Table of Contents

 

 

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, 2015

 

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)

 

Vicsaly Torres Ruiz
Torre Latitud, L501, Piso 5
Av. Lázaro Cárdenas 2225
Col. Valle Oriente, San Pedro Garza García
Nuevo León, Mexico
+ 52 81 8625 4300

 
vtorres@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

 

350,234,000

Series BB shares

 

49,766,000

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

 

Yes þ No o

 

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

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

1

 

 

 

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

1

 

 

 

ITEM 3.

KEY INFORMATION

1

 

 

 

 

Selected Financial Data

1

 

 

 

 

Exchange Rates

7

 

 

 

 

Risk Factors

8

 

 

 

 

Forward-Looking Statements

24

 

 

 

ITEM 4.

INFORMATION ON THE COMPANY

25

 

 

 

 

History And Development Of The Company

25

 

 

 

 

Business Overview

29

 

 

 

 

Regulatory Framework

53

 

 

 

 

Organizational Structure

67

 

 

 

 

Property, Plant And Equipment

69

 

 

 

ITEM 4A.

UNRESOLVED STAFF COMMENTS

69

 

 

 

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

69

 

 

 

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

101

 

 

 

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS

108

 

 

 

 

Major Shareholders

108

 

 

 

 

Related-Party Transactions

110

 

 

 

ITEM 8.

FINANCIAL INFORMATION

111

 

 

 

 

Legal Proceedings

112

 

 

 

 

Dividends And Capital Stock Reimbursements

115

 

 

 

ITEM 9.

THE OFFER AND LISTING

117

 

 

 

 

Share Price History

117

 

 

 

 

Trading On The Mexican Stock Exchange

117

 

 

 

ITEM 10.

ADDITIONAL INFORMATION BYLAWS

118

 

 

 

 

Material Contracts

130

 

 

 

 

Exchange Controls

130

 

 

 

 

Taxation

130

 

 

 

 

Documents On Display

133

 

 

 

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

133

 

 

 

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

133

 

 

 

ITEM 12A.

DEBT SECURITIES

133

 

 

 

ITEM 12B.

WARRANTS AND RIGHTS

133

 

 

 

ITEM 12C.

OTHER SECURITIES

133

 

 

 

ITEM 12D.

AMERICAN DEPOSITARY SHARES

133

 

i



Table of Contents

 

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

135

 

 

 

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

135

 

 

 

ITEM 15.

CONTROLS AND PROCEDURES

135

 

 

 

ITEM 16.

[RESERVED]

136

 

 

 

ITEM 16A.

AUDIT COMMITTEE’S FINANCIAL EXPERT

136

 

 

 

ITEM 16B.

CODE OF ETHICS

137

 

 

 

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT AND NON-AUDIT FEES

137

 

 

 

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

137

 

 

 

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

137

 

 

 

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

138

 

 

 

ITEM 16G.

CORPORATE GOVERNANCE

138

 

 

 

ITEM 16H.

MINE SAFETY DISCLOSURES

141

 

 

 

ITEM 17.

FINANCIAL STATEMENTS

141

 

 

 

ITEM 18.

FINANCIAL STATEMENTS

141

 

 

 

ITEM 19.

EXHIBITS

142

 

ii


 


Table of Contents

 

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 the IASB.  We publish our consolidated financial statements in thousands of Mexican pesos.

 

References in this annual report on Form 20-F to “dollars,” “U.S. dollars” or “U.S.$” are to the lawful currency of the United States.  References in this annual report on Form 20-F to “pesos” or “Ps.” are to the lawful currency of Mexico.  This Form 20-F contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader.  These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated.  Unless otherwise indicated, U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps. 17.3398 to U.S.$ 1.00, the FIX exchange rate as reported by the Mexican Central Bank (Banco de México) on December 31, 2015.

 

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 for the year (which we categorize as aeronautical and non-aeronautical revenues) for ratios or comparative calculations.  Both of these categories of revenues are dependent, either directly or indirectly, on passenger traffic, while revenues from construction services under IFRS Interpretations Committee (“IFRIC”) 12, “Service Concession Arrangements,” are not dependent upon passenger traffic, but from the level of capital expenditures carried out at each airport.  Information reported using only revenues that generated cash inflows may be more useful for readers of this annual report because those revenues are driven by the key elements of our business:  passenger traffic and our maximum tariffs.  The use of aeronautical and non-aeronautical revenues is more common in our industry, as they represent the revenues generated from our core operations, which are services provided to passengers, airlines and other third parties based on passenger traffic at our airports.  Additionally, management regularly reviews our aeronautical and non-aeronautical revenues as they provide representative information regarding our passenger traffic and cash flows, which allows us to compare such revenues over comparative periods as well as make projections about our expected future cash flows.  Finally, management reviews non-aeronautical revenues per terminal passenger excluding hotel services because hotel services are not necessarily driven by passenger traffic and therefore may not provide representative information with respect to passenger traffic.  This metric is not considered to be an IFRS metric, given its exclusion of certain revenues.  We indicate each instance in which we use only aeronautical and non-aeronautical revenues and non-aeronautical revenues excluding hotel services by indicating the category of revenues used.  The following tables present a reconciliation of our aeronautical and non-aeronautical revenues to our total revenues per our consolidated statement of income and other comprehensive income:

