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, 2012
 
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, Mexico
(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, Mexico
+ 52 81 8625 4327
jlguerrero@oma.aero
(Name, Telephone, E-mail and/or facsimile number and address of Company contact person)
 
Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
Title of each class:
 
Name of each exchange
on which registered
American Depositary Shares (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 o No þ
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes o No þ
 
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
     
ITEM 1.
1
ITEM 2.
1
ITEM 3.
1
 
1
 
7
 
8
 
30
ITEM 4.
31
 
31
 
37
 
72
 
91
 
92
ITEM 4A.
93
ITEM 5.
93
ITEM 6.
138
ITEM 7.
149
 
149
 
152
ITEM 8.
154
 
154
 
159
ITEM 9.
162
 
162
 
162
ITEM 10.
163
 
180
 
180
 
180
 
183
ITEM 11.
183
ITEM 12.
183
ITEM 12A.
183

 
TABLE OF CONTENTS
(continued)

   
Page
     
ITEM 12B.
183
ITEM 12C.
184
ITEM 12D.
184
ITEM 13.
186
ITEM 14.
186
ITEM 15.
186
ITEM 16.
188
ITEM 16A.
188
ITEM 16B.
188
ITEM 16C.
189
ITEM 16D.
189
ITEM 16E.
189
ITEM 16F.
190
ITEM 16G.
191
ITEM 16H.
195
ITEM 17.
196
ITEM 18.
196
ITEM 19.
196

 
PART I
 
Item 1.
Identity of Directors, Senior Management and Advisers
 
Not applicable.
 
Item 2.
Offer Statistics and Expected Timetable
 
Not applicable.
 
Item 3.
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.  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.$” are to the lawful currency of the United States.  References in this annual report on Form 20-F to “pesos” or “Ps.” are to the lawful currency of Mexico.  This Form 20-F contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader.  These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated.  Unless otherwise indicated, U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps. 12.86 to U.S.$ 1.00, the interbank selling rate as reported by Banco Nacional de México, S.A. (“Banamex”), on December 31, 2012.
 
This annual report on Form 20-F contains references to “workload units,” which are units measuring an airport’s passenger traffic volume and cargo volume.  A workload unit currently is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.
 
The discussion in this annual report of aeronautical and non-aeronautical revenues in relation to our total revenues is not in accordance with IFRS because it excludes our construction revenues from such amounts. Therefore, in reviewing this annual report, you should be aware that in several sections of this annual report we take into account only revenues that resulted in actual cash inflows (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 International Financial Reporting Interpretations Committee (“IFRIC”) 12, “Service Concession Arrangements,” are not dependent upon passenger traffic, but from the level of capital expenditures carried out at each airport.  Information reported using only revenues that generated cash inflows may be more useful for readers of this annual report because those revenues are 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 tables present a reconciliation of our aeronautical and non-aeronautical revenues to our total revenues per our IFRS consolidated statements of comprehensive income:
 
 
   
Year Ended December 31, 2012
 
   
Aeronautical
Revenues
   
Non-
Aeronautical
Revenues
   
Total
Aeronautical
and Non-
Aeronautical
Revenues
   
Percentage of
Total
Revenues
   
Construction
Revenues
   
Total
Revenues
 
   
(in thousands of pesos)
 
Metropolitan
                                   
Monterrey
  Ps. 989,976     Ps. 292,169     Ps. 1,282,145       94.7 %   Ps. 72,331     Ps. 1,354,476  
Tourist
                                               
Acapulco
    99,498       18,725       118,223       85.7 %     19,665       137,888  
Mazatlán
    122,061       34,900       156,961       92.9 %     11,940       168,901  
Zihuatanejo
    89,602       17,401       107,003       87.2 %     15,708       122,711  
Regional
                                               
Chihuahua
    139,127       27,259       166,386       86.2 %     26,654       193,040  
Culiacán
    194,285       26,605       220,890       77.0 %     66,093       286,983  
Durango
    45,051       6,723       51,774       98.1 %     1,015       52,789  
San Luis Potosí
    63,281       13,836       77,117       89.2 %     9,355       86,472  
Tampico
    105,275       14,938       120,213       93.7 %     8,028       128,241  
Torreón
    77,305       13,259       90,564       89.8 %     10,231       100,795  
Zacatecas
    51,177       6,713       57,890       73.1 %     21,343       79,233  
Border
                                               
Ciudad Juárez
    110,444       20,563       131,007       82.5 %     27,785       158,792  
Reynosa
    53,719       8,143       61,862       66.2 %     31,570       93,432  
Hotel
          158,477       158,477       100.0 %           158,477  
Other(1)
          2,123,202       2,123,202       100.0 %           2,123,202  
Total
    2,140,801       2,782,913       4,923,714       93.9 %     321,718       5,245,432  
Eliminations(2)
    (10,138 )     (2,093,956 )     (2,104,094 )     N/A             (2,104,094 )
Total Revenues
  Ps. 2,130,663     Ps. 688,957     Ps. 2,819,620       89.8 %   Ps. 321,718     Ps. 3,141,338  
 
(1)
Represents our subsidiaries Servicios Aeroportuarios del Centro Norte, S.A. de C.V., Operadora de Aeropuertos del Centro Norte, S.A. de C.V., Servicios Aero Especializados del Centro Norte, S.A. de C.V., OMA Logística, S.A. de C.V., OMA VYNMSA Aero Industrial Park, S.A. de C.V., Holding Consorcio Grupo Hotelero T2, S.A. de C.V., Servicios Complementarios del Centro Norte, S.A. de C.V., Servicios Corporativos Terminal 2, S.A. de C.V., and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (on an individual basis).
 
(2)
Eliminations consist of operations and balances between our subsidiaries, as well as reclassifications.
 
 
   
Year Ended December 31, 2011
 
   
Aeronautical
Revenues
   
Non-
Aeronautical
Revenues
   
Total
Aeronautical
and Non-
Aeronautical
Revenues
   
Percentage of
Total
Revenues
   
Construction
Revenues
   
Total
Revenues
 
   
(in thousands of pesos)
 
Metropolitan
                                   
Monterrey
  Ps. 843,773     Ps. 250,719     Ps. 1,094,492       85.6 %   Ps. 184,574     Ps. 1,279,066  
Tourist
                                               
Acapulco
    103,695       21,986       125,681       96.3 %     4,853       130,534  
Mazatlán
    122,733       36,440       159,173       93.0 %     12,002       171,175  
Zihuatanejo
    77,611       17,537       95,148       55.9 %     75,096       170,244  
Regional
                                               
Chihuahua
    122,508       24,910       147,418       88.5 %     19,101       166,519  
Culiacán
    168,427       23,614       192,041       94.0 %     12,156       204,197  
Durango
    38,390       6,046       44,436       96.3 %     1,723       46,159  
San Luis Potosí
    51,845       12,018       63,863       98.2 %     1,179       65,042  
Tampico
    92,958       12,857       105,545       95.0 %     5,510       111,055  
Torreón
    65,984       11,471       77,455       100.0 %           77,455  
Zacatecas
    44,698       6,528       51,226       95.7 %     2,324       53,550  
Border
                                               
Ciudad Juárez
    101,423       18,345       119,768       92.5 %     9,771       129,539  
Reynosa
    36,132       6,601       42,733       94.3 %     2,571       45,304  
Hotel
          142,098       142,098       100.0 %           142,098  
Other(1)
          1,970,958       1,970,958       100.0 %     3       1,970,961  
Total
    1,870,177       2,561,858       4,432,035       93.1 %     330,863       4,762,898  
Eliminations(2)
          (1,973,187 )     (1,973,187 )     N/A             (1,973,187 )
Total Revenues
  Ps. 1,870,177     Ps. 588,671     Ps. 2,458,848       88.1 %   Ps. 330,863     Ps. 2,787,711  
 
(1)
Represents our subsidiaries Servicios Aeroportuarios del Centro Norte, S.A. de C.V., Operadora de Aeropuertos del Centro Norte, S.A. de C.V., Servicios Aero Especializados del Centro Norte, S.A. de C.V., OMA Logística, S.A. de C.V., Holding Consorcio Grupo Hotelero T2, S.A. de C.V., Servicios Complementarios del Centro Norte, S.A. de C.V., Servicios Corporativos Terminal 2, S.A. de C.V., and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (on an individual basis).
 
