1,048,926 | | 1,401,483 |
For the year ended December 31,In 2018, 2019 and 2020, our capitalmajor maintenance expenditures totaled Ps.1,048,926 thousand.Ps. 139,320 thousand, Ps.305,133 thousand, and Ps.103,704 thousand, respectively. For a detailed reconciliation of expenditures actually made during 2018, 2019 was the fourth year of the 2016-2020 Master Development Program, and we continue implementing all of the projects to which we committed at the end of 2015. As a result,2019 and their classification in our capital expendituresconsolidated financial statements for 2019 were dedicated primarily to our committed investments pursuant to our master development programs. Seesuch periods, see “Item 5.5 Operating and Financial Review and Prospects—Liquidity and Capital Resources—Principal Uses of Capital” for a further discussion on our actual expenditures made during 2017, 2018 and 2019 and their classification in our consolidated financial statements for such periods.Capital.”
Our actual capital expenditures from 20172018 through 20192020 were allocated to the following types of investments at the majority of our airports:
| Terminals. We started the construction of |
| Paved surfaces. We performed major rehabilitation work on our runways, taxiways and service roads to meet ICAO standards, including the modernization of our illuminated navigation aid systems to improve the safety of our airports. We expanded several aircraft aprons for general and commercial aviation, particularly at the Monterrey airport. We also completed construction of two taxiways at each of the Culiacan airport and Monterrey airport, two new car rental facilities at each of the Monterrey and Acapulco airports, |
| Machinery and equipment. We invested in machinery and equipment such as |
39
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33
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Our Operations
Through our subsidiaries, we hold concessions to operate, maintain and develop 13 airports in Mexico, which are concentrated in the country’s central and northern regions. Each of our concessions has a term of 50 years beginning on November 1, 1998. The term of each of our concessions may be extended by the Ministry of Communications and Transportation under certain circumstances for up to 50 additional years. The terms of our concessions also include the right to occupy, use and improve the land appurtenant to our airports, which we do not own and which will revert to the Mexican government upon the termination of our concession. As operator of the 13 airports under our concessions, we charge fees to airlines, passengers and other users for the use of the airports’ facilities. We also derive rental and other income from commercial and diversification activities conducted at our airports, such as the leasing of space to restaurants and retailers, the operation of parking facilities, the operation of the OMA Carga business, the Terminal 2 NH Collection Hotel and the Hilton Garden Inn Hotel at the Monterrey airport, among others.
We operate 13 airports, which serve a major metropolitan area (Monterrey), three tourist destinations (Acapulco, Mazatlán and Zihuatanejo), seven regional centers (Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas) and two border cities (Ciudad Juárez and Reynosa). Our airports are located in nine of the 32 Mexican states, covering a territory of approximately 926,421 square kilometers (575,667 square miles), with a population of approximately 27.629.0 million according to the Mexican National Institute of Statistics and Geography. All of our airports are designated as international airports under Mexican law, meaning that they are all equipped to receive international flights and to maintain customs and immigration services managed by the Mexican government, as well as refueling services.
According to figures published by the AFAC,, our total aviation passenger traffic accounted for approximately 14.7%14.2% of all arriving and departing total aviation passengers in Mexico in 2019.2020.
In 2019,2020, we recorded revenues of Ps.8,527,101Ps.5,367,466 thousand (U.S.$451,822269,604 thousand) and consolidated net income of Ps.3,227,434Ps.1,097,879 thousand (U.S.$171,01155,146 thousand), the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues was Ps.7,572,267Ps. 4,113,597 thousand (U.S.$401,229206,623 thousand) and our airports handled approximately 23.211.1 million terminal passengers, an increasea decrease of 7.4%52.3% with respect to the 21.623.2 million terminal passengers handled in 2018.
40
2019.
Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, Monterrey-Atlanta, Monterrey-Detroit, Monterrey-Las Vegas, San Luis Potosí-Dallas, Monterrey-San Antonio, Chihuahua-Dallas, Mazatlán-Los Angeles, Monterrey-Chicago, San Luis Potosí-Houston,Mazatlán-Phoenix, Monterrey-Atlanta, Zihuatanejo-Los Angeles and Zihuatanejo-Los Angeles.Monterrey-Las Vegas. Our airports also serve several other major international destinations, including Dallas, Chicago, Houston, Dallas, Los Angeles, Chicago, Atlanta, Detroit, Las Vegas, Phoenix,Minneapolis, Denver, Miami, New York, San Jose California and San AntonioPhoenix in the United States, Panama City, Havana, Cuba and Varadero, Cuba.Panama City. In addition, our airports serve major resort destinations, such as Acapulco, Mazatlán and Zihuatanejo, which are popular destinations in Mexico frequented by tourists from Mexico, the United States and Canada. Our airports also serve major domestic routes, including Monterrey‑MexicoMonterrey-Mexico City, which was the country’s busiest domestic route in 2019,2020, with approximately 3.81.6 million total passengers (including passengers flying directly to the nearby airport of Toluca, which are counted together with those flying to Mexico City), according to the AFAC. Other major domestic routes served by our airports include Cancún‑Monterrey,n-Monterrey, Tijuana-Culiacán and Guadalajara‑Monterrey,Chihuahua-Mexico City, with approximately 1,411,144, 911,985832,462, 608,145 and 847,874406,554 total passengers, respectively, in 2019,2020, according to the AFAC.
Our international traffic in 2019 increased2020 decreased by 7.9%56.9% compared to 2018,2019, principally as a result of VivaAerobus’temporary suspensions in the operations of United Airlines’ Monterrey-Houston route, American Airlines’ Monterrey-Dallas route,
34
Delta Airlines’ Monterrey-Atlanta route, United Airlines’ Monterrey-Chicago route, Alaska Airlines’ Mazatlán-Los Angeles route, Aeroméxico’ Monterrey-Los Angeles route, United Airlines’ San Luis Potosí-Houston route, AmericanDelta Airlines’ Torreon-DallasMonterrey-Detroit route, VivaAerobus’Aeroméxico’ Monterrey-New York route, Interjet’ Monterrey-Las Vegas route and Alaska Airlines’ Mazatlán-LosZihuatanejo-Los Angeles route, and Volaris’ new Durango-Dallas route, American Airlines’ new Durango-Dallas route.
Monterrey and its metropolitan area is the third largest city in Mexico based on population, with a population of approximately 4.55.0 million. Monterrey ranks among Mexico’s most established urban and commercial centers and is the capital of the state of Nuevo León, Mexico’s eighthseventh largest state based on population. It is home to many of Mexico’s largest companies in a wide variety of industries, as well as several major universities. Business travelers account for a substantial portion of passengers at the Monterrey airport. The Monterrey airport is our leading airport based on passenger traffic volume, air traffic movements and contribution to revenues and ranked as the fourthfifth busiest airport in Mexico based on passenger traffic volume in 2019,2020, according to data published by the AFAC. In 2019,2020, our Monterrey airport accounted for approximately 48.2% 45.1% of our terminal passenger traffic, 43.3%47.7% of our total revenues and 44.5% 42.7% of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Three of our airports, Acapulco, Mazatlán and Zihuatanejo, serve popular Mexican tourist destinations. Acapulco is Mexico’s 24th largest tourist destination, Mazatlán is the 2010th and Zihuatanejo is the 31st12th, based on the number of international visitors in 20192020 according to the AFAC. Acapulco is a principal port of call for cruise ships. In 2019,2020, the Acapulco, Mazatlán and Zihuatanejo airports collectively accounted for 11.5%13.2% of our aggregate terminal passengers, 11.5%11.4% of our total revenues and 11.4%12.4% of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Seven of our airports serve small and mid‑sizedmid-sized cities that are important regional centers of economic activity, with diverse economic activities such as mining (the Durango and Zacatecas airports), maquiladora manufacturing (the Chihuahua and Torreón airports), petroleum and chemical production (the Tampico airport), agriculture and livestock (the Culiacán airport) and transportation and logistics (the San Luis Potosí airport). In 2019,2020, these seven regional airports collectively accounted for 31.3%32.5% of our aggregate terminal passengers, 30.1%27.6% of our total revenues and 28.3%28.8% of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
The remaining two airports in the group, the Ciudad Juárez and Reynosa airports, serve cities situated along the border of Mexico and the United States. Both Ciudad Juárez and Reynosa are popular entry points to the United States. In 2019,2020, the Ciudad Juárez and Reynosa airports collectively accounted for 9.0%9.2% of our aggregate terminal passengers, 8.2%7.3% of our total revenues and 7.5% of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
In addition,Additionally, we operate four bonded warehouses under the OMA Carga brand that provide cargo logistics services, which include storage, handling, custody maneuvers, loading and unloading, and x-ray screening of exports, among other services. Two bonded warehouses operate at the Monterrey airport, one operates at the Ciudad Juárez airport and the other at the Chihuahua airport.
We also have a 90% investment with a Mexican subsidiary of the international hotel operator NH Hoteles SA under Consorcio Grupo Hotelero T2, S.A. de C.V. to develop and operate a 287‑room287-room hotel and more than 5,000 square meters (53,820 square feet) of commercial space inside Terminal 2 of Mexico City International Airport under a lease agreement (the “Lease”) with Mexico City International Airport that expires in 2029. The Terminal 2 NH Collection Hotel opened in August 2009. Under certain circumstances, the Mexico City International Airport can terminate the Lease at any time with partial or no compensation to us.
4135
In November 2012, as part of our diversification activities, we signed a strategic alliance agreement with VYNMSA Desarrollo Inmobiliario, S.A. de C.V. (“VYNMSA”), to build and operate an industrial park at the Monterrey airport. As part of this strategic alliance, 32.4 hectares (80.06 acres) within the Monterrey airport’s perimeter are being developed in phases for use as an industrial park. The industrial park was inaugurated on March 20, 2015, and as of December 20192020 we had constructedbuilt a total of 89 warehouses with a total leasable area of 54,10758,940 square meters (582,209 square feet)(634,426 square-feet), of which 7all warehouses have already been leased and are currently in operation. The current total leased area of the industrial park is 53,442 square meters (575,244 square feet)operation with lease terms ranging from 40 to 144 months. Two new lease contracts were signedAn additional warehouse was developed, which construction ended in December 2019. One contract is related to a 4,945 square-meter (53,228 square-foot) warehouse and will start generating revenue in 2020. The second contract relates to a new 4,945 square-meter (53,228 square-foot) facility, which is currently under construction, and will start generating revenues in 2020.January 2021, with an area of 4,849 square meters (52,192 square-feet).
We also have an investment with Grupo Hotelero Santa Fe, S. de R.L. de C.V. (“Grupo Hotelero Santa Fe”), a Mexican hospitality investment and operating company, to develop and operate a 134‑134-room hotel at the Monterrey airport under the Hilton Garden Inn brand. The hotel started operations on August 27, 2015.
We consider OMA Carga, our hotel operations and the operation of our industrial park a key part of our diversification strategy to increase our non‑aeronauticalnon-aeronautical revenues.
The following table provides summary data for each of our 13 airports for the years ended December 31, 2017, 2018, 2019 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||
| | For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 2018 | | 2019 | | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | Aeronautical | | | | | | | | | | Aeronautical | | | | | | | | | | Aeronautical | |||||||||||||||||||||||||||||||
| | | | | | Sum of | | and Non- | | | | | | Sum of | | and Non- | | | | | | Sum of | | and Non- | |||||||||||||||||||||||||||||||||||||
| | | | | | Aeronautical | | Aeronautical | | | | | | Aeronautical | | Aeronautical | | | | | | Aeronautical | | Aeronautical | |||||||||||||||||||||||||||||||||||||
| | | | | | and | | Revenues | | | | | | and | | Revenues per | | | | | | and | | Revenues | |||||||||||||||||||||||||||||||||||||
| | Terminal | | Non-Aeronautical | | per Terminal | | Terminal | | Non-Aeronautical | | Terminal | | Terminal | | Non-Aeronautical | | per Terminal | |||||||||||||||||||||||||||||||||||||||||||
| | Passengers | | Revenues (1) | | Passenger(2) | | Passengers | | Revenues(1) | | Passenger (2) | | Passengers | | Revenues(1) | | Passenger (2) | |||||||||||||||||||||||||||||||||||||||||||
|
| (Number |
| |
| (in millions |
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Monterrey |
| 9.8 |
| 49.7 | % | 2,593.7 |
| 49.1 | % | 265.4 |
| 10.7 |
| 49.8 | % | 3,097.4 |
| 50.1 | % | 288.6 |
| 11.2 |
| 48.2 | % | 3,367.7 |
| 48.5 | % | 301.3 |
| 10.7 |
| 49.8 | % | 3,097.4 |
| 50.1 | % | 288.6 |
| 11.2 |
| 48.2 | % | 3,367.7 |
| 48.5 | % | 301.3 |
| 5.0 |
| 45.1 | % | 1,757.6 |
| 46.7 | % | 351.9 | |
Total metropolitan destination |
| 9.8 |
| 49.7 | % | 2,593.7 |
| 49.1 | % | 265.4 | (3) | 10.7 |
| 49.8 | % | 3,097.4 |
| 50.1 | % | 288.6 | (3) | 11.2 |
| 48.2 | % | 3,367.7 |
| 48.54 | % | 301.3 | | 10.7 |
| 49.8 | % | 3,097.4 |
| 50.1 | % | 288.6 | (3) | 11.2 |
| 48.2 | % | 3,367.7 |
| 48.5 | % | 301.3 | (3) | 5.0 |
| 45.1 | % | 1,757.6 |
| 46.74 | % | 351.9 | |
Tourist destinations: |
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Acapulco |
| 0.7 |
| 3.5 | % | 192.5 |
| 3.7 | % | 281.0 |
| 0.7 |
| 3.4 | % | 216.9 |
| 3.5 | % | 293.5 |
| 0.9 |
| 3.8 | % | 268.2 |
| 3.9 | % | 306.4 |
| 0.7 |
| 3.4 | % | 216.9 |
| 3.5 | % | 293.5 |
| 0.9 |
| 3.8 | % | 268.2 |
| 3.9 | % | 306.4 |
| 0.4 |
| 3.6 | % | 144.4 |
| 3.8 | % | 364.6 | |
Mazatlán |
| 1.0 |
| 5.1 | % | 297.3 |
| 5.6 | % | 299.0 |
| 1.0 |
| 4.9 | % | 322.9 |
| 5.2 | % | 310.9 |
| 1.2 |
| 5.0 | % | 374.2 |
| 5.4 | % | 322.2 |
| 1.0 |
| 4.9 | % | 322.9 |
| 5.2 | % | 310.9 |
| 1.2 |
| 5.0 | % | 374.2 |
| 5.4 | % | 322.2 |
| 0.7 |
| 6.7 | % | 248.6 |
| 6.6 | % | 335.8 | |
Zihuatanejo |
| 0.6 |
| 3.0 | % | 194.9 |
| 3.7 | % | 325.9 |
| 0.6 |
| 2.6 | % | 190.5 |
| 3.1 | % | 336.3 |
| 0.6 |
| 2.7 | % | 217.1 |
| 3.1 | % | 347.3 |
| 0.6 |
| 2.6 | % | 190.5 |
| 3.1 | % | 336.3 |
| 0.6 |
| 2.7 | % | 217.1 |
| 3.1 | % | 347.3 |
| 0.3 |
| 2.9 | % | 117.0 |
| 3.1 | % | 368.6 | |
Total tourist destinations |
| 2.3 |
| 11.6 | % | 684.7 |
| 13.0 | % | 300.7 | (3) | 2.3 |
| 10.9 | % | 730.3 |
| 11.8 | % | 311.6 | (3) | 2.7 |
| 11.5 | % | 859.5 |
| 12.39 | % | 322.9 | | 2.3 |
| 10.9 | % | 730.3 |
| 11.8 | % | 311.6 | (3) | 2.7 |
| 11.5 | % | 859.5 |
| 12.39 | % | 322.9 | (3) | 1.4 |
| 13.2 | % | 510.0 |
| 13.56 | % | 350.80 | |
Regional destinations: |
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Chihuahua |
| 1.4 |
| 7.2 | % | 361.5 |
| 6.9 | % | 256.5 |
| 1.6 |
| 7.2 | % | 420.9 |
| 6.8 | % | 270.4 |
| 1.7 |
| 7.3 | % | 478.4 |
| 6.9 | % | 281.4 |
| 1.6 |
| 7.2 | % | 420.9 |
| 6.8 | % | 270.4 |
| 1.7 |
| 7.3 | % | 478.4 |
| 6.9 | % | 281.4 |
| 0.8 |
| 7.4 | % | 261.8 |
| 7.0 | % | 320.0 | |
Culiacán |
| 1.9 |
| 9.7 | % | 462.7 |
| 8.8 | % | 242.3 |
| 2.3 |
| 10.5 | % | 596.9 |
| 9.6 | % | 262.8 |
| 2.5 |
| 10.6 | % | 684.3 |
| 9.9 | % | 278.3 |
| 2.3 |
| 10.5 | % | 596.9 |
| 9.6 | % | 262.8 |
| 2.5 |
| 10.6 | % | 684.3 |
| 9.9 | % | 278.3 |
| 1.4 |
| 12.4 | % | 411.3 |
| 10.9 | % | 299.5 | |
Durango |
| 0.4 |
| 2.0 | % | 111.9 |
| 2.1 | % | 282.8 |
| 0.4 |
| 1.9 | % | 123.1 |
| 2.0 | % | 293.9 |
| 0.5 |
| 2.3 | % | 163.6 |
| 2.4 | % | 310.4 |
| 0.4 |
| 1.9 | % | 123.1 |
| 2.0 | % | 293.9 |
| 0.5 |
| 2.3 | % | 163.6 |
| 2.4 | % | 310.4 |
| 0.3 |
| 2.5 | % | 90.6 |
| 2.4 | % | 334.0 | |
San Luis Potosí |
| 0.6 |
| 2.8 | % | 174.4 |
| 3.3 | % | 315.2 |
| 0.6 |
| 2.9 | % | 197.3 |
| 3.2 | % | 314.9 |
| 0.6 |
| 2.8 | % | 210.0 |
| 3.0 | % | 326.4 |
| 0.6 |
| 2.9 | % | 197.3 |
| 3.2 | % | 314.9 |
| 0.6 |
| 2.8 | % | 210.0 |
| 3.0 | % | 326.4 |
| 0.3 |
| 2.8 | % | 136.6 |
| 3.6 | % | 441.5 | |
Tampico |
| 0.7 |
| 3.6 | % | 197.4 |
| 3.7 | % | 275.2 |
| 0.7 |
| 3.4 | % | 217.4 |
| 3.5 | % | 295.1 |
| 0.7 |
| 3.2 | % | 225.2 |
| 3.2 | % | 304.7 |
| 0.7 |
| 3.4 | % | 217.4 |
| 3.5 | % | 295.1 |
| 0.7 |
| 3.2 | % | 225.2 |
| 3.2 | % | 304.7 |
| 0.3 |
| 2.4 | % | 91.7 |
| 2.4 | % | 338.7 | |
Torreón |
| 0.6 |
| 3.1 | % | 178.6 |
| 3.4 | % | 288.6 |
| 0.7 |
| 3.2 | % | 207.1 |
| 3.3 | % | 303.8 |
| 0.7 |
| 3.1 | % | 225.1 |
| 3.2 | % | 317.7 |
| 0.7 |
| 3.2 | % | 207.1 |
| 3.3 | % | 303.8 |
| 0.7 |
| 3.1 | % | 225.1 |
| 3.2 | % | 317.7 |
| 0.3 |
| 2.9 | % | 112.3 |
| 3.0 | % | 350.1 | |
Zacatecas |
| 0.3 |
| 1.8 | % | 107.3 |
| 2.0 | % | 307.1 |
| 0.4 |
| 1.7 | % | 117.6 |
| 1.9 | % | 320.4 |
| 0.5 |
| 2.1 | % | 155.4 |
| 2.2 | % | 327.1 |
| 0.4 |
| 1.7 | % | 117.6 |
| 1.9 | % | 320.4 |
| 0.5 |
| 2.1 | % | 155.4 |
| 2.2 | % | 327.1 |
| 0.2 |
| 2.1 | % | 81.8 |
| 2.2 | % | 352.1 | |
Total regional destinations |
| 5.9 |
| 30.2 | % | 1,593.8 |
| 30.2 | % | 267.7 | (3) | 6.7 |
| 30.8 | % | 1,880.3 |
| 30.3 | % | 282.4 | (3) | 7.2 |
| 31.3 | % | 2,142.0 |
| 30.9 | % | 295.4 | | 6.7 |
| 30.8 | % | 1,880.3 |
| 30.3 | % | 282.4 | (3) | 7.2 |
| 31.3 | % | 2,142.0 |
| 30.9 | % | 295.4 | (3) | 3.6 |
| 32.5 | % | 1,186.1 |
| 31.5 | % | 329.9 | |
Border destinations: |
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Ciudad Juárez |
| 1.2 |
| 6.0 | % | 285.6 |
| 5.4 | % | 243.4 |
| 1.4 |
| 6.3 | % | 356.2 |
| 5.8 | % | 261.1 |
| 1.6 |
| 6.9 | % | 436.3 |
| 6.3 | % | 273.1 |
| 1.4 |
| 6.3 | % | 356.2 |
| 5.8 | % | 261.1 |
| 1.6 |
| 6.9 | % | 436.3 |
| 6.3 | % | 273.1 |
| 0.8 |
| 7.1 | % | 237.4 |
| 6.3 | % | 300.5 | |
Reynosa |
| 0.5 |
| 2.5 | % | 119.4 |
| 2.3 | % | 245.8 |
| 0.5 |
| 2.2 | % | 121.7 |
| 2.0 | % | 260.6 |
| 0.5 |
| 2.1 | % | 131.8 |
| 1.9 | % | 274.2 |
| 0.5 |
| 2.2 | % | 121.7 |
| 2.0 | % | 260.6 |
| 0.5 |
| 2.1 | % | 131.8 |
| 1.9 | % | 274.2 |
| 0.2 |
| 2.1 | % | 69.5 |
| 1.8 | % | 303.5 | |
Total border destinations |
| 1.7 |
| 8.5 | % | 405.0 |
| 7.7 | % | 244.1 | (3) | 1.9 |
| 8.5 | % | 477.9 |
| 7.8 | % | 261.0 | (3) | 2.1 |
| 9.0 | % | 568.1 |
| 8.2 | % | 273.4 | | 1.9 |
| 8.5 | % | 477.9 |
| 7.8 | % | 261.0 | (3) | 2.1 |
| 9.0 | % | 568.1 |
| 8.2 | % | 273.4 | (3) | 1.0 |
| 9.2 | % | 306.9 |
| 8.2 | % | 301.2 | |
Sum of aeronautical and non-aeronautical revenues(1) |
| 19.7 |
| 100 | % | 5,277.3 |
| 100 | % | 268.4 | (3) | 21.6 |
| 100.0 | % | 6,185.8 |
| 100.0 | % | 286.8 | (3) | 23.2 |
| 100 | % | 6,937.3 |
| 100 | % | 299.4 | | 21.6 |
| 100 | % | 6,185.8 |
| 100 | % | 286.8 | (3) | 23.2 |
| 100 | % | 6,937.3 |
| 100 | % | 299.4 | (3) | 11.1 |
| 100 | % | 3,761 |
| 100 | % | 339.9 |
(1) |
| Defined as the sum of aeronautical and non-aeronautical revenues for each airport, which does not include eliminations among our subsidiaries and does not include revenues from construction services. Revenues in millions rounded to the decimal. |
(2) |
| Revenues per terminal passenger are calculated by dividing the sum of aeronautical and non-aeronautical revenues for each airport by the number of terminal passengers for each airport. The result has been rounded to the decimal. |
(3) |
| Represents average total revenues per terminal passenger for the applicable airports. |
See Note 2625 to our consolidated financial statements for further information by segment. The Company’s reportable segments under IFRS include its airports, the Terminal 2 NH Collection Hotel, the Hilton Garden Inn Hotel and the OMA-VYNMSA Industrial Park, individually, and information about our holding company and service companies has been combined in the “other segments”“other” line item, as they represent other business activities and are segments that are not required to be reported separately. For purposes of analysis, segments are comprised of our two hotels and thirteen individual airports, which have been grouped into four different regions according to their location: metropolitan, tourist, regional and border airports.
4236
Our Sources of Revenues
Aeronautical Services
Aeronautical services represent the most significant source of our revenues. All of our revenues from aeronautical services are regulated under the maximum‑ratemaximum-rate price regulation system applicable to our airports. In 2017, 2018, 2019 and 2019,2020, aeronautical services revenues represented approximately 61.0%65.0%, 65.0%67.5% and 67.5%54.8%, respectively, of our total revenues and 74.9%76.0%, 76.0% and 76.0%71.5%, respectively, of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Our revenues from aeronautical services are derived principally from: passenger charges, landing charges, aircraft parking charges, charges for the use of passenger walkways and charges for the provision of airport security services. Aeronautical services revenues are principally dependent on the following factors: passenger traffic volume, the number of air traffic movements, the weight of the aircraft, the duration of an aircraft’s stay at the airport, the time of day the aircraft operates at the airport and the specific prices charged for the service.
Passenger Charges
We collect a passenger charge for each departing passenger on an aircraft (other than diplomats, infants and transfer and transit passengers) called the Tarifa de Uso de Aeropuerto. We do not collect passenger charges from arriving passengers. Passenger charges are included in the cost of a passenger’s ticket and we issue invoices for those charges to each airline on a weekly basis and record an account receivable for the invoice corresponding to a flight during the actual month of the flight.
The current agreements between our airports and our principal airline customers provide that payments for passenger charges will be between 30 and 60 days after the invoice delivery date. In 2019,2020, the weighted average term of payment was 4348 days.
International passenger charges are currently U.S. dollar‑dollar-denominated but are collected in pesos based on the average exchange rate during the month prior to the flight, and the value of our revenues from those charges is therefore affected by fluctuations in the value of the U.S. dollar as compared to the peso. Domestic passenger charges are peso‑denominated.peso-denominated. In 2017, 2018, 2019 and 2019,2020, passenger charges represented approximately 85.7%86.5%, 86.5%86.6% and 86.6%81.6%, respectively, of our aeronautical services revenues, 52.2%56.2%, 56.2%58.5% and 58.5%44.7%, respectively, of our total revenues and 64.2%65.7%, 65.7%65.9% and 65.9%58.4%, respectively, of the sum of aeronautical and non‑aeronauticalnon-aeronautical revenues. Passenger charges vary at each airport and based on the destination of each flight.
Aircraft Landing Charges
We collect landing charges from all carriers including cargo carriers for their use of our runways and taxiways, illumination systems on the runways and taxiways and other visual landing assistance services. Our landing charges are different for each of our airports and are based on each landing aircraft’s weight (determined as an average of the aircraft’s weight without fuel and maximum takeoff weight), the time of the landing, the origin of the flight and the nationality of the airline or client. In 2017, 2018, 2019 and 2019,2020, these charges represented approximately 4.1%4.0%, 4.0% and 4.0%5.0%, respectively, of our aeronautical services revenues, 2.5%2.6%, 2.6%2.7% and 2.7%, respectively, of our total revenues and 3.1%3.0%, 3.0% and 3.0%3.6%, respectively, of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Aircraft Parking, Boarding and Unloading Charges and Aircraft Long-Term Parking Charges
We collect various charges from all carriers including cargo carriers for the use of our facilities by their aircraft and passengers after landing. We collect aircraft parking charges based on the time an aircraft is at an airport’s gate or parking position. Each of these charges varies based on the time of day or night that the relevant service is provided (with higher fees generally charged during peak usage periods and at night), the aircraft’s maximum takeoff weight, the origin and destination of the flight and whether the service is domestic or international. We collect aircraft parking charges the entire time an aircraft is on our aprons.
4337
We collect charges from carriers for the long‑termlong-term use of facilities at our airports for aircraft long‑long-term parking that does not involve the loading or unloading of passengers or cargo. These charges are based on the time of day or night the aircraft is parked at our facilities, the length of time the aircraft is parked at our facilities and whether the service is domestic or international. Together with our aircraft parking, boarding and unloading charges described above, in 2017, 2018, 2019 and 2019,2020, these charges represented approximately 3.5%3.4%, 3.4%3.2% and 3.2%4.2%, respectively, of our aeronautical services revenues, 2.1%2.2%, 2.2% and 2.2%2.3%, respectively, of our total revenues and 2.6%2.5%, 2.5%, and 2.5%3.0%, respectively, of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Passenger Walkway Charges
Airlines are also assessed charges for the connection of their aircraft to our terminals through a passenger walkway and for the transportation of passengers between terminals and aircraft via buses and other vehicles. These charges are generally based on the amount of time each service is used, the number of these services used, the time of day the services are used, the origin and destination of the flight and the nationality of the airline or client. In 2017, 2018, 2019 and 2019,2020, these charges represented approximately 1.0%0.9%, 0.9%0.8% and 0.8%0.7%, respectively, of our aeronautical services revenues, 0.6%, 0.6% and 0.6%0.4%, respectively, of our total revenues and 0.8%0.7%, 0.7%0.6% and 0.6%0.5%, respectively, of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Airport Security Charges
We also assess an airport security charge, which is collected from each airline, based on the number of its departing terminal passengers (excluding infants, diplomats and transit passengers), for use of our x‑x-ray equipment, metal detectors and other security equipment and personnel. These charges are based on the time of day the services are used, the number of departing passengers and the destination of the flight. Independent subcontractors provide airport security services at our airports. In 2017, 2018, 2019 and 2019,2020, these charges represented approximately 1.1%, 1.1% and 1.1%1.0%, respectively, of our aeronautical services revenues, 0.7%, 0.7% and 0.7%0.6%, respectively, of our total revenues and 0.8%, 0.8% and 0.8%0.7%, respectively, of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
The ICAO, the AFAC and the Office of Public Security issue guidelines for airport security in Mexico. In response to the September 11, 2001 terrorist attacks in the United States, we have taken additional steps to increase security at our airports. The ICAO issued directives in October 2001 establishing new rules and procedures to be adopted at our airports. Under these directives, these rules and procedures were to be implemented immediately and for an indefinite period of time.
Several of our airline customers have also contributed to the enhanced security at our airports as they have adopted new procedures and guidelines established by the ICAO applicable to airlines. Some measures adopted by the airlines included adding more points for verification of passenger identification, inspecting luggage prior to check‑incheck-in and reinforcing controls over access to airplanes by various service providers (such as baggage handlers and food service providers).
The ICAO established security guidelines requiring checked baggage on all international commercial flights as of January 2006, and all domestic commercial flights as of July 2006, to undergo a comprehensive screening process for the detection of explosives. Our subsidiary, Servicios Complementarios del Centro Norte, S.A. de C.V., has operated the checked‑baggagechecked-baggage screening system since March 1, 2012. In some countries, such as the United States, the federal government (in the case of the United States, through TSA) is responsible for screening checked baggage. Under Mexican law, however, airlines are responsible for screening checked baggage. On May 1, 2014 and July 1, 2016, the AFAC published mandatory circulars CO SA‑17.2/SA-17.2/10 R3 and CO SA-17.9/16, respectively, which require that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines. Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of equipment could increase our exposure to liability as a result of our involvement in the screening process. In addition, although we are not currently obligated to screen checked baggage, we could become obligated to do so, and thus become subject to potential liability, if Mexican law changes in the future. Revenues derived from checked baggage screening are classified as non-aeronautical revenues see “Item 4. Information on the Company—Our Sources of Revenue.”
4438
In response to the COVID-19 pandemic, we have implemented, among others, the following measures, which increased airport costs and expenses during 2020:
● | installed disinfectant gel dispensers based on alcohol at a minimum of 70% in public areas and strategic points, |
● | mandated the use of face coverings in all areas, |
● | installed temperature checkpoints at entry points for passengers and airport personnel, |
● | provided personal protection equipment (PPE) (facemasks, gloves, face shields) to all our airport personnel, |
● | installed disinfectant mats to eliminate viruses and bacteria on footwear at the entrances to the terminals and offices, |
● | installed protective acrylics to minimize the transmission routes of COVID-19 between passengers and personnel in the airport facilities, including at information modules and commercial areas, such as stores and rental companies, |
● | installed physical barriers to ensure entry only and exit only flows, |
● | distributed the questionnaire required by AFAC for the “Identification of Risk Factors in Travelers” in paper and electronic form, |
● | increased the cleaning and sanitation cycles in all areas of our facilities, including through the increased use of disinfectants and the daily cleaning of transport equipment, |
● | established guidelines for effective, efficient and recurrent supervision of compliance with health measures to prevent the spread of COVID-19, |
● | displayed COVID-19 information, including national and international regulations regarding the pandemic and other relevant information, on all our airport information screens, |
● | instituted work from home and staggered activity policies in certain departments, and |
● | circulated to airport personnel informational materials on preventive measures and questionnaires to detect health risks. |
Complementary Service Providers
At each of our airports, we earn revenues from charging access and other fees from third‑partythird-party providers, ramp‑handlingramp-handling and baggage‑baggage-handling services, catering services, aircraft security, providers of aircraft maintenance and repair and fuel. These access fees are included in the revenues that are regulated under our maximum‑ratemaximum-rate price regulation system and are determined for each third‑partythird-party service provider based on a percentage of their total revenues. We currently maintain contracts with 53 51 companies that provide the majority of these complementary services at our 13 airports.
Under the Mexican Airport Law, we are required to provide complementary services at each of our airports if there is no third party providing such services. If any service providers were to halt operations at any of our airports, we could be required to seek a new provider of these services or to provide these services ourselves.
On November 1, 1998, the Company entered into an agreement with the Mexican Airport and Auxiliary Services Agency (Aeropuertos y Servicios Auxiliares or "ASA"“ASA”), pursuant to which the Company granted the agency access to the facilities at the Company’s airports for a nominal fee in order for ASA to buy, sell and supply fuel in such facilities. On July 21, 2018, the Mexican Bureau of Civil Aviation (currently AFAC) published a notice in the Federal Official Gazette clarifying the scope of Transitory Article Nine of the Regulations of the Mexican Airport Law, stating that as of the publication of the Hydrocarbons Law on August 11, 2014, the fuel market was to be considered open so that any interested party can distribute and sell Jet-A fuel. This clarification opens the possibility for third parties complying with the applicable legal requirements to provide fuel distribution and supply services within the airports operated by the Company. As of the date of this report, there are no third parties, other than ASA, providing fuel distribution and supply services within such airports.
39
Leasing of Space to Airlines
We derive aeronautical revenues from leasing space in our airports to airlines that is necessary for their operations, such as ticket counters and offices. Our lease agreements with airline customers for the use of space in our airports are typically for terms of three years with provisions for periodic inflation adjustments to our rental fees.
Cargo Handling
Cargo‑Cargo-related revenues include revenues from the leasing of space in the airside of our airports to cargo handling agents and shippers, landing fees for each arriving aircraft carrying cargo and a portion of the revenues derived from other complementary services provided in connection with cargo services. Cargo‑relatedCargo-related revenues are largely aeronautical and therefore subject to maximum rates applicable to aeronautical revenue sources.
Revenues from cargo handling in our airports historically have represented a negligible portion of our total revenues.
Permanent Ground Transportation
We receive revenues from ground transportation vehicles and taxi companies who pay an access fee to operate on our airport premises. Our revenues from providers of ground transport services deemed “permanent” under applicable Mexican law, such as access fees charged to taxis, are subject to price regulation.
Non-Aeronautical Services
General
Non‑Non-aeronautical services historically have generated a significantly smaller portion of our revenues as compared to aeronautical services. Our revenues from non‑aeronauticalnon-aeronautical services are principally derived from (i) commercial activities, such as the leasing of space in our airports to retailers, restaurants and other commercial tenants, maintaining and operating parking facilities and advertising; (ii) diversification activities, such as OMA Carga, hotel services, air
45
cargo logistics services, operation and lease of the industrial park and real estate services and (iii) complementary activities, which principally include the baggage-screening system and the leasing of space to airlines and the baggage‑screening system.airlines.
None of our revenues from non‑aeronauticalnon-aeronautical services are regulated under our maximum‑maximum-rate price regulation system, though other authorities may regulate them. For example, our parking facilities may be subject to certain municipal regulations.
As one of the main parts of our business strategy, we have prioritized increasing our non‑non-aeronautical revenues, seeking new and improved commercial prices at our airports, as well as the development of the diversification and complementary activities. As a result of our efforts during the last ten years, our non‑aeronauticalnon-aeronautical revenues have increased as a percentage of our revenues. In 2009, non‑aeronautical2010, non-aeronautical revenues represented 14% of our total revenues, while in 2017, 2018, 2019, and 2019 non‑aeronautical2020 non-aeronautical revenues accounted for approximately 20.4%20.6%, 20.6%21.3% and 21.3%21.8% of our total revenues, respectively. Non‑aeronauticalNon-aeronautical revenues represented 25.1%24.0%, 24.0%, 24.0%28.5% in 2017, 2018, 2019 and 2019,2020, respectively, of the sum of our aeronautical and non‑aeronauticalnon-aeronautical revenues.
Revenues from Commercial Activities
As another main part of our business strategy to enhance our non‑non aeronautical revenues, we have prioritized increasing our revenues per passenger from commercial activities in our airports through the development of new areas, introduction of new services, brands and promotion of the commercial services described below. As a resultconsequence of our efforts,the outbreak of COVID-19, our revenues from commercial activities increaseddecreased by 15.3%37.6% in 20192020 as compared to 2018, primarily2019 as a resultrevenues from commercial activities are largely dependent on passenger traffic. In order to reduce the impact from the outbreak of COVID-19 and to position our commercial revenues for future growth as demand for air travel recovers, the following initiatives: initiatives have been implemented or expanded:
40
| Expanding and reconfiguring the commercial space available in our airport terminals. In order to increase our revenues from commercial activities, we have expanded and redesigned the layout of certain terminals in our airports to allow for the inclusion of more commercial businesses and larger individual commercial spaces, as well as to redirect the flow of passengers through our airports so as to increase passengers’ exposure to the commercial businesses operating in our airports. As a result, during the last ten years, we increased the total area available for commercial activity in our 13 airports by approximately |
| Supporting our commercial tenants through the effects of COVID-19 as a direct response to the pandemic, and ensuring that commercial services continue despite the pandemic by providing support programs, such as discounts and a payment deferral program, to certain commercial activities that were largely impacted by the decrease in passenger traffic. Such support programs are voluntary and solely to address the pandemic and do not represent ongoing obligations of the Company. |
● | Renegotiating agreements with |
| Improving the quality of retail offerings in our airports. Historically, commercial tenants in our terminals consisted of small, often similar, local businesses offering goods and services of limited variety. We have leased redesigned space formerly occupied by such tenants, as well as newly available space, to more established, internationally recognized businesses in order to improve the quality, diversity and brand recognition of commercial goods and services available to our passengers, which we believe, based in part on market surveys conducted at several of our airports, will increase the sales revenues of our commercial tenants, thereby increasing our revenues from commercial activities. As a result, our food and beverage service tenants currently offer internationally recognized brands such as Starbucks, Chili’s, Carl’s Jr, |
46
| Providing timely commercial information. We use social media to communicate the commercial opportunities and activities at our airports on a daily basis. We believe that good communication is the best method to promote our commercial services. We advertise current deals and new commercial services and, in some cases, we offer seasonal deals in coordination with our tenants. |
| Improving travel experience. Our commercial team works together with our operational team, airline clients and commercial tenants to devise |
Commercial activities in each of our airports currently consist of the following:
| Parking facilities.Our concessions provide us the right to operate the car parking facilities at all of our airports. Revenues from parking facilities at our airports currently are not regulated under our maximum rates, although they are subject to the regulatory oversight of the Ministry of Communications and Transportation. In |
| Advertising. On October 4, 2018, we signed a |
41
| Retail and duty free. We have completed several renovation projects as part of our overall effort (described above) to improve the product mix and brand recognition of retail stores in the commercial areas at our airports. We also have several |
| Food and beverage services. |
| Car rentals. We have |
|
|
| Financial services. We lease space to financial services providers (such as currency exchange bureaus, banks and ATMs) at our airports, and we charge providers of these financial services fees based partly on a percentage of the revenues recorded by their operations. ATM service is currently available at all of our |
| Communications. We offer telephone, mobile phone and internet services at our airports through contractual agreements with service providers and offer wireless internet access at all of our airports. |
47
| VIP Lounges. We lease space for the OMA Premium Lounge in the Monterrey, Mazatlán, Culiacán,Chihuahua, Acapulco and San Luis Potosí airports and for the American |
Revenues from Diversification Activities
To enhance our non‑aeronauticalnon-aeronautical revenues, we also focus our business strategy on generating new services and products to diversify our revenue sources, such as our OMA Carga business, hotel services, air cargo logistics services and real estate services. We develop land not intended for aeronautical purposes at our airports for industrial, logistical or commercial uses that are directly or indirectly related to airport activities in order to strengthen the airports’ role as focal points of economic development in the cities where they are located.
As a resultconsequence of our efforts,the outbreak of COVID-19 our revenues from diversification activities increaseddecreased by 8.1% in 201934.0% as compared to 2018, primarily as a result2019. The following are our main diversification initiatives, of the following initiatives:which, some of them were negatively affected during 2020:
| Developments at Mexico City International Airport. In October 2008, we acquired 90% of the shares of Consorcio Grupo Hotelero Terminal 2, S.A. de C.V., which has the rights to develop and operate a |
| Hotel at Monterrey Airport.In July 2013, we partnered with Grupo Hotelero Santa Fe, a Mexican hospitality investment and operating company, to develop and operate a |
42
Monterrey airport under the Hilton Garden Inn brand. We own 85% of Consorcio Grupo Hotelero de Monterrey, S.A.P.I. de C.V. and Grupo Hotelero Santa Fe holds the remaining 15%. The Hilton Garden Inn at the Monterrey airport includes a restaurant and bar, business centers and a fitness center and is easily accessible from Terminals A and B of the airport. For the year ended December 31, |
| OMA Carga Operations.We operate four bonded warehouses that provide cargo logistics services, which include storage, handling, custody maneuvers, loading and unloading, and |
| Shopping Center and Office Plaza. Located in the outside areas of Terminal A of the Monterrey airport, the shopping center and office plaza consists of a |
|
|
| Gasoline Service Station at Monterrey Airport. In December 2012, a gasoline service station within the Monterrey airport began operations. The 2,500 square meters (26,910 square feet) of land on which the service station is located is identified for diversification activities and was leased to Grupo ORSAN, an authorized distributor of Mobil, for a renewable term of 15 years. Grupo ORSAN is responsible for the operation of and all investments in the service station. In |
48
| Strategic Alliance with VYNMSA.In November 2012, we, through our subsidiary OMA Logística, signed a strategic alliance agreement with VYNMSA, to build and operate an industrial park at the Monterrey airport, through the company OMA-VYNMSA Aero Industrial Park, S.A. de C.V. |
● | Office Center for Cargo Logistics Agents.Leasing of 1,045 square meters (11,248 square feet) of space at the Monterrey airport with an occupancy rate of 91.4% as of December 31, 2020. |
Revenues from Complementary Activities
Our complementary activities generated 15.9%16.9% of our non‑non-aeronautical revenues in 2019.2020. These include:
| Leasing of space. Revenues that we derive from the leasing of space in our terminals to airlines and complementary service providers for certain activities that are not essential to airport operations, such as first class/VIP lounges, are not subject to price regulation under our maximum rates and are classified as |
|
|
43
completed the purchase and installation of screening equipment in all of our airports in 2015 to facilitate our airline customers’ compliance with the |
|
|
| Access Rights.Revenues that we derive from granting access rights to transportation providers to terminal buildings at our airports are not subject to price regulation under our maximum rates and are classified as |
Our Airports
In 2017, 2018, 2019 and 2019,2020, our airports served a total of approximately 19.7 million, 21.6 million, 23.2 million and 23.211.1 million terminal passengers, respectively. All of our airports are designated as international airports under applicable Mexican law, meaning that they are equipped to receive international flights and maintain customs and immigration facilities operated by the Mexican government.
