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, 2011
 
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)

Torre Latitud, L501, Piso 5
Av. Lázaro Cárdenas 2225
Col. Valle Oriente, San Pedro Garza García
Nuevo León, México
(Address of principal executive offices)

 
José Luis Guerrero
Torre Latitud, L501, Piso 5
Av. Lázaro Cárdenas 2225
Col. Valle Oriente, San Pedro Garza García
Nuevo León, México
+ 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 (ADSs) 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 ADSs, pursuant to the requirements of the Securities and Exchange Commission.
 
Securities registered or to be registered pursuant to Section 12(g) of the Act:
 
None
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 
N/A
 
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 
 
Title of each class:
 
Number of Shares
Series B Shares
341,200,000
Series BB Shares
  58,800,000
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes              No   x
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes              No   x
 
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 (§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           þ                      Other o
 
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
       
 
1
       
 
1
       
 
1
       
   
1
       
   
4
       
   
5
       
   
29
       
 
29
       
   
29
       
   
36
       
   
69
       
   
89
       
   
91
       
 
91
       
 
91
       
 
115
       
 
125
       
   
125
       
   
128
       
 
130
       
   
130
       
   
134
       
 
137
       
   
137
       
   
138
       
 
138
       
   
155
       
   
155
       
   
155
       
   
158
       
 
158
       
 
158
       
 
159
 
 
TABLE OF CONTENTS
(continued)
 
     
Page
       
 
159
       
 
159
       
 
160
       
 
161
       
 
161
       
 
162
       
 
164
       
 
164
       
 
164
       
 
165
       
 
165
       
 
165
       
 
166
       
 
167
       
 
172
       
 
173
       
 
173
       
 
174
 

PART I
 
Identity of Directors, Senior Management and Advisers
 
Not applicable.
 
Offer Statistics and Expected Timetable
 
Not applicable.
 
Key Information
 
SELECTED FINANCIAL DATA
 
Our consolidated financial statements included in this annual report are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB.  Our date of transition to IFRS was January 1, 2010.  These consolidated annual financial statements are our first financial statements prepared in accordance with IFRS.  IFRS 1—”First-time Adoption of International Financial Reporting Standards” has been applied in preparing these financial statements.  A description of the effects of our transition from Mexican Financial Reporting Standards (our previous generally accepted accounting principles, or MFRS) to IFRS on our financial information is presented in Note 24 to our audited consolidated financial statements.  We publish our consolidated financial statements in Mexican pesos.
 
References in this annual report on Form 20-F to “dollars,” “U.S. dollars” or “U.S.$” are to the lawful currency of the United States.  References in this annual report on Form 20-F to “pesos” or “Ps.” are to the lawful currency of México.  This Form 20-F contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader.  These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated.  Unless otherwise indicated, U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps. 13.95 to U.S.$ 1.00, the noon buying rate for Mexican pesos on December 30, 2011, as published by the U.S. Federal Reserve.  On April 18, 2012, the U.S. Federal Reserve noon buying rate for Mexican pesos was Ps. 13.13 to U.S.$ 1.00.
 
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.
 
In reviewing this annual report, you should be aware that in several sections of this annual report we take into account only revenues that resulted in actual cash inflows (which we categorize as aeronautical and non-aeronautical revenues) for ratios or comparative calculations.  Both of these categories of revenues are dependent, either directly or indirectly, on passenger traffic, while revenues from construction services under IFRIC 12, “Service Concession Arrangements,” are not dependent upon passenger traffic, but from the level of capital expenditures carried out at each airport.  Information reported using only revenues that generated cash inflows may be more useful for readers of this annual report because those revenues are the key drivers of our business, passenger traffic and our maximum tariffs.  The use of aeronautical and non-aeronautical revenues is more common in our industry, as they represent the revenues generated from our core operations, which are services provided to passengers, airlines and other third parties based on passenger traffic at our airports.  Additionally, management regularly reviews our aeronautical and non-aeronautical revenues as they provide representative information regarding our passenger traffic and actual cash flows, which allows us to compare such revenues over comparative periods as well as make projections about our expected future cash flows.  We indicate each instance in which we use only aeronautical and non-aeronautical revenues by indicating the category of revenues used.  The following table presents a reconciliation of our aeronautical and non-aeronautical revenues to our total revenues per our IFRS consolidated statements of comprehensive income.
 
 
2011
 
(amounts in millions of pesos)
 
   
Total Revenues
   
Monterrey
   
Acapulco
   
Mazatlán
   
Culiacán
   
Chihuahua
   
Zihuatanejo
   
Other Airports
   
Eliminations(1)
   
Hotel Services
 
Aeronautical services
    1,870.20       843.80       103.70       122.70       168.40       122.50       77.60       431.40              
Non-aeronautical services
    588.70       250.70       22.00       36.40       23.60       24.90       17.50       73.60       (2.00 )     142.00  
Total aeronautical and non-aeronautical services
    2,458.90       1,094.50       125.70       159.10       192.00       147.40       95.10       505.00       (2.00 )     142.00  
Percentage of total revenues
    88.14 %     85.57 %     96.25 %     92.99 %     94.03 %     88.53 %     55.88 %     95.64 %             100.00 %
                                                                                 
Construction services
    330.90       184.60       4.90       12.00       12.20       19.10       75.10       23.00              
Total revenues
    2,789.80       1,279.10       130.60       171.10       204.20       166.50       170.20       528.00       (2.00 )     142.00  
                                                                                 
2010
 
(amounts in millions of pesos)
 
   
Total Revenues
   
Monterrey
   
Acapulco
   
Mazatlán
   
Culiacán
   
Chihuahua
   
Zihuatanejo
   
Other Airports
   
Eliminations(1)
   
Hotel
 
Aeronautical services
    1,652.60       731.40       115.40       117.60       147.40       116.00       78.60       346.20              
Non-aeronautical services
    491.80       209.60       22.10       34.90       20.30       23.30       16.50       73.00       (8.00 )     100.00  
Total aeronautical and non-aeronautical services
    2,144.40       941.00       137.50       152.50       167.70       139.30       95.10       419.20       (8.00 )     100.00  
Percentage of total revenues
    83.30 %     83.05 %     75.59 %     77.06 %     86.40 %     81.37 %     72.93 %     88.48 %             100.00 %
                                                                                 
Construction services
    430.00       192.00       44.40       45.40       26.40       31.90       35.30       54.60              
Total revenues
    2,574.40       1,133.00       181.90       197.90       194.10       171.20       130.40       473.80       (8.00 )     100.00  
 
(1)     Intra-airport transactions that are eliminated in consolidation
 
The following tables present our selected consolidated financial information for or as of each of the periods or dates indicated, and have been derived in part from our audited consolidated financial statements.  This information should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements, including the notes to our consolidated financial statements.  The selected financial information for 2010 differs from the information we previously published for 2010, because it is presented in accordance with IFRS.
 
 
   
Year Ended December 31,
 
   
 
2010
   
2011
 
   
(thousands of pesos)
   
(thousands
of dollars)(1)
 
Statement of Income data:
                 
                   
Revenues:
                 
Aeronautical services(2)
    1,652,626       1,870,177       134,063  
Non-aeronautical services(3)
    491,797       588,671       42,199  
Construction services
    430,029       330,863       23,718  
Total revenues
    2,574,452       2,789,711       199,980  
Operating costs:
                       
Costs of services
    749,154       768,284       55,074  
Construction costs
    430,029       330,863       23,718  
General and administrative expenses
    380,474       432,340       30,992  
Concession tax(4)
    103,067       115,979       8,314  
Technical assistance fee(5)
    47,567       55,150       3,953  
Depreciation and amortization:
                       
Depreciation(6)
    24,770       28,905       2,072  
Amortization(7)
    124,462       136,183       9,762  
Total depreciation and amortization
    149,232       165,088       11,834  
Other (expenses) income, net
    (5,589 )     2,739       197  
Total operating costs
    1,853,934       1,870,443       134,082  
Income from operations
    720,518       919,268       65,898  
Interest income
    15,791       16,079       1,153  
Interest cost 
    (87,088 )     (98,431 )     (7,056 )
Exchange (loss) gain, net 
    1,562       (38,766 )     (2,779 )
Income before income taxes
    650,783       798,150       57,216  
Income tax expense
    (8,796 )     182,070       13,052  
Consolidated comprehensive income
    659,579       616,080       44,164  
Basic earnings per share(8)
    1.6532       1.5439       0.1106  
Basic earnings per ADS(8)
    13.2256       12.3512       0.8854  
 
Other operating data:
                       
Total terminal passengers (thousands of passengers)(9)
    11,588       11,773          
Total air traffic movements (thousands of movements)
    345       336          
Aeronautical + non-aeronautical revenues per terminal passenger(10)
    185       209          
 
 
 
   
Year Ended December 31,
 
      2010      2011  
   
(thousands of pesos)
   
(thousands
of dollars)(1)
 
Statement of Financial Position data:
                       
