form20f.htm


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
For the fiscal year ended December 31, 2009

 
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
 
United Mexican States
(Translation of registrant’s name into English)
 
(Jurisdiction of incorporation or organization)
 
Aeropuerto Internacional de Monterrey
Zona de Carga
Carretera Miguel Alemán, Km. 24 s/n
66600 Apodaca, Nuevo León, Mexico
(Address of principal executive offices)

 
José Luis Guerrero
Aeropuerto Internacional de Monterrey
Zona de Carga
Carretera Miguel Aleman, Km. 24 s/n
66600 Apodaca Nuevo Leon, Mexico
+ 52 81 8625 4327
jlguerrero@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:
 
Name of each exchange
on which registered
American Depositary Shares each representing 8 Series B shares
 
The NASDAQ Stock Market LLC
Series B shares
 
The NASDAQ Stock Market LLC*
 
       __________________________________
 
 
*
Not for trading, but only in connection with the registration of American Depositary Shares, 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
 
341,200,000

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes o No T
 
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 o No T
 
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 þ No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes o No þ
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
U.S. GAAP o   IFRS o   Other þ
 
Indicate by check mark which financial statement item the registrant has elected to follow:
 
Item 17 o Item 18 þ
 
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 o No þ
 
 
 

 
 
TABLE OF CONTENTS
        Page
ITEM 1.
   
1
ITEM 2.
   
1
ITEM 3.
   
1
     
1
     
5
     
6
     
27
ITEM 4.
   
28
     
28
     
34
     
65
     
84
     
85
ITEM 4A.
   
86
ITEM 5.
   
86
ITEM 6.
   
116
ITEM 7.
   
125
     
125
     
127
ITEM 8.
   
129
     
129
     
132
ITEM 9.
   
134
     
134
     
137
ITEM 10.
   
137
     
151
     
152
     
152
     
154
ITEM 11.
   
155
ITEM 12.
   
155
ITEM 12A.
   
155
 
 
TABLE OF CONTENTS
(continued)
 
ITEM 12B.
   
155
ITEM 12C.
   
155
ITEM 12D.
   
155
ITEM 13.
   
157
ITEM 14.
   
157
ITEM 15.
   
157
ITEM 16.
   
160
ITEM 16A.
   
160
ITEM 16B.
   
161
ITEM 16C.
   
161
ITEM 16D.
   
161
ITEM 16E.
   
161
ITEM 16F.
   
162
ITEM 16G.
   
163
ITEM 17.
   
168
ITEM 18.
   
168
ITEM 19.
   
169


PART I
 
Identity of Directors, Senior Management and Advisers
 
Not applicable.
 
Offer Statistics and Expected Timetable
 
Not applicable.
 
Key Information
 
SELECTED FINANCIAL DATA
 
We publish our financial statements in Mexican pesos.  Pursuant to Mexican Financial Reporting Standards accepted in Mexico (Normas de Información Financiera), or MFRS, financial data for all periods up through December 31, 2009 in the financial statements included in Items 3, 5 and 8 and, unless otherwise indicated, throughout this Form 20-F have been restated in constant pesos as of December 31, 2007, and financial data for all periods from and after January 1, 2008 in the financial statements included in Items 3, 5 and 8 and unless otherwise indicated, throughout this Form 20-F are expressed in nominal pesos.
 
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. 13.06 to U.S.$1.00, the noon buying rate for Mexican pesos on December 31, 2009, as published by the Federal Reserve Bank of New York.  On May 28, 2010, the Federal Reserve Bank of New York’s noon buying rate for Mexican pesos was Ps. 12.86 to U.S.$1.00.
 
The following tables present a summary of our audited consolidated financial information and that of our subsidiaries for each of the periods indicated.  This information should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements, including the notes thereto.  Our consolidated financial statements are prepared in accordance with Mexican Financial Reporting Standards (“MFRS”, individually referred to as Normas de Información Financiera or “NIFs”), which differ in certain significant respects from generally accepted accounting principles in the United States, or U.S. GAAP.  A reconciliation to U.S. GAAP to our net income and total stockholders’ equity is also provided in this summary financial data.  I nformation relating to the nature and effect of the principal differences between MFRS and U.S. GAAP is presented in Note 24 to the consolidated financial statements.
 
In accordance with the guidelines set forth in NIF B-10, “Effects of Inflation,” calendar years 2008 and 2007 are considered noninflationary economic environments because the recording of inflation effects is only required in an environment where the cumulative inflation over the three preceding years is equal to or greater than 26%.  Therefore, from January 1, 2008, we suspended the recognition of the effects of inflation on our financial statements.  The amounts in the accompanying consolidated financial statements as of and for the years ended December 31, 2009 and 2008 are expressed in nominal values.
 
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 of America.  References in this annual report on Form 20-F to “pesos” or “Ps.” are to the lawful currency of Mexico.  We publish our financial statements in pesos.
 

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 summary financial and other information set forth below reflects our financial condition, results of operations and certain operating data since the year ended December 31, 2005.
 
   
Year ended December 31,
 
   
2005
   
2006
   
2007
   
2008
   
2009
 
   
(thousands of Mexican pesos)
   
(thousands of Mexican pesos)
   
(thousands of dollars) (1)
 
Statement of Income data:
                                   
MFRS:
                                   
Revenues:
                                   
Aeronautical services(2)
    1,192,249       1,370,968       1,549,827       1,617,195       1,526,965       116,918  
Non-aeronautical services(3)
    287,628       316,343       347,526       371,281       369,312       28,278  
Total revenues
    1,479,877       1,687,311       1,897,353       1,988,476       1,896,277       145,196  
Operating costs:
                                               
Costs of services
    389,037       397,465       420,777       460,074       457,767       35,052  
Administrative expenses
    244,707       237,475       256,730       317,069       320,770       24,561  
Technical assistance fee(4)
    40,016       49,541       57,416       55,604       51,710       3,959  
Concession tax(5) 
    72,643       84,635       98,307       101,642       94,756       7,255  
Depreciation and amortization:
                                               
Depreciation(6) 
    22,560       28,257       32,872       39,306       47,979       3,673  
Amortization(7) 
    205,246       263,839       303,330       327,413       363,911       27,865  
Total depreciation and amortization
    227,805       292,096       336,202       366,719       411,890       31,538  
Total operating costs
    974,208       1,061,212       1,169,432       1,301,108       1,336,893       102,365  
Income from operations
    505,669       626,099       727,921       687,368       559,384       42,831  
Other income (expenses) net
    3,853       (30,679 )     (7,584 )     104,792       10,051       770  
Net comprehensive financing income (cost)
    29,613       70,328       96,218       (11,451 )     (22,126 )     (1,694 )
Income before income taxes
    539,135       665,748       816,555       780,709       547,309       41,907  
Income tax expense
    158,029       196,511       785,363       238,906       77,785       5,956  
Consolidated net income
    381,106       469,237       31,192       541,803       469,524       35,951  
Basic and diluted earnings per share(8)
    0.9722       1.1874       0.0781       1.3672       1.1889       0.091  
Basic and diluted earnings per ADS(8)
    7.7778       9.4992       0.6248       10.9376       9.5112       0.728  
                                                 
U.S. GAAP:
                                               
Revenues
    1,479,878       1,687,311       1,897,353       1,988,476       1,896,277       145,196  
Income from operations
    600,249       697,879       811,103       804,380       663,929       50,837  
Consolidated net income
    445,812       548,798       (118,318 )     1,013,454       302,380       23,153  
Basic (loss) earnings per share(8)
    1.1459       1.4013       (0.2961 )     2.5574       0.7656       0.0586  
Diluted (loss) earnings per share(9)
    1.1372       1.3909       (0.2961 )     2.5386       0.7600       0.0582  
Basic (loss) earnings per ADS(8)
    9.1673       11.2110       (2.3688 )     20.4592       6.1248       0.4690  
Diluted (loss) earnings per ADS(9)
    9.0976       11.1271       (2.3688 )     20.3088       6.0800       0.4655  
                                                 
Other operating data:
                                               
Total terminal passengers (thousands of passengers)(10)
    10,599       11,784       14,212       14,061       11,518       11,518  
Total air traffic movements (thousands of movements)
    362       383       424       387       327       327  
Total revenues per terminal passenger(11)
    139       143       134       141       165       13  



   
Year ended December 31,
 
   
2005
   
2006
   
2007
   
2008
   
2009
 
   
(thousands of Mexican pesos)
   
(thousands of Mexican pesos)
   
(thousands of dollars) (1)
 
Balance Sheet data:
                                   
MFRS:
                                   
Cash and cash equivalents
    1,706,604       1,672,994       1,756,704       257,420       267,734       20,500  
Total current assets
    2,009,260       2,143,271       2,084,057       926,245       884,405       67,720  
Airport concessions—net
    781,971       764,198       746,426       728,655       710,882       54,432  
Rights to use airport facilities—net
    4,252,072       4,126,235       4,000,390       3,874,510       3,748,762       287,042  
Total assets
    8,591,575       8,873,950       9,134,388       9,859,832       10,276,678       786,884  
Current liabilities
    155,331       184,236       407,096       1,145,793       1,037,603       79,449  
Total liabilities
    744,522       891,999       1,660,046       2,330,072       2,601,715       199,214  
Total stockholders’ equity(12) 
    7,847,053       7,981,951       7,474,342       7,529,760       7,674,963       587,670  
U.S. GAAP:
                                               
Cash and cash equivalents
    1,706,604       1,672,994       1,756,704       257,420       267,734       20,500  
Total current assets
    2,009,260       2,143,271       2,084,057       929,695       884,405       67,719  
Assets under concession (“Rights to use airport facilities” under MFRS)
    957,456       917,497       877,388       837,291       797,545       61,068  
Total assets
    5,220,539       5,495,086       5,263,692       6,292,200       6,614,260       506,452  
Current liabilities
    184,870       203,844       421,398       1,158,298       1,037,603       79,449  
Total liabilities
    240,789       264,653       680,277       1,203,591       1,538,221       117,781  
Total stockholders’ equity
    4,979,750       5,230,433       4,583,415       5,088,609       5,076,039       388,671  
Dividend per share
            1.1167       1.1103       1.0856       1.0000       0.0766  
Other data:
                                               
MFRS:
                                               
Net cash flows from operating activities1
                            735,464       448,811       34,365  
Net cash flows provided by financing activities
                            (352,146 )     158,637       12,148  
Net cash flows generated by (used in) investing activities
                            (1,882,602 )     (597,134 )     (45,724 )
(Decrease) increase in cash and cash equivalents
                            (1,499,284 )     10,314       789  
Net resources generated by operating activities
    701,405       729,090       1,070,588                          
Net resources used in financing activities
            (322,465 )     (328,868 )                        
Net resources used in investing activities
    (293,516 )     (440,235 )     (658,010 )                        
Increase (decrease) in cash and cash equivalents
    407,889       (33,610 )     83,710                          
U.S. GAAP(13):
                                               
Net cash provided by operating activities
    692,739       694,103       1,036,011       799,809       431,757       33,059  
Net cash used in investing activities
    (286,083 )     (458,262 )     (657,018 )     (1,948,393 )     (619,227 )     (47,414 )
Net cash used in financing activities
    -       (322,465 )     (328,868 )     (350,700 )     197,784       15,144  
Effect of inflation accounting
    1,234       53,014       33,585       -       -       -  
Increase (decrease) in cash and cash equivalents
    407,889       (33,610 )     83,710       (1,499,284 )     10,314       789  