49
The following table sets forth the percentage of terminal passenger traffic generated at our airports per type of destination during 2017, 2018, 2019 and 2019:2020:
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| |||||||
|
| Percentage of Total Passenger Traffic |
| |||||||||||
| | | | | | | | |||||||
| | Percentage of Total Passenger Traffic |
| |||||||||||
Type of Destination |
| 2017 |
| 2018 |
| 2019 |
|
| 2018 |
| 2019 |
| 2020 |
|
Metropolitan (Monterrey) |
| 49.7 | % | 49.8 | % | 48.2 | % |
| 49.8 | % | 48.2 | % | 45.1 | % |
Tourist (Acapulco, Mazatlán and Zihuatanejo) |
| 11.6 | % | 10.9 | % | 11.5 | % |
| 10.9 | % | 11.5 | % | 13.2 | % |
Border (Ciudad Juárez and Reynosa) |
| 8.5 | % | 8.5 | % | 9.0 | % |
| 8.5 | % | 9.0 | % | 9.2 | % |
Regional (Culiacán, Chihuahua, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas) |
| 30.2 | % | 30.8 | % | 31.3 | % |
| 30.8 | % | 31.3 | % | 32.5 | % |
5044
The following tables set forth the passenger traffic volume presented in amounts of (i) total passengers, (ii) terminal departing and arriving passengers and (iii) transit passengers, for each of our airports for the periods indicated:
Passenger Traffic
|
| For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||
| | For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total |
| Terminal(1) |
| Transit(2) |
| Total | ||||||||||||||||||||||||||||||
Total passengers: |
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|
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|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
Acapulco |
| 730,382 |
| 5,420 |
| 735,802 |
| 718,493 |
| 5,478 |
| 723,971 |
| 685,124 |
| 5,198 |
| 690,322 |
| 739,120 |
| 15,340 |
| 754,460 |
| 875,315 |
| 14,298 |
| 889,613 |
| 718,493 |
| 5,478 |
| 723,971 |
| 685,124 | | 5,198 |
| 690,322 |
| 739,120 | | 15,340 |
| 754,460 |
| 875,315 | | 14,298 |
| 889,613 |
| 395,948 | | 1,704 |
| 397,652 |
Ciudad Juárez |
| 863,760 |
| 13,153 |
| 876,913 |
| 1,102,855 |
| 19,262 |
| 1,122,117 |
| 1,173,135 |
| 7,846 |
| 1,180,981 |
| 1,364,028 |
| 9,725 |
| 1,373,753 |
| 1,597,471 |
| 8,168 |
| 1,605,639 |
| 1,102,855 |
| 19,262 |
| 1,122,117 |
| 1,173,135 | | 7,846 |
| 1,180,981 |
| 1,364,028 | | 9,725 |
| 1,373,753 |
| 1,597,471 | | 8,168 |
| 1,605,639 |
| 790,009 | | 3,053 |
| 793,062 |
Culiacán |
| 1,432,315 |
| 4,930 |
| 1,437,245 |
| 1,726,654 |
| 12,227 |
| 1,738,881 |
| 1,909,651 |
| 14,480 |
| 1,924,131 |
| 2,270,834 |
| 10,477 |
| 2,281,311 |
| 2,458,863 |
| 8,915 |
| 2,467,778 |
| 1,726,654 |
| 12,227 |
| 1,738,881 |
| 1,909,651 | | 14,480 |
| 1,924,131 |
| 2,270,834 | | 10,477 |
| 2,281,311 |
| 2,458,863 | | 8,915 |
| 2,467,778 |
| 1,373,102 | | 2,571 |
| 1,375,673 |
Chihuahua |
| 1,110,513 |
| 23,631 |
| 1,134,144 |
| 1,305,961 |
| 31,791 |
| 1,337,752 |
| 1,409,579 |
| 16,762 |
| 1,426,341 |
| 1,556,770 |
| 11,788 |
| 1,568,558 |
| 1,699,816 |
| 5,004 |
| 1,704,820 |
| 1,305,961 |
| 31,791 |
| 1,337,752 |
| 1,409,579 | | 16,762 |
| 1,426,341 |
| 1,556,770 | | 11,788 |
| 1,568,558 |
| 1,699,816 | | 5,004 |
| 1,704,820 |
| 818,151 | | 650 |
| 818,801 |
Durango |
| 315,835 |
| 5,174 |
| 321,009 |
| 424,415 |
| 7,817 |
| 432,232 |
| 395,905 |
| 3,442 |
| 399,347 |
| 418,914 |
| 2,711 |
| 421,625 |
| 527,004 |
| 5,521 |
| 532,525 |
| 424,415 |
| 7,817 |
| 432,232 |
| 395,905 | | 3,442 |
| 399,347 |
| 418,914 | | 2,711 |
| 421,625 |
| 527,004 | | 5,521 |
| 532,525 |
| 271,231 | | 1,317 |
| 272,548 |
Mazatlán |
| 853,409 |
| 17,176 |
| 870,585 |
| 973,440 |
| 35,656 |
| 1,009,096 |
| 994,283 |
| 22,085 |
| 1,016,368 |
| 1,038,555 |
| 14,220 |
| 1,052,775 |
| 1,161,155 |
| 21,573 |
| 1,182,728 |
| 973,440 |
| 35,656 |
| 1,009,096 |
| 994,283 | | 22,085 |
| 1,016,368 |
| 1,038,555 | | 14,220 |
| 1,052,775 |
| 1,161,155 | | 21,573 |
| 1,182,728 |
| 740,306 | | 8,310 |
| 748,616 |
Monterrey |
| 8,461,917 |
| 60,260 |
| 8,522,177 |
| 9,178,533 |
| 18,608 |
| 9,197,141 |
| 9,771,630 |
| 28,232 |
| 9,799,862 |
| 10,733,186 |
| 36,620 |
| 10,769,806 |
| 11,176,555 |
| 24,797 |
| 11,201,352 |
| 9,178,533 |
| 18,608 |
| 9,197,141 |
| 9,771,630 | | 28,232 |
| 9,799,862 |
| 10,733,186 | | 36,620 |
| 10,769,806 |
| 11,176,555 | | 24,797 |
| 11,201,352 |
| 4,994,170 | | 4,341 |
| 4,998,511 |
Reynosa |
| 507,186 |
| 838 |
| 508,024 |
| 563,952 |
| 545 |
| 564,497 |
| 485,727 |
| 288 |
| 486,015 |
| 466,934 |
| 158 |
| 467,092 |
| 480,524 |
| 169 |
| 480,693 |
| 563,952 |
| 545 |
| 564,497 |
| 485,727 | | 288 |
| 486,015 |
| 466,934 | | 158 |
| 467,092 |
| 480,524 | | 169 |
| 480,693 |
| 229,058 | | 221 |
| 229,279 |
San Luis Potosí |
| 444,469 |
| 1,596 |
| 446,065 |
| 504,313 |
| 1,467 |
| 505,780 |
| 553,353 |
| 1,639 |
| 554,992 |
| 626,512 |
| 2,282 |
| 628,794 |
| 643,224 |
| 2,509 |
| 645,733 |
| 504,313 |
| 1,467 |
| 505,780 |
| 553,353 | | 1,639 |
| 554,992 |
| 626,512 | | 2,282 |
| 628,794 |
| 643,224 | | 2,509 |
| 645,733 |
| 309,311 | | 823 |
| 310,134 |
Tampico |
| 763,744 |
| 9,747 |
| 773,491 |
| 717,599 |
| 8,685 |
| 726,284 |
| 717,342 |
| 4,199 |
| 721,541 |
| 736,627 |
| 2,638 |
| 739,265 |
| 739,143 |
| 2,750 |
| 741,893 |
| 717,599 |
| 8,685 |
| 726,284 |
| 717,342 | | 4,199 |
| 721,541 |
| 736,627 | | 2,638 |
| 739,265 |
| 739,143 | | 2,750 |
| 741,893 |
| 270,835 | | 728 |
| 271,563 |
Torreón |
| 556,449 |
| 7,168 |
| 563,617 |
| 646,898 |
| 9,123 |
| 656,021 |
| 618,930 |
| 4,191 |
| 623,121 |
| 681,551 |
| 5,164 |
| 686,715 |
| 708,563 |
| 6,153 |
| 714,716 |
| 646,898 |
| 9,123 |
| 656,021 |
| 618,930 | | 4,191 |
| 623,121 |
| 681,551 | | 5,164 |
| 686,715 |
| 708,563 | | 6,153 |
| 714,716 |
| 320,820 | | 1,591 |
| 322,411 |
Zacatecas |
| 320,065 |
| 2,817 |
| 322,882 |
| 343,136 |
| 2,802 |
| 345,938 |
| 349,453 |
| 1,470 |
| 350,923 |
| 366,871 |
| 2,639 |
| 369,510 |
| 475,241 |
| 3,849 |
| 479,090 |
| 343,136 |
| 2,802 |
| 345,938 |
| 349,453 | | 1,470 |
| 350,923 |
| 366,871 | | 2,639 |
| 369,510 |
| 475,241 | | 3,849 |
| 479,090 |
| 232,352 | | 1,003 |
| 233,355 |
Zihuatanejo |
| 562,099 |
| 6,156 |
| 568,255 |
| 557,389 |
| 5,835 |
| 563,224 |
| 597,902 |
| 2,068 |
| 599,970 |
| 566,497 |
| 1,331 |
| 567,828 |
| 625,186 |
| 501 |
| 625,687 |
| 557,389 |
| 5,835 |
| 563,224 |
| 597,902 | | 2,068 |
| 599,970 |
| 566,497 | | 1,331 |
| 567,828 |
| 625,186 | | 501 |
| 625,687 |
| 317,395 | | 637 |
| 318,032 |
Total |
| 16,922,143 |
| 158,066 |
| 17,080,209 |
| 18,763,638 |
| 159,296 |
| 18,922,934 |
| 19,662,014 |
| 111,900 |
| 19,773,914 |
| 21,566,399 |
| 115,093 |
| 21,681,492 |
| 23,168,060 |
| 104,207 |
| 23,272,267 |
| 18,763,638 |
| 159,296 |
| 18,922,934 |
| 19,662,014 |
| 111,900 |
| 19,773,914 |
| 21,566,399 |
| 115,093 |
| 21,681,492 |
| 23,168,060 |
| 104,207 |
| 23,272,267 |
| 11,062,688 |
| 26,949 |
| 11,089,637 |
(1) |
| Includes arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft). |
(2) |
| Terminal passengers who arrive at our airports but generally depart without changing aircraft. |
5145
|
| For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total | ||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||
| | For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total | ||||||||||||||||||||||||||||||||||||||||
Terminal departing passengers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Acapulco |
| 329,383 |
| 39,643 |
| 369,026 |
| 323,773 |
| 40,745 |
| 364,518 |
| 305,337 |
| 41,326 |
| 346,663 |
| 327,220 |
| 43,948 |
| 371,168 |
| 392,382 |
| 46,383 |
| 438,765 |
| 323,773 |
| 40,745 |
| 364,518 |
| 305,337 | | 41,326 |
| 346,663 |
| 327,220 | | 43,948 |
| 371,168 |
| 392,382 | | 46,383 |
| 438,765 |
| 178,343 | | 22,046 |
| 200,389 | ||||||||||
Ciudad Juárez |
| 422,071 |
| 439 |
| 422,510 |
| 533,229 |
| 4,233 |
| 537,462 |
| 573,739 |
| 2,244 |
| 575,983 |
| 668,369 |
| 3,927 |
| 672,296 |
| 772,724 |
| 5,856 |
| 778,580 |
| 533,229 |
| 4,233 |
| 537,462 |
| 573,739 | | 2,244 |
| 575,983 |
| 668,369 | | 3,927 |
| 672,296 |
| 772,724 | | 5,856 |
| 778,580 |
| 384,557 | | 1,677 |
| 386,234 | ||||||||||
Culiacán |
| 705,913 |
| 15,757 |
| 721,670 |
| 850,046 |
| 20,723 |
| 870,769 |
| 940,889 |
| 22,723 |
| 963,612 |
| 1,118,311 |
| 25,413 |
| 1,143,724 |
| 1,210,867 |
| 30,656 |
| 1,241,523 |
| 850,046 |
| 20,723 |
| 870,769 |
| 940,889 | | 22,723 |
| 963,612 |
| 1,118,311 | | 25,413 |
| 1,143,724 |
| 1,210,867 | | 30,656 |
| 1,241,523 |
| 681,298 | | 11,417 |
| 692,715 | ||||||||||
Chihuahua |
| 488,509 |
| 66,048 |
| 554,557 |
| 587,020 |
| 64,486 |
| 651,506 |
| 638,836 |
| 65,574 |
| 704,410 |
| 701,064 |
| 72,745 |
| 773,809 |
| 762,680 |
| 80,957 |
| 843,637 |
| 587,020 |
| 64,486 |
| 651,506 |
| 638,836 | | 65,574 |
| 704,410 |
| 701,064 | | 72,745 |
| 773,809 |
| 762,680 | | 80,957 |
| 843,637 |
| 370,880 | | 40,497 |
| 411,377 | ||||||||||
Durango |
| 139,890 |
| 16,113 |
| 156,003 |
| 181,066 |
| 30,084 |
| 211,150 |
| 161,252 |
| 36,228 |
| 197,480 |
| 171,650 |
| 37,542 |
| 209,192 |
| 208,049 |
| 56,567 |
| 264,616 |
| 181,066 |
| 30,084 |
| 211,150 |
| 161,252 | | 36,228 |
| 197,480 |
| 171,650 | | 37,542 |
| 209,192 |
| 208,049 | | 56,567 |
| 264,616 |
| 105,226 | | 30,968 |
| 136,194 | ||||||||||
Mazatlán |
| 282,542 |
| 145,994 |
| 428,536 |
| 341,246 |
| 145,987 |
| 487,233 |
| 341,616 |
| 157,267 |
| 498,883 |
| 363,086 |
| 157,710 |
| 520,796 |
| 413,165 |
| 166,222 |
| 579,387 |
| 341,246 |
| 145,987 |
| 487,233 |
| 341,616 | | 157,267 |
| 498,883 |
| 363,086 | | 157,710 |
| 520,796 |
| 413,165 | | 166,222 |
| 579,387 |
| 279,964 | | 94,180 |
| 374,144 | ||||||||||
Monterrey |
| 3,518,133 |
| 691,649 |
| 4,209,782 |
| 3,908,835 |
| 661,811 |
| 4,570,646 |
| 4,193,276 |
| 674,556 |
| 4,867,832 |
| 4,612,687 |
| 728,440 |
| 5,341,127 |
| 4,777,176 |
| 774,363 |
| 5,551,539 |
| 3,908,835 |
| 661,811 |
| 4,570,646 |
| 4,193,276 | | 674,556 |
| 4,867,832 |
| 4,612,687 | | 728,440 |
| 5,341,127 |
| 4,777,176 | | 774,363 |
| 5,551,539 |
| 2,195,445 | | 288,703 |
| 2,484,148 | ||||||||||
Reynosa |
| 245,030 |
| 189 |
| 245,219 |
| 270,902 |
| 244 |
| 271,146 |
| 234,880 |
| 3,210 |
| 238,090 |
| 225,614 |
| 3,354 |
| 228,968 |
| 230,461 |
| 3,392 |
| 233,853 |
| 270,902 |
| 244 |
| 271,146 |
| 234,880 | | 3,210 |
| 238,090 |
| 225,614 | | 3,354 |
| 228,968 |
| 230,461 | | 3,392 |
| 233,853 |
| 108,582 | | 1,809 |
| 110,391 | ||||||||||
San Luis Potosí |
| 144,976 |
| 75,117 |
| 220,093 |
| 167,369 |
| 83,748 |
| 251,117 |
| 185,349 |
| 91,558 |
| 276,907 |
| 207,879 |
| 104,717 |
| 312,596 |
| 211,770 |
| 108,127 |
| 319,897 |
| 167,369 |
| 83,748 |
| 251,117 |
| 185,349 | | 91,558 |
| 276,907 |
| 207,879 | | 104,717 |
| 312,596 |
| 211,770 | | 108,127 |
| 319,897 |
| 105,942 | | 48,709 |
| 154,651 | ||||||||||
Tampico |
| 345,185 |
| 30,284 |
| 375,469 |
| 333,111 |
| 27,728 |
| 360,839 |
| 332,405 |
| 28,354 |
| 360,759 |
| 333,706 |
| 37,904 |
| 371,610 |
| 331,815 |
| 38,671 |
| 370,486 |
| 333,111 |
| 27,728 |
| 360,839 |
| 332,405 | | 28,354 |
| 360,759 |
| 333,706 | | 37,904 |
| 371,610 |
| 331,815 | | 38,671 |
| 370,486 |
| 123,884 | | 14,274 |
| 138,158 | ||||||||||
Torreón |
| 253,366 |
| 27,594 |
| 280,960 |
| 291,377 |
| 35,472 |
| 326,849 |
| 277,275 |
| 37,673 |
| 314,948 |
| 299,449 |
| 43,274 |
| 342,723 |
| 306,625 |
| 47,316 |
| 353,941 |
| 291,377 |
| 35,472 |
| 326,849 |
| 277,275 | | 37,673 |
| 314,948 |
| 299,449 | | 43,274 |
| 342,723 |
| 306,625 | | 47,316 |
| 353,941 |
| 144,792 | | 16,840 |
| 161,632 | ||||||||||
Zacatecas |
| 100,021 |
| 61,219 |
| 161,240 |
| 106,950 |
| 65,909 |
| 172,859 |
| 104,028 |
| 71,578 |
| 175,606 |
| 107,399 |
| 76,809 |
| 184,208 |
| 158,191 |
| 81,492 |
| 239,683 |
| 106,950 |
| 65,909 |
| 172,859 |
| 104,028 | | 71,578 |
| 175,606 |
| 107,399 | | 76,809 |
| 184,208 |
| 158,191 | | 81,492 |
| 239,683 |
| 79,767 | | 39,216 |
| 118,983 | ||||||||||
Zihuatanejo |
| 159,121 |
| 119,679 |
| 278,800 |
| 159,999 |
| 116,872 |
| 276,871 |
| 177,623 |
| 121,440 |
| 299,063 |
| 167,886 |
| 116,800 |
| 284,686 |
| 197,126 |
| 116,593 |
| 313,719 |
| 159,999 |
| 116,872 |
| 276,871 |
| 177,623 | | 121,440 |
| 299,063 |
| 167,886 | | 116,800 |
| 284,686 |
| 197,126 | | 116,593 |
| 313,719 |
| 95,487 | | 67,842 |
| 163,329 | ||||||||||
Total |
| 7,134,140 |
| 1,289,725 |
| 8,423,865 |
| 8,054,923 |
| 1,298,042 |
| 9,352,965 |
| 8,466,505 |
| 1,353,731 |
| 9,820,236 |
| 9,304,320 |
| 1,452,583 |
| 10,756,903 |
| 9,973,031 |
| 1,556,595 |
| 11,529,626 |
| 8,054,923 |
| 1,298,042 |
| 9,352,965 |
| 8,466,505 |
| 1,353,731 |
| 9,820,236 |
| 9,304,320 |
| 1,452,583 |
| 10,756,903 |
| 9,973,031 |
| 1,556,595 |
| 11,529,626 |
| 4,854,167 |
| 678,178 |
| 5,532,345 |
5246
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||
| | For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
| | 2016 | | 2017 | | 2018 | | 2019 | | 2020 | |||||||||||||||||||||||||||||
|
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total | |||||||||
Terminal arriving passengers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Acapulco |
| 340,645 |
| 13,330 |
| 353,975 |
| 326,492 | | 11,969 |
| 338,461 |
| 354,367 | | 13,585 |
| 367,952 |
| 422,254 | | 14,296 |
| 436,550 |
| 182,686 | | 12,873 |
| 195,559 | |||||||||
Ciudad Juárez |
| 561,086 |
| 4,307 |
| 565,393 |
| 596,586 | | 566 |
| 597,152 |
| 691,262 | | 470 |
| 691,732 |
| 818,244 | | 647 |
| 818,891 |
| 403,398 | | 377 |
| 403,775 | |||||||||
Culiacán |
| 849,603 |
| 6,282 |
| 855,885 |
| 939,409 | | 6,630 |
| 946,039 |
| 1,123,022 | | 4,088 |
| 1,127,110 |
| 1,211,407 | | 5,933 |
| 1,217,340 |
| 678,105 | | 2,282 |
| 680,387 | |||||||||
Chihuahua |
| 610,388 |
| 44,067 |
| 654,455 |
| 659,426 | | 45,743 |
| 705,169 |
| 734,964 | | 47,997 |
| 782,961 |
| 802,503 | | 53,676 |
| 856,179 |
| 381,813 | | 24,961 |
| 406,774 | |||||||||
Durango |
| 194,669 |
| 18,596 |
| 213,265 |
| 177,219 | | 21,206 |
| 198,425 |
| 191,524 | | 18,198 |
| 209,722 |
| 224,717 | | 37,671 |
| 262,388 |
| 110,487 | | 24,550 |
| 135,037 | |||||||||
Mazatlán |
| 353,629 |
| 132,578 |
| 486,207 |
| 353,920 | | 141,480 |
| 495,400 |
| 375,957 | | 141,802 |
| 517,759 |
| 434,104 | | 147,664 |
| 581,768 |
| 285,878 | | 80,284 |
| 366,162 | |||||||||
Monterrey |
| 4,008,793 |
| 599,094 |
| 4,607,887 |
| 4,308,480 | | 595,318 |
| 4,903,798 |
| 4,788,705 | | 603,354 |
| 5,392,059 |
| 4,979,390 | | 645,626 |
| 5,625,016 |
| 2,292,727 | | 217,295 |
| 2,510,022 | |||||||||
Reynosa |
| 292,452 |
| 354 |
| 292,806 |
| 247,231 | | 406 |
| 247,637 |
| 237,689 | | 277 |
| 237,966 |
| 246,429 | | 242 |
| 246,671 |
| 118,395 | | 272 |
| 118,667 | |||||||||
San Luis Potosí |
| 190,596 |
| 62,600 |
| 253,196 |
| 210,794 | | 65,652 |
| 276,446 |
| 243,290 | | 70,626 |
| 313,916 |
| 242,306 | | 81,021 |
| 323,327 |
| 115,160 | | 39,500 |
| 154,660 | |||||||||
Tampico |
| 341,655 |
| 15,105 |
| 356,760 |
| 341,321 | | 15,262 |
| 356,583 |
| 349,805 | | 15,212 |
| 365,017 |
| 353,006 | | 15,651 |
| 368,657 |
| 126,954 | | 5,723 |
| 132,677 | |||||||||
Torreón |
| 300,763 |
| 19,286 |
| 320,049 |
| 286,981 | | 17,001 |
| 303,982 |
| 322,643 | | 16,185 |
| 338,828 |
| 331,013 | | 23,609 |
| 354,622 |
| 149,194 | | 9,994 |
| 159,188 | |||||||||
Zacatecas |
| 116,216 |
| 54,061 |
| 170,277 |
| 117,174 | | 56,673 |
| 173,847 |
| 121,675 | | 60,988 |
| 182,663 |
| 169,639 | | 65,919 |
| 235,558 |
| 80,903 | | 32,466 |
| 113,369 | |||||||||
Zihuatanejo |
| 172,528 |
| 107,990 |
| 280,518 |
| 188,412 | | 110,427 |
| 298,839 |
| 177,154 | | 104,657 |
| 281,811 |
| 208,721 | | 102,746 |
| 311,467 |
| 97,830 | | 56,236 |
| 154,066 | |||||||||
Total |
| 8,333,023 |
| 1,077,650 |
| 9,410,673 |
| 8,753,445 |
| 1,088,333 |
| 9,841,778 |
| 9,712,057 |
| 1,097,439 |
| 10,809,496 |
| 10,443,733 |
| 1,194,701 |
| 11,638,434 |
| 5,023,530 |
| 506,813 |
| 5,530,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended December 31, | ||||||||||||||||||||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||||||||||||||||||||
|
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
| Domestic |
| International |
| Total |
Terminal arriving passengers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acapulco |
| 348,315 |
| 13,041 |
| 361,356 |
| 340,645 |
| 13,330 |
| 353,975 |
| 326,492 |
| 11,969 |
| 338,461 |
| 354,367 |
| 13,585 |
| 367,952 |
| 422,254 |
| 14,296 |
| 436,550 |
Ciudad Juárez |
| 440,887 |
| 363 |
| 441,250 |
| 561,086 |
| 4,307 |
| 565,393 |
| 596,586 |
| 566 |
| 597,152 |
| 691,262 |
| 470 |
| 691,732 |
| 818,244 |
| 647 |
| 818,891 |
Culiacán |
| 710,359 |
| 286 |
| 710,645 |
| 849,603 |
| 6,282 |
| 855,885 |
| 939,409 |
| 6,630 |
| 946,039 |
| 1,123,022 |
| 4,088 |
| 1,127,110 |
| 1,211,407 |
| 5,933 |
| 1,217,340 |
Chihuahua |
| 509,752 |
| 46,204 |
| 555,956 |
| 610,388 |
| 44,067 |
| 654,455 |
| 659,426 |
| 45,743 |
| 705,169 |
| 734,964 |
| 47,997 |
| 782,961 |
| 802,503 |
| 53,676 |
| 856,179 |
Durango |
| 153,140 |
| 6,692 |
| 159,832 |
| 194,669 |
| 18,596 |
| 213,265 |
| 177,219 |
| 21,206 |
| 198,425 |
| 191,524 |
| 18,198 |
| 209,722 |
| 224,717 |
| 37,671 |
| 262,388 |
Mazatlán |
| 291,938 |
| 132,935 |
| 424,873 |
| 353,629 |
| 132,578 |
| 486,207 |
| 353,920 |
| 141,480 |
| 495,400 |
| 375,957 |
| 141,802 |
| 517,759 |
| 434,104 |
| 147,664 |
| 581,768 |
Monterrey |
| 3,626,723 |
| 625,412 |
| 4,252,135 |
| 4,008,793 |
| 599,094 |
| 4,607,887 |
| 4,308,480 |
| 595,318 |
| 4,903,798 |
| 4,788,705 |
| 603,354 |
| 5,392,059 |
| 4,979,390 |
| 645,626 |
| 5,625,016 |
Reynosa |
| 261,644 |
| 323 |
| 261,967 |
| 292,452 |
| 354 |
| 292,806 |
| 247,231 |
| 406 |
| 247,637 |
| 237,689 |
| 277 |
| 237,966 |
| 246,429 |
| 242 |
| 246,671 |
San Luis Potosí |
| 169,231 |
| 55,145 |
| 224,376 |
| 190,596 |
| 62,600 |
| 253,196 |
| 210,794 |
| 65,652 |
| 276,446 |
| 243,290 |
| 70,626 |
| 313,916 |
| 242,306 |
| 81,021 |
| 323,327 |
Tampico |
| 372,402 |
| 15,873 |
| 388,275 |
| 341,655 |
| 15,105 |
| 356,760 |
| 341,321 |
| 15,262 |
| 356,583 |
| 349,805 |
| 15,212 |
| 365,017 |
| 353,006 |
| 15,651 |
| 368,657 |
Torreón |
| 248,776 |
| 26,713 |
| 275,489 |
| 300,763 |
| 19,286 |
| 320,049 |
| 286,981 |
| 17,001 |
| 303,982 |
| 322,643 |
| 16,185 |
| 338,828 |
| 331,013 |
| 23,609 |
| 354,622 |
Zacatecas |
| 109,894 |
| 48,931 |
| 158,825 |
| 116,216 |
| 54,061 |
| 170,277 |
| 117,174 |
| 56,673 |
| 173,847 |
| 121,675 |
| 60,988 |
| 182,663 |
| 169,639 |
| 65,919 |
| 235,558 |
Zihuatanejo |
| 173,799 |
| 109,500 |
| 283,299 |
| 172,528 |
| 107,990 |
| 280,518 |
| 188,412 |
| 110,427 |
| 298,839 |
| 177,154 |
| 104,657 |
| 281,811 |
| 208,721 |
| 102,746 |
| 311,467 |
Total |
| 7,416,860 |
| 1,081,418 |
| 8,498,278 |
| 8,333,023 |
| 1,077,650 |
| 9,410,673 |
| 8,753,445 |
| 1,088,333 |
| 9,841,778 |
| 9,712,057 |
| 1,097,439 |
| 10,809,496 |
| 10,443,733 |
| 1,194,701 |
| 11,638,434 |
5347
The following table sets forth the air traffic movement capacity of each of our airports as of December 31, 2019:2020:
Capacity(1) by Airport(2)
|
|
|
|
|
|
| ||||||
|
| Peak Air Traffic |
|
|
|
| ||||||
|
| Movements per |
| Runway |
| % Capacity | ||||||
| | | | | | | ||||||
|
| Peak Air Traffic |
| |
| | ||||||
| | Movements per | | Runway | | % Capacity | ||||||
Airport |
| Hour |
| Capacity(3) |
| Used | | Hour | | Capacity(3) | | Used |
Acapulco |
| 7 |
| 40 |
| 17.5 |
| 5 |
| 40 |
| 12.5 |
Ciudad Juárez |
| 8 |
| 20 |
| 40.0 |
| 6 |
| 20 |
| 30.0 |
Culiacán |
| 9 |
| 24 |
| 37.5 |
| 6 |
| 24 |
| 25.0 |
Chihuahua |
| 9 |
| 40 |
| 22.5 |
| 6 |
| 40 |
| 15.0 |
Durango |
| 4 |
| 40 |
| 10.0 |
| 3 |
| 40 |
| 7.5 |
Mazatlán |
| 8 |
| 22 |
| 36.4 |
| 6 |
| 22 |
| 27.3 |
Monterrey |
| 26 |
| 38 |
| 68.4 |
| 16 |
| 38 |
| 42.1 |
Reynosa |
| 4 |
| 18 |
| 22.2 |
| 3 |
| 18 |
| 16.7 |
San Luis Potosí |
| 6 |
| 20 |
| 30.0 |
| 4 |
| 20 |
| 20.0 |
Tampico |
| 5 |
| 22 |
| 22.7 |
| 5 |
| 22 |
| 22.7 |
Torreón |
| 5 |
| 20 |
| 25.0 |
| 3 |
| 20 |
| 15.0 |
Zacatecas |
| 3 |
| 20 |
| 15.0 |
| 2 |
| 20 |
| 10.0 |
Zihuatanejo |
| 7 |
| 20 |
| 35.0 |
| 5 |
| 20 |
| 25.0 |
(1) |
| Capacity is calculated based on Hour 30 (the thirtieth hour of maximum activity during the year). |
(2) |
|
|
(3) |
| Air traffic movements per hour. |
The following table sets forth the terminal capacity of each of our airports as of December 31, 2019:2020:
Capacity(1) by Airport(2)
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|
|
|
|
| ||||||||
|
| Peak Passenger |
|
|
|
| ||||||||
|
| Traffic Movements |
| Terminal |
| % Capacity | ||||||||
| | | | | | | ||||||||
|
| Peak Passenger |
| |
| | ||||||||
| | Traffic Movements | | Terminal | | % Capacity | ||||||||
Airport |
| per Hour |
| Capacity(3) |
| Used | | per Hour | | Capacity(3) | | Used | ||
Acapulco |
| 596 |
| 1,096 |
| 54.0 |
| 421 | | 1,103 | | 38.2 | ||
Ciudad Juárez |
| 890 |
| 621 |
| 143.3 |
| 628 | | 621 |
| 101.1 | ||
Culiacán |
| 1,105 |
| 938 |
| 117.8 |
| 762 |
| 938 |
| 81.2 | ||
Chihuahua |
| 1,039 |
| 1,286 |
| 80.5 |
| 735 |
| 1,297 |
| 56.7 | ||
Durango |
| 362 |
| 482 |
| 75.1 |
| 275 |
| 606 |
| 45.4 | ||
Mazatlán |
| 958 |
| 1,537 |
| 62.3 |
| 713 |
| 1,537 |
| 46.4 | ||
Monterrey Terminal A |
| 1,552 |
| 2,091 |
| 74.2 |
| 972 |
| 2,091 |
| 46.5 | ||
Monterrey Terminal B |
| 843 |
| 1,469 |
| 57.4 |
| 509 |
| 1,469 |
| 34.6 | ||
Monterrey Terminal C |
| 1,701 |
| 1,168 |
| 145.6 |
| 1,047 |
| 1,246 |
| 84.0 | ||
Reynosa |
| 469 |
| 326 |
| 143.9 |
| 351 |
| 911 |
| 38.5 | ||
San Luis Potosí |
| 453 |
| 1,380 |
| 32.8 |
| 335 |
| 1,380 |
| 24.3 | ||
Tampico |
| 519 |
| 683 |
| 76.0 |
| 519 |
| 683 |
| 76.0 | ||
Torreón |
| 488 |
| 545 |
| 89.5 |
| 331 |
| 549 |
| 60.3 | ||
Zacatecas |
| 435 |
| 573 |
| 75.9 |
| 322 |
| 579 |
| 55.6 | ||
Zihuatanejo |
| 797 |
| 945 |
| 84.3 |
| 596 |
| 945 |
| 63.1 |
(1) |
| Capacity is calculated based on Hour 30 (the thirtieth hour of maximum activity during the year). |
(2) | 2020 figures. |
|
|
|
|
48
54
(3) | Passenger traffic during peak hours. |
The following table sets forth the air traffic movements for each of our airports for the periods indicated:
Air Traffic Movements by Airport(1)
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| For the Year Ended December 31, | ||||||||||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||||||||||
| | | | | | | | | | | ||||||||||
| | For the Year Ended December 31, | ||||||||||||||||||
|
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| 2020 | ||||||||||
Acapulco |
| 24,452 |
| 23,831 |
| 22,838 |
| 24,151 |
| 23,606 |
| 23,831 |
| 22,838 |
| 24,151 |
| 23,606 |
| 16,115 |
Ciudad Juárez |
| 13,699 |
| 18,415 |
| 16,215 |
| 18,512 |
| 19,260 |
| 18,415 |
| 16,215 |
| 18,512 |
| 19,260 |
| 12,277 |
Culiacán |
| 36,716 |
| 38,611 |
| 38,018 |
| 41,133 |
| 40,750 |
| 38,611 |
| 38,018 |
| 41,133 |
| 40,750 |
| 29,520 |
Chihuahua |
| 31,336 |
| 33,869 |
| 29,361 |
| 30,760 |
| 30,222 |
| 33,869 |
| 29,361 |
| 30,760 |
| 30,222 |
| 20,990 |
Durango |
| 17,556 |
| 17,324 |
| 14,559 |
| 15,324 |
| 16,039 |
| 17,324 |
| 14,559 |
| 15,324 |
| 16,039 |
| 11,556 |
Mazatlán |
| 16,290 |
| 19,685 |
| 17,424 |
| 17,579 |
| 17,342 |
| 19,685 |
| 17,424 |
| 17,579 |
| 17,342 |
| 13,407 |
Monterrey |
| 114,428 |
| 115,593 |
| 110,938 |
| 114,564 |
| 112,188 |
| 115,593 |
| 110,938 |
| 114,564 |
| 112,188 |
| 58,265 |
Reynosa |
| 11,705 |
| 11,146 |
| 8,639 |
| 7,278 |
| 6,757 |
| 11,146 |
| 8,639 |
| 7,278 |
| 6,757 |
| 4,825 |
San Luis Potosí |
| 20,891 |
| 21,719 |
| 21,605 |
| 21,394 |
| 19,813 |
| 21,719 |
| 21,605 |
| 21,394 |
| 19,813 |
| 12,628 |
Tampico |
| 20,724 |
| 20,401 |
| 18,702 |
| 18,930 |
| 17,219 |
| 20,401 |
| 18,702 |
| 18,930 |
| 17,219 |
| 10,266 |
Torreón |
| 16,587 |
| 17,922 |
| 14,842 |
| 16,863 |
| 16,912 |
| 17,922 |
| 14,842 |
| 16,863 |
| 16,912 |
| 10,350 |
Zacatecas |
| 8,987 |
| 8,261 |
| 6,868 |
| 6,903 |
| 7,390 |
| 8,261 |
| 6,868 |
| 6,903 |
| 7,390 |
| 4,377 |
Zihuatanejo |
| 11,685 |
| 11,584 |
| 12,343 |
| 11,959 |
| 12,582 |
| 11,584 |
| 12,343 |
| 11,959 |
| 12,582 |
| 9,580 |
Total |
| 345,056 |
| 358,361 |
| 332,352 |
| 345,350 |
| 340,080 |
| 358,361 |
| 332,352 |
| 345,350 |
| 340,080 |
| 214,156 |
(1) |
| Includes departures and landings. |
The following table sets forth the average number of passengers per air traffic movement for each of our airports for the periods indicated:
Average Passengers per Air Traffic Movements by Airport(1)
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| For the Year Ended December 31, | ||||||||||||||||||
|
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 | ||||||||||
| | | | | | | | | | | ||||||||||
| | For the Year Ended December 31, | ||||||||||||||||||
|
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| 2020 | ||||||||||
Acapulco |
| 29.9 |
| 30.1 |
| 30.0 |
| 30.6 |
| 37.1 |
| 30.1 |
| 30.0 |
| 30.6 |
| 37.1 |
| 24.6 |
Ciudad Juárez |
| 63.1 |
| 59.9 |
| 72.3 |
| 73.7 |
| 82.9 |
| 59.9 |
| 72.3 |
| 73.7 |
| 82.9 |
| 64.3 |
Culiacán |
| 39.0 |
| 44.7 |
| 50.2 |
| 55.2 |
| 60.3 |
| 44.7 |
| 50.2 |
| 55.2 |
| 60.3 |
| 46.5 |
Chihuahua |
| 35.4 |
| 38.6 |
| 48.0 |
| 50.6 |
| 56.2 |
| 38.6 |
| 48.0 |
| 50.6 |
| 56.2 |
| 39.0 |
Durango |
| 18.0 |
| 24.5 |
| 27.2 |
| 27.3 |
| 32.9 |
| 24.5 |
| 27.2 |
| 27.3 |
| 32.9 |
| 23.5 |
Mazatlán |
| 52.4 |
| 49.5 |
| 57.1 |
| 59.1 |
| 67.0 |
| 49.5 |
| 57.1 |
| 59.1 |
| 67.0 |
| 55.2 |
Monterrey |
| 73.9 |
| 79.4 |
| 88.1 |
| 93.7 |
| 99.6 |
| 79.4 |
| 88.1 |
| 93.7 |
| 99.6 |
| 85.7 |
Reynosa |
| 43.3 |
| 50.6 |
| 56.2 |
| 64.2 |
| 71.1 |
| 50.6 |
| 56.2 |
| 64.2 |
| 71.1 |
| 47.5 |
San Luis Potosí |
| 21.3 |
| 23.2 |
| 25.6 |
| 29.3 |
| 32.5 |
| 23.2 |
| 25.6 |
| 29.3 |
| 32.5 |
| 24.5 |
Tampico |
| 36.9 |
| 35.2 |
| 38.4 |
| 38.9 |
| 42.9 |
| 35.2 |
| 38.4 |
| 38.9 |
| 42.9 |
| 26.4 |
Torreón |
| 33.5 |
| 36.1 |
| 41.7 |
| 40.4 |
| 41.9 |
| 36.1 |
| 41.7 |
| 40.4 |
| 41.9 |
| 31.0 |
Zacatecas |
| 35.6 |
| 41.5 |
| 50.9 |
| 53.1 |
| 64.3 |
| 41.5 |
| 50.9 |
| 53.1 |
| 64.3 |
| 53.1 |
Zihuatanejo |
| 48.1 |
| 48.1 |
| 48.4 |
| 47.4 |
| 49.7 |
| 48.1 |
| 48.4 |
| 47.4 |
| 49.7 |
| 33.1 |
Average of all airports |
| 49.0 |
| 52.4 |
| 59.2 |
| 62.4 |
| 68.1 |
| 52.4 |
| 59.2 |
| 62.4 |
| 68.1 |
| 51.7 |
(1) |
| Includes total passengers divided by total air traffic movements. |
49
55
Air Traffic Movements by Aviation Category(1)
|
|
|
|
| ||||
|
| For the Year Ended December 31, | ||||||
|
| 2018 |
| 2019 | ||||
| | | | | ||||
| | For the Year Ended December 31, | ||||||
|
| 2019 |
| 2020 | ||||
Commercial aviation |
| 233,175 |
| 238,630 |
| 238,630 |
| 125,975 |
Charter aviation |
| 1,006 |
| 916 |
| 916 |
| 648 |
General aviation and other |
| 111,169 |
| 100,534 |
| 100,534 |
| 87,533 |
Total |
| 345,350 |
| 340,080 |
| 340,080 |
| 214,156 |
(1) |
| Includes departures and landings for all 13 airports. |
Metropolitan Destination
Monterrey International Airport
The Monterrey airport is our most important airport based on passenger traffic (including both domestic and international passengers), air traffic movements and contribution to aeronautical revenues. According to the AFAC, the Monterrey airport was the fourthfifth busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, it accounted for approximately 49.7%49.8%, 49.8%48.2% and 48.2%45.1%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 9.8 million, 10.7 million, 11.2 million and 11.25.0 million, terminal passengers, respectively, were served by the Monterrey airport. Of the terminal passengers in 2017, 87.0% were domestic, and 13.0% were international passengers. In 2018, 87.6% were domestic, and 12.4% were international passengers. In 2019, 87.3% were domestic, and 12.7% were international passengers. In 2020, 89.9% were domestic, and 10.1% were international passengers. This airport serves primarily business travelers and is also a hub for the transportation of goods.
A total of 1412 commercial airlines operated at this airport during 2019.2020. In 2019,2020, airlines operating at this airport served 5042 direct destinations, including 3330 domestic destinations and 1712 international destinations. In 2019,2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Cancún, Guadalajara, Tijuana, Veracruz, Puerto Vallarta, Querétaro, Mérida, Villahermosa, Hermosillo, El Bajío, Puerto Vallarta, Chihuahua, Toluca, Veracruz, Mérida,Mazatlán, Puebla, Hermosillo, Houston, Dallas, San Antonio, Atlanta, Detroit, Las Vegas, Detroit, Chicago, Los Angeles, Miami, New York, San Antonio, MiamiLa Havana and Panama City. In 2019,2020, the principal domestic airlines operating at the airport were VivaAerobus, Interjet, Volaris, Aeroméxico, Connect, Aeroméxico Connect, Interjet and Magnicharters.
The Monterrey airport is located approximately 21 kilometers (13 miles) from the city of Monterrey, which has a population (including its suburbs) of approximately 4.55.0 million inhabitants. Monterrey is Mexico’s third largest city based on population and is one of Mexico’s most productive industrial centers. It is home to many of Mexico’s largest companies in a wide variety of industries, as well as several major universities. Monterrey is the capital of the state of Nuevo León, the third largest contributor to Mexico’s GDP.
The Monterrey airport operates 24 hours a day. The airport has two operating runways, one with a length of 3,000 meters (9,842 feet) and the other with a length of 1,800 meters (5,905 feet). The airport’s runway capacity is 38 air traffic movements per hour. The airport also has an instrument landing system on runway 29. The airport occupies a total area of 806.2 hectares (3.11 square miles) and has three commercial passenger terminal buildings (Terminal A, B and C for domestic and international flights) with a total area of approximately 61,52067,103 square meters (662,196(722,291 square feet). The airport has three platforms for commercial aviation operations, one platform for general aviation operations, one platform for air freight operations and eleven taxiways.
The Terminal A building has a total area of approximately 29,269 square meters (315,049 square feet), of which 4,8474,611 square meters (52,173(49,632 square feet) is commercial space, a 19‑position19-position apron for commercial aviation, one‑positionone-position apron for air freight, a five‑five-position apron for general aviation, nine air bridges, an ample boarding lounge for passengers making connections with other flights and other boarding lounges. Terminal A has 15 boarding gates for international or domestic flights and a public parking facility that accommodates 2,1262,213 vehicles.
50
56
The Terminal B building started operations on September 1, 2010, and is used by Aeroméxico, Aeroméxico Connect and Delta. Terminal B has a total area of approximately 20,568 square meters (221,392 square feet), of which 3,9203,263 square meters (42,195(35,123 square feet) is commercial space. It has two levels plus a mezzanine and includes six air bridges, an 18‑position18-position commercial aviation apron and 14 boarding gates. Terminal B also has a public parking facility that accommodates 650639 vehicles.
The Terminal C building has a total area of approximately 11,68312,460 square meters (125,755(134,118 square feet), of which 1,9781,711 square meters (21,291(18,417 square feet) is commercial space. This terminal, which commenced operation at year‑endyear-end 2006, is used by the low‑costlow-cost carrier VivaAerobus. Terminal C has eight boarding gates and serves 16 aircraft positions for commercial aviation. In January 2012, we concluded the construction of a new modern access to the Terminal C building, more commercial spaces and an additional baggage‑claimbaggage-claim area, with a total area of approximately 3,420 square meters (36,812 square feet). Terminal C has a public parking facility that accommodates 719986 vehicles.
The Monterrey airport offers air cargo services for imports and exports and serves as a logistical hub for domestic and international air shipping providers. Its current infrastructure servicing air cargo operations includes bonded terminal warehouses. An area of 8,465 square meters (91,117 square feet) has been occupied by Federal Express and OMA Carga (which we operate directly) since 2003,2004, United Parcel Service since 2005 and DHL since January 2010.2011. In 2017, OMA Logística (which we also operate directly) started operating a bonded warehouse to facilitate for ground cargo operations between customs. Inside the Monterrey airport, the customs authority has import and export merchandise checkpoint platforms and our warehouses offer services for the handling, storage and custody of merchandise, dry cargo, controlled temperature, DGR (Dangerous Goods Regulation), X-ray (authorized equipment by TSA), 24/7 surveillance cameras, scales of up to 30 tons, as well as miscellaneous services required for authorized import and export operations,operations. The Monterrey airport also offers commercial, office and parking spaces that facilitate and contribute to the activities of all users and make it an attractive logistical hub for logistics andthe entire foreign trade userscommunity, in conjunction with the infrastructure and operational and office facilities for Mexican customs.
To allow the future expansion of the Monterrey airport, including its second commercial runway, in 2009, we completed the acquisition of land strategically located adjacent to the Monterrey airport with an aggregate surface area of 777 hectares (3 square miles) for an aggregate price of Ps.1,159,631 thousand (U.S.$88.8 million) (amount expressed in nominal 2009 pesos). The acquired land is classified in our financial statements as land owned by the Company at its acquisition value, presented as a fixed asset. On October 1, 2012, we presented a proposal to the Mexican Bureau of Civil Aviation (currently AFAC) to recover the cost of our investment in the land, meaning that we requested that the Mexican Bureau of Civil Aviation (currently AFAC) recognize the acquired land as part of our future investment in the Monterrey airport concession included in the airport’s required master development programMaster Development Program investments, rather than as a fixed asset that we own. On December 4, 2012, we received authorization from the Mexican Bureau of Civil Aviation (currently AFAC) to reallocate Ps.386,538 thousand (amount expressed in nominal 2009 pesos) in investments included in the 2011–2015 master development programMaster Development Program for the Monterrey airport. Additionally, during the 2011 master development programMaster Development Program review, Ps.77,306 thousand was reallocated due to extraordinary adjustment of the Monterrey airport’s maximum rate under its master development program.Master Development Program. We are currently evaluating various possibilitiesreceived authorization from AFAC to reallocate Ps.386,538 thousand (amount expressed in nominal 2009 pesos) of our investment in the land at this airport to investments included in the 2011–2015 Master Development Program for the Monterrey airport. The recovery of the remaining investment with the Mexican Bureau of Civil Aviation (currently AFAC) at a cost of Ps.695,759 thousand (amount expressed in nominal 2009 pesos), which was not recognized underis included in the 2016–2020 master development programindicative period of our current approved Master Development Program for the Monterrey airport. The2026-2035.The actual amounts of recovery are adjusted annually based on the Mexican Producer Index.
On July 22, 2016, we sold 200,000 square meters (2,152,782 square feet) of vacant land outside the Monterrey airport, which was not required for future aeronautical use, for Ps.30 million. The Acapulco airport owned 58.82% of the vacant land and the Zihuatanejo airport owned 41.18%.
In September 2018, we completed a 1,200 square-meter (12,917 square-foot) expansion of the passenger waiting area for regional flights of Terminal B at the Monterrey airport. The expansion increased the regional waiting area by 280%. The project had a total investment of Ps.125 million, and it started operations on September 8, 2018.
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In November 2019, we started a major expansion project at the Monterrey airport. We expect to invest approximately Ps.4.2 billion between 2019 and 2025, of which Ps.500 million correspond to our current master development program commitment.2025. The project will be built in two phases. Phase 1 consists of the expansion of the public and check-in areas of Terminal A and the construction of a new wing. As a result, total terminal space will
57
increase by over 15,000approximately 14,646 square meters (161,459(157,648 square feet), approximately a 25%24% increase of thenthe existing terminal space. Certain components of Phase 1 willare expected to become operational by the end of 2021, with all of Phase 1 to be completed and operational by late 2022. Phase 2 consists of the construction of a second new wing and an overall expansion of the terminal, increasing terminal space by an additional 16,00014,753 square meters (172,223(158,800 square feet), an increase of 19%. Phase 2 is expected to be completed by 2024.2025. After both phases of the expansion, the Monterrey airport will have an annual capacity of 16.516.3 million passengers (up from 11.612.0 million passengers currently), positioning itself as one of the busiest connection centers in northern Mexico.
In the future, we may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession. Historically, Aeropuerto del Norte has been used solely for general aviation operations. The state of Nuevo León has requested in the past that the Ministry of Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations. To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession. The Ministry of Communications and Transportation may authorize such an amendment and that commercial aviation flights will operate from Aeropuerto del Norte in the future. In addition, we understand that Aeropuerto del Norte is not capable of accommodating commercial passenger traffic with its current infrastructure.
Tourist Destinations
Acapulco International Airport
The Acapulco airport is our sixth most important airport based on passenger traffic and our sixth most important airport based on aeronautical revenues. According to the AFAC, the Acapulco airport was the 2425th busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, it accounted for approximately 3.5%3.4%, 3.4%3.8% and 3.8%3.6%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 685,124, 739,120, 875,315 and 875,315395,948 terminal passengers, respectively, were served by the Acapulco airport. Of the terminal passengers in 2017, 92.2% were domestic, and 7.8% were international. In 2018, 92.2% were domestic, and 7.8% were international. In 2019, 93.1% were domestic, and 6.9% were international. In 2020, 91.2% were domestic, and 8.8% were international. Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are highly seasonal and affected by Mexican and international economic conditions.
A total of 1211 airlines (ten(nine commercial airlines and two charter airlines) operated at this airport during 2019.2020. In 2019,2020, airlines operating at this airport served teneleven direct destinations, including seven domestic destinations and threefour international destinations. In 2019,2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Tijuana, Monterrey, Guadalajara, Toluca, MonterreyCancún and Guadalajara.Querétaro. In 2019,2020, the principal domestic airlines operating at the airport were Volaris, Interjet, Aeromar, Aeroméxico Connect, Volaris, Aeromar, VivaAerobus, TARAeroméxico and Aeroméxico.TAR.
The Acapulco airport is located approximately 15 kilometers (9 miles) from the city of Acapulco in the state of Guerrero, which has a population (including its suburbs) of 886,975.852,622. Guerrero is Mexico’s 1214th largest state based on population, and the city of Acapulco is one of Mexico’s most recognized tourist destinations, of particular importance as a port of embarkation and disembarkation for cruise ships. We believe that these cruise ship passengers represent a significant portion of the airport’s terminal passengers.
The Acapulco airport operates 24 hours a day. The airport has two operating runways and six taxiways. The principal runway has a length of 3,300 meters (10,827 feet), and the auxiliary runway has a length of 1,700 meters (5,577 feet). The apron servicing commercial aviation accommodates 17 airplanes, and the general aviation apron accommodates 24 aircrafts.
The runway capacity at the Acapulco airport is 40 air traffic movements per hour. The airport also has two instrument landing systems for landing in low visibility on runways 10 and 28, which provide precise guidance to assist
52
aircraft during landing. The airport occupies a total area of 422.2 hectares (1.63 square miles) with a total terminal space of 15,436 square meters (166,151 square feet), of which 2,0632,053 square meters (22,206(22,098 square feet) is commercial space. Besides having the instrument landing system, runways 10 and 28 have approach lights and flashes on both headers. The Acapulco airport has a public parking facility that accommodates 110 vehicles.
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Due to its technical and geographic characteristics, the Acapulco airport is the primary alternate airport of Mexico City. The length of the airport’s runway as well as its elevation and average temperature makes it possible to operate airplanes at their maximum passenger, freight and fuel capacities.
In May 2018, we inaugurated a new terminal building at Acapulco airport that has an 18,800 square-meter (202,362 square-foot) surface, with three levels and a mezzanine. The new terminal has the capacity to serve 1.3 million passengers per year. The project had a total investment of Ps.615 million since July 2016.million.
Mazatlán International Airport
The Mazatlán airport is our fifth most important airport based on passenger traffic. According to the AFAC, the Mazatlán airport was the 2015th busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, it accounted for approximately 5.1%4.8%, 4.8%5.0% and 5.0%6.7%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 994,283, 1,038,555, 1,161,155 and 1,161,155740,306 terminal passengers, respectively, were served by the Mazatlán airport. Of the terminal passengers in 2017, 70.0% were domestic, and 30.0% were international. In 2018, 71.2% were domestic, and 28.8% were international. In 2019, 73.0% were domestic, and 27.0% were international. In 2020, 76.4% were domestic, and 23.6% were international. The airport’s passengers are predominantly domestic tourists who come from Mexico City, Monterrey and Tijuana, among other cities, and international tourists who come primarily from the United States and Canada. Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are highly seasonal and affected by Mexican and international economic conditions.
A total of 1715 airlines operate at the airport (15(13 commercial airlines and two charter airlines). In 2019,2020, airlines operating at this airport served 2426 direct destinations, including ten domestic destinations and fourteensixteen international destinations. Of these destinations, Mexico City, Tijuana, Monterrey, Cabo San Lucas, San José del Cabo, Chihuahua, La Paz, Cabo San Lucas, Ciudad Juárez, Hermosillo, CuliacánQuerétaro and QuerétaroHermosillo were the main domestic routes. The main international destinations served by this airport were Los Angeles, Phoenix, Dallas and Minneapolis in the United States and Calgary, Edmonton, Vancouver, Abbotsford and AbbotsfordWinnipeg in Canada. In 2019,2020, the principal commercial domestic airlines operating at this airport were Volaris, VivaAerobus, Volaris, Aeroméxico Connect, Aero Calafía, Interjet, Magnicharters, Aerocalafia, TAR and Aeroméxico.
The Mazatlán airport is located approximately 18 kilometers (11 miles) from the city of Mazatlán, which has a population of 502,547.501,441. Mazatlán is the principal tourist destination of the Sinaloa region, with about 9,8599,779 hotel rooms, according to the Mexican Ministry of Tourism (Secretaría de Turismo). Mazatlán offers attractive beaches and is also a major producer of shrimp, sardines and tuna.