                         
Cash and cash equivalents
    312,838       523,634       37,536  
Total current assets
    897,009       1,163,381       83,396  
Land, buildings, machinery and equipment  net
    2,093,160       2,118,450       151,860  
Investments in airport concessions
    5,561,881       5,769,688       413,598  
Total assets
    8,703,959       9,295,154       666,319  
Current liabilities
    1,108,101       824,945       59,136  
Total liabilities
    2,827,949       3,210,653       230,154  
Total stockholders’ equity
    5,876,010       6,084,501       436,165  
Other data:
                       
                         
Net cash flows from operating activities
    482,501       607,373       43,539  
Net cash flows used in investing activities
    (399,091 )     (312,704 )     (22,416 )
Net cash flows used in financing activities
    (38,306 )     (83,873 )     (6,013 )
Increase in cash and cash equivalents
    45,104       210,796       15,110  
 

(1)
Translated into dollars at the rate of Ps. 13.95 per U.S.$ 1.00, the U.S. Federal Reserve noon buying rate for Mexican pesos at December 30, 2011.  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 hotel services, car parking charges, advertising, leasing of commercial space to tenants, taxis and other ground transportation providers, revenues from OMA Carga and other miscellaneous sources of revenues.  Pursuant to our concessions and to the Mexican Airport Law (Ley de Aeropuertos) and the regulations thereunder, parking services are currently excluded from aeronautical services under our maximum rates, although the Ministry of Communications and Transportation could decide to regulate such rates, and such rates may be regulated by other authorities.
(4)
Each of our subsidiary concession holders is required to pay a concession tax to the Mexican government under the Mexican Federal Duties Law 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.
(5)
On January 1, 2001, we began paying Servicios de Tecnología Aeroportuaria, S.A. de C.V. (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 Transactions—Related Party Transactions—Arrangements with SETA.”
(6)
Reflects depreciation of fixed assets.
(7)
Reflects amortization of airport concessions and rights to use airport facilities.
(8)
For IFRS purposes, 398,967,758 weighted average common shares in 2010 and 399,039,231 weighted average common shares in 2011.  Earnings per ADS are based on the ratio of eight Series B shares per ADS.
 
 
(9)
Arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft).  Excludes transit passengers (passengers who arrive at our airports but generally depart without changing aircraft).
(10)
Aeronautical plus non-aeronautical revenues divided by terminal passengers for the period.  Expressed in pesos (not thousands of pesos).
 
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 U.S. Federal Reserve 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)
 
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  
2010
    13.19       12.16       12.38       12.62  
2011
    14.25       11.51       13.95       12.43  
2012:
                               
January
    13.75       12.93       13.04       13.38  
February
    12.95       12.63       12.79       12.78  
March
    12.99       12.63       12.81       12.75  
April (through April 18)
    13.23       12.73       13.13       13.01  
 

(1)
Average of month-end rates or daily rates, as applicable.
Source:  U.S. 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 (Bolsa Mexicana de Valores), 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 30, 2011, the U.S. Federal Reserve noon buying rate was Ps. 13.95 per U.S.$ 1.00.  On April 18, 2012, the U.S. Federal Reserve noon buying rate was Ps. 13.13 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 2010 and 2011 approximately 64.2% and 67.0%, respectively, of our total revenues, and approximately 77.1% and 76.1%, respectively, of the sum of our aeronautical and non-aeronautical 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.  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 2015.
 
In 2015, the Ministry of Communications and Transportation will set our maximum rates and annual efficiency adjustments for 2016 through 2020.  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 the period from 2016 to 2020, 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 business, results of operations, prospects and financial condition.
 
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 you 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 2016 to 2020), the Ministry of Communications and Transportations may be solicited by different entities (such as, for example, the Mexican Federal Competition Commission (Comisión Federal de Competencia or the “Competition Commission”) 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 business, results of operations, prospects and financial condition.
 
On December 14, 2011, a bill was introduced in Mexico’s Congress to amend the Mexican Airport Law.  The bill proposes that the Ministry of Communications and Transportation gain additional authority to plan and apply the standards, policies and programs for the Mexican airport system, to oversee the proper operation of civil aviation in Mexico and to establish rules for airport service providers and the general basis for flight schedules, so as to guarantee the competitiveness of Mexico’s airports.  See “Item 5.  Operating and Financial Review and Prospects—Recent Developments—Possible Amendments to the Mexican Airport Law.”  The bill has been approved by the Senate and is currently being considered in the House of Deputies.  Should the current Mexican Airport law be amended with respect to matters that are related to our operations, such amendment could have a material adverse effect on our business, results of operations, prospects and financial condition.
 
 
Our business is dependent upon international regulations that affect Mexican airlines.
 
On July 30, 2010, the Federal Aviation Administration (FAA) downgraded México’s aviation safety rating from Category 1 to Category 2, as a result of the FAA’s visit to the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil) between January and July 2010.  The reason for the downgrade was not having enough flight inspectors and administrative and organizational elements in the Mexican Bureau of Civil Aviation.
 
The FAA also evaluates the legal framework for civil aviation and issues related to the monitoring, staff training and inspection processes related to regulations issued by the International Civil Aviation Organization, an agency of the United Nations Organization.
 
The consequences of the downgrade from Category 1 to Category 2 were:  the suspension of the right to operate code-shared flights, the restriction of Mexican airlines’ ability to increase the frequency of, or add new routes to, the United States, and that the international routes of Mexicana de Aviación may not be flown by any Mexican carrier throughout the duration of the Category 2 rating.
 
México regained its Category 1 safety rating on December 1, 2010; however, we cannot be sure that México will not be downgraded in the future and we cannot be certain of how long this Category 1 rating will be maintained.
 
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 the results of operations of any airport, will be profitable, or that we will realize our expected return on investment.
 
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 2010, the Ministry of Communications and Transportation determined, based on the terms of our concessions, the maximum rates for our airports from January 1, 2011, through December 31, 2015.  Under the terms of our concessions, there is no guarantee that the results of operations of any airport will be profitable.  We may not realize our expected return on investment from capital investments under the master development plans.
 
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 assurance 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 2011, our revenues subject to maximum rate regulation represented approximately 96.0% 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 revenues 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 our 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.
 
Depreciation of the peso may cause us to exceed our maximum rates.
 
We aim to charge prices that are as close as possible to our maximum chargeable rates, and we are entitled to adjust our specific prices only once every six months (or earlier upon a cumulative increase of 5% in the Mexican producer price index (excluding petroleum)).  However, we generally collect passenger charges from airlines 30 to 60 days following the date of each flight.  Such tariffs for the services that we provide to international flights or international passengers are generally denominated in U.S. dollars but are paid in Mexican pesos based on the average exchange rate for the month prior to each flight.  Accordingly, depreciation of the peso, particularly late in the year, could cause us to exceed the maximum rates at one or more of our airports, which could lead to the imposition of fines and the termination of one or more of our concessions.  The peso has recently experienced significant volatility, depreciating 29.4%, from Ps. 10.98 per U.S.$ 1.00 on September 30, 2008, to Ps. 14.21 per U.S.$ 1.00 on March 31, 2009.  Between March 31, 2009, and December 31, 2009, the peso fluctuated between Ps. 13.00 and Ps. 14.00 per U.S.$ 1.00 and then began to appreciate.  From December 31, 2009, to December 30, 2010, the peso appreciated by approximately 5.5%, from Ps. 13.06 per U.S.$ 1.00 on December 31, 2009, to Ps. 12.35 per U.S. 1.00 on December 30, 2010.  From December 30, 2010, to December 30, 2011, the peso depreciated by approximately 13.1%, from Ps. 12.35 per U.S.$ 1.00 on December 30, 2010, to Ps. 13.95 per U.S.$ 1.00 on December 30, 2011.  On April 18, 2012, the exchange rate was Ps. 13.13 per U.S.$ 1.00.
 
 
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 México, 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 regulations 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 León has requested in the past that the Ministry of Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations.  To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession.  However, 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.
 
 
Any competition from other such airports could have a material adverse effect on our business, results of operations, prospects and financial condition.  Under certain circumstances, the grant of a concession for a new or existing airport must be made pursuant to a public bidding process.  In the event that a competing concession is offered in a public bidding process, we cannot assure you that we would participate in such a 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 adversely affected our business.
 
The global economic and financial crisis in 2009 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 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 also limited the availability of credit and increased financial costs for companies around the world, including in México and the United States.
 
Although during most of 2010 and the first half of 2011, global economic conditions improved, growth decreased in the second half of 2011 due to persistent weaknesses such as the jobs crisis in the United States, the sovereign-debt crises in the eurozone (which worsened in the second half of 2011), fiscal problems and the declining prospects for economic growth, especially in the developed economies.  These weaknesses could lead to another major worldwide economic downturn.  In the event of a recession, developing countries, which had rebounded from the economic and financial crisis in 2009, would be impacted through trade and financial channels.
 
Further downturns in the global economy would adversely affect our business, results of operations, prospects and financial condition.  (See also “Risks Related to México – Our business is significantly dependent upon the volume of air passenger traffic in México, and negative economic developments in México will adversely affect our business and results of operations” and “Risks Related to México – 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 an economic downturn in México, the United States and the world, the political situation in México 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, our insurance policies do not cover all losses and liabilities resulting from terrorism.  Any future terrorist attacks, whether or not involving aircraft, will likely adversely affect our 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 FAA 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 business, results of operations, prospects and financial condition.
 