 

 

 

For the Year Ended December 31, 2015

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
Percentage
of Total
Revenues

 

Construction
Revenues

 

Total
Revenues

 

 

(in thousands of pesos)

Metropolitan

 

 

 

 

 

 

 

 

 

 

 

 

Monterrey

 

Ps.

1,443,311

 

Ps.

484,111

 

Ps.

1,927,422

 

96.4%

 

Ps.

70,999

 

Ps.

1,998,421

Tourist

 

 

 

 

 

 

 

 

 

 

 

 

Acapulco

 

138,309

 

27,864

 

166,173

 

67.0%

 

81,869

 

248,042

Mazatlán

 

168,703

 

40,820

 

209,523

 

83.5%

 

41,487

 

251,010

Zihuatanejo

 

118,736

 

23,751

 

142,487

 

71.1%

 

57,943

 

200,430

 

1



Table of Contents

 

 

 

For the Year Ended December 31, 2015

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
Percentage
of Total
Revenues

 

Construction
Revenues

 

Total
Revenues

Regional

 

 

 

 

 

 

 

 

 

 

 

 

Chihuahua

 

196,033

 

40,204

 

236,237

 

98.4%

 

3,769

 

240,006

Culiacán

 

255,921

 

39,981

 

295,902

 

89.7%

 

34,058

 

329,960

Durango

 

63,186

 

9,080

 

72,266

 

96.0%

 

2,992

 

75,258

San Luis Potosí

 

99,341

 

20,482

 

119,823

 

96.3%

 

4,668

 

124,491

Tampico

 

144,178

 

22,810

 

166,988

 

94.6%

 

9,589

 

176,577

Torreón

 

110,480

 

18,191

 

128,671

 

89.7%

 

14,796

 

143,467

Zacatecas

 

66,957

 

9,304

 

76,261

 

88.1%

 

10,294

 

86,555

Border

 

 

 

 

 

 

 

 

 

 

 

 

Ciudad Juárez

 

146,201

 

29,225

 

175,426

 

94.9%

 

9,512

 

184,938

Reynosa

 

95,742

 

12,557

 

108,299

 

94.7%

 

6,012

 

114,311

Terminal 2 NH Hotel

 

 

212,488

 

212,488

 

100.0%

 

 

212,488

Hilton Garden Inn Hotel

 

 

16,882

 

16,882

 

100.0%

 

 

16,882

Other(1)

 

 

3,639,434

 

3,639,434

 

100.0%

 

 

3,639,434

Total

 

3,047,098

 

4,647,184

 

7,694,282

 

95.7%

 

347,988

 

8,042,270

Eliminations(2)

 

(13,968)

 

(3,535,643)

 

(3,549,611)

 

N/A

 

 

(3,549,611)

Total Revenues

 

Ps.

3,033,130

 

Ps.

1,111,541

 

Ps.

4,144,671

 

92.3%

 

Ps.

347,988

 

Ps.

4,492,659

 

(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. 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.

 

 

 

For the Year Ended December 31, 2014

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
Percentage
of Total
Revenues

 

Construction
Revenues

 

Total
Revenues

 

 

(in thousands of pesos)

Metropolitan

 

 

 

 

 

 

 

 

 

 

 

 

Monterrey

 

Ps.

1,167,807

 

Ps.

360,228

 

Ps.

1,528,035

 

97.7%

 

Ps.

36,618

 

Ps.

1,564,653

Tourist

 

 

 

 

 

 

 

 

 

 

 

 

Acapulco

 

117,573

 

22,779

 

140,352

 

74.4%

 

48,313

 

188,665

Mazatlán

 

148,781

 

37,002

 

185,783

 

73.6%

 

66,475

 

252,258

Zihuatanejo

 

102,780

 

19,990

 

122,770

 

89.4%

 

14,504

 

137,274

Regional

 

 

 

 

 

 

 

 

 

 

 

 

Chihuahua

 

162,469

 

34,792

 

197,261

 

92.6%

 

15,719

 

212,980

Culiacán

 

223,423

 

35,022

 

258,445

 

88.3%

 

34,097

 

292,542

Durango

 

48,937

 

7,784

 

56,721

 

80.7%

 

13,598

 

70,319

San Luis Potosí

 