The Mazatlán airport operates 24 hours a day. Its runway capacity is 22 air traffic movements per hour. The airport occupies approximately 439.8 hectares (1.70 square miles) of land. The airport’s facilities include a terminal building with a total area of 18,444 square meters (198,530 square feet), of which 2,4982,353 square meters (26,888(25,327 square feet) is commercial space. The airport has a commercial aviation apron with 10 positions and a general aviation apron with 24 positions. In addition, the airport has four air bridges and a public parking facility that accommodates 157 vehicles. The airport’s runway is 2,702 meters (8,865 feet) long, with four taxiways that connect the commercial and general aviation platforms and includes an instrument landing system on runway 26.
In 2014, the terminal building was expanded by 2,300 square meters (24,757 square feet) and 2,500 square meters (26,919(26,909 square feet) of space were refurbished, including the main façade of the airport, waiting area, check‑check-in and inspection points, restrooms and offices. Commercial spaces were also expanded.
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Zihuatanejo International Airport
The Zihuatanejo airport is our tentheighth most important airport based on passenger traffic. According to the AFAC, the Zihuatanejo airport was the 3128st busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, it accounted for approximately 3.0%2.6%, 2.6%2.7% and 2.7%,2.9% respectively, of our terminal passenger traffic.
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In 2017, 2018, 2019 and 2019,2020, a total of 597,902, 566,497, 625,186 and 625,186317,395 terminal passengers, respectively, were served by the Zihuatanejo airport. Of the terminal passengers in 2017, 61.2% were domestic, and 38.8% were international. In 2018, 60.9% were domestic, and 39.1% were international. In 2019, 64.9% were domestic, and 35.1% were international. In 2020, 60.9% were domestic, and 39.1% were international Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are seasonal and are affected by Mexican and international economic conditions.
A total of 1615 airlines operate at the airport (13(12 commercial airlines and three charter airlines). In 2019,2020, airlines operating at this airport served 18 direct destinations, including fivefour domestic destinations and 1314 international destinations. In 2019,2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Tijuana, Monterrey,Toluca, Querétaro, Toluca, Los Angeles, Calgary, Houston, Vancouver, PhoenixMinneapolis, Chicago and Toronto.Montreal. In 2019,2020, the principal domestic airlines operating at this airport were Interjet, Aeroméxico Connect, Volaris, Interjet, Aeromar, VivaAerobus, Magnicharters, TAR, Aeroméxico and AeroméxicoMagnicharters and the non-Mexican airlines included Alaska Airlines, Sunwing, United Airlines, Air Canada, WestJet, United, American Airlines and Delta.Sun Country.
The Zihuatanejo airport is located approximately 12 kilometers (7 miles) from the city of Zihuatanejo. Situated in the state of Guerrero, with a population of 124,824126,001 people, the city of Zihuatanejo is one of Mexico’s most attractive tourist destinations, with approximately 6,2825,826 hotel rooms, according to the Ministry of Tourism, a marina, world‑classworld-class golf courses and a growing residential real estate market.
The Zihuatanejo airport operates 14 hours a day. The airport has one runway, which is 2,506 meters (8,222 feet) long with a runway capacity of 20 air traffic movements per hour. The airport’s facilities include a terminal building encompassing an area of 11,336 square meters (122,020 square feet), including 1,4631,453 square meters (15,748(15,640 square feet) of commercial space. It has a six‑positionsix-position commercial aviation apron, a 23‑position23-position general aviation apron and two taxiways. The Zihuatanejo airport has a public parking facility that accommodates 140 vehicles.
The quality of services offered at the Zihuatanejo airport has improved as a result of the rehabilitation of its runway, the remodeling and expansion of the departure gate area and the reconfiguration of the passenger and carry‑oncarry-on luggage screening area, which were completed on July 14, 2016.
In order to maintain the current infrastructure of the Zihuatanejo airport, on June 2019, we began construction of a structural reinforcement of its terminal building. Total investment is approximately Ps.158 million and construction is expected to be completed in June 2021.
Regional Destinations
Chihuahua International Airport
The Chihuahua airport is our third most important airport based on passenger traffic and air traffic movements and our third most important airport based on aeronautical revenues. According to the AFAC, the Chihuahua airport was the 12th busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, it accounted for approximately 7.2%, 7.2%7.3% and 7.3%7.4%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 1,409,579, 1,556,770, 1,699,816, and 1,699,816818,151 terminal passengers, respectively, were served by the Chihuahua airport. Of the terminal passengers in 2017, 92.1% were domestic, and 7.9% were international. In 2018, 92.2% were domestic, and 7.8% were international. In 2019, 92.1% were domestic, and 7.9% were international. In 2020, 92.0% were domestic, and 8.0% were international. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
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A total of ten commercial airlines operate at the airport. In 2019,2020, airlines operating at this airport served 18 direct destinations, including fourteen domestic destinations and four international destinations. In 2019,2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Guadalajara, Monterrey, Guadalajara, Cancún, Tijuana, Mazatlán, Hermosillo, Querétaro, Culiacán, Mérida, Dallas, Denver, Houston and Denver.Phoenix. In 2019,2020, the principal domestic airlines operating at this airport were Volaris, Aeroméxico Connect, VivaAerobus, Aeroméxico, Interjet TAR and AeroméxicoTAR and the principal non‑Mexicannon-Mexican airlines were American Airlines and United.
The Chihuahua airport is located approximately 18 kilometers (11 miles) from the city of Chihuahua, the capital of the state of Chihuahua. The city’s population is 878,062.937,674. Chihuahua’s close proximity to the United States and its highly developed maquiladora industry account for the majority the airport’s incoming and outgoing traffic.
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The Chihuahua airport operates 14 hours a day. The airport has three runways, with lengths of 2,600 meters (8,530 feet), 2,420 meters (7,940 feet) and 1,100 meters (3,609 feet), respectively. The runway system has a capacity of 40 air traffic movements per hour. The airport also has an instrument landing system on runway 36. The airport occupies a total area of approximately 909.2 hectares (3.51 square miles). The airport’s facilities include a terminal building with a total area of approximately 7,95112,968 square meters (85,584(139,586 square feet), including 1,9251,609 square meters (20,720(17,319 square feet) of commercial space, a seven‑positionseven-position apron for commercial aviation, two aprons with a total of 21 positions for general aviation, four taxiways, a one‑positionone-position apron for airfreight and one air bridge. The airport has six gates for international or domestic flights. The Chihuahua airport has a public parking facility that accommodates 475627 vehicles.
To accommodate growing demand for airfreight services and an expanding local economy, in August 2005 we completed the construction of a cargo area, which includes a warehouse, a customs platform and office, x‑x-ray zones, storage areas and logistics offices. We currently operate all international cargo operations at this airport directly.
In December 2016, we started an expansion and remodeling of the terminal building at the Chihuahua airport, which was completed on September 17, 2019. The project had a total investment of Ps.318 million and included 5,743 square meters (61,817 square feet) of new areas and the remodeling of 9,510 square meters (102,365 square feet).
Culiacán International Airport
The Culiacán airport is our second most important airport based on passenger traffic, air traffic movements and contribution to aeronautical revenues. According to the AFAC, the Culiacán airport was the 109th busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, it accounted for approximately 9.7%10.5%, 10.5%10.6% and 10.6%12.4%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 1,909,651, 2,270,834, 2,458,863 and 2,458,8631,373,102 terminal passengers, respectively, were served by the Culiacán airport. Of the terminal passengers in 2017, 98.5% were domestic, and 1.5% were international. In 2018, 98.7% were domestic, and 1.3% were international. In 2019, 98.5% were domestic, and 1.5% were international. In 2020, 99.0% were domestic, and 1.0 % were international. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are highly affected by Mexican economic conditions.
The airport’s terminal passenger traffic consists predominantly of commercial aviation. In 2017, 2018, 2019 and 2019,2020, commercial aviation accounted for approximately 98.2%99.8%, 99.8% and 99.8%99.7%, respectively, and general aviation accounted for approximately 1.8%0.2%, 0.2% and 0.2%0.3%, respectively, of the airport’s terminal passenger traffic.
A total of seven commercial airlines operate at the airport. In 2019,2020, airlines operating at this airport served eleventwelve domestic destinations: Tijuana, Mexico City, Guadalajara, Monterrey, Mexicali, San José del Cabo, Monterrey, Mexicali, La Paz, Ciudad Juárez, Chihuahua, Hermosillo Chihuahua,and Cabo San Lucas and one international destination to Phoenix. In 2019,2020, the domestic airlines operating at this airport were Volaris, VivaAerobus, Aeroméxico Connect, Interjet, TAR, Aerocalafia TAR and Aeroméxico.
The Culiacán airport is located approximately 14 kilometers (9 miles) from the city of Culiacán. The population of the whole municipality is 1,059,617.1,155,462. Culiacán is the capital of the state of Sinaloa, an important producer
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of beef and agricultural products. The potential for growth of exports to the United States could generate an increase in cargo operations at this airport, though growth may not occur, and therefore cargo operations may not increase as a result thereof.
The Culiacán airport operates 16 hours a day. The runway has a length of 2,227 meters (7,306 feet) and capacity of 24 air traffic movements per hour. The airport occupies a total area of 280.9 hectares (1.08 square miles). The airport’s facilities include a terminal building expanded in 2012 with a total area of approximately 11,250 square meters (121,094 square feet), including 2,0992,098 square meters (22,593 square feet) of commercial space, a seven‑positioneight-position apron for commercial aviation, a 57‑position57-position apron for general aviation, six taxiways and two air bridges. The Culiacán airport has a public parking facility that accommodates 343 vehicles.
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The Culiacán airport also includes military installations. The presence of these installations amid their operational activity may at some point affect the airport’s runway capacity at peak hours, thus affecting its civil aviation operations.
Durango International Airport
In 2017, 2018, 2019 and 2019,2020, the Durango airport accounted for approximately 2.0%1.9%, 1.9%2.3% and 2.3%2.5%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 395,905, 418,914, 527,004 and 527,004271,231 terminal passengers, respectively, were served by the Durango airport. Of the terminal passengers in 2017, 85.5% were domestic, and 14.5% were international. In 2018,in2018, 86.7% were domestic, and 13.3% were international. In 2019, 82.1% were domestic, and 17.9% were international. In 2020, 79.5% were domestic, and 20.5% were international Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of five commercial airlines operate at the airport. In 2019,2020, airlines operating at this airport served nine direct destinations, including six domestic destinations and three international destinations: Mexico City, Tijuana, Guadalajara, Monterrey, Guadalajara, Ciudad Juárez, Querétaro, Dallas, Chicago and Los Angeles. In 2019,2020, the domestic airlines operating at this airport were Volaris, Aeroméxico Connect, Volaris, TAR and VivaAerobus and the principal non Mexican airline was American Airlines.
The Durango airport is located approximately 16 kilometers (10 miles) from the City of Durango, which has a population of 654,876.688,697. The state of Durango is rich in natural resources and is Mexico’s leading producer of gold, silver, lead and zinc.
The Durango airport operates 14 hours a day. The airport’s runway is 2,900 meters (9,514 feet) long. The runway has five taxiways and a capacity of 40 air traffic movements per hour.
The airport’s total area is 541.4 hectares (2.09 square miles). Its facilities include a 3,8554,846 square-meter (41,495(52,162 square-foot) terminal building with 272517 square meters (2,928(5,565 square feet) of commercial space. It has a four‑five position commercial aviation apron, a 33‑position33-position general aviation apron and a 343136 space public parking area. The airport has three boarding gates for international or domestic flights.
San Luis Potosí International Airport
According to the AFAC, the San Luis Potosí airport was the 3029th busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, the San Luis Potosí airport accounted for approximately 2.8%2.9%, 2.9%2.8% and 2.8%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 553,353, 626,512, 643,224, and 643,224309,311 terminal passengers, respectively, were served by the San Luis Potosí airport. Of the terminal passengers in 2017, 71.6% were domestic, and 28.4% were international. In 2018, 72.0% were domestic, and 28.0% were international. In 2019, 70.6% were domestic, and 29.4% were international. In 2020, 71.5% were domestic, and 28.5% were international. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions. A total of eight commercial airlines operate at the
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airport: Aeroméxico Connect, Volaris, Aeromar, VivaAerobus, TAR, VivaAerobus, Magnicharters, American Airlines and United.United Airlines. In 2019,2020, airlines operating at this airport served seven destinations, including five domestic destinations and two international destinations. In 2019,2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Cancún, Tijuana, Monterrey, Puerto Vallarta, Dallas and Houston .
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Houston.
The San Luis Potosí airport operates 24 hours per day and is located approximately 15 kilometers (9 miles) from the city of San Luis Potosí, which is the capital of the state of San Luis Potosí and has a population of 824,229.911,908. The airport has two runways with a total capacity of 20 air traffic movements per hour. The principal runway is 3,006 meters (9,862 feet) long, and the secondary runway is 1,000 meters (3,281 feet) long. The airport has a total area of 508.3 hectares (1.96 square miles). The airport’s facilities include a terminal building with approximately 11,042 square meters (118,855 square feet), including 1,2551,229 square meters (13,509(13,229 square feet) of commercial space, a five‑positionsix-position platform for commercial aviation, two aprons with a total of 24 positions for general aviation, four taxiways, a boarding lounge with five gates and a public parking facility that accommodates 222 vehicles. The airport’s navigational aids include precision approach path indicators, VHF omnidirectional radio and an instrument landing system on runway 14.
In November 2016, we started an expansion and remodeling of the terminal building at the San Luis Potosí airport, which was completed on August 16, 2019. The project had a total investment of Ps.400 million and included an expansion of 8,600 square meters (92,570 square feet), for a total of 13,482 square meters (145,119 square feet). Passenger capacity grew threefold to serve up to 1.2 million passengers per year.
Tampico International Airport
According to the AFAC, the Tampico airport was the 27th32nd busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, it accounted for approximately 3.6%3.4%, 3.4%3.2% and 3.2%2.4%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 20192020 a total of 717,342, 736,627, 739,143 and 739,143270,835 terminal passengers, respectively, were served by the Tampico airport. Of the terminal passengers in 2017, 93.9% were domestic, and 6.1% were international. In 2018, 92.8% were domestic, and 7.2% were international. In 2019, 92.7% were domestic, and 7.3% were international. In 2020, 92.6% were domestic, and 7.4% were international. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of fivesix commercial airlines operate at the airport. In 2019,2020, airlines operating at this airport served nine direct destinations, including eight domestic destinations and one international destination: Mexico City, Monterrey, Cancún, Villahermosa, Guadalajara, Ciudad del Carmen, Villahermosa, Guadalajara, Veracruz, Querétaro and Houston. In 2019,2020, the domestic airlines operating at the airport were VivaAerobus, Interjet, Aeroméxico Connect, VivaAerobus, Interjet, TAR and TAR,Volaris, and the non-Mexican airline was United.United Airlines.
The Tampico airport serves the industrial zone of Tampico, Ciudad Madero and Altamira, which have a combined population of 758,659.773,285. This industrial zone is home to companies in the petroleum and chemical industries.
The Tampico airport operates Monday, Wednesday and Friday from 6:30 a.m. to 9:30 p.m. (local time) and from 6:30 a.m. to 9:00 p.m. on Sunday, Tuesday, Thursday and Saturday. The airport has three runways in operation. The principal runway is 2,550 meters (8,366 feet) long, the second runway is 1,221 meters (4,006 feet) in length, and the third runway (used exclusively for Alpha (A) category aircraft and visual flights) is 1,200 meters (3,937 feet) long. The airport has a capacity of 22 air traffic movements per hour and includes an instrument landing system, which provides precise guidance to assist aircraft during landing.
The airport’s total area is 372.5 hectares (1.44 square miles). Its facilities include a 6,833 square-meter (73,550 square-foot) terminal building, of which 8261,077 square meters (8,891(11,593 square feet) are commercial spaces. It has a six position apron for commercial aviation, a 17 position apron for general aviation, two taxiways and four boarding gates. The Tampico airport has a public parking facility that accommodates 254 vehicles.
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In December 2017, we started an expansion and remodeling of the terminal building at the Tampico airport. The project will have a total investment of approximately Ps.175Ps.196 million. After the project concludes, total area will be 7,9817,763 square meters (85,907 square feet), an increase of approximately 17%14%.
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Torreón International Airport
According to the AFAC, the Torreón airport was the 2927th busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, the Torreón airport accounted for approximately 3.1%3.2%, 3.2% and 3.2%2.9%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 618,930, 681,551, 708,563 and 708,563320,820 terminal passengers, respectively, were served by the Torreón airport. Of the terminal passengers in 2017, 91.2% were domestic, and 8.8% were international. In 2018, 91.3% were domestic, and 8.7% were international. In 2019, 90.0% were domestic, and 10.0% were international. In 2020, 91.6% were domestic, and 8.4% were international. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of seven commercial airlines operate at the airport. In 2019,2020, airlines operating at this airport served seven direct destinations, including six domestic destinations and one international destination. In 2019,2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Guadalajara,Tijuana, Cancún, Tijuana,Guadalajara, Querétaro, Ciudad Juárez and Dallas. In 2019,2020, the domestic airlines operating at the airport were Aeroméxico Connect, VivaAerobus, Volaris, Interjet, Volaris, TAR and Aeroméxico, and the non-Mexican airline was American Airlines.
The Torreón airport is located in the city of Torreón, which is part of the La Laguna region, Mexico’s top dairy‑dairy-producing region and an important industrial and commercial region. Approximately 679,288720,848 people live in the city of Torreón, and approximately 1.31.4 million people live in La Laguna region.
The Torreón airport operates 14 hours a day. The airport has two runways. The principal runway measures 2,755 meters (9,038 feet) in length, and the secondary runway measures 1,467 meters (4,813 feet) in length. The airport has a runway capacity of 20 air traffic movements per hour.
The airport’s total area is 354.6 hectares (1.37 square miles). Its facilities include a terminal building of 5,4475,492 square meters (5,863(59,115 square feet), of which 732610 square meters (7,879(6,566 square feet) are commercial space, a seven‑positionsix-position apron for commercial aviation, a seven‑positionseven-position apron for general aviation, one taxiway, five boarding gates, several VIP lounges and one air bridge. The Torreón airport has a public parking facility that accommodates 142 vehicles.
Zacatecas International Airport
According to the AFAC, the Zacatecas airport was the 3536th busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, the Zacatecas airport accounted for approximately 1.8%1.7%, 1.7%2.1% and 2.1%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 349,453, 366,871, 475,241 and 475,241232,352 terminal passengers, respectively, were served by the Zacatecas airport. Of the terminal passengers in 2017, 63.3% were domestic, and 36.7% were international. In 2018, 62.4% were domestic, and 37.6% were international. In 2019, 69.0% were domestic, and 31.0% were international. In 2020, 69.1% were domestic, and 30.9% were international. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of four commercial airlines operate at the airport. In 2019,2020, airlines operating at this airport served six direct destinations, including two domestic destinations and four international destinations: Mexico City, Tijuana, Los Angeles, Chicago, San José, California and Dallas.
In 2019,2020, the domestic airlines operating at this airport were Volaris, Aeroméxico Connect and VivaAerobus, and the non-Mexican airline was American Airlines.
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Located in the center of Mexico, the state of Zacatecas (of which the city of Zacatecas is the capital) is Mexico’s leading silver producer and second leading producer of lead, copper, zinc and gold. The state of Zacatecas has a population of approximately 1.6 million.
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The airport currently operates 24 hours a day. The airport has one runway, which measures 3,000 meters (9,843 feet) in length. The runway capacity is 20 air traffic movements per hour.
The airport’s total area is 207.6 hectares (0.80 square miles). The terminal building is 5,7075,796 square meters (61,430(62,388 square feet), of which 491508 square meters (5,285(5,468 square feet) is commercial area. It has a four‑positionfour-position apron for commercial aviation, a 14‑position14-position apron for general aviation, three boarding gates and a parking lot with 202 parking spaces.
In 2012, we built a solar park at Zacatecas airport with an installed capacity of 200 Kw in a land area of approximately 4,000 square meters (43,056 square feet), which in 20192020 generated approximately 322,455308,166 Kw/h for the airport, equivalent to approximately 37%45% of the airport’s total electricity requirements.
Border Destinations
Ciudad Juárez International Airport
According to the AFAC, the Ciudad Juárez airport was the 13th busiest airport in Mexico in 20172020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, the Ciudad Juárez airport accounted for approximately 6.0%6.3%, 6.3%6.9% and 6.9%7.1%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 1,173,135, 1,364,028, 1,597,471, and 1,597,471790,009 terminal passengers, respectively, were served by the Ciudad Juárez airport. Of the terminal passengers in 2017, 2018, 2019 and 2019, 99.8%2020, 99.7%, 99.7%99.6% and 99.6%99.7%, respectively, were domestic.
A total of six commercial airlines operate at the airport. In 2019,2020, airlines operating at this airport served 1312 direct destinations, all of which were domestic. In 2019,2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Guadalajara, Monterrey, Cancún, El Bajío, Cancún, Tijuana, Hermosillo, Culiacán, Hermosillo, Chihuahua, Torreón, Durango, Mazatlán and Querétaro.Chihuahua. In 2019,2020, the domestic airlines operating at the airport were VivaAerobus, Volaris, Aeroméxico Connect, Interjet, TARAeroméxico and Aeroméxico.TAR. As of the date of this annual report, the airport does not have any active non-Mexican airlines.
The airport is located in the city of Ciudad Juárez, which is near the U.S. border and has a population of 1,391,180.1,512,450. The city is a major center of the maquiladora industry. Because Ciudad Juárez is a popular entry point to the United States many of the airport’s passengers consist of Mexican migrant workers traveling to Ciudad Juárez in order to seek work in the United States. Although the airport’s passengers are predominantly domestic, its passenger traffic and results of operations are affected by economic conditions in both Mexico and the United States.
The Ciudad Juárez airport operates 14 hours a day. The airport has two runways. The principal runway measures 2,700 meters (8,858 feet) in length, and the secondary runway measures 1,710 meters (5,610 feet) in length. The airport has a capacity of 20 air traffic movements per hour.
The airport’s total area is 367.95 hectares (1.42 square miles). Its facilities include a terminal building of 6,210 square meters (66,844 square feet), consisting of 964923 square meters (10,376(9.935 square feet) of commercial space, five boarding gates and two air bridges. The airport has a six‑positionsix-position commercial aviation apron, a 15‑position15-position general aviation apron, a one‑positionone-position freight services apron and three taxiways. The Ciudad Juárez International Airport has a public parking facility that accommodates 300501 vehicles.
In January 2021, we started an expansion and remodeling of the terminal building at the Ciudad Juárez airport. The project will have a total investment of approximately Ps.959 million. After the project concludes total area will be 12,470 square meters (134,226 square feet), an increase of approximately 101%.
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Reynosa International Airport
According to the AFAC, the Reynosa airport was the 3437rd busiest airport in Mexico in 20192020 based on commercial and general aviation passenger traffic. In 2017, 2018, 2019 and 2019,2020, the Reynosa airport accounted for approximately 2.5%2.2%, 2.2%2.1% and 2.1%, respectively, of our terminal passenger traffic.
In 2017, 2018, 2019 and 2019,2020, a total of 485,727, 466,934, 480,524 and 480,524229,058 terminal passengers, respectively, were served by the Reynosa airport. Of the terminal passengers in 2017, 2018, 2019 and 2019, 99.3%2020, 99.2%, 99.2%, and 99.2%,99.1% respectively,
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were domestic. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of two airlines operate at the airport. In 2019,2020, airlines operating at this airport served four direct destinations, all of which are domestic destinations: Mexico City, Cancún, Guadalajara and Veracruz. In 2019,2020, the domestic airlines operating at this airport were VivaAerobus and Aeroméxico Connect.
The airport is located in Reynosa, a city with a population of 646,202704,767 inhabitants bordering the United States near the Gulf of Mexico. We believe that Reynosa’s robust industrial economic activity and proximity to the United States create the potential for growth in air cargo services. Because Reynosa is a popular entry point to the United States, many of the airport’s passengers consist of Mexican migrant workers traveling to Reynosa in order to seek work in the United States. Although the airport’s passengers are predominantly domestic, its passenger traffic and results of operations are affected by economic conditions in both Mexico and the United States.
The Reynosa airport operates 12 hours a day. The airport has one runway, which is 1,893 meters (6,211 feet) in length and has a runway capacity of 18 air traffic movements per hour.
The airport’s total area is approximately 407.4 hectares (1.57 square miles). In February 2021, we inaugurated the new terminal building at the Reynosa airport. The project had a total investment of Ps.335 million and included an expansion of 4,550 square meters (48,976 square feet). Passenger capacity grew threefold to serve up to 900,000 passengers per year. The new terminal building is 2,6087,286 square meters (28,072(78,426 square feet), which includes 2561,047 square meters (2,756(11,270 square feet) of commercial area. It has a four‑positionfour-position apron for commercial aviation, an 11‑position11-position apron for general aviation, two taxiways, three boarding gates and a public parking area with 270 spaces.
In December 2016, we started construction of a new terminal building at Reynosa airport. The new terminal building is 191% larger than the existing one and will increase the airport terminal’s capacity to approximately one million passengers per year. The project will have a total investment of Ps.325 million, and is expected to start operations in the first half of 2020.
Principal Aeronautical Services Customers
Airline Customers
As of December 31, 2019,2020, over 12 international commercial airlines and nine Mexican commercial airlines operated flights at our 13 airports. VivaAerobus and Grupo Aeroméxico operated the most flights at our airports, followed by Volaris, InterjetTAR and TAR.Interjet. In 2019,2020, revenues from VivaAerobus were Ps.1,285,954Ps.824,568 thousand (U.S.$68.141.4 million), revenues from Volaris were Ps.689,127 thousand (U.S.$34.6 million), revenues from Grupo Aeroméxico and its affiliates were Ps.1,255,147totaled Ps.588,903 thousand (U.S.$66.5 million), revenues from Volaris totaled Ps.1,177,915 thousand (U.S.$62.429.6 million) and revenues from Interjet were Ps.761,076Ps.166,943 thousand (U.S.$40.38.8 million), representing 22.4%28.0%, 21.8%23.4%, 20.5%20.0% and 13.2%5.7%, respectively, of our aeronautical revenues from airline customers for 2019.2020. These revenues were earned from passenger charges, landing charges, aircraft parking charges and the leasing of space to these airlines.
On December 9, 2020, Interjet stopped operations in all our airports and as of the date of this report, the airline has not resumed any operations in the airports we operate.
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The following table sets forth the number of air traffic customers per airline for the years ended December 31, 2017, 2018, 2019 and 2019:2020:
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| Terminal Passengers | |||||||||||||||
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| | Terminal Passengers | |||||||||||||||
Principal Air Traffic Customers Per Airline |
| 2017 |
| 2018 |
| 2019 |
| 2018 |
| 2019 |
| 2020 | |||||
Domestic: |
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|
| | | | | | | |||||
VivaAerobus |
| 4,786,803 |
| 5,668,700 |
| 6,666,650 | | 5,668,700 | | 6,666,650 | | 3,996,278 | |||||
Grupo Aeroméxico |
| 5,113,728 |
| 5,524,016 |
| 5,079,229 | | 5,524,016 | | 5,079,229 | | 2,248,687 | |||||
Volaris |
| 3,706,882 |
| 4,189,679 |
| 5,300,929 | | 4,189,679 | | 5,300,929 | | 2,900,985 | |||||
Interjet |
| 3,096,444 |
| 3,137,721 |
| 3,045,049 | | 3,137,721 | | 3,045,049 | | 620,940 | |||||
TAR Aerolíneas |
| 381,377 |
| 486,151 |
| 437,626 | | 486,151 | | 437,626 | | 136,962 | |||||
Other |
| 641,633 |
| 781,732 |
| 827,597 | | 781,732 | | 827,597 | | 311,720 | |||||
Total domestic |
| 17,726,867 |
| 19,787,999 |
| 21,357,080 | | 19,787,999 | | 21,357,080 | | 10,215,572 | |||||
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International: |
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American Airlines |
| 504,782 |
| 516,367 |
| 544,886 | | 516,367 | | 544,886 | | 306,241 | |||||
United |
| 494,547 |
| 494,861 |
| 507,277 | | 494,861 | | 507,277 | | 162,630 | |||||
Delta |
| 260,700 |
| 203,812 |
| 192,509 | | 203,812 | | 192,509 | | 42,201 | |||||
Alaska Airlines |
| 124,430 |
| 131,119 |
| 145,414 | | 131,119 | | 145,414 | | 63,317 | |||||
Sunwing Airlines |
| 64,648 |
| 79,853 |
| 85,996 | | 79,853 | | 85,996 | | 54,212 | |||||
Other |
| 210,128 |
| 149,566 |
| 165,887 | | 149,566 | | 165,887 | | 91,573 | |||||
Total international |
| 1,659,235 |
| 1,575,578 |
| 1,641,969 | | 1,575,578 | | 1,641,969 | | 720,174 | |||||
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General aviation |
| 275,912 |
| 202,822 |
| 169,011 | | 202,822 | | 169,011 | | 126,942 | |||||
Total |
| 19,662,014 |
| 21,566,399 |
| 23,168,060 | | 21,566,399 | | 23,168,060 | | 11,062,688 |
Historically, traditional carriers such as Aeroméxico had represented a substantial majority of the Mexican commercial airline market. In recent years, however, international carriers, discount carriers, low‑costlow-cost carriers and other new market entrants have represented a growing proportion of the Mexican commercial airline market. In 2019,2020, passengers traveling on discount and low‑costlow-cost carriers, such as VivaAerobus, Interjet and Volaris, accounted for approximately 65.3%68.7% of our commercial aviation passenger traffic. Since air transportation historically has been affordable only to the higher income segments of Mexico’s population, resulting in a comparatively low level of air travel, we believe that the entry of low‑costlow-cost and discount carriers into the Mexican commercial airline market has helped to increase the use of air transportation in Mexico.
Aeroméxico is a publicly traded company and Delta Airlines currently owns approximately 50.7% of Aeroméxico.
In June 2020, Aeromexico and its affiliates filed voluntary Chapter 11 petitions in the United States to implement a financial restructuring, while continuing to operate.
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The following table sets forth our principal air traffic customers for the years ended December 31, 2017, 2018, 2019 and 2019:2020:
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| Percentage of Aeronautical Revenues |
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| | Percentage of Aeronautical Revenues |
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Principal Air Traffic Customers |
| 2017 |
| 2018 |
| 2019 |
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| 2018 |
| 2019 |
| 2020 |
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Domestic: |
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Grupo Aeroméxico (Aeroméxico and Aeroméxico Connect) |
| 24.2 | % | 24.5 | % | 24.5 | % | |||||||
VivaAerobus |
| 19.4 | % | 21.2 | % | 21.2 | % |
| 21.2 | % | 22.4 | % | 28.0 | % |
Volaris |
| 16.7 | % | 17.5 | % | 17.5 | % |
| 17.5 | % | 20.5 | % | 23.4 | % |
Grupo Aeroméxico (Aeroméxico and Aeroméxico Connect) |
| 24.5 | % | 21.8 | % | 20.0 | % | |||||||
Interjet |
| 14.8 | % | 14.2 | % | 14.2 | % |
| 14.2 | % | 13.2 | % | 5.7 | % |
Grupo Aeromonterrey (Magnicharters) |
| 1.9 | % | 2.0 | % | 1.4 | % | |||||||
TAR |
| 1.7 | % | 2.1 | % | 2.1 | % |
| 2.1 | % | 1.8 | % | 1.2 | % |
Grupo Aeromonterrey (Magnicharters) |
| 1.8 | % | 1.9 | % | 1.9 | % | |||||||
Aeromar |
| 0.8 | % | 0.8 | % | 0.8 | % |
| 0.8 | % | 0.8 | % | 0.9 | % |
DHL Express México |
| 0.3 | % | 0.3 | % | 0.6 | % | |||||||
Calafia Airlines |
| 0.5 | % | 0.5 | % | 0.5 | % |
| 0.5 | % | 0.4 | % | 0.3 | % |
DHL Express México |
| 0.3 | % | 0.3 | % | 0.3 | % | |||||||
Other |
| 4.8 | % | 4.1 | % | 4.1 | % |
| 4.1 | % | 4.0 | % | 6.1 | % |
Total domestic |
| 85.0 | % | 87.1 | % | 87.1 | % |
| 87.1 | % | 87.2 | % | 87.6 | % |
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International: |
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American Airlines |
| 4.8 | % | 4.3 | % | 4.3 | % |
| 4.3 | % | 4.3 | % | 5.3 | % |
United |
| 4.7 | % | 4.1 | % | 4.1 | % |
| 4.1 | % | 4.0 | % | 2.8 | % |
Alaska Airlines |
| 1.1 | % | 1.1 | % | 1.1 | % | |||||||
Delta |
| 2.1 | % | 1.4 | % | 1.4 | % |
| 1.4 | % | 1.3 | % | 0.6 | % |
Alaska Airlines |
| 1.1 | % | 1.1 | % | 1.1 | % | |||||||
Copa Airlines |
| 0.3 | % | 0.3 | % | 0.3 | % |
| 0.3 | % | 0.2 | % | 0.1 | % |
Charters |
| 1.5 | % | 1.3 | % | 1.3 | % |
| 1.3 | % | 1.3 | % | 1.3 | % |
Other |
| 0.5 | % | 0.4 | % | 0.4 | % |
| 0.4 | % | 0.6 | % | 1.2 | % |
Total international |
| 15.0 | % | 12.9 | % | 12.9 | % |
| 12.9 | % | 12.8 | % | 12.4 | % |
Total |
| 100.0 | % | 100.0 | % | 100.0 | % |
| 100.0 | % | 100.0 | % | 100.0 | % |
Complementary Services Customers
As of December 31, 2019,2020, our principal complementary services clients are three principal providers of ramp‑handlingramp-handling and baggage‑handlingbaggage-handling services, AGN Aviation Services, S.A. de C.V., Menzies Aviation Mexico, S.A. de C.V. and Administradora Especializada en Negocios,Servicios Aeroportuarios Monterrey, S.A. de C.V., and our primary catering client is Aero Cocina, S.A. de C.V., all of which provided an aggregate of Ps.28,627Ps.17,049 thousand of revenues in the form of access fees in 2019.2020.
Principal Non-Aeronautical Services Customers
As of December 31, 2019,2020, we were party to approximately 1,3011,246 contracts with providers of commercial services in the commercial space in our airports, including retail store operators, duty free store operators, food and beverage providers, financial services providers, car rental companies, telecommunications providers, VIP lounges, advertising, travel agencies, time‑time-share sales and promotions services and tourist information and promotion services. As a result, our revenues from non‑aeronauticalnon-aeronautical services commercial customers are spread across a large number of customers and are, therefore, not dependent on a limited number of principal customers. In 2019,2020, our largest commercial customers were ISA Corporativo S. A. de C. V. (advertising), Aerocomidas, S.A. de C.V. (food and beverage), Alquiladora de Vehículos Automotores, S.A. de C.V. (car rental), Aerocomidas, S.A. de C.V. (food and beverage), DMC Transportación Ejecutiva, S. de R.L. de C. V. (VIP lounges), Operadora Aeroboutiques, S.A. de C.V. (duty paid stores), a subsidiary of Grupo Areas, Café Sirena, S. de R.L. de C.V (food and beverage), and Dufry México, S.A. de C.V. (duty free) and Comercial Ariete, S.A. de C.V. (car rental).
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Seasonality
Seasonality
Our business is subject to seasonal fluctuations. In general, demand for air travel is typically higher during the summer months and during the winter holiday season, particularly in international markets, because there is more vacation travel during these periods. Our results of operations generally reflect this seasonality but have also been impacted by numerous other factors that are not necessarily seasonal, including economic conditions, war or threat of war, weather, air traffic control delays and general economic conditions, as well as the other factors discussed above. For example, the impact of COVID-19 on the Company’s longer-term operational performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty. As a result, our operating results for a quarterly period are not necessarily indicative of operating results for an entire year, and historical operating results are not necessarily indicative of future operating results.
Competition
Excluding our airports servicing tourist destinations, our airports currently are the only major airports in the geographic areas that they serve and generally do not face significant competition.
However, since the Acapulco, Mazatlán and Zihuatanejo airports are substantially dependent on tourists, these airports face competition from competing tourist destinations. We believe that the main competitors to these airports are those airports serving vacation destinations in Mexico, such as Los Cabos, Cancún and Puerto Vallarta, and abroad, such as in Florida, Puerto Rico, Cuba, Jamaica, the Dominican Republic, other Caribbean islands and Central America.
The relative attractiveness of the locations we serve is dependent on many factors, some of which are beyond our control. These factors include the general state of the Mexican economy, and to a significant degree, the U.S. economy and the attractiveness of other commercial and industrial centers in Mexico, which may affect the attractiveness of Monterrey and other growing population centers in our airport group, such as Ciudad Juárez and San Luis Potosí. In addition, with respect to Acapulco, Mazatlán and Zihuatanejo, these factors include promotional activities and pricing policies of hotel and resort operators, weather conditions, natural disasters (such as hurricanes and earthquakes) and the development of new resorts that may be considered more attractive. The locations we serve may not continue to attract the same level of passenger traffic in the future.
The Mexican Airport and Auxiliary Services Agency currently operates 12 small airports in Mexico’s northern region, which collectively served 2,434,3291,236,409 passengers in 2019,2020, representing an increasea decrease of 14.1%49.2 % from 20182019 traffic, mainly as a result of an increasea decrease in passenger traffic to and from Querétaro, TepicCiudad Obregón and Colima.
In the future, we may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession. The state of Nuevo León has requested in the past that the Ministry of Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations, but to date the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession. In addition, we understand that Aeropuerto del Norte is not capable of accommodating commercial passenger traffic with its current infrastructure.
In addition, the Mexican government could grant new concessions to operate existing government‑government-managed airports or authorize the construction of new airports, which could compete directly with our airports. Any competition from other such airports could have a material adverse effect on our business and results of operations.
For more information, see "Risk Factors - Risks Related to the Regulation of Our Business - "The Mexican government could grant new concessions that compete with the airports operated by the Company".
Sustainability and Our Corporate Culture
Sustainability is one of the core values of our corporate culture. Our integrated management system focuses on quality, customer service, occupational health and safety, environmental care, corporate social responsibility and corporate governance. This allows us to respond in a balanced way to the relevant aspects of our stakeholders through different actions and projects in our 13 airports.
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Awards and Recognition
In 2018, OMA was included in the Dow Jones Sustainability Index (“DJSI”) Emerging Markets for the third consecutive year. In addition, OMA was included in 2019 in the Dow Jones Sustainability Index-MILA, for the second consecutive year. The current DJSI-MILA is valid through Spetember 2020.
In, 2018,2020, we were included in the Sustainability Index of the Mexican Stock Exchange (Índice Sustentable de la Bolsa Mexicana de Valores)now called S&P/BMV Total México ESG Index, for the seventhninth year in a row.
Ten of our 13 airports have maintained certifications as Safe Companies by the Mexican Ministry of Labor and Social Welfare (Secretaría del Trabajo y Previsión Social) for their achievements in the administration of health and safety in the workplace. The San Luis Potosí airport was the first airport in Mexico to receive such certification in 2011, and in 2015 it was granted the highest recognition by the Ministry of Labor and Social Welfare with a Level III Safe Company Certificate (Certificado de Empresa Segura Nivel III). The Ministry of Labor and Social Welfare granted Level I Safe Company Certificates (Certificado de Empresa Segura Nivel I) to the Reynosa airport, Level II Safe Company Certificates (Certificado de Empresa Segura Nivel II) to the Zacatecas airport, Level III to the Acapulco, Ciudad Juárez, Monterrey and Zihuatanejo airports, and the Revalidation of Level III Safe Company Certificates (Certificado de Empresa Segura Revalidación Nivel III) to the Culiacán, Mazatlán, San Luis Potosí and Torreón airports.
In 2013 and 2014, respectively, the Acapulco airport and the Ciudad Juárez airport received the Environmental Quality Certificate (Certificado de Calidad Ambiental) issued by the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente) for compliance with applicable Mexican environmental laws, regulations and applicable Official Mexican Standards and must be renewed on a biannual basis. In 2014, this certificate was renewed for the Ciudad Juárez and Chihuahua airports, in 2015 the Acapulco, Culiacán, Mazatlán and Zihuatanejo airports received new Environmental Quality Certificates valid for two years, and in 2016 the certificate was renewed for the Chihuahua airport and a new certificate was granted for the Tampico airport. In 2017, the Mazatlán, Ciudad Juárez, Culiacán, Chihuahua, Tampico, Acapulco, Reynosa and Zihuatanejo airports kept current Environmental Quality Certificates. In 2019, all our airports, excluding Monterrey, maintained the certification, and the Monterrey airport is expected to receive its certificate in 2020. In addition, in 2018 the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente) granted OMA the Environmental Commitment Recognition for the implementation of innovative business strategies to preserve and improve the environment while contributing to sustainable development.
In November 2018, for the ninth consecutive year, we received a “Great Place to Work” certificate granted by Great Place to Work Institute®, and were ranked first in the top 100 best companies to work for in the Northeastern Region of Mexico, according to the ranking published by this organization.
In February 2018, for the eleventh consecutive year, we received the Socially Responsible Business Distinction (Distintivo de Empresa Socialmente Responsable) granted by the Mexican Center for Philanthropy (Centro Mexicano para la Filantropía).
In 2017, the Zacatecas airport received a Family Responsibility Company Certificate (Certificado de Empresa Familiarmente Responsable) granted by the Mexican Ministry of Labor and Social Welfare. This certificate was also granted to the Chihuahua and Tampico airports in 2018, to the Culiacán, Durango and Reynosa airports in 2016 and to the Ciudad Juárez, Monterrey, Mazatlán and Torreón airports in 2017. In 2019, the Culiacán, Mazatlán and Reynosa airports received the renewal of the certificate.
In 2014 and 2016, the Zacatecas and the Culiacán airports, respectively, received the Inclusive Company Award (Distintivo Empresa Incluyente) granted by the Ministry of Labor and Social Welfare to companies with good labor practices that promote the inclusion and no discrimination of persons with a disability. This award was granted to the Culiacán airport again in 2017.
In 2018, the Culiacán, Mazatlán, Reynosa, Tampico, Torreón, Zacatecas and Zihuatanejo airports received the Distinctive “S” (Distintivo(Distintivo “S”) granted by the Ministry of Tourism to companies with good practices in the
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development of tourism projects and its commitment to global sustainability criteria. In 2019, the Acapulco, Ciudad Juárez, Chihuahua, Durango and San Luis Potosí airports also received such Distinctive “S” (Distintivo(Distintivo “S”).
On February 16, 2015,Twelve of our airports, have received the Culiacán airport was namedEnvironmental Quality Certificate (Certificado de Calidad Ambiental) awarded by the Best Regional Airport of 2014 in Latin America and the Caribbean by Airports Council International (“ACI”), and on February 29, 2016 it received this recognitionFederal Office for the second consecutive year.Protection of the Environment (Procuraduría Federal de Protección al Ambiente) for compliance with applicable Mexican environmental laws, regulations and applicable Official Mexican Standards and must be renewed on a biannual basis. Our Monterrey airport is in the process of obtaining this certification, which is expected to be received in 2021.
In 2020, the Chihuahua, Culiacán, Mazatlán, Reynosa and Tampico airports maintained a Family Responsibility Company Certificate (Certificado de Empresa Familiarmente Responsable) granted by the Mexican Ministry of Labor and Social Welfare.
On March 6, 2018, the Mazatlán airport was named the Best Regional Airport of 2017 in Latin America and the Caribbean by ACI.Airports Council International (“ACI”). Previous recognition was awarded in 2014.
In 2020, all of our airports received the Health Security Distinction, awarded by the Mexican Institute of Social Security (IMSS) related to implementation of a healthy return to the workplace due to COVID-19 outbreak.
In 2020, all of our airports received the Safe Travels seal granted by the World Travel and Tourism Council (WTTC) because of the actions and protocols implemented to provide its users of facilities with high standards of sanitation in order to mitigate the risk of infection of COVID-19 in each of its terminal buildings.
In 2020, the Monterrey airport was certified by ACI with the Airport Health Accreditation. This recognition certifies compliance with global health standards including those of ACI and ICAO recommendations, for passengers, authorities and users at the Monterrey airport.
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Sources of Regulation
The following are the principal laws, regulations and instruments that govern our business and the operation of our airports:
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| ●the Mexican Airport Law, enacted December 22, 1995; |
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| ●the concessions that entitle our subsidiaries to operate our 13 airports for a term of 50 years beginning on November 1, 1998; |
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The Mexican Airport Law and the regulations under the Mexican Airport Law establish the general framework regulating the construction, operation, maintenance and development of Mexican airport facilities. The Mexican Airport
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Law’s stated intent is to promote the expansion, development and modernization of Mexico’s airport infrastructure by encouraging investment and competition.
Under the Mexican Airport Law, the holder of a concession granted by the Ministry of Communications and Transportation is required to construct, operate, maintain and develop a public service airport in Mexico. A concession generally must be granted pursuant to a public bidding process, except for: (i) concessions granted to either (a) entities considered part of “the federal public administration” as defined under Mexican law or (b) private companies whose principal shareholders may be a state or municipal government; (ii) concessions granted to operators of private airports (who have operated privately for five or more years) wishing to begin operating their facilities as public service airports; and (iii) complementary concessions granted to existing concession holders. Complementary concessions may be granted only under certain limited circumstances, such as where an existing concession holder can demonstrate, among other things, that the award of the complementary concession is necessary to satisfy passenger demand.
On June 29, 1998, the Ministry of Communications and Transportation granted 13 concessions to operate, maintain and develop the 13 principal airports in Mexico’s Central North region to our subsidiaries. Because our subsidiaries were considered entities of the federal public administration at the time the concessions were granted, the concessions were awarded without a public bidding process. However, the process of selling Series BB shares (currently representing 12.8% of our capital stock) to our strategic shareholder pursuant to the privatization process was conducted through a public bidding process. Each of our concessions was amended on September 12, 2000, in order, among other things, to incorporate each airport’s maximum rates and certain other terms as part of the concession.
Reforms to the Mexican Airport Law and Civil Aviation Law
On January 26, 2015, amendments to the Mexican Airport Law and Civil Aviation Law were published and enacted. Among other matters, the amendments include provisions that intend to create a competitive market for the suppliers of complementary services. To this end, the amendments establish that a concession holder may not limit the number of providers of complementary services in its airport, except in instances in which space availability, operational efficiency and/or safety warrant such a limitation. If a concession holder denies entry to any complementary service provider for a reason other than the above, that service provider may file a complaint before the Ministry of Communications and Transportation.
On June 8, 2016, Article 10 BIS was added to the Mexican Airport Law to provide guidance regarding the granting of concession titles and extensions. Article 10 BIS requires the Ministry of Communications and Transportation to file with the Ministry of Finance and Public Credit, in accordance with the Mexican Airport Law and corresponding regulations, the following: (i) a favorable opinion on the economic profitability of the respective project; (ii) if federal public funds are used to finance part of the project, evidence of the registration of the project with the investment program and project registry maintained by the Ministry of Finance and Public Credit; and (iii) the determination of the fee and duties payable by the concessionaire to the Mexican government, in terms of the applicable law.
We believe we are currently complying in all material respects with the requirements of the Mexican Airport Law and its regulations. Noncompliance with these regulations could result in fines or other sanctions being assessed by the Ministry of Communications and Transportation, and are among the violations that could result in termination of a concession if they occur three or more times.
On November 8, 2017, an amendment to the Mexican Airport Law took effect, which modified various regulations, primarily impacting airlines. As a result of the amendment, airlines must, among others: (i) be transparent when providing information regarding taxes and restrictions on a passenger’s airplane ticket and the breakdown of each cargo fee; (ii) provide passengers at least a 24-hour advance notice of any change in itinerary; (iii) compensate passengers in the event of a cancellation, overbooking and/or the damage, loss or destruction of luggage; and (iv) allow passengers with disabilities to transport necessary implements (such as wheelchairs, walkers, prostheses, crutches, walking sticks or any other implement), at no extra charge, provided that it is for personal use and the item is directly related to the traveler’s disability.
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Federal Antitrust Commission
On May 23, 2014, a new Federal Antitrust Law (Ley Federal de Competencia Económica) was enacted. The law grants broader powers to the Mexican Antitrust Commission, including the abilities to regulate essential facilities, order the divestment of assets and eliminate barriers to competition in order to promote access to the market. The law also sets forth important changes in connection with mergers and anti‑competitiveanti-competitive behavior, increases liabilities that may be incurred for violations of the law, increases the amount of fines that may be imposed for violations of the law and limits the availability of legal defenses against the application of the law. If the Mexican Antitrust Commission determines that a specific service or product is an essential facility, it has the ability to regulate access conditions, prices, tariffs or technical conditions for or in connection with the relevant service or product. As of April 22, 2020,2021, the Mexican Antitrust Commission had not made any determination as to whether the services we render are considered an essential facility.