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 2010 and 2011, passenger charges represented 50.0% and 54.4%, respectively, of our total revenues and 60.1% and 61.7%, respectively, of the sum of our aeronautical and non-aeronautical 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 México, including extortion and drug trafficking in particular, could adversely affect our business.
 
The travel warning issued by the U.S. Department of State (Bureau of Consular Affairs) on February 8, 2012 (the “Travel Warning”) urges U.S. citizens to defer non-essential travel to the states of Nuevo León (except the metropolitan area of Monterrey), Tamaulipas, Sonora, Chihuahua, Coahuila, Sinaloa, Durango, Zacatecas, San Luis Potosí, Aguascalientes, Guerrero, Michoacán, Nayarit and Jalisco and to be aware of safety and security when visiting these cities and other regions, such as the metropolitan area of Monterrey, Baja California, Morelos, Veracruz and Colima.  The Travel Warning highlights the special concern regarding the situation in Ciudad Juárez and surrounding areas and notes that in Monterrey, the level of violence and insecurity has increased.
 
Higher incidences of crime throughout México, including extortion and drug trafficking in particular, could have an adverse affect on our business, results of operations, prospects and financial condition, as it may decrease the international passenger traffic directed to México from abroad.
 
Increases in international fuel prices could adversely affect our business and results from operations.
 
International fuel prices, which represent a significant cost for airlines using our airports, have increased in recent years.  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 requirements.  Fuel prices in 2011 were higher than prices in 2010 due primarily to political turmoil in the Middle East.  The social and political crises affecting the Middle East caused a surge in oil prices that forced sharp increases in the price of fuel in 2011.  Global weaknesses, such as the sovereign-debt issues in the eurozone, the deceleration of the U.S. economy due to the end of the government-led stimulus after the economic and financial crisis in 2009 and the slow-down in developing countries, principally China and India due to their dependence on capital inflows from, or exports to, developed countries, also affect fuel prices, increasing costs for airlines.
 
Fuel prices may be subject to further increases resulting from any future terrorist attacks, a general increase in international hostilities or a reduction in output of fuel, voluntary or otherwise, by oil-producing countries, 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 revenues and profitability will depend in part on our business strategy, which consists of increasing passenger and cargo traffic at our airports and increasing revenues from commercial activities.
 
Our ability to increase commercial revenues 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 NH Hotel and commercial project at México 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 NH Hotel.
 
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 (53,820 square feet) of commercial space inside the new Terminal 2 of México City International Airport, under a 20-year contract with México City International Airport.  NH Hoteles, S.A. de C.V., a Spanish company, owns the other 10%.  The Terminal 2 NH Hotel opened in August 2009.  The net amount of our investment in the Terminal 2 NH Hotel as of December 31, 2011, was Ps. 321.9 million.
 
Part of the value of our investment in Terminal 2 of México City International Airport reflects the airport’s status as the only one in the proximity of México City.  If a new airport were to be built near México City, México 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 México City International Airport can be terminated by México City International Airport with partial or no compensation to us.  Should a new México City airport be constructed or should México City International Airport terminate our operating lease agreement, there could be no assurances as to our ability to fully recover our investment in the Terminal 2 NH Hotel.
 
As a new business endeavor, the Terminal 2 NH Hotel faces the challenge of maintaining enough market participation as it continues with its operations.  We cannot assure you that the occupancy rate of the hotel will be sufficient to recover our investment.  As of December 31, 2011, total revenues amounted to Ps. 142.1 million for the year, annual average occupancy increased to 82.8% from 63.6% in 2010 and the annual average rate per room was Ps. 1,320.99. We cannot assure you that the occupancy rate of the hotel will continue to increase.
 
Competition from other tourist destinations could adversely affect our business.
 
The principal factor affecting our results of operations and business is the number of passengers using our airports.  The number of passengers using our airports (particularly the Acapulco, Mazatlán and Zihuatanejo airports) may vary as a result of factors beyond our control, including the level of tourism in México.  In addition, our passenger traffic volume may be adversely affected by the attractiveness, affordability and accessibility of competing tourist destinations in México, such as Cancún, Puerto Vallarta and Los Cabos, or elsewhere, such as Florida, Puerto Rico, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America.  The attractiveness of the destinations we serve is also likely to be affected by perceptions of travelers as to the safety and political and social stability of México.  Furthermore, the current global economic crisis has 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 five of our airports and could be adversely impacted by any condition affecting those airports.
 
In 2011, approximately 69.8% of the sum of our aeronautical and non-aeronautical revenues, were generated from five of our 13 airports.  In particular, the Monterrey airport generates the most significant portion of our revenues.  The following table lists the percentage of total revenues generated at our airports including the percentage of total revenues generated by our hotel services:
 
Airport
 
For Year Ended December 31, 2011
 
Monterrey International Airport
    44.4 %
Culiacán International Airport
    7.8 %
Mazatlán International Airport
    6.5 %
Chihuahua International Airport
    6.0 %
Acapulco International Airport
    5.1 %
Eight other airports and Terminal 2 NH Hotel
    30.2 %
Total
    100.0 %
 
As a result of the substantial contribution to our revenues from these five 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.
 
If any conflicts with our employees were to arise, including with our unionized employees (which accounted for 57% of our total employees as of December 31, 2011), 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, 2011) are represented by a national union of airport workers that operates throughout México.  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 aeronautical revenues generated at our airports in 2011, Aeroméxico and its affiliates represented 31.8%, VivaAerobus represented 15.3% and Interjet represented 15.1%.  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 2011, passengers traveling on discount, charter and low-cost carriers, such as VivaAerobus, Interjet and Volaris accounted for approximately 45.9% of our commercial aviation passenger traffic.
 
On November 29, 2011, AMR Corporation, the parent company of American Airlines and American Eagle, announced that AMR Corporation and certain of its U.S.-based subsidiaries filed voluntary petitions for Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of New York.  The same day, the U.S. Bankruptcy Court for the Southern District of New York granted approval of a series of motions to help facilitate American Airlines and American Eagle’s continued normal business operations throughout the reorganization process.
 
 
AMR Corporation generated 3.9% of our revenues from January 1, 2011, to December 31, 2011, of which American Airlines accounted for 3.6% and American Eagle accounted for 0.3%.  As a percentage of our total passenger traffic, AMR Corporation generated 3.0%, of which American Airlines accounted for 2.1% and American Eagle accounted for 0.9% during the same period.
 
Grupo Mexicana, which comprises Mexicana de Aviación, ClickMexicana and MexicanaLink, operated at 12 of our 13 airports.  In July 2010, prior to the bankruptcy filing of Mexicana de Aviación, the three airlines operated 24 routes at our airports, of which 18 were also operated by other airlines.
 
On August 3, 2010, Mexicana de Aviación announced that it filed for bankruptcy protection (concurso mercantil) before the 11th Federal judge in México City and that it also sought bankruptcy protection in the United States.  On August 27, 2010, Grupo Mexicana announced the indefinite suspension of operations of Mexicana de Aviación, ClickMexicana and MexicanaLink.
 
On September 7, 2010, ClickMexicana and MexicanaLink (subsidiaries of Grupo Mexicana) filed for bankruptcy protection before the 11th Federal Court in México.  ClickMexicana and MexicanaLink’s insolvency petitions were accepted in conciliary phase on November 16, 2010.
 
During the first six months of 2010, Grupo Mexicana generated 16.6% of our total passenger traffic, of which 7.6% was accounted for solely by Mexicana de Aviación.  Grupo Mexicana generated 17.3% of our domestic passenger traffic, including 7.2% from Mexicana de Aviación.  In terms of international traffic, Grupo Mexicana generated 13.1% of traffic, of which Mexicana de Aviación accounted for 9.3%.  Grupo Mexicana generated 12.2% of our revenues during the first six months of 2010, of which Mexicana de Aviación accounted for 5.9%.
 
In November 2010, we filed a motion (incidente de separación de bienes) against Grupo Mexicana, ClickMexicana and MexicanaLink to recover the passenger charges that Grupo Mexicana collected for us.
 
Currently the motion has been resolved only for ClickMexicana.  On January 4, 2012, a federal court of appeals (tribunal colegiado de circuito) determined that the dispute over the passenger charges was separable from the bankruptcy process.  On February 27, 2012, the court of first instance ordered the separation of Ps. 58.1 million from the bankruptcy trial of ClickMexicana in our favor, and on April 18, 2012, the court ordered ClickMexicana to pay us or to declare it legally impossible to execute the payment within five days from the date of the court’s decision.  As of the date of this report, ClickMexicana has not paid us or declared payment legally impossible.
 
As of April 18, 2012, the total amount owed to us by Grupo Mexicana amounted to Ps. 145.9 million.  There can be no assurance that these amounts will be recovered from Grupo Mexicana.
 
None of our contracts with our airline customers obligate them to continue providing service from 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 revenues from our key customers.
 
Due to increased competition, higher fuel prices and the general decrease in demand because of global volatility in the financial and exchange markets and economic crises, 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 all cases, our revenues from passenger charges and other aeronautical services are secured by a performance bond or other types of guarantees; however, guarantees may not fully cover the amount owed by an airline at a certain date.  In the event of the insolvency of any of these airlines, we would not be certain of the collection of any amounts invoiced to that airline in respect of passenger charges.
 