_______________________

(1)
Translated into dollars at the rate of Ps.13.06 per U.S. dollar, the U.S. Federal Reserve noon buying rate for Mexican pesos at December 31, 2009.  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, a fee for the transfer of passengers from the aircraft to the terminal building, 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 revenues from car parking charges, leasing of commercial space to tenants, advertising, taxis, hotel business and other ground transportation providers and other miscellaneous sources of revenues.  Pursuant to our concessions and to the Airport Law and the regulations thereunder, parking services are currently excluded from aeronautical services under our maximum rates, although the Ministry of Communications and Transportation could decide to regulate such rates, and such rates may be regulated by other authorities.
(4)
On January 1, 2001, we began paying SETA a technical assistance fee under 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 Transaction – Related Party Transactions – Arrangements with SETA.”
(5)
Each of our subsidiary concession holders is required to pay a concession tax to the Mexican government under the Mexican Federal Duties Law 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.
(6)
Reflects depreciation of fixed assets.
(7)
Reflects amortization of airport concessions and rights to use airport facilities.
(8)
For MFRS purposes, based on 392,000,000 weighted average common shares outstanding in 2005, 395,173,149 weighted average common shares outstanding in 2006, 399,611,578 weighted average common shares outstanding in 2007, 396,284,313 weighted average common shares outstanding in 2008 and 394,934,855 weighted average common shares in 2009.  For U.S. GAAP purposes, based on 391,624,384 weighted average common shares outstanding in 2006, 399,611,578 weighted average common shares outstanding in 2007, 396,284,313 weighted average common shares outstanding in 2008 and 394,934,855 weighted average common shares in 2009 .  Earnings per ADS are based on the ratio of 8 Series B shares per ADS.
(9)
Based on 399,611,578 , 399,224,413 and 397,874,855 weighted average common shares and common share equivalents outstanding for the year ended December 31, 2007, 2008 and 2009, respectively.  Earnings per ADS are based on the ratio of 8 Series B shares per ADS.
(10)
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).  Excludes transit passengers (passengers who arrive at our airports but generally depart without changing aircraft).
(11)
Total revenues for the period divided by terminal passengers for the period.  Expressed in pesos (not thousands of pesos).
(12)
Total stockholders’ equity under MFRS reflects the value assigned to our concessions.  Under U.S. GAAP, no value has been assigned to our concessions.
(13)
U.S. GAAP cash flow data is expressed in nominal Mexican pesos.
 

EXCHANGE RATES
 
The following table sets forth, for the periods indicated, the high, low, average and period-end, free-market exchange rate expressed in pesos per U.S. dollar.  The average annual rates presented in the following table were calculated using the average of the exchange rates on the last day of each month during the relevant period.  The data provided in this table is based on noon buying rates published by the Federal Reserve Bank of New York for cable transfers in Mexican pesos.  All amounts are stated in pesos and have not been restated in constant currency units. We make no representation that the Mexican peso amounts referred to in this annual report could have been or could be converted into U.S. dollars at any particular rate or at all.
 
   
Exchange Rate
 
                         
Year Ended December 31,
 
High
   
Low
   
Period End
   
Average(1)
 
2005
    11.41       10.41       10.63       10.88  
2006
    11.46       10.43       10.80       10.91  
2007
    11.27       10.67       10.92       10.93  
2008
    13.94       9.92       13.83       11.14  
2009
    15.41       12.63       13.06       13.50  
December 2009                                     
    13.08       12.63       13.06       12.86  
2010:
                               
January 2010                                     
    13.03       12.65       13.03       12.81  
February 2010                                     
    13.19       12.76       12.76       12.94  
March 2010                                     
    12.74       12.30       12.30       12.57  
April 2010                                     
    12.41       12.16       12.23       12.24  
May 2010                                     
    13.14       12.27       12.86       12.73  
___________________
(1)
Average of month-end rates or daily rates, as applicable.
Source:  Federal Reserve noon buying rate.
 
Except for the period from September through December 1982, during a liquidity crisis, the Mexican Central Bank has consistently made foreign currency available to Mexican private-sector entities (such as us) to meet their foreign currency obligations.  Nevertheless, in the event of renewed shortages of foreign currency, there can be no assurance that foreign currency would continue to be available to private-sector companies or that foreign currency needed by us to service foreign currency obligations or to import goods could be purchased in the open market without substantial additional cost.
 
Fluctuations in the exchange rate between the peso and the U.S. dollar will affect the U.S. dollar value of securities traded on the Mexican Stock Exchange, and, as a result, will likely affect the market price of the ADSs.  Such fluctuations will also affect the U.S. dollar conversion by the depositary of any cash dividends paid in pesos.
 
On December 31, 2009, the Federal Reserve noon buying rate was Ps. 13.06 per U.S.$1.00. On May 28, 2010, the Federal Reserve noon buying rate was Ps. 12.86 per U.S. $1.00.
 
For a discussion of the effects of fluctuations in the exchange rates between the peso and the U.S. dollar, see “Item 10.  Additional Information—Exchange Controls.”
 

RISK FACTORS
 
Risks Related to the Regulation of Our Business
 
We provide a public service regulated by the Mexican government, and our flexibility in managing our aeronautical activities is limited by the regulatory environment in which we operate.
 
Our aeronautical fees charged to airlines and passengers are regulated, like most airports in other countries.  In 2007, 2008 and 2009, approximately 81.7%, 81.3% and 80.5% respectively, of our total revenues were earned from regulated services, which are subject to price regulation under our maximum rates.  These regulations may limit our flexibility in operating our aeronautical activities, which could have a material adverse effect on our business, results of operations, prospects and financial condition.  In addition, several of the regulations applicable to our operations that affect our profitability are authorized (as in the case of our master development programs) or established (as in the case of our maximum rates) by the Ministry of Communications and Transportation for five-year terms.   Except under limited circumstances, we generally do not have the ability to unilaterally change our obligations (such as the investment obligations under our master development programs or the obligation under our 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, there can be no assurance that this price regulation system will not be amended in a manner that would cause additional sources of our revenues to be regulated.
 
Our maximum rates and annual efficiency adjustments will be renegotiated in 2010.
 
This year, the Ministry of Communications and Transportation will set our maximum rates and annual efficiency adjustments for 2011 through 2016.  For a discussion of the framework for establishing our maximum rates and the application of these rates, see “Item 4.  Information on the Company—Regulatory Framework—Revenue Regulation.”  We are unable to predict what our maximum rates or annual efficiency adjustments will be for this period, and we cannot assure you that any changes to our maximum rates or annual efficiency adjustments for this period will not have a material adverse impact on our results of operations.
 
We cannot predict how the regulations governing our business will be applied.
 
Many of the laws, regulations and instruments that regulate our business were adopted or became effective in 1999, and there is only a limited history that would allow us to predict the impact of these legal requirements on our future operations.  In addition, although Mexican law establishes ranges of sanctions that might be imposed should we fail to comply with the terms of one of our concessions, the Mexican Airport Law (Ley de Aeropuertos) and its regulations or other applicable laws, we cannot predict the sanctions that are likely to be assessed for a given violation within these ranges.  We cannot assure that we will not encounter difficulties in complying with these laws, regulations and instruments.
 
Moreover, when determining our maximum rates for the next five-year period (from 2011 to 2015), the Ministry of Communications and Transportations may be solicited by different entities (such as, for example, the Mexican Federal Competition Commission (Comisón Federal de Competencia or the “Competition Comission”) and the carriers operating at our airports) to modify our maximum rates, thus reducing our profitability.  Therefore, there can be no assurance that the laws and regulations governing our business, including the rate-setting process and the Mexican Airport Law, will not change in the future or be applied or interpreted in a way that could have a material adverse effect on our results of operations.
 

On October 1, 2007, the Chairman of the Mexican Federal Competition Commission released an independent report on the competitiveness of Mexico’s airports relative to each other and to international airports.  The Chairman’s report made the following recommendations as ways to increase efficiency at Mexican airports:
 
make economic efficiency a basis of tariff regulation for new concessions;
 
include income from commercial services as one of the factors in determining tariffs for new concessions;
 
strengthen the independence of the regulatory agency and increase the transparency of airport regulation;
 
promote greater efficiency in scheduling at airports with heavy volumes of passenger traffic;
 
promote greater competition between airports;
 
eliminate Aeropuertos y Servicios Auxiliares’ role as exclusive fuel service provider;
 
eliminate barriers to entry for taxi providers at airports; and
 
be mindful of vertical integration among airports and airlines.
 
On February 26, 2009, a legislative initiative was filed with the Chamber of Representatives (Cámara de Diputados) of the Congress of the Mexican Union (Congreso de la Union) by representantives of PRD (Partido de la Revolución Democrática), PT (Partido del Trabajo) and CONVERGENCIA.
 
This initiative seeks to reform a substantial part of the current Mexican Airport Law, which regulates airport-related matters.  The initiative was sent to the Transport and Communications Commissions of the Congress to be analyzed and, if each commission determines that the initiative includes all the elements necessary to reform the law, then the initiative will be submitted to the Congress for its approval.  On March 25, 2010, the Transport and Communications Commissions released a negative opinion on this initiative.  The negative opinion must now be submitted to Congress for its approval.  If Congress approves this negative opinion it would end this legislative process and the initiative would be discarded.  The approval by Congress is still pending.  There can be no assura nce that Congress will approve the Commissions’ negative opinion or that these committees or Congress will file other initiatives that seek to reform the current Mexican Airport Law.  Should the current Mexican Airport law be amended with respect to matters that are related to our operations, such amendment could have a material impact on our operations.
 
The regulations pursuant to which the maximum rates applicable to our aeronautical revenues are established do not guarantee that our consolidated results of operations, or that the results of operations of any airport, will be profitable.
 
The regulations applicable to our 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 we may earn at that airport from services subject to price regulation.  In December 2005, the Ministry of Communications and Transportation determined, based on the terms of our concessions, the maximum rates for our airports from January 1, 2006 through December 31, 2010.  Under the terms of our concessions, there is no guarantee that the results of operations of any airport will be profitable.
 

Our concessions provide that an airport’s maximum rates will be adjusted periodically for inflation (determined by reference to the Mexican producer price index, excluding fuel).  Although we are 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, decreases in capital investments attributable to Mexican economy-related passenger traffic decreases or modifications of the concession tax payable by us to the Mexican government, our concessions provide that such a request will be approved only if the Ministry of Communications and Transportation determines that certain limited events specified in our concessions have occurred.  Therefore, there can be no assura nce that any such request would be granted.  If a request to increase an airport’s maximum rates is not granted, our results of operations and financial condition could be adversely affected, and the value of Series B shares and ADSs could decline.
 
If we exceed the maximum rate at any airport at the end of any year, we could be subject to sanctions.
 
Historically, we have set the prices we charge 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 2009, our revenues subject to maximum rate regulation represented approximately 95.1% of the amounts we were entitled to earn under the maximum rates for all of our airports.  There can be no assurance that we will be able to establish prices in the future that allow us to collect substantially all of the revenue we are entitled to earn from services subject to price regulation.
 
The specific prices we charge 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 our control.  Our projections could differ from the applicable actual data, and, if these differences occur at the end of any year, they could cause us to exceed the maximum rate at any one or more of ours airports during that year.
 