Role of the Ministry of Communications and Transportation
The Ministry of Communications and Transportation is the principal regulator of airports in Mexico and is authorized by the Mexican Airport Law to perform the following functions:
| ●plan, formulate and establish the policies and programs for the development of the national airport system; |
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| ●grant, modify and revoke concessions for the operation of airports; |
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| ●establish safety regulations; |
| ●close airports entirely or partially when safety requirements are not being satisfied; |
| ●monitor airport facilities to determine their compliance with the Mexican Airport Law, other applicable laws and the terms of the concessions; |
| ●maintain the Mexican aeronautical registry for registrations relating to airports; |
| ●impose penalties for failure to observe and perform the rules under the Mexican Airport Law, the regulations thereunder and the concessions; |
| ●approve any transaction or transactions that directly or indirectly may result in a change of control of a concession holder; |
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| ●determine each airport’s maximum rates; |
| ●approve any agreements entered into between a concession holder and a third party providing airport or complementary services at its airport; and |
| ●perform any other function specified by the Mexican Airport Law. |
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In addition, under the Mexican Organic Law of the Federal Public Administration (Ley Orgánica de la Administración Pública Federal), the Mexican Airport Law and the Mexican Civil Aviation Law, the Ministry of Communications and Transportation is required to provide air traffic control, radio assistance and aeronautical communications at Mexico’s airports. The Ministry of Communications and Transportation provides these services through Services for Navigation in Mexican Air Space, the Mexican air traffic control authority, which is a division of the Ministry of Communications and Transportation. Since 1978, the Mexican air traffic control authority has provided air traffic control for Mexico’s airports.
On October 16, 2019, the Ministry of Communications and Transportation established AFAC, an independent regulatory agency, that replaced the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil). AFAC is responsible for establishing, coordinating, overseeing and controlling international and national air transportation, as well as the airports, complementary services and generally all activities related to civil aviation. Even though AFAC has been formally established, its internal regulations and operation manuals are still pending as of the date of this report. As such, the Company cannot predict how this new agency will be organized, the scope of its authority, the actions that it will take in the future or the effect of any such actions on its business.
Concession Tax
Under Article 232‑A232-A of the Mexican Federal Duties Law, holders of airport concessions must pay a tax for the use of state‑state-owned assets. As such, each of our subsidiary concession holders is required to pay the Mexican government a concession tax based on its gross annual revenues (excluding revenues from improvements to concession assets) from the use of public domain assets pursuant to the terms of its concession. Currently, this concession tax is set at a rate of 5% and may be revised at any time by the Mexican government. Our concessions provide that we may request an amendment of our maximum rates if there is a change in this concession tax, although such a request may not be honored in the future.
Scope of Concessions
We hold (through subsidiary holding companies) concessions granted to us by the Mexican government to use, operate, maintain and develop 13 airports in the Central North region of Mexico in accordance with the Mexican Airport Law. As authorized under the Mexican Airport Law, each of the concessions is held by one of our subsidiaries for an initial 50‑year50-year term beginning on November 1, 1998. This initial term of each of our concessions may be renewed in one or more terms for up to an additional 50 years, subject to our acceptance of any new conditions imposed by the Ministry of Communications and Transportation and to our compliance with the terms of our concession.
In order to renew a concession, the Ministry of Communications and Transportation must obtain a favorable opinion from the Tax Ministry, which will analyze the profitability of each of the airports together with the costs and benefits of renewing the concession. Such analysis compares the cash revenues that may be generated from the use, benefit and exploitation of the public domain assets and services subject to the relevant concessions against the associated costs. The Tax Ministry must issue a resolution on the profitability of each airport within 30 days following receipt of all relevant information from the Ministry of Communications and Transportation. If the Tax Ministry does not issue a resolution within the 30-day period, it will be deemed that the Tax Ministry issued favorable opinion. In addition, together with the profitability analysis, the Ministry of Communications and Transportation shall submit a proposal for the concession fee applicable to the renewed period to the Tax Ministry.
The concessions held by our subsidiary concession holders allow the relevant concession holder, during the term of the concession, to: (i) operate, maintain and develop its airport and carry out any necessary construction in order to render airport, complementary and commercial services as provided under the Mexican Airport Law and its regulations and (ii) use and develop the assets that comprise the airport that is the subject of the concession (consisting of the airport’s real estate and improvements but excluding assets used in connection with fuel supply and storage). These assets are government‑ownedgovernment-owned assets, subject to the Mexican National Assets Law. Upon expiration of a concession, the use of these assets, together with any improvements thereto, automatically revert to the Mexican government.
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Concession holders are required to provide airport security, which must include contingent and emergency plans in accordance with the regulations under the Mexican Airport Law. The security regulations shall be implemented in accordance with the requirements set forth in the National Program for Airport Security (Plan Nacional de Seguridad Aeroportuaria). In addition, the regulations pertaining to the Mexican Airport Law specify that an airport concession holder is responsible for the inspection of passengers and carry‑oncarry-on luggage prior to approaching the departure gates and specify that the transporting airline is responsible for the inspection of checked‑inchecked-in luggage and cargo. If public order or national security is endangered, the competent federal authorities are authorized to act to protect the safety of aircraft, passengers, cargo, mail, installations and equipment.
The shares of a concession holder and the rights under a concession may be subject to a lien only with the approval of the Ministry of Communications and Transportation. No agreement documenting liens approved by the
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Ministry of Communications and Transportation may allow the beneficiary of a pledge to become a concession holder under any circumstances.
A concession holder may not assign any of its rights or obligations under its concession without the authorization of the Ministry of Communications and Transportation. The Ministry of Communications and Transportation is authorized to consent to an assignment only if the proposed assignee satisfies the requirements to be a concession holder under the Mexican Airport Law, undertakes to comply with the obligations under the relevant concession and agrees to any other conditions that the Ministry of Communications and Transportation may require.
General Obligations of Concession Holders
The concessions impose certain obligations on the concession holders, including, among others, (i) the obligation to pay the concession tax described above, (ii) the obligation to deliver concession services in a continuous, public and non‑discriminatorynon-discriminatory manner, (iii) the obligation to maintain the airports in good working condition and (iv) the obligation to make investments with respect to the infrastructure and equipment in accordance with the master development programsMaster Development Programs and the concessions.
Each concession holder and any third party providing services at an airport is required to carry specified insurance in amounts and covering specified risks, such as damage to persons and property at the airport, in each case as specified by the Ministry of Communications and Transportation. As of April 22, 2020,2021, the Ministry of Communications and Transportation has not specified the required amounts of insurance. We may be required to obtain additional insurance once these amounts are specified. We, together with our subsidiary concession holders, are jointly and severally liable to the Ministry of Communications and Transportation for the performance of all obligations under the concessions held by our subsidiaries. Each of our subsidiary concession holders is responsible for the performance of the obligations set forth in its concession and in the master development programs,Master Development Programs, including the obligations arising from third‑partythird-party contracts, as well as for any damages to the Mexican government‑ownedgovernment-owned assets that they use and to third‑partythird-party airport users. In the event of a breach of one concession, the Ministry of Communications and Transportation is entitled to revoke all of the concessions held by our subsidiaries.
Substantially all of the contracts entered into prior to the grant of our concessions by the Mexican Airport and Auxiliary Services Agency with respect to each of our airports were assigned to the relevant concession holder for each airport. As part of this assignment, each concession holder agreed to indemnify the Mexican Airport and Auxiliary Services Agency for any loss suffered by the Mexican Airport and Auxiliary Services Agency due to the concession holder’s breach of its obligations under an assigned agreement.
Classification of Services Provided at Airports
The Mexican Airport Law and its regulations classify the services that may be rendered at an airport into the following three categories:
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Third parties rendering airport, complementary or commercial services are required to do so pursuant to a written agreement with the relevant concession holder. We have entered into agreements with third parties for security and surveillance services, ramp‑handlingramp-handling and baggage‑handlingbaggage-handling services and checked‑baggagechecked-baggage services, among others. All agreements relating to airport or complementary services are required to be approved by the Ministry of Communications and Transportation. The Mexican Airport Law provides that the concession holder is jointly liable with these third parties for compliance with the terms of the relevant concession with respect to the services provided by such third parties. All third‑partythird-party service providers of complementary services are required to be corporations incorporated under Mexican law. In addition, we lease spaces to third-party tenants that provide commercial services such as food and beverage, retail and advertising.
A concession holder is also required to allow for a competitive market for complementary services. A concession holder may only limit the number of providers of complementary services in its airport due to space, efficiency and/or safety considerations. If a concession holder denies entry to any complementary services provider for reasons other than the above, such service provider may file a complaint with the Ministry of Communications and Transportation, which shall determine within 60 days of the filing of the complaint whether entry of the service provider into the airport shall be authorized. If the number of complementary service providers must be limited due to these considerations, contracts for the provision of complementary services must be awarded through a competitive bidding process.
Airport and complementary services are required to be provided to all users in a uniform and regular manner, without discrimination as to quality, access or price. Concession holders are required to provide airport and complementary services on a priority basis to military aircraft, disaster‑supportdisaster-support aircraft and aircraft experiencing emergencies. Airport and complementary services are required to be provided at no cost to military aircraft and aircraft performing national security activities.
In the event of force majeure, the Ministry of Communications and Transportation may impose additional regulations governing the provision of services at airports, but only to the extent necessary to address the force majeure
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event. The Mexican Airport Law allows the airport administrator appointed by a concession holder to suspend the provision of airport services in the event of force majeure.
Master Development Programs
Concession holders are also required to submit to the Ministry of Communications and Transportation a Master Development Program describing, among other things, the concession holder’s construction and maintenance plans.
Each Master Development Program is for a period of 15 years and is required to be updated every five years and resubmitted for approval to the Ministry of Communications and Transportation. Upon such approval, the Master Development Program is deemed to constitute a part of the relevant concession. Any major construction, renovation or expansion of an airport may only be made pursuant to a concession holder’s Master Development Program or upon approval by the Ministry of Communications and Transportation. Information required to be presented in the Master Development Program includes:
The concessions require the concession holder to prepare and submit the concession holder’s Master Development Program in a 24-month period and consider the necessary requirements of the airport users in the preparation of the Master Development Program as well as the opinions of air carriers and operations and timetable’s committee. The concession holder must submit a draft of the Master Development Program to an operations committee (Comité de Operación y Horarios), composed of each of the airport’s principal users, for their review and comments six months prior to its submission for approval to the Ministry of Communications and Transportation. Further, the concession holder must submit, six months prior to the expiration of the five-year term, the new Master Development Program to the Ministry of Communications and Transportation. The Ministry of Communications and Transportation may request additional information or clarification as well as seek further comments from airport users. The Mexican Ministry of Defense (Secretaría de la Defensa Nacional) may also opine on the Master Development Programs.
A concession holder may only undertake a major construction project, renovation or expansion relating to an airport pursuant to its Master Development Program or with the approval of the Ministry of Communications and Transportation. We are required to spend the full amounts set forth in each investment program under our Master Development Programs, and the Ministry of Communications and Transportation may apply sanctions if we do not comply.
Changes to a Master Development Program and investment program require the approval of the Ministry of Communications and Transportation, except for emergency repairs and minor works that do not adversely affect an airport’s operations.
Pursuant to the terms of our concessions, we are required to comply with the investment obligations under the Master Development Programs on a year-by-year basis, and the Ministry of Communications and Transportation is entitled to review our compliance thereunder (and apply sanctions accordingly) on a year-by-year basis. Although
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historically the Ministry of Communications and Transportation has indicated its intent to review our compliance with these obligations on an aggregate five-year basis, we understand that the Ministry of Communications and Transportation may also conduct more limited reviews of our compliance with our obligations on a year-by-year basis going forward.
During 2020, we negotiated the Master Development Program for the 2021 to 2025 period with the Ministry of Communications and Transportation for each of our subsidiary concession holders. This five-year program is in effect from January 1, 2021 until December 31, 2025.
Revenue Regulation
The Mexican Airport Law provides for the Ministry of Communications and Transportation to establish price regulations for services for which the Antitrust Commission determines that a competitive market does not exist. In 1999, the Antitrust Commission issued a ruling stating that competitive markets generally do not exist for airport services and airport access provided to third parties rendering complementary services. This ruling authorized the Ministry of Communications and Transportation to establish regulations governing the prices that may be charged for airport services and access fees that may be charged to third parties rendering complementary services in our airports. On September 12, 2000, the Rate Regulation (Regulación Tarifaria), which provides a framework for the setting by the Ministry of Communications and Transportation of five-year maximum rates, was incorporated within the terms of each of our concessions. See “Item 3. Key Information—Risk Factors—Risks Related to the Regulation of Our Business— The Company cannot predict how the regulations governing the business will be applied.”
Regulated Revenues
Since January 1, 2000, all of our revenues from aeronautical services have been subject to the Rate Regulation. This price regulation system establishes a “maximum rate” for each airport for every year in a five-year period. The “maximum rate” is the maximum amount of revenues per “workload unit” that may be earned at an airport each year from regulated revenue sources. Under this regulation, a workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo, including those transported in passenger airplanes. The combined maximum tariffs are expressed in workload units for each airport and were determined based on: (i) projected workload units; (ii) capital investments; and (iii) the operating expenses authorized for the five-year period in the Master Development Programs.
We are able to set the specific prices for regulated services, other than complementary services and the leasing of space to airlines, for each of our airports every six months (or earlier upon a cumulative increase of 5% in the Mexican Producer Price Index (excluding fuel)), as long as the combined revenues from regulated services at an airport does not exceed the maximum rate per workload unit at that airport on an annual basis. Since our aggregate revenues resulting from regulated services are not otherwise restricted, increases in passenger and cargo traffic increase the workload units permit greater revenues overall within each five-year period for which maximum rates are established.
The Rate Regulation establishes a “dual-till” system of price regulation under which a majority of our revenues, such as passenger fees, landing fees, aircraft parking fees and access fees from third parties providing complementary services at our airports, are regulated, while the revenues that we earn from commercial activities in terminals at our airports, such as the leasing of space to retailers, restaurants, car rental companies and banks, are not regulated. In 2018, 2019 and 2020, approximately 65.0%, 67.5%, and 54.8%, respectively, of our total revenues were earned from aeronautical services subject to price regulation under our maximum rates (76.0%, 76.0%, and 71.5%, respectively, of the sum of aeronautical and non-aeronautical revenues).
Our revenues from non-aeronautical services, including revenues that we earn from most commercial activities in our terminals, are not subject to this maximum-rate price regulation system and are therefore not subject to a ceiling. For a description of how we classify our revenues into aeronautical and non-aeronautical services, see “Item 5. Operating and Financial Review and Prospects—Overview—Classification of Revenues.”
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Maximum Rates
Each airport’s maximum rate is to be determined for each year by the Ministry of Communications and Transportation based on a general framework established in our concessions. This framework reflects, among other factors, projections of an airport’s revenues, operating costs and capital expenditures, as well as the estimated cost of capital related to regulated services and projected annual efficiency adjustments determined by the Ministry of Communications and Transportation. The schedule of maximum rates for each airport is to be established every five years.
Maximum Rates for 2016 through 2020
The following table sets forth the maximum rates for each of our airports under our 2016 to 2020 Master Development Programs that went into effect as of January 1, 2016:
Historical Maximum Rates(1)
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| | For the Year Ended December 31, | ||||||||
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| 2017 |
| 2018 |
| 2019 |
| 2020 |
Acapulco |
| 330.39 | | 328.08 | | 325.77 | | 323.50 | | 321.24 |
Ciudad Juárez |
| 250.18 | | 248.42 | | 246.68 | | 244.95 | | 243.24 |
Culiacán |
| 266.39 | | 264.53 | | 262.68 | | 260.84 | | 259.02 |
Chihuahua |
| 251.96 | | 250.19 | | 248.44 | | 246.70 | | 244.97 |
Durango |
| 305.90 | | 303.76 | | 301.64 | | 299.52 | | 297.43 |
Mazatlán |
| 293.86 | | 291.81 | | 289.76 | | 287.74 | | 285.72 |
Monterrey |
| 244.15 | | 242.43 | | 240.73 | | 239.05 | | 237.37 |
Reynosa |
| 285.53 | | 283.53 | | 281.54 | | 279.57 | | 277.61 |
San Luis Potosí |
| 213.08 | | 211.59 | | 210.11 | | 208.64 | | 207.18 |
Tampico |
| 286.87 | | 284.87 | | 282.88 | | 280.91 | | 278.95 |
Torreón |
| 302.68 | | 300.55 | | 298.46 | | 296.37 | | 294.30 |
Zacatecas |
| 320.22 | | 317.97 | | 315.75 | | 313.55 | | 311.35 |
Zihuatanejo |
| 330.24 | | 327.93 | | 325.64 | | 323.36 | | 321.10 |
(1) | Expressed in constant pesos as of December 31, 2020, as required by the maximum rate regulation. The maximum rate for each succeeding year from 2016 onwards is reduced by the efficiency factor of 0.70% per year. |
Maximum Rates for 2021 through 2025
On December 28, 2020, the Ministry of Communications and Transportation set the airport maximum rates for the five-year period from January 1, 2021 through December 31, 2025. These maximum rates are subject to adjustment only under the limited circumstances described below under “Special Adjustments to Maximum Rates.” The following table sets forth the maximum rates for each of our airports under our 2021 to 2025 Master Development Programs that went into effect as of January 1, 2021:
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Current Maximum Rates(1)
| | | | | | | | | | |
| | For the Year Ended December 31, | ||||||||
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| 2021 |
| 2022 |
| 2023 |
| 2024 |
| 2025 |
Acapulco |
| 330.62 | | 328.30 | | 326.01 | | 323.73 | | 321.46 |
Ciudad Juárez |
| 271.00 | | 269.11 | | 267.22 | | 265.35 | | 263.49 |
Culiacán |
| 288.89 | | 286.87 | | 284.87 | | 282.87 | | 280.89 |
Chihuahua |
| 284.85 | | 282.86 | | 280.88 | | 278.91 | | 276.95 |
Durango |
| 330.07 | | 327.76 | | 325.46 | | 323.18 | | 320.92 |
Mazatlán |
| 321.57 | | 319.32 | | 317.09 | | 314.87 | | 312.66 |
Monterrey |
| 270.47 | | 268.58 | | 266.70 | | 264.83 | | 262.98 |
Reynosa |
| 286.31 | | 284.30 | | 282.31 | | 280.33 | | 278.36 |
San Luis Potosí |
| 258.19 | | 256.38 | | 254.58 | | 252.80 | | 251.03 |
Tampico |
| 316.50 | | 314.28 | | 312.08 | | 309.89 | | 307.73 |
Torreón |
| 320.78 | | 318.54 | | 316.31 | | 314.10 | | 311.90 |
Zacatecas |
| 343.94 | | 341.53 | | 339.14 | | 336.76 | | 334.40 |
Zihuatanejo |
| 348.49 | | 346.05 | | 343.63 | | 341.22 | | 338.83 |
(1) | Expressed in constant pesos as of December 31, 2020, as required by the maximum rate regulation. The maximum rate for each succeeding year from 2021 onwards is reduced by the efficiency factor of 0.70% per year. |
Methodology for Determining Future Maximum Rates
The Rate Regulation provides that each airport’s annual maximum rates are to be determined in five-year intervals based on the following variables:
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Our concessions specify a discounted cash flow formula to be used by the Ministry of Communications and Transportation to determine the maximum rates that, given the projected pre-tax earnings, the efficiency adjustment, capital expenditures and discount rate, would result in a net present value equal to the reference values established in connection with the last determination of maximum rates. In connection with the preparation of the current Master Development Programs, we prepared a proposal to submit to the Ministry of Communications and Transportation establishing the values we believe should be used with respect to each variable included in the determination of maximum rates, including the efficiency factor, projected capital expenditures and the discount rate. Historically, the maximum rates ultimately established by the Ministry of Communications and Transportation reflect a negotiation between the Ministry and us regarding these variables. Once the maximum rates are established, they may be adjusted annually to take account of projected improvements in efficiency and the Mexican Producer Price Index (excluding fuel).
The concessions provide that each airport’s reference values, discount rate and the other variables used in calculating the maximum rates do not represent an undertaking by the Ministry of Communications and Transportation or the Mexican government as to the profitability of any concession holder. Therefore, whether or not the maximum rates (or the amounts up to the maximum rates that we have been able to collect) multiplied by workload units at any airport generate a profit or exceed our profit estimates, or reflect the actual profitability, discount rates, capital expenditures or productivity gains at that airport over the five-year period, we are not entitled to any adjustment to compensate for this shortfall.
To the extent that such aggregate revenues per workload unit exceed the relevant maximum rate, the Ministry of Communications and Transportation may proportionately reduce the maximum rate in the immediately subsequent year and assess penalties equivalent to 1,000 to 50,000 times the Unit of Measurement and Update (“UMA”). The UMA as of January 1, 2021 was Ps.89.62. As a result, the maximum penalty at such date could have been Ps.4,481 thousand (U.S.$225,077) per airport.
As established by the Ministry of Communications and Transportation, the calculation of workload units does not include transit passengers for subsequent years. The current workload unit calculation is therefore equal to one terminal passenger or 100 kilograms (220 pounds) of commercial cargo.
Special Adjustments to Maximum Rates
Once determined, each airport’s maximum rates are subject to special adjustment only under the following circumstances:
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Increases in Maximum Rates Associated with Baggage-Screening Services
On November 23, 2012, the Mexican Bureau of Civil Aviation (currently AFAC) published mandatory circulars CO SA-17.2/10 R1, superseded by circulars CO SA-17.2/10 R3 and CO SA-17.9/16, which required that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines to provide the service to the airlines. On November 30, 2012, after negotiation with the Mexican Bureau of Civil Aviation (currently AFAC), the maximum rates of our thirteen airports were increased to take into account the maintenance cost incurred due to the operation of baggage-screening equipment. The maximum rate increase became effective on January 1, 2013.
Ownership Commitments and Restrictions
The concessions require us to retain a 51% direct ownership interest in each of our 13 concession holders throughout the term of these concessions. Any acquisition by us or one of our concession holders of any additional airport concessions or of a beneficial interest of 30% or more of another concession holder requires the consent of the Antitrust Commission. In addition, the concessions prohibit us and our concession holders, collectively or individually, from acquiring more than one concession for the operation of an airport along each of Mexico’s southern and northern borders.
Air carriers are prohibited under the Mexican Airport Law from controlling or beneficially owning 5% or more of the shares of a holder of an airport concession. We, and each of our subsidiaries, are similarly restricted from owning 5% or more of the shares of any air carrier.
Foreign governments acting in a sovereign capacity are prohibited from owning any direct or indirect equity interest in a holder of an airport concession.
Reporting, Information and Consent Requirements
Concession holders and third parties providing services at airports are required to provide the Ministry of Communications and Transportation access to all airport facilities and information relating to an airport’s construction, operation, maintenance and development. Each concession holder is obligated to maintain statistical records of operations and air traffic movements in its airport and to provide the Ministry of Communications and Transportation with any information that it may request. Each concession holder is also required to publish its annual audited consolidated financial statements in a principal Mexican newspaper within the first four months of each year.
The Mexican Airport Law provides that any person or group directly or indirectly acquiring control of a concession holder is required to obtain the consent of the Ministry of Communications and Transportation to such control acquisition. For purposes of this requirement, control is deemed to be acquired in the following circumstances:
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Under the regulations to the Mexican Airport Law, any company acquiring control of a concession holder is deemed to be jointly and severally liable with the concession holder for the performance of the terms and conditions of the concession.
The Ministry of Communications and Transportation is required to be notified upon any change in a concession holder’s chief executive officer, board of directors or management. A concession holder is also required to notify the Ministry of Communications and Transportation at least 90 days prior to the adoption of any amendment to its bylaws concerning the dissolution, corporate purpose, merger, transformation or spinoff of the concession holder.
Penalties and Termination and Revocation of Concessions and Concession Assets
Termination of Concessions
Under the Mexican Airport Law and the terms of the concessions, a concession may be terminated upon any of the following events:
Following a concession’s termination, the concession holder remains liable for the performance of its obligations during the term of the concession.
On May 20, 2004, a new Mexican National Assets Law was adopted and published in the Federal Official Gazette that, among other things, establishes regulations relating to concessions on real property held in the public domain, including the airports that we operate. The Mexican National Assets Law establishes additional grounds for revocation of concessions for failure to pay certain applicable taxes.
Revocation of Concessions
A concession may be revoked by the Ministry of Communications and Transportation under certain conditions, including:
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The Ministry of Communications and Transportation is entitled to revoke a concession without prior notice as a result of the first six events described above. In the case of other violations, a concession may be revoked as a result of a violation only if sanctions have been imposed at least three times with respect to the same violation.
Pursuant to the terms of our concessions, in the event the Ministry of Communications and Transportation revokes one of our concessions, it is entitled to revoke all of our other concessions.
According to the Mexican National Assets Law, Mexico’s national patrimony consists of private and government-owned assets of Mexico. The surface area of our airports and improvements on such space are considered government-owned assets. A concession concerning government-owned assets may be “rescued,” or reverted to the Mexican government prior to the concession’s expiration, when considered necessary for the public interest. In exchange, the Mexican government is required to pay compensation as determined by expert appraisers. Following a
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declaration of “rescue,” or reversion, the assets that were subject to the concession are automatically returned to the Mexican government.
In the event of war, public disturbances or threats to national security, the Mexican government may assume the operations (through a process known as requisa) of any airport, airport and complementary services as well as any other airport assets. Such government action may exist only during the duration of the emergency. Except in the case of war, the Mexican government is required to compensate all affected parties for any damages or losses suffered as a result of such government action. If the Mexican government and a concession holder cannot agree as to the appropriate amount of damages or losses, the amount of damages shall be determined by experts jointly appointed by both parties, and the amount of losses shall be determined based on the average net income of the concession holder during the previous year. In the event of a requisa due to international war, the Mexican government would not be obligated to indemnify us.
The Mexican Airport Law provides that sanctions of up to 400,000 times the UMA may be assessed for failures to comply with the terms of a concession. The UMA as of January 1, 2021 was Ps.89.62. As a result, the maximum penalty at such date could have been Ps.35,848 thousand (U.S.$1.8 million) per airport.
Consequences of Termination or Revocation of a Concession
Upon termination, whether as a result of expiration or revocation, the real estate and fixtures that were the subject of the concession automatically revert to the Mexican government. In addition, upon termination, the Mexican government has a preemptive right to acquire all other assets used by the concession holder to provide services under the concession at prices determined by expert appraisers appointed by the Ministry of Communications and Transportation. Alternatively, the Mexican government may elect to lease these assets for up to five years at fair market rates as determined by expert appraisers appointed by the Mexican government and the concession holder. In the event of a discrepancy between appraisals, a third expert appraiser must be jointly appointed by the Mexican government and the concession holder. If the concession holder does not appoint an expert appraiser, or if such appraiser fails to determine a price, the determination of the appraiser appointed by the Mexican government will be conclusive. If the Mexican government chooses to lease the assets, it may thereafter purchase the assets at their fair market value, as determined by an expert appraiser appointed by the Mexican government.
The Mexican Communications Law, however, provides that upon expiration, termination or revocation of a concession, all assets necessary to operate the airports will revert to the Mexican government at no cost and free of any liens or other encumbrances. There is substantial doubt as to whether the provisions of our concessions would prevail over those of the Mexican Communications Law. Accordingly, upon expiration or termination of our concessions, the assets used by our subsidiary concession holders to provide services at our airports may revert to the Mexican government, free of charge, together with government-owned assets and improvements permanently attached thereto.
Grants of New Concessions
The Mexican government may grant new concessions to manage, operate, develop and construct airports. Such concessions may be granted through a public bidding process in which bidders must demonstrate their technical, legal, managerial and financial capabilities. The Mexican Antitrust Commission has the power, under certain circumstances, to prohibit a party from bidding, and to cancel an award after the process has concluded. In addition, the government may grant concessions without a public bidding process to the following entities:
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Additionally, under the Mexican Airport Law for the granting of a concession title or the resolution to extend the term thereof, the Ministry of Communications and Transportation shall file before the Ministry of Finance and Public Credit the following:
Environmental Matters
Regulation
Our operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment. The major federal environmental laws applicable to our operations are: (i) the General Law of Ecological Equilibrium and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección al Ambiente) or the “General Environmental Law,” and its regulations, which are administered by the Ministry of the Environment and Natural Resources and enforced by the Ministry’s enforcement branch, the Federal Attorney for Environmental Protection; (ii) the General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos), the “Law on Waste”, the General Law for Sustainable Forest Development (Ley General de Desarrollo Forestal Sustentable) and the General Law for Wildlife (Ley General de Vida Silvestre), each of which are also administered by the Federal Attorney for Environmental Protection; (iii) the National Waters Law (Ley de Aguas Nacionales) and its regulations, which are administered and enforced by the National Waters Commission, also a branch of the Ministry of the Environment and Natural Resources; (iv) the General Law of Climate Change; and (v) the Federal Law of Environmental Responsibility (Ley Federal de Responsabilidad Ambiental).
Under the General Environmental Law, regulations have been enacted concerning air pollution, environmental impact, environmental audits, natural protected areas, ecological ordering, emissions records and transfer of pollutants. The General Environmental Law also regulates, among other things, vibrations, thermal energy, soil contamination and visual pollution, although the Mexican government has not yet issued enforceable regulation on the majority of these matters. The General Environmental Law also provides that companies that contaminate soils are responsible for their clean-up. Further, according to the Law on Waste, which was published in October 2003, owners and/or possessors of real property with soil contamination are jointly and severally liable for the remediation of such contaminated sites, irrespective of any recourse or other actions such owners and/or possessors may have against the contaminating party, and aside from the criminal or administrative liability to which the contaminating party may be subject. Restrictions on the transfer of contaminated sites also exist. The Law on Waste also regulates the generation, handling and final disposal of hazardous waste.
Pursuant to the National Waters Law, companies that discharge wastewaters into national water bodies must comply with, among other rules, maximum permissible contaminant levels in order to preserve water quality. Periodic reports on water quality must be provided to competent authorities. Liability may result from the contamination of
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underground waters or recipient water bodies. The use of underground waters is subject to restrictions pursuant to our concessions and the National Waters Commission.
In addition to the foregoing, Official Mexican Standards (Normas Oficiales Mexicanas), which are technical standards issued by competent regulatory authorities pursuant to the General Metrology and Normalization Law (Ley General de Metrología y Normalización) and to other laws that include the environmental laws described above, establish standards relating to air emissions, soil contamination, wastewater discharges, the generation, handling and disposal of hazardous waste and noise control, among other issues.
The Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) and the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente) are the responsible regulators. The Federal Office for the Protection of the Environment can bring administrative, civil and criminal proceedings against companies that violate environmental laws, and it also has the power to close non-complying facilities and impose a variety of sanctions. Companies in Mexico are required to obtain proper authorizations, licenses, concessions or permits from competent environmental authorities for the performance of activities that may have an impact on the environment or that may constitute a source of contamination. Companies in Mexico are also required to comply with a variety of reporting obligations that include, among others, providing the Ministry of the Environment and Natural Resources, the Federal Office for the Protection of the Environment and the National Waters Commission, as applicable, with periodic reports regarding compliance with various environmental laws.
Prior to the opening of Mexico’s airports to private investment, the Federal Office for the Protection of the Environment required that environmental audits be performed at each of our airports. Based on the results of these audits, the Federal Office for the Protection of the Environment issued recommendations for improvements and corrective actions to be taken at each of our airports (with which we have complied). In connection with the transfer of the management of our airports from our predecessor, we entered into environmental compliance agreements with the Federal Office for the Protection of the Environment on January 1, 1999, and July 12, 2000, pursuant to which we agreed to comply with a specific action plan and adopted specific actions within a determined time frame.
On June 6, 2012, the General Law on Climate Change was adopted and published in the Official Gazette of the Federation, which, among other objectives, (i) regulates greenhouse gases and emissions, taking into consideration the goals set forth by the UN Framework Convention on Climate Change and the provisions derived therein; (ii) promotes the education, research, development and technology transfer, innovation and promotion with respect to adapting to and mitigating climate change; and (iii) promotes the transition to a competitive, sustainable and low-carbon economy. In accordance with the General Law of Climate Change, individuals and entities that are responsible for sources of emission that are subject to environmental reporting are obligated to compile necessary information, data and documents with respect to direct and indirect emissions for the inclusion in the Mexican National Registry of Emissions (Registro Nacional de Emisiones). This regulation was published on October 28, 2014. We have been obligated to comply with this requirement since February 15, 2016.
Furthermore, on June 7, 2013, the Federal Law of Environmental Responsibility was published in the Federal Official Gazette and requires that any person or entity who, whether by act or omission, directly or indirectly, causes harm to the environment, is obligated to repair such harm. If repair of such harm is not possible, such person is required to pay compensation for the harm caused and take any action necessary to avoid any additional harm or damage. Likewise, this law establishes a judicial procedure for environmental responsibility through which any physical or moral person with a legitimate interest can sue for repair and compensation for harm done to the environment.
On August 11, 2014, the Mexican National Agency of Industrial Safety and Protection of the Environment of the Hydrocarbons Sector (Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos, or “ASEA”) was created. While initially taking a secondary role to the role of the Mexican Ministry of the Environment and Natural Resources, ASEA has recently started to enforce its legal powers. Our airport growth projects related to fuel supply must now be approved by ASEA, which may result in more burdensome proceedings for the approval of special projects related to hydrocarbons. As of the date of this report, there can be no assurance whether ASEA’s rules and regulations will materially affect our business or results of operations.
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In 2018, Mexico launched a carbon dioxide (“CO2”) market. The market requires that industries that generate above a certain amount of CO2 emissions pay for rights to excess emissions. Starting in 2019, the legislation also requires that companies report their global emissions as verified by the Mexican Emissions Registry (Registro Nacional de Emisiones). In addition, new water quality standards are being discussed, which would require greater water quality for all of our wastewater disposal.
Modifications of existing environmental laws and regulations or the adoption of more stringent environmental laws and regulations may result in the need for investments that are not currently provided for in our capital expenditures program and may otherwise result in a material adverse effect on our business, results or operations or financial condition. Although we do not currently expect that compliance with environmental laws will have material effect on our financial condition or results of operations, there can be no assurance, however, that environmental regulations or the enforcement thereof will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition. For more information see “Item 3. Key Information—Risk Factors—Risks Related to Mexico—Mexico’s environmental legislation could limit the growth of some of our airports.”
Environmental Certification
Since 2011 we have been selected to be one of the members of the Sustainability Index by the Mexican Stock Exchange. The Mexican Stock Exchange Sustainability Index members were selected from among the 70 most traded stocks on the Mexican Stock Exchange based on evaluation criteria of corporate governance, environmental management and social responsibility. In 2020, we were selected again to be one of the members of the Mexican Stock Exchange Sustainability Index (now called S&P/BMV Total México ESG Index).
Liability for Environmental Noncompliance
The legal framework of environmental liability applicable to our operations is generally outlined above. Under the terms of our concessions, the Mexican government has agreed to indemnify us for any environmental liabilities arising prior to November 1, 1998, and for any failure by the Mexican Airport and Auxiliary Services Agency prior to November 1, 1998, to comply with applicable environmental laws and with its agreements with Mexican environmental authorities. We believe that we are entitled to indemnification for any liabilities related to actions that our predecessor was required to perform or refrain from performing under applicable environmental laws and under their agreements with environmental authorities, though this may change in the future.
The level of environmental regulation in Mexico has significantly increased in recent years, and the enforcement of environmental laws is becoming substantially more stringent. We expect this trend to continue and expect additional norms to be imposed by the trilateral agreement on Environmental Cooperation that will be entered into by Canada, the United States and Mexico in the context of the USMCA (which was formally signed on November 30, 2018 and entered into force July 1, 2020), as well as by other international treaties on environmental matters. In 2018, Mexico, the United States and Canada announced a Trilateral Agreement of Environmental Cooperation under the USMCA which, has replaced the North American Agreement on Environmental Cooperation in force since January 1, 1994. We do not expect that compliance with Mexican federal, state or municipal environmental laws currently in effect will have a material adverse effect on our financial condition or results of operations. However, environmental regulations or the enforcement thereof may change in a manner that could have a material adverse effect on our business, results of operations, prospects and financial condition.
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The following table sets forth our consolidated subsidiaries as of April 22, 2021, including our direct and indirect ownership interest in each:
| | | | | | |
---|---|---|---|---|---|---|
Name of Company | Jurisdiction of | Percentage | Description | |||
Aeropuerto de Acapulco, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Acapulco |
| | | | | | |
Aeropuerto de Ciudad Juárez, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Ciudad Juárez |
| | | | | | |
Aeropuerto de Culiacán, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Culiacán |
| | | | | | |
Aeropuerto de Chihuahua, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Chihuahua |
| | | | | | |
Aeropuerto de Durango, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Durango |
| | | | | | |
Aeropuerto de Mazatlán, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Mazatlán |
| | | | | | |
Aeropuerto de Monterrey, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Monterrey |
| | | | | | |
Aeropuerto de Reynosa, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Reynosa |
| | | | | | |
Aeropuerto de San Luis Potosí, S.A. de C.V. | | Mexico | | 100 | | Holds concession for San Luis Potosí |
| | | | | | |
Aeropuerto de Tampico, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Tampico |
| | | | | | |
Aeropuerto de Torreón, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Torreón |
| | | | | | |
Aeropuerto de Zacatecas, S.A. de C.V. | | Mexico | | 100 | | Holds concession for Zacatecas |
| | | | | | |
Aeropuerto de Zihuatanejo, S.A. de C.V. | | Mexico | | 100 | | Holds concession for |
| | | | | | |
Servicios Aeroportuarios del Centro Norte, S.A. de C.V. | | Mexico | | 100 | | Provider of administrative and other services. |
| | | | | | |
Operadora de Aeropuertos del Centro Norte, S.A. de C.V. | | Mexico | | 100 | | Provider of operational services. |
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| | | | | | |
---|---|---|---|---|---|---|
Name of Company | Jurisdiction of | Percentage | Description | |||
| | | | | | |
Holding Consorcio Grupo Hotelero T2, S.A. de C.V. | | Mexico | | 100 | | Holds 90% of the shares of the Consortium to develop and operate an NH-branded hotel and commercial areas inside the Terminal 2 of Mexico City International Airport. A Mexican subsidiary of NH Hoteles SA, a Spanish company, owns the other 10%. |
| | | | | | |
Consorcio Grupo Hotelero T2, S.A. de C.V. | | Mexico | | 90 | | Holds a 20-year lease agreement with Mexico City International Airport to develop and operate a 287-room, 5-star hotel and more than 5,000 square meters (53,820 square feet) in commercial space inside Terminal 2. |
| | | | | | |
Servicios Corporativos Terminal T2, S.A. de C.V. | | Mexico | | 90 | | Provider of administrative and other services. |
| | | | | | |
Servicios Complementarios del Centro Norte, S.A. de C.V. | | Mexico | | 100 | | Provider of complementary services. |
| | | | | | |
OMA Logística, S.A. de C.V. | | Mexico | | 100 | | Develops and operates commercial areas in our concessionaries. Is authorized to operate a bonded warehouse in the Monterrey airport. Holds 85% of the shares of the investment project to develop and operate a Hilton Garden Inn and commercial areas at the Monterrey airport. Grupo Hotelero Santa Fe owns the remaining 15%. Holds 51% of the shares of OMA-VYNMSA Aero Industrial Park, S.A. de C.V., an investment project to develop, operate and build an industrial park at the Monterrey airport. VYNMSA owns the remaining 49%. |
| | | | | | |
Servicios Aero Especializados del Centro Norte, S.A. de C.V. | | Mexico | | 100 | | Provider of administrative and other services. |
| | | | | | |
OMA-VYNMSA Aero Industrial Park, S.A. de C.V. | | Mexico | | 51 | | Entity created to build and operate an industrial park at the Monterrey airport. |
| | | | | | |
Consorcio Hotelero Aeropuerto Monterrey, S.A.P.I. de C.V. | | Mexico | | 85 | | Holds a 20-year lease agreement with the Monterrey airport to develop and operate a 134-room hotel at the Monterrey airport under the brand Hilton Garden Inn. |
| | | | | | |
Servicios Hoteleros Aeropuerto Monterrey, S.A. de C.V. | | Mexico | | 85 | | Provider of administrative and other services. |
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Pursuant to the Mexican National Assets Law, all real estate and fixtures in our airports are owned by the Mexican government. Each of our concessions is scheduled to terminate in 2048, although each concession may be extended one or more times for up to an aggregate of an additional 50 years. The option to extend a concession is subject to our acceptance of any changes to such concession that may be imposed by the Ministry of Communications and Transportation and our compliance with the terms of our current concessions. Upon expiration of our concessions, these assets automatically revert to the Mexican government, including improvements we may have made during the terms of the concessions, free and clear of any liens and/or encumbrances, and we will be required to indemnify the Mexican government for damages to these assets, including any improvements thereon, except for those caused by normal wear and tear.
We use the property constituting our airports pursuant to our concessions. For more information regarding our property, plant and equipment, see “Item 4. Business Overview—Our Airports.”
We maintain comprehensive insurance coverage that covers the principal assets of our airports and other property, subject to customary limits, against damage due to natural disasters, accidents, terrorism or similar events. We also maintain general liability insurance but do not maintain business-interruption insurance. Among other insurance policies, we carry a U.S.$50.0 million insurance policy covering damages to our property resulting from certain terrorist acts and a U.S.$500 million policy covering personal and property damages to third parties. We also carry a U.S.$200.0 million insurance policy covering damage to our assets and infrastructure.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements and the notes to those consolidated financial statements. It does not include all of the information included in our consolidated financial statements. You should read our consolidated financial statements to gain a better understanding of our business and our historical results of operations.
Our consolidated financial statements included in this annual report are prepared in accordance with IFRS, as issued by the IASB.
Overview
We hold concessions to operate, maintain and develop 13 airports in Mexico, many of which are located in the northern and central regions of the country, pursuant to concessions granted by the Mexican government. The substantial majority of our revenues are derived from providing aeronautical services, which generally are related to the use of our airport facilities by airlines and passengers. For example, approximately 54.8% of our total revenues in 2020 were earned from aeronautical services and approximately 71.5% of the sum of our aeronautical and non-aeronautical revenues in 2020 were earned from aeronautical services. Changes in our revenues from aeronautical services are principally driven by the passenger and cargo volume at our airports. Our revenues from aeronautical services are also affected by the maximum rates we are allowed to charge under the price regulation system established by the Ministry of Communications and Transportation and the specific prices that we negotiate with airlines for the provision of aeronautical services. The maximum rate system of price regulation that applies to our aeronautical revenues is linked to the traffic volume (measured in workload units) at each airport; thus, increases in passenger and cargo volume generally permit greater revenues from aeronautical services. In evaluating our aeronautical revenues, we focus principally on workload units, which measure volume, and aeronautical revenues per workload unit, which measures the contribution to aeronautical revenues from each workload unit.
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We also derive revenues from non-aeronautical activities, which principally relate to the commercial activities carried out at our airports, such as the operation of parking facilities, advertising and the leasing of space to restaurants and retailers. We also derive non-aeronautical revenues from diversification activities, such as hotel services, air cargo logistics services and real estate services; and complementary activities, which principally include the leasing of space to airlines and operating our baggage-screening system. Our revenues from non-aeronautical activities are not subject to the system of price regulation established by the Ministry of Communications and Transportation (though they may be subject to regulation by other authorities). Our commercial revenues are principally affected by the passenger volume at our airports, the mix of commercial activities carried out at our airports and our ability to increase the rates we charge to those service providers. We evaluate our non-aeronautical revenues by analyzing changes in diversification, commercial and complementary revenues.
During 2020, our business initiatives were focused on reactivating overall operations in our airports and diversification activities, mitigating the effect of the COVID-19 pandemic, which generated adverse effects in our operations during most of 2020, as well as preserving liquidity.
Recent Developments
COVID-19 Outbreak
The United States government has put in place travel restrictions in response to the COVID-19 pandemic, and closed the United States border with Mexico, except to essential travel and trade and commerce, on March 20, 2020. As of April 22, 2021, the land border remains closed. On January 26, 2021, the United States issued a decree, requesting negative COVID-19 test results for all inbound passengers traveling by air. Beginning on January 7, 2021, Canada established similar testing requirements for passengers traveling by air to the country. Subsequently, the Canadian government suspended flights between Canada, Mexico and the Caribbean until April 30, 2021.
The Mexican government has implemented various measures to control the spread of COVID-19, including extraordinary actions, such as school closures and the suspension of non-essential activities, in the regions most affected. On March 31, 2020, Mexico’s Ministry of Health issued a decree suspending all non-essential activities in the country through April 30, and on April 21, such suspension was extended through May 30, 2020. For purposes of these measures, airports are considered essential and our airports remain operational. On May 29, 2020, Mexico’s Ministry of Health issued a decree establishing an epidemiological risk traffic light system by region, applicable both to municipalities and states which became effective on June 1, 2020 (and which remains in place as of the date of this report) that determines the level of health risk and the type of activities authorized to take place. As a result, different states of the country are experiencing different reactivation levels and, consequently, different types of economic activities are being allowed.
As a result of the COVID-19 pandemic, our reserve for doubtful accounts receivable increased by 231% to Ps.20.8 million as of December 31, 2020, which is mainly comprised of commercial tenants. We cannot assure you whether the COVID-19 pandemic will continue to cause an increase in our reserve for doubtful accounts receivable in 2021. The full extent of the ongoing impact of COVID-19 on the Company’s longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty. Our total passenger traffic decreased 52.3% in 2020 compared to 2019. The sum of aeronautical and non-aeronautical revenues for the first quarter of 2021 decreased to Ps.1,189,679 thousand, as compared to Ps.1,715,650 thousand in the first quarter of 2020. Even where formal advisories and restrictions have been lifted or reduced, the increased spread or resurgence of COVID-19 could result in the reintroduction of or increase in such formal advisories and restrictions. We expect that the COVID-19 pandemic will continue to severely impact the countries and regions served by airlines that operate in our airports in 2021.
While we are expecting a negative impact to our operational and our financial results due to the COVID-19 outbreak, we do not foresee a risk to the overall continuity of our business. We have carried out a preliminary analysis of
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the financial results in the short, medium and long term, and we have not identified any significant asset deterioration. Nevertheless, the demand for travel may decrease more than expected, which could magnify the impact of the COVID-19 pandemic going forward. Accordingly, we will continue to monitor and analyze the situation closely. We do not expect interruptions to our business. We have the ability to continue as a going concern and do not foresee the cancellation of our operations at any of our airports.
We are unable to predict with certainty the impact of the COVID-19 outbreak on our business, clients, suppliers and employees, as well as on international air travel. We are also unable to predict the degree to which the COVID-19 outbreak may impact air travel demand in the domestic regions in which we operate, or whether continuous travel restrictions, as well as general population fears with respect to air travel, may have a materially adverse effect on our business and on our operating results. The global and domestic impact of the COVID-19 outbreak on our business will depend on its duration and its impact on the economy of Mexico.
Stock Purchase Agreement
On September 14, 2020, Fintech filed Amendment No. 8 amending the Schedule 13D filed with the SEC, informing that on June 10, 2020, Fintech entered into a Stock Purchase Agreement with ICATEN and in the case of Bagual, a Stock Purchase Agreement with each of ICATEN and ICA Infraestructura, S.A. de. C.V. (a subsidiary of ICATEN), to purchase collectively 100% of the capital stock of SETA. The transactions closed on June 12, 2020 and the aggregate purchase price for the SETA shares was Ps. 5.47 per share for 862,703,377 shares.
Potential Tender Offer by Fintech Holdings Inc. and its affiliates
As of December 22, 2020, Fintech Holdings Inc, and Fintech owned Series B shares and underlying ADRs and Series BB Shares (which convert into Series B Shares upon their disposition to a third party) (the “Series B Shares”) which represented approximately 14.7% of our total outstanding capital stock.
Fintech informed on December 23, 2020 that it has considered from time to time making a tender offer, in Mexico or globally, for an additional interest in our Series B Shares, without exceeding an aggregate interest of 40% of our aggregate outstanding shares. In connection with consideration of such an offer, Fintech informed that it has evaluated alternative possibilities for the financial, legal and regulatory structures available for such an offer, and that it has engaged in exploratory discussions regarding those possibilities with, among others, potential providers of financing, potential dealer-managers and regulatory authorities in the United States and Mexico.
On December 22, 2020 Fintech filed Amendment No.10 amending the Schedule 13D filed with the SEC describing possible transactions under consideration related to its investment, but has not determined to proceed, and has stated that there can be no assurance it will proceed with any offer. If Fintech were to proceed with such an offer, Fintech currently expects that any such offer would be for at least 19,505,578 Series B Shares (or 5% of the aggregate outstanding shares of OMA) and up to 97,527,889 Series B Shares (or 25% of the aggregate outstanding shares of OMA) for an expected purchase price of up to Ps.137 per Series B Share (or the corresponding price in US dollars per American Depositary Share representing Series B Shares, based on the applicable US Dollar/Mexican peso exchange rate upon settlement). Fintech stated that the expected offer amount and purchase price disclosed above and the willingness of the reporting persons to proceed with an offer are subject to change based on market conditions, obtaining financing, obtaining regulatory approval in the United States and Mexico, obtaining approval by the our board of directors and other factors, and has indicated that there can be no assurance that it will proceed with any offer. As of the date of Amendment No. 10, these plans remain preliminary and subject to change, and Fintech has not yet determined to proceed and has not commenced any tender offer. Fintech informed it does not expect to be in a position to commence an offer before the final week of January 2021. Fintech anticipates that it would try to finalize its financing commitments in the first ten business days of any offer, and if it is able to obtain satisfactory financing commitments, Fintech would disclose the terms of such financing commitments to the extent required by applicable law, any financing conditions would then be satisfied and Fintech would maintain the offer open for acceptances for the time prescribed by applicable law.
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As of April 22, 2021, Fintech has not initiated any tender offer to purchase Series B shares.
Third amendment to the Technical Assistance Agreement
On December 14, 2020, the Technical Assistance Agreement was amended. Among the main modifications, the term was extended until December 31, 2021, with automatic renewals for one year periods starting on January 1, 2022, unless termination notice is provided by any of the parties involved. Additionally, the automatic renewals shall prevail as long as SETA holds an individual interest of at least 7.65% of the shares of the Company. The economic terms of the agreement were not modified.