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 de Aviación, Aeromar and Aeroméxico Connect—refused to pay certain increases in our airport service charges.  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 México.
 
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 the 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 (i) contracts governing charges for certain aeronautical services and (ii) 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.  Subsequently, we entered into a new agreement covering the period from August 1, 2009, to December 31, 2011.  As of April 18, 2012, we continued to charge our principal airline customers in accordance with the terms of this agreement.  At this time, we are in the process of negotiating a new agreement with the National Air Transportation Board.
 
Although passenger traffic volume (and therefore overall revenues) 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.
 
Passenger charges are collected by the airlines and then paid to us on the basis of contracts entered into with each airline operating at our airports.  We cannot guarantee that all airlines will continue collecting the passenger charges for us.  Should one or more airlines stop collecting passenger charges for us, we would have to collect these charges directly ourselves, which would result in 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 government entities 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 adverse 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 controlled Servicios de Apoyo en Tierra, or SEAT, pursuant to a trust.  SEAT was at one time the largest provider of baggage and handling services at our airports.  In December 2010, the Mexican Bureau of Civil Aviation determined that SEAT did not fulfill the provisions of Article 54 of the Mexican Airport Law and ordered each of Grupo Aeroméxico and Grupo Mexicana to create a business association to provide themselves with complementary services and another separate business association to render services to third parties.  SEAT ceased operations on May 11, 2011.  Grupo Aeroméxico created the company Estrategias Especializadas de Negocios, S.A. de C.V., to provide itself with complementary services and also created the company Administradora Especializada en Negocios, S.A. de C.V., to render services to third parties.  Both companies have been authorized by the Mexican Bureau of Civil Aviation and are in operation as of May 12, 2011.  In the event that Grupo Mexicana resumes operations, the same requirements of the Mexican Bureau of Civil Aviation must be fulfilled if Grupo Mexicana decides to create companies to provide baggage and handling services.  If any service providers, including Administradora Especializada en Negocios, S.A. de C.V., were to halt operations at any of our airports, we could be required to seek a new provider of these services or to provide these services ourselves, either of which 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 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 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.$ 120.0 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 ruling 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 because the Ministry of Communications and Transportation is the grantor of the concession title to the Ciudad Juárez 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.  In May 2010, the Court of Appeals granted the Federal Government’s request.  The plaintiffs filed a constitutional claim against this ruling before the District Court in Chihuahua.  On November 29, 2010, the District Court in Chihuahua confirmed the Court of Appeals ruling.  Against this ruling, the plaintiffs filed an appeal (recurso de revisión) before the Federal Circuit Court, and on July 7, 2011, the Federal Circuit Court ruled that the plaintiffs’ constitutional claim should be heard by a District Court in Ciudad Juárez.  In October 2011, the District Court in Ciudad Juárez denied the plaintiffs’ constitutional claim, against which, in November 2011, the plaintiffs filed a new appeal (recurso de revisión) before the Federal Circuit Court.  This petition is currently 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, our concession to operate Ciudad Juárez airport would terminate and negatively affect our results of operations.  In 2011, the Ciudad Juárez airport represented 4.6% of our total revenues (4.9% of the sum of our aeronautical and non-aeronautical revenues).
 
We may be liable for property taxes as a result of claims asserted against us by certain municipalities.
 
Various municipalities have asserted administrative law proceedings against us, for the payment of property taxes with respect to the real estate on which we operate our airports in those cities. We have appealed all the administrative law proceedings against us and, while some have been dismissed by the relevant administrative authority, many are still pending.
 
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.
 
On June 16, 2010, the Congress of Jalisco filed before the Federal Congress a legislative initiative to amend the Mexican Airport Law to require airports to pay property taxes and obtain various municipal licenses.  The initiative was sent to the Transport and Communications Commission of the Federal Congress to be reviewed and, if the Commission determines that the initiative includes all the elements necessary to amend the law, then the initiative is expected to be submitted to the Federal Congress for its approval.  There can be no assurance that the Transport and Communications Commission, the Federal Congress or the Congress of the States will not file other initiatives that seek to amend the Mexican Airport Law.  An amendment to the Mexican Airport law with respect to matters that are related to our operations could have a material negative impact on our business, results of operations, prospects and financial condition.
 
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 that could affect our business, results of operations, prospects and financial condition may be enacted in the future.  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 material adverse effect on our business, results of operations, prospects and financial condition.
 
Natural disasters could adversely affect our business.
 
From time to time, the Northern and Central regions of México experience torrential rains, hurricanes (particularly during the months of July through September) and, depending on the region, earthquakes and volcanic activity.  In addition, the Mazatlán, Culiacán and Acapulco airports are susceptible to occasional flooding due to torrential rainfall.  Natural disasters may impede 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 that we serve could adversely affect our business, results of operations, prospects and financial condition.
 
 
In July 2010, operations in the Tampico, Reynosa and Monterrey airports were adversely impacted by Hurricane Alex, which caused significant complications in and around Monterrey and the border region.  In Nuevo León, Hurricane Alex was considered to be one of the most destructive hurricanes recorded in the history of the state, causing severe damages to bridges, highways, roads and the interruption of water, electricity and natural gas supplies.  In accordance with our regulations, our airports remained open.  However, some airlines suspended several flights.  From June 30 to July 5, 2010, a total of 117 flights were cancelled at the Monterrey airport, and 10 flights were cancelled at the Reynosa airport.
 
We have insurance for the physical facilities at our airports against damage caused by natural disasters, accidents or other similar events, but we do not have insurance covering losses due to resulting business interruption.  Moreover, should losses occur, 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 airports, have only one commercial aviation runway.  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 Official Gazette of the Federation (Diario Oficial de la Federación) on July 9, 2009, requires subcontractors to register their employees at the Mexican Social Security Institute (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 such contractors 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 business, results of operations, prospects and financial condition.
 
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 those described above, could restrict any such expansion and thus have a material adverse effect on the future profitability and growth of our business.
 
We are exposed to risks inherent to the operation of airports.
 
We are obligated to protect the public at our airports and to reduce the risk of accidents at our airports.  As with any company dealing with members of the public, we must implement certain measures for the protection of the public, such as fire safety in public spaces, design and maintenance of car parking facilities and access routes to meet road safety rules.  We are also obligated to take certain measures related to aviation activities, such as maintenance, management and supervision of aviation facilities, rescue and fire-fighting services for aircraft, measurement of runway friction coefficients, flood control at the Acapulco airport and measures to control the threat from birds and other wildlife on airport sites.  These obligations may require us to incur additional costs and could increase our exposure to liability to third parties for personal injury or property damage resulting from our operations.
 
On April 13, 2010, an accident involving an Airbus A-300 cargo plane belonging to Aerotransportes de Carga Unión occurred at the Monterrey airport due to weather conditions.  On November 24, 2010, an accident involving a Mexican Air Force plane occurred at the Monterrey airport due to internal mechanical failures that resulted in several injuries.  Claims relating to these accidents have not been asserted against us.  These incidents lead to increased security measures relating to hazardous materials and the development of an assistance plan for victims.
 
 
Interruptions in the proper functioning of information systems could disrupt operations and cause unanticipated increases in costs and/or decreases in revenues.
 
The proper functioning of our information systems is important to the successful operation of our business.  If critical information systems fail or are otherwise unavailable, our ability to provide airport services at our airports, collect accounts receivable, pay expenses, and maintain our security and customer data, could be adversely affected.  Currently, our information systems are protected with backup systems, including physical and software safeguards located outside of our offices for protection purposes, and a cold site on certain systems to recover information technology operations.  These safety components reduce the risk of disruptions, failures or security breaches of our information technology infrastructure and are reviewed periodically by external advisors.  Nonetheless, any such disruption, failure or security breach of our information technology infrastructure, including our back-up systems, could have a negative impact on 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.
 
México’s environmental legislation could limit the growth of some of our airports.
 
There are areas protected by Mexican environmental laws within the grounds of the Acapulco and Zihuatanejo airports, and there are restrictions on any construction or development of any infrastructure within these areas.  According to the Ministry of Environment and Natural Resources norm NOM-059-2001, mangroves are protected species, and it is a criminal offense to remove such species.
 
For new buildings, extensions and/or modifications at airports that include a total or partial removal of forest vegetation for non-forest activities, it is necessary to obtain approval for a change in the use of the forest area, as provided by the Sustainable Forestry Development Act.
 
The National Water Commission (Comisión Nacional del Agua) has the authority to restrict water use in some of our airports due to water shortage in the north of México.  Airports such as Monterrey and Ciudad Juárez are affected by these regulations that could limit future growth of infrastructure and operations at those airports.
 