If we exceed 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 our concessions is terminated, our other concessions may also be terminated.  As of today, no sanctions have been imposed for any reason with respect to any of our concessions.
 
The Mexican government may terminate or reacquire our concessions under various circumstances, some of which are beyond our control.
 
Our concessions are our principal assets, and we would be unable to continue operations without them.  A concession may be revoked by the Mexican government for certain prescribed reasons, including failure to comply with our master development programs, a temporary or permanent halt in our operations, actions affecting the operations of other concession holders in Mexico, failure to pay damages resulting from our operations, exceeding our maximum rates or failure to comply with any other material term of our 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.  Our concessions may also be terminated upon our bankruptcy or insolvency.  Violations of the Mexican Airport Law or its regulation could result in similar sanctions.  In the event that any one of our concessions is terminated, our 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 our concessions, our concessions may also be made subject to additional conditions, including under our renewed master development programs, which we 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 our 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 us to implement certain changes in our operations.  In the event of a reversion of the public domain assets that are the subject of our concessions, the Mexican government under Mexican law is required to compensate us 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 change in our operations, the cost of that change.  Similarly, in the event of an assumption of our operations, other than in the event of war, the government is required to compensate us and any other affected parties for any resulting damages.  There can be no assurance that we would receive compensation equivalent to the value of our investment in or any additional damages related to our concessions and related assets in the event of such action.
 
In the event that any one of our concessions is terminated, whether through revocation or otherwise, our other concessions may also be terminated.  Thus, the loss of any concession would have a material adverse effect on our business and results of operations.
 
The Mexican government could grant new concessions that compete with our airports.
 
The Mexican government could grant additional concessions to operate existing government-managed airports or authorize the construction of new airports, which could compete directly with our airports.
 
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 Leon 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, there can be no assurance that the Ministry of Communications and Transportation will not authorize such an amendment and that commercial aviation flights will not 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.
 
Any competition from other such airports could have a material adverse effect on our business and results of operations.  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, we cannot assure that we would participate in such process, or that we would be successful if we were to participate.  Please see “Item 4. Information on the Company—Regulatory Framework—Grants of New Concessions” below.
 

Risks Related to Our Operations
 
The global economic and financial crisis has adversely affected our business and may continue to do so.
 
The current global economic and financial crisis has led to high volatility and lack of liquidity in the global credit and other financial markets.  Such downturns in the U.S. and global economies have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, decreased market valuations, increased market volatility, high financial risk premiums, and a widespread reduction of business activity generally.  These conditions have also limited the availability of credit and increased financial costs for companies around the world, including in Mexico and the United States.  The volatility of the credit and capital markets can significantly affect our ability to access credit to finance our future projects, therefore adver sely affecting our business.
 
If the global economy does not recover or falls into a deeper recession, our business and results of operations will continue to be adversely affected. (See also “Risks Related to Mexico – Our business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico will adversely affect our business and results of operations” and “Risks Related to Mexico – Our business could be adversely affected by a downturn in the U.S. economy”).
 
Our revenues are highly dependent on levels of air traffic, which depend on factors beyond our control.
 
Our revenues are closely linked to passenger and cargo traffic volumes and 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.  Passenger and cargo traffic volumes and air traffic movements depend on many factors beyond our control, including the current economic downturn in Mexico, the United States and the world, the political situation in Mexico and elsewhere in the world, the attractiveness of our airports relative to that of other competing airports, fluctuations in fuel prices (which can have a negative impact on traffic as a result of fuel surcharges or other measures adopted by airlines in response to increased fuel costs) and changes in regulatory policies applicable to the aviation industry.  Any decreases in air traffic to or from our airports as a result of factors such as these could adversely affect our business, results of operations, prospects and financial condition.
 
International events could adversely affect our business
 
Terrorist attacks have had a severe impact on the international air travel industry, have adversely affected our business and may continue to do so in the future.
 
As with all airport operators, we are subject to the threat of terrorist attacks.  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 on 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.  In the event of a terrorist attack involving one of our airports directly, 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, o ur 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 business, results of operations, prospects and financial condition.
 

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 Authority in addition to the directives of Mexican aviation authorities.  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 results of operations.
 
International events could have a negative impact on international air travel.
 
Historically, a substantial majority of our revenues have been derived from aeronautical services, and our principal source of aeronautical services revenues is passenger charges.  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 2007, 2008 and 2009, passenger charges represented 61.2%, 62.0% and 62.7%, respectively, of our total revenues.  Events such as the war in Iraq and public health crisis such as the Severe Acute Respiratory Syndrome, or SARS, crisis and the Influenza A(H1N1) crisis have negatively affected the frequency and pattern of air travel worldwide.
 
On April 30, 2009, President Felipe Calderon Hinojosa issued a presidential decree instructing Mexicans to remain in their homes for a period of five days to reduce the spread of the Influenza A(H1N1) virus.  The president also requested that travel should continue to operate subject to special passenger measures, including the use of thermographic cameras to prevent the spread of the A(H1N1) virus.
 
As a consequence of the presidential decree and public concerns, many people chose to cancel or delay scheduled travel, producing a reduction in passenger traffic and operations during the second quarter of 2009.  Although the World Health Organization recommended that borders remain open and international travel remain unrestricted, these factors affecting passenger traffic continued without change.
 
Because our revenues are largely dependent on the level of passenger traffic in our airports, any general increase of hostilities relating to reprisals against terrorist organizations, further conflict in the Middle East, further outbreaks of health epidemics such as SARS, Influenza A(H1N1) or other events of general international concern (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition.
 
High incidences of crime in Mexico, and drug trafficking in particular, could adversely affect our business.
 
A travel alert issued by the U.S. Department of State (Bureau of Consular Affairs) on April 12, 2010 (the “Travel Alert”), recommended the departure of dependents of U.S. government personnel from U.S. consulates in the Northern Mexican border cities of Tijuana, Nogales, Ciudad Juarez, Nuevo Laredo, Monterrey and Matamoros.  According to the Travel Alert, while millions of U.S. citizens safely visit Mexico each year, many are victims of violence.  The Travel Alert reported that gunfights involving the Mexican army, police and drug cartels have taken place in many towns and cities across Mexico but occur mostly in certain cities in northern Mexico, including Ciudad Juárez, Tijuana, Chihuahua City, Nogales, Matamoros, Reynosa and Monterrey.
 
U.S. government employees are restricted to travel within the state of Durango, certain parts of the state of Chihuahua and Ciudad Juarez, and all parts of the state of Coahuila.
 

 
The situation in Ciudad Juarez and surrounding areas is of special concern.  The U.S. Consulate General recommends U.S. citizens to defer non-essential travel to the southeast of Ciudad Juarez and to the northwest quarter of the state of Chihuahua.  In both areas U.S. citizens have been victims of drug-related violence and both areas are reached easily from the United States through various ports of entry.  While most crime victims are Mexican citizens, the Travel Alert warns that the uncertain security situation of the border region poses serious risks for U.S. citizens as well.
 
Higher incidences of crime throughout Mexico, and drug trafficking in particular, could have an adverse affect on our business as it may decrease the international passenger traffic directed to Mexico from abroad.
 
Increases in international fuel prices could adversely affect our business and results from operations.
 
International prices of fuel, which represent a significant cost for airlines using our airports, have increased in recent years, reaching record highs in the second quarter of 2008.  Such increases in airlines 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 (such as Alma and Aladia).  For other airlines, such as Avolar and Aerocalifornia, such increased costs may have contributed to the denial of extensions of their concessions by the Mexican regulatory authorities for failure to satisfy security, service, coverage and quality requirement.  Although fuel prices in 2009 were below the prices in 2008, they may be subject to further increases resulting from any future terrorist at tacks, a general increase in international hostilities or a reduction in output of fuel, voluntary or otherwise, by oil-producing countries, and there can be no assurances that future air business would not be further affected by increased fuel prices.
 
Our revenues and profitability may be adversely affected if we fail in our business strategy.
 
Our ability to increase revenue and profitability will depend in part on our business strategy, which consists of increasing passenger and cargo traffic at our airports and increasing revenue from commercial activities.
 
Our ability to increase commercial revenue is, among other factors, significantly dependent upon increasing passenger traffic at our airports and the profitability from other non-aeronautical commercial businesses, such as our Terminal 2 hotel and commercial project at the Mexico City International Airport.  We cannot assure you that we will be successful in implementing our strategy of increasing our passenger traffic or revenues from commercial activities.  The passenger traffic volume in our 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 our airports will increase.
 
We may not fully recover our investment for the acquisition of the Terminal 2 commercial project.
 
In October 2008, we acquired 90% of the shares of Consorcio Grupo Hotelero T2, S.A. de C.V., which has the rights to develop and operate a 287-room hotel and approximately 5,000 square meters of commercial space inside the new Terminal 2 of the Mexico City International Airport, under a 20-year contract with the Mexico City International Airport.  The Spanish company NH Hoteles, S.A. de C.V. owns the other 10%.  The Terminal 2 Hotel opened in August 2009.
 
Part of the value of our investment in Terminal 2 of the Mexico City International Airport reflects the airport’s status as the only one in the proximity of Mexico City.  If a new airport were to be built near Mexico City, the Mexico City International Airport could be closed and we would therefore have no assurance of our ability to continue operating the hotel and the commercial areas or of our ability to recover our investment.  In addition, under certain circumstances, the operating lease agreement with the Mexico City International Airport can be terminated by the Mexico City International Airport with partial or no compensation to us.  Should a new Mexico City airport be constructed or the Mexico City International Airport terminates the operating lease agreement, there could be no assurances as to our ability to fully recover our investment in the Terminal 2 project.
 

As a new business endeavor, the NH Terminal 2 Hotel faces the challenge of gaining enough market share as it begins operations. We cannot assure you that the occupancy of the hotel will be sufficient to recover our investment.
 
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 our 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 Puerto Rico, Florida, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America.  The attractiveness of the destinations we serve is also likely to be affected by perceptions of travelers as to the safety an d political and social stability of Mexico.  Furthermore, the current global economic crisis affected our international passenger traffic, with particular reference to our tourist destinations airports.  There can be no assurance that tourism levels, and therefore the number of passengers using our airports, in the future will match or exceed current levels, which could have a direct and indirect impact on our aeronautical and non-aeronautical revenues.
 
Our business is highly dependent upon revenues from four of our airports and could be adversely impacted by any condition affecting those airports.
 
In 2009, approximately 68.6% of our revenues were generated from four of our 13 airports.  In particular, the Monterrey International Airport generates the most significant portion of our revenues.  The following table lists the percentage of total revenues generated at our airports:
 
Airport
 
For year ended December 31, 2009
 
Monterrey International Airport
    45.5 %
Culiacán International Airport
    8.0 %
Mazatlán International Airport
    7.7 %
Acapulco International Airport
    7.4 %
Nine other airports
    31.4 %
Total
    100.0 %

As a result of the substantial contribution to our revenues from these four airports, any event or condition affecting these principal airports could have a material adverse effect on our business, results of operations, prospects and financial condition.
 

If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.
 
Although we believe we currently maintain good relations with our labor force, if any conflicts with our employees were to arise in the future, including with our unionized employees (which accounted for 57% of our total employees as of December 31, 2009), 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.
 
Our operations may be affected by union activities.
 