2021-2025 Master Development Programs
On November 27, 2020, the 2021-2025 Master Development Programs for OMA’s 13 airports were authorized by AFAC. The Master Development Programs include major maintenance, minor expenses and capital investment for the expansion, improvement, modernization and maintenance of airport infrastructure and equipment according to national and international efficiency, operational and safety standards, considering the growth of estimated passenger traffic. The amount of the committed investment was Ps.11,979,621 in pesos with purchasing power as of December 31, 2019.
2020 Annual and Extraordinary Shareholders’ Meeting
The Annual Meeting for the Shareholders of the Company that was rescheduled due to COVID-19 took place on July 7, 2020. The Extraordinary General Shareholders’ Meeting, also held on July 7, 2020, approved the cancellation of 3,659,417 Series “B” shares, acquired by OMA pursuant to Article 56 of the Securities Market Law. As a result, shares outstanding after giving effect to the aforementioned cancellation of shares are 390,111,556.
2021 Annual Shareholders’ Meeting
The Annual Meeting for the Shareholders of the Company was held on April 21, 2021. The General Ordinary Shareholders’ Meeting approved the declaration and payment of a cash dividend to shareholders of up to Ps. 2,000 million and delegated to the Board of Directors the power to determine the amount to be paid out, which will come from accumulated earnings, as well as the date or dates and forms of payment. The declaration of the aforementioned dividend will become effective as of the date the Board makes its determination.
Operations of Hilton Garden Inn Hotel
On July 6, 2020, the Hilton Garden Inn Hotel that operates at the Monterrey airport restarted activities. The hotel had suspended operations since April 6, 2020 due to low occupancy derived from COVID-19.
Inauguration of Reynosa Airport Terminal Building
In February 2021, we inaugurated the terminal building at the Reynosa airport. The project involved a total investment of Ps.335 million and included an expansion of 4,550 square meters (48,976 square feet), for a total of 7,286 square meters (78,426 square feet). Passenger capacity grew threefold to serve up to 900,000 passengers per year.
Approval of Master Development Program for the 2021-2025 period
In November 2020, we received approval from the Ministry of Communications and Transportation, through the AFAC, of the Master Development Program for each of our thirteen airports, corresponding to the 2021-2025 period.
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Issuance OMA21V and OMA21-2 (2021 Green Variable Rate Notes and 2021 Fixed Rate Notes)
On April 16, 2021, OMA issued Ps.1,000,000 thousand in five-year notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the “2021 Green Variable Rate Notes Indenture”). Interest payments are made every 28 days at a variable annual interest rate of TIIE 28 + 0.75%. The principal amount will be repaid at maturity on April 10, 2026. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to finance green investments pursuant to our Master Development Programs for 2021-2025. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.
On April 16, 2021, OMA issued Ps.2,500,000 thousand in seven year notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the 2021 Fixed Rate Notes indenture). Interest payments are made on a semiannual basis at a fixed annual interest rate of 7.83%. The principal amount will be repaid at maturity on April 7, 2028. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to extend the maturity profile of debt by prepaying the Ps.3,000,000 thousand in fixed rate notes issued under the 2014 Indenture. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.
For a detailed description of covenants, events of default and the green bond framework, see “Item 5 Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness.”
Operating Results
Certain U.S. dollar amounts have been translated from Mexican pesos for convenience purposes at an exchange rate of Ps.19.9087 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2020.
Passenger and Cargo Volumes
In 2020, approximately 89.3% of the terminal passengers using our airports were domestic. Domestic traffic decreased by 51.6% and international traffic decreased by 56.9% as compared to 2019. In addition, of the international passengers traveling through our airports, a majority has historically traveled on flights originating in or departing to the United States. Accordingly, our results of operations are influenced strongly by changes to Mexican economic conditions and to a lesser extent influenced by U.S. economic and other conditions, particularly trends and events affecting leisure travel and consumer spending.
Many factors affecting our passenger traffic volume and the mix of passenger traffic in our airports are beyond our control, including the adverse effects of the COVID-19 pandemic.
In 2018, 2019 and 2020, our 13 airports handled approximately 100,914, 97,620 and 93,242 metric tons of cargo, respectively. The decrease in 2020 was due to a 5.7% decrease in cargo transportation at the Monterrey airport and a 9.0% decrease in cargo transportation at the San Luis Potosí airport. Increases in our cargo volume are beneficial to us for purposes of the maximum-rate calculations, as cargo increases the number of our workload units.
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The following table sets forth certain operating and financial data relating to our revenues and passenger and cargo volumes for the periods indicated:
| | | | | | | |
| | For the Year Ended December 31, |
| ||||
|
| 2018 |
| 2019 |
| 2020 |
|
Domestic terminal passengers(1) |
| 19,016.38 |
| 20,416.76 | | 9,877.70 | |
International terminal passengers(1) |
| 2,550.02 |
| 2,751.30 | | 1,184.99 | |
Total terminal passengers(1) |
| 21,566.40 |
| 23,168.06 | | 11,062.69 | |
Cargo units(1) |
| 1,009.14 |
| 976.20 | | 932.42 | |
Total workload units(1) |
| 22,575.54 |
| 24,144.26 | | 11,995.11 | |
Change in total terminal passengers(2) |
| 9.7 | % | 7.4 | % | (52.3) | % |
Change in workload units(2) |
| 9.3 | % | 6.9 | % | (50.3) | % |
| | | | | | | |
Aeronautical revenues(3) |
| 5,140,052 |
| 5,752,662 | | 2,942,558 | |
Change in aeronautical revenues(2) |
| 18.2 | % | 11.9 | % | (48.8) | % |
Aeronautical revenues per workload unit |
| 227.7 |
| 238.3 | | 245.3 | |
Change in aeronautical revenues per workload unit(1)(2) |
| 8.2 | % | 4.6 | % | 3.0 | % |
| | | | | | | |
Non-aeronautical revenues(3) |
| 1,625,497 |
| 1,819,605 | | 1,171,039 | |
Change in non-aeronautical revenues(2) |
| 11.6 | % | 11.9 | % | (35.6) | % |
Non-aeronautical revenues per terminal passenger(4) |
| 75.4 |
| 78.5 | | 105.9 | |
Change in non-aeronautical revenues per terminal passenger(2) |
| 1.8 | % | 4.2 | % | 34.8 | % |
Non-aeronautical revenues per terminal passenger, excluding hotel services(4)(5) |
| 59.3 |
| 63.1 | | 93.0 | |
Change in non-aeronautical revenues per terminal passenger, excluding hotel services(2)(5) |
| 4.6 | % | 6.4 | % | 47.4 | % |
(1) | In thousands. One cargo unit is equivalent to 100 kilograms (220 pounds) of cargo. Under the regulation applicable to our aeronautical revenues, one workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo. |
(2) | In each case, as compared to previous period. |
(3) | In thousands of pesos. |
(4) | In pesos. |
(5) | Figures presented for comparison purposes, as revenues from hotel services do not increase as a function of terminal passengers. |
In 2020, we served 11.1 million terminal passengers, of which 9.9 million were domestic and 1.2 million were international. The decrease in passengers in 2020 was principally due to the COVID-19 outbreak.
Classification of Revenues
We classify our revenues into three categories: revenues from aeronautical services, revenues from non-aeronautical services and revenues from construction services. Historically, a substantial majority of our total revenues have been derived from aeronautical services. For example, in 2020, 54.8% of our total revenues were derived from aeronautical services, and the remainder of our revenues was derived from non-aeronautical services and construction services. Aeronautical services represented 71.5% of the sum of our aeronautical and non-aeronautical revenues.
Our revenues from aeronautical services are subject to price regulation under the applicable maximum rate at each of our airports and principally consist of passenger charges, aircraft landing and parking charges, airport security charges, passenger walkway charges, the leasing of space in our airports to airlines (other than first class/VIP lounges and other similar activities not directly related to essential airport operations) and complementary services (i.e., fees from handling and catering providers, permanent ground transportation operators and access fees from fuel providers at our airports).
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Our revenues from non-aeronautical services are not subject to price regulation under our maximum rates and generally include revenues earned from: (i) commercial activities, such as car parking (which may be subject to certain municipal regulations, but not to our maximum rates), rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as advertising, retail operators, food and beverage providers, car rental companies, time-share sales and promotions service providers, duty-free operators and fees collected from other miscellaneous sources, such as telecommunications providers, financial services providers and other passenger services providers; (ii) diversification activities, which include revenues earned by OMA Carga operations (air cargo and ground cargo logistics services), the operation of the Terminal 2 NH Collection Hotel of Mexico City International Airport, the Hilton Garden Inn hotel at the Monterrey airport and real estate services; and (iii) complementary activities, which principally include our checked baggage-screening services, the leasing of space to airlines and complementary service providers for first class/VIP lounges and other activities not directly related to essential airport operations, as well as fees for access to federal zones.
We recognize revenues from construction services derived from the improvements made to airports that are included in our Master Development Programs. Construction service revenues related to the airport concession are determined based on negotiations between us and the Ministry of Communication and Transportation (recognized according to the percentage-of-completion method), as we construct or improve the airports based on the Master Development Programs. In 2020, revenues from improvements to concessioned assets accounted for 23.4% of our total revenues.
For a detailed description of the components of our aeronautical and non-aeronautical revenue categories, see “Item 4. Information on the Company—Business Overview—Our Sources of Revenues.”
Fluctuations in the Peso
From December 31, 2017 to December 31, 2018, the peso remained the same at Ps.19.64 per U.S.$1.00. From December 31, 2018 to December 31, 2019, the peso appreciated by approximately 3.9%, from Ps.19.64 per U.S.$1.00 on December 31, 2018, to Ps.18.86 per U.S.$1.00 on December 31, 2019. From December 31, 2019 to December 31, 2020, the peso depreciated by approximately 5.5%, from Ps.18.86 per U.S.$1.00 on December 31, 2019, to Ps.19.89 per U.S.$1.00 on December 31, 2020. In the first months of 2021, the peso appreciated, reaching Ps.19.87 per U.S.$1.00 on April 22, 2021.
International passengers and international flights pay tariffs denominated in U.S. dollars. However, these tariffs are generally collected in Mexican pesos 30 to 60 days following the date of each flight, and our maximum rates are set in Mexican pesos. Therefore, a significant depreciation of the Mexican peso as compared to the dollar during this 30 to 60-day period could result in us exceeding our maximum rates, which would be a violation of our concession. We attempt to set our U.S. dollar-denominated tariffs so as to avoid exceeding our maximum rates, and so far, fluctuations in the peso have not caused us to exceed our maximum rates or required us to issue rebates to avoid exceeding our maximum rates.
In addition, we have financial liabilities denominated in U.S. dollars, and a significant depreciation in the Mexican peso could result in higher debt balances when converted to Mexican pesos, thus resulting in foreign exchange losses. We may also, from time to time, maintain cash balances denominated in U.S. dollars, in which cases a depreciation of the Mexican peso against the U.S. dollar could result in a foreign exchange gain. As of December 31, 2020, Ps.1,584 million of our cash balance was denominated in U.S. dollars.
As of December 31, 2020, international passenger charges amounted to Ps.542,933 thousand, and as of December 31, 2020, we had U.S.$4.1 million of liabilities denominated in U.S. dollars.
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Aeronautical Revenues
The system of price regulation applicable to our aeronautical revenues establishes a maximum rate in pesos for each airport for each year in a five-year period, which is the maximum annual amount of revenues per workload unit (a workload unit is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from aeronautical services. See “Item 4. Regulatory Framework—Revenue Regulation” for a description of our maximum rates and the rate setting procedures for future periods. The maximum rates for our airports have been determined for each year through December 31, 2025.
The following table sets forth our revenues from aeronautical services for the periods indicated:
| | | | | | | | | | | | | |
| | For the Year Ended December 31, |
| ||||||||||
| | 2018 | | 2019 | | 2020 |
| ||||||
|
| Amount |
| % | | Amount |
| % | | Amount |
| % | |
| | (in thousands of pesos, except percentages) |
| ||||||||||
Aeronautical revenues: |
|
|
|
|
|
|
|
|
|
|
|
| |
Domestic passenger charges |
| 3,382,198 |
| 65.8 | % | 3,776,401 | | 65.6 | % | 1,857,551 | | 63.1 | % |
International passenger charges |
| 1,061,793 |
| 20.7 | % | 1,207,989 | | 21.0 | % | 542,933 | | 18.5 | % |
Landing charges |
| 205,787 |
| 4.0 | % | 229,919 |
| 4.0 | % | 147,387 |
| 5.0 | % |
Platform for embarking and disembarking |
| 136,852 |
| 2.7 | % | 150,055 |
| 2.6 | % | 90,257 |
| 3.1 | % |
Aircraft parking charges on extended stay or overnight |
| 36,402 |
| 0.7 | % | 35,910 |
| 0.6 | % | 31,905 |
| 1.1 | % |
Domestic and international passenger and carry-on baggage check |
| 54,570 |
| 1.1 | % | 62,970 |
| 1.1 | % | 29,688 |
| 1.0 | % |
Aerocars and jetways | | 47,956 | | 0.9 | % | 48,074 | | 0.8 | % | 19,920 | | 0.7 | % |
Other airport services, leases and regulated access(1) |
| 214,494 |
| 4.1 | % | 241,342 |
| 4.2 | % | 222,917 |
| 7.6 | % |
Total aeronautical revenues |
| 5,140,052 |
| 100.0 | % | 5,752,662 |
| 100.0 | % | 2,942,558 |
| 100.0 | % |
(1) | Includes regulated access fees, leasing of space to airlines for their operations and leasing of space in the airside to cargo handling agents and shippers. |
Under the regulatory system applicable to our aeronautical revenues, we can set the specific price for each category of aeronautical services, other than complementary services and the leasing of space to airlines, every six months (or earlier upon a cumulative increase of 5% in the Mexican Producer Price Index (excluding fuel)), as long as the total aeronautical revenues per workload unit each year at each of our airports does not exceed the maximum rate at that airport for that year. See “Item 4. Information on the Company—Regulatory Framework—Price Regulation” for a description of our maximum rates and the rate-setting procedures for future periods. We currently set the specific price for these categories of aeronautical services after negotiating with our principal airline customers. Historically, our specific prices have been structured such that the substantial majority of our aeronautical revenues are derived from passenger charges, and we expect this to continue to be the case in future agreements with our principal airline customers. In 2020, passenger charges represented 81.6% of our aeronautical services revenues. In 2020, aeronautical services represented 54.8% of our total revenues and 71.5 % of the sum of our aeronautical and non-aeronautical revenues.
Aeronautical revenue per workload unit is an indicator that is calculated by dividing total aeronautical revenues by the workload units for a given period. This indicator is affected annually, except for years in which the new maximum tariffs are set, by: (i) adjustment in the maximum rates for the efficiency factor and the Mexican Producer Price Index (excluding fuel); (ii) increases and decreases in the relative number of workload units at each airport; and (iii) changes in total workload units per airport.
We, from time to time, seek to offer incentives, including discounts on charges for aeronautical services, to encourage carriers to establish new routes and take other measures expected to increase passenger traffic at our airports. The Mexican Airport Law prevents discriminatory pricing, so incentives we offer must be available to any carrier
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meeting the conditions specified for those incentives. The main objective is to promote passenger growth in all of our airports. We may continue to offer further incentives in the future.
Such initiatives undertaken in the future may not be carried out, and may not increase our passenger traffic volume or our revenues.
In 2020, our aeronautical revenues represented approximately 99.3% of the amount we were entitled to earn under the maximum rates applicable to all of our airports. To the extent that we offer incentives to carriers to establish routes serving our airports in the future, or other changes to our sources of aeronautical revenues, this percentage could decrease. We may not be able to collect substantially all of the revenues we are entitled to earn from services subject to price regulation in the future.
Non-Aeronautical Revenues
Non-aeronautical services historically have generated a significantly smaller portion of our total revenues as compared to aeronautical services. Non-aeronautical revenues per terminal passenger are calculated by dividing total non-aeronautical revenues by the number of terminal passengers during the same period. The contribution to our total revenues from non-aeronautical services was 21.8% in 2020. Our non-aeronautical revenues per terminal passenger increased from Ps.78.5 in 2019 to Ps.105.9 in 2020 due primarily to the fixed portion of rent embedded in most of our contracts from the commercial, diversification and complementary activities, combined with the effect of the decrease in passenger traffic due to COVID-19. Our non-aeronautical revenues in 2020 represented 28.5% of the sum of our aeronautical and non-aeronautical revenues, and our revenues from commercial activities per terminal passenger increased from Ps.39.5 in 2019 to Ps.51.7 in 2020, due primarily to the minimum guaranteed fixed amount of rent in our commercial contracts.
Certain categories of non-aeronautical revenues are directly impacted by passenger traffic (for example car parking and rental, and food and beverage providers) while others are not (for example leasing of space, on which we earn at least a minimum fixed rent indexed to inflation each year, which may be increased by royalty-based payments as discussed below, or diversification revenues). Accordingly, non-aeronautical revenues do not always behave in the same manner as passenger traffic or workload units.
A substantial amount of our contracts with third-party tenants are royalty-based arrangements. Under a royalty-based contract, the amount tenants must pay is based on tenants’ revenues, subject to minimum guaranteed fixed amounts for the space leased. When the royalty-based amount is lower than the minimum guaranteed amount, the tenant must still pay the latter. Conversely, when the royalty-based amount is higher than the minimum guaranteed amount, the tenant will pay the former. Therefore, a decrease in passenger traffic volumes would result in a reduction in non-aeronautical revenues only if, (i) prior to such decrease in passenger traffic, the sales of royalty-based tenants were higher than the minimum guaranteed amount and (ii) the decrease in traffic volumes is such that it would cause the royalty-based amount to be lower than the minimum guaranteed amount for a given tenant. As a result, during periods in which airports experience a reduction in passenger traffic volumes, non-aeronautical revenues may remain stable due to the minimum guaranteed amount received by the airport under the lease contract, thereby resulting in a potential increase in non-aeronautical revenues per workload unit.
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The following table sets forth our revenues from non-aeronautical activities for the periods indicated:
| | | | | | | | | | | | | |
| | For the Year Ended December 31, |
| ||||||||||
| | 2018 | | 2019 | | 2020 |
| ||||||
|
| Amount |
| % | | Amount |
| % | | Amount |
| % | |
| | (in thousands of pesos, except percentages) |
| ||||||||||
Non-aeronautical revenues: | | | | | | | | | | | | | |
Commercial activities: | | | | | | | | | | | | | |
Car parking charges |
| 244,461 |
| 15.0 | % | 279,463 |
| 15.4 | % | 126,818 |
| 10.8 | % |
Advertising |
| 68,475 |
| 4.2 | % | 76,200 |
| 4.2 | % | 59,695 |
| 5.1 | % |
Retail operations(1) |
| 114,418 |
| 7.0 | % | 124,554 |
| 6.8 | % | 64,486 |
| 5.5 | % |
Food and beverage |
| 120,828 |
| 7.4 | % | 144,374 |
| 7.9 | % | 87,499 |
| 7.5 | % |
Car rental operators |
| 131,478 |
| 8.1 | % | 149,454 |
| 8.2 | % | 111,037 |
| 9.5 | % |
Time share developers |
| 14,115 |
| 0.9 | % | 16,663 |
| 0.9 | % | 12,683 |
| 1.1 | % |
Financial services |
| 9,255 |
| 0.6 | % | 10,367 |
| 0.6 | % | 7,853 |
| 0.7 | % |
Communication and services |
| 15,551 |
| 1.0 | % | 16,006 |
| 0.9 | % | 17,800 |
| 1.5 | % |
Services to passenger |
| 2,746 |
| 0.2 | % | 4,127 |
| 0.2 | % | 3,281 |
| 0.3 | % |
VIP lounges |
| 36,649 |
| 2.3 | % | 51,176 |
| 2.8 | % | 36,538 |
| 3.1 | % |
Other commercial revenues(3) |
| 36,607 |
| 2.3 | % | 43,542 |
| 2.4 | % | 44,300 |
| 3.8 | % |
Total commercial activities |
| 794,583 |
| 49.0 | % | 915,927 |
| 50.3 | % | 571,990 |
| 48.8 | % |
Diversification activities: | | | | | | | | | | | | | |
Hotel services |
| 344,307 |
| 21.2 | % | 357,032 |
| 19.6 | % | 141,890 |
| 12.1 | % |
OMA Carga |
| 177,396 |
| 10.9 | % | 194,936 |
| 10.7 | % | 183,382 |
| 15.7 | % |
Real estate services |
| 16,352 |
| 1.0 | % | 18,181 |
| 1.0 | % | 16,499 |
| 1.4 | % |
Industrial services |
| 26,340 |
| 1.6 | % | 39,451 |
| 2.2 | % | 51,272 |
| 4.4 | % |
Other diversification revenues(3) |
| 4,061 |
| 0.2 | % | 4,966 |
| 0.3 | % | 7,547 |
| 0.6 | % |
Total diversification activities |
| 568,456 |
| 34.9 | % | 614,565 |
| 33.8 | % | 400,590 |
| 34.2 | % |
Complementary Activities: | | | | | | | | | | | | | |
Leasing of space(2) |
| 74,887 |
| 4.6 | % | 83,477 |
| 4.6 | % | 85,729 |
| 7.3 | % |
Access rights |
| 18,023 |
| 1.1 | % | 19,709 |
| 1.1 | % | 15,819 |
| 1.4 | % |
Documented baggage inspection |
| 153,192 |
| 9.4 | % | 175,006 |
| 9.6 | % | 86,491 |
| 7.4 | % |
Other complementary revenues(4) |
| 16,356 |
| 1.0 | % | 10,922 |
| 0.6 | % | 10,420 |
| 0.9 | % |
Total complementary activities |
| 262,458 |
| 16.1 | % | 289,113 |
| 15.9 | % | 198,459 |
| 16.9 | % |
Total revenues from non-aeronautical services |
| 1,625,497 |
| 100.0 | % | 1,819,605 |
| 100.0 | % | 1,171,039 |
| 100.0 | % |
(1) | Includes revenues from duty-free operations. |
(2) | Includes the leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and other similar non-essential activities). |
(3) | Other revenues consist mainly of recovery of costs for utility, marketing, security and maintenance charges that are transferred to airlines and other tenants in our airports. |
(4) | Other complementary revenues consist of the recovery of costs for utility, marketing, security and maintenance charges that are transferred to airlines and other tenants in our airports, among others. |
The majority of our non-aeronautical revenues are derived from commercial activities, which represented 48.8% of our non-aeronautical revenues in 2020. Commercial activities include car parking charges (which may be subject to government regulation, but not to our maximum rates), rental and royalty payments from third parties operating retail stores and providing commercial services at our airports, such as advertising, food and beverage providers, car rentals, time-share sales and promotions services, duty-free stores and fees collected from other miscellaneous sources, such as telecommunications providers, financial services providers and other passenger services providers.
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On an individual basis, during 2020, our most important source of non-aeronautical revenues was OMA Carga which provides air and ground cargo logistics services, and represented 15.7% of our non-aeronautical revenues in 2020 and is part of our diversification activities. Other than OMA Carga, diversification activities include hotel services (both Terminal 2 NH Collection Hotel at the Mexico City International Airport and the Hilton Garden Inn Hotel at the Monterrey Airport) and real estate services.
Complementary activities represented 16.9% of our non-aeronautical revenues in 2020. These activities primarily include baggage-screening services, the leasing of space to airlines and complementary service providers for first class/VIP lounges and other activities not directly related to essential airport operations; as well as fees for access to federal zones.
Operating Costs
Our operating costs have been, and we believe that they will continue to be, funded entirely from our results of operations. The following table sets forth our operating costs and certain other related information for the periods indicated:
| | | | | | | | | | | | | |
| | For the Year Ended December 31, |
| ||||||||||
| | 2018 | | 2019 | | 2020 |
| ||||||
|
| Amount | | % Change |
| Amount |
| % Change |
| Amount |
| % Change |
|
| | (in thousands of pesos, except percentages) |
| ||||||||||
Operating Costs: |
|
| | |
|
|
|
|
|
|
|
| |
Cost of services: |
|
| | |
|
|
|
|
|
|
|
| |
Wages and salaries |
| 231,753 |
| 5.4 | % | 242,237 |
| 4.5 | % | 227,076 |
| (6.3) | % |
Maintenance |
| 152,583 |
| (17.2) | % | 177,191 |
| 16.1 | % | 124,563 |
| (29.7) | % |
Security and insurance |
| 170,549 |
| (3.2) | % | 161,351 |
| (5.4) | % | 134,774 |
| (16.5) | % |
Utilities (electricity, cleaning and water) |
| 210,158 |
| 11.1 | % | 177,250 |
| (15.7) | % | 122,961 |
| (30.6) | % |
Building lease |
| 44,359 |
| (1.8) | % | 15,683 |
| (64.6) | % | 2,543 |
| (83.8) | % |
Allowance for doubtful accounts |
| (5,960) |
| (43.6) | % | (241) |
| (96) | % | 17,738 |
| (7,460) | % |
Cost of hotel service |
| 65,853 |
| 1.3 | % | 85,706 |
| 30.1 | % | 30,650 |
| (64.2) | % |
Employee statutory profit sharing |
| 1,099 |
| (29.9) | % | 236 |
| (78.5) | % | 1,917 |
| 712.3 | % |
Equipment lease, fees and other |
| 107,502 |
| (2.5) | % | 94,794 |
| (11.8) | % | 103,736 |
| 9.4 | % |
Total cost of services |
| 977,896 |
| (0.3) | % | 954,207 |
| (2.4) | % | 765,958 |
| (19.7) | % |
Major maintenance provision |
| 248,636 |
| (14.6) | % | 292,324 |
| 17.6 | % | 392,531 |
| 34.3 | % |
Cost of construction |
| 1,141,505 |
| (13.9) | % | 954,834 |
| (16.4) | % | 1,253,868 |
| 31.3 | % |
Administrative expenses |
| 563,151 |
| (4.2) | % | 542,664 |
| (3.6) | % | 518,059 |
| (4.5) | % |
Right to use airport facilities |
| 319,180 |
| 17.6 | % | 363,561 |
| 13.9 | % | 199,202 |
| (45.2) | % |
Technical assistance fees |
| 172,610 |
| 27.8 | % | 150,108 |
| (13.0) | % | 81,164 |
| (45.9) | % |
Depreciation and amortization(1) |
| 351,745 |
| 17.6 | % | 415,252 |
| 18.1 | % | 435,344 |
| 4.8 | % |
Other income, net |
| (205) |
| (85.1) | % | (1,155) |
| 463.4 | % | (128) |
| (88.9) | % |
Total operating costs |
| 3,774,518 |
| (3.0) | % | 3,671,795 |
| (2.7) | % | 3,645,998 |
| (0.7) | % |
(1) | Depreciation reflects depreciation of fixed assets, and amortization reflects amortization of our concessions and rights to use airport facilities. |
Cost of Services
Our cost of services consists primarily of employee, maintenance, safety, security and insurance costs, utilities (a portion of which we recover from our tenants) and other miscellaneous expenses.
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Major maintenance provision
We are required to perform major maintenance activities to our airports as established by our concession provided by the Mexican government. The estimated major maintenance costs are based on our Master Development Programs, which are reviewed and updated every five years. The contractual obligations to maintain and restore the infrastructure of our airports is recognized as a provision in our consolidated statements of financial position based on an estimate of the expenditure that would be required to settle the present obligation at the end of the reporting period. When the effect of the time value of money is material, the amount of the provision equals the present value of the expenditures expected to be required to settle the obligation. Where discounting is used, the carrying amount of the provision increases each period to reflect the passage of time and this increase is recognized as a borrowing cost. After initial recognition, provisions are reviewed at the end of each reporting period and adjusted to reflect current best estimates. Adjustments to provisions arise from three sources: (i) revisions to estimated cash flows (both in amount and timing); (ii) changes to present value due to the passage of time; and (iii) revisions of discount rates to reflect prevailing current market conditions. In periods following the initial recognition and measurement of the major maintenance provision at its present value, the provision is revised to reflect estimated cash flows being closer to the measurement date. The unwinding of the discount relating to the passage of time is recognized as a financing cost and the revision of estimates of the amount and timing of cash flows is a reassessment of the provision and charged or credited as an operating item within our consolidated statements of income and other comprehensive income.
Every quarter, the major maintenance provision is revised to update the amount that has been provided for in order to keep the provision as accurate as possible. The provision could increase or decrease, as a result of certain events, such as, on the one hand, a contingency in an airport that requires immediate major maintenance or other maintenance that has been delayed or, on the other hand, an asset that does not need maintenance, in which case resources can be better used for other activities.
Construction Costs
We invest in additions and upgrades to our concession assets in accordance with our Master Development Programs. As our construction costs are equal to our revenues from construction services, they do not have a cash impact on our results of operations.
Administrative Expenses
Our administrative expenses consist primarily of personnel expenses, fees and expenses paid to consultants and other providers of professional services and other administrative overhead expenses.
Concession Tax
Beginning November 1, 1998, we became subject to Article 232-A of the Mexican Federal Duties Law, which requires that the holders of concessions pay a tax for the use of state-owned assets. This tax is currently equal to 5% of the gross annual revenues of each concession holder obtained from the use of public domain assets pursuant to the terms of its concession. The concession tax may be revised at any time by the Mexican government, and this tax may increase in the future. If the Mexican government increases the concession tax, we are entitled to request an increase in its maximum rates from the Ministry of Communications and Transportation; however, the Ministry of Communications and Transportation may not honor such requests in the future.
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Technical Assistance Fee
Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers technical assistance and technological and industry knowledge and experience to us in exchange for a fee. For more information about this agreement, see “Item 7. Major Shareholders and Related-Party Transactions—Related Party Transactions.” The technical assistance fee for each of 2001 and 2002 was fixed at U.S.$5.0 million (adjusted annually for U.S. inflation). For the remainder of the original contract term, the fee was equal to the greater of U.S.$3.0 million adjusted annually for inflation (measured by the U.S. consumer price index) or 5% of our EBITDA. Pursuant to the second amendment to the Technical Assistance Agreement signed on May 13, 2015, as of June 14, 2015, the fee was reduced to the greater of U.S.$3,478,000 (updated annually according to the U.S. consumer price index) and 4% of our EBITDA for the first three years of the extension and 3% of our EBITDA for the last two years of the extension. Pursuant to the third amendment of the Technical Assistance Agreement, dated as of December 14, 2020, the term of such agreement has been extended until December 31, 2021, with automatic renewals for one year periods starting on January 1, 2022, unless a termination notice is provided by any of the parties involved. Additionally, the automatic renewals shall be in force as long as SETA holds an individual interest of at least 7.65% of the shares of the Company. The economic terms of the agreement were not modified.
Depreciation and Amortization
Our depreciation and amortization expenses primarily reflect the amortization of our investment in our 13 concessions. In 2020, our depreciation and amortization expenses increased by 4.8%, as compared to 2019, primarily due to an increase in the investment to improve our concessions’ assets during 2020.
The value of our concessions was determined in June 2000, when SETA won the bid to acquire Series BB shares currently representing 12.8% of our capital stock, based on the value assigned by the independent company INGENIAL. In addition, we depreciate the value of certain fixed assets that we acquire or build at our airports pursuant to the investment requirements under our Master Development Programs. For further information regarding depreciation and amortization expenses, refer to Notes 9 and 10 to our audited consolidated financial statements.
Solidarity Fees
We and our subsidiaries have entered into inter-company agreements under which we provide services and make payments among us and our subsidiaries. The payments under these agreements affect the revenues, operating costs and income at our individual subsidiaries but not our consolidated results. Under the intercompany agreements, our parent company Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., or GACN, and our administrative services subsidiaries provide certain services and guarantees to our airport operating subsidiaries (which may include payments to certain of our airport operating subsidiaries), in exchange for which our airport operating subsidiaries make payments to GACN and the service subsidiaries. Each of our airports has entered into a “Solidarity Agreement” with our parent company, pursuant to which each of our airport operating subsidiaries pays a solidarity fee to GACN in exchange for which GACN guarantees the ongoing viability of that subsidiary’s concession, including, in the case of certain subsidiaries, by making payments to those subsidiaries to ensure that they have the resources to comply with their Master Development Programs and other regulatory obligations. As described under “Item 4. Information on the Company—Regulatory Framework—General Obligations of Concession Holders,” in the event of a breach of one concession, the Ministry of Communications and Transportation is entitled to revoke all of the concessions held by our airport operating subsidiaries. Therefore, our airport operating subsidiaries that generate higher revenues pay higher solidarity fees to our parent company to ensure the continued viability of the concessions held by our airport operating subsidiaries that generate lower revenues. Amounts paid pursuant to the Solidarity Agreements are determined in accordance with Mexican transfer pricing regulations established under the Mexican Income Tax Law and are in line with a transfer pricing study that we commission annually from an independent third party. The intercompany agreements also include agreements to provide other routine services, including negotiating regulated tariffs and interfacing with regulators, leasing of commercial real estate, trademark license royalties, marketing services and employee costs. The costs of these services and guarantees, including the solidarity fees, are actual costs that are charged to individual airports.
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Expenditures pursuant to master development programs and other capital expenditures
In 2020, expenditures pursuant to master development programs and other capital expenditures were Ps.1,506,237 thousand. We funded our expenditures through cash flows from operations, and we believe that we will continue to fund them through cash flow from operations, as well as new debt, in the future. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
Employee Statutory Profit Sharing
We are subject to the mandatory statutory employee profit sharing regime (participación de los trabajadores en las utilidades de las empresas, or “PTU”) established by the Mexican Federal Labor Law. Under this regime, 10% of a company’s unconsolidated annual profits, as calculated for tax purposes, must be distributed among employees other than the chief executive officer.
Taxation
The recognition of a deferred tax asset from previous years represented Ps.85,731 thousand for the year ended December 31, 2020, while the current tax amounted to Ps. 480,322 thousand. In 2020, we had an effective tax rate of 26.4%, which reflects the permanent differences related primarily to inflationary effects for tax purposes.
The statutory Mexican corporate income tax rate in 2020, 2019 and 2018 was 30.0%.
A withholding tax at a rate of 10% on the gross amount of dividends distributed to non-Mexican holders with respect to our Series B shares and our ADSs was enacted as part of the 2013 tax reforms. For a further discussion of the withholding tax, see “Item 10. Additional Information—Taxation—Taxation of Dividends.”
Effects of Devaluation and Inflation
The following table sets forth, for the periods indicated, the percentage that the Mexican peso devalued or appreciated against the U.S. dollar, the Mexican inflation rate, the U.S. inflation rate and the percentage that Mexican GDP changed as compared to the previous period:
| | | | | |
| | For the Year Ended December 31, |
| ||
|
| 2019 |
| 2020 |
|
Depreciation of the Mexican peso as computed to the U.S. dollar(1) |
| (3.9) | % | 5.5 | % |
Mexican inflation rate(2) |
| 2.8 | % | 3.2 | % |
U.S. inflation rate(3) |
| 2.1 | % | 1.4 | % |
Increase in Mexican GDP(4) |
| (0.1) | % | (8.5) | % |
(1) Based on changes in the noon buying rate for Mexican pesos, as published by the U.S. Federal Reserve at the end of each period, which were as follows: Ps.18.86 per U.S.$1.00 as of December 31, 2019 and Ps.19.89 per U.S.$1.00 as of December 31, 2020.
(2) Based on changes in the Mexican Consumer Price Index from the previous period, as reported by the Mexican Central Bank. The year-end Mexican Consumer Price Index was 105.9340 in 2019 and 109.271 in 2020.
(3) Based on changes in the Consumer Price Index for all urban consumers before seasonal adjustment, as reported by the U.S. Department of Labor, Bureau of Labor Statistics.
(4) In real terms, as reported by the Mexican Central Bank.
98
The general condition of the Mexican economy, the devaluation of the peso as compared to the U.S. dollar, inflation and high interest rates have in the past adversely affected, and may in the future adversely affect, the following:
Passenger charges. Passenger charges for international passengers are currently denominated in U.S. dollars (although invoiced and paid in Mexican pesos), while passenger charges for domestic passengers are denominated in pesos. Consequently, an appreciation of the peso against the U.S. dollar could cause declines in our revenues from passenger charges for international passengers and consequently our aeronautical revenues. This would also produce a decline in peso-denominated revenues when compared with the previous year, because our tariffs for the services we provide to international flights or international passengers are denominated in U.S. dollars but are generally invoiced and paid for in Mexican pesos based on the average exchange rate for the month prior to each flight on which the charge is incurred.
Exchange gains and losses. Our consolidated statement of comprehensive income reflects gains and losses from foreign exchange transactions and could be impacted by exchange rates (to the extent of our foreign currency transactions). A portion of our indebtedness is denominated in U.S. dollars. Given that a substantial portion of our revenues are collected or converted into Mexican pesos, a depreciation in the peso as against the dollar would result in us having to spend more pesos for payment of dollar-denominated indebtedness, whereas an appreciation of the peso would result in us spending fewer pesos for dollar-denominated indebtedness payments. In addition, our cash balance may be, from time to time, denominated in U.S. dollars, in which case a depreciation of the Mexican peso against the U.S. dollar could result in a foreign exchange gain.
Cash flows. Our cash flows are affected by changes in exchange rates as a result of holding monetary assets and liabilities in foreign currencies.
Maximum rates in Mexican pesos. The tariffs for the services that we provide for international flights or international passengers are generally denominated in U.S. dollars but are paid in Mexican pesos based on the average exchange rate for the month prior to each flight. Accordingly, depreciation of the peso, particularly late in the year, could cause us to exceed the maximum rates at one or more of our airports, which could lead to the imposition of fines and the subsequent termination of one or more of our concessions. In addition, if the Mexican peso appreciates as compared to the U.S. dollar, we may underestimate the specific prices we can charge for regulated services and be unable to adjust our prices upwards to maximize our regulated revenues.
99
Operating Results by Segment
The following table sets forth our results of operations for the periods indicated for each of our airports, our hotel services and our industrial services.
| | | | | | | |
| | For the Year Ended December 31, |
| ||||
|
| 2018 |
| 2019 |
| 2020 |
|
| | (in thousands of pesos, except percentages) |
| ||||
Metropolitan Destination |
|
|
|
|
|
| |
Monterrey: |
|
|
|
|
|
| |
Revenues: |
|
|
|
|
|
| |
Aeronautical services |
| 2,447,993 | | 2,641,052 | | 1,278,255 | |
Non-aeronautical services |
| 649,393 | | 726,684 | | 479,322 | |
Construction services |
| 232,698 | | 323,035 | | 802,470 | |
Total revenues |
| 3,330,084 | | 3,690,771 | | 2,560,047 | |
Operating costs: |
|
| |
| |
| |
Costs and administrative expenses |
| 383,309 | | 392,344 | | 254,416 | |
Major maintenance provision |
| 56,985 | | 63,673 | | 78,811 | |
Construction costs |
| 232,698 | | 323,035 | | 802,470 | |
Depreciation and amortization |
| 103,454 | | 111,020 | | 122,507 | |
Solidarity fee |
| 1,738,583 | | 2,327,084 | | 855,891 | |
Total operating costs |
| 2,515,029 | | 3,217,156 | | 2,114,095 | |
Income from operations |
| 815,055 | | 473,615 | | 445,952 | |
Operating margin(1) |
| 24.5 | % | 12.8 | % | 17.4 | % |
100
| | | | | | | |
| | For the Year Ended December 31, |
| ||||
|
| 2018 |
| 2019 |
| 2020 |
|
| | (in thousands of pesos, except percentages) |
| ||||
Tourist Destinations |
|
|
|
| |
| |
Acapulco: |
|
|
|
| |
| |
Revenues: |
|
|
|
| |
| |
Aeronautical services |
| 182,663 | | 227,954 | | 117,218 | |
Non-aeronautical services |
| 34,279 | | 40,242 | | 27,159 | |
Construction services |
| 279,099 | | 63,102 | | 29,410 | |
Total revenues |
| 496,041 | | 331,298 | | 173,787 | |
Operating costs: |
|
| |
| |
| |
Costs and administrative expenses |
| 59,847 | | 61,603 | | 49,893 | |
Major maintenance provision |
| 9,211 | | 9,374 | | 13,536 | |
Construction costs |
| 279,099 | | 63,102 | | 29,410 | |
Depreciation and amortization |
| 33,125 | | 43,286 | | 44,780 | |
Solidarity fee |
| 71,299 | | 100,121 | | 14,580 | |
Total operating costs |
| 452,581 | | 277,486 | | 152,199 | |
Income from operations |
| 43,460 | | 53,812 | | 21,588 | |
Operating margin(1) |
| 8.8 | % | 16.2 | % | 12.4 | % |
| | | | | | | |
Mazatlán: |
|
| |
| |
| |
Revenues: |
|
| |
| |
| |
Aeronautical services |
| 276,126 | | 321,313 | | 211,184 | |
Non-aeronautical services |
| 46,754 | | 52,857 | | 37,431 | |
Construction services |
| 31,308 | | 34,572 | | 24,704 | |
Total revenues |
| 354,188 | | 408,742 | | 273,319 | |
Operating costs: |
|
| |
| |
| |
Costs and administrative expenses |
| 64,062 | | 61,828 | | 38,068 | |
Major maintenance provision |
| 16,297 | | 16,796 | | 13,282 | |
Construction costs |
| 31,308 | | 34,572 | | 34,572 | |
Depreciation and amortization |
| 16,594 | | 17,514 | | 18,699 | |
Solidarity fee |
| 144,273 | | 225,406 | | 105,593 | |
Total operating costs |
| 272,534 | | 356,116 | | 210,214 | |
Income from operations |
| 81,654 | | 52,626 | | 63,105 | |
Operating margin(1) |
| 23.1 | % | 12.9 | % | 23.1 | % |
| | | | | | | |
Zihuatanejo: |
|
| |
| |
| |
Revenues: |
|
| | | | | |
Aeronautical services |
| 167,578 | | 191,512 | | 98,645 | |
Non-aeronautical services |
| 22,934 | | 25,596 | | 18,360 | |
Construction services |
| 13,534 | | 22,876 | | 45,984 | |
Total revenues |
| 204,046 | | 239,984 | | 162,989 | |
Operating costs: |
|
| |
| |
| |
Costs and administrative expenses |
| 43,740 | | 38,918 | | 29,319 | |
Major maintenance provision |
| 17,228 | | 32,792 | | 40,780 | |
Construction costs |
| 13,534 | | 22,876 | | 45,984 | |
Depreciation and amortization |
| 18,266 | | 18,660 | | 19,091 | |
Solidarity fee |
| 67,683 | | 83,124 | | 14,855 | |
Total operating costs |
| 160,451 | | 196,370 | | 150,029 | |
Income from operations |
| 43,595 | | 43,614 | | 12,960 | |
Operating margin(1) |
| 21.4 | % | 18.2 | % | 8.0 | % |
101
| | | | | | | |
| | For the Year Ended December 31, |
| ||||
|
| 2018 |
| 2019 |
| 2020 |
|
| | (in thousands of pesos, except percentages) |
| ||||
Regional Destinations |
|
|
|
| |
| |
Chihuahua: |
|
|
|
| |
| |
Revenues: |
|
|
|
| |
| |
Aeronautical services |
| 364,755 | | 411,392 | | 215,728 | |
Non-aeronautical services |
| 56,128 | | 67,022 | | 46,049 | |
Construction services |
| 141,546 | | 124,701 | | 30,679 | |
Total revenues |
| 562,429 | | 603,115 | | 292,456 | |
Operating costs: |
|
| |
| |
| |
Costs and administrative expenses |
| 60,372 | | 68,233 | | 51,254 | |
Major maintenance provision |
| 20,392 | | 34,802 | | 52,396 | |
Construction costs |
| 141,546 | | 124,701 | | 30,679 | |
Depreciation and amortization |
| 13,462 | | 17,974 | | 25,274 | |
Solidarity fee |
| 222,676 | | 290,026 | | 82,815 | |
Total operating costs |
| 458,448 | | 535,736 | | 242,418 | |
Income from operations |
| 103,981 | | 67,379 | | 50,038 | |
Operating margin(1) |
| 18.5 | % | 11.2 | % | 17.1 | % |
| | | | | | | |
Culiacán: |
|
| |
| |
| |
Revenues: |
|
| |
| |
| |
Aeronautical services |
| 539,540 | | 617,978 | | 359,562 | |
Non-aeronautical services |
| 57,313 | | 66,287 | | 51,732 | |
Construction services |
| 33,888 | | 68,961 | | 68,142 | |
Total revenues |
| 630,741 | | 753,226 | | 479,436 | |
Operating costs: |
|
| |
| |
| |
Costs and administrative expenses |
| 76,788 | | 80,460 | | 57,683 | |
Major maintenance provision |
| 10,514 | | 8,884 | | 64,627 | |
Construction costs |
| 33,888 | | 68,961 | | 68,142 | |
Depreciation and amortization |
| 17,408 | | 18,658 | | 20,887 | |
Solidarity fee |
| 346,376 | | 479,985 | | 175,756 | |
Total operating costs |
| 484,974 | | 656,948 | | 387,095 | |
Income from operations |
| 145,767 | | 96,278 | | 92,341 | |
Operating margin(1) |
| 23.1 | % | 12.8 | % | 19.3 | % |
| | | | | | | |
Durango: |
|
| |
| |
| |
Revenues: |
|
| |
| |
| |
Aeronautical services |
| 112,310 | | 150,130 | | 79,515 | |
Non-aeronautical services |
| 10,822 | | 13,433 | | 11,083 | |
Construction services |
| 13,788 | | 36,677 | | 50,202 | |
Total revenues |
| 136,920 | | 200,240 | | 140,800 | |
Operating costs: |
|
| |
| |
| |
Costs and administrative expenses |
| 24,949 | | 27,964 | | 21,566 | |
Major maintenance provision |
| 13,951 | | 14,506 | | 26,418 | |
Construction costs |
| 13,788 | | 36,677 | | 50,202 | |
Depreciation and amortization |
| 6,558 | | 7,537 | | 8,259 | |
Solidarity fee |
| 48,335 | | 90,542 | | 24,135 | |
Total operating costs |
| 107,581 | | 177,226 | | 130,580 | |
Income from operations |
| 29,339 | | 23,014 | | 10,220 | |
Operating margin(1) |
| 21.4 | % | 11.5 | % | 7.3 | % |
102
| | | | | | | |
| | For the Year Ended December 31, |
| ||||
|
| 2018 |
| 2019 |
| 2020 |
|
| | (in thousands of pesos, except percentages) |
| ||||
San Luis Potosí: | | | | | | | |
Revenues: | | | | | | | |
Aeronautical services |
| 167,030 |
| 174,340 |
| 108,045 | |
Non-aeronautical services |
| 30,275 |
| 35,631 |
| 28,508 | |
Construction services |
| 231,726 |
| 110,743 |
| 58,189 | |
Total revenues |
| 429,031 |
| 320,714 |
| 194,742 | |
Operating costs: | | | | | | | |
Costs and administrative expenses |
| 30,189 |
| 35,460 |
| 26,288 | |
Major maintenance provision |
| 30,698 |
| 26,093 |
| 12,962 | |
Construction costs |
| 231,726 |
| 110,743 |
| 58,189 | |
Depreciation and amortization |
| 8,711 |
| 12,857 |
| 21,569 | |
Solidarity fee |
| 88,041 |
| 107,623 |
| 41,086 | |
Total operating costs |
| 389,365 |
| 292,776 |
| 160,094 | |
Income from operations |
| 39,666 |
| 27,938 |
| 34,648 | |
Operating margin(1) |
| 9.2 | % | 8.7 | % | 17.8 | % |
| | | | | | | |
Tampico: | | | | | | | |
Revenues: | | | | | | | |
Aeronautical services |
| 190,502 |
| 197,161 |
| 74,330 | |
Non-aeronautical services |
| 26,891 |
| 28,056 |
| 17,414 | |
Construction services |
| 26,169 |
| 61,823 |
| 67,530 | |
Total revenues |
| 243,562 |
| 287,040 |
| 159,274 | |
Operating costs: | | | | | | | |
Costs and administrative expenses |
| 46,136 |
| 43,969 |
| 38,759 | |
Major maintenance provision |
| 8,327 |
| 11,593 |
| 29,466 | |
Construction costs |
| 26,169 |
| 61,823 |
| 67,530 | |
Depreciation and amortization |
| 8,605 |
| 9,218 |
| 9,920 | |
Solidarity fee |
| 106,706 |
| 128,629 |
| 3,441 | |
Total operating costs |
| 195,943 |
| 255,232 |
| 149,116 | |
Income from operations |
| 47,619 |
| 31,808 |
| 10,158 | |
Operating margin(1) |
| 19.6 | % | 11.1 | % | 6.4 | % |
| | | | | | | |
Torreón: | | | | | | | |
Revenues: | | | | | | | |
Aeronautical services |
| 184,396 |
| 201,446 |
| 94,892 | |
Non-aeronautical services |
| 22,655 |
| 23,683 |
| 17,425 | |
Construction services |
| 19,991 |
| 18,343 |
| 12,233 | |
Total revenues |
| 227,042 |
| 243,472 |
| 124,550 | |
Operating costs: | | | | | | | |
Costs and administrative expenses |
| 36,732 |
| 34,781 |
| 24,812 | |
Major maintenance provision |
| 11,198 |
| 17,457 |
| 19,327 | |
Construction costs |
| 19,991 |
| 18,343 |
| 12,233 | |
Depreciation and amortization |
| 9,426 |
| 9,883 |
| 10,605 | |
Solidarity fee |
| 100,811 |
| 131,350 |
| 33,913 | |
Total operating costs |
| 178,158 |
| 211,814 |
| 100,890 | |
Income from operations |
| 48,884 |
| 31,658 |
| 23,660 | |
Operating margin(1) |
| 21.5 | % | 13.0 | % | 19.0 | % |
| | | | | | | |
Zacatecas: | | | | | | | |
Revenues: | | | | | | | |
Aeronautical services |
| 105,626 |
| 141,500 |
| 71,292 | |
Non-aeronautical services |
| 11,935 |
| 13,945 |
| 10,512 | |
Construction services |
| 9,656 |
| 6,843 |
| 7,480 | |
Total revenues |
| 127,217 |
| 162,288 |
| 89,284 | |
Operating costs: | | | | | | | |
Costs and administrative expenses |
| 25,056 |
| 27,746 |
| 22,432 | |
Major maintenance provision |
| 10,230 |
| 12,129 |
| 1,243 | |
Construction costs |
| 9,656 |
| 6,843 |
| 7,480 | |
Depreciation and amortization |
| 7,460 |
| 7,813 |
| 8,024 | |
Solidarity fee |
| 47,148 |
| 76,622 |
| 29,349 | |
Total operating costs |
| 99,550 |
| 131,153 |
| 68,528 | |
Income from operations |
| 27,667 |
| 31,135 |
| 20,756 | |
Operating margin(1) |
| 21.7 | % | 19.2 | % | 23.2 | % |
103
| | | | | | | |
| | For the Year Ended December 31, |
| ||||
|
| 2018 |
| 2019 |
| 2020 |
|
| | (in thousands of pesos, except percentages) |
| ||||
Border Destinations |
|
|
|
|
|
| |
Ciudad Juárez: |
|
|
|
|
|
| |
Revenues: |
|
|
|
|
|
| |
Aeronautical services |
| 310,892 |
| 380,271 | | 199,685 | |
Non-aeronautical services |
| 45,287 |
| 55,999 | | 37,736 | |
Construction services |
| 9,096 |
| 17,650 | | 27,949 | |
Total revenues |
| 365,275 |
| 453,920 | | 265,370 | |
Operating costs: |
|
|
|
| |
| |
Costs and administrative expenses |
| 49,809 |
| 60,977 | | 43,601 | |
Major maintenance provision |
| 30,915 |
| 31,050 | | 18,155 | |
Construction costs |
| 9,096 |
| 17,650 | | 27,949 | |
Depreciation and amortization |
| 11,631 |
| 11,799 | | 12,717 | |
Solidarity fee |
| 174,273 |
| 271,070 | | 102,706 | |
Total operating costs |
| 275,724 |
| 392,546 | | 205,128 | |
Income from operations |
| 89,551 |
| 61,374 | | 60,242 | |
Operating margin(1) |
| 24.5 | % | 13.5 | % | 22.7 | % |
| | | | | | | |
Reynosa: |
|
|
|
| |
| |
Revenues: |
|
|
|
| |
| |
Aeronautical services |
| 106,867 |
| 113,515 | | 58,010 | |
Non-aeronautical services |
| 14,810 |
| 18,240 | | 11,500 | |
Construction services |
| 144,830 |
| 112,031 | | 55,366 | |
Total revenues |
| 266,507 |
| 243,786 | | 124,876 | |
Operating costs: |
|
|
|
| |
| |
Costs and administrative expenses |
| 24,833 |
| 28,119 | | 21,123 | |
Major maintenance provision |
| 12,690 |
| 13,177 | | 21,528 | |
Construction costs |
| 144,830 |
| 112,031 | | 55,366 | |
Depreciation and amortization |
| 7,909 |
| 8,189 | | 9,553 | |
Solidarity fee |
| 46,141 |
| 55,895 | | 8,135 | |
Total operating costs |
| 236,403 |
| 217,411 | | 115,705 | |
Income from operations |
| 30,104 |
| 26,375 | | 9,171 | |
Operating margin(1) |
| 11.3 | % | 10.8 | % | 7.3 | % |
(1) | We determine operating margin per airport by dividing income from operations at each airport by total revenues for that airport. |
104
| | | | | | | |
| | For the Year Ended December 31, |
| ||||
| | 2018 |
| 2019 |
| 2020 |
|
| | (in thousands of pesos, except percentages) |
| ||||
Hotels |
|
| |
|
|
| |
Terminal 2 NH Collection Hotel: |
|
| |
|
|
| |
Revenues: |
|
| |
|
|
| |
Non-aeronautical services |
| 246,065 |
| 255,393 | | 110,299 | |
Equity method (1) | | 476 | | 220 | | 226 | |
Total revenues |
| 246,541 |
| 255,613 | | 110,525 | |
Operating costs: |
|
|
|
| |
| |
Costs and administrative expenses |
| 156,322 |
| 138,742 | | 78,833 | |
Depreciation and amortization |
| 22,969 |
| 39,546 | | 40,301 | |
Total operating costs |
| 179,291 |
| 178,288 | | 119,134 | |
(Loss) income from operations |
| 67,250 |
| 77,325 | | (8,609) | |
Operating margin |
| 27.3 | % | 30.3 | % | (7.8) | % |
| | | | | | | |
Hilton Garden Inn Hotel: |
|
|
|
| |
| |
Revenues: |
|
|
|
| |
| |
Non-aeronautical services |
| 100,051 |
| 103,474 | | 32,614 | |
Equity method (1) | | 203 | | (188) | | 336 | |
Total revenues | | 100,254 |
| 103,286 | | 32,950 | |
Operating costs: | |
|
|
| |
| |
Costs and administrative expenses | | 60,440 |
| 59,559 | | 28,438 | |
Depreciation and amortization | | 10,840 |
| 11,382 | | 11,430 | |
Total operating costs | | 71,280 |
| 70,941 | | 39,868 | |
(Loss) income from operations | | 28,974 |
| 32,345 | | (6,918) | |
Operating margin | | 28.9 | % | 31.3 | % | (21.0) | % |
| | | | | | | |
| For the Year Ended December 31, |
| |||||
| 2018 | 2019 |
| 2020 |
| ||
| (in thousands of pesos, except percentages) |
| |||||
Industrial Park | |
| |
|
|
| |
OMA-Vynmsa Aero Industrial Park: | |
| |
|
|
| |
Revenues: | |
| |
|
|
| |
Non-aeronautical services | | 28,190 | | 41,981 | | 56,454 | |
Total revenues | | 28,190 | | 41,981 | | 56,454 | |
Operating costs: | |
| |
| |
| |
Costs and administrative expenses | | 5,654 | | 6,811 | | 8,751 | |
Depreciation and amortization | | 14,260 | | 19,548 | | 23,621 | |
Total operating costs | | 19,914 | | 26,359 | | 32,372 | |
Income from operations | | 8,276 | | 15,622 | | 24,082 | |
Operating margin | | 29.4 | % | 37.2 | % | 42.7 | % |
(1) | Equity method revenue is eliminated in full on consolidation. |
105
Summary Historical Consolidated Results of Operations
The following table sets forth a summary of our consolidated results of operations for the years indicated:
| | | | | | | | | | | |
| | Year Ended December 31, |
| ||||||||
| | 2018 | | 2019 | | 2020 |
| ||||
|
| Amount |
| Amount |
| % Change |
| Amount |
| % Change |
|
| | (in thousands of pesos, except percentages) |
| ||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
| |
Aeronautical services |
| 5,140,052 |
| 5,752,662 |
| 11.9 | % | 2,942,558 |
| (48.8) | % |
Non-aeronautical services |
| 1,625,497 |
| 1,819,605 |
| 11.9 | % | 1,171,039 |
| (35.6) | % |
Construction services |
| 1,141,505 |
| 954,834 |
| (16.4) | % | 1,253,869 |
| 31.3 | % |
Total revenues |
| 7,907,054 |
| 8,527,101 |
| 7.8 | % | 5,367,466 |
| (37.1) | % |
Operating costs and expenses: |
|
|
|
|
| | |
|
| | |
Cost of services |
| 977,896 |
| 954,207 |
| (2.4) | % | 765,958 |
| (19.7) | % |
Major maintenance provision |
| 248,636 |
| 292,324 |
| 17.6 | % | 392,531 |
| 34.3 | % |
Construction costs |
| 1,141,505 |
| 954,834 |
| (16.4) | % | 1,253,869 |
| 31.3 | % |
Administrative expenses |
| 563,151 |
| 542,664 |
| (3.6) | % | 518,059 |
| (4.5) | % |
Concession taxes |
| 319,180 |
| 363,561 |
| 13.9 | % | 199,202 |
| (45.2) | % |
Technical assistance fees |
| 172,610 |
| 150,108 |
| (13.0) | % | 81,164 |
| (45.9) | % |
Depreciation and amortization |
| 351,745 |
| 415,252 |
| 18.1 | % | 435,344 |
| 4.8 | % |
Other income |
| (205) |
| (1,155) |
| 463.4 | % | (128) |
| (88.9) | % |
Total operating costs and expenses |
| 3,774,518 |
| 3,671,795 |
| (2.7) | % | 3,645,998 |
| (0.7) | % |
Income from operations |
| 4,132,536 |
| 4,855,306 |
| 17.5 | % | 1,721,468 |
| (64.5) | % |
Interest expense, net |
| (131,466) |
| (204,772) |
| 55.8 | % | (308,610) |
| 50.7 | % |
Exchange loss, net |
| (15,488) |
| (50,878) |
| 228.5 | % | 79,522 |
| (256.3) | % |
Income before income taxes |
| 3,985,582 |
| 4,599,656 |
| 15.4 | % | 1,492,380 |
| (67.6) | % |
Income taxes |
| 1,121,403 |
| 1,372,222 |
| 22.4 | % | 394,501 |
| (71.3) | % |
Consolidated net income |
| 2,864,179 |
| 3,227,434 |
| 12.7 | % | 1,097,879 |
| (66.0) | % |
| | | | | | | | | | | |
Other operating data: |
|
|
|
|
|
| |
|
|
| |
Operating margin(1) |
| 52.3 | % | 56.9 | % | N/A | | 32.1 | % | N/A | |
Net margin(2) |
| 36.2 | % | 37.8 | % | N/A | | 20.5 | % | N/A | |
(1) | Income from operations divided by total revenues, expressed as a percentage. |
(2) | Consolidated net income divided by total revenues, expressed as a percentage. |
Results of Operations for the Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019.