(2)
Eliminations consist of operations and balances between our subsidiaries, as well as reclassifications.
 
 
   
Year Ended December 31, 2010
 
   
Aeronautical
Revenues
   
Non-
Aeronautical
Revenues
   
Total
Aeronautical
and Non-
Aeronautical
Revenues
   
Percentage of
Total
Revenues
   
Construction
Revenues
   
Total
Revenues
 
   
(in thousands of pesos)
 
Metropolitan
                                   
Monterrey
  Ps. 731,415     Ps. 209,636     Ps. 941,051       83.1 %   Ps. 192,050     Ps. 1,133,101  
Tourist
                                               
Acapulco
    115,417       22,130       137,547       75.6 %     44,382       181,929  
Mazatlán
    117,603       34,947       152,550       77.1 %     45,350       197,900  
Zihuatanejo
    78,644       16,528       95,172       72.9 %     35,312       130,484  
Regional
                                               
Chihuahua
    115,961       23,250       139,211       81.4 %     31,874       171,085  
Culiacán
    147,441       20,324       167,765       86.4 %     26,391       194,156  
Durango
    30,628       10,785       41,413       100.0 %           41,413  
San Luis Potosí
    43,747       11,512       55,259       100.0 %           55,259  
Tampico
    68,193       10,863       79,056       100.0 %           79,056  
Torreón
    52,473       10,805       63,278       100.0 %           63,278  
Zacatecas
    41,917       5,773       47,690       72.9 %     17,685       65,375  
Border
                                               
Ciudad Juárez
    80,682       17,369       98,051       81.0 %     22,936       120,987  
Reynosa
    28,505       5,917       34,422       71.0 %     14,049       48,471  
Hotel
          99,823       99,823       100.0 %           99,823  
Other(1)
          1,567,270       1,567,270       100.0 %           1,567,270  
Total
    1,652,626       2,066,932       3,719,558       89.6 %     430,029       4,149,587  
Eliminations(2)
          (1,575,135 )     (1,575,135 )     N/A             (1,575,135 )
Total Revenues
  Ps. 1,652,626     Ps. 491,797     Ps. 2,144,423       83.3 %   Ps. 430,029     Ps. 2,574,452  
 
(1)
Represents our subsidiaries Servicios Aeroportuarios del Centro Norte, S.A. de C.V., Operadora de Aeropuertos del Centro Norte, S.A. de C.V., Servicios Aero Especializados del Centro Norte, S.A. de C.V., OMA Logística, S.A. de C.V., Holding Consorcio Grupo Hotelero T2, S.A. de C.V., Servicios Complementarios del Centro Norte, S.A. de C.V., Servicios Corporativos Terminal 2, S.A. de C.V., and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (on an individual basis).
 
(2)
Eliminations consist of operations and balances between our subsidiaries, as well as reclassifications.
 
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.
 
 
   
Year Ended December 31,
 
   
2010
   
2011
   
2012
 
   
(in thousands of pesos)
   
(in thousands
of dollars)(1)
 
Statement of Comprehensive Income data:
                       
Revenues:
                       
Aeronautical services(2)
    1,652,626       1,870,177       2,130,663       165,681  
Non-aeronautical services(3)
    491,797       588,671       688,957       53,574  
Construction services
    430,029       330,863       321,718       25,017  
Total revenues
    2,574,452       2,789,711       3,141,338       244,272  
Operating costs:
                               
Costs of services
    688,381       606,091       661,749       51,458  
Major maintenance provision
    64,274       165,683       164,208       12,769  
Construction costs
    430,029       330,863       321,718       25,017  
General and administrative expenses
    380,474       432,340       452,217       35,165  
Concession tax(4)
    103,067       115,979       137,028       10,655  
Technical assistance fee(5)
    47,567       55,150       67,365       5,238  
Depreciation and amortization:
                               
Depreciation(6)
    24,770       28,905       32,469       2,525  
Amortization(7)
    124,462       136,183       154,334       12,001  
Total depreciation and amortization
    149,232       165,088       186,803       14,526  
Other (expenses) income, net
    (9,090 )     (751 )     (9,924 )     (770 )
Total operating costs
    1,853,934       1,870,443       1,981,164       154,058  
Income from operations
    720,518       919,268       1,160,174       90,214  
Interest income
    15,791       16,079       27,764       2,159  
Interest cost
    (87,088 )     (98,431 )     (103,846 )     (8,075 )
Exchange (loss) gain, net
    1,562       (38,766 )     23,168       1,802  
Income before income taxes
    650,783       798,150       1,107,260       86,100  
Income tax expense
    (8,796 )     182,070       288,172       22,408  
Consolidated net income
    659,579       616,080       819,088       63,692  
Actuarial losses from defined benefit plan
    0       0       (11,313 )     (880 )
Deferred asset from defined benefit plan
    0       0       3,390       264  
Consolidated comprehensive income
    659,579       616,080       811,165       63,078  
Basic and diluted earnings per share(8)
    1.6532       1.5439       2.0327       0.1581  
Basic and diluted earnings per ADS(8)
    13.2256       12.3512       16.2616       1.2648  
                                 
Other operating data:
                               
Total terminal passengers (thousands of passengers)(9)
    11,588       11,773       12,594          
Total air traffic movements (thousands of movements)
    345       336       332          
Aeronautical + non-aeronautical revenues per terminal passenger(10)
    185       209       224          

   
Year Ended December 31,
 
   
2010
   
2011
   
2012
 
   
(in thousands of pesos)
   
(in thousands
of dollars)(1)
 
Statement of Financial Position data:
                       
Cash and cash equivalents
    312,838       523,634       1,152,433       89,614  
Total current assets
    897,009       1,163,381       1,696,415       131,914  
Land, buildings, machinery and equipment – net
    2,093,160       2,118,450       2,150,327       167,210  
Investments in airport concessions
    5,561,881       5,769,688       5,942,989       462,130  
Total assets
    8,703,959       9,295,154       10,010,410       778,414  
Current liabilities
    1,108,101       824,945       1,216,881       94,625  
Total liabilities
    2,827,949       3,210,653       3,594,459       279,507  
Total shareholders’ equity
    5,876,010       6,084,501       6,415,956       498,907  
                                 
Other data(11):
                               
                                 
Net cash flows from operating activities
    482,501       749,144       1,260,413       98,009  
Net cash flows used in investing activities
    (399,091 )     (454,475 )     (393,884 )     (30,628
Net cash flows used in financing activities
    (38,306 )     (83,873 )     (237,730 )     (18,485 )
Increase in cash and cash equivalents
    45,104       210,796       628,799       48,896  
 
(1)
Translated into dollars at the rate of Ps. 12.86 per U.S.$ 1.00, the interbank selling rate as reported by Banamex on December 31, 2012.  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, food and beverage services, retail, car rentals, revenues from OMA Carga, revenues from our checked baggage-screening services 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 Mexican Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes) could decide to regulate such rates, and such rates may be regulated by other authorities.
 