Our unionized employees (which accounted for 57% of our total employees as of December 31, 2009) are represented by a national union of airport workers that operates throughout Mexico.  To the extent that any unionized airport workers throughout the country successfully negotiate different employment terms than those we offer at our airports, our operations could be adversely affected by union activities, including organized strikes or other work stoppages.  In addition, we could be required to increase our labor expenses to match the terms agreed by the union with other Mexican airport operators.
 
Our operations depend on certain key airline customers, and the loss of 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 revenues generated at our airports in 2009, Aeroméxico and its affiliates accounted for 27.8%, Mexicana and its affiliates accounted for 15.7%, VivaAerobus represented 11.0% and Interjet represented 9.4%.  In recent years, discount carriers, charter carriers, low-cost carriers and other new market entrants have represented a growing proportion of the Mexican commercial airline market.  In 2009, passengers traveling on discount, charter and low-cost carriers, such as VivaAerobus, Interjet and Volaris accounted for approximately 31% of our commercial aviation passenger traffic.  Avolar, Alma and Aladia ceased operations during the last quarter of 2008 for not satisfying security, service, coverage and quality requirements (in the case of Avolar), or because of bankruptcy (in the case of Alma and Aladia).
 
Our airports could be affected by the reduction in aeronautical and non-aeronautical revenues resulting from a merger between Aeromexico and Mexicana or Volaris and Interjet. As of May 2010, we are not aware of any merger agreements between these airlines.
 
On June 3, 2009, the Ministry of Communications and Transportation, acting through the General Director for Civil Aviation, temporarily suspended the operation of 25 Aviacsa aircraft. Aviacsa received a judicial injunction that enabled it to continue operating, and it resumed operations on June 12.  On July 6, 2009 the Ministry of Communications and Transportation suspended Aviacsa’s right to use Mexican airspace, based on non-payment of royalties owed to the Navigation Services for Mexican Airspace. Aviacsa filed for insolvency protection on October 30, 2009.  Aviacsa accounted for 7.0% of our total passenger traffic during the January-June 2009 period and 96.7% of such passengers were domestic.
 
As a result of Aviacsa’s insolvency, we could encounter difficulties recovering the spaces leased to Aviacsa in our airports.  There can be no assurance that Aviacsa will voluntarily surrender the spaces leased in our airports.
 
None of our contracts with our airline customers obligate them to continue providing service to our airports, and we can offer no assurance that, if any of our key customers reduced their use of our airports, competing airlines would add flights to their schedules to replace any flights no longer handled by our principal airline customers.  Our business and results of operations could be adversely affected if we do not continue to generate comparable portions of our revenue from our key customers.
 

On August 5, 2008 the Mexican regulatory authorities announced the temporary suspension of Avolar.  This suspension was effective for 2 days.  Avolar resumed its operations on August 8, 2008.  On October 24, 2008, the Mexican regulatory authorities denied Avolar’s extension of its concession due to Avolar’s financial problems.  Avolar was operating in four of our airports during 2008 overall (Acapulco, Culiacán, Durango and Zacatecas).  This airline represented 0.6% of our terminal passengers as of the end of August 2008.
 
On October 21, 2008, the charter airline Aladia announced the suspension of its operations.  We cannot predict whether Aladia will resume it operations with us in the future.  This airline accounted for 1.4% of our total passenger traffic for the first 10 months of 2008.  The main airports served by Aladia were Monterrey, Chihuahua, Mazatlán and Ciudad Juárez.
 
On November 7, 2008, Aerolíneas Mesoamericanas, S.A. de C.V. (Alma de México or Alma) announced the suspension of its operations and filed for bankruptcy. Alma was operating in nine of our airports:  Chihuahua, Mazatlán, Monterrey, San Luis Potosí, Tampico, Zihuatanejo, Reynosa, Torreón, and Ciudad Juárez.  The airline accounted for 3.5% of total passenger traffic during the first ten months of 2008 and for 3.3% of our total passenger traffic in October 2008.
 
Due to increased competition, higher fuel prices and the general decrease in the demand consequent to the global volatility in the financial and exchange markets and economic crisis, many airlines are operating in adverse conditions.  Further increases in fuel prices or other adverse economic developments could cause one or more of our principal carriers to become insolvent, cancel routes, suspend operations or file for bankruptcy.  All such events could have a material adverse effect on our results from operations.
 
Revenues from passenger and other charges are not secured, and we may not be able to collect amounts invoiced in the event of the insolvency of one of our principal airline customers.
 
In recent years, many airlines have reported substantial losses.  In a few cases, our revenues from passenger charges and other aeronautical services are secured by a performance bond or other types of guarantees.  The rest of our revenues from passenger and other charges from other airline customers are not secured by a performance bond or any other collateral.  Thus, in the event of the insolvency of any of these airlines, we would not be assured of collecting any amounts invoiced to that airline in respect of passenger charges.
 
The main domestic airlines operating at our airports have in the past refused to pay certain increases in our specific prices for regulated aeronautical services and could refuse to pay additional increases in the future.
 
From January 2002 to November 2002, several domestic airlines operating at our 13 airports —Aeroméxico, Mexicana, Aeromar and Aeroméxico Connect (formerly Aerolitoral) — refused to pay certain increases in our airport service charges.  As of December 2002, the amount of invoiced fees subject to dispute was Ps.3.7 million.  As part of this dispute, these airlines brought proceedings challenging the privatization of the Mexican airport sector and the methodology for calculating the maximum rate system applicable under the privatization of all of the airport groups in Mexico.
 
Subsequently, we entered into an agreement with the National Air Transportation Board (Cámara Nacional de Aerotransportes) and the Ministry of Communications and Transportation pursuant to which we settled existing disputes with our principal airline customers and established specific prices for regulated aeronautical services applicable to those airlines.  Under the agreement, the National Air Transportation Board agreed to cause our principal airline customers to enter into (a) contracts governing charges for certain aeronautical services and (b) lease contracts for property used by the airlines.  Although our agreement with the National Air Transportation Board expired in December 2005, we continued to charge our principal airline customers in accordance with the terms of the agreement until December 31, 2008, at which time we entered into a new agreement with the National Air Transportation Board that offered incentives, including discounts, for the establishment of new routes and other measures expected to increase passenger traffic volume at our airports.  We recently entered into a new agreement covering the period from August 1, 2009 to December 31, 2011. We continue to charge our principal airline customers in accordance with the terms of this agreement.
 

Although passenger traffic volume (and therefore overall revenue) may increase, any agreed incentives and/or discounts 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 operations could be adversely affected due to changes in the collection of passenger charges.
 
The 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 the 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 higher costs for us.
 
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 and ground transportation providers.  We also depend upon the Mexican government or entities of the government for provision of services, such as electricity, supply of fuel to aircraft, air traffic control by 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 adv erse effect on the operation of our airports and on our results of operations.
 
In addition, we depend on third-party providers of certain complementary services such as catering and baggage handling.  For example, Grupo Aeroméxico and Grupo Mexicana together control Servicios de Apoyo en Tierra, or SEAT, pursuant to a joint venture. SEAT is the largest provider of baggage and handling services at our airports.  If SEAT or any of its affiliates or shareholders encounters financial difficulties, its ability to provide services at our airports could be negatively affected.  If any service providers, including SEAT, were to halt operations at any of our airports, we could be required to seek a new provider of these services or provide these services ourselves, either of which is likely to result in increased costs and have an adverse impact on our results of operations.
 

Actions by parties purporting to be former owners of land comprising a portion of the Ciudad Juárez International Airport could cause our concession to operate the airport to be terminated.
 
Parties purporting to be former owners of land comprising a portion of the Ciudad Juárez International Airport initiated legal proceedings against the airport to reclaim the land, alleging that it was improperly transferred to the Mexican government.  As an alternative to recovery of this land, the claimants also sought monetary damages in the amount of U.S.$120 million.  On May 18, 2005 a Mexican court ordered us to return the disputed land to the plaintiffs.  However that decision and three subsequent constitutional claims (juicios de amparo) permitted the case to be reconsidered, and as a result of such constitutional claims, the original claimants must now include the Ministry of Communications and Transportation as a party to the litigation s ince the Ministry of Communications and Transportation is the grantor of the concession title to the Ciudad Juarez Airport.  On August 28, 2009, the Federal Government filed its answer to the claim, in which it requested that the trial be moved to Federal Jurisdiction.  This petition is still pending.
 
 In the event that any subsequent action results in a decision substantially similar to the May 18, 2005 court order or that is otherwise adverse to us, and the Mexican government does not subsequently exercise its power of eminent domain to retake possession of the land for our use, which we believe the terms of our concessions would require, our concession to operate the Ciudad Juárez International Airport would terminate.  In 2009, the Ciudad Juárez International Airport represented 4.8% of our revenue.  Although we believe and have been advised by the Ministry of Communications and Transportation that under the terms of our concessions the termination of our Ciudad Juárez concession would not affect the validity of our remaining airport concessions and that the Mexican federal government would be obligated to indemnify us against any monetary or other damages resulting from the termination of our Ciudad Juárez concession or a definitive resolution of the matter in favor of the plaintiffs, there can be no assurance that we would be so indemnified.
 
We may be liable for property taxes as a result of claims asserted against us by certain municipalities.
 
Administrative law proceedings were asserted against us by the municipalities of Reynosa, Zihuatanejo, Ciudad Juárez and Tampico for the payment of property taxes with respect to the real property on which we operate our airports in those cities.  The claims of the municipalities of Reynosa, Zihuatanejo, Ciudad Juárez and Tampico amounted to Ps.59.5 million, Ps.2.8 million, Ps.1.8 and Ps.1.0 million, respectively. The claim of Zihuatanejo, Ciudad Juárez and Tampico were dismissed on January, 2009, March, 2009 and February, 2009, respectively. On November 2009, the municipality of Ciudad Juárez claimed that we owe Ps.7.5 million in property taxes. The total amounts of the property-tax claims outstanding, as recently updated to reflect additional amounts claimed since the proceedings were first asserted, in Re ynosa and Ciudad Juárez are Ps.59.5 million and Ps.7.5 million, respectively, although these amounts could increase if the underlying claims are not resolved in our favor.  Moreover, other municipalities where we operate our airports could assert similar claims.
 
We do not believe that liabilities related to any claims or proceedings against us are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition or results of operations; should a court determine that these taxes must be paid in response to any future proceedings, we believe that only the owner of the land should be responsible for paying these taxes directly, and the obligation to pay these taxes is not otherwise contemplated in the terms of our concessions.  The Mexican government has not acknowledged any obligation to pay such taxes, however, and any changes to the Mexican Constitution and other applicable laws could render us liable to municipalities for property taxes in the future.
 


Other Mexican airport operators contesting the assessment of similar property tax claims have been required to post 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.
 
Future changes in applicable laws with respect to property taxes could have an adverse effect on us.
 
Changes to the Mexican Constitution and other laws on property taxes may be enacted in the future that could affect our business and results of operations.  We cannot predict the amount of any future property tax liabilities or the criteria that would be used to determine them.  If such changes were to take effect, and any amounts owed were substantial, these tax liabilities could have a materially adverse effect on our financial condition or results of operations.  If we believe that there is a substantial likelihood of an adverse result in a pending case, we will establish reserves to meet such liabilities consistent with MFRS.
 