Consolidated Revenues
Total revenues for 2020 were Ps.5,367,466 thousand, 37.1% lower than the Ps.8,527,101 thousand recorded in 2019, primarily as a result of a decrease in both aeronautical and non aeronautical revenues. The sum of aeronautical and non-aeronautical revenues in 2020 decreased by 45.7% as compared to 2019.
Aeronautical revenues decreased by 48.8% to Ps.2,942,558 thousand in 2020, as compared to Ps.5,752,662 thousand in 2019 due primarily to a decrease in passenger charges from Ps.4,984,390 thousand in 2019 to Ps.2,400,484 thousand in 2020, attributable to a 52.3% decrease in passenger traffic. Aeronautical revenues per workload unit in 2020 were Ps.245.3 compared to Ps.238.3 in 2019, an increase of 3.0%.
Non-aeronautical revenues decreased by 35.6% from Ps.1,819,605 thousand in 2019 to Ps.1,171,039 thousand in 2020, due primarily to the reduction in operations at our airports, attributable to a 52.3% decrease in passenger traffic. Non-aeronautical revenues per terminal passenger increased by 34.8%, from Ps.78.5 in 2019 to Ps.105.9 in 2020, due primarily to a lower reduction in non-aeronautical revenue compared to passenger traffic, as a result of the nature of
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contracts from commercial, diversification and complementary activities, which provide for a minimum guaranteed fixed rent.
Revenues from construction services in 2020 were Ps.1,253,869 thousand, an increase of 31.3% from Ps.954,834 thousand recognized in 2019, primarily as a result of the progress in the improvements of concession assets, principally in the Monterrey, Culiacán, Tampico and San Luis Potosí airports.
Our revenues are highly dependent on the volume of passenger traffic. The effects of the COVID-19 pandemic resulted in a significant reduction in passenger traffic during 2020, as a result of the actions taken by the Mexican, U.S. and other governments and from the broader reduction in demand for air travel caused by the COVID-19 pandemic. Even though we have taken action to recover passenger confidence, along with measures taken to preserve liquidity, the ongoing adverse effects of COVID-19 on our operations remain uncertain and the continuation of reduced air travel demand could have a material adverse effect on the Company’s business, operating results, financial condition and liquidity. For more information, see “Risk Factors—Risks Related to Our Operations— The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Revenues by Segment
On an airport-by-airport basis, the principal contributors to total revenues in 2020 were the Monterrey airport (Ps.2,560,047 thousand), the Culiacán airport (Ps.479,436 thousand), the Chihuahua airport (Ps.292,456 thousand), the Mazatlán airport (Ps.273,319 thousand), the Ciudad Juárez airport (Ps.265,370 thousand), the San Luis Potosí airport (Ps.194,742 thousand), and the Acapulco airport (Ps.173,787 thousand). Based on contribution to aeronautical and non-aeronautical revenues in 2020, the main contributors were the Monterrey airport (Ps.1,757,577 thousand), the Culiacán airport (Ps.411,294 thousand), the Chihuahua airport (Ps.261,777 thousand), the Mazatlán airport (Ps.248,615 thousand), the Ciudad Juárez airport (Ps.237,421 thousand), the Acapulco airport (Ps.144,377 thousand), and the San Luis Potosí airport (Ps.136,553 thousand). Historically, Monterrey, Culiacán and Chihuahua have been our three principal contributors to aeronautical and non-aeronautical revenues, and we expect this trend to continue in the future.
Metropolitan Destination
At the Monterrey airport, aeronautical revenues decreased by 51.6% from Ps. 2,641,052 thousand in 2019 to Ps.1,278,255 thousand in 2020, due primarily to a 54.9% decrease in passenger charges, as a result of a 55.3% decrease in passenger traffic. Non-aeronautical revenues decreased by 34.0% from Ps. 726,684 thousand in 2019 to Ps.479,322 thousand in 2020, due primarily to a 70.2% decrease in car parking charges, a 42.7% decrease in food and beverage and a 54.1% decrease in retail operations. The sum of aeronautical and non-aeronautical revenues decreased by 47.8% from Ps. 3,367,736 thousand in 2019 to Ps.1,757,577 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 11.3% from Ps.287.9 in 2019 to Ps.320.5 in 2020, principally due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
TouristDestinations
At the Acapulco airport, aeronautical revenues decreased by 48.6% from Ps.227,954 thousand in 2019 to Ps.117,218 thousand in 2020, due primarily to a 52.1% decrease in passenger charges, as a result of a 54.8% decrease in passenger traffic. Non-aeronautical revenues decreased by 32.5% from Ps.40,242 thousand in 2019 to Ps.27,159 thousand in 2020, due primarily to a 45.6% decrease in retail operations, a 28.8% decrease in revenues from car rentals and a 35.9% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 46.2% from Ps.268,196 thousand in 2019 to Ps.144,377 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 19.1% from Ps.305.3 in 2019 to Ps.363.7 in 2020, principally due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Mazatlán airport, aeronautical revenues decreased by 34.3% from Ps.321,313 thousand in 2019 to Ps.211,184 thousand in 2020, due primarily to a 36.6% decrease in passenger charges, as a result of a 36.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 29.2% from Ps.52,857 thousand in 2019 to Ps.37,431 thousand in 2020, due primarily to a 32.8% decrease in retail operations, a 39.5% decrease in revenues from time-share
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developers and a 46.3% decrease in revenues from car parking. The sum of aeronautical and non-aeronautical revenues decreased by 33.6% from Ps.374,170 thousand in 2019 to Ps.248,615 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 2.3% from Ps.316.4 in 2019 to Ps.323.7 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Zihuatanejo airport, aeronautical revenues decreased by 48.5% from Ps.191,512 thousand in 2019 to Ps.98,645 thousand in 2020, due primarily to a 52.2% decrease in passenger charges, as a result of a 49.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 28.3% from Ps.25,596 thousand in 2019 to Ps.18,360 thousand in 2020, due primarily to a 34.7% decrease in retail operations, a 20.6% decrease in revenues from car rentals and a 51.9% decrease in revenues from car parking. The sum of aeronautical and non-aeronautical revenues decreased by 46.1% from Ps.217,108 thousand in 2019 to Ps.117,005 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 6.2% from Ps.346.0 in 2019 to Ps.367.4 in 2020.
Regional Destinations
At the Chihuahua airport, aeronautical revenues decreased by 47.6% from Ps.411,392 thousand in 2019 to Ps.215,728 thousand in 2020, due primarily to a 52.0% decrease in passenger charges, as a result of a 51.9% decrease in passenger traffic. Non-aeronautical revenues decreased by 31.3% from Ps.67,022 thousand in 2019 to Ps.46,049 thousand in 2020, due primarily to a 55.8% decrease in revenues from car parking, a 38.3% decrease in revenues from car rentals, and a 44.4% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 45.3% from Ps.478,414 thousand in 2019 to Ps.261,777 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.8% from Ps.271.0 in 2019 to Ps.292.1 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Culiacán airport, aeronautical revenues decreased by 41.8% from Ps.617,978 thousand in 2019 to Ps.359,562 thousand in 2020, due primarily to a 43.9% decrease in passenger charges, as a result of a 44.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 22.0% from Ps.66,287 thousand in 2019 to Ps.51,732 thousand in 2020, due primarily to a 54.8% decrease in revenues from car parking, a 14.8% decrease in food and beverage, and a 44.3% decrease in revenues from VIP lounges. The sum of aeronautical and non-aeronautical revenues decreased by 39.9% from Ps.684,265 thousand in 2019 to Ps.411,294 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 5.8% from Ps.272.8 in 2019 to Ps.288.5 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Durango airport, aeronautical revenues decreased by 47.0% from Ps.150,130 thousand in 2019 to Ps.79,515 thousand in 2020, due primarily to a 51.6% decrease in passenger charges, as a result of a 48.5% decrease in passenger traffic. Non-aeronautical revenues decreased by 17.5% from Ps.13,433 thousand in 2019 to Ps.11,083 thousand in 2020, due primarily to a 47.6% decrease in revenues from car parking, a 58.4% decrease in retail operations and a 21.9% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 44.6% from Ps.163,563 thousand in 2019 to Ps.90,598 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.7% from Ps.308.4 in 2019 to Ps.332.1 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the San Luis Potosí airport, aeronautical revenues decreased by 38.0% from Ps.174,340 thousand in 2019 to Ps.108,045 thousand in 2020, due primarily to a 43.8% decrease in passenger charges, as a result of a 51.9% decrease in passenger traffic. Non-aeronautical revenues decreased by 20.0% from Ps.35,631 thousand in 2019 to Ps.28,508 thousand in 2020, due primarily to a 57.3% decrease in revenues from car parking, a 50.3% decrease in revenues from VIP lounges and a 9.5% decrease in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 35.0% from Ps Ps.209,971 thousand in 2019 to Ps.136,553 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 8.7% from Ps.237.3 in 2019 to Ps.258.0 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Tampico airport, aeronautical revenues decreased by 62.3% from Ps.197,161 thousand in 2019 to Ps.74,330 thousand in 2020, due primarily to a 69.5% decrease in passenger charges, as a result of a 63.4% decrease in passenger traffic. Non-aeronautical revenues decreased by 37.9% from Ps.28,056 thousand in 2019 to Ps.17,414
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thousand in 2020, due primarily to a 59.0% decrease in revenues from car parking, a 33.2% decrease in revenues from car rentals and a 70.8% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 59.3% from Ps.225,217 thousand in 2019 to Ps.91,744 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 10.8% from Ps.303.0 in 2019 to Ps.335.7 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Torreón airport, aeronautical revenues decreased by 52.9% from Ps.201,446 thousand in 2019 to Ps.94,892 thousand in 2020, due primarily to a 56.7% decrease in passenger charges, as a result of a 54.7% decrease in passenger traffic. Non-aeronautical revenues decreased by 26.4% from Ps.23,683 thousand in 2019 to Ps.17,425 thousand in 2020, due primarily to a 58.7% decrease in revenues from car parking , a 50.8% decrease in retail operations and a 14.9% decrease in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 50.1% from Ps.225,129 thousand in 2019 to Ps.112,317 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 9.3% from Ps.312.8 in 2019 to Ps.341.8 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Zacatecas airport, aeronautical revenues decreased by 49.6% from Ps.141,500 thousand in 2019 to Ps.71,292 thousand in 2020, due primarily to a 52.1% decrease in passenger charges, as a result of a 51.1% decrease in passenger traffic. Non-aeronautical revenues decreased by 24.6% from Ps.13,945 thousand in 2019 to Ps.10,512 thousand in 2020, due primarily to a 54.0% decrease in revenues from car parking, a 37.1% decrease in retail operations and a 24.4% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 47.4% from Ps.155,445 thousand in 2019 to Ps.81,804 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit at the Zacatecas airport increased by 7.7% from Ps.325.4 in 2019 to Ps.350.5 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
Border Destinations
At the Ciudad Juárez airport, aeronautical revenues decreased by 47.5% from Ps.380,271 thousand in 2019 to Ps.199,685 thousand in 2020, due primarily to a 49.6% decrease in passenger charges, as a result of a 50.5% decrease in passenger traffic. Non-aeronautical revenues decreased by 32.6% from Ps.55,999 thousand in 2019 to Ps.37.736 thousand in 2020, due primarily to a 44.3% decrease in revenues from car parking, a 46.5% decrease in food and beverage and a 33.4% decrease in car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 45.6% from Ps.436,270 thousand in 2019 to Ps.237,421 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.1% from Ps.265.5 in 2019 to Ps.284.3 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Reynosa airport, aeronautical revenues decreased by 48.9% from Ps.113,515 thousand in 2019 to Ps.58,010 thousand in 2020, due primarily to a 50.8% decrease in passenger charges, as a result of a 52.3% decrease in passenger traffic. Non-aeronautical revenues decreased by 37.0% from Ps.18,240 thousand in 2019 to Ps.11,500 thousand in 2020, due primarily to a 45.6% decrease in revenues from car parking, a 24.8% decrease in car rentals and a 67.6% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 47.2% from Ps.131,755 thousand in 2019 to Ps.69,510 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 10.0% from Ps.271.0 in 2019 to Ps.298.2 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
Hotels
At our Terminal 2 NH Collection Hotel, total revenues decreased by 56.8% from Ps.255,393 thousand in 2019 to Ps.110,299 thousand in 2020, due primarily to a decrease in the annual average occupancy rate from 84.1% in 2019 to 40.2% in 2020. The revenues of the Terminal 2 NH Collection Hotel are dependent on passenger traffic traveling to and from the Mexico City International Airport.
At our Hilton Garden Inn Hotel at the Monterrey airport, total revenues decreased by 68.5% from Ps.103,474 thousand in 2019 to Ps.32,614 thousand in 2020, due primarily to a decrease in the annual average occupancy rate from
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77.7% in 2019 to 36.1% in 2020. The revenues of the Hilton Garden Inn Hotel are dependent on passenger traffic traveling to and from the Monterrey international airport.
The full extent of the ongoing impact of COVID-19 on the Company’s longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty. Even where formal advisories and restrictions have been lifted or reduced, the increased spread or resurgence of COVID-19 could result in the reintroduction of or increase in such formal advisories and restrictions. We expect that the COVID-19 pandemic will continue to severely impact the countries and regions where we operate in 2021. On April 6, 2020, we temporarily suspended services of our Hilton Garden Inn Hotel through July 6, 2020 due to low occupancy. For more information, see “Risk Factors—Risks Related to Our Operations— We face risks associated with our diversification activities, which could lead to our inability to recover our investment as planned.”
Industrial Park
At our OMA-VYNMSA Aero Industrial Park, total revenues increased by 34.5% from Ps.41,981 thousand in 2019 to Ps.56,454 thousand in 2020, due primarily to an increase in the number of leased commercial warehouses. An additional warehouse was developed, which construction ended in January 2021. with an area of 4,849 square meters (52,192 square-feet).
Operating Results
Cost of Services
Our cost of services decreased by 19.7% from Ps.954,207 thousand in 2019 to Ps.765,958 thousand in 2020, mainly as a result of our cost cutting initiatives that resulted in a decrease of 30.6% in utilities, mainly as a result of a decrease in electricity consumption of 19,556 thousand KwH, equivalent to a reduction of 32.5%, as compared to 2019, and a 29.6% decrease in maintenance, fees, and others. Additionally, our cost of hotel services declined 64.2% as a result of lower occupancy levels in our hotels during 2020. As a percentage of the sum of aeronautical and non-aeronautical revenues, cost of services increased from 12.6% in 2019 to 18.6% in 2020. For more information on cost cutting initiatives implemented during 2020, see “Risk Factors—Risks Related to Our Operations— The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Major maintenance provision
Our major maintenance provision increased from Ps.292,324 thousand in 2019 to Ps.392,531 thousand in 2020, due primarily to the recognition of the major maintenance works included in the new Master Development Program for 2021-2025 approved in November 2020.
Administrative Expenses
Our administrative expenses decreased by 4.5% from Ps.542,664 thousand in 2019 to Ps.518,059 thousand in 2020, due primarily to a 12.5% decrease in expenses paid to consultants and other providers of professional services and a 70.8% decrease in travel expenses.
Technical Assistance Fee
Our technical assistance fee, which is paid in U.S. dollars, decreased by 45.9% from Ps.150,108 thousand in 2019 to Ps.81,164 thousand in 2020, as a result of a decrease in EBITDA, which is the base for its calculation.
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Concession Tax
Our concession tax decreased by 45.2% from Ps.363,561 thousand in 2019 to Ps.199,202 thousand in 2020, as a result of a decrease in aeronautical and non-aeronautical revenues.
Depreciation and Amortization
Our depreciation and amortization increased 4.8% from Ps.415,252 thousand in 2019 to Ps.435,344 thousand in 2020, due primarily to an increase in the investment to improve our concessions’ assets during 2020.
Income from Operations
On a consolidated basis, our operating income decreased by 64.5% from Ps.4,855,306 thousand in 2019 to Ps.1,721,468 thousand in 2020, due primarily to a 37.1% decrease in total revenue. Our operating margin decreased from 56.9% in 2019 to 32.1% in 2020, and considering only the sum of our aeronautical and non-aeronautical revenues, our operating margin decreased from 64.2% in 2019 to 41.8% in 2020.
Operating Income by Segment
The figures presented in this section take into account the intercompany transactions described above under “Item 5. Operating and Financial Review and Prospects—Operating Results—Solidarity Fees.” In addition, the operating cost amounts exclude construction costs, which have been eliminated together with construction revenues.
On an airport-by-airport basis, the principal contributors to our operating income in 2020 were the Monterrey airport (Ps.445,952 thousand), the Culiacán airport (Ps.92,341 thousand), the Mazatlán airport (Ps.63,103 thousand), the Ciudad Juárez airport (Ps.60,241 thousand), the Chihuahua airport (Ps.50,038 thousand), and the San Luis Potosí airport (Ps.36,648 thousand).
Metropolitan Destination
Operating income for the Monterrey airport decreased by 5.8% from Ps.473,615 thousand in 2019 to Ps.445,952 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.2,327,084 thousand in 2019 to Ps.855,891 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Tourist Destinations
Operating income for the Acapulco airport decreased by 59.9% from Ps.53,812 thousand in 2019 to Ps.21,588 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.100,121 thousand in 2019 to Ps.14,580 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Mazatlán airport increased by 19.9% from Ps.52,616 thousand in 2019 to Ps.63,105 thousand in 2020, due primarily to a decrease in operating costs. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.225,406 thousand in 2019 to Ps.105,593 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Zihuatanejo airport decreased by 70.3% from Ps.43,614 thousand in 2019 to Ps.12,960 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.83,124 thousand in 2019 to Ps.14,855 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
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Regional Destinations
Operating income for the Chihuahua airport decreased by 25.7% from Ps.67,379 thousand in 2019 to Ps.50,038 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.290,026 thousand in 2019 to Ps.82,815 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Culiacán airport decreased by 4.1% from Ps.96,278 thousand in 2019 to Ps.92,341 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.479,985 thousand in 2019 to Ps.175,756 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Durango airport decreased by 55.6% from Ps.23,014 thousand in 2019 to Ps.10,220 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.90,542 thousand in 2019 to Ps.24,135 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the San Luis Potosí airport increased by 24.0% from Ps.27,938 thousand in 2019 to Ps.34,648 thousand in 2020, due primarily to a decrease in operating costs. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.107,623 thousand in 2019 to Ps.41,086 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Tampico airport decreased by 68.1% from Ps.31,808 thousand in 2019 to Ps.10,158 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.128,629 thousand in 2019 to Ps.3,441 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Torreón airport decreased by 25.3% from Ps.31,658 thousand in 2019 to Ps.23,660 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.131,350 thousand in 2019 to Ps.33,913 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Zacatecas airport decreased by 33.3% from Ps.31,135 thousand in 2019 to Ps.20,756 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.76,622 thousand in 2019 to Ps.29,349 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Border Destinations
Operating income for the Ciudad Juárez airport decreased by 1.8% from Ps.61,374 thousand in 2019 to Ps.60,242 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.271,070 thousand in 2019 to Ps.102,706 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Reynosa airport decreased by 65.2% from Ps.26,375 thousand in 2019 to Ps.9,171 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.55,895 thousand in 2019 to Ps.8,135 thousand in 2020, which
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declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.
Hotels
Operating income for our Terminal 2 NH Collection Hotel decreased from Ps.77,325 thousand in 2019 to an operating loss of Ps.8,609 thousand in 2020 due primarily to a decrease in revenues.
Operating income for our Hilton Garden Inn Hotel decreased from Ps.32,345 thousand in 2019 to an operating loss of Ps.6,918 thousand in 2020 due primarily to a decrease in revenues.
Industrial Park
Operating income for our OMA-VYNMSA Industrial Park increased from Ps.15,622 thousand in 2019 to Ps.24,082 thousand in 2020 which reflected an increase in revenues.
Exchange Gain (Loss)
We had a net exchange gain in 2020 of Ps.79,522 thousand, as compared to a loss of Ps. 50,878 thousand in 2019 due primarily to the depreciation of the Mexican peso in relation to the U.S. dollar on our U.S. dollar cash balances in 2020. The exchange rate used to convert our dollar-denominated liabilities from pesos to U.S. dollars was Ps.19.9087 to U.S.$1.00 as of December 31, 2020 and Ps.18.8727 to U.S.$1.00 as of December 31, 2019. Our cash balance denominated in U.S. dollar was Ps.78,940 thousand on December 31, 2019 and Ps.79,552 thousand on December 31, 2020.
Net Interest Expense
Our net interest expense increased by 50.7% from Ps.204,772 thousand in 2019 to Ps.308,610 thousand in 2020, as a result of higher interest expense due to the unwinding of our major maintenance provision as well as a reduction in interest income due to lower interest rates. During 2020, the annualized interest rates on 28-day short-term Mexican treasury bills, or Certificados de la Tesorería de la Federación, consistently decreased from 7.3% on January 1, 2020 to 4.2% on December 31, 2020, with a yearly average of 5.3%.
Income Taxes
We recorded an income tax expense of Ps. 394,501 thousand in 2020, as compared to Ps.1,372,222 thousand in 2019, due primarily to a decrease in revenues and the lower taxable income.
Our current income tax decreased from Ps.1,329,867 thousand in 2019 to Ps.480,232 thousand in 2020 as a result of decreased revenues.
Our effective tax rate was 29.8% in 2019 and 26.4% in 2020. The effective tax rates in 2019 and 2020 differed from the statutory rate of 30%, as a result of the permanent differences related primarily to inflationary effects for tax purposes.
Net Income and Comprehensive Income
Our net income decreased by 66.0% from Ps.3,227,434 thousand in 2019 to Ps.1,097,879 thousand in 2020. Comprehensive income attributable to the controlling interest decreased by 66.2% from Ps.3,210,814 thousand in 2019 to Ps.1,085,231 thousand in 2020. Earnings per share were Ps.2.8038 and earnings per ADS were Ps.22.4304 in 2020.
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Results of Operations for the Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018.
For a comparison of the results of operations for the year ended December 31, 2019 as compared to the year ended December 31, 2018, see “Item 5—Operating and Financial Review and Prospects—Results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018” in our Fiscal Year 2019 Form 20-F.
Liquidity and Capital Resources
Sources of Liquidity
Historically, we covered all of our liquidity needs, including our obligations under the Master Development Programs, with cash flows generated by the operations of our subsidiaries and incurred no significant debt. We modified our strategy to finance our operations and incorporated debt as a means to fund capital investments. In the future, we hope to continue covering our liquidity needs with cash flows generated by the operations of our subsidiaries, with a reduction and control of costs and operational improvements to maximize profitability, and with the incurrence of additional debt to finance expenditures pursuant to our Master Development Program obligations, other capital expenditures and working capital, and make our capital structure more efficient.
In November 2020, we received approval from the Ministry of Communications and Transportation, through the AFAC, of the Master Development Program for each of our thirteen airports, corresponding to the 2021-2025 period. Total investments approved amount to Ps.12,586,901 thousand in pesos as of December 31, 2020. As a result, in our opinion, our cash flows from operations are sufficient for our present operating obligations; however, we may, from time to time, have to incur in additional debt to finance our investment expenditures pursuant to our Master Development Program obligations, as well as other strategic investment expenditures. As of the date of this report, we have been able to timely service our debt and other obligations, without having to take advantage of any available payment deferrals, forbearance periods, or other concessions. For a discussion on our Master Development Program obligations, see “Item 4. Information on the Company—Master Development Programs and Capital Expenditures—Revenue Regulation.”
Pursuant to our Master Development Programs, in 2021 through 2025, we anticipate investing Ps. 12,586,901 thousand as follows:
Expected Investments Under Master Development Programs by Category for 2021 to 2025
| | | | | | | | | | | | | |||
| | For the Year Ended December 31, | |||||||||||||
|
| | | | | | | | | | | Total | |||
| | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2021 - 2025 | |||
| | ||||||||||||||
Terminal capacity expansions and quality projects |
| 610,054 | | 1,051,955 | | 1,295,208 | | 1,444,221 | | 1,438,497 |
| 5,839,936 | |||
Runways and aprons |
| 371,483 | | 441,930 | | 348,335 | | 284,352 | | 135,296 |
| 1,581,395 | |||
Machinery and equipment |
| 437,868 | | 527,027 | | 198,793 | | 159,582 | | 217,715 |
| 1,540,984 | |||
Security, Safety and Information Technology Equipment |
| 388,412 | | 156,264 | | 544,285 | | 361,149 | | 81,534 |
| 1,531,644 | |||
Operational Infrastructure Expansion |
| 190,178 | | 176,799 | | 158,040 | | 209,535 | | 313,502 |
| 1,048,054 | |||
Projects to meet ICAO directives |
| 236,096 | | 139,842 | | 14,053 | | 10,260 | | 9,502 |
| 409,753 | |||
Other |
| 331,412 | | 161,252 | | 62,027 | | 41,027 | | 39,418 |
| 635,135 | |||
Total |
| 2,565,502 |
| 2,655,068 |
| 2,620,741 |
| 2,510,125 |
| 2,235,465 |
| 12,586,901 |
Our committed investments pursuant to our Master Development Programs for 2021 amount to Ps.2,565,502 thousand. Our committed investment for 2021 includes investments for additional capacity and equipment, among others. See “Item 4. Information on the Company—Master Development Programs and Capital Expenditures.”
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Cash Flows
Our treasury monitors cash flows on a daily, monthly and annual basis to plan and determine the management, sources and uses of resources, as well as to meet our capital and debt service obligations at all times, and to improve our working capital and capital structure.
As of December 31, 2018, 2019 and 2020, we had Ps.2,958,902 thousand, Ps.3,429,873 thousand and Ps.2,958,804 , respectively, of cash and cash equivalents, of which 44.3%, 43.4% and 53.0% respectively, was denominated in U.S. dollars. We invested these resources in financial instruments in accordance with our investment policy.
In 2020, we generated Ps. 1,303,478 thousand in cash flows from operating activities of which Ps. 2,569,574 thousand was directly from operating activities and was offset mainly by Ps.747,867 thousand of income tax paid, Ps. 103,704 thousand of major maintenance expenses and Ps. 94,229 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.1,324,430 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.528,888 thousand, mainly for payment of Ps.320,866 thousand in interest and Ps.150,000 thousand in the repurchase of shares.
In 2019, we generated Ps.3,716,524 thousand in cash flows from operating activities of which Ps.5,554,608 thousand was directly from operating activities and was offset mainly by Ps.1,324,834 thousand of income tax paid, Ps.305,133 thousand of major maintenance expenses and Ps.60,949 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.952,227 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.2,246,461 thousand, mainly for payment of Ps.1,598,681 thousand in dividends and Ps.327,309 thousand in interest.
In 2018, we generated Ps.3,709,346 thousand in cash flows from operating activities of which Ps.4,764,277 thousand was directly from operating activities and was offset mainly by Ps.995,258 thousand of income tax paid, Ps.139,320 thousand of major maintenance expenses and Ps.59,849 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.1,088,373 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.1,940,463 thousand, mainly for payment of Ps.1,605,736 thousand in dividends and Ps.323,070 thousand in interest.
Indebtedness
Short-Term Indebtedness
As of April 22, 2021, we had unused lines of credit available for short-term issuances totaling Ps.650,000 thousand.
Long-Term Indebtedness
On March 26, 2013, we issued Ps.1,500,000 thousand in 10-year peso-denominated notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered in 2011 (the “2011 Indenture”). Interest payments are made on a semiannual basis at a fixed annual interest rate of 6.47%. The principal amount will be repaid at maturity on March 14, 2023. The Acapulco, Ciudad Juárez, Culiacan, Chihuahua, Mazatlán, Monterrey, Tampico, Torreón and Zihuatanejo airports act as guarantors under these notes. The net proceeds from the placement were used to prepay existing debt and were used to fund committed investments under the Master Development Programs for our 13 airports, as well as for strategic investments. The notes received ratings of mxAA+ by Standard and Poor’s and AA+ (mex) by Fitch Ratings at the moment of the issuance. Currently our long-term debt has a mxAAA by Standard and Poor’s and AA+ (mex) by Fitch Ratings and Baa1/Aaa.mx by Moody’s. The principal covenants and the events of default under the indenture pursuant to which these notes were issued (the “2013 Indenture”) are described below.
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Covenants
Events of Default
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As of the date of this annual report, we were in compliance with these covenants, and no event of default had been triggered. None of our credit or other debt agreements contain financial covenants.
We, through seven of our airports, have maintained lines of credit with Private Export Funding Corporation (backed by Ex-Im Bank) for U.S.$20.4 million, pursuant to agreements dated October 15, 2010 and December 14, 2010, valid through December 21, 2021. As of December 31, 2020, the balance of credit was U.S.$678,000. These lines of credit are guaranteed by checked-baggage inspection equipment acquired by the airports. The interest rate is three-month LIBOR plus 125 basis points.
On June 16, 2014, OMA issued Ps.3,000,000 thousand in seven-year notes (certificados bursátiles) at a fixed rate of 6.85% that were registered with the Mexican National Registry of Securities. The purpose of the issuance was to fix interest payments and to extend the maturity profile of debt by prepaying the Ps.1,300,000 thousand in floating-rate notes issued under the 2011 Indenture, and to finance the Master Development Programs and strategic investments. The floating-rate Ps. notes issued under the 2011 Indenture were paid on July 11, 2014. The principal covenants and the events of default under the indenture pursuant to which these notes were issued (the “2014 Indenture”) are substantially similar to those under the 2013 Indenture. On April 19, 2021, the notes issued under the 2014 indenture were paid in full.
On April 16, 2021, OMA issued Ps.1,000,000 thousand in five-year green notes (certificados bursátiles verdes) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the “2021 Green Variable Rate Notes Indenture”). Interest payments are made every 28 days at a variable annual interest rate of TIIE 28 + 0.75%. The principal amount will be repaid at maturity on April 10, 2026. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance is to finance green investments pursuant to our Master Development Programs for 2021-2025. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.
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On April 16, 2021, OMA issued Ps.2,500,000 thousand in seven-year notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an Indenture into which we entered on that date (the 2021 Fixed Rate Notes Indenture). Interest payments are made on a semiannual basis at a fixed annual interest rate of 7.83%. The principal amount will be repaid at maturity on April 7, 2028. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to extend the maturity profile of debt by prepaying the Ps.3,000,000 thousand in fixed-rate notes issued under the 2014 Indenture. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.
The principal covenants and the events of default under the 2021 Green Variable Rate Notes Indenture and the 2021 Fixed Rate Notes Indenture are described below:
Events of Default
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As of the date of this annual report, we are in compliance with these covenants, and no event of default has been triggered.
We did not access revolving lines of credit or raise capital in the public or private markets to address any liquidity needs as a result of the COVID-19 pandemic.
Total Indebtedness
The following table sets forth our total indebtedness at the closing of each of the periods indicated:
| | | | |
As of December 31, |
| Indebtedness | ||
|
| | (in thousands of pesos) | |
2018 | | Ps. | 4,584,594 | |
2019 | | Ps. | 4,543,609 | |
2020 | | Ps. | 4,510,388 |
Derivative Financial Instruments
As of December 31, 2020, we were not party to and did not hold any financial derivative instrument.
Other Restrictions
As of December 31, 2020, restrictions imposed by debt instruments did not have any impact on our ability to fulfill our capital and cash obligations.
Principal Treasury Policies and Procedures
The operation of the treasury department is based on various policies, with which we were in compliance as of December 31, 2020. The most significant policies currently in effect are as follows:
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Principal Uses of Capital
Resources
Our capital resources are mainly used to comply with the Master Development Programs (which include capital expenditures, major maintenance and other expenditures) and to invest in other capital expenditures necessary to accommodate the growth of our business.
The following table details our actual expenditures made during 2018, 2019 and 2020 and their classification in our consolidated financial statements for such periods:
| | | | | | |
| | For the Year Ended December 31, | ||||
|
| 2018 |
| 2019 |
| 2020 |
| | (in thousands of pesos) | ||||
Capital expenditures pursuant to master development programs |
| 1,141,504 |
| 954,834 |
| 1,253,869 |
Other capital expenditures |
| 172,859 |
| 94,090 |
| 147,614 |
Total capital expenditures |
| 1,314,363 |
| 1,048,924 |
| 1,401,483 |
Expenditures made for major maintenance(1) |
| 139,320 |
| 305,133 |
| 103,704 |
Other expenditures pursuant to master development programs |
| 3,727 |
| 4,526 |
| 1,050 |
Expenditures pursuant to master development programs and other capital expenditures(2) |
| 1,457,410 |
| 1,358,584 |
| 1,506,237 |
(1) | The amounts disclosed in this table refer to increases in our investments in capital assets and represent both actual cash expenditures and capital additions, which are included in our accounts payable as of the end of each period, as the cash required for the capital additions has not yet been expended. |
(2) | Amounts represent cash outlays for major maintenance, which are provisioned in our major maintenance provision. |
In 2020, we spent Ps.1,401,483 thousand on capital expenditures, principally in connection with works to improve our terminal and operating infrastructure. In 2019, we spent Ps.1,048,924 thousand on capital expenditures, principally in connection with works to improve our terminals. In 2018, we spent Ps.1,314,363 thousand on capital expenditures, principally in connection with works to improve our terminals.
We currently intend to fund our commitments pursuant to the Master development programs, other capital expenditures and working capital required by our business operations through cash flows generated from our operations and through the issuance of additional debt as deemed necessary by our management to comply with our obligations under the Master Development Programs. For a discussion on our Master Development Program obligations, see “Item 4. Information on the Company—Master Development Programs and Capital Expenditures—Revenue Regulation.”
Share Repurchase Program
On April 21, 2019, our shareholders authorized the use of an amount of up to Ps.1,500 million for repurchases of Series B shares until the next annual shareholders’ meeting approved the 2019 results. On July 7, 2020, our shareholders authorized an increase of the share purchase reserve to Ps. 1,500 million and the use up to such amount to repurchase Series B shares until the next annual shareholders’ meeting approved the 2020 results. On April 21, 2021, our shareholders authorized the use of an amount of up to Ps. 1,500 million for the repurchase of Series B shares until the next annual shareholders’ meeting approves the 2021 results.
Our share repurchase program started in October 2007. The operation of our share repurchase program generates cash inflow and cash outflow depending on the nature of the transaction (buying or selling). For the year ended December 31, 2018 the share repurchase program generated a cash flow of Ps.0, for the year ended December 31,
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2019 the share repurchase program generated a cash outflow of Ps.244,201 thousand, and for the year ended December 31, 2020, the share repurchase program generated a cash outflow of Ps.150,000 thousand. On December 31, 2018, 2019, and 2020 the number of repurchased shares in treasury amounted to 324,507 and 2,145,651 and 0 respectively. At the Extraordinary Shareholders’ Meeting held on July 7, 2020, the shareholders approved the cancellation of 3,659,417 repurchased shares held in treasury.
Critical Accounting Policies
We prepare consolidated financial statements in conformity with IFRS. As such, we are required to make estimates, judgments and assumptions that affect (i) certain reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the date of the financial statements, and (iii) certain reported amounts of revenues and expenses during the reporting period. We base estimates and judgments on our historical experience and on various other reasonable factors that together form the basis for making judgments about the carrying values of our assets and liabilities. Our actual results may differ from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Our significant accounting policies are described in Note 4 to our consolidated financial statements. The Board of Directors approves our accounting policies, taking into consideration the advice of the Audit Committee. For additional information, see Note 4 to our consolidated financial statements. We believe our most critical accounting policies that result in the application of estimates and/or judgments are the following:
IFRS 16, Leases
IFRS 16 (issued by the IASB in January 2016), which establishes new or modified requirements regarding lease accounting. It introduced significant changes to the lessee’s accounting, eliminating the distinction between an operating and financial lease, requiring the recognition of an asset for use rights and a lease liability on the start date of all leases, except those considered to be short term or low value assets. In contrast to lessee accounting, the requirements for the lessor remain significantly unchanged. Details of the effects of the adoption of IFRS 16 are described in Note 18 of the financial statements.
Deferred Income Taxes
The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement and tax values of assets and liabilities. Our deferred income taxes as of December 31, 2018, 2019 and 2020 were prepared taking into account that we will only be obligated to pay the Mexican corporate income tax.
Additionally, the Company’s subsidiaries have tax loss carryforwards available to be amortized in addition to other deferred income tax assets for which we assess their recoverability. We determine the recoverability of those assets based on our projections of future taxable income, which includes investments made under the Master Development Programs to which we are subject, as well as the maximum rates that we are able to charge, as established by the Mexican government.
Employee benefits
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the consolidated statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur.
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Contingencies
We are a party to a number of legal proceedings. Under IFRS, liabilities are recognized in the financial statements when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the loss is neither probable nor estimable or if the likelihood of a loss is remote, no amounts are recognized in the financial statements. The factors considered in this analysis are the legal merits of the case, as substantiated by the opinion of our legal advisors.
Allowance for Doubtful Accounts
The Company recognizes lifetime expected credit losses (ECL) for trade receivables and contract assets. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, including general economic conditions.
Useful Lives of Long-Lived Assets
Our long-lived assets correspond to concessions granted by the Mexican government, represented as an intangible asset, and property and equipment, represented as tangible assets. We review the estimated useful lives, residual values and depreciation and amortization methods of tangible and intangible long-lived assets at the end of each reporting period. The level of uncertainty associated with estimates of useful lives is mainly related to changes in the market conditions in which the tangible and intangible assets are used, as well as utilization volumes and technological development.
Impairment of Tangible and Intangible Assets Excluding Goodwill
Our management periodically evaluates the impairment of long-lived assets in order to determine whether there is evidence that those assets have suffered an impairment loss. If impairment indicators exist, the recoverable amount of assets is determined, with the help of independent experts, to determine the extent of the impairment loss, if any. Our management considers that the aggregate of all airport concessions is an “independent cash generating unit,” as each of our 13 airports formed part of the Central-North package included in the Mexican government’s original bidding process. In accordance with the terms established by the Mexican government, each of our 13 airports must be in operation, regardless of their individual results and are therefore evaluated for impairment on a consolidated basis. Our hotel segment is evaluated separately. Pursuant to IAS 36, during 2020 the effect of COVID-19 pandemic was deemed to be an indication of impairment. Accordingly management tested for impairment its concessions and hotels cash generating units, and concluded that no impairment charges were needed. We do not currently expect the COVID-19 pandemic to have a significant impact in the evaluation of impairment of our tangible and intangible assets, however, the severity and extent of the current COVID-19 pandemic may impact that determination.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a weighted average cost of capital that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
Major Maintenance Provision
We have an obligation to perform major maintenance activities in our airports, per the terms of our concession agreements. The provision is recognized as accrued at an amount that represents the best estimate of the present value of
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future disbursements required to settle the obligation. Future disbursements are determined by considering the requirements of our Master Development Programs. The recognition of the major maintenance provision affects the results of the periods in which the infrastructure under concession becomes available for use through the date on which the maintenance and/or repair work is performed.
For more information regarding recently-issued accounting standards and how they may affect us, see Note 4 to our consolidated financial statements.
Off-Balance Sheet Arrangements
Except for operating lease agreements and purchase obligations as disclosed in the contractual obligations table below, we are not party to any off-balance sheet arrangements.