(4)
Each of our subsidiary concession holders is required to pay a concession tax to the Mexican government under the Mexican Federal Duties Law (Ley Federal de Derechos) for the use of public domain assets pursuant to the terms of its concession.  The concession tax is currently equal to 5% of each concession holder’s gross annual revenues.
 
(5)
We pay 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)
Based on 398,967,758 weighted average common shares in 2010, 399,039,231 weighted average common shares in 2011 and 399,060,153 weighted average common shares in 2012.  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).
 
(11)
Our 2011 consolidated statement of cash flows has been restated to reclassify Ps. 141,771 thousand relating to investments in fixed and intangible assets, which were presented initially as part of operating activities and are presented following the restatement as part of investing activities.  The restatement of our 2011 consolidated statement of cash flows had no effect on our balance of cash and cash equivalents or on our financial position as of December 31, 2011.
 

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.
 
Year Ended December 31,
 
High
   
Low
   
Period End
   
Average(1)
 
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
    14.37       12.63       12.96       13.15  
2013:
                               
January
    12.79       12.59       12.73       12.70  
February
    12.88       12.64       12.78       12.72  
March
    12.80       12.32       12.32       12.50  
April (through April 18)
    12.34       12.07       12.27       12.21  
 
(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 (Banco de México) 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 31, 2012, the U.S. Federal Reserve noon buying rate was Ps. 12.96 per U.S.$ 1.00.  On April 18, 2013, the U.S. Federal Reserve noon buying rate was Ps. 12.27 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, 2011 and 2012, approximately 64.2%, 67.0% and 67.8%, respectively, of our total revenues, and approximately 77.1%, 76.1% and 75.6%, 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 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 Transportation may be solicited by different entities (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.
 
 
Our business is dependent upon international regulations that affect Mexican airlines.
 
The Federal Aviation Administration (“FAA”) evaluates the legal framework for civil aviation and issues related to the monitoring, staff training and inspection processes related to regulations issued by the International Civil Aviation Organization, an agency of the United Nations Organization (“ICAO”).
 
On July 30, 2010, the FAA downgraded Mexico’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 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.
 
Mexico regained its Category 1 safety rating on December 1, 2010; however, we cannot be sure that Mexico 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 programs.
 
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, 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, and we are impacted by the circumstances that led to the request, our results of operations and financial condition could be adversely affected, and the value of Series B shares and ADSs could decline.  For a discussion of the framework for establishing our maximum rates and the application of our rates, see “Item 4.  Information on the Company—Regulatory Framework—Revenue Regulation.”
 
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 2012, our revenues subject to maximum rate regulation represented approximately 99.2% 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.  For a discussion of events that may lead to a termination of a concession, see “Item 4.  Information on the Company—Regulatory Framework—Penalties and Termination and Revocation of Concessions and Concession Assets.”
 
Depreciation of the peso may cause 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 for inflation (or earlier upon a cumulative increase of 5% in the Mexican producer price index (excluding fuel)).  However, we generally collect passenger charges from airlines 30 to 60 days following the date of each flight.  The 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 subsequent termination of one or more of our concessions.  The peso has historically experienced significant volatility.  From December 31, 2009, to December 30, 2010, the peso appreciated by approximately 5.2%, from Ps. 13.06 per U.S.$ 1.00 on December 31, 2009, to Ps. 12.38 per U.S. 1.00 on December 30, 2010.  From December 30, 2010, to December 30, 2011, the peso depreciated by approximately 12.7%, from Ps. 12.38 per U.S.$ 1.00 on December 30, 2010, to Ps. 13.95 per U.S.$ 1.00 on December 30, 2011.  From December 30, 2011 to December 31, 2012, the peso appreciated by approximately 7.1%, from Ps. 13.95 per U.S.$ 1.00 on December 30, 2011, to Ps. 12.96 per U.S.$ 1.00 on December 31, 2012.  On April 18, 2013, the exchange rate was Ps. 12.27 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 the failure to comply with our master development programs, a temporary or permanent halt in our operations, actions affecting the operations of other concession holders in Mexico, the failure to pay damages resulting from our operations, the failure to keep our rates from exceeding our maximum rates or the 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
 
Our business could be adversely affected by a downturn in the global economy, particularly with regard to the U.S. economy.
 
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 Mexico and the United States.
 
During the second half of 2011, economic growth decreased due to persistent weaknesses such as the jobs crisis in the United States, the sovereign-debt crises in the Eurozone, which worsened during this period, fiscal problems and the declining prospects for economic growth, especially in developed economies.  These weaknesses continued during 2012, despite moderate economic recovery in the Eurozone.  In the event of a recession, developing countries, which had largely rebounded from the economic and financial crisis in 2009, would be impacted through trade and financial channels.  According to the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía), in 2012, exports from Mexico to the United States represented approximately 77.6% of Mexican exports, 58.5% of foreign direct investment in Mexico originated in the United States, and private remittances received from the United States were approximately U.S.$ 13.6 billion, according to the U.S. Bureau of Economic Analysis.
 
As the demand for aeronautical services in Mexico is substantially dependent on the performance of the Mexican economy, which is in turn highly dependent on the performance of the U.S. economy, a further downturn in the U.S economy could cause a material adverse effect on our business, results of operations, prospects and financial condition.  More generally, further downturns in the global economy would also adversely affect our business, results of operations, prospects and financial condition.  See also “—Risks Related to Mexico—Our business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico will adversely affect our business and results of operations.”
 
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 Mexico, the United States and the world, the political situation in Mexico and elsewhere in the world, the attractiveness of our airports relative to that of other competing airports, fluctuations in fuel prices (which can have a negative impact on traffic as a result of fuel surcharges or other measures adopted by airlines in response to increased fuel costs) and changes in regulatory policies applicable to the aviation industry.  Any decreases in passenger and cargo traffic volumes and the number of air traffic movements to or from our airports as a result of these factors could adversely affect our business, results of operations, prospects and financial condition.
 
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.  Any future terrorist attacks involving one of our airports, whether or not involving aircraft, will likely adversely affect our business, results of operations, prospects and financial condition.  Among other consequences, airport operations would be disrupted or suspended during the time necessary to conduct rescue operations, investigate the incident and repair or rebuild damaged or destroyed facilities, and our future insurance premiums would likely increase.  In addition, our insurance policies do not cover all losses and liabilities resulting from terrorism.  Any future terrorist attacks, whether or not involving aircraft, will likely adversely affect our 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, 2011 and 2012, passenger charges represented 50.1%, 54.4% and 55.8%, respectively, of our total revenues and 60.1%, 61.7% and 62.1%, respectively, of the sum of our aeronautical and non-aeronautical revenues.  Events such as the conflicts in the Middle East and public health crisis such as the Severe Acute Respiratory Syndrome, or SARS, crisis and the Influenza A(H1N1) crisis have negatively affected in the past the frequency and pattern of air travel worldwide.
 
On April 30, 2009, President Felipe Calderón 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 international events of general concern (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition.
 
 
High incidences of crime in Mexico, including extortion and drug trafficking in particular, could adversely affect our business.
 