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 International Airports are susceptible to occasional flooding due to torrential rainfall.  Natural disasters may impede operations, damage infrastructure necessary to our operations or adversely affect the destinations served by our airports.  Any of these events could reduce our passenger and cargo traffic volume.  The occurrence of natural disasters in the destinations we serve could adversely affect our business, results of operations, prospects and financial condition.  We have insured the physical facil ities at our airports against damage caused by natural disasters, accidents or other similar events, but do not have insurance covering losses due to resulting business interruption.  Moreover, should losses occur, there can be no assurance that losses caused by damages to the physical facilities will not exceed the pre-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 Culiacán, Mazatlán and Zihuatanejo International Airports, have only one commercial aviation runway.  While we seek to keep our runways in good working order and to conduct scheduled maintenance during off peak hours, we cannot assure you that the operation of our runways will not 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 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 expenses 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, which are established as a necessary requirement to our concessions.
 

Labor laws and recent reforms to the Social Security Act published in the “Diario Oficial de la Federación” on July 9, 2009, requires subcontractors to register their employees at the Instituto Mexicano del Seguro Social and makes anyone hiring the services of subcontractors that have failed to do so, 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 employees registered at the Instituto Mexicano del Seguro Social, we could be held jointly liable for the payment of social security obligations that these may have, as well as any applicable penalties.
 
We are exposed to certain risks inherently associated with the rental of real property.
 
We are exposed to risks generally associated with ownership of properties rented to third parties, such as a decline in rental market demand, occupancy rates or rent levels, 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, ramp handling and baggage handling services and checked baggage services) necessary to conduct our operations.  The airport is obligated to provide some specific services, like ramp handling services.  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 results of operations.
 
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 International Civil Aviation Organization 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 International Civil Aviation Organization 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.
 
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 the ones 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, management and supervision of aviation facilities, rescue and fire-fighting services for aircraft, measurement of runway friction coefficients, flood control at the Acapulco International 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 inc rease 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, we can offer no assurance that our insurance policies would cover all of our liabilities in the event of an accident, terrorist attack or 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-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 interruption insurance.
 
Changes in Mexican environmental regulations could limit the growth of certain of our airports.
 
Several of our airports, such as the Ciudad Juárez, Tampico and Torreón International Airports, are located in densely populated urban areas, which are subject to more restrictive environmental regulations than less populated areas of Mexico.  Should environmental regulators adopt a more restrictive regulatory framework in any of these areas (such as limitations on noise pollution), our ability to expand these airports to meet growth in demand could be limited, which could adversely affect our results of operations.  Furthermore, compliance with future environmental regulations may require us to incur additional costs in order to bring our airports into compliance, and if we fail to comply with current or future environmental regulations, we may be subject to fines and other sanctions.
 
We are liable under Mexican Law for inspection of passengers and their carry-on luggage.
 
Under Mexican Airport Law (Ley de Aeropuertos) we are currently responsible for inspecting passengers and their carry-on luggage before they board 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-on luggage are required to be enhanced, which could increase our liability or adversely affect our operating results.
 
We may be subject to potential liability for screening checked baggage.
 
The International Civil Aviation Organization 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.  We are currently planning to purchase and install new screening equipment in all of our airports to facilitate our airline customers’ compliance with the new baggage screening guidelines. Until we agree on the contractual terms for the operation of this equipment with the airlines and the new screening equipment becomes operational, checked baggage will continue to be screened by hand by each airline in order to comply with the screening guidelines.  In some countries, such as the United States of America, the federal gov ernment (in the case of the United States, through the Transportation Security Administration) is responsible for screening checked baggage.  Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new 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 subject to potential liability, if Mexican law changes in the future.
 

Enforcing civil liabilities against us or our directors, officers and controlling persons may be difficult.
 
We are organized under the laws of Mexico, and 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.
 

 
Risks Related to Our Stockholders
 
Aeroinvest and SETA control our management, and their interests may differ from those of other stockholders.
 
Aeroinvest, S.A. de C.V. (Aeroinvest) is the beneficial owner of 54.4% of our total capital stock.  Aeroinvest directly owns Series B shares representing 42.0% of our total capital stock and Series A shares of SETA representing 74.5% of its capital stock.  SETA in turn owns Series BB shares and Series B shares that collectively represent 16.7% of our capital stock.  Pursuant to our bylaws, SETA (as holder of our Series BB shares) has the right to present to the Board of Directors the name or names of the candidates for appointment as our chief executive officer, to appoint and remove half of our executive officers, which currently include our chief financial officer, our chief operating officer and our commercial director, and to elect three members of our Board of Directors.  SETA (as holder of ou r Series BB shares) also has the right pursuant to our bylaws to veto certain actions requiring approval of our stockholders (including the payment of dividends, the amendment of our bylaws and the amendment of its right to appoint certain members of our senior management).  Additionally, most matters voted on by our Board of Directors require the affirmative vote of the directors appointed by our Series BB shareholders.  In the event of the termination of the Technical Assistance Agreement, the Series BB shares would be converted into Series B shares, resulting in the termination of all of SETA's special rights. If at any time before June 14, 2015 SETA were to hold less than 7.65% of our capital stock in the form of Series BB shares, it would lose its veto rights (but its other special rights would be unaffected).  If at any time after June 14, 2015 SETA were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares must be converted into Series B shares, which would cause SETA to lose all of its special rights.  As long as SETA retains at least 7.65% of our capital stock in the form of Series BB shares, whether before or after June 14, 2015, all of its special rights will remain in place.  Pursuant to our bylaws, the Technical Assistance Agreement, the Participation Agreement and the Bancomext Trust, SETA was required to retain at least 51% of its Series BB shares until June 14, 2007, after which it became entitled to transfer up to one eighth of such 51% during each year thereafter. To date, SETA has not executed its right to transfer its Series BB shares.  The rights and obligations of SETA in our management are explained in “Item 7. Major Shareholders and Related Party Transactions – Major Shareholders.”
 
So long as the technical assistance agreement remains in effect and SETA continues to hold any Series BB shares, it also has the obligation to appoint and nominate the same directors and officers that it currently is entitled to appoint under our bylaws.  The technical assistance agreement sets forth certain qualifications that members of our management appointed by them must have.  The technical assistance agreement will remain in effect until June 14, 2015, after which it will be automatically extended for successive five-year periods unless any party thereto elects otherwise.
 

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 and appoint certain directors and officers as holder of Series BB shares until June 14, 2015, will continue for so 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 stockholder and/or operator.  Through 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.
 
In addition to these special rights of SETA, Aeroinvest is entitled under Mexican law to elect one director to our board for each 10% of our capital stock that it owns.  Thus, Aeroinvest's ownership of at least 42.0% of our capital stock entitles it to elect four members of our Board of Directors. SETA and Aeroinvest are each subsidiaries of Empresas ICA.
 
The interests of SETA and Aeroinvest may differ from those of our other stockholders and can be contrary to the preferences and expectations of our other stockholders. We can offer no assurance that SETA and Aeroinvest and the officers nominated or appointed by them would exercise their rights in ways that favor the interests of our other stockholders.
 
If SETA or Aeroinvest, our principal stockholders, should sell or otherwise transfer all or a portion of their remaining interests in us, our operations could be adversely affected.
 
SETA and Aeroinvest currently exercise a substantial influence over our management, as described above.  Our bylaws and certain of the agreements executed in connection with the privatization process provided that SETA was required to retain at least 51% of its Series BB shares until June 14, 2007, after which it became entitled to transfer up to one eighth of such 51% during each year thereafter. SETA, as holder of the Series BB shares, is entitled to present to the Board of Directors the name or names of the candidates for appointment as our chief executive officer and to appoint and remove half of our executive officers, which currently includes our chief financial officer, our chief operating officer and our commercial director, and to elect three of our board members.  Elimination of these rights from our bylaws would require the consent of SETA for so long as it owns Series BB shares representing at least 7.65% of our capital stock. Should SETA 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.
 
In addition, in December 2005, our parent company Aeroinvest entered into certain credit facilities to finance Aeroinvest’s acquisition from the Mexican government of the Series B shares currently representing 35.3% of our capital stock and to finance an additional loan to SETA for the exercise of the option to acquire 2% of our Series B shares.  These credit facilities were amended and restated to, among other things, increase the amount of the facility and the amount borrowed thereunder in October 2006 and again in April 2007.  Aeroinvest subsequently purchased additional Series B shares currently representing 6.7% of our capital stock in connection with our initial public offering in November 2006.  Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to ref inance its existing credit facilities in June 2007.  If Aeroinvest were to default on its obligations under the refinancing agreements, Aeroinvest could lose its ability to vote its shares of our capital stock as well as its shares of SETA, and the trustee could in certain circumstances foreclose on the Series B shares and SETA shares held in trust.  The terms of the refinancing documents are described in “Item 5.  Operating and Financial Review and Prospects – Liquidity and Capital Resources.”  If Aeroinvest were to sell its Series B shares or lose its ability to vote its Series B shares, SETA and Aeroinvest may no longer control us, which could adversely affect our operations and result in a decrease in the price of our Series B shares and ADSs.
 

Our ability to make certain business decisions could be limited if Aeroinvest defaults on certain obligations under its refinancing facility.
 
As mentioned above, Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  In connection therewith, Aeroinvest has assigned its economic interests (including its right to receive dividends) in its Series B Shares representing 42.0% of our capital stock as well as 74.5% of the Series A shares of SETA.  Under the refinancing agreements, Aeroinvest is required to cause us to comply with numerous covenants, which include certain restrictions on our ability to create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change our business or make investments or capital expenditures outside of the master development plans.  In addition, Aeroinvest is required to cau se us to distribute all of our available cash, subject to certain limitations, as quarterly dividends in accordance with our dividend policy, and is required to restrict us from making certain changes to the dividend policy.  If we do not distribute a minimum required amount of dividends on each dividend payment date, Aeroinvest will be in default under the refinancing documents.  If Aeroinvest defaults on its obligations under the refinancing documents, we would be further restricted in our ability create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change our business or make investments or capital expenditures outside of the master development plans, which could restrict our flexibility to capitalize on business opportunities or otherwise adversely affect our business and results of operations.  In addition, Aeroinvest could lose its ability to vote its shares of our capital stock as well as its shares of SETA, and t he trustee could in certain circumstances foreclose on the Series B shares and SETA shares held in trust.  The terms of the refinancing documents are described in “Item 5.  Operating and Financial Review and Prospects – Liquidity and Capital Resources.”
 
Risks Related to Mexico
 
Our business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico will adversely affect our business and results of operations.
 
In 2007, 2008 and 2009, domestic terminal passengers have represented approximately 82.6%, 83.4% and 84.3% respectively, of the passenger traffic volume in our airports.  In addition, all of our assets are located, and all of our operations are conducted, in Mexico.  Accordingly, our financial conditions and results of operations are substantially dependent on economic conditions prevailing from time to time in Mexico.  As a result, our business, financial condition and results of operations could be adversely affected by the general condition of the Mexican economy, by a devaluation of the peso, by inflation and high interest rates in Mexico, or by political, social and economic developments in Mexico.
 
In the past, Mexico has experienced economic crises, caused by internal and external factors, characterized by exchange rate instability (including large devaluations), high inflation, high domestic interest rates, economic contraction, a reduction of international capital flows, a reduction of liquidity in the banking sector and high unemployment rates.
 