Tabular Disclosure of Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2020:
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Maximum Rates for 2016 through 2020 The
Historical Maximum Rates(1)
Maximum Rates for 2021 through 2025 On December 28, 2020, the Ministry of Communications and Transportation
73
Current Maximum Rates(1)
Methodology for Determining Future Maximum Rates The Rate Regulation provides that each airport’s annual maximum rates are to be determined in five-year intervals based on the following variables:
●Projections for the following 15 years of capital expenditures related to regulated services, based on air traffic forecasts and quality of standards for services to be derived from the Master Development Programs. ●Reference values, which initially were established in the concessions and are designed to reflect the net present value of the regulated revenues minus the corresponding regulated operating costs and expenses (excluding amortization and depreciation), and capital expenditures related to the provision of regulated services plus a terminal value. ●A discount rate to be determined by the Ministry of Communications and Transportation. The concessions provide that the discount rate shall reflect the cost of capital to Mexican and international companies in the airport industry (on a pre-tax basis), as well as Mexican economic conditions. The concessions provide that the discount rate shall be at least equal to the average yield of long term Mexican government debt securities quoted in the international markets during the prior 24 months plus a risk premium to be determined by the Ministry of Communications and Transportation based on the inherent risk of the airport business in Mexico. ●An efficiency factor to be determined by the Ministry of Communications and Transportation. For the five-year period ending December 31, 2020, the maximum rates applicable to our airports reflect a projected annual efficiency improvement of 0.70%. 74 Our concessions specify a discounted cash flow formula to be used by the Ministry of Communications and Transportation to determine the maximum rates that, given the projected pre-tax earnings, the efficiency adjustment, capital expenditures and discount rate, would result in a net present value equal to the reference values established in connection with the last determination of maximum rates. In connection with the preparation of the current Master Development Programs, we prepared a proposal to submit to the Ministry of Communications and Transportation establishing the values we believe should be used with respect to each variable included in the determination of maximum rates, including the efficiency factor, projected capital expenditures and the discount rate. Historically, the maximum rates ultimately established by the Ministry of Communications and Transportation reflect a negotiation between the Ministry and us regarding these variables. Once the maximum rates are established, they may be adjusted annually to take account of projected improvements in efficiency and the Mexican Producer Price Index (excluding fuel). The concessions provide that each airport’s reference values, discount rate and the other variables used in calculating the maximum rates do not represent an undertaking by the Ministry of Communications and Transportation or the Mexican government as to the profitability of any concession holder. Therefore, whether or not the maximum rates (or the amounts up to the maximum rates that we have been able to collect) multiplied by workload units at any airport generate a profit or exceed our profit estimates, or reflect the actual profitability, discount rates, capital expenditures or productivity gains at that airport over the five-year period, we are not entitled to any adjustment to compensate for this shortfall. To the extent that such aggregate revenues per workload unit exceed the relevant maximum rate, the Ministry of Communications and Transportation may proportionately reduce the maximum rate in the immediately subsequent year and assess penalties equivalent to 1,000 to 50,000 times the Unit of Measurement and Update (“UMA”). The UMA as of January 1, 2021 was Ps.89.62. As a result, the maximum penalty at such date could have been Ps.4,481 thousand (U.S.$225,077) per airport. As established by the Ministry of Communications and Transportation, the calculation of workload units does not include transit passengers for subsequent years. The current workload unit calculation is therefore equal to one terminal passenger or 100 kilograms (220 pounds) of commercial cargo. Special Adjustments to Maximum Rates Once determined, each airport’s maximum rates are subject to special adjustment only under the following circumstances: ●Change in law or natural disasters. A concession holder may request an adjustment in its maximum rates if a change in law with respect to quality standards or safety and environmental protection results in operating costs or capital expenditures that were not contemplated when its maximum rates were determined. In addition, a concession holder may also request an adjustment in its maximum rates if a natural disaster affects demand or requires unanticipated capital expenditures. Requests on these grounds may not be approved in the future. ●Macroeconomic conditions. A concession holder may also request an adjustment in its maximum rates if, as a result of a decrease of at least 5% in Mexican GDP in a 12-month period, the workload units processed in the concession holder’s airport are less than that projected when its Master Development Program was approved. To grant an adjustment under these circumstances, the Ministry of Communications and Transportation under the Master Development Program must have already allowed the concession holder to decrease its projected capital improvements as a result of the decline in passenger traffic volume. Requests on these grounds may not be approved in the future. ●Increase in concession tax under Mexican Federal Duties Law. An increase in duty payable by a concession holder under the Mexican Federal Duties Law entitles the concession holder to request an adjustment in its maximum rates. Requests on these grounds may not be approved in the future. 75 ●Failure to make required investments or improvements. The Ministry of Communications and Transportation is required to review annually each concession holder’s compliance with its Master Development Program (including the provision of services and the making of capital investments). If a concession holder fails to satisfy any of the investment commitments contained in its Master Development Program, the Ministry of Communications and Transportation is entitled to decrease the concession holder’s maximum rates and assess penalties. ●Excess revenues. In the event that revenues subject to price regulation per workload unit in any year exceed the applicable maximum rate, the maximum rate for the following year will be decreased to compensate airport users for overpayment in the previous year. Under these circumstances, the Ministry of Communications and Transportation is also entitled to assess penalties against the concession holder. Increases in Maximum Rates Associated with Baggage-Screening Services On November 23, 2012, the Mexican Bureau of Civil Aviation (currently AFAC) published mandatory circulars CO SA-17.2/10 R1, superseded by circulars CO SA-17.2/10 R3 and CO SA-17.9/16, which required that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines to provide the service to the airlines. On November 30, 2012, after negotiation with the Mexican Bureau of Civil Aviation (currently AFAC), the maximum rates of our thirteen airports were increased to take into account the maintenance cost incurred due to the operation of baggage-screening equipment. The maximum rate increase became effective on January 1, 2013. Ownership Commitments and Restrictions The concessions require us to retain a 51% direct ownership interest in each of our 13 concession holders throughout the term of these concessions. Any acquisition by us or one of our concession holders of any additional airport concessions or of a beneficial interest of 30% or more of another concession holder requires the consent of the Antitrust Commission. In addition, the concessions prohibit us and our concession holders, collectively or individually, from acquiring more than one concession for the operation of an airport along each of Mexico’s southern and northern borders. Air carriers are prohibited under the Mexican Airport Law from controlling or beneficially owning 5% or more of the shares of a holder of an airport concession. We, and each of our subsidiaries, are similarly restricted from owning 5% or more of the shares of any air carrier. Foreign governments acting in a sovereign capacity are prohibited from owning any direct or indirect equity interest in a holder of an airport concession. Reporting, Information and Consent Requirements Concession holders and third parties providing services at airports are required to provide the Ministry of Communications and Transportation access to all airport facilities and information relating to an airport’s construction, operation, maintenance and development. Each concession holder is obligated to maintain statistical records of operations and air traffic movements in its airport and to provide the Ministry of Communications and Transportation with any information that it may request. Each concession holder is also required to publish its annual audited consolidated financial statements in a principal Mexican newspaper within the first four months of each year. The Mexican Airport Law provides that any person or group directly or indirectly acquiring control of a concession holder is required to obtain the consent of the Ministry of Communications and Transportation to such control acquisition. For purposes of this requirement, control is deemed to be acquired in the following circumstances: ●if a person acquires 35% or more of the shares of a concession holder; 76 ●if a person has the ability to control the outcome of meetings of the shareholders of a concession holder; ●if a person has the ability to appoint a majority of the members of the board of directors of a concession holder; or ●if a person by any other means acquires control of an airport. Under the regulations to the Mexican Airport Law, any company acquiring control of a concession holder is deemed to be jointly and severally liable with the concession holder for the performance of the terms and conditions of the concession. The Ministry of Communications and Transportation is required to be notified upon any change in a concession holder’s chief executive officer, board of directors or management. A concession holder is also required to notify the Ministry of Communications and Transportation at least 90 days prior to the adoption of any amendment to its bylaws concerning the dissolution, corporate purpose, merger, transformation or spinoff of the concession holder. Penalties and Termination and Revocation of Concessions and Concession Assets Termination of Concessions Under the Mexican Airport Law and the terms of the concessions, a concession may be terminated upon any of the following events: ●the expiration of its term; ●the surrender by the concession holder; ●the revocation of the concession by the Ministry of Communications and Transportation; ●the reversion (“rescate”) of the Mexican government-owned assets that are the subject of the concession (principally real estate, improvements and other infrastructure); ●the inability to achieve the purpose of the concession, except in the event of force majeure; ●the dissolution, liquidation or bankruptcy of the concession holder; or ●the failure by the concession holder to satisfy the shareholding obligations set forth in the concession. Following a concession’s termination, the concession holder remains liable for the performance of its obligations during the term of the concession. On May 20, 2004, a new Mexican National Assets Law was adopted and published in the Federal Official Gazette that, among other things, establishes regulations relating to concessions on real property held in the public domain, including the airports that we operate. The Mexican National Assets Law establishes additional grounds for revocation of concessions for failure to pay certain applicable taxes. Revocation of Concessions A concession may be revoked by the Ministry of Communications and Transportation under certain conditions, including: ●the failure by a concession holder to begin operating, maintaining and developing an airport pursuant to the terms established in the concession; 77 ●the failure by a concession holder to maintain insurance as required under the Mexican Airport Law; ●the assignment, encumbrance, transfer or sale of a concession, any of the rights thereunder or the assets underlying the concession in violation of the Mexican Airport Law; ●any alteration of the nature or condition of an airport’s facilities without the authorization of the Ministry of Communications and Transportation; ●use, with a concession holder’s consent and without the approval of air traffic control authorities, of an airport by any aircraft that does not comply with the requirements of the Mexican Civil Aviation Law, that has not been authorized by the Mexican air traffic control authority or that is involved in the commission of a felony; ●knowingly appointing a chief executive officer or board member of a concession holder that is not qualified to perform his functions under the law as a result of having violated criminal laws; ●the failure by the concession holder to pay the Mexican government the concession tax; ●the failure by the concession holder to beneficially own at least 51% of the capital stock of its subsidiary concession holders; ●a violation of the safety regulations established in the Mexican Airport Law and other applicable laws; ●a total or partial interruption of the operation of an airport or its airport or complementary services without justified cause; ●the failure to maintain the airport’s facilities; ●the provision of unauthorized services; ●the failure to indemnify a third party for damages caused by the provision of services by the concession holder or a third-party service provider; ●charging prices higher than those registered with the Ministry of Communications and Transportation for regulated services or exceeding the applicable maximum rate; ●any act or omission that impedes the ability of other service providers or authorities to carry out their functions within the airport; or ●any other failure to comply with the Mexican Airport Law, its regulations and the terms of a concession. The Ministry of Communications and Transportation is entitled to revoke a concession without prior notice as a result of the first six events described above. In the case of other violations, a concession may be revoked as a result of a violation only if sanctions have been imposed at least three times with respect to the same violation. Pursuant to the terms of our concessions, in the event the Ministry of Communications and Transportation revokes one of our concessions, it is entitled to revoke all of our other concessions. According to the Mexican National Assets Law, Mexico’s national patrimony consists of private and government-owned assets of Mexico. The surface area of our airports and improvements on such space are considered government-owned assets. A concession concerning government-owned assets may be “rescued,” or reverted to the Mexican government prior to the concession’s expiration, when considered necessary for the public interest. In exchange, the Mexican government is required to pay compensation as determined by expert appraisers. Following a 78 declaration of “rescue,” or reversion, the assets that were subject to the concession are automatically returned to the Mexican government. In the event of war, public disturbances or threats to national security, the Mexican government may assume the operations (through a process known as requisa) of any airport, airport and complementary services as well as any other airport assets. Such government action may exist only during the duration of the emergency. Except in the case of war, the Mexican government is required to compensate all affected parties for any damages or losses suffered as a result of such government action. If the Mexican government and a concession holder cannot agree as to the appropriate amount of damages or losses, the amount of damages shall be determined by experts jointly appointed by both parties, and the amount of losses shall be determined based on the average net income of the concession holder during the previous year. In the event of a requisa due to international war, the Mexican government would not be obligated to indemnify us. The Mexican Airport Law provides that sanctions of up to 400,000 times the UMA may be assessed for failures to comply with the terms of a concession. The UMA as of January 1, 2021 was Ps.89.62. As a result, the maximum penalty at such date could have been Ps.35,848 thousand (U.S.$1.8 million) per airport. Consequences of Termination or Revocation of a Concession Upon termination, whether as a result of expiration or revocation, the real estate and fixtures that were the subject of the concession automatically revert to the Mexican government. In addition, upon termination, the Mexican government has a preemptive right to acquire all other assets used by the concession holder to provide services under the concession at prices determined by expert appraisers appointed by the Ministry of Communications and Transportation. Alternatively, the Mexican government may elect to lease these assets for up to five years at fair market rates as determined by expert appraisers appointed by the Mexican government and the concession holder. In the event of a discrepancy between appraisals, a third expert appraiser must be jointly appointed by the Mexican government and the concession holder. If the concession holder does not appoint an expert appraiser, or if such appraiser fails to determine a price, the determination of the appraiser appointed by the Mexican government will be conclusive. If the Mexican government chooses to lease the assets, it may thereafter purchase the assets at their fair market value, as determined by an expert appraiser appointed by the Mexican government. The Mexican Communications Law, however, provides that upon expiration, termination or revocation of a concession, all assets necessary to operate the airports will revert to the Mexican government at no cost and free of any liens or other encumbrances. There is substantial doubt as to whether the provisions of our concessions would prevail over those of the Mexican Communications Law. Accordingly, upon expiration or termination of our concessions, the assets used by our subsidiary concession holders to provide services at our airports may revert to the Mexican government, free of charge, together with government-owned assets and improvements permanently attached thereto. Grants of New Concessions The Mexican government may grant new concessions to manage, operate, develop and construct airports. Such concessions may be granted through a public bidding process in which bidders must demonstrate their technical, legal, managerial and financial capabilities. The Mexican Antitrust Commission has the power, under certain circumstances, to prohibit a party from bidding, and to cancel an award after the process has concluded. In addition, the government may grant concessions without a public bidding process to the following entities: ●parties who hold permits to operate civil aerodromes and intend to transform the aerodrome into an airport so long as (i) the proposed change is consistent with the national airport development programs and policies, (ii) the civil aerodrome has been in continuous operation for the previous five years and (iii) the permit holder complies with all requirements of the concession; ●current concession holders when necessary to meet increased demand so long as (i) a new airport is necessary to increase existing capacity, (ii) the operation of both airports by a single concession holder is more efficient than other options, and (iii) the concession holder complies with all requirements of the concession; 79 ●current concession holders when it is in the public interest for their airport to be relocated; ●entities in the federal public administration; and ●commercial entities in which local or municipal governments have a majority equity interest if the entities’ corporate purpose is to manage, operate, develop and/or construct airports. Additionally, under the Mexican Airport Law for the granting of a concession title or the resolution to extend the term thereof, the Ministry of Communications and Transportation shall file before the Ministry of Finance and Public Credit the following: ●a favorable opinion regarding the economic profitability of the corresponding project, ●the registry of the programs portfolio and investment projects, in terms of the Federal Budget and Fiscal Responsibility Law (Ley Federal de Presupuesto y Responsabilidad Hacendaria), in case public funds are used to finance an airport project, and ●the assessment of the considerations that the concession holder shall pay to the federal government in terms of applicable law. For purposes of this section, the Ministry of Communications and Transportation shall submit a proposal of said considerations to the Ministry of Finance and Public Credit. Environmental Matters Regulation Our operations are subject to Mexican federal and state laws and regulations relating to the protection of the environment. The major federal environmental laws applicable to our operations are: (i) the General Law of Ecological Equilibrium and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección al Ambiente) or the “General Environmental Law,” and its regulations, which are administered by the Ministry of the Environment and Natural Resources and enforced by the Ministry’s enforcement branch, the Federal Attorney for Environmental Protection; (ii) the General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos), the “Law on Waste”, the General Law for Sustainable Forest Development (Ley General de Desarrollo Forestal Sustentable) and the General Law for Wildlife (Ley General de Vida Silvestre), each of which are also administered by the Federal Attorney for Environmental Protection; (iii) the National Waters Law (Ley de Aguas Nacionales) and its regulations, which are administered and enforced by the National Waters Commission, also a branch of the Ministry of the Environment and Natural Resources; (iv) the General Law of Climate Change; and (v) the Federal Law of Environmental Responsibility (Ley Federal de Responsabilidad Ambiental). Under the General Environmental Law, regulations have been enacted concerning air pollution, environmental impact, environmental audits, natural protected areas, ecological ordering, emissions records and transfer of pollutants. The General Environmental Law also regulates, among other things, vibrations, thermal energy, soil contamination and visual pollution, although the Mexican government has not yet issued enforceable regulation on the majority of these matters. The General Environmental Law also provides that companies that contaminate soils are responsible for their clean-up. Further, according to the Law on Waste, which was published in October 2003, owners and/or possessors of real property with soil contamination are jointly and severally liable for the remediation of such contaminated sites, irrespective of any recourse or other actions such owners and/or possessors may have against the contaminating party, and aside from the criminal or administrative liability to which the contaminating party may be subject. Restrictions on the transfer of contaminated sites also exist. The Law on Waste also regulates the generation, handling and final disposal of hazardous waste. Pursuant to the National Waters Law, companies that discharge wastewaters into national water bodies must comply with, among other rules, maximum permissible contaminant levels in order to preserve water quality. Periodic reports on water quality must be provided to competent authorities. Liability may result from the contamination of 80 underground waters or recipient water bodies. The use of underground waters is subject to restrictions pursuant to our concessions and the National Waters Commission. In addition to the foregoing, Official Mexican Standards (Normas Oficiales Mexicanas), which are technical standards issued by competent regulatory authorities pursuant to the General Metrology and Normalization Law (Ley General de Metrología y Normalización) and to other laws that include the environmental laws described above, establish standards relating to air emissions, soil contamination, wastewater discharges, the generation, handling and disposal of hazardous waste and noise control, among other issues. The Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) and the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente) are the responsible regulators. The Federal Office for the Protection of the Environment can bring administrative, civil and criminal proceedings against companies that violate environmental laws, and it also has the power to close non-complying facilities and impose a variety of sanctions. Companies in Mexico are required to obtain proper authorizations, licenses, concessions or permits from competent environmental authorities for the performance of activities that may have an impact on the environment or that may constitute a source of contamination. Companies in Mexico are also required to comply with a variety of reporting obligations that include, among others, providing the Ministry of the Environment and Natural Resources, the Federal Office for the Protection of the Environment and the National Waters Commission, as applicable, with periodic reports regarding compliance with various environmental laws. Prior to the opening of Mexico’s airports to private investment, the Federal Office for the Protection of the Environment required that environmental audits be performed at each of our airports. Based on the results of these audits, the Federal Office for the Protection of the Environment issued recommendations for improvements and corrective actions to be taken at each of our airports (with which we have complied). In connection with the transfer of the management of our airports from our predecessor, we entered into environmental compliance agreements with the Federal Office for the Protection of the Environment on January 1, 1999, and July 12, 2000, pursuant to which we agreed to comply with a specific action plan and adopted specific actions within a determined time frame. On June 6, 2012, the General Law on Climate Change was adopted and published in the Official Gazette of the Federation, which, among other objectives, (i) regulates greenhouse gases and emissions, taking into consideration the goals set forth by the UN Framework Convention on Climate Change and the provisions derived therein; (ii) promotes the education, research, development and technology transfer, innovation and promotion with respect to adapting to and mitigating climate change; and (iii) promotes the transition to a competitive, sustainable and low-carbon economy. In accordance with the General Law of Climate Change, individuals and entities that are responsible for sources of emission that are subject to environmental reporting are obligated to compile necessary information, data and documents with respect to direct and indirect emissions for the inclusion in the Mexican National Registry of Emissions (Registro Nacional de Emisiones). This regulation was published on October 28, 2014. We have been obligated to comply with this requirement since February 15, 2016. Furthermore, on June 7, 2013, the Federal Law of Environmental Responsibility was published in the Federal Official Gazette and requires that any person or entity who, whether by act or omission, directly or indirectly, causes harm to the environment, is obligated to repair such harm. If repair of such harm is not possible, such person is required to pay compensation for the harm caused and take any action necessary to avoid any additional harm or damage. Likewise, this law establishes a judicial procedure for environmental responsibility through which any physical or moral person with a legitimate interest can sue for repair and compensation for harm done to the environment. On August 11, 2014, the Mexican National Agency of Industrial Safety and Protection of the Environment of the Hydrocarbons Sector (Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos, or “ASEA”) was created. While initially taking a secondary role to the role of the Mexican Ministry of the Environment and Natural Resources, ASEA has recently started to enforce its legal powers. Our airport growth projects related to fuel supply must now be approved by ASEA, which may result in more burdensome proceedings for the approval of special projects related to hydrocarbons. As of the date of this report, there can be no assurance whether ASEA’s rules and regulations will materially affect our business or results of operations. 81 In 2018, Mexico launched a carbon dioxide (“CO2”) market. The market requires that industries that generate above a certain amount of CO2 emissions pay for rights to excess emissions. Starting in 2019, the legislation also requires that companies report their global emissions as verified by the Mexican Emissions Registry (Registro Nacional de Emisiones). In addition, new water quality standards are being discussed, which would require greater water quality for all of our wastewater disposal. Modifications of existing environmental laws and regulations or the adoption of more stringent environmental laws and regulations may result in the need for investments that are not currently provided for in our capital expenditures program and may otherwise result in a material adverse effect on our business, results or operations or financial condition. Although we do not currently expect that compliance with environmental laws will have material effect on our financial condition or results of operations, there can be no assurance, however, that environmental regulations or the enforcement thereof will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition. For more information see “Item 3. Key Information—Risk Factors—Risks Related to Mexico—Mexico’s environmental legislation could limit the growth of some of our airports.” Environmental Certification Since 2011 we have been selected to be one of the members of the Sustainability Index by the Mexican Stock Exchange. The Mexican Stock Exchange Sustainability Index members were selected from among the 70 most traded stocks on the Mexican Stock Exchange based on evaluation criteria of corporate governance, environmental management and social responsibility. In 2020, we were selected again to be one of the members of the Mexican Stock Exchange Sustainability Index (now called S&P/BMV Total México ESG Index). Liability for Environmental Noncompliance The legal framework of environmental liability applicable to our operations is generally outlined above. Under the terms of our concessions, the Mexican government has agreed to indemnify us for any environmental liabilities arising prior to November 1, 1998, and for any failure by the Mexican Airport and Auxiliary Services Agency prior to November 1, 1998, to comply with applicable environmental laws and with its agreements with Mexican environmental authorities. We believe that we are entitled to indemnification for any liabilities related to actions that our predecessor was required to perform or refrain from performing under applicable environmental laws and under their agreements with environmental authorities, though this may change in the future. The level of environmental regulation in Mexico has significantly increased in recent years, and the enforcement of environmental laws is becoming substantially more stringent. We expect this trend to continue and expect additional norms to be imposed by the trilateral agreement on Environmental Cooperation that will be entered into by Canada, the United States and Mexico in the context of the USMCA (which was formally signed on November 30, 2018 and entered into force July 1, 2020), as well as by other international treaties on environmental matters. In 2018, Mexico, the United States and Canada announced a Trilateral Agreement of Environmental Cooperation under the USMCA which, has replaced the North American Agreement on Environmental Cooperation in force since January 1, 1994. We do not expect that compliance with Mexican federal, state or municipal environmental laws currently in effect will have a material adverse effect on our financial condition or results of operations. However, environmental regulations or the enforcement thereof may change in a manner that could have a material adverse effect on our business, results of operations, prospects and financial condition. 82 The following table sets forth our consolidated subsidiaries as of April 22, 2021, including our direct and indirect ownership interest in each:
83
84 Pursuant to the Mexican National Assets Law, all real estate and fixtures in our airports are owned by the Mexican government. Each of our concessions is scheduled to terminate in 2048, although each concession may be extended one or more times for up to an aggregate of an additional 50 years. The option to extend a concession is subject to our acceptance of any changes to such concession that may be imposed by the Ministry of Communications and Transportation and our compliance with the terms of our current concessions. Upon expiration of our concessions, these assets automatically revert to the Mexican government, including improvements we may have made during the terms of the concessions, free and clear of any liens and/or encumbrances, and we will be required to indemnify the Mexican government for damages to these assets, including any improvements thereon, except for those caused by normal wear and tear. We use the property constituting our airports pursuant to our concessions. For more information regarding our property, plant and equipment, see “Item 4. Business Overview—Our Airports.” We maintain comprehensive insurance coverage that covers the principal assets of our airports and other property, subject to customary limits, against damage due to natural disasters, accidents, terrorism or similar events. We also maintain general liability insurance but do not maintain business-interruption insurance. Among other insurance policies, we carry a U.S.$50.0 million insurance policy covering damages to our property resulting from certain terrorist acts and a U.S.$500 million policy covering personal and property damages to third parties. We also carry a U.S.$200.0 million insurance policy covering damage to our assets and infrastructure. Item 4A. Unresolved Staff Comments None. Item 5. Operating and Financial Review and Prospects The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements and the notes to those consolidated financial statements. It does not include all of the information included in our consolidated financial statements. You should read our consolidated financial statements to gain a better understanding of our business and our historical results of operations. Our consolidated financial statements included in this annual report are prepared in accordance with IFRS, as issued by the IASB. Overview We hold concessions to operate, maintain and develop 13 airports in Mexico, many of which are located in the northern and central regions of the country, pursuant to concessions granted by the Mexican government. The substantial majority of our revenues are derived from providing aeronautical services, which generally are related to the use of our airport facilities by airlines and passengers. For example, approximately 54.8% of our total revenues in 2020 were earned from aeronautical services and approximately 71.5% of the sum of our aeronautical and non-aeronautical revenues in 2020 were earned from aeronautical services. Changes in our revenues from aeronautical services are principally driven by the passenger and cargo volume at our airports. Our revenues from aeronautical services are also affected by the maximum rates we are allowed to charge under the price regulation system established by the Ministry of Communications and Transportation and the specific prices that we negotiate with airlines for the provision of aeronautical services. The maximum rate system of price regulation that applies to our aeronautical revenues is linked to the traffic volume (measured in workload units) at each airport; thus, increases in passenger and cargo volume generally permit greater revenues from aeronautical services. In evaluating our aeronautical revenues, we focus principally on workload units, which measure volume, and aeronautical revenues per workload unit, which measures the contribution to aeronautical revenues from each workload unit. 85 We also derive revenues from non-aeronautical activities, which principally relate to the commercial activities carried out at our airports, such as the operation of parking facilities, advertising and the leasing of space to restaurants and retailers. We also derive non-aeronautical revenues from diversification activities, such as hotel services, air cargo logistics services and real estate services; and complementary activities, which principally include the leasing of space to airlines and operating our baggage-screening system. Our revenues from non-aeronautical activities are not subject to the system of price regulation established by the Ministry of Communications and Transportation (though they may be subject to regulation by other authorities). Our commercial revenues are principally affected by the passenger volume at our airports, the mix of commercial activities carried out at our airports and our ability to increase the rates we charge to those service providers. We evaluate our non-aeronautical revenues by analyzing changes in diversification, commercial and complementary revenues. During 2020, our business initiatives were focused on reactivating overall operations in our airports and diversification activities, mitigating the effect of the COVID-19 pandemic, which generated adverse effects in our operations during most of 2020, as well as preserving liquidity. Recent Developments COVID-19 Outbreak The United States government has put in place travel restrictions in response to the COVID-19 pandemic, and closed the United States border with Mexico, except to essential travel and trade and commerce, on March 20, 2020. As of April 22, 2021, the land border remains closed. On January 26, 2021, the United States issued a decree, requesting negative COVID-19 test results for all inbound passengers traveling by air. Beginning on January 7, 2021, Canada established similar testing requirements for passengers traveling by air to the country. Subsequently, the Canadian government suspended flights between Canada, Mexico and the Caribbean until April 30, 2021. The Mexican government has implemented various measures to control the spread of COVID-19, including extraordinary actions, such as school closures and the suspension of non-essential activities, in the regions most affected. On March 31, 2020, Mexico’s Ministry of Health issued a decree suspending all non-essential activities in the country through April 30, and on April 21, such suspension was extended through May 30, 2020. For purposes of these measures, airports are considered essential and our airports remain operational. On May 29, 2020, Mexico’s Ministry of Health issued a decree establishing an epidemiological risk traffic light system by region, applicable both to municipalities and states which became effective on June 1, 2020 (and which remains in place as of the date of this report) that determines the level of health risk and the type of activities authorized to take place. As a result, different states of the country are experiencing different reactivation levels and, consequently, different types of economic activities are being allowed. As a result of the COVID-19 pandemic, our reserve for doubtful accounts receivable increased by 231% to Ps.20.8 million as of December 31, 2020, which is mainly comprised of commercial tenants. We cannot assure you whether the COVID-19 pandemic will continue to cause an increase in our reserve for doubtful accounts receivable in 2021. The full extent of the ongoing impact of COVID-19 on the Company’s longer-term operational and financial performance will depend on future developments, including those While we are expecting a negative impact to our operational and our financial results due to the COVID-19 outbreak, we do not foresee a risk to the overall continuity of our business. We have carried out a preliminary analysis of 86 the financial results in the short, medium and long term, and we have not identified any significant asset deterioration. Nevertheless, the demand for travel may decrease more than expected, which could magnify the impact of the COVID-19 pandemic going forward. Accordingly, we will continue to monitor and analyze the situation closely. We do not expect interruptions to our business. We have the ability to continue as a going concern and do not foresee the cancellation of our operations at any of our airports. We are unable to predict with certainty the impact of the COVID-19 outbreak on our business, clients, suppliers and employees, as well as on international air travel. We are also unable to predict the degree to which the COVID-19 outbreak may impact air travel demand in the domestic regions in which we operate, or whether continuous travel restrictions, as well as general population fears with respect to air travel, may have a materially adverse effect on our business and on our operating results. The global and domestic impact of the COVID-19 outbreak on our business will depend on its duration and its impact on the economy of Mexico. Stock Purchase Agreement On September 14, 2020, Fintech filed Amendment No. 8 amending the Schedule 13D filed with the SEC, informing that on June 10, 2020, Fintech entered into a Stock Purchase Agreement with ICATEN and in the case of Bagual, a Stock Purchase Agreement with each of ICATEN and ICA Infraestructura, S.A. de. C.V. (a subsidiary of ICATEN), to purchase collectively 100% of the capital stock of SETA. The transactions closed on June 12, 2020 and the aggregate purchase price for the SETA shares was Ps. 5.47 per share for 862,703,377 shares. Potential Tender Offer by Fintech Holdings Inc. and its affiliates As of December 22, 2020, Fintech Holdings Inc, and Fintech owned Series B shares and underlying ADRs and Series BB Shares (which convert into Series B Shares upon their disposition to a third party) (the “Series B Shares”) which represented approximately 14.7% of our total outstanding capital stock. Fintech informed on December 23, 2020 that it has considered from time to time making a tender offer, in Mexico or globally, for an additional interest in our Series B Shares, without exceeding an aggregate interest of 40% of our aggregate outstanding shares. In connection with consideration of such an offer, Fintech informed that it has evaluated alternative possibilities for the financial, legal and regulatory structures available for such an offer, and that it has engaged in exploratory discussions regarding those possibilities with, among others, potential providers of financing, potential dealer-managers and regulatory authorities in the United States and Mexico. On December 22, 2020 Fintech filed Amendment No.10 amending the Schedule 13D filed with the SEC describing possible transactions under consideration related to its investment, but has not determined to proceed, and has stated that there can be no assurance it will proceed with any offer. If Fintech were to proceed with such an offer, Fintech currently expects that any such offer would be for at least 19,505,578 Series B Shares (or 5% of the aggregate outstanding shares of OMA) and up to 97,527,889 Series B Shares (or 25% of the aggregate outstanding shares of OMA) for an expected purchase price of up to Ps.137 per Series B Share (or the corresponding price in US dollars per American Depositary Share representing Series B Shares, based on the applicable US Dollar/Mexican peso exchange rate upon settlement). Fintech stated that the expected offer amount and purchase price disclosed above and the willingness of the reporting persons to proceed with an offer are subject to change based on market conditions, obtaining financing, obtaining regulatory approval in the United States and Mexico, obtaining approval by the our board of directors and other factors, and has indicated that there can be no assurance that it will proceed with any offer. As of the date of Amendment No. 10, these plans remain preliminary and subject to change, and Fintech has not yet determined to proceed and has not commenced any tender offer. Fintech informed it does not expect to be in a position to commence an offer before the final week of January 2021. Fintech anticipates that it would try to finalize its financing commitments in the first ten business days of any offer, and if it is able to obtain satisfactory financing commitments, Fintech would disclose the terms of such financing commitments to the extent required by applicable law, any financing conditions would then be satisfied and Fintech would maintain the offer open for acceptances for the time prescribed by applicable law. 87 As of April 22, 2021, Fintech has not initiated any tender offer to purchase Series B shares. Third amendment to the Technical Assistance Agreement On December 14, 2020, the Technical Assistance Agreement was amended. Among the main modifications, the term was extended until December 31, 2021, with automatic renewals for one year periods starting on January 1, 2022, unless termination notice is provided by any of the parties involved. Additionally, the automatic renewals shall prevail as long as SETA holds an individual interest of at least 7.65% of the shares of the Company. The economic terms of the agreement were not modified. 2021-2025 Master Development Programs On November 27, 2020, the 2021-2025 Master Development Programs for OMA’s 13 airports were authorized by AFAC. The Master Development Programs include major maintenance, minor expenses and capital investment for the expansion, improvement, modernization and maintenance of airport infrastructure and equipment according to national and international efficiency, operational and safety standards, considering the growth of estimated passenger traffic. The amount of the committed investment was Ps.11,979,621 in pesos with purchasing power as of December 31, 2019. 2020 Annual and Extraordinary Shareholders’ Meeting The Annual Meeting for the Shareholders of the Company that was rescheduled due to COVID-19 took place on July 7, 2020. The Extraordinary General Shareholders’ Meeting, also held on July 7, 2020, approved the cancellation of 3,659,417 Series “B” shares, acquired by OMA pursuant to Article 56 of the Securities Market Law. As a result, shares outstanding after giving effect to the aforementioned cancellation of shares are 390,111,556. 2021 Annual Shareholders’ Meeting The Annual Meeting for the Shareholders of the Company was held on April 21, 2021. The General Ordinary Shareholders’ Meeting approved the declaration and payment of a cash dividend to shareholders of up to Ps. 2,000 million and delegated to the Board of Directors the power to determine the amount to be paid out, which will come from accumulated earnings, as well as the date or dates and forms of payment. The declaration of the aforementioned dividend will become effective as of the date the Board makes its determination. Operations of Hilton Garden Inn Hotel On July 6, 2020, the Hilton Garden Inn Hotel that operates at the Monterrey airport restarted activities. The hotel had suspended operations since April 6, 2020 due to low occupancy derived from COVID-19. Inauguration of Reynosa Airport Terminal Building In February 2021, we inaugurated the terminal building at the Reynosa airport. The project involved a total investment of Ps.335 million and included an expansion of 4,550 square meters (48,976 square feet), for a total of 7,286 square meters (78,426 square feet). Passenger capacity grew threefold to serve up to 900,000 passengers per year. Approval of Master Development Program for the 2021-2025 period In November 2020, we received approval from the Ministry of Communications and Transportation, through the AFAC, of the Master Development Program for each of our thirteen airports, corresponding to the 2021-2025 period. 88 Issuance OMA21V and OMA21-2 (2021 Green Variable Rate Notes and 2021 Fixed Rate Notes) On April 16, 2021, OMA issued Ps.1,000,000 thousand in five-year notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the “2021 Green Variable Rate Notes Indenture”). Interest payments are made every 28 days at a variable annual interest rate of TIIE 28 + 0.75%. The principal amount will be repaid at maturity on April 10, 2026. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to finance green investments pursuant to our Master Development Programs for 2021-2025. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance. On April 16, 2021, OMA issued Ps.2,500,000 thousand in seven year notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the 2021 Fixed Rate Notes indenture). Interest payments are made on a semiannual basis at a fixed annual interest rate of 7.83%. The principal amount will be repaid at maturity on April 7, 2028. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to extend the maturity profile of debt by prepaying the Ps.3,000,000 thousand in fixed rate notes issued under the 2014 Indenture. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance. For a detailed description of covenants, events of default and the green bond framework, see “Item 5 Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness.” Operating Results Certain U.S. dollar amounts have been translated from Mexican pesos for convenience purposes at an exchange rate of Ps.19.9087 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2020. Passenger and Cargo Volumes In 2020, approximately 89.3% of the terminal passengers using our airports were domestic. Domestic traffic decreased by 51.6% and international traffic decreased by 56.9% as compared to 2019. In addition, of the international passengers traveling through our airports, a majority has historically traveled on flights originating in or departing to the United States. Accordingly, our results of operations are influenced strongly by changes to Mexican economic conditions and to a lesser extent influenced by U.S. economic and other conditions, particularly trends and events affecting leisure travel and consumer spending. Many factors affecting our passenger traffic volume and the mix of passenger traffic in our airports are beyond our control, including the adverse effects of the COVID-19 pandemic. In 2018, 2019 and 2020, our 13 airports handled approximately 100,914, 97,620 and 93,242 metric tons of cargo, respectively. The decrease in 2020 was due to a 5.7% decrease in cargo transportation at the Monterrey airport and a 9.0% decrease in cargo transportation at the San Luis Potosí airport. Increases in our cargo volume are beneficial to us for purposes of the maximum-rate calculations, as cargo increases the number of our workload units. 89 The following table sets forth certain operating and financial data relating to our revenues and passenger and cargo volumes for the periods indicated:
In 2020, we served 11.1 million terminal passengers, of which 9.9 million were domestic and 1.2 million were international. The decrease in passengers in 2020 was principally due to the COVID-19 outbreak. Classification of Revenues We classify our revenues into three categories: revenues from aeronautical services, revenues from non-aeronautical services and revenues from construction services. Historically, a substantial majority of our total revenues have been derived from aeronautical services. For example, in 2020, 54.8% of our total revenues were derived from aeronautical services, and the remainder of our revenues was derived from non-aeronautical services and construction services. Aeronautical services represented 71.5% of the sum of our aeronautical and non-aeronautical revenues. Our revenues from aeronautical services are subject to price regulation under the applicable maximum rate at each of our airports and principally consist of passenger charges, aircraft landing and parking charges, airport security charges, passenger walkway charges, the leasing of space in our airports to airlines (other than first class/VIP lounges and other similar activities not directly related to essential airport operations) and complementary services (i.e., fees from handling and catering providers, permanent ground transportation operators and access fees from fuel providers at our airports). 90 Our revenues from non-aeronautical services are not subject to price regulation under our maximum rates and generally include revenues earned from: (i) commercial activities, such as car parking (which may be subject to certain municipal regulations, but not to our maximum rates), rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as advertising, retail operators, food and beverage providers, car rental companies, time-share sales and promotions service providers, duty-free operators and fees collected from other miscellaneous sources, such as telecommunications providers, financial services providers and other passenger services providers; (ii) diversification activities, which include revenues earned by OMA Carga operations (air cargo and ground cargo logistics services), the operation of the Terminal 2 NH Collection Hotel of Mexico City International Airport, the Hilton Garden Inn hotel at the Monterrey airport and real estate services; and (iii) complementary activities, which principally include our checked baggage-screening services, the leasing of space to airlines and complementary service providers for first class/VIP lounges and other activities not directly related to essential airport operations, as well as fees for access to federal zones. We recognize revenues from construction services derived from the improvements made to airports that are included in our Master Development Programs. Construction service revenues related to the airport concession are determined based on negotiations between us and the Ministry of Communication and Transportation (recognized according to the percentage-of-completion method), as we construct or improve the airports based on the Master Development Programs. In 2020, revenues from improvements to concessioned assets accounted for 23.4% of our total revenues. For a detailed description of the components of our aeronautical and non-aeronautical revenue categories, see “Item 4. Information on the Company—Business Overview—Our Sources of Revenues.” Fluctuations in the Peso From December 31, 2017 to December 31, 2018, the peso remained the same at Ps.19.64 per U.S.$1.00. From December 31, 2018 to December 31, 2019, the peso appreciated by approximately 3.9%, from Ps.19.64 per U.S.$1.00 on December 31, 2018, to Ps.18.86 per U.S.$1.00 on December 31, 2019. From December 31, 2019 to December 31, 2020, the peso depreciated by approximately 5.5%, from Ps.18.86 per U.S.$1.00 on December 31, 2019, to Ps.19.89 per U.S.$1.00 on December 31, 2020. In the first months of 2021, the peso appreciated, reaching Ps.19.87 per U.S.$1.00 on April 22, 2021. International passengers and international flights pay tariffs denominated in U.S. dollars. However, these tariffs are In addition, we have financial liabilities denominated in U.S. dollars, and a significant depreciation in the Mexican peso could result in higher debt balances when converted to Mexican pesos, thus resulting in foreign exchange losses. We may also, from time to time, maintain cash balances denominated in U.S. dollars, in which cases a depreciation of the Mexican peso against the U.S. dollar could result in a foreign exchange gain. As of December 31, 2020, Ps.1,584 million of our cash balance was denominated in U.S. dollars. As of December 31, 2020, international passenger charges amounted to Ps.542,933 thousand, and as of December 31, 2020, we had U.S.$4.1 million of liabilities denominated in U.S. dollars. 91 Aeronautical Revenues The system of price regulation applicable to our aeronautical revenues establishes a maximum rate in pesos for each airport for each year in a five-year period, which is the maximum annual amount of revenues per workload unit (a workload unit is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from aeronautical services. See “Item 4. Regulatory Framework—Revenue Regulation” for a description of our maximum rates and The following table sets forth our revenues from aeronautical services for the
Under the
Aeronautical revenue per workload unit We, from time to time, seek to offer incentives, including discounts on charges for aeronautical services, to encourage carriers to establish new routes and take other measures expected to increase passenger traffic at our airports. The Mexican Airport Law prevents discriminatory pricing, so incentives we offer must be available to any carrier 92 meeting the conditions specified for those incentives. The main objective is to promote passenger growth in all of our airports. We may continue to offer further incentives in the future. Such initiatives undertaken in the future may not be carried out, and may not increase our passenger traffic volume or our revenues. In 2020, our aeronautical revenues represented approximately 99.3% of the amount we were entitled to earn under the maximum rates applicable to all of our airports. To the extent that we offer incentives to carriers to establish routes serving our airports in the future, or other changes to our sources of aeronautical revenues, this percentage could decrease. We may not be able to collect substantially all of the revenues we are
Non-Aeronautical Revenues Non-aeronautical services historically have generated a significantly smaller portion of our total revenues as compared to aeronautical services. Non-aeronautical revenues per terminal passenger are calculated by dividing total non-aeronautical revenues by the number of terminal passengers during the same period. The contribution to our total revenues from non-aeronautical services was 21.8% in 2020. Our non-aeronautical revenues per terminal passenger increased from Ps.78.5 in 2019 to Ps.105.9 in 2020 due primarily to the fixed portion of rent embedded in most of our contracts from the commercial, diversification and complementary activities, combined with the effect of the decrease in passenger traffic due to COVID-19. Our non-aeronautical revenues in 2020 represented 28.5% of the sum of our aeronautical and non-aeronautical revenues, and our revenues from commercial activities per terminal passenger increased from Ps.39.5 in 2019 to Ps.51.7 in 2020, due primarily to the minimum guaranteed fixed amount of rent in our commercial contracts. Certain categories of non-aeronautical revenues are directly impacted by passenger traffic (for example car parking and rental, and food and beverage providers) while others are not (for example leasing of space, on which we earn at least a minimum fixed rent indexed to inflation each year, which may be increased by royalty-based payments as discussed below, or diversification revenues). Accordingly, non-aeronautical revenues do not always behave in the same manner as passenger traffic or workload units. A substantial amount of our contracts with third-party tenants are royalty-based arrangements. Under a royalty-based contract, the amount tenants must pay is based on tenants’ revenues, subject to minimum guaranteed fixed amounts for the space leased. When the royalty-based amount is lower than the minimum guaranteed amount, the tenant must still pay the latter. Conversely, when the royalty-based amount is higher than the minimum guaranteed amount, the tenant will pay the former. Therefore, a decrease in passenger traffic volumes would result in a reduction in non-aeronautical revenues only if, (i) prior to such decrease in passenger traffic, the sales of royalty-based tenants were higher than the minimum guaranteed amount and (ii) the decrease in traffic volumes is such that it would cause the royalty-based amount to be lower than the minimum guaranteed amount for a given tenant. As a result, during periods in which airports experience a reduction in passenger traffic volumes, non-aeronautical revenues may remain stable due to the minimum guaranteed amount received by the airport under 93 The following table sets forth our revenues from non-aeronautical activities for the periods indicated:
The majority of our non-aeronautical revenues 94 On an individual basis, during 2020, our most important source of non-aeronautical revenues was OMA Carga which provides air and ground cargo logistics services, and represented 15.7% of our non-aeronautical revenues in 2020 and is part of our diversification activities. Other than OMA Carga, diversification activities include hotel services (both Terminal 2 NH Collection Hotel at the Mexico City International Airport and the Hilton Garden Inn Hotel at the Monterrey Airport) and real estate services. Complementary activities represented 16.9% of our non-aeronautical revenues in 2020. These activities primarily include baggage-screening services, the leasing of space to Operating Costs Our operating costs have been, and we believe that they will continue to be, funded entirely from our results of operations. The following table sets forth our operating costs and certain other related information for the periods indicated:
Cost of Services Our cost of services consists primarily of employee, maintenance, safety, security and insurance costs, utilities (a portion of which we recover from our tenants) and other miscellaneous expenses. 95 Major maintenance provision We are Every quarter, the major maintenance provision is revised to update the amount that has been provided for in order to keep the provision as accurate as possible. The provision could increase or decrease, as a result of certain events, such as, on the one hand, a contingency in an airport that requires immediate major maintenance or other maintenance that has been delayed or, on the other hand, an asset that does not need maintenance, in which case resources can be better used for other activities. Construction Costs We invest in additions and upgrades to our concession assets in accordance with our Master Development Programs. As our construction costs are equal to our revenues from construction services, they do not have a cash impact on our results of operations. Administrative Expenses Our administrative expenses consist primarily of personnel expenses, fees and expenses paid to consultants and other providers of professional services and other administrative overhead expenses. Concession Tax Beginning November 1, 1998, we became subject to Article 232-A of the Mexican Federal Duties Law, which requires that the holders of concessions pay a tax for the use of state-owned assets. This tax is currently equal to 5% of the gross annual revenues of each concession holder obtained from the use of public domain assets pursuant to the terms of its concession. The concession tax may be revised at any time by the Mexican government, and this tax may increase in the future. If the Mexican government increases the concession tax, we are entitled to request an increase in its maximum rates from the Ministry of Communications and Transportation; however, the Ministry of Communications and Transportation may not honor such requests in the future. 96 Technical Assistance Fee Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers technical assistance and technological and industry knowledge and experience to us in exchange for a fee. For more information about this agreement, see “Item 7. Major Shareholders and Related-Party Transactions—Related Party Transactions.” The technical assistance fee for each of 2001 and 2002 was fixed at U.S.$5.0 million (adjusted annually for U.S. inflation). For the remainder of the original contract term, the fee was equal to the greater of U.S.$3.0 million adjusted annually for inflation (measured by the U.S. consumer price index) or 5% of our EBITDA. Pursuant to the second amendment to the Technical Assistance Agreement signed on May 13, 2015, as of June 14, 2015, the fee was reduced to the greater of U.S.$3,478,000 (updated annually according to the U.S. consumer price index) and 4% of our EBITDA for the first three years of the extension and 3% of our EBITDA for the last two years of the extension. Pursuant to the third amendment of the Technical Assistance Agreement, dated as of December 14, 2020, the term of such agreement has been extended until December 31, 2021, with automatic renewals for one year periods starting on January 1, 2022, unless a termination notice is provided by any of the parties involved. Additionally, the automatic renewals shall be in force as long as SETA holds an individual interest of at least 7.65% of the shares of the Company. The economic terms of the agreement were not modified. Depreciation and Amortization Our depreciation and amortization expenses primarily reflect the amortization of our investment in our 13 concessions. In 2020, our depreciation and amortization expenses increased by 4.8%, as compared to 2019, primarily due to an increase in the investment to improve our concessions’ assets during 2020. The value of our concessions was determined in June 2000, when SETA won the bid to acquire Series BB shares currently representing 12.8% of our capital stock, based on the value assigned by the independent company INGENIAL. In addition, we depreciate the value of certain fixed assets that we acquire or build at our airports pursuant to the investment requirements under our Master Development Programs. For further information regarding depreciation and amortization expenses, refer to Notes 9 and 10 to our audited consolidated financial statements. Solidarity Fees We and our subsidiaries have entered into inter-company agreements under which we provide services and make payments among us and our subsidiaries. The payments under these agreements affect the revenues, operating costs and income at our individual subsidiaries but not our consolidated results. Under the intercompany agreements, our parent company Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., or GACN, and our administrative services subsidiaries provide certain services and guarantees to our airport operating subsidiaries (which may include payments to certain of our airport operating subsidiaries), in exchange for which our airport operating subsidiaries make payments to GACN and the service subsidiaries. Each of our airports has entered into a “Solidarity Agreement” with our parent company, pursuant to which each of our airport operating subsidiaries pays a solidarity fee to GACN in exchange for which GACN guarantees the ongoing viability of that subsidiary’s concession, including, in the case of certain subsidiaries, by making payments to those subsidiaries to ensure that they have the resources to comply with their Master Development Programs and other regulatory obligations. As described under “Item 4. Information on the Company—Regulatory Framework—General Obligations of Concession Holders,” in the event of a breach of one concession, the Ministry of Communications and Transportation is entitled to revoke all of the concessions held by our airport operating subsidiaries. Therefore, our airport operating subsidiaries that generate higher revenues pay higher solidarity fees to our parent company to ensure the continued viability of the concessions held by our airport operating subsidiaries that generate lower revenues. Amounts paid pursuant to the Solidarity Agreements are determined in accordance with Mexican transfer pricing regulations established under the Mexican Income Tax Law and are in line with a transfer pricing study that we commission annually from an independent third party. The intercompany agreements also include agreements to provide other routine services, including negotiating regulated tariffs and interfacing with regulators, leasing of commercial real estate, trademark license royalties, marketing services and employee costs. The costs of these services and guarantees, including the solidarity fees, are actual costs that are charged to individual airports. 97 Expenditures pursuant to master development programs and other capital expenditures In 2020, expenditures pursuant to master development programs and other capital expenditures were Ps.1,506,237 thousand. We funded our expenditures through cash flows from operations, and we believe that we will continue to fund them through cash flow from operations, as well as new debt, in the future. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.” Employee Statutory Profit Sharing We are subject to the mandatory statutory employee profit sharing regime (participación de los trabajadores en las utilidades de las empresas, or “PTU”) established by the Mexican Federal Labor Law. Under this regime, 10% of a company’s unconsolidated annual profits, as calculated for tax purposes, must be distributed among employees other than the chief executive officer. Taxation The recognition of a deferred tax asset from previous years represented Ps.85,731 thousand for the year ended December 31, 2020, while the current tax amounted to Ps. 480,322 thousand. In 2020, we had an effective tax rate of 26.4%, which reflects the permanent differences related primarily to inflationary effects for tax purposes. The statutory Mexican corporate income tax rate in 2020, 2019 and 2018 was 30.0%. A withholding tax at a rate of 10% on the gross amount of dividends distributed to non-Mexican holders with respect to our Series B shares and our ADSs was enacted as part of the 2013 tax reforms. For a further discussion of the withholding tax, see “Item 10. Additional Information—Taxation—Taxation of Dividends.” Effects of Devaluation and Inflation The following table sets forth, for the periods indicated, the percentage that the Mexican peso devalued or appreciated against the U.S. dollar, the Mexican inflation rate, the U.S. inflation rate and the percentage that Mexican GDP changed as compared to the previous period:
(1) Based on changes in the noon buying rate for Mexican pesos, as published by the U.S. Federal Reserve at the end of each period, which were as follows: Ps.18.86 per U.S.$1.00 as of December 31, 2019 and Ps.19.89 per U.S.$1.00 as of December 31, 2020. (2) Based on changes in the Mexican Consumer Price Index from the previous period, as reported by the Mexican Central Bank. The year-end Mexican Consumer Price Index was 105.9340 in 2019 and 109.271 in 2020. (3) Based on changes in the Consumer Price Index for all urban consumers before seasonal adjustment, as reported by the U.S. Department of Labor, Bureau of Labor Statistics. (4) In real terms, as reported by the Mexican Central Bank. 98 The general condition of the Mexican economy, the devaluation of the peso as compared to the U.S. dollar, inflation and high interest rates have in the past adversely affected, and may in the future adversely affect, the following: Passenger charges. Passenger charges for international passengers are currently denominated in U.S. dollars (although invoiced and paid in Mexican pesos), while passenger charges for domestic passengers are denominated in pesos. Consequently, an appreciation of the peso against the U.S. dollar could cause declines in our revenues from passenger charges for international passengers and consequently our aeronautical revenues. This would also produce a decline in peso-denominated revenues when compared with the previous year, because our tariffs for the services we provide to international flights or international passengers are denominated in U.S. dollars but are generally invoiced and paid for in Mexican pesos based on the average exchange rate for the month prior to each flight on which the charge is incurred. Exchange gains and losses. Our consolidated statement of comprehensive income reflects gains and losses from foreign exchange transactions and could be impacted by exchange rates (to the extent of our foreign currency transactions). A portion of our indebtedness is denominated in U.S. dollars. Given that a substantial portion of our revenues are collected or converted into Mexican pesos, a depreciation in the peso as against the dollar would result in us having to spend more pesos for payment of dollar-denominated indebtedness, whereas an appreciation of the peso would result in us spending fewer pesos for dollar-denominated indebtedness payments. In addition, our cash balance may be, from time to time, denominated in U.S. dollars, in which case a depreciation of the Mexican peso against the U.S. dollar could result in a foreign exchange gain. Cash flows. Our cash flows are affected by changes in exchange rates as a result of holding monetary assets and liabilities in foreign currencies. Maximum rates in Mexican pesos. The tariffs for the services that we provide for international flights or international passengers are generally denominated in U.S. dollars but are paid in Mexican pesos based on the average exchange rate for the month prior to each flight. Accordingly, depreciation of the peso, particularly late in the year, could cause us to exceed the maximum rates at one or more of our airports, which could lead to the imposition of fines and the subsequent termination of one or more of our concessions. In addition, if the Mexican peso appreciates as compared to the U.S. dollar, we may underestimate the specific prices we can charge for regulated services and be unable to adjust our prices upwards to maximize our regulated revenues. 99 Operating Results by Segment The following table sets forth our results of operations for the periods indicated for each of our airports, our hotel services and our industrial services.