Higher incidences of crime throughout Mexico, including extortion and drug trafficking in particular, could have an adverse effect on our business, results of operations, prospects and financial condition, as it may decrease the international passenger traffic directed to Mexico from abroad.  The travel warning issued by the U.S. Department of State (Bureau of Consular Affairs) on November 20, 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 (except the city of Mazatlán), Durango, Zacatecas (except the city of Zacatecas), San Luis Potosí (except the city of San Luis Potosí), Aguascalientes, Guerrero (except the cities of Acapulco, Zihuatanejo and Ixtapa), Michoacán, Nayarit, Colima and Jalisco and to be aware of safety and security when visiting these cities and other regions, such as the metropolitan area of Monterrey, the cities of Mazatlán, Zacatecas, Acapulco, Zihuatanejo and Ixtapa and the states of Baja California, Morelos and Veracruz.  The Travel Warning highlights the special concern regarding the situation in Ciudad Juárez, Chihuahua and surrounding areas and notes that in Monterrey, the level of violence and insecurity has remained high.
 
Increases in international fuel prices could adversely affect our business and results from operations.
 
While there was a decline in 2012, international fuel prices, which represent a significant cost for airlines using our airports, have increased in recent years.  Increases in previous years 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.
 
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 and diversification activities.
 
Our ability to increase commercial revenues is, among other factors, significantly dependent upon increasing passenger traffic at our airports and the profitability of other non-aeronautical commercial businesses, such as our Terminal 2 NH Hotel and the commercial project referred to below at Mexico City International Airport.  We cannot assure you that we will be successful in implementing our strategy of increasing our passenger and cargo traffic or revenues from other non-aeronautical 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 could be exposed to additional risks if we pursue business opportunities in other countries.
 
From time to time, we may consider strategic participation in airport assets located in other countries.  We may evaluate international expansion opportunities through capital investment in other concessions.  Expansion into a market outside of Mexico could require significant capital expenditures and have a material effect on our capital structure.  If we pursue an international expansion opportunity, we could face internal or external risks, including, without limitation:  (i) a lack of market experience in the relevant country, (ii) foreign exchange and economic volatility, (iii) the dedication of significant management resources to executing the international operation and (iv) exposure to risks inherent to doing business in the relevant country.  Our inability to successfully manage the risks and uncertainties related to such business opportunities could have a material adverse effect on our business, results of operations, prospects and financial condition.
 
 
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 Mexico City International Airport, under a lease with Mexico City International Airport that expires in 2027.  A Mexican subsidiary of NH Hoteles SA, 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, 2012, was Ps. 301,598 thousand.
 
Part of the value of our investment in Terminal 2 of Mexico City International Airport reflects the airport’s status as the only one in the proximity of Mexico City.  If a new airport were to be built near Mexico City, Mexico City International Airport could be closed and we would therefore have no assurance as to our ability to continue operating the hotel and the commercial space or our ability to recover our investment.  In addition, under certain circumstances, the operating lease agreement with Mexico City International Airport can be terminated by Mexico City International Airport with partial or no compensation to us.  Should a new Mexico City airport be constructed or should Mexico 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, 2012, total revenues amounted to Ps. 158,477 thousand, as compared to Ps. 142,098 thousand in 2011, annual average occupancy decreased to 79.3% from 82.8% in 2011, due principally to the relocation of United’s (formerly Continental) operations to Terminal 1 of Mexico City International Airport and the annual average rate per room was Ps. 1,477.9.  We cannot assure you that the occupancy rate of the hotel will increase or that it will not continue to decrease.
 
Competition from other tourist destinations could adversely affect our business.
 
The principal factor affecting our results of operations and business is the number of passengers using our airports.  The number of passengers using our airports (particularly the Acapulco, Mazatlán and Zihuatanejo airports) may vary as a result of factors beyond our control, including the level of tourism in Mexico.  In addition, our passenger traffic volume may be adversely affected by the attractiveness, affordability and accessibility of competing tourist destinations in Mexico, such as Cancún, Puerto Vallarta and Los Cabos, or elsewhere, such as Florida, Puerto Rico, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America.  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 Mexico.  Furthermore, the recent 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 six of our airports and could be adversely impacted by any condition affecting those airports.
 
In 2012, approximately 73.6% of the sum of our aeronautical and non-aeronautical revenues, were generated from six of our 13 airports.  The Monterrey airport generated 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,
2012
 
Monterrey
    45.5 %
Culiacán
    7.8 %
Chihuahua
    5.9 %
Mazatlán
    5.6 %
Ciudad Juárez
    4.6 %
Acapulco
    4.2 %
Seven other airports, Terminal 2 NH Hotel, Servicios Complementarios del Centro Norte and OMA Logística
    26.4 %
Total
    100.0 %
 
As a result of the substantial contribution to our revenues from these six 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 56.3% of our total employees as of December 31, 2012), 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 56.3% of our total employees as of December 31, 2012) are represented by a national union of airport workers that operates throughout Mexico.  To the extent that any unionized airport workers throughout the country successfully negotiate different employment terms than those we offer at our airports, our operations could be adversely affected by union activities, including organized strikes or other work stoppages.  In addition, we could be required to increase our labor expenses to match the terms agreed by the union with other Mexican airport operators.
 
Our operations depend on certain key airline customers, and the loss 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 2012, Aeroméxico and its affiliates represented 31.2%, VivaAerobus represented 17.8%, and Interjet represented 15.8%.  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 2012, passengers traveling on discount, charter and low-cost carriers, such as VivaAerobus, Interjet and Volaris, accounted for approximately 50.0% of our commercial aviation passenger traffic.
 
 
AMR Corporation, the parent company of American Airlines and American Eagle, generated 3.4% of the sum of our aeronautical and non-aeronautical revenues from January 1, 2012, to December 31, 2012, of which American Airlines accounted for 3.2% and American Eagle accounted for 0.2%.  As a percentage of our total passenger traffic, AMR Corporation generated 3.1%, of which American Airlines accounted for 2.1% and American Eagle accounted for 1.0% during the same period.
 
On November 29, 2011, AMR Corporation 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 was granted the exclusive right to propose its own plan of reorganization.  On February 14, 2013, AMR Corporation and US Airways announced that they had signed an agreement to merge.  See also “Item 5.  Operating and Financial Review and Prospects—Recent Developments—Merger Between AMR Corporation and US Airways.”
 
Grupo Mexicana, which comprises Mexicana de Aviación, ClickMexicana and MexicanaLink, operated 24 routes at 12 of our 13 airports in July 2010, prior to the bankruptcy filing of Mexicana de Aviación.  On August 3, 2010, Mexicana de Aviación announced that it filed for bankruptcy protection (concurso mercantil) before the 11th Federal District Court in Mexico 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.  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 our 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%.
 
As of April 18, 2013, the total amount owed to us by Grupo Mexicana amounted to approximately Ps. 145,881 thousand.  As of December 31, 2012, we had recognized and recorded a corresponding provision of Ps. 145,881 thousand under costs of services.  We have not charged any further amount or generated any interest on the amount owed ever since.  In subsequent bankruptcy proceedings, Mexican courts have ordered the separation of a total of approximately Ps. 132,628 thousand in passenger charges in our favor from the bankruptcy proceedings of Mexicana de Aviación, ClickMexicana and MexicanaLink and ordered the airlines to pay us or to declare it legally impossible to execute the payment.  To date, we have not received any portion of the amount due to us.  There can be no assurance that these amounts will be recovered from Grupo Mexicana, representing a cash flow risk.
 