Mexico experienced a period of slow growth from 2001 through 2003, primarily as a result of the downturn in the U.S. economy.  In 2001, Mexico’s GDP declined by 0.2%, while inflation reached 4.4%.  In 2002, GDP grew by 0.8% and inflation reached 5.7%.  In 2003, GDP grew by 1.4% and inflation was 4.0%.  In 2004, GDP grew by 4.2% and inflation increased to 5.2%.  In 2005, GDP grew by approximately 2.8% and inflation decreased to 3.3%.  In 2006, GDP grew by approximately 4.8% and inflation reached 4.1%.  In 2007, GDP grew by approximately 1.8% and inflation declined to 3.8%.  In 2008, GDP grew by approximately 1.3% and inflation increased to 6.5%. In 2009, GDP decreased by 6.5% and inflation was 3.6%.
 

During 2009, real and nominal interest rates in Mexico decreased more than 2% compared to 2008.  The annualized interest rates on 28 day Cetes (Certificados de la Tesoreria de la Federación) averaged approximately 9.2%, 7.2%, 7.2% 7.7% and 5.4% for 2005, 2006, 2007, 2008 and 2009, respectively.  To the extent that we incur Peso-denominated debt in the future, it could be at high interest rates.
 
The Mexican economy is undergoing 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 crisis has adversely impacted our business and may have an even greater impact going forward to the extent that the global economy falls into an even deeper and longer lasting recession.  According to the Mexican National Statistical, Geographic and Information Institute, the Mexican gross domestic product decreased at an annualized rate of 2.3% during the fourth quarter of 2009.
 
In Mexico, the economic and financial crisis has adversely affected domestic traffic in 2009, which decreased substantialy compared to 2008, which itself had been adversely affected by the exit from the market of Aviacsa during that year and significant reductions in capacity by several other carriers. Furthermore, due to the suspension of operations by Aerocalifornia in July 2008 and the exit from the market of Aladia, Alma, and Avolar in the fourth quarter of 2008, our airports have lost terminal passenger traffic, with the main decreases being at the Ciudad Juárez (30.1%), Acapulco (22.9%), Monterrey (21.0%), San Luis Potosí (20.9%) and Tampico (19.2%) airports (in each case, 2009 as compared to 2008).  Generally all of our airports were affected during 2009 by the reductions in volume of passengers, the A(H1N1) vi rus and the exit from the market of 5 airlines in less than a year. We expect that domestic passenger traffic levels will continue to decrease until economic conditions improve in Mexico.
 
Moreover, if inflation or interest rates increase significantly or if the Mexican economy is otherwise further adversely impacted, our business, financial condition and results of operations could be materially and adversely affected because, among other things, demand for transportation services may decrease.  We cannot assure our investors that similar events may not occur, or that any recurrence of these or similar events will not adversely affect our business, results of operations, prospects and financial condition.
 
Depreciation of the peso relative to the U.S. dollar could adversely affect our results of operations and our financial condition.
 
Following the devaluation of the peso and the economic crisis beginning in 1994, the aggregate passenger traffic volume in our airports in 1995 (then operated by our predecessor) decreased as compared to prior years, reflecting a decrease in Mexican passenger traffic volume.  From September 30, 2008 to March 31, 2009, the peso depreciated by approximately 29.4%, from 10.98 pesos per U.S. dollar on September 30, 2008 to 14.21 pesos per U.S. dollar on March 31, 2009.  From September 30, 2009 to March 31, 2010, the peso appreciated by approximately 8.8%, from 13.49 pesos per U.S. dollar on September 30, 2009 to 12.30 pesos per U.S. dollar on March 31, 2010.  Between March 31, 2009, and September 30, 2009, the peso fluctuated between 13.00 and 14.00 pesos per U.S. dollar.  It began to appreciate, reach ing 12.74 pesos per U.S. dollar on March 1, 2010.
 

A depreciation of the peso affects our business in the following ways: (i) international passengers and international flights pay tariffs denominated in U.S. dollars, while these tariffs are generally collected in Mexican pesos 60-115 days following the date of each flight, thus the depreciation of the Mexican peso had a positive impact on our results from operations which are denominated in Mexican pesos; and  (ii) as of December 31, 2009, we had 9.4 million of liabilities denominated in U.S. dollars, causing foreign exchange rate losses.  Any depreciation in the peso may cause additional foreign exchange losses.
 
Moreover, the depreciation of the peso also affected some of our airline customers having transactions 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 our ability to transfer or to convert pesos into U.S. dollars and other currencies.
 
Changes to Mexican laws, regulations and decrees applicable to us could have a material adverse impact on our results of operations.
 
The Mexican government has in recent years implemented changes to the tax laws applicable to Mexican companies, including us.  The terms of our concessions do not exempt us from any changes to the Mexican tax laws.  Should the Mexican government implement changes to the tax laws that result in our having significantly higher tax income or Business Flat tax, we will be required to pay the higher amounts due pursuant to any such changes, which could have a material adverse impact on our results of operations. For example the issuance of the new “Impuesto Empresarial a Tasa Unica” or “Business Flat Tax”, which was published on October 1, 2007, adversely impacted our results of operatio ns in 2007, 2008 and 2009. See Item 5 “Operating and Financial Review and Prospects – Taxation”.  In addition, changes to the Mexican constitution or to any other Mexican laws could also have a material adverse impact on our results of operations.
 
Developments in other countries may affect us.
 
The market value of securities of Mexican companies 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 Russia, Brazil, Argentina,Venezuela, Portugal, Italy, Greece, Spain and Dubai.
 
In addition, in recent years, economic conditions in Mexico have become increasingly correlated to economic conditions in the United States.  Therefore, the current economic downturn in the United States significantly adversely impacted the Mexican economy.  There can be no assurance that the market value of our securities will not be adversely affected by events elsewhere.
 
Delays in the process of obtaining necessary governmental approvals could affect our ability to expand our airports.
 
The expansion, development and growth of our 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 our airports.
 

Our business could be adversely affected by a downturn in the U.S. economy.
 
The U.S. economy is affected by a recession, which has had a direct impact on our business and results of operations, and may have an even greater impact going forward to the extent that the global economy falls into an even deeper and longer lasting recession.
 
The global economic crisis has had a direct impact on our business and results of operations, and may have an even greater impact going forward to the extent that the global economy falls into an even deeper and longer lasting recession.  In the third and fourth quarters of 2009, according to the U.S. Bureau of Economic Analysis, the U.S. gross domestic product increased at annualized rates of 2.2% and  5.9%, respectively.  Likewise, according to the Mexican National Statistical, Geographic and Information Institute, the Mexican gross domestic product decreased at an annualized rate of 2.3% during the fourth quarter of 2009.  The air travel industry, and as a result, our results of operations, are substantially influenced by economic conditions in Mexico and the United States.  In 2009, a pproximately 80% of the international passengers in our airports arrived or departed on flights originating in or departing to the United States and approximately 16% of our revenues in 2009 were derived from passengers charges imposed on departures from or arriving in the United States.  Similarly, in 2009, approximately 84% of our passengers traveled on domestic flights, and approximately 47% of our revenues in 2009 were derived from domestic passenger charges.
 
Our international traffic in 2009 decreased 22.4% compared to 2008, principally as a result of the cancellation of routes, and the reduction of frequencies on scheduled international flights, largely on part of U.S. carriers.  The airports where these factors had the greatest impact include Monterrey and our tourist destination airports (Acapulco, Mazatlán and Zihuatanejo).  In the fourth quarter of 2009, international passenger traffic decreased 10.6% compared to the fourth quarter of 2008.  The reduction in frequencies of some scheduled international flights and the cancellation of routes, principally by Continental, Delta, Aviacsa, American, Frontier, and Alaska, affected international traffic in the majority of our airports. Monterrey, Zihuatanejo, Mazatlán, Acapulco, and Culiacán were the airports most affected followed by Ciudad Juárez, Torreón, San Luis Potosí, Durango, Tampico, and Chihuahua. Zacatecas and Reynosa were the only two airports that reported an increase in international traffic.
 
In addition, we cannot predict what effect any future terrorist attacks or threatened attacks on the United States or any retaliatory measures taken by the United States in response to these events may have on the U.S. economy.  The current economic downturn in the United States negatively affected our results of operations and a prolonged economic recession in the United States will likely have a further material adverse effect on our results of operations.
 

Minority shareholders may be less able to enforce their rights against us, our directors, or our 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, because provisions concerning fiduciary duties of directors have only recently been incorporated into the new Mexican Securities Market Law, it may be difficult for minority shareholders to bring an action against directors for breach of this duty and achieve the same results as in most jurisdictions in the United States.  The grounds for shareholder derivative actions under Mexican law are extremely limited, which effectively bars most of these kinds of suits in Mexico.  Procedures for class action lawsuits do not exist under applicable Mexican law.  Therefore, it may be more difficult for minority shareholders to enforce their rights a gainst us, our directors, or our controlling shareholders than it would be for minority shareholders of a U.S. company.
 
We are subject to different corporate disclosure and accounting 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.  While we are required to reconcile our net income and stockholders’ equity to those amounts that would be derived under U.S. GAAP in our annual financial statements, the effects of inflation accounting under MFRS through December 31, 2007 are not eliminated in such reconciliation in our annual financial statements.  For this and other reasons, the presentation of MFRS consolidated financial statements and reported earnings may differ from that of U.S. companies in t his and other important respects.  For further information about the differences between MFRS and US GAAP please see Note 24 to our financial statements.
 
FORWARD-LOOKING STATEMENTS
 
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 Securities and Exchange Commission 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:
 
 
·
projections of operating revenues, net 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,
 
 
·
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 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 may cause actual results to differ materially from those in forwar d-looking statements.
 

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.
 
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 anonima bursatil 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”, “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 o wn or operate, unless otherwise specified.  Our registered office is located at Aeropuerto Internacional de Monterrey, Zona de Carga, Carretera Miguel Alemán, Km. 24 s/n, 66600 Apodaca, Nuevo León, México, 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.
 
Investment by Servicios de Tecnología Aeroportuaria, S.A. de C.V. and its Affiliates
 
In 2000, as part of the first stage of our privatization, the Mexican government sold Series BB shares currently representing 14.7% of our capital stock to Servicios de Tecnología Aeroportuaria, S.A. de C.V., or SETA (formerly Operadora Mexicana de Aeropuertos, S.A. de C.V.), in a public bidding process.  Pursuant to this transaction, SETA paid the Mexican government a total of Ps. 864,055,578 (nominal pesos, excluding interest) (U.S. $76 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 currently represent 14.7% of our outstanding capital stock;
 
 
·
an option to acquire from the Mexican government shares currently representing 35.3% of our capital stock (which subsequently was assigned to and exercised by Aeroinvest, S.A. de C.V., a principal shareholder of SETA);
 
 
·
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 subscribed for 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), a 15-year technical assistance agreement setting forth SETA’s right and obligation to provide technical assistance to us in exchange for an annual fee, and a shareholders’ agreement under terms established during the public bidding process.  These agreements are described in greater detail under “Item 7. Principal Stockholders and Selling Stockholder” and “Related Party Transactions.”
 