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104
105 Summary Historical Consolidated Results of Operations The following table sets forth a summary of our consolidated results of operations for the years indicated:
Results of Operations for the Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019. Consolidated Revenues Total revenues for 2020 were Ps.5,367,466 thousand, 37.1% lower than the Ps.8,527,101 thousand recorded in 2019, primarily as a result of a decrease in both aeronautical and non aeronautical revenues. The sum of aeronautical and non-aeronautical revenues in 2020 decreased by 45.7% as compared to 2019. Aeronautical revenues decreased by 48.8% to Ps.2,942,558 thousand in 2020, as compared to Ps.5,752,662 thousand in 2019 due primarily to a decrease in passenger charges from Ps.4,984,390 thousand in 2019 to Ps.2,400,484 thousand in 2020, attributable to a 52.3% decrease in passenger traffic. Aeronautical revenues per workload unit in 2020 were Ps.245.3 compared to Ps.238.3 in 2019, an increase of 3.0%. Non-aeronautical revenues decreased by 35.6% from Ps.1,819,605 thousand in 2019 to Ps.1,171,039 thousand in 2020, due primarily to the reduction in operations at our airports, attributable to a 52.3% decrease in passenger traffic. Non-aeronautical revenues per terminal passenger increased by 34.8%, from Ps.78.5 in 2019 to Ps.105.9 in 2020, due primarily to a lower reduction in non-aeronautical revenue compared to passenger traffic, as a result of the nature of 106 contracts from commercial, diversification and complementary activities, which provide for a minimum guaranteed fixed rent. Revenues from construction services in 2020 were Ps.1,253,869 thousand, an increase of 31.3% from Ps.954,834 thousand recognized in 2019, primarily as a result of the progress in the improvements of concession assets, principally in the Monterrey, Culiacán, Tampico and San Luis Potosí airports. Our revenues are highly dependent on the volume of passenger traffic. The effects of the COVID-19 pandemic resulted in a significant reduction in passenger traffic during 2020, as a result of the actions taken by the Mexican, U.S. and other governments and from the broader reduction in demand for air travel caused by the COVID-19 pandemic. Even though we have taken action to recover passenger confidence, along with measures taken to preserve liquidity, the ongoing adverse effects of COVID-19 on our operations remain uncertain and the continuation of reduced air travel demand could have a material adverse effect on the Company’s business, operating results, financial condition and liquidity. For more information, see “Risk Factors—Risks Related to Our Operations— The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.” Revenues by Segment On an airport-by-airport basis, the principal contributors to total revenues in 2020 were Metropolitan Destination At the Monterrey airport, aeronautical revenues decreased by 51.6% from Ps. 2,641,052 thousand in 2019 to Ps.1,278,255 thousand in 2020, due primarily to a 54.9% decrease in passenger charges, as a result of a 55.3% decrease in passenger traffic. Non-aeronautical revenues decreased by 34.0% from Ps. 726,684 thousand in 2019 to Ps.479,322 thousand in 2020, due primarily to a 70.2% decrease in car parking charges, a 42.7% decrease in food and beverage and a 54.1% decrease in retail operations. The sum of aeronautical and non-aeronautical revenues decreased by 47.8% from Ps. 3,367,736 thousand in 2019 to Ps.1,757,577 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 11.3% from Ps.287.9 in 2019 to Ps.320.5 in 2020, principally due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. TouristDestinations At the Acapulco airport, aeronautical revenues decreased by 48.6% from Ps.227,954 thousand in 2019 to Ps.117,218 thousand in 2020, due primarily to a 52.1% decrease in passenger charges, as a result of a 54.8% decrease in passenger traffic. Non-aeronautical revenues decreased by 32.5% from Ps.40,242 thousand in 2019 to Ps.27,159 thousand in 2020, due primarily to a 45.6% decrease in retail operations, a 28.8% decrease in revenues from car rentals and a 35.9% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 46.2% from Ps.268,196 thousand in 2019 to Ps.144,377 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 19.1% from Ps.305.3 in 2019 to Ps.363.7 in 2020, principally due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Mazatlán airport, aeronautical revenues decreased by 34.3% from Ps.321,313 thousand in 2019 to Ps.211,184 thousand in 2020, due primarily to a 36.6% decrease in passenger charges, as a result of a 36.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 29.2% from Ps.52,857 thousand in 2019 to Ps.37,431 thousand in 2020, due primarily to a 32.8% decrease in retail operations, a 39.5% decrease in revenues from time-share 107 developers and a 46.3% decrease in revenues from car parking. The sum of aeronautical and non-aeronautical revenues decreased by 33.6% from Ps.374,170 thousand in 2019 to Ps.248,615 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 2.3% from Ps.316.4 in 2019 to Ps.323.7 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Zihuatanejo airport, aeronautical revenues decreased by 48.5% from Ps.191,512 thousand in 2019 to Ps.98,645 thousand in 2020, due primarily to a 52.2% decrease in passenger charges, as a result of a 49.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 28.3% from Ps.25,596 thousand in 2019 to Ps.18,360 thousand in 2020, due primarily to a 34.7% decrease in retail operations, a 20.6% decrease in revenues from car rentals and a 51.9% decrease in revenues from car parking. The sum of aeronautical and non-aeronautical revenues decreased by 46.1% from Ps.217,108 thousand in 2019 to Ps.117,005 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 6.2% from Ps.346.0 in 2019 to Ps.367.4 in 2020. Regional Destinations At the Chihuahua airport, aeronautical revenues decreased by 47.6% from Ps.411,392 thousand in 2019 to Ps.215,728 thousand in 2020, due primarily to a 52.0% decrease in passenger charges, as a result of a 51.9% decrease in passenger traffic. Non-aeronautical revenues decreased by 31.3% from Ps.67,022 thousand in 2019 to Ps.46,049 thousand in 2020, due primarily to a 55.8% decrease in revenues from car parking, a 38.3% decrease in revenues from car rentals, and a 44.4% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 45.3% from Ps.478,414 thousand in 2019 to Ps.261,777 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.8% from Ps.271.0 in 2019 to Ps.292.1 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Culiacán airport, aeronautical revenues decreased by 41.8% from Ps.617,978 thousand in 2019 to Ps.359,562 thousand in 2020, due primarily to a 43.9% decrease in passenger charges, as a result of a 44.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 22.0% from Ps.66,287 thousand in 2019 to Ps.51,732 thousand in 2020, due primarily to a 54.8% decrease in revenues from car parking, a 14.8% decrease in food and beverage, and a 44.3% decrease in revenues from VIP lounges. The sum of aeronautical and non-aeronautical revenues decreased by 39.9% from Ps.684,265 thousand in 2019 to Ps.411,294 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 5.8% from Ps.272.8 in 2019 to Ps.288.5 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Durango airport, aeronautical revenues decreased by 47.0% from Ps.150,130 thousand in 2019 to Ps.79,515 thousand in 2020, due primarily to a 51.6% decrease in passenger charges, as a result of a 48.5% decrease in passenger traffic. Non-aeronautical revenues decreased by 17.5% from Ps.13,433 thousand in 2019 to Ps.11,083 thousand in 2020, due primarily to a 47.6% decrease in revenues from car parking, a 58.4% decrease in retail operations and a 21.9% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 44.6% from Ps.163,563 thousand in 2019 to Ps.90,598 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.7% from Ps.308.4 in 2019 to Ps.332.1 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the San Luis Potosí airport, aeronautical revenues decreased by 38.0% from Ps.174,340 thousand in 2019 to Ps.108,045 thousand in 2020, due primarily to a 43.8% decrease in passenger charges, as a result of a 51.9% decrease in passenger traffic. Non-aeronautical revenues decreased by 20.0% from Ps.35,631 thousand in 2019 to Ps.28,508 thousand in 2020, due primarily to a 57.3% decrease in revenues from car parking, a 50.3% decrease in revenues from VIP lounges and a 9.5% decrease in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 35.0% from Ps Ps.209,971 thousand in 2019 to Ps.136,553 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 8.7% from Ps.237.3 in 2019 to Ps.258.0 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Tampico airport, aeronautical revenues decreased by 62.3% from Ps.197,161 thousand in 2019 to Ps.74,330 thousand in 2020, due primarily to a 69.5% decrease in passenger charges, as a result of a 63.4% decrease in passenger traffic. Non-aeronautical revenues decreased by 37.9% from Ps.28,056 thousand in 2019 to Ps.17,414 108 thousand in 2020, due primarily to a 59.0% decrease in revenues from car parking, a 33.2% decrease in revenues from car rentals and a 70.8% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 59.3% from Ps.225,217 thousand in 2019 to Ps.91,744 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 10.8% from Ps.303.0 in 2019 to Ps.335.7 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Torreón airport, aeronautical revenues decreased by 52.9% from Ps.201,446 thousand in 2019 to Ps.94,892 thousand in 2020, due primarily to a 56.7% decrease in passenger charges, as a result of a 54.7% decrease in passenger traffic. Non-aeronautical revenues decreased by 26.4% from Ps.23,683 thousand in 2019 to Ps.17,425 thousand in 2020, due primarily to a 58.7% decrease in revenues from car parking , a 50.8% decrease in retail operations and a 14.9% decrease in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 50.1% from Ps.225,129 thousand in 2019 to Ps.112,317 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 9.3% from Ps.312.8 in 2019 to Ps.341.8 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Zacatecas airport, aeronautical revenues decreased by 49.6% from Ps.141,500 thousand in 2019 to Ps.71,292 thousand in 2020, due primarily to a 52.1% decrease in passenger charges, as a result of a 51.1% decrease in passenger traffic. Non-aeronautical revenues decreased by 24.6% from Ps.13,945 thousand in 2019 to Ps.10,512 thousand in 2020, due primarily to a 54.0% decrease in revenues from car parking, a 37.1% decrease in retail operations and a 24.4% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 47.4% from Ps.155,445 thousand in 2019 to Ps.81,804 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit at the Zacatecas airport increased by 7.7% from Ps.325.4 in 2019 to Ps.350.5 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. Border Destinations At the Ciudad Juárez airport, aeronautical revenues decreased by 47.5% from Ps.380,271 thousand in 2019 to Ps.199,685 thousand in 2020, due primarily to a 49.6% decrease in passenger charges, as a result of a 50.5% decrease in passenger traffic. Non-aeronautical revenues decreased by 32.6% from Ps.55,999 thousand in 2019 to Ps.37.736 thousand in 2020, due primarily to a 44.3% decrease in revenues from car parking, a 46.5% decrease in food and beverage and a 33.4% decrease in car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 45.6% from Ps.436,270 thousand in 2019 to Ps.237,421 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.1% from Ps.265.5 in 2019 to Ps.284.3 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. At the Reynosa airport, aeronautical revenues decreased by 48.9% from Ps.113,515 thousand in 2019 to Ps.58,010 thousand in 2020, due primarily to a 50.8% decrease in passenger charges, as a result of a 52.3% decrease in passenger traffic. Non-aeronautical revenues decreased by 37.0% from Ps.18,240 thousand in 2019 to Ps.11,500 thousand in 2020, due primarily to a 45.6% decrease in revenues from car parking, a 24.8% decrease in car rentals and a 67.6% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 47.2% from Ps.131,755 thousand in 2019 to Ps.69,510 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 10.0% from Ps.271.0 in 2019 to Ps.298.2 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic. Hotels At our Terminal 2 NH Collection Hotel, total revenues decreased by 56.8% from Ps.255,393 thousand in 2019 to Ps.110,299 thousand in 2020, due primarily to a decrease in the annual average occupancy rate from 84.1% in 2019 to 40.2% in 2020. The revenues of the Terminal 2 NH Collection Hotel are dependent on passenger traffic traveling to and from the Mexico City International Airport. At our Hilton Garden Inn Hotel at the Monterrey airport, total revenues decreased by 68.5% from Ps.103,474 thousand in 2019 to Ps.32,614 thousand in 2020, due primarily to a decrease in the annual average occupancy rate from 109 77.7% in 2019 to 36.1% in 2020. The revenues of the Hilton Garden Inn Hotel are dependent on passenger traffic traveling to and from the Monterrey international airport. The full extent of the ongoing impact of COVID-19 on the Company’s longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty. Even where formal advisories and restrictions have been lifted or reduced, the increased spread or resurgence of COVID-19 could result in the reintroduction of or increase in such formal advisories and restrictions. We expect that the COVID-19 pandemic will continue to severely impact the countries and regions where we operate in 2021. On April 6, 2020, we temporarily suspended services Industrial Park At our OMA-VYNMSA Aero Industrial Park, total revenues increased by 34.5% from Ps.41,981 thousand in 2019 to Ps.56,454 thousand in 2020, due primarily to an increase in the number of leased commercial warehouses. An additional warehouse was developed, which construction ended in January 2021. with an area of 4,849 square meters (52,192 square-feet). Operating Results Cost of Services Our cost of services decreased by 19.7% from Ps.954,207 thousand in 2019 to Ps.765,958 thousand in 2020, mainly as a result of our cost cutting initiatives that resulted in a decrease of 30.6% in utilities, mainly as a result of a decrease in electricity consumption of 19,556 thousand KwH, equivalent to a reduction of 32.5%, Major maintenance provision Our Administrative Expenses Our administrative expenses decreased by 4.5% from Technical Assistance Fee Our technical assistance fee, which is paid in U.S. dollars, decreased by 45.9% from Ps.150,108 thousand in 2019 to Ps.81,164 thousand in 2020, as a result of 110 Concession Tax Our concession tax decreased by 45.2% from Ps.363,561 thousand in 2019 to Ps.199,202 thousand in 2020, as a result of a decrease in aeronautical and non-aeronautical Depreciation and Amortization Our depreciation and amortization increased 4.8% from Ps.415,252 thousand in 2019 to Ps.435,344 thousand in 2020, due primarily to an increase in the investment to improve our concessions’ assets during 2020. Income from Operations On a consolidated basis, our operating income decreased by 64.5% from Ps.4,855,306 thousand in 2019 to Ps.1,721,468 thousand in 2020, due primarily to a 37.1% decrease in total revenue. Our operating margin decreased from 56.9% in 2019 to 32.1% in 2020, and considering only the sum of our aeronautical and non-aeronautical revenues, our operating margin decreased from 64.2% in 2019 to 41.8% in 2020. Operating Income by Segment The figures presented in this section take into account the intercompany transactions described above under “Item 5. Operating and Financial Review and Prospects— On an airport-by-airport basis, the principal contributors to our operating income in 2020 were the Monterrey airport (Ps.445,952 thousand), the Culiacán airport (Ps.92,341 thousand), the Mazatlán airport (Ps.63,103 thousand), the Ciudad Juárez airport (Ps.60,241 thousand), the Chihuahua airport (Ps.50,038 thousand), and the San Luis Potosí airport (Ps.36,648 thousand). Metropolitan Destination Operating income for the Monterrey airport decreased by 5.8% from Ps.473,615 thousand in 2019 to Ps.445,952 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.2,327,084 thousand in 2019 to Ps.855,891 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Tourist Destinations Operating income for the Acapulco airport decreased by 59.9% from Ps.53,812 thousand in 2019 to Ps.21,588 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.100,121 thousand in 2019 to Ps.14,580 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Mazatlán airport increased by 19.9% from Ps.52,616 thousand in 2019 to Ps.63,105 thousand in 2020, due primarily to a decrease in operating costs. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.225,406 thousand in 2019 to Ps.105,593 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Zihuatanejo airport decreased by 70.3% from Ps.43,614 thousand in 2019 to Ps.12,960 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.83,124 thousand in 2019 to Ps.14,855 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. 111 Regional Destinations Operating income for the Chihuahua airport decreased by 25.7% from Ps.67,379 thousand in 2019 to Ps.50,038 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.290,026 thousand in 2019 to Ps.82,815 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Culiacán airport decreased by 4.1% from Ps.96,278 thousand in 2019 to Ps.92,341 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.479,985 thousand in 2019 to Ps.175,756 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Durango airport decreased by 55.6% from Ps.23,014 thousand in 2019 to Ps.10,220 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.90,542 thousand in 2019 to Ps.24,135 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the San Luis Potosí airport increased by 24.0% from Ps.27,938 thousand in 2019 to Ps.34,648 thousand in 2020, due primarily to a decrease in operating costs. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.107,623 thousand in 2019 to Ps.41,086 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Tampico airport decreased by 68.1% from Ps.31,808 thousand in 2019 to Ps.10,158 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.128,629 thousand in 2019 to Ps.3,441 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Torreón airport decreased by 25.3% from Ps.31,658 thousand in 2019 to Ps.23,660 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.131,350 thousand in 2019 to Ps.33,913 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Zacatecas airport decreased by 33.3% from Ps.31,135 thousand in 2019 to Ps.20,756 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.76,622 thousand in 2019 to Ps.29,349 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Border Destinations Operating income for the Ciudad Juárez airport decreased by 1.8% from Ps.61,374 thousand in 2019 to Ps.60,242 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.271,070 thousand in 2019 to Ps.102,706 thousand in 2020, which declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Operating income for the Reynosa airport decreased by 65.2% from Ps.26,375 thousand in 2019 to Ps.9,171 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.55,895 thousand in 2019 to Ps.8,135 thousand in 2020, which 112 declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues. Hotels Operating income for our Terminal 2 NH Collection Hotel decreased from Ps.77,325 thousand in 2019 to an operating loss of Ps.8,609 thousand in 2020 due primarily to a decrease in revenues. Operating income for our Hilton Garden Inn Hotel decreased from Ps.32,345 thousand in 2019 to an operating loss of Ps.6,918 thousand in 2020 due primarily to a decrease in revenues. Industrial Park Operating income for our OMA-VYNMSA Industrial Park increased from Ps.15,622 thousand in 2019 to Ps.24,082 thousand in 2020 which reflected an increase in revenues. Exchange Gain (Loss) We had a net exchange gain in 2020 of Ps.79,522 thousand, as compared to a loss of Ps. 50,878 thousand in 2019 due primarily to the depreciation of the Mexican peso in relation to the U.S. dollar on our U.S. dollar cash balances in 2020. The exchange rate used to convert our dollar-denominated liabilities from pesos to U.S. dollars was Ps.19.9087 to U.S.$1.00 as of December 31, 2020 and Ps.18.8727 to U.S.$1.00 as of December 31, 2019. Our cash balance denominated in U.S. dollar was Ps.78,940 thousand on December 31, 2019 and Ps.79,552 thousand on December 31, 2020. Net Interest Expense Our net interest expense increased by 50.7% from Ps.204,772 thousand in 2019 to Ps.308,610 thousand in 2020, as a result of higher interest expense due to the unwinding of our major maintenance provision as well as a reduction in interest income due to lower interest rates. During 2020, the annualized interest rates on 28-day short-term Mexican treasury bills, or Certificados de la Tesorería de la Federación, consistently decreased from 7.3% on January 1, 2020 to 4.2% on December 31, 2020, with a yearly average of 5.3%. Income Taxes We recorded an income tax expense of Ps. 394,501 thousand in 2020, as compared to Ps.1,372,222 thousand in 2019, due primarily to a decrease in revenues and the lower taxable income. Our current income tax decreased from Ps.1,329,867 thousand in 2019 to Ps.480,232 thousand in 2020 as a result of decreased revenues. Our effective tax rate was 29.8% in 2019 and 26.4% in 2020. The effective tax rates in 2019 and 2020 differed from the statutory rate of 30%, as a result of the permanent differences related primarily to inflationary effects for tax purposes. Net Income and Comprehensive Income Our net income decreased by 66.0% from Ps.3,227,434 thousand in 2019 to Ps.1,097,879 thousand in 2020. Comprehensive income attributable to the controlling interest decreased by 66.2% from Ps.3,210,814 thousand in 2019 to Ps.1,085,231 thousand in 2020. Earnings per share were Ps.2.8038 and earnings per ADS were Ps.22.4304 in 2020. 113 Results of Operations for the Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018. For a comparison of the results of operations for the year ended December 31, 2019 as compared to the year ended December 31, 2018, see “Item 5—Operating and Financial Review and Prospects—Results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018” in our Fiscal Year 2019 Form 20-F. Liquidity and Capital Resources Sources of Liquidity Historically, we covered all of our liquidity needs, including our obligations under the Master Development Programs, with cash flows generated by the operations of our subsidiaries and incurred no significant debt. We modified our strategy to finance our operations and incorporated debt as a means to fund capital investments. In the future, we hope to continue covering our liquidity needs with cash flows generated by the operations of our subsidiaries, with a reduction and control of costs and operational improvements to maximize profitability, and with the incurrence of additional debt to finance expenditures pursuant to our Master Development Program obligations, other capital expenditures and working capital, and make our capital structure more efficient. In November 2020, we received approval from the Ministry of Communications and Transportation, through the AFAC, of the Master Development Program for each of our thirteen airports, corresponding to the 2021-2025 period. Total investments approved amount to Ps.12,586,901 thousand in pesos as of December 31, 2020. As a result, in our opinion, our cash flows from operations are sufficient for our present operating obligations; however, we may, from time to time, have to incur in additional debt to finance our investment expenditures pursuant to our Master Development Program obligations, as well as other strategic investment expenditures. As of the date of this report, we have been able to timely service our debt and other obligations, without having to take advantage of any available payment deferrals, forbearance periods, or other concessions. For a discussion on our Master Development Program obligations, see “Item 4. Information on the Company—Master Development Programs and Capital Expenditures—Revenue Regulation.” Pursuant to our Master Development Programs, in 2021 through 2025, we anticipate investing Ps. 12,586,901 thousand as follows: Expected Investments Under Master Development Programs by Category for 2021 to 2025
Our committed investments pursuant to our Master Development Programs for 2021 amount to Ps.2,565,502 thousand. Our committed investment for 2021 includes investments for additional capacity and equipment, among others. See “Item 4. Information on the Company—Master Development Programs and Capital Expenditures.” 114 Cash Flows Our treasury monitors cash flows on a daily, monthly and annual basis to plan and determine the management, sources and uses of resources, as well as to meet our capital and debt service obligations at all times, and to improve our working capital and capital structure. As of December 31, 2018, 2019 and 2020, we had Ps.2,958,902 thousand, Ps.3,429,873 thousand and Ps.2,958,804 , respectively, of cash and cash equivalents, of which 44.3%, 43.4% and 53.0% respectively, was denominated in U.S. dollars. We invested these resources in financial instruments in accordance with our investment policy. In 2020, we generated Ps. 1,303,478 thousand in cash flows from operating activities of which Ps. 2,569,574 thousand was directly from operating activities and was offset mainly by Ps.747,867 thousand of income tax paid, Ps. 103,704 thousand of major maintenance expenses and Ps. 94,229 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.1,324,430 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.528,888 thousand, mainly for payment of Ps.320,866 thousand in interest and Ps.150,000 thousand in the repurchase of shares. In 2019, we generated Ps.3,716,524 thousand in cash flows from operating activities of which Ps.5,554,608 thousand was directly from operating activities and was offset mainly by Ps.1,324,834 thousand of income tax paid, Ps.305,133 thousand of major maintenance expenses and Ps.60,949 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.952,227 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.2,246,461 thousand, mainly for payment of Ps.1,598,681 thousand in dividends and Ps.327,309 thousand in interest. In 2018, we generated Ps.3,709,346 thousand in cash flows from operating activities of which Ps.4,764,277 thousand was directly from operating activities and was offset mainly by Ps.995,258 thousand of income tax paid, Ps.139,320 thousand of major maintenance expenses and Ps.59,849 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.1,088,373 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.1,940,463 thousand, mainly for payment of Ps.1,605,736 thousand in dividends and Ps.323,070 thousand in interest. Indebtedness Short-Term Indebtedness As of April 22, 2021, we had unused lines of credit available for short-term issuances totaling Ps.650,000 thousand. Long-Term Indebtedness On March 26, 2013, we issued Ps.1,500,000 thousand in 10-year peso-denominated notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered in 2011 (the “2011 Indenture”). Interest payments are made on a semiannual basis at a fixed annual interest rate of 6.47%. The principal amount will be repaid at maturity on March 14, 2023. The Acapulco, Ciudad Juárez, Culiacan, Chihuahua, Mazatlán, Monterrey, Tampico, Torreón and Zihuatanejo airports act as guarantors under these notes. The net proceeds from the placement were used to prepay existing debt and were used to fund committed investments under the Master Development Programs for our 13 airports, as well as for strategic investments. The notes received ratings of mxAA+ by Standard and Poor’s and AA+ (mex) by Fitch Ratings at the moment of the issuance. Currently our long-term debt has a mxAAA by Standard and Poor’s and AA+ (mex) by Fitch Ratings and Baa1/Aaa.mx by Moody’s. The principal covenants and the events of default under the indenture pursuant to which these notes were issued (the “2013 Indenture”) are described below. 115 Covenants ●We will preserve our legal existence and that of our guarantors and will maintain an ongoing business. ●We will do what is necessary to ensure that our obligations under the notes constitute our direct and unsecured obligations and that they have the same priority of payment, in the case of bankruptcy, as the rest of its direct and unsecured obligations, except for priorities established by the operation of law. ●In the event of a Change of Control (as defined in the 2013 Indenture), we will be obligated to perform and initiate, through the Mexican Stock Exchange, a public offer to purchase with respect to the notes no more than 15 business days after the occurrence of such Change of Control. We shall offer, and the holders will have the right to accept, the repurchase of the notes in circulation in exchange for a price equal to 101% of the nominal value of the notes plus the interest accrued and not paid through the date of repurchase. ●We cannot merge, divide, dissolve or liquidate, nor can we permit any of our subsidiaries to merge, divide, dissolve or liquidate, except for (i) mergers in which we or the subsidiary, as the case may be, is the surviving company, (ii) mergers in which the entity created by the merger assumes our obligations, (iii) mergers that do not imply a Change in Control or (iv) dissolutions and liquidations of subsidiaries that we consider advantageous in making our corporate structure more efficient and that do not directly result in an event of default. ●We cannot sell, rent or otherwise dispose of Important Assets (as defined in the 2013 Indenture) (including the share capital of any subsidiary), nor permit that our subsidiaries do so, except for (i) sales in the ordinary course of business, (ii) sales of obsolete or discontinued equipment and (iii) sales between subsidiaries or between us and our subsidiaries. ●We cannot incur nor permit our subsidiaries to incur any lien, except (i) if they are permitted liens or (ii) if, concurrently with the creation of any lien, we guarantee our obligations under the notes in the same manner. Events of Default ●If we do not pay interest within three business days following a payment date. ●If we disclose financial, accounting or legal information to the public that is incorrect or false in any important respect, and such information is not corrected within 15 business days from the date on which any responsible officer had knowledge of such a situation. ●If we or our subsidiaries breach any of the obligations incurred with the issuance of notes, with the understanding that it is considered a breach if the obligations are not remedied within 30 calendar days of the date on which we receive a notification from the common representative of the holders in which the breach of obligation is specified. ●If the terms and conditions of the concessions are modified in such a manner that they limit or negatively and significantly affect the rights that they presently afford to us or to our subsidiaries, or if, for any reason, a governmental authority confiscates, rescues or seizes the installations and operations of an airport operated by us by means of a final and unappealable resolution or if a concession is revoked and terminated by means of a final and unappealable resolution. ●If we or our subsidiaries do not make a payment on a payment date of principal or interest of any important debt or if an event of default is declared with respect to any important debt that obligates us or our subsidiaries to pay an amount greater than U.S.$10.0 million or its equivalent in any other currency before such debt’s scheduled maturity. 116 ●If we or any of our subsidiaries are declared to be in bankruptcy by a final and unappealable resolution or if we or any of our subsidiaries admit in writing to our inability to pay our debts by maturity. ●If any definitive judicial resolution is issued against us or our subsidiaries that, individually or together, with any other definitive judicial resolution exceeds the amount of U.S.$10.0 million or its equivalent in other currencies and said amount was not paid or guaranteed within 30 calendar days. ●If we reject, question or dispute the validity or enforceability of the notes. ●If we do not begin or perform the repurchase offer when a Change of Control has occurred. ●If on the 30th day business day after the audited annual financial statements are available, the notes are not secured by guarantors that fulfill minimum requirements. As of the date of this annual report, we were in compliance with these covenants, and no event of default had been triggered. None of our credit or other debt agreements contain financial covenants. We, through seven of our airports, have maintained lines of credit with Private Export Funding Corporation (backed by Ex-Im Bank) for U.S.$20.4 million, pursuant to agreements dated October 15, 2010 and December 14, 2010, valid through December 21, 2021. As of December 31, 2020, the balance of credit was U.S.$678,000. These lines of credit are guaranteed by checked-baggage inspection equipment acquired by the airports. The interest rate is three-month LIBOR plus 125 basis points. On June 16, 2014, OMA issued Ps.3,000,000 thousand in seven-year notes (certificados bursátiles) at a fixed rate of 6.85% that were registered with the Mexican National Registry of Securities. The purpose of the issuance was to fix interest payments and to extend the maturity profile of debt by prepaying the Ps.1,300,000 thousand in floating-rate notes issued under the 2011 Indenture, and to finance the Master Development Programs and strategic investments. The floating-rate Ps. notes issued under the 2011 Indenture were paid on July 11, 2014. The principal covenants and the events of default under the indenture pursuant to which these notes were issued (the “2014 Indenture”) are substantially similar to those under the 2013 Indenture. On April 19, 2021, the notes issued under the 2014 indenture were paid in full. On April 16, 2021, OMA issued Ps.1,000,000 thousand in five-year green notes (certificados bursátiles verdes) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the “2021 Green Variable Rate Notes Indenture”). Interest payments are made every 28 days at a variable annual interest rate of TIIE 28 + 0.75%. The principal amount will be repaid at maturity on April 10, 2026. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance is to finance green investments pursuant to our Master Development Programs for 2021-2025. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance. ●As part of the issuance process of the green notes, in March, 2021, OMA created a Green Bond Framework (the “Framework”), in order to meet the commitments therein and finance projects that will deliver environmental benefits to support the Company’s business strategy and vision. Under the Framework, the Company can issue bonds, where proceeds are used to finance eligible green projects, as defined therein. The Framework is in accordance with the International Capital Market Association (“ICMA”) Green Bond Principles (GBP) 2018 and also describes the manner in which a green bond issued by the Company supports and contributes towards meeting the United Nations Sustainable Development Goals. ●The majority of resources from the green bond are focused on renewable energy and energy efficiency projects, particularly on the implementation of solar power throughout our airports, as well as other projects that reduce energy consumption. In order to assure proper implementation, OMA has established a Green Bond Working Group, that is responsible for the review and selection of projects that will qualify as eligible green projects. This group is chaired by the Chief Executive Officer of the Company and will meet on a semi-annual basis. Finally, the Company appointed Sustainalytics to 117 provide an external review on the Framework, which issued its opinion on March 16, 2021. Sustainalytics opined that the Framework is credible and impactful and aligns with the four core components of the ICMA Green Bond Principles (GBP) 2018. For more information about the framework and Sustainalytics’ independent party opinion, visit OMA’s Investor Relations website at http://ir.oma.aero. On April 16, 2021, OMA issued Ps.2,500,000 thousand in seven-year notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an Indenture into which we entered on that date (the 2021 Fixed Rate Notes Indenture). Interest payments are made on a semiannual basis at a fixed annual interest rate of 7.83%. The principal amount will be repaid at maturity on April 7, 2028. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to extend the maturity profile of debt by prepaying the Ps.3,000,000 thousand in fixed-rate notes issued under the 2014 Indenture. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance. The principal covenants and the events of default under the 2021 Green Variable Rate Notes Indenture and the 2021 Fixed Rate Notes Indenture are described below: ●We will preserve our legal existence and that of our guarantors and will maintain an ongoing business. ●We will do what is necessary to ensure that our obligations under the notes constitute our direct and unsecured obligations and that they have the same priority of payment, in the case of bankruptcy, as the rest of its direct and unsecured obligations, except for priorities established by the operation of law. ●We cannot merge, divide, dissolve or liquidate, nor can we permit any of our guarantors to merge, divide, dissolve or liquidate, except for (i) mergers in which we or the subsidiary, as the case may be, is the surviving company, and (ii) mergers in which the entity created by the merger assumes our obligations. ●We and the guarantors cannot sell or otherwise dispose of assets, except for (i) sales in the ordinary course of business, (ii) sales agreed upon prior to the issuance of the notes, or (iii) sales that would not cause a material adverse effect on the Issuer or the guarantors. ●We cannot incur nor permit our subsidiaries to incur any lien, except (i) if they are permitted liens or (ii) if, concurrently with the creation of any lien, we guarantee our obligations under the notes in at least the same manner. ●We cannot pay dividends if an Event of Default has occurred and is continuing. Events of Default ●If we do not pay interest within 3 business days following a payment date. ●If we or any guarantor are declared to be in bankruptcy or if we or any of our subsidiaries admit in writing to our inability to pay our debts by maturity. ●If we or any of the guarantors reject, question or dispute the validity or enforceability of the notes. ●If we disclose financial, accounting or legal information to the public that is incorrect or false in any important respect, and such information is not corrected within 10 business days from the date on which any responsible officer had knowledge of such a situation. ●If the terms and conditions of the concessions are modified in such a manner that they limit or negatively and significantly affect the rights that they presently afford to us or to our subsidiaries, or if, 118 for any reason, a governmental authority confiscates, rescues or seizes the installations and operations of an airport operated by us by means of a final and unappealable resolution or if a concession is revoked and terminated by means of a final and unappealable resolution. ●If we or the guarantors do not make a payment on a payment date of principal or interest of any important debt or if an event of default is declared with respect to any important debt that obligates us or our subsidiaries to pay an amount greater than U.S.$20.0 million or its equivalent in any other currency before such debt’s scheduled maturity. ●If we or the guarantors breach any of the obligations incurred with the issuance of notes, with the understanding that it is considered a breach of the obligations if not remedied within 30 calendar days of the date on which we receive a notification from the common representative of the holders in which the breach of obligation is specified. ●If any definitive judicial resolution is issued against us or the guarantors that, individually or together with any other definitive judicial resolution exceeds the amount of U.S.$20.0 million or its equivalent in other currencies, and said amount was not paid or guaranteed within 30 calendar days. As of the date of this annual report, we are in compliance with these covenants, and no event of default has been triggered. We did not access revolving lines of credit or raise capital in the public or private markets to address any liquidity needs as a result of the COVID-19 pandemic. Total Indebtedness The following table sets forth our total indebtedness at the closing of each of the periods indicated:
Derivative Financial Instruments As of December 31, 2020, we were not party to and did not hold any financial derivative instrument. Other Restrictions As of December 31, 2020, restrictions imposed by debt instruments did not have any impact on our ability to fulfill our capital and cash obligations. Principal Treasury Policies and Procedures The operation of the treasury department is based on various policies, with which we were in compliance as of December 31, 2020. The most significant policies currently in effect are as follows: ●Investments in Financial Instruments. The Company shall invest its cash balance in a secure and diversified portfolio, including investments of varying terms and with multiple financial institutions, in accordance with the following: ●The Company shall invest in instruments with a minimum credit rating of MxAA in Mexico or its equivalent from a recognized rating agency. 119 ●The investment period shall never exceed 180 days. ●No more than 50% of consolidated cash shall be invested in a single financial institution. ●The financial institution with which the investment is made shall be recognized in the Mexican market and registered with the CNBV and shall have had positive earnings for the past three years and a minimum credit rating of MxA in Mexico or its equivalent from a recognized rating agency. ●Investments in Foreign Financial Instruments. The Company shall invest its cash balance in U.S. dollars in a secure and diversified portfolio, including investments of varying terms and with multiple financial institutions, in accordance with the following: ●Company shall invest in financial institutions recognized by the laws under the regulation of the United States, and by the Federal Reserve (FED), a minimum shareholders’ equity of U.S.$500 million, a minimum unsecured credit rating of A2 (Global rating) by Moody’s or A (global rating) by Standard and Poor’s. ●The Company shall invest in instruments like certificates of deposit, checkbook deposits, checking accounts or money market funds with the highest credit rating from Moody’s or Standard and Poor’s through an investment account of the Foreign Financial Institution Authorized. ●The investment period shall never exceed 90 days. ●Indebtedness. The Company shall comply with any debt restrictions established in its debt agreements or in related parties debt agreements that include any restriction on the Company’s debt level. ●Derivative Financial Instruments. The Company may only invest in derivative financial instruments that are strictly for coverage, with the objective of setting maximum financial costs and established on a national value. The derivative financial investments shall be tested for effectiveness, the type of coverage shall be designated, and calculations of the Value at Risk or its equivalent will be validated with a third party. The counterparty shall have a minimum risk rating of MxAA in Mexico or the equivalent international risk rating from a recognized rating agency. ●Related-Party Transactions. Related-party transactions shall be entered into on market terms in accordance with the opinion of an external expert. Related-party transactions that exceed Ps.1,500 thousand in a single transaction or Ps.10,000 thousand in a series of transactions shall be authorized by the Board of Directors. ●Loans Between Affiliates. Loans between affiliates shall only be vertical (from the holding company to its subsidiaries and from a subsidiary to the holding company) and never horizontal (between subsidiaries). Such loans shall be made at market rates and within the parameters established in annual price and transfer studies. ●Payment to Service Providers. Payment to service providers shall be made within 30 calendar days after the date of receipt of the bill; provided that there may be special cases in which this period is shortened or lengthened. ●Share Repurchase. The Company carries out repurchases of its shares in compliance with various policies, including, but not limited to: (i) being up-to-date on payment of cumulative dividends for Series BB shares, (ii) being up-to-date on payment of obligations derived from debt instruments registered with the Mexican National Registry of Securities, (iii) purchasing shares at market price, 120 except with regard to public offerings or auctions authorized by the CNBV and (iv) ensuring that there are no relevant events that have not been disclosed to the investing public. Principal Uses of Capital Resources Our capital resources are mainly used to comply with the Master Development Programs (which include capital expenditures, major maintenance and other expenditures) and to invest in other capital expenditures necessary to accommodate the growth of our business. The following table details our actual expenditures made during 2018, 2019 and 2020 and their classification in our consolidated financial statements for such periods:
In 2020, we spent Ps.1,401,483 thousand on capital expenditures, principally in connection with works to improve our terminal and operating infrastructure. In 2019, we spent Ps.1,048,924 thousand on capital expenditures, principally in connection with works to improve our terminals. In 2018, we spent Ps.1,314,363 thousand on capital expenditures, principally in connection with works to improve our terminals. We currently intend to fund our commitments pursuant to the Master development programs, other capital expenditures and working capital required by our business operations through cash flows generated from our operations and through the issuance of additional debt as deemed necessary by our management to comply with our obligations under the Master Development Programs. For a discussion on our Master Development Program obligations, see “Item 4. Information on the Company—Master Development Programs and Capital Expenditures—Revenue Regulation.” Share Repurchase Program On April 21, 2019, our shareholders authorized the use of an amount of up to Ps.1,500 million for repurchases of Series B shares until the next annual shareholders’ meeting approved the 2019 results. On July 7, 2020, our shareholders authorized an increase of the share purchase reserve to Ps. 1,500 million and the use up to such amount to repurchase Series B shares until the next annual shareholders’ meeting approved the 2020 results. On April 21, 2021, our shareholders authorized the use of an amount of up to Ps. 1,500 million for the repurchase of Series B shares until the next annual shareholders’ meeting approves the 2021 results. Our share repurchase program started in October 2007. The operation of our share repurchase program generates cash inflow and cash outflow depending on the nature of the transaction (buying or selling). For the year ended December 31, 2018 the share repurchase program generated a cash flow of Ps.0, for the year ended December 31, 121 2019 the share repurchase program generated a cash outflow of Ps.244,201 thousand, and for the year ended December 31, 2020, the share repurchase program generated a cash outflow of Ps.150,000 thousand. On December 31, 2018, 2019, and 2020 the number of repurchased shares in treasury amounted to 324,507 and 2,145,651 and 0 respectively. At the Extraordinary Shareholders’ Meeting held on July 7, 2020, the shareholders approved the cancellation of 3,659,417 repurchased shares held in treasury. Critical Accounting Policies We prepare consolidated financial statements in conformity with IFRS. As such, we are required to make estimates, judgments and assumptions that affect (i) certain reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the date of the financial statements, and (iii) certain reported amounts of revenues and expenses during the reporting period. We base estimates and judgments on our historical experience and on various other reasonable factors that together form the basis for making judgments about the carrying values of our assets and liabilities. Our actual results may differ from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Our significant accounting policies are described in Note 4 to our consolidated financial statements. The Board of Directors approves our accounting policies, taking into consideration the advice of the Audit Committee. For additional information, see Note 4 to our consolidated financial statements. We believe our most critical accounting policies that result in the application of estimates and/or judgments are the following: IFRS 16, Leases IFRS 16 (issued by the IASB in January 2016), which establishes new or modified requirements regarding lease accounting. It introduced significant changes to the lessee’s accounting, eliminating the distinction between an operating and financial lease, requiring the recognition of an asset for use rights and a lease liability on the start date of all leases, except those considered to be short term or low value assets. In contrast to lessee accounting, the requirements for the lessor remain significantly unchanged. Details of the effects of the adoption of IFRS 16 are described in Note 18 of the financial statements. Deferred Income Taxes The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement and tax values of assets and liabilities. Our deferred income taxes as of December 31, 2018, 2019 and 2020 were prepared taking into account that we will only be obligated to pay the Mexican corporate income tax. Additionally, the Company’s subsidiaries have tax loss carryforwards available to be amortized in addition to other deferred income tax assets for which we assess their recoverability. We determine the recoverability of those assets based on our projections of future taxable income, which includes investments made under the Master Development Programs to which we are subject, as well as the maximum rates that we are able to charge, as established by the Mexican government. Employee benefits Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the consolidated statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. 122 Contingencies We are a party to a number of legal proceedings. Under IFRS, liabilities are recognized in the financial statements when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the loss is neither probable nor estimable or if the likelihood of a loss is remote, no amounts are recognized in the financial statements. The factors considered in this analysis are the legal merits of the case, as substantiated by the opinion of our legal advisors. Allowance for Doubtful Accounts The Company recognizes lifetime expected credit losses (ECL) for trade receivables and contract assets. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, including general economic conditions. Useful Lives of Long-Lived Assets Our long-lived assets correspond to concessions granted by the Mexican government, represented as an intangible asset, and property and equipment, represented as tangible assets. We review the estimated useful lives, residual values and depreciation and amortization methods of tangible and intangible long-lived assets at the end of each reporting period. The level of uncertainty associated with estimates of useful lives is mainly related to changes in the market conditions in which the tangible and intangible assets are used, as well as utilization volumes and technological development. Impairment of Tangible and Intangible Assets Excluding Goodwill Our management periodically evaluates the impairment of long-lived assets in order to determine whether there is evidence that those assets have suffered an impairment loss. If impairment indicators exist, the recoverable amount of assets is determined, with the help of independent experts, to determine the extent of the impairment loss, if any. Our management considers that the aggregate of all airport concessions is an “independent cash generating unit,” as each of our 13 airports formed part of the Central-North package included in the Mexican government’s original bidding process. In accordance with the terms established by the Mexican government, each of our 13 airports must be in operation, regardless of their individual results and are therefore evaluated for impairment on a consolidated basis. Our hotel segment is evaluated separately. Pursuant to IAS 36, during 2020 the effect of COVID-19 pandemic was deemed to be an indication of impairment. Accordingly management tested for impairment its concessions and hotels cash generating units, and concluded that no impairment charges were needed. We do not currently expect the COVID-19 pandemic to have a significant impact in the evaluation of impairment of our tangible and intangible assets, however, the severity and extent of the current COVID-19 pandemic may impact that determination. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a weighted average cost of capital that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss. Major Maintenance Provision We have an obligation to perform major maintenance activities in our airports, per the terms of our concession agreements. The provision is recognized as accrued at an amount that represents the best estimate of the present value of 123 future disbursements required to settle the obligation. Future disbursements are determined by considering the requirements of our Master Development Programs. The recognition of the major maintenance provision affects the results of the periods in which the infrastructure under concession becomes available for use through the date on which the maintenance and/or repair work is performed. For more information regarding recently-issued accounting standards and how they may affect us, see Note 4 to our consolidated financial statements. Off-Balance Sheet Arrangements Except for operating lease agreements and purchase obligations as disclosed in the contractual obligations table below, we are not party to any off-balance sheet arrangements. Tabular Disclosure of Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2020:
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