Several of our airports, such as Ciudad Juárez, Tampico and Torreón, are located in densely populated urban areas, which are subject to more restrictive environmental regulations (such as limitations on noise pollution and air emissions) that may limit our ability to expand.  This 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 we are currently responsible for inspecting passengers and their carry-on luggage before they board any aircraft.  Under Mexican law, we may be liable to third parties for personal injury or property damage resulting from the performance of such inspection.  In addition, we may be required to adopt additional security measures in the future or undertake capital expenditures if security measures for carry-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 completed the purchase and installation of screening equipment in all of our airports to facilitate compliance with the new baggage-screening guidelines.  Our subsidiary, Servicios Complementarios del Centro Norte, S.A. de C.V., operates the checked-baggage screening system as of March 1, 2012.  The airlines that do not utilize our services continue to screen baggage by hand in order to comply with the baggage-screening guidelines.  In some countries, such as the United States, the federal government (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 equipment could increase our exposure to liability as a result of our involvement in the screening process.  In addition, although we are not currently obligated to screen checked baggage, we could become obligated to do so, and thus become subject to potential liability, if Mexican law changes in the future.
 
We are exposed to risks related to handling cargo.
 
Increased cargo traffic at our airports presents a challenge to the safe operation of flights.  We are subject to the International Air Transport Association’s four core elements presented at the World Customs Organization Forum in Kuala Lumpur in March 2012:  (i) advanced electronic information and intelligence to risk-assess cargo, (ii) physical screening and the use of technology equipment to secure cargo, (iii) secure supply chain with operators preserving the integrity of the cargo until departure and (iv) mutual recognition of controls and operators as well as cooperation between authorities.
 
The air cargo system is a complex, multi-faceted network that handles a vast amount of freight, packages and mail carried aboard passenger and all-cargo aircraft.  The air cargo system is vulnerable to several security threats, including:  potential plots to place explosives aboard aircraft; illegal shipments of hazardous materials; criminal activities, such as smuggling and theft; and potential hijackings and sabotage by persons with access to aircraft.  Several procedural and technology initiatives to enhance air cargo security and deter terrorist and criminal threats have been put in place or are under consideration.
 
Any of the events described above could reduce our cargo traffic volume.  The occurrence of such events could adversely affect our business, results of operations, prospects and financial condition.
 
Enforcing civil liabilities against us or our directors, officers and controlling persons may be difficult.
 
We are organized under the laws of México, and all of our directors, officers and controlling persons reside in México.  In addition, a substantial portion of our assets and the assets of our directors, officers and controlling persons are located in México.  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 México 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 México, whether in original actions or in actions to enforce judgments of U.S. courts or other courts outside of México, of liabilities based solely on U.S. federal securities laws.
 
 
Risks Related to Our Stockholders
 
Aeroinvest, S.A. de C.V. (Aeroinvest), and Servicios de Tecnología Aeroportuaria, S.A. de C.V. (SETA), control our management, and their interests may differ from those of other stockholders.
 
Aeroinvest is the beneficial owner of 54.4% of our total capital stock.  Aeroinvest directly owns Series B shares representing 41.9% 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 our 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 entered into with SETA providing for management and consulting services (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, a participation agreement setting forth the rights and obligations of each of the parties involved in the privatization (including SETA) (the “Participation Agreement”) and a trust with Bancomext into which SETA has placed its shares (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 41.9% of our capital stock entitles it to elect four members of our Board of Directors.  SETA and Aeroinvest are each subsidiaries of Empresas ICA, S.A.B. de C.V. (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, 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.
 
On December 20, 2011, Aeroinvest entered into a credit agreement with Bank of America, N.A., for U.S.$ 45.0 million that requires us to comply with certain covenants that include, but are not limited to, compliance with certain ratios, restrictions on our ability to create liens, incur indebtedness, sell, lease, transfer or dispose of assets, engage in merger transactions or otherwise change our business, make investments or capital expenditures outside of our master development plans or issue additional shares.
 
Risks Related to México
 
Our business is significantly dependent upon the volume of air passenger traffic in México, and negative economic developments in México will adversely affect our business and results of operations.
 
In 2010 and 2011, domestic terminal passengers have represented approximately 83.4% and 84.8%, 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 México.  Accordingly, our financial conditions and results of operations are substantially dependent on economic conditions prevailing from time to time in México.  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 México or by political, social and economic developments in México.
 
 
In the past, México 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.
 
México experienced a period of slow growth from 2001 through 2003, primarily as a result of the downturn in the U.S. economy.  In 2001, México’s GDP decreased by 0.2%, and inflation reached 4.4%.  In 2002, GDP increased by 0.8%, and inflation reached 5.7%.  In 2003, GDP increased by 1.4%, and inflation was 4.0%.  In 2004, GDP increased by 4.2%, and inflation increased to 5.2%.  In 2005, GDP increased by approximately 2.8%, and inflation decreased to 3.3%.  In 2006, GDP increased by approximately 4.8%, and inflation reached 4.1%.  In 2007, GDP increased by approximately 1.8%, and inflation declined to 3.8%.  In 2008, GDP increased by approximately 1.5%, and inflation increased to 6.5%.  In 2009, GDP decreased by 6.1%, and inflation was 3.6%.  In 2010, GDP increased by 5.5%, and inflation was 4.4%.  In 2011, GDP increased by 3.9%, and inflation was 3.8%.
 
During 2011, real and nominal interest rates in México decreased by 3.6% compared to 2010.  The annualized interest rates on 28-day Cetes (Certificados de la Tesorería de la Federación) averaged approximately 7.2%, 7.7%, 5.4%, 4.4% and 4.2% for 2007, 2008, 2009, 2010 and 2011, respectively.  To the extent that we incur peso-denominated debt in the future, it could be at high interest rates.
 
The Mexican economy underwent an economic crisis that began in 2008 and continued in 2009 as a result of the impact of the global financial crisis, which affected many emerging economies.  The Mexican economy’s link with the U.S. economy remains very important, and therefore, any downside to the economic outlook of the U.S. may hinder any recovery in México.  This crisis adversely impacted our business.
 
In México, the economic and financial crisis adversely affected domestic traffic in 2009, which decreased substantially as 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 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) virus and the exit from the market of five airlines in less than a year. Even though GDP increased by 5.5% in 2010, Mexicana de Aviación, ClickMexicana and MexicanaLink (Grupo Mexicana) ceased operations during the third quarter of 2010.  In July 2010, prior to their suspension, the three airlines operated 24 routes at our airports, six of which were not operated by other airlines (Culiacán-Mexicali, Monterrey-Chicago, Monterrey-New York, Monterrey-Puebla, Zacatecas-Chicago and Zacatecas-Oakland).  These suspensions adversely impacted the recovery of air traffic volumes in all of our airports.
 
For the beginning of 2011, Grupo Aeroméxico, Interjet, VivaAerobus and Volaris gradually increased the number of operations to recover the domestic market left by Grupo Mexicana and started flying with higher-capacity equipment.  As for the international market left by Grupo Mexicana, only the Monterrey-New York and Zacatecas-Oakland routes were not taken by any other airline.  In the last quarter of 2011, VivaAerobus started flying new international routes, which are from Monterrey to Chicago, San Antonio, Miami and Orlando, on October 14, November 8, November 11 and November 19, respectively.  Copa Airlines also started operations at the Monterrey airport with a new international route to the destination of Panama City, which started flying on December 7, 2011, with four flights per week.
 
 
Moreover, if inflation or interest rates increase significantly or if the Mexican economy is otherwise further adversely impacted, our business, financial condition, prospects 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.
 
Political conditions in México could materially and adversely affect Mexican economic policy and, in turn, our operations.
 
National presidential and legislative elections are set to take place on July 1, 2012, and could result in political and economic instability.  Multiparty rule is still relatively new in México, and new legislative initiatives could result in economic or political conditions that could materially and adversely affect our business.
 
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.  Between January 4, 2010, and December 30, 2011, the peso fluctuated from Ps. 12.91 per U.S.$ 1.00 to Ps. 13.95 per U.S.$ 1.00, reaching Ps. 14.25 per U.S.$ 1.00 on November 25, 2011.  From September 30, 2010, to March 31, 2011, the peso appreciated by approximately 5.4%, from Ps. 12.60 per U.S.$ 1.00 to Ps. 11.92 per U.S.$ 1.00.  Between March 31, 2011, and September 30, 2011, the peso fluctuated between Ps. 11.92 and Ps. 13.77 per U.S.$ 1.00.  It began to appreciate, reaching Ps. 13.13 per U.S.$ 1.00 on April 18, 2012.
 
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 up to 60 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, 2011, we had U.S.$ 17.8 million of liabilities denominated in U.S. dollars, causing foreign-exchange 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 (Impuesto Empresarial a Tasa Única), 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 Business Flat Tax, which was published on October 1, 2007, adversely impacted our results of operations in 2007, 2008, 2009, 2010 and 2011.  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 business, results of operations, prospects and financial condition.
 
 
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 México, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers.  In past years, prices of both Mexican debt and equity securities have been adversely affected by the sharp drop in Asian securities markets and the economic crises in Argentina, Brazil, Greece, Italy, Portugal, Russia, Spain, Venezuela and the United Arab Emirates.
 
In addition, in recent years, economic conditions in México have become increasingly correlated to economic conditions in the United States.  Therefore, an economic downturn in the United States will significantly adversely impact the Mexican economy.  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.
 
During 2008 and 2009, the U.S. economy was affected by a recession, which had a direct impact on our business and results of operations.
 