SETA’s current stockholders are:
 
 
·
Aeroinvest, S.A. de C.V. (“Aeroinvest”), which owns 74.5% of SETA.  Aeroinvest is a wholly owned subsidiary of Empresas ICA, S.A.B. de C.V.  Aeroinvest also directly owns 42.0% of our Series B shares as a result of its exercise of an option to acquire these shares from the Mexican government and its subsequent purchase of additional Series B shares representing 6.7% of our capital stock.  Aeroinvest’s Series B shares were acquired in December 2005 from the Mexican government at an aggregate cost of U.S. $203.3 million (determined based on an initial price per share of U.S. $1.28 plus an annual 5% premium, subject to decreases corresponding to dividends declared and paid by us).  Empresas ICA, the parent of Aeroinvest, is the largest engineering, construction and procurement company in Mexico.  Empresas ICA’s principal lines of business are co nstruction and engineering, housing and infrastructure operations, including the operation of airports (through SETA), toll roads and municipal services.  Empresas ICA is listed on the Mexican Stock Exchange and the New York Stock Exchange.  Through Aeroinvest, Empresas ICA controls a majority of our capital stock.
 
 
·
Aéroports de Paris Management, S.A., which owns 25.5% of SETA.  Aéroports de Paris Management is a wholly owned subsidiary of Aéroports de Paris, S.A., a French company recognized as a leading European airport group.  Aéroports de Paris, S.A. was previously the direct owner of the 25.5% participation in SETA until August 2006 when it transferred its participation in SETA to Aéroports de Paris Management. For more than 40 years, Aéroports de Paris has operated the Charles de Gaulle and Orly airports in France, which processed 83 million passengers in 2009.  Aéroports de Paris is listed on the Eurolist Market of Euronext Paris S.A.
 
In December 2005, our parent company Aeroinvest entered into certain credit facilities to finance Aeroinvest’s acquisition from the Mexican government of the Series B shares currently representing 35.3% of our capital stock and to finance an additional loan to SETA for SETA’s exercise of the option to acquire 2% of our Series B shares.  These credit facilities were amended and restated to, among other things, increase the amount of the facility and the amount borrowed thereunder in October 2006 and again in April 2007.  In November 2006 Aeroinvest purchased additional Series B shares representing 0.75% of our capital stock.  Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  In connect ion with the Merrill Lynch refinancing, Aeroinvest has assigned its economic interests (including its right to receive dividends) with respect to its Series B shares representing 42.0% of our capital stock as well as 74.5% of the Series A shares of SETA.  During 2007, 2008 and 2009, Aeroinvest purchased additional Series B shares representing 3.14%, 2.43% and 0.34%, respectively, of our capital stock, and from January 1, 2008 to December 31, 2008, Aeroinvest purchased additional Series B shares representing 2.43% of our capital stock.  Aeroinvest's economic interests with respect to these or any other additional Series B shares purchased by Aeroinvest may become subject to an assignment under the terms of the refinancing documents in certain circumstances, including any issuance of additional notes.  The terms of the refinancing documents are described in “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.”  In add ition, Aeroinvest and SETA have entered into an agreement with Nacional Financiera, S.N.C., or NAFIN, a Mexican national credit institution and development bank owned and controlled by the Mexican Government, pursuant to which Aeroinvest has agreed, if certain conditions to be agreed by the parties are met, on or after December 2010, to either (i) sell the Series B shares it owns representing 35.3% of our capital stock or (ii) deposit such Series B shares in a voting trust.  The terms of this obligation are described more fully under “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.”
 

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 2009 amounted to approximately Ps. 51.9 million.  This agreement is more fully described in “Item 7. Related Party Transactions.”
 
Initial Public Offering
 
On November 29, 2006, a Mexican trust established by NAFIN, or the NAFIN Trust, acting pursuant to the instructions of the Mexican Ministry of Communications and Transportation, sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of American Despositary Shares, or 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
 
Every five years, we are required to submit to the Ministry of Communications and Transportation for approval a master development program for each of our concessions describing, among other matters, our traffic forecasts for the following 15 years, expansion, modernization and maintenance plans, and detailed investment plan for the following five years.  Each master 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 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 prog ram and upon approval by the Ministry of Communications and Transportation.  In December 2005, the Ministry of Communications and Transportation approved the master development programs for each of our subsidiary concession holders for the 2006 to 2010 period.  These five-year programs will be in effect from January 1, 2006 until December 31, 2010.  During 2010, the master development program for the next five-year period will be prepared for each of our concessions.
 
The following tables set forth our historical committed investments and capital expenditures for the periods indicated.  Our capital expenditures have historically exceeded our committed investments pursuant to our master development programs, primarily due to capital expenditures intended to complement the minimum amounts required under our master development programs or that are otherwise necessary to accommodate the growth of our business (such as our investments at Terminal 2 at the Mexico City International Airport).  In addition, our master development programs include some commitments that are expensed rather than capitalized; thus, not all of our committed investments will constitute capital expenditures.  These capital expenditures are updated based on the Producer Price Index.
 

Historical Committed Investments Under Master Development Programs
 
   
Year ended December 31,
 
   
2007
   
2008
   
2009
   
Total
2007-2009
 
   
(thousands of pesos)
 
Acapulco
    47,273       32,341       15,082       94,696  
Ciudad Juárez
    38,963       22,864       19,818       81,645  
Culiacán
    15,281       8,630       23,045       46,956  
Chihuahua
    9,800       31,258       7,849       48,907  
Durango
    29,834       20,686       24,486       75,006  
Mazatlán
    29,148       10,413       19,371       58,932  
Monterrey
    277,742       267,165       86,095       631,002  
Reynosa
    20,356       11,683       9,582       41,621  
San Luis Potosí
    13,740       21,049       25,108       59,897  
Tampico
    24,311       12,693       15,943       52,947  
Torreón
    10,951       31,332       6,407       48,690  
Zacatecas
    14,392       4,612       24,934       43,938  
Zihuatanejo
    15,139       21,979       28,367       65,485  
Total
    546,930       496,705       306,087       1,349,722  

 
The following table sets forth our historical capital expenditures, which reflect our actual expenditures (as compared to its committed investments, which are presented above) by airport for the periods indicated.
 
 
Historical Capital Expenditures by Airport
 
   
Year ended December 31,
 
   
2007
   
2008
   
2009
 
   
(thousands of pesos)
 
Acapulco 
    42,917       36,275       37,366  
Ciudad Juárez 
    21,421       52,641       18,465  
Culiacán  
    12,517       37,111       35,743  
Chihuahua    
    16,431       23,102       21,132  
Durango
    53,786       30,548       10,285  
Mazatlán
    22,550       24,021       10,324  
Monterrey 
    396,142       1,743,039       395,964  
Reynosa
    17,130       13,644       19,386  
San Luis Potosí
    15,825       23,050       26,273  
Tampico
    20,845       25,028       18,430  
Torreón 
    7,229       24,516       30,998  
Zacatecas     
    9,230       15,177       17,222  
Zihuatanejo 
    14,900       22,613       32,269  
Other 
    7,087       156,796       193,799  
Total
    658,010       2,227,561       867,656  

 
The following table sets forth our historical capital expenditures by type of investment across all of our airports for the periods indicated:
       
   
Year ended December 31,
 
   
2007
   
2008
   
2009
 
   
(thousands of pesos)
 
Terminals
    407,928       232,961       328,271  
Runways and aprons
    159,888       263,000       181,465  
Machinery and equipment
    44,310       35,796       38,988  
Land
    0       1,455,904       62,725  
Other  
    45,884       239,900       256,207  
Total
    658,010       2,227,561       867,656  

Our capital expenditures from 2007 through 2009 were allocated to the following types of investments at the majority of our airports:
 
 
·
Terminals.  We remodeled many of the terminals at our airports by expanding departure areas (concourses and lounges), baggage claim areas and arrival areas, by improving lighting systems, adding office space, adding taxi and other ground transportation waiting areas, and by increasing handicapped services and remodeling restrooms.
 
 
·
Runways, access roads and aircraft parking.  We improved our runways and access roads (including their lighting systems), expanded aircraft parking areas, and made improvements and renovations to the fences on the outlying areas of our properties subject to our concessions.
 
 
·
Machinery and equipment.  We invested in machinery and equipment such as fire extinguishing vehicles, emergency back-up electricity generators, metal detectors and other security-related equipment, ambulances, moving walkways and public information systems.
 
 
·
Land.  As part of our strategic investments, in 2009 and 2008 territorial reserves of Ps. 62,725 and Ps. 1,455,904, respectively, were purchased to develop and expand our key airports.
 
 
·
Utility-related infrastructure.  We installed sewage treatment plants and systems at several of our airports, improved drainage systems, and installed underground electric wiring systems at several of our airports.
 
 
·
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 287-room hotel and approximately 5,000 square meters of commercial space inside the new Terminal 2 of the Mexico City International Airport, under a 20-year lease agreement with the Mexico City International Airport.  The Spanish company NH Hoteles, S.A. de C.V. owns the other 10%. The Terminal 2 Hotel opened in August 2009.
 
The following table sets forth our committed investments approved by the Ministry of Communications and Transportation for each airport for 2006 through 2010.  We will be required to comply with the investment obligations under these programs on a year-by-year basis.  These capital expenditures are updated based on the Producer Price Index.
 

Committed Investments by Airport
 
   
Year ended December 31,
 
   
2006(1)
   
2007
   
2008
   
2009
   
2010
   
Total
2006-2010
 
   
(thousands of pesos)
 
Acapulco
    108,790       47,273       32,341       15,082       15,292       218,778  
Ciudad Juárez
    52,097       38,963       22,864       19,818       12,411       146,153  
Culiacán
    69,324       15,281       8,630       23,045       2,467       118,747  
Chihuahua
    80,275       9,800       31,258       7,849       10,647       139,829  
Durango
    19,270       29,834       20,686       24,486       9,422       103,698  
Mazatlán
    100,740       29,148       10,413       19,371       2,293       161,965  
Monterrey
    351,599       277,742       267,165       86,095       24,417       1,007,018  
Reynosa
    20,747       20,356       11,683       9,582       1,788       64,156  
San Luis Potosí
    28,013       13,740       21,049       25,108       3,166       91,076  
Tampico
    44,999       24,311       12,693       15,943       4,592       102,538  
Torreón
    19,527       10,951       31,332       6,407       8,310       76,527  
Zacatecas
    18,831       14,392       4,612       24,934       7,960       70,729  
Zihuatanejo
    81,292       15,139       21,979       28,367       13,299       160,076  
Total
    995,504       546,930       496,705       306,087       116,064       2,461,290  
______________
(1)           Amounts listed for 2006 include committed investments relating to the purchase and installation of new baggage screening equipment.  We expect to undertake these investments before the end of 2010 so as to comply with the master development program. Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new equipment could increase our exposure to liability as a result of our involvement in the screening process.

 
The following table sets forth our committed investments for 2006 through 2010 by type of investment, which are updated based on the Producer Price Index:
 
Committed Investments by Type
 
   
Year ended December 31,
 
   
2006(1)
   
2007
   
2008
   
2009
   
2010
   
Total
2006-2010
 
   
(thousands of pesos)
 
Terminals
    121,565       119,407       240,368       65,400       16,264       563,004  
Runways and aprons
    295,128       252,062       195,582       177,501       71,708       991,981  
Machinery and equipment
    74,087       90,802       50,181       56,185       28,092       299,347  
Baggage screening system – investments
    497,027       69,839       0       0       0       566,866  
Other
    7,697       14,820       10,574       7,001       0       40,092  
Total 
    995,504       546,930       496,705       306,087       116,064       2,461,290  
_______________
(1)           Amounts listed for 2006 include committed investments relating to the purchase and installation of new baggage screening equipment.  We expect to undertake these investments before the end of 2010 so as to comply with the master development program.  Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new equipment could increase our exposure to liability as a result of our involvement in the screening process.
 