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, such as the case of the amount owed to us by Grupo Mexicana.  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 Mexico.
 
Subsequently, we entered into an agreement with the Mexican 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.  In 2012, we did not sign a new agreement with, and we did not offer any incentive through, the National Air Transportation Board.  In January 2013, we signed a new agreement with the National Air Transportation Board covering the period from January 1, 2013 through December 31, 2015.  Historically, amounts paid under these agreements have not been material, and we do not expect the current agreement or any similar future agreements with the National Air Transportation Board to have a material effect on our results of operations.
 
Although passenger traffic volume (and therefore overall revenues) may increase, any agreed incentives and/or discounts 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.
 
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, some 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.
 
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.
 
 
On December 18, 2012, a proposed amendment to Article 115 of the Constitution to eliminate airport concessions’ exemption from the payment of property taxes was filed before the House of Deputies (Cámara de Diputados).  The initiative was sent to the Constitutional Commission (Comisión de Puntos Constitucionales) of the House of Deputies for review.  As of April 18, 2013, no further legislative action had been taken with regard to this proposed amendment.  If adopted, this amendment could have a material impact on our business, results of operations, prospects and financial condition.
 
Recent reforms to the Mexican Constitutional Protection Law (Ley de Amparo) may cause a material adverse effect on our results of operations.
 
On April 2, 2013, amendments to the Mexican Constitutional Protection Law were published in the Mexican Official Gazette of the Federation (Diario Oficial de la Federación).  These amendments include, among others, new criteria for suspending acts by government authorities relating to concessions granted by the government.  Pursuant to this amendment, such a suspension will not be applied when it would “impede the government’s ability to benefit from goods in the public domain.”  It is possible that a judge would consider that our airports are government concessions intended for public use.  Therefore, if we are unable to obtain a suspension of a government act that we believe to be unconstitutional, our business, results of operations, prospects and financial condition could be adversely affected.
 
Recent reforms to the Mexican Federal Labor Law (Ley Federal del Trabajo) may cause a material adverse effect on our results of operations.
 
Amendments to several articles of the Mexican Federal Labor Law became effective on November 30, 2012.  The Mexican Federal Labor Law had not been substantially modified since it was enacted in 1970.  The principal changes resulting from the amendments include:  (i) the creation of new models of employment (seasonal employment and employment following training); (ii) increased flexibility for termination of employment; (iii) a requirement that the monthly total of salaries paid on an hourly basis be no less than the minimum mandatory monthly wage in effect; (iv) the application of regulations under the Mexican Federal Labor Law to personnel employed by services companies; (v) an increase in labor inspectors’ power to review employers; (vi) the addition of sexual harassment and other abuses as justified causes for termination of employment; and (vii) a new profit-sharing scheme for employees. Our business, results of operations, prospects and financial condition may be materially and adversely impacted as a result of increases in labor costs or modified labor conditions derived from the interpretation of the Mexican courts of the recent amendments to the Mexican Federal Labor Law.
 
Natural disasters could adversely affect our business.
 
From time to time, the Northern and Central regions of Mexico experience torrential rains, hurricanes (particularly during the months of July through September) and, depending on the region, earthquakes and volcanic activity.  In addition, the Mazatlán, Culiacán and Acapulco airports are susceptible to occasional flooding due to torrential rainfall.  Natural disasters may impede 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.
 
In accordance with applicable labor laws, 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 Mexican Social Security Institute (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 ICAO require the maintenance of a perimeter surrounding the land used for airport operations.  At several of our airports, we do not control portions of the land within the required perimeters.  If portions of such land adjacent to certain of our airports are developed by third parties in a manner that encroaches on the required perimeters, our ability to comply with applicable guidelines of the ICAO or to expand our airport operations could be adversely affected.  Also, the growth of certain cities in the proximity of our airports could limit our ability to expand our airports.
 
Within our plans for future expansion of the Monterrey airport, in February and June 2007, March and May 2008, July and December 2009 and February, July and December 2010, we completed acquisitions of land surrounding the airport with an aggregate area of 777 hectares (3 square miles) for an aggregate price of Ps. 1,559,381 thousand (U.S.$ 121.3 million).  We received authorization from the Mexican Bureau of Civil Aviation to reallocate Ps. 386,538 thousand (amount expressed in nominal 2009 pesos) of our investment in this land to investments included in the 2011–2015 master development program for the Monterrey airport.  We cannot assure you that the remaining amount of the investments will be recognized by the Ministry of Communication and Transportation in the future.
 
Our future profitability and growth will depend upon our ability to expand our airports in the future.  Potential limitations on our possibility of expansion, such as those described above, could restrict any such expansion and thus have a material adverse effect on the future profitability and growth of our business.
 
We are exposed to risks inherent to the operation of airports.
 
We are obligated to protect the public at our airports and to reduce the risk of accidents at our airports.  As with any company dealing with members of the public, we must implement certain measures for the protection of the public, such as fire safety in public spaces, design and maintenance of car parking facilities and access routes to meet road safety rules.  We are also obligated to take certain measures related to aviation activities, such as maintenance, 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 led to increased security measures relating to hazardous materials and the development of an assistance plan for victims.
 
 
We are dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity risks.
 
We rely on a variety of information technology to manage our operations.  The proper functioning of these systems is critical to the efficient operation and management of our business.  In addition, these systems may require modifications or upgrades as a result of technological changes or growth in our business.  These changes may be costly and disruptive to our operations, and could impose substantial demands on management time.  Our systems may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access and cyber-attacks.  Currently, our information systems are protected with backup systems, including physical and software safeguards located outside of our offices for protection purposes, and a cold site on certain systems to recover information technology operations; furthermore, we undertake other steps to secure our systems and electronic information from exogenous events.  These safety components reduce the risk of disruptions, failures or security breaches of our information technology infrastructure and are reviewed periodically by external advisors.  The measures that we take to secure our systems and electronic information may not be adequate.  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.
 
Mexico’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 Mexican Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) 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 (Ley General de Desarrollo Forestal Sustentable).
 
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 Mexico.  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 the 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 ICAO established security guidelines requiring checked baggage on all international commercial flights as of January 2006, and all domestic commercial flights as of July 2006, to undergo a comprehensive screening process for the detection of explosives.  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., has operated the checked-baggage screening system since 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 (“TSA”)) is responsible for screening checked baggage.  On November 23, 2012, the Mexican Bureau of Civil Aviation published mandatory circular CO SA-17.2/10 R1 that requires that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of equipment could increase our exposure to liability as a result of our involvement in the screening process.
 
We are exposed to risks related to handling cargo.
 
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, such as an x-ray machine certified by the TSA in the OMA Carga area at the Monterrey airport, or are under consideration.
 
We may be subject to risks related to the integrity of our facilities or the reduction of our cargo traffic volume.  The occurrence of such events could adversely affect our business, results of operations, prospects and financial condition.
 
Enforcing civil liabilities against us or our directors, officers and controlling persons may be difficult.
 
We are organized under the laws of Mexico, and all of our directors, officers and controlling persons reside in Mexico.  In addition, a substantial portion of our assets and the assets of our directors, officers and controlling persons are located in Mexico.  As a result, it may be difficult for investors to effect service of process on such persons within the United States or elsewhere outside of Mexico or to enforce judgments against us or our directors, officers and controlling persons, including in any action based on civil liabilities under U.S. federal securities laws.  There is doubt as to the enforceability in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts or other courts outside of Mexico, of liabilities based solely on U.S. federal securities laws.
 