84,498

 

17,508

 

102,006

 

87.4%

 

14,772

 

116,778

Tampico

 

124,312

 

18,183

 

142,495

 

91.7%

 

12,981

 

155,476

Torreón

 

98,985

 

15,671

 

114,656

 

90.2%

 

12,444

 

127,100

Zacatecas

 

56,872

 

7,535

 

64,407

 

82.1%

 

14,036

 

78,443

Border

 

 

 

 

 

 

 

 

 

 

 

 

Ciudad Juárez

 

124,252

 

24,784

 

149,036

 

91.5%

 

13,782

 

162,818

Reynosa

 

85,018

 

10,988

 

96,006

 

90.6%

 

9,988

 

105,994

Terminal 2 NH Hotel

 

 

195,742

 

195,742

 

100.0%

 

 

195,742

Other(1)

 

 

2,441,636

 

2,441,636

 

100.0%

 

 

2,441,636

Total

 

2,545,707

 

3,249,644

 

5,795,351

 

95.0%

 

307,327

 

6,102,678

Eliminations(2)

 

(13,041)

 

(2,359,950)

 

(2,372,991)

 

N/A

 

 

(2,372,991)

 

2



Table of Contents

 

 

 

For the Year Ended December 31, 2014

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
Percentage
of Total
Revenues

 

Construction
Revenues

 

Total
Revenues

 

 

(in thousands of pesos)

Total Revenues

 

Ps.

2,532,666

 

Ps.

889,694

 

Ps.

3,422,360

 

91.8%

 

Ps.

307,327

 

Ps.

3,729,687

 

(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. 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.

 

 

 

For the Year Ended December 31, 2013

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
Percentage
of Total
Revenues

 

Construction
Revenues

 

Total
Revenues

 

 

(in thousands of pesos)

Metropolitan

 

 

 

 

 

 

 

 

 

 

 

 

Monterrey

 

Ps.

1,046,621

 

Ps.

320,774

 

Ps.

1,367,395

 

94.8%

 

Ps.

74,722

 

Ps.

1,442,117

Tourist

 

 

 

 

 

 

 

 

 

 

 

 

Acapulco

 

108,420

 

20,266

 

128,686

 

74.6%

 

43,861

 

172,547

Mazatlán

 

136,063

 

34,719

 

170,782

 

92.3%

 

14,173

 

184,955

Zihuatanejo

 

91,203

 

17,843

 

109,046

 

81.7%

 

24,348

 

133,394

Regional

 

 

 

 

 

 

 

 

 

 

 

 

Chihuahua

 

148,028

 

30,461

 

178,489

 

95.1%

 

9,127

 

187,616

Culiacán

 

211,588

 

32,504

 

244,092

 

93.0%

 

18,294

 

262,386

Durango

 

44,341

 

7,144

 

51,485

 

69.0%

 

23,149

 

74,634

San Luis Potosí

 

65,573

 

14,541

 

80,114

 

52.0%

 

73,874

 

153,988

Tampico

 

108,330

 

15,504

 

123,834

 

95.3%

 

6,116

 

129,950

Torreón

 

87,321

 

14,114

 

101,435

 

89.5%

 

11,887

 

113,322

Zacatecas

 

51,282

 

7,139

 

58,421

 

69.0%

 

26,264

 

84,685

Border

 

 

 

 

 

 

 

 

 

 

 

 

Ciudad Juárez

 

112,707

 

22,460

 

135,167

 

93.7%

 

9,078

 

144,245

Reynosa

 

69,919

 

9,425

 

79,344

 

81.7%

 

17,795

 

97,139

Terminal 2 NH Hotel

 

 

176,510

 

176,510

 

100.0%

 

 

176,510

Other(1)

 

 

2,113,785

 

2,113,785

 

100.0%

 

 

2,113,785

Total

 

2,281,396

 

2,837,189

 

5,118,585

 

93.6%

 

352,688

 

5,471,273

Eliminations(2)

 

(12,527)

 

(2,040,688)

 

(2,053,215)

 

N/A

 

 

(2,053,215)

Total Revenues

 

Ps.

2,268,869

 

Ps.

796,501

 

Ps.

3,065,370

 

89.7%

 

Ps.

352,688

 

Ps.

3,418,058

 

(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. 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.

 

3



Table of Contents

 

 

 

For the Year Ended December 31, 2012

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
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

Terminal 2 NH 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., Holding Consorcio Grupo Hotelero T2, 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.

 

 

 

For the Year Ended December 31, 2011

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
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

 

12,587

 

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

 

4



Table of Contents

 

 

 

For the Year Ended December 31, 2011

 

 

Aeronautical
Revenues

 

Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues

 

Total
Aeronautical
and Non-
Aeronautical
Revenues
as a
Percentage
of Total
Revenues

 

Construction
Revenues

 

Total
Revenues

 

 

(in thousands of pesos)

Terminal 2 NH 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. 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.