For the year ended December 31, 2009, our capital expenditures totaled Ps. 867,656 million.  Our capital expenditures for 2009 were devoted primarily to our committed investments.
 
BUSINESS OVERVIEW
 
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 activities conducted at our airports, such as the leasing of space to restaurants and retailers.
 
We operate 13 airports, which serve a major metropolitan area (Monterrey), three tourist destinations (Acapulco, Mazatlán and Zihuatanejo), regional centers (Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas) and border cities (Ciudad Juárez and Reynosa). Our airports are located in nine of the 31 Mexican states, covering a territory of approximately 926,421 square kilometers (approximately 575,667 square miles), with a population of approximately 24 million according to the Mexican National Institute of Statistics, Geography and Computer Science (Instituto Nacional de Estadística, Geografía e Informática) and the Mexican National Population Council. 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 Mexican Bureau of Civil Aviation, our commercial aviation passenger traffic accounted for approximately 15.2 % of all arriving and departing commercial aviation passengers in Mexico in 2009.
 
In 2009, we recorded revenues of Ps. 1,896.3 million (U.S.$145.2 million) and net income of Ps. 469.5 million (U.S.$ 35.9 million).  In 2009 our airports handled approximately 11.5 million terminal passengers, a decrease of 18.1% with respect to the 14.1 million terminal passengers in 2008.
 
Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, Monterrey-Las Vegas, Monterrey-Atlanta, Monterrey-Chicago and Monterrey -New York. Our airports also serve several other major international destinations, including Houston, Los Angeles, Dallas and Phoenix.  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-Mexico City, which was the country’s busiest domestic route in 2009, with approximately 2.2 million total passengers (including passengers flying directly to the nearby airport of Toluca, which are counted together with those flyi ng to Mexico City), according to the Mexican Bureau of Civil Aviation.  Other major domestic routes served by our airports include Mexico City-Acapulco, Mexico City-Ciudad Juárez and Culiacán-Tijuana, with approximately 393 thousand, 347 thousand and 282 thousand total passengers, respectively, in 2009 according to the Mexican Bureau of Civil Aviation.
 
Monterrey is the third largest city in Mexico in terms of population, with a population of 4,199,292 in the greater metropolitan area.  Monterrey ranks among Mexico’s most established urban and commercial centers and is the capital of the state of Nuevo León, Mexico’s ninth largest state in terms of 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 International Airport.  The airport is our leading airport in terms of passenger traffic volume, air traffic movements and contribution to revenues, and ranked fourth busiest airport in Mexico based on passenger traffic volume in 2009, according to data published by the Mexican Bureau of Civil Aviation. Our Monterrey International Airport accounted for approximately 46.8% and 45.1% of our terminal passenger traffic in 2008 and 2009, respectively.
 
Three of our airports, Acapulco International Airport, Mazatlán International Airport and Zihuatanejo International Airport, serve popular Mexican tourist destinations.  Of these tourist destinations, Acapulco and Mazatlán are the largest, with Acapulco constituting Mexico’s thirteenth largest international tourist destination and Mazatlán the seventeenth largest in terms of visitors in 2009, according to the Mexican National Institute of Immigration.  Acapulco is a principal port of call for cruise ships.  In 2009, the Acapulco International Airport, Mazatlán International Airport and Zihuatanejo International Airport collectively accounted for 18.5% of our aggregate terminal passengers and 20.4% of our total revenues.
 
Mexico was the tenth largest tourist destination in the world in 2008 in terms of international arriving tourists. Mexico had 22.6 million arriving tourists, according to the latest data published by the World Tourism Organization.  Within Latin America and the Caribbean, in October 2009 Mexico ranked nineteenth in terms of number of foreign visitors and income from tourism, according to the World Tourism Organization.
 
Seven of our airports serve small and mid-sized cities that are important regional centers of economic activity, with such diverse economic activities as mining (Durango International Airport and Zacatecas International Airport), maquiladora manufacturing (Chihuahua International Airport and Torreón International Airport), petroleum and chemical production (Tampico International Airport), agriculture and livestock (Culiacán International Airport) and transportation and logistics (San Luis Potosí International Airport).  In 2009, these seven regional airports collectively accounted for 29.0% of our aggregate terminal passengers and 27.7% of our total revenues.
 

The remaining two airports in the group, Ciudad Juárez International Airport and Reynosa International Airport, 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 2009, the Ciudad Juárez International Airport and the Reynosa International Airport collectively accounted for 7.4% of our aggregate terminal passengers and 6.4% of our total revenues.
 
In addition, we entered into a joint investment with the international hotel operator NH Hoteles, S.A. de C.V., under Consorcio Grupo Hotelero T2 (“Consortium”) to develop and operate a 287-room hotel and more than 5,000 square meters of commercial space inside Terminal 2 of the Mexico City International Airport (the Mexico City International Airport), under a 20-year lease agreement with the Mexico City International Airport. The Terminal 2 Hotel opened in August 2009.
 
The Consortium is currently carrying out market and feasibility studies for the development of the commercial areas, with an expected beginning of operations of the first phase of the commercial development in 2010.
 
This project provides us with the opportunity to participate in the operation of the Mexico City International Airport Terminal 2 passenger terminal, which according to the Mexico City International Airport, served more than 24 million passengers in 2009.  Airlines based in Terminal 2 include Aeromar, Aeroméxico and Aeroméxico Connect, Continental, Copa, Delta and LAN.  We consider this a key part of our strategy to increase our non-aeronautical revenues.  This project, along with acquisitions of land reserves in 2008 to develop and expand our key airports, accounted for the significant increase in our balance of property, machinery and equipment at December 31, 2008 compared to our balance at December 31, 2007.
 

The following table provides summary data for each of our 13 airports for the years ended December 31, 2008 and 2009:
 
   
Year ended December 31, 2008
   
Year ended December 31, 2009
 
Airport
 
Terminal
Passengers
    Revenues(1)    
Revenues per terminal passenger(1)
   
Terminal
passengers
   
Revenues(1)
   
Revenues per terminal passenger(2)
 
   
Number (in millions)
   
%
   
(millions of pesos)
   
%
   
(pesos)
   
Number (in millions)
   
%
   
(millions of pesos)
   
%
   
(pesos)
 
Metropolitan area:
                                                           
Monterrey International Airport
    6.6       46.8       924.2       46.3       140.3       5.2       45.1       858.6       45.5       165.1  
Tourist destinations:
                                                                               
Acapulco International Airport
    1.1       7.7       157.5       7.9       144.8       0.8       7.3       141.3       7.5       168.4  
Mazatlán International Airport
    0.8       5.9       139.2       7.0       167.0       0.7       6.5       144.5       7.7       194.3  
Zihuatanejo International Airport
    0.6       4.6       96.6       4.8       150.0       0.6       4.7       98.3       5.2       180.5  
Total tourist destinations
    2.6       18.2       393.3       19.7       153.3       2.1       18.5       384.1       20.4       180.5  
Regional cities:
                                                                               
Chihuahua International Airport
    0.8       5.9       120.5       6.0       144.5       0.7       6.5       116.1       6.2       155.8  
Culiacán International Airport
    1.1       7.8       140.5       7.0       127.9       1.1       9.2       150.1       8.0       141.2  
Durango International Airport
    0.2       1.7       33.5       1.7       143.4       0.2       1.8       34.0       1.8       159.3  
San Luis Potosí International Airport
    0.3       1.9       46.7       2.3       178.9       0.2       1.8       45.7       2.4       221.4  
Tampico International Airport
    0.6       4.1       79.8       4.0       137.0       0.5       4.1       70.6       3.7       150.1  
Torreón International Airport
    0.5       3.4       70.4       3.5       146.2       0.4       3.4       65.8       3.5       166.9  
Zacatecas International Airport
    0.3       1.9       37.2       1.9       139.1       0.3       2.2       40.0       2.1       159.0  
Total regional destinations
    3.8       26.7       528.5       26.5       140.6       3.4       29       522.3       27.7       156.2  
Border cities:
                                                                               
Ciudad Juárez International Airport
    0.9       6.4       117.5       5.9       130.1       0.6       5.5       90.0       4.8       142.6  
Reynosa International Airport
    0.2       1.8       30.6       1.6       123.7       0.2       1.9       31.2       1.6       144.5  
Total border city destinations
    1.2       8.2       148.1       7.5       128.7       0.8       7.4       121.2       6.4       143.1  
TOTAL:
    14.1       100.0       1,994.2       100.00       141.8       11.5       100       1,886.2       100.0       163.8  
________________
(1)
Revenues do not include eliminations of transactions among our subsidiaries.
 
(2)
Revenues per terminal passenger are calculated by dividing the total revenues for each airport by the number of terminal passengers for each airport. The total numbers have been rounded to the decimal.
 

As of July 2006, Mexico and the United States are parties to an amended bilateral aviation agreement that increases, from two each to three each, the number of Mexican and U.S. carriers eligible to operate routes between certain pairs of cities, which may include any U.S. city and twelve specified cities in Mexico including Acapulco, Mazatlán and Zihuatanejo.  The agreement also provides for a future increase, from two each to three each, in the number of Mexican and U.S. carriers eligible to operate routes between U.S. cities and two specified additional Mexican cities, including Monterrey.  This subsequent increase took effect in October 2007.  To date, this bilateral agreement did not benefit our business as we expected, mainly because of the decrease in the tourism levels from the U.S. to Mexico con nected with the U.S. economic recession.
 
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-rate price regulation system applicable to our airports.  In 2007, 2008 and 2009, aeronautical services revenues represented approximately 81.7%, 81.3% and 80.5% respectively, of our total 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 automatically included in the cost of a passenger’s ticket and we issue invoices for those charges to each airline on a bi-weekly basis and record an account receivable for the invoice corresponding to a flight during the actual month of the flight.
 
Our principal airline customers were required to pay us no later than 152 days after the invoice delivery date.  The term for payment was dependent upon interest rates on short-term Mexican treasury bills, or Cetes, with longer payment terms during periods of lower interest rates (within a defined range).  In 2009, the weighted average term of payment was 81 days.
 
The new agreements between our airports and our principal airline customers provide that from May 1, 2010, payments for passenger charges will be 60 days after the invoice delivery date for Aeromexico, Mexicana and Volaris, 45 days after the invoice delivery date for VivaAerobus and 30 days after the invoice delivery date for Interjet.
 
International passenger charges are currently U.S. dollar-denominated, but are collected in pesos based on the average exchange rate during the month prior to the flight, and as such 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.  In 2007, 2008 and 2009, passenger charges represented approximately 75.0%, 76.3% and 77.9%, respectively, of our aeronautical services revenues and approximately 61.2%, 62.0% and 62.7%, respectively, of our total revenues.  Passenger charges vary at each airport and based on the destination of each flight.
 

Aircraft Landing Charges
 
We collect landing charges from 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 2007, 2008 and 2009, these charges represented approximately 7.7%, 6.9% and 6.2%, respectively, of our aeronautical services revenues and approximately 6.3%, 5.6% and 5.0%, respectively, of our total revenues.
 
Aircraft Parking, Boarding and Unloading Charges
 
We collect various charges from 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 the nationality of the airline or client.  We collect aircraft parking charges the entire time an aircraft is on our aprons.