 
Risks Related to Our Shareholders
 
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 shareholders.
 
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 our 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 shareholders (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.  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 entered into with SETA providing for management and consulting services (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.”
 
In the event of the termination of the Technical Assistance Agreement, the Series BB shares would be converted into Series B shares, resulting in the termination of all of SETA’s special rights.  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, appoint and remove 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 shareholder 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 shareholders and can be contrary to the preferences and expectations of our other shareholders.  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 shareholders.
 
If SETA, one of our principal shareholders, should sell or otherwise transfer all or a portion of our Series BB shares that it holds our operations could be adversely affected.
 
SETA currently exercises 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.
 
Risks Related to Mexico
 
Our business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico will adversely affect our business and results of operations.
 
In 2010, 2011 and 2012, domestic terminal passengers have represented approximately 83.4%, 84.8% and 85.5%, respectively, of the passenger traffic volume in our airports.  In addition, all of our assets are located, and all of our operations are conducted, in Mexico.  Accordingly, our financial conditions and results of operations are substantially dependent on economic conditions prevailing from time to time in Mexico.  As a result, our business, financial condition and results of operations could be adversely affected by any deterioration of the general condition of the Mexican economy, by a devaluation of the peso, by inflation and high interest rates in Mexico or by other negative political, social and economic developments in Mexico.
 
In the past, Mexico has experienced economic crises, caused by internal and external factors, characterized by exchange-rate instability (including large devaluations), high inflation, high domestic interest rates, economic contraction, a reduction of international capital flows, a reduction of liquidity in the banking sector and high unemployment rates.
 
 
Mexico experienced a period of slow growth from 2001 through 2003, primarily as a result of the downturn in the U.S. economy.  In 2001, Mexico’s GDP 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%.  In 2012, GDP increased by 3.9%, and inflation was 3.6%.
 
During 2012, real and nominal interest rates in Mexico increased by 1.6% compared to 2011.  The annualized interest rates on 28-day short-term Mexican treasury bills, or Cetes (Certificados de la Tesorería de la Federación), averaged approximately 7.7%, 5.4%, 4.4%, 4.2% and 4.2% for 2008, 2009, 2010, 2011 and 2012, 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 Mexico.  This crisis adversely impacted our business.
 
In Mexico, the economic and financial crisis adversely affected domestic air 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.
 
Since the beginning of 2011, Grupo Aeroméxico, Interjet, VivaAerobus and Volaris have 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 have not been taken over by any other airline.
 
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 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 Mexico could materially and adversely affect Mexican economic policy and, in turn, our operations.
 
Multiparty rule is still relatively new in Mexico, 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.  From September 30, 2011, to March 30, 2012, the peso depreciated by approximately 7.0% from Ps. 13.77 per U.S.$ 1.00 to Ps. 12.81 per U.S.$ 1.00.  Between March 30, 2012 and September 28, 2012, the peso fluctuated between Ps. 12.81 and Ps. 12.86 per U.S.$ 1.00.  It began to appreciate, reaching Ps. 12.27 per U.S.$ 1.00 on April 18, 2013.
 
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 any depreciation of the Mexican peso has a positive impact on our results from operations, which are denominated in Mexican pesos; and (ii) as of December 31, 2012, we had U.S.$ 23.3 million of liabilities denominated in U.S. dollars, causing foreign-exchange profits.  Any appreciation of the peso may in turn cause 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 Business Flat Tax, which was published on October 1, 2007, adversely impacted our results of operations in 2007, 2008, 2009, 2010, 2011 and 2012.  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 Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers.  In past years, prices of both Mexican debt and equity securities have been adversely affected by the sharp drop in Asian securities markets and the economic crises in Argentina, Brazil, Greece, Italy, Portugal, Russia, Spain, Venezuela and the United Arab Emirates.
 
In addition, in recent years, economic conditions in Mexico have become increasingly correlated to economic conditions in the United States.  Therefore, an economic downturn in the United States will significantly adversely impact the Mexican economy.  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.
 
Minority shareholders may be less able to enforce their rights against us, our directors or our controlling shareholders in Mexico.
 
Under Mexican law, the protections afforded to minority shareholders are different from those afforded to minority shareholders in the United States.  For example, because provisions concerning fiduciary duties of directors have only recently been incorporated into the Mexican Securities Law, it may be difficult for minority shareholders to bring an action against directors for breach of these duties and achieve the same results as in most jurisdictions in the United States.  Procedures for class-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 (“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, S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V. (“Indeval”), a Mexican or foreign credit institution or a brokerage house in order to attend a shareholders’ meeting.  A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to attend shareholders’ meetings.  A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with the procedures provided for in the deposit agreement, but a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.
 
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 comprehensive income (loss), net comprehensive income (loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios,
 
 
 
·
statements of our plans, objectives or goals,
 
 
·
changes in our regulatory environment,
 
 
·
statements about our future economic performance or that of Mexico, and
 
 
·
statements of assumptions underlying such statements.
 
Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
 
Forward-looking statements involve inherent risks and uncertainties.  We caution you that a number of important factors could cause actual results to differ materially from the projections, plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.  These factors, some of which are discussed above under “Risk Factors,” include material changes in the performance or terms of our concessions, developments in legal proceedings, economic and political conditions and government policies in Mexico or elsewhere, inflation rates, exchange rates, regulatory developments, customer demand and competition.  We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties 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.
 
Item 4.
Information on the Company
 
HISTORY AND DEVELOPMENT OF THE COMPANY
 
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., which we refer to by the acronym “GACN”, is a corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico.  We were incorporated in 1998 as part of the Mexican government’s program for the opening of Mexico’s airports to private investment.  The duration of our corporate existence is indefinite.  We are a holding company and conduct substantially all of our operations through our subsidiaries.  The terms “GACN”, “the Company”, “we”, “us” and “our” in this annual report refer to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., together with its subsidiaries, and to properties and assets that we own or operate, unless otherwise specified.  Our registered office is located at Torre Latitud, L501, Piso 5, Av. Lázaro Cárdenas 2225, Col. Valle Oriente, San Pedro Garza García, Nuevo León, Mexico, 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 (amount in nominal pesos, excluding interest) (U.S.$ 76.0 million based on the exchange rate in effect on the date of SETA’s bid) in exchange for:
 
 
·
all of our Series BB shares, which 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.  Major Shareholders and Related-Party Transactions.”
 
SETA’s current shareholders 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.  Based on data from the Mexican Chamber of the Construction Industry (Cámara Mexicana de la Industria de la Construcción) and the Mexican National Institute of Statistics and Geography, Empresas ICA, the parent of Aeroinvest, is the largest engineering, procurement and construction company in Mexico and the largest provider in Mexico of construction services to both public- and private-sector clients.  Empresas ICA’s principal lines of business are the construction of infrastructure facilities, as well as industrial, urban, and housing construction and it has increased its participation in construction-related businesses both in Mexico and in foreign markets, such as infrastructure operations, housing development and, as of 2012, mining services.  In addition; Empresas ICA is engaged in the development and marketing of real estate, the construction, maintenance and operation of airports, highways, social infrastructure and tunnels and in the management and operation of water supply systems and solid waste disposal systems.  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 88.8 million passengers in 2012.  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 required us to maintain a debt to EBITDA ratio below 2.25:1.  There were no further arrangements that resulted in our guarantee, pledge of assets or stock or providing of security for Aeroinvest’s loan.  Aeroinvest prepaid the entire amount outstanding under this credit agreement on November 30, 2012.  Our controlling shareholder, Aeroinvest, and its affiliates have entered into certain agreements that contain covenants requiring our controlling shareholder to, among other things, (i) cause us to maintain of a debt-to-EBITDA ratio below 3.50:1; (ii) cause us to continue listing our common shares on the Mexican Stock Exchange; (iii) prohibit us from granting loans or transferring funds to third parties outside the normal course of our operations other than dividend distributions and other distributions to shareholders and loans to employees; and (iv) prohibit us from entering into any agreement that may limit our ability to pay dividends, fees, interest or any other cash distribution to our shareholders.  We were in compliance with these restrictions as of December 31, 2012.
 