Although during most of 2010 and during the first half of 2011 there were signs of recovery in the global economy, this recovery may be fragile and may only reflect temporary benefits from government stimulus programs that may not be sustained. The subsequent slowdown in the United States and Europe, as well as concerns over the sovereign-debt obligations of several European countries (including Greece, Ireland, Portugal, Spain, and to a lesser extent, Belgium and Italy) and the consequent impact on the solvency of European banks has increased the possibility of another worldwide recession.
 
In the fourth quarter of 2011, according to the U.S. Bureau of Economic Analysis, the U.S. gross domestic product, or GDP, increased at an annualized rate of 3.0%.  Likewise, according to the Mexican National Statistical, Geographic and Information Institute, the Mexican GDP increased at an annualized rate of 3.7% during the fourth quarter of 2011.  The air travel industry, and as a result, our results of operations, are substantially influenced by economic conditions in México and the United States.  In 2011, approximately 81.9% of the international passengers in our airports arrived or departed on flights originating in or departing to the United States and approximately 13.1% of our aeronautical revenues in 2011 were derived from passengers charges imposed on departures from, or arriving in, the United States.  Similarly, in 2011, approximately 84.8% of our passengers traveled on domestic flights, and 63.9% of our aeronautical revenues in 2011 were derived from domestic passenger charges.
 
 
Our international traffic in 2011 decreased by 7.4% compared to 2010, principally as a result of the suspension of operations of Grupo Mexicana in the third quarter of 2010 and international flights like Monterrey-New York and Zacatecas-Chicago not recovered by other airlines.  Furthermore, the Acapulco, Zacatecas, Zihuatanejo, Culiacán, Mazatlán and Chihuahua airports experienced decreased international passenger traffic in comparison to 2010.  The principal international airlines that contributed to these decreases were Frontier, US Airways, WestJet, Alaska Airlines and Continental (now United).  The key international destinations that led to the decreased passenger traffic are Oakland, New York, Chicago, Miami, Denver, Minneapolis, Phoenix, Las Vegas, Detroit and other Canadian destinations (charter flights).
 
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 has negatively affected our results of operations and another economic recession in the United States would likely have a further material adverse effect on our business, results of operations, prospects and financial condition.
 
Minority shareholders may be less able to enforce their rights against us, our directors or our controlling shareholders in México.
 
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 Mexican Securities 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.  Procedures for class-action lawsuits were incorporated into Mexican law and became effective in March 2012. However, these rules and procedures are different and more limited than those in place in the United States.  Therefore, it may be more difficult for minority shareholders to enforce their rights against us, our directors or our controlling shareholders.
 
Mexican law and our bylaws restrict the ability of non-Mexican shareholders to invoke the protection of their governments with respect to their rights as shareholders.
 
As required by Mexican law, our bylaws provide that non-Mexican shareholders shall be considered as Mexicans in respect of their ownership interests in the Company and shall be deemed to have agreed not to invoke the protection of their governments in certain circumstances.  Under this provision, a non-Mexican shareholder is deemed to have agreed not to invoke the protection of his own government by asking such government to interpose a diplomatic claim against the Mexican government with respect to the shareholder’s rights as a shareholder, but is not deemed to have waived any other rights it may have, including any rights under the U.S. securities laws, with respect to its investment in the Company.  If you invoke such governmental protection in violation of this agreement, your shares could be forfeited to the Mexican government.
 
We are subject to different corporate disclosure standards than U.S. companies.
 
A principal objective of the securities laws of the United States is to promote full and fair disclosure of all material corporate information.  However, there may be less publicly available information about foreign issuers of securities listed in the United States than is regularly published by or about U.S. issuers of listed securities.
 
 
Risks Related to Our ADSs
 
You may not be entitled to participate in future preemptive rights offerings.
 
Under Mexican law, if we issue new shares for cash as part of a capital increase, we generally must grant our shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in the Company.  Rights to purchase shares in these circumstances are known as preemptive rights.  We may not legally be permitted to allow holders of ADSs in the United States to exercise any preemptive rights in any future capital increase unless we file a registration statement with the U.S. Securities and Exchange Commission, or SEC, with respect to that future issuance of shares, or the offering qualifies for an exemption from the registration requirements of the Securities Act of 1933, as amended.
 
At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC and any other factors that we consider important to determine whether we will file such a registration statement.
 
We cannot assure you that we will file a registration statement with the SEC to allow holders of ADSs or shares in the United States to participate in a preemptive rights offering.  In addition, under current Mexican law, sales by the depository of preemptive rights and distribution of the proceeds from such sales to you, the ADS holders, is not possible.  As a result, your equity interest in the Company may be diluted proportionately.
 
Holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary.
 
Under Mexican law, a shareholder is required to deposit its shares with the Secretary of the Company, the S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., a Mexican or foreign credit institution or a brokerage house in order to attend a shareholders’ meeting.  A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to attend shareholders’ meetings.  A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with the procedures provided for in the deposit agreement, but a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.
 
 
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 SEC on Forms 20-F and 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others.  Examples of such forward-looking statements include:
 
 
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,
 
 
changes in our regulatory environment,
 
 
statements about our future economic performance or that of México, and
 
 
statements of assumptions underlying such statements.
 
Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
 
Forward-looking statements involve inherent risks and uncertainties.  We caution you that a number of important factors could cause actual results to differ materially from the projections, plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.  These factors, some of which are discussed above under “Risk Factors,” include material changes in the performance or terms of our concessions, developments in legal proceedings, economic and political conditions and government policies in México 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 forward-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 anónima bursátil de capital variable) organized under the laws of México.  We were incorporated in 1998 as part of the Mexican government’s program for the opening of México’s airports to private investment.  The duration of our corporate existence is indefinite.  We are a holding company and conduct substantially all of our operations through our subsidiaries.  The terms “GACN”, “the Company”, “we”, “us” and “our” in this annual report refer to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., together with its subsidiaries, and to properties and assets that we own or operate, unless otherwise specified.  Our registered office is located at Torre Latitud, L501, Piso 5, Av. Lázaro Cárdenas 2225, Col. Valle Oriente, San Pedro Garza García, 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 SETA 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 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.$ 76.0 million based on the exchange rate in effect on the date of SETA’s bid) in exchange for:
 
 
all of our Series BB shares, which 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, 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, which owns 74.5% of SETA.  Aeroinvest is a wholly owned subsidiary of Empresas ICA.  Aeroinvest also directly owns 41.9% 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 6.6% of our capital stock.  Aeroinvest purchased these shares from the Mexican government in December 2005 pursuant to this option, acquiring 141,120,000 Series B shares  at an aggregate purchase price of U.S.$ 203.3 million.  Empresas ICA, the parent of Aeroinvest, is the largest engineering, construction and procurement company in México.  Empresas ICA’s principal lines of business are construction 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, managing 88.1 million passengers in 2011.  Aéroports de Paris is listed on the Eurolist Market of Euronext Paris S.A.
 
 
On December 20, 2011, Aeroinvest entered into a credit agreement with Bank of America, N.A., for U.S.$ 45.0 million that requires us to comply with certain covenants that include, but are not limited to, compliance with certain ratios, restrictions on our ability to create liens, incur indebtedness, sell, lease, transfer or dispose of assets, engage in merger transactions or otherwise change our business, make investments or capital expenditures outside of our master development plans or issue additional shares.
 
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 2011 amounted to approximately Ps. 55.2 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 Nacional Financiera, S.N.C., or NAFIN (a Mexican national credit institution and development bank owned and controlled by the Mexican Government), acting pursuant to the instructions of the Ministry of Communications and Transportation, sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of ADSs and Series B shares, concurrently in the United States and México.  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 a 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 program and upon approval by the Ministry of Communications and Transportation.  In December 2010, the Ministry of Communications and Transportation approved the master development programs for each of our subsidiary concession holders for the 2011 to 2015 period.  These five-year programs will be in effect from January 1, 2011, until December 31, 2015.  During 2015, 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 México 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 (excluding fuel).
 
 
Historical Committed Investments Under Master Development Programs
 
   
Year Ended December 31,
 
   
2010
   
2011
   
Total
2010-2011
 
   
(thousands of pesos)
 
Acapulco
    17,364       30,979       48,343  
Ciudad Juárez
    14,092       18,016       32,108  
Culiacán
    2,801       55,278       58,079  
Chihuahua
    12,089       24,458       36,547  
Durango
    10,697       37,610       48,307  
Mazatlán
    2,605       20,019       22,624  
Monterrey
    27,719       272,902       300,621  
Reynosa
    2,032       33,881       35,913  
San Luis Potosí
    3,595       19,856       23,451  
Tampico
    5,213       32,687       37,900  
Torreón
    9,436       31,945       41,381  
Zacatecas
    9,039       18,517       27,556  
Zihuatanejo
    15,100       18,118       33,218  
Total
    131,782       614,266       746,048  
 
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,
 
   
2010
   
2011
 
   
(thousands of pesos)
 
Acapulco
    44,408       6,296  
Ciudad Juárez
    22,848       9,768  
Culiacán 
    26,562       13,504  
Chihuahua                                           
    32,142       21,807  
Durango                                           
    108       2,100  
Mazatlán                                           
    45,536       12,916  
Monterrey                                           
    291,953       199,013  
Reynosa                                           
    14,108       3,556  
San Luis Potosí                                           
    93       1,635  
Tampico                                           
    185       6,954  
Torreón                                           
    100       1,100  
Zacatecas                                           
    17,736       3,191  
Zihuatanejo                                           
    35,259       75,489  
Other                                           
    25,749       27,703  
Total
    556,787       385,032  
 
 
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,
 
   
2010
   
2011
 
   
(thousands of pesos)
 
Terminals
    150,818       85,270  
Runways and aprons
    45,569       0  
Machinery and equipment
    58,763       8,845  
Land
    90,906       12,141  
Baggage Screening System – Investments
    163,013       220,066  
New Businesses
    0       17,306  
Other
    47,718       41,404  
Total
    556,787       385,032  
 
Our capital expenditures from 2010 through 2011 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, improving lighting systems, adding office space, adding taxi and other ground transportation waiting areas and 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 2011 and 2010 territorial reserves of Ps. 15,283 and Ps. 90,906, respectively, were purchased to develop and expand our key airports.
 