 
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 2012 amounted to approximately Ps. 67,365 thousand.  This agreement is more fully described in “Item 7.  Major Shareholders and 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 Mexico.  The net proceeds from the sale of the shares totaled approximately U.S.$ 432.2 million and were paid to the Mexican government.
 
Master Development Programs and Capital Expenditures
 
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, and detailed expansion, modernization and major and minor maintenance plans 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, and we will be required to comply with them on a year-by-year basis.  During 2015, the master development program for the next five-year period will be prepared for each of our concessions.
 
 
The following table sets forth our current committed investments under our master development programs by airport for 2011 through 2015.  Figures are updated based on the Producer Price Index (excluding fuel):
 
Committed Investments Under Master Development Programs by Airport
for 2011 through 2015
 
   
Year Ended December 31,
       
   
2011
   
2012
   
2013
   
2014
   
2015
   
Total
2011–2015
 
   
(in thousands of pesos)
 
Acapulco
    31,106       60,544       58,169       117,549       32,061       299,429  
Ciudad Juárez
    18,089       37,532       89,899       19,634       15,945       181,099  
Culiacán
    55,504       56,223       92,664       72,262       55,863       332,516  
Chihuahua
    24,558       37,470       56,116       14,891       10,767       143,802  
Durango
    37,763       22,921       12,251       22,270       3,920       99,125  
Mazatlán
    20,101       28,737       50,307       104,481       29,188       232,814  
Monterrey
    274,018       91,938       247,735       251,592       120,069       985,352  
Reynosa
    34,021       39,552       35,635       25,891       6,430       141,529  
San Luis Potosí
    19,937       21,369       56,524       51,730       43,020       192,580  
Tampico
    32,820       47,493       46,025       18,091       13,749       158,178  
Torreón
    32,076       13,941       36,436       25,809       4,323       112,585  
Zacatecas
    18,592       39,914       26,772       10,741       11,686       107,705  
Zihuatanejo
    18,193       47,277       26,705       50,652       27,673       170,500  
Total
    616,778       544,911       835,238       785,593       374,694       3,157,214  
 
The following table sets forth our current committed investments under our master development programs by category for 2011 through 2015.  Figures are updated based on the Producer Price Index (excluding fuel):
 
Committed Investments Under Master Development Programs by Category
for 2011 through 2015
 
   
Year Ended December 31,
       
   
2011
   
2012
   
2013
   
2014
   
2015
   
Total
2011–2015
 
   
(in thousands of pesos)
 
Terminals
    52,325       80,347       187,216       238,740       71,992       630,620  
Runways and aprons
    76,254       157,013       290,690       264,511       156,635       945,103  
Machinery and equipment
    159,227       76,781       194,447       140,489       54,458       625,402  
Baggage-screening system – investments
    150,952       16,039       6,931       3,264       55,561       232,747  
Security – investments
    51,555       141,831       60,606       44,653       20,990       319,635  
Other
    126,465       72,900       95,348       93,936       15,058       403,707  
Total
    616,778       544,911       835,238       785,593       374,694       3,157,214  
 
 
The following table sets forth our committed investments under our master development programs approved by the Ministry of Communications and Transportation for each airport for 2010 through 2012.  Figures are updated based on the Producer Price Index (excluding fuel):
 
Committed Investments Under Master Development Programs by Airport
for 2010 through 2012
 
   
Year Ended December 31,
       
   
2010
   
2011
   
2012
   
Total
2010-2012
 
   
(in thousands of pesos)
 
Acapulco
    17,218       31,106       60,544       108,868  
Ciudad Juárez
    13,973       18,089       37,532       69,594  
Culiacán
    2,777       55,504       56,223       114,504  
Chihuahua
    11,987       24,558       37,470       74,015  
Durango
    10,607       37,763       22,921       71,291  
Mazatlán
    2,583       20,101       28,737       51,421  
Monterrey
    27,485       274,018       91,938       393,441  
Reynosa
    2,014       34,021       39,552       75,587  
San Luis Potosí
    3,565       19,937       21,369       44,871  
Tampico
    5,169       32,820       47,493       85,482  
Torreón
    9,357       32,076       13,941       55,374  
Zacatecas
    8,963       18,592       39,914       67,469  
Zihuatanejo
    14,972       18,193       47,277       80,442  
Total
    130,670       616,778       544,911       1,292,359  
 
Expenditures incurred to comply with our obligations under the master development programs include capital expenditures for fixed assets, expenditures associated with improvements to our concession assets, major maintenance costs and other items recorded as operating costs as incurred.  Major maintenance expenditures are not subject to capitalization and reduce our major maintenance provision.  See “Item 5.  Operating and Financial Review and Prospects—Critical Accounting Policies—Major Maintenance Provision.”  Thus, not all expenditures incurred to comply with our obligations under the master development programs will constitute capital expenditures.
 
In addition to investments in our  master development programs, we have also invested in commercial and real estate opportunities, including our investment in a hotel in Terminal 2 of Mexico City International Airport.
 
 
The following table sets forth our actual capital expenditures, including capital expenditures made pursuant to our master development programs and other strategic capital expenditures by airport for 2010 through 2012:
 
Actual Capital Expenditures by Airport for 2010 through 2012
 
   
Year Ended December 31,
 
   
2010
   
2011
   
2012
 
   
(in thousands of pesos)
 
Acapulco
    44,408       6,296       23,875  
Ciudad Juárez
    22,848       9,768       28,395  
Culiacán
    26,562       13,504       69,615  
Chihuahua
    32,142       21,807       30,479  
Durango
    108       2,100       1,673  
Mazatlán
    45,536       12,916       13,657  
Monterrey
    291,953       199,013       96,724  
Reynosa
    14,108       3,556       33,778  
San Luis Potosí
    93       1,635       10,885  
Tampico
    185       6,954       9,772  
Torreón
    100       1,100       10,912  
Zacatecas
    17,736       3,191       22,251  
Zihuatanejo
    35,259       75,489       26,488  
Other
    25,749       27,703       13,626  
Total
    556,787       385,032       392,130  
 
The following table sets forth our actual capital expenditures by category across all of our airports for 2010 through 2012:
 
Actual Capital Expenditures by Category for 2010 through 2012
 
   
Year Ended December 31,
 
   
2010
   
2011
   
2012
 
   
(in thousands of pesos)
 
Terminals
    150,818       85,270       175,648  
Runways and aprons
    45,569       0       29,716  
Machinery and equipment
    58,763       8,845       77,638  
Land
    90,906       12,141       378  
Baggage screening system – investments
    163,013       220,066       6,789  
New businesses
    0       17,306       4,292  
Other
    47,718       41,404       97,669  
Total
    556,787       385,032       392,130  
 
 
For the year ended December 31, 2012, our capital expenditures totaled Ps. 392,130 thousand.  Our capital expenditures for 2012 were dedicated primarily to our committed investments pursuant to our master development programs.
 