 
Baggage Screening System – Investments.  We purchased and installed screening equipment in all of our airports to facilitate compliance with the new baggage-screening guidelines to undergo a comprehensive screening process for the detection of explosives.
 
 
New Businesses.  In 2011, we developed a shopping center and office plaza located close to the bonded area between Terminal A and Terminal C of the Monterrey airport.  This construction consists of a two-story building with a commercial space on the lower level and office space for rent on the upper level.  A further explanation of our diversification activities is described in “Item 4.  Information on the Company—Business Overview—Non-Aeronautical Services.”
 
 
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 México 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 (53,820 square feet) of commercial space inside the new Terminal 2 of México City International Airport, under a 20-year lease agreement with México City International Airport.  NH Hoteles, S.A. de C.V., a Spanish company, owns the other 10%.  The Terminal 2 NH 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 2011 through 2015.  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 (excluding fuel).
 
Committed Investments Under Master Development Programs by Airport
 
   
Year Ended December 31,
 
   
2011
   
2012
   
2013
   
2014
   
2015
   
Total
2011-2015
 
   
(thousands of pesos)
 
Acapulco
    30,979       60,297       57,932       117,071       31,931       298,210  
Ciudad Juárez
    18,016       37,379       89,533       19,554       15,880       180,362  
Culiacán
    55,278       55,994       92,287       71,970       55,636       331,165  
Chihuahua
    24,458       37,317       55,889       14,831       10,723       143,218  
Durango
    37,610       22,827       12,201       22,180       3,905       98,723  
Mazatlán
    20,019       28,621       50,102       104,057       29,069       231,868  
Monterrey
    272,902       91,563       246,728       250,568       119,581       981,342  
Reynosa
    33,881       39,392       35,490       25,785       6,404       140,952  
San Luis Potosí
    19,856       21,280       56,294       51,520       42,845       191,795  
Tampico
    32,687       47,300       45,838       18,018       13,693       157,536  
Torreón
    31,945       13,885       36,287       25,705       4,305       112,127  
Zacatecas
    18,517       39,751       26,664       10,697       11,639       107,268  
Zihuatanejo
    18,118       47,084       26.596       50,446       27,558       169,802  
Total
    614,266       542,690       831,841       782,402       373,169       3,144,368  
 
The following table sets forth our committed investments for 2011 through 2015 by type of investment, which are updated based on the Producer Price Index (excluding fuel):
 
Committed Investments Under Master Development Programs by Type
 
   
Year Ended December 31,
 
   
2011
   
2012
   
2013
   
2014
   
2015
   
Total
2011-2015
 
   
(thousands of pesos)
 
Terminals
    52,112       80,021       186,455       237,769       71,699       628,056  
Runways and aprons
    75,942       156,372       289,507       263,435       155,998       941,254  
Machinery and equipment
    158,578       76,468       193,657       139,917       54,236       622,856  
Baggage-screening system – investments
    150,338       15,973       6,904       3,253       55,334       231,802  
Security – investments
    51,344       141,252       60,360       44,472       20,905       318,333  
Other
    125,952       72,604       94,958       93,556       14,997       402,067  
Total
    614,266       542,690       831,841       782,402       373,169       3,144,368  
 
 
Until December 31, 2010, the date until which our financial information was prepared in accordance with MFRS, capital expenditures contemplated major maintenance expenses coming from our master development plan, as they were considered part of improvements to our concession assets and were amortized over the maintenance cycle of each asset.  As of 2011, with the adoption of IFRS, major maintenance expenses were provisioned and were expensed as described in “Item 5.  Operating and Financial Review and Prospects—Critical Accounting Policies”; for that reason major maintenances are no longer capitalized for IFRS purposes.
 
The following table details the expenditures made by us during 2010 and 2011 related to the master development plan as well as with other capital expenditures for the acquisition of fixed assets not associated with the master development plan and their classification in our consolidated financial statements for such periods:
 
   
2010
   
2011
 
   
(thousands of pesos)
 
Major maintenance provision under IFRS recognized in earnings
    145,195       316,922  
Capital Expenditures under IFRS
    556,787       385,032  
Other
    -6,493       38,562  
Total expenditures per the master development program and other capital expenditures
    695,489       740,516  
 
For the year ended December 31, 2011, our capital expenditures totaled Ps. 385.0 million.  Our capital expenditures for 2011 were devoted primarily to our committed investments under our master development program.
 
 
BUSINESS OVERVIEW
 
Our Operations
 
Through our subsidiaries, we hold concessions to operate, maintain and develop 13 airports in México, 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 (575,667 square miles), with a population of approximately 24.0 million according to the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía) 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 total aviation passenger traffic accounted for approximately 14.6% of all arriving and departing total aviation passengers in México in 2011.
 
In 2011, we recorded revenues of Ps. 2,789.7 million (U.S.$ 200.0 million) and consolidated comprehensive income of Ps. 616.1million (U.S.$ 44.2 million).  In 2011, the sum of our aeronautical and non-aeronautical revenues represented Ps. 2,458.8 million.  In 2011 our airports handled approximately 11.8 million terminal passengers, an increase of 1.6% with respect to the 11.6 million terminal passengers handled in 2010.
 
Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, Monterrey-Atlanta, Monterrey-Las Vegas, Monterrey-Detroit, Monterrey-San Antonio, Monterrey-Chicago and Monterrey-Los Angeles.  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 México frequented by tourists from México, the United States and Canada.  Our airports also serve major domestic routes, including Monterrey-México City, which was the country’s busiest domestic route in 2011, with approximately 2.4 million total passengers (including passengers flying directly to the nearby airport of Toluca, which are counted together with those flying to México City), according to the Mexican Bureau of Civil Aviation.  Other major domestic routes served by our airports include Cancún-Monterrey, México City-Chihuahua and México City-Culiacán, with approximately 571,000, 450,000 and 408,000 total passengers, respectively, in 2011 according to the Mexican Bureau of Civil Aviation.
 
 
Monterrey and its metropolitan area is the third largest city in México in terms of population, with a population of approximately 3,930,388.  Monterrey ranks among México’s most established urban and commercial centers and is the capital of the state of Nuevo León, México’s eighth largest state in terms of population, which is 4,653,458, according to the Mexican National Institute of Statistics and Geography’s 2010 national population census.  It is home to many of México’s largest companies in a wide variety of industries, as well as several major universities.  Business travelers account for a substantial portion of passengers at the Monterrey airport.  The airport is our leading airport in terms of passenger traffic volume, air traffic movements and contribution to revenues and ranked as the fourth busiest airport in México based on passenger traffic volume in 2011, according to data published by the Mexican Bureau of Civil Aviation.  In 2011, our Monterrey airport accounted for approximately 47.4% of our terminal passenger traffic, 45.8% of our total revenues and 44.5% of the sum of our aeronautical and non-aeronautical revenues.
 
Three of our airports, Acapulco, Mazatlán and Zihuatanejo, serve popular Mexican tourist destinations.  Of these tourist destinations, Acapulco and Mazatlán are the largest, with Acapulco constituting México’s 19th largest international tourist destination and Mazatlán the 17th largest in terms of visitors in 2011, according to the Mexican National Institute of Immigration.  Acapulco is a principal port of call for cruise ships.  In 2011, the Acapulco, Mazatlán and Zihuatanejo airports collectively accounted for 15.3% of our aggregate terminal passengers, 16.9% of our total revenues and 15.5% of the sum of our aeronautical and non-aeronautical revenues.
 
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 (the Durango and Zacatecas airports), maquiladora manufacturing (the Chihuahua and Torreón airports), petroleum and chemical production (the Tampico airport), agriculture and livestock (the Culiacán airport) and transportation and logistics (the San Luis Potosí airport).  In 2011, these seven regional airports collectively accounted for 29.7% of our aggregate terminal passengers, 26.0% of our total revenues and 27.7% of the sum of our aeronautical and non-aeronautical revenues.
 
The remaining two airports in the group, the Ciudad Juárez and Reynosa airports, serve cities situated along the border of México and the United States.  Both Ciudad Juárez and Reynosa are popular entry points to the United States.  In 2011, the Ciudad Juárez and Reynosa airports collectively accounted for 7.6% of our aggregate terminal passengers, 6.3% of our total revenues and 6.6% of the sum of our aeronautical and non-aeronautical 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 (53,820 square feet) of commercial space inside Terminal 2 of México City International Airport under a 20-year lease agreement with México City International Airport.  The Terminal 2 NH Hotel opened in August 2009.
 