Our capital expenditures from 2010 through 2012 were allocated to the following types of investments at the majority of our airports:
 
 
·
Terminals.  We remodeled and performed expansion projects at our airports to improve our departure lounges, baggage-claim and arrival areas, lighting and air conditioning systems, office spaces, taxi and other ground transportation.
 
 
·
Paved surfaces.  We improved our runways, taxiways and service roads, including lighting systems, to meet and in certain cases exceed ICAO standards.  We also expanded several aircraft apron areas.
 
 
·
Machinery and equipment.  We invested in machinery and equipment such as aircraft-approved fire-extinguishing vehicles, emergency back-up electricity generators, metal detectors and other security-related equipment, ambulances, elevators, moving walkways and public information systems, among others.
 
 
·
Land.  As part of our strategic investments, in 2010 and 2011 territorial reserves of Ps. 90,906 thousand and Ps. 15,283 thousand, respectively, were purchased to develop and expand our key airports.  In 2012, we did not purchase any territorial reserves.
 
 
·
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.
 
BUSINESS OVERVIEW
 
Our Operations
 
Through our subsidiaries, we hold concessions to operate, maintain and develop 13 airports in Mexico, which are concentrated in the country’s central and northern regions.  Each of our concessions has a term of 50 years beginning on November 1, 1998.  The term of each of our concessions may be extended by the Ministry of Communications and Transportation under certain circumstances for up to 50 additional years.  The terms of our concessions also include the right to occupy, use and improve the land appurtenant to our airports, which we do not own and which will revert to the Mexican government upon the termination of our concession.  As operator of the 13 airports under our concessions, we charge fees to airlines, passengers and other users for the use of the airports’ facilities.  We also derive rental and other income from commercial activities conducted at our airports, such as the leasing of space to restaurants and retailers.
 
 
We operate 13 airports, which serve a major metropolitan area (Monterrey), three tourist destinations (Acapulco, Mazatlán and Zihuatanejo), seven regional centers (Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas) and two border cities (Ciudad Juárez and Reynosa).  Our airports are located in nine of the 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 and the Mexican National Population Council (Consejo Nacional de Población).  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 14.5% of all arriving and departing total aviation passengers in Mexico in 2012.
 
In 2012, we recorded revenues of Ps. 3,141,338 thousand (U.S.$ 244.3 million) and consolidated net income of Ps. 819,088 thousand (U.S.$ 63.7 million).  In 2012, the sum of our aeronautical and non-aeronautical revenues was Ps. 2,819,620 thousand (U.S.$ 219.3 million).  In 2012, our airports handled approximately 12.6 million terminal passengers, an increase of 7.0% with respect to the 11.8 million terminal passengers handled in 2011.
 
Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, Mazatlán-Phoenix, Monterrey-Las Vegas, Monterrey-Atlanta, Zihuatanejo-Los Angeles, Mazatlán-Los Angeles and Monterrey-San Antonio.  Our airports also serve several other major international destinations, including Detroit, Chicago, Houston, Los Angeles, Dallas and Phoenix in the United States, Panama City and San José, Costa Rica.  In addition, our airports serve major resort destinations, such as Acapulco, Mazatlán and Zihuatanejo, which are popular destinations in Mexico frequented by tourists from Mexico, the United States and Canada.  Our airports also serve major domestic routes, including Monterrey-Mexico City, which was the country’s busiest domestic route in 2012, with approximately 2.5 million total passengers (including passengers flying directly to the nearby airport of Toluca, which are counted together with those flying to Mexico City), according to the Mexican Bureau of Civil Aviation.  Other major domestic routes served by our airports include Cancún-Monterrey, Mexico City-Chihuahua and Mexico City-Culiacán, with approximately 718,000,534,000 and 422,000 total passengers, respectively, in 2012 according to the Mexican Bureau of Civil Aviation.
 
In the last quarter of 2011, VivaAerobus started flying new international routes at the Monterrey airport to and from 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 and from Panama City, which started on December 7, 2011 with four flights per week.  During 2012, Avianca also started operations at the Monterrey airport with a new international route to and from San José, Costa Rica, which started on June 2, 2012 with three flights per week.  Interjet started flying new international routes at the Monterrey airport to and from Habana and San Antonio on October 25 and November 11, respectively.  Volaris started flying a new international route at the Culiacán airport to and from Los Angeles on August 4, 2012.  United (formerly Continental) started flying a new international route at the Durango airport to and from Los Angeles on March 10, 2012.  Magnicharters started flying a new international route at the Monterrey airport to and from Las Vegas on March 15, 2012.
 
 
Our international traffic in 2012 increased by 2.3% compared to 2011, principally as a result of the entry of new operators such as Avianca in the Monterrey airport, which began flying to and from San José, Costa Rica.  Furthermore, Interjet started flying new international routes between Monterrey and Habana and Monterrey and San Antonio.  Volaris started flying a new international route between Culiacán and Los Angeles.  United (formerly Continental) started flying a new international route between Durango and Los Angeles.  Magnicharters started flying a new international route between Monterrey and Las Vegas.  The principal international airlines that contributed to these increases are United (formerly Continental), American Eagle, American Airlines, Alaska Airlines, Delta, Copa Airlines and Avianca.  The key international destinations that led to the increased passenger traffic are Houston, Dallas, Los Angeles, Phoenix, Las Vegas, Atlanta and San Antonio in the United States, Panama City and San José, Costa Rica.
 
Monterrey and its metropolitan area is the third largest city in Mexico in terms of population, with a population of approximately 3,930,388.  Monterrey ranks among Mexico’s most established urban and commercial centers and is the capital of the state of Nuevo León, Mexico’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 Mexico’s largest companies in a wide variety of industries, as well as several major universities.  Business travelers account for a substantial portion of passengers at the Monterrey airport.  The 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 Mexico based on passenger traffic volume in 2012, according to data published by the Mexican Bureau of Civil Aviation.  In 2012, our Monterrey airport accounted for approximately 48.5% of our terminal passenger traffic, 43.1% of our total revenues and 45.5% 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 Mexico’s 22nd  largest international tourist destination and Mazatlán the 18th largest in terms of visitors in 2012, according to the Mexican National Institute of Migration (Instituto Nacional de Migración).  Acapulco is a principal port of call for cruise ships.  In 2012, the Acapulco, Mazatlán and Zihuatanejo airports collectively accounted for 13.3% of our aggregate terminal passengers, 13.7% of our total revenues and 13.6% 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 2012, these seven regional airports collectively accounted for 30.3% of our aggregate terminal passengers, 29.5% of our total revenues and 27.8% 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 Mexico and the United States.  Both Ciudad Juárez and Reynosa are popular entry points to the United States.  In 2012, the Ciudad Juárez and Reynosa airports collectively accounted for 8.0% of our aggregate terminal passengers, 8.0% of our total revenues and 6.8% of the sum of our aeronautical and non-aeronautical revenues.
 
In addition, we entered into a joint investment with a Mexican subsidiary of the international hotel operator NH Hoteles SA under Consorcio Grupo Hotelero T2 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 Mexico City International Airport under a lease agreement with Mexico City International Airport that expires in 2027.  The Terminal 2 NH Hotel opened in August 2009.
 
 
Airlines based in Terminal 2 of Mexico City International Airport 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, 2011 and 2012:
 
   
Year Ended December 31,
 
   
2010
   
2011
   
2012
 
 
Airport
 
Terminal
Passengers