Airlines based in Terminal 2 include Aeromar, Aeroméxico and Aeroméxico Connect, Copa, Delta and LAN.  We consider this a key part of our strategy to increase our non-aeronautical revenues.
 
 
The following table provides summary data for each of our 13 airports for the years ended December 31, 2010 and 2011:
 
   
Year Ended December 31, 2010
   
Year Ended December 31, 2011
 
Airport
 
Terminal
Passengers
   
Revenues(1)
   
Revenues per Terminal Passenger(2)
   
Terminal
Passengers
   
Revenues(1)
   
Revenues per Terminal Passenger(2)
 
   
Number (in millions)
   
%
   
(millions of pesos)
   
%
   
(pesos)
   
Number (in millions)
   
%
   
(millions of pesos)
   
%
   
(pesos)
 
Metropolitan destination:
                                                           
Monterrey
    5.4       46.4       941.1       45.8       174.9       5.6       47.4       1,094.5       47.2       196.0  
Total metropolitan destination
    5.4       46.4       941.1       45.8       174.9       5.6       47.4       1,094.5       47.2       196.0  
Tourist destinations:
                                                                               
Acapulco
    0.7       6.4       137.5       6.7       186.7       0.6       5.1       125.7       5.4       210.8  
Mazatlán
    0.8       6.5       152.6       7.4       201.8       0.7       6.1       159.2       6.9       220.3  
Zihuatanejo
    0.5       4.3       95.2       4.6       191.7       0.5       4.1       95.1       4.1       198.0  
Total tourist destinations
    2.0       17.2       385.3       18.8       193.6       1.8       15.3       380.0       16.4       211.2  
Regional destinations:
                                                                               
Chihuahua
    0.8       7.1       139.2       6.8       168.1       0.8       6.6       147.4       6.4       188.5  
Culiacán
    1.1       9.1       167.8       8.2       158.3       1.1       9.1       192.0       8.3       179.4  
Durango
    0.2       1.9       41.4       2.0       190.6       0.2       1.9       44.4       1.9       195.6  
San Luis Potosí
    0.2       1.9       55.3       2.7       248.0       0.2       2.1       63.9       2.8       247.9  
Tampico
    0.5       3.9       79.1       3.9       175.3       0.5       4.7       105.6       4.5       192.6  
Torreón
    0.3       2.9       63.3       3.1       187.2       0.4       3.2       77.5       3.3       206.2  
Zacatecas
    0.3       2.3       47.7       2.3       177.6       0.2       2.1       51.2       2.2       206.5  
Total regional destinations
    3.4       29.2       593.8       29.0       175.3       3.5       29.7       681.9       29.4       194.2  
Border destinations:
                                                                               
Ciudad Juárez
    0.6       5.5       98.1       4.8       154.7       0.7       5.7       119.8       5.2       177.9  
Reynosa
    0.2       1.7       34.4       1.7       173.7       0.2       1.8       42.7       1.8       197.3  
Total border city destinations
    0.8       7.2       132.5       6.5       159.2       0.9       7.6       162.5       7.0       182.6  
AIRPORT REVENUES (1):
    11.6       100       2,052.7       100       177.1       11.8       100       2,318.9       100       196.8  
 

(1)
Revenues in millions rounded to the decimal, which does not include eliminations of transactions among our subsidiaries or construction services.
(2)
Revenues per terminal passenger are calculated by dividing the revenues for each airport by the number of terminal passengers for each airport. The result has been rounded to the decimal.
 
Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided.  As a result, the Company’s reportable segments under IFRS present its significant airports and the hotel individually and the information about the holding company and the other seven airports have been combined disclosed in the “other segments” column as they have similar economic characteristics, are similar in respect of the nature of the services they provide to their customers as well as being subject to a similar regulatory environment in which they operate.  See Note 21 to our consolidated financial statements for our information by segment.
 
As of July 2006, México 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 12 specified cities in México 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 has not benefited our business as we expected, mainly because of the decrease in the tourism levels from the United States to México as a result of the U.S. economic downturn.
 
 
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 2010 and 2011, aeronautical services revenues represented approximately 64.2% and 67.0%, respectively, of our total revenues and 77.1% and 76.1%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
 
Our revenues from aeronautical services are derived principally from:  passenger charges, landing charges, aircraft parking charges, charges for the use of passenger walkways and charges for the provision of airport security services.  Aeronautical services revenues are principally dependent on the following factors:  passenger traffic volume, the number of air traffic movements, the weight of the aircraft, the duration of an aircraft’s stay at the airport, the time of day the aircraft operates at the airport and the specific prices charged for the service.
 
Passenger Charges
 
We collect a passenger charge for each departing passenger on an aircraft (other than diplomats, infants and transfer and transit passengers) called the Tarifa de Uso de Aeropuerto.  We do not collect passenger charges from arriving passengers.  Passenger charges are 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.
 
Until April 30, 2010, 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).  The new agreements between our airports and our principal airline customers provide that from May 1, 2010, payments for passenger charges will be between 30 and 60 days after the invoice delivery date.  In 2011, the weighted average term of payment was 45 days.
 
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 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 2010 and 2011, passenger charges represented approximately 78.0% and 81.1%, respectively, of our aeronautical services revenues, 50.1% and 54.4%, respectively, of our total revenues and 60.1% and 61.7%, respectively, of the sum of aeronautical and non-aeronautical 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 2010 and 2011, these charges represented approximately 6.2% and 5.4%, respectively, of our aeronautical services revenues, 4.0% and 3.6%, respectively, of our total revenues and 4.8% and 4.1%, respectively, of the sum of our aeronautical and non-aeronautical 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.
 
Aircraft Long-Term Parking Charges
 
We collect charges from our carriers for the long-term use of facilities at our airports for aircraft long-term parking that does not involve the loading or unloading of passengers or cargo.  These charges are based on the time of day or night the aircraft is parked at our facilities, the length of time the aircraft is parked at our facilities and the nationality of the airline or client.  Together with our aircraft parking, boarding and unloading charges described above, in 2010 and 2011, these charges represented approximately 5.3% and 4.3%, respectively, of our aeronautical services revenues, 3.4% and 2.9%, respectively, of our total revenues and 4.1% and 3.3%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
 
Passenger Walkway Charges
 
Airlines are also assessed charges for the connection of their aircraft to our terminals through a passenger walkway and for the transportation of passengers between terminals and aircraft via buses and other vehicles.  These charges are generally based on the amount of time each service is used, the number of these services used, the time of day the services are used, the origin and destination of the flight and the nationality of the airline or client.  In 2010 and 2011, these charges represented approximately 1.2% and 1.1%, respectively, of our aeronautical services revenues, 0.7% and 0.8%, respectively, of our total revenues and 0.9% and 0.9%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
 
Airport Security Charges
 
We also assess an airport security charge, which is collected from each airline, based on the number of its departing terminal passengers (excluding infants, diplomats and transit passengers), for use of our x-ray equipment, metal detectors and other security equipment and personnel.  These charges are based on the time of day the services are used, the number of departing passengers and the destination of the flight.  Independent subcontractors provide airport security services at our airports.  In 2010 and 2011, these charges represented approximately 1.2% and 1.2%, respectively, of our aeronautical services revenues, 0.8% and 0.8%, respectively, of our total revenues and 1.0% and 0.9%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
 
The International Civil Aviation Organization, the Mexican Bureau of Civil Aviation and the Office of Public Security issue guidelines for airport security in México.  In response to the September 11, 2001, terrorist attacks in the United States, we have taken additional steps to increase security at our airports.  The International Civil Aviation Organization issued directives in October 2001 establishing new rules and procedures to be adopted at our airports.  Under these directives, these rules and procedures were to be implemented immediately and for an indefinite period of time.
 
 
To comply with these directives, we reinforced our security by:
 
 
updating and amending our emergency security and contingency plans and the responsibilities of security personnel relating thereto;
 
 
segregating flows of arriving and departing passengers;
 
 
improving security supervision committees at each of our airports, particularly those with significant international traffic;
 
 
updating our security screening technology, including increasing the sensitivity of metal detectors and introducing new procedures for x-ray inspection of luggage;
 
 
increasing and improving the training of security personnel;
 
 
coordinating security measures and emergency plans with operators of complementary and commercial services at our airports;
 
 
implementing a higher security employee identification system; and
 
 
increased collaboration with providers of security equipment installation services.
 
These improvements are expected to be expensed on our results of operations, while others are expected to require additional capital expenditures under our master development program.
 
Several of our airline customers have also contributed to the enhanced security at our airports as they have adopted new procedures and guidelines established by the International Civil Aviation Organization applicable to airlines.  Some measures adopted by the airlines include adding more points for verification of passenger identification, inspecting luggage prior to check-in and reinforcing controls over access to airplanes by various service providers (such as baggage handlers and food service providers).
 
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 completed the purchase and installation of screening equipment in all of our airports to facilitate compliance with the new baggage-screening guidelines.  Our subsidiary, Servicios Complementarios del Centro Norte, S.A. de C.V.