 

 

 

For the Year Ended December 31,

 

 

 

2011

 

2012

 

2013

 

2014

 

2015

 

 

 

(in thousands of pesos, except per share and operating data)

 

(in thousands
of dollars)
(1)

 

Statements of Income and Other Comprehensive Income data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Aeronautical services(2)

 

1,870,177

 

2,130,663

 

2,268,869

 

2,532,666

 

3,033,130

 

174,923

 

Non-aeronautical services(3)

 

588,671

 

688,957

 

796,501

 

889,694

 

1,111,541

 

64,103

 

Construction services

 

330,863

 

321,718

 

352,688

 

307,327

 

347,988

 

20,069

 

Total revenues

 

2,789,711

 

3,141,338

 

3,418,058

 

3,729,687

 

4,492,659

 

259,095

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs of services, excluding depreciation and amortization

 

603,900

 

656,217

 

725,329

 

772,946

 

836,133

 

48,220

 

Major maintenance provision

 

165,683

 

164,208

 

263,167

 

179,932

 

174,293

 

10,052

 

Cost of construction

 

330,863

 

321,718

 

352,688

 

307,327

 

347,988

 

20,069

 

Administrative expenses

 

434,531

 

457,749

 

501,233

 

536,034

 

562,055

 

32,414

 

Right to use airport facilities(4)

 

115,979

 

137,028

 

148,159

 

171,670

 

209,771

 

12,098

 

Technical assistance fees(5)

 

55,150

 

67,365

 

66,643

 

82,461

 

97,818

 

5,641

 

Depreciation and amortization(6)

 

165,088

 

186,803

 

201,226

 

223,982

 

238,809

 

13,772

 

Other income, net

 

(751)

 

(9,924)

 

(49,782)

 

(13,654)

 

(10,763)

 

(621)

 

Total operating costs and expenses

 

1,870,443

 

1,981,164

 

2,208,663

 

2,260,698

 

2,456,104

 

141,645

 

Operating income

 

919,268

 

1,160,174

 

1,209,395

 

1,468,989

 

2,036,555

 

117,450

 

Interest expense

 

(98,431)

 

(103,846)

 

(209,359)

 

(264,368)

 

(334,764)

 

(19,306)

 

Interest income

 

16,079

 

27,764

 

72,650

 

77,147

 

80,740

 

4,656

 

Exchange (loss) gain, net

 

(38,766)

 

23,168

 

(6,198)

 

(22,463)

 

(33,784)

 

(1,948)

 

Income before income taxes

 

798,150

 

1,107,260

 

1,066,488

 

1,259,305

 

1,748,747

 

100,852

 

Income tax (benefit) expense

 

182,070

 

288,172

 

(134,876)

 

232,345

 

512,110

 

29,534

 

Consolidated net income for the year

 

616,080

 

819,088

 

1,201,364

 

1,026,960

 

1,236,637

 

71,318

 

Items that will not be subsequently reclassified to income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Actuarial losses on labor obligations

 

0

 

(11,313)

 

(2,851)

 

437

 

(1,286)

 

(74)

 

Income tax relating to items that will not be subsequently reclassified to profit or loss

 

0

 

3,390

 

843

 

(131)

 

386

 

22

 

Total comprehensive income for the year

 

616,080

 

811,165

 

1,199,356

 

1,027,266

 

1,235,737

 

71,266

 

Consolidated net income attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Controlling interest

 

615,823

 

818,121

 

1,199,636

 

1,024,694

 

1,233,772

 

71,153

 

Non-controlling interest

 

257

 

967

 

1,728

 

2,266

 

2,865

 

165

 

Consolidated comprehensive income attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Controlling interest

 

615,823

 

810,198

 

1,197,628

 

1,025,000

 

1,232,872

 

71,101

 

Non-controlling interest

 

257

 

967

 

1,728

 

2,266

 

2,865

 

165

 

Basic and diluted earnings per share of controlling interest(7)

 

1.5433

 

2.0501

 

3.0062

 

2.5844

 

3.1328

 

0.1807

 

 

5



Table of Contents

 

 

 

For the Year Ended December 31,

 

 

 

2011

 

2012

 

2013

 

2014

 

2015

 

 

 

(in thousands of pesos, except per share and operating data)

 

(in thousands
of dollars)
(1)

 

Basic and diluted earnings per ADS(7)

 

12.3464

 

16.4008

 

24.0496

 

20.6752

 

25.0623

 

1.4454

 

Dividend or reimbursement of capital per share(8)

 

1.0000

 

1.2500

 

3.0000

 

3.0000

 

3.0000

 

0.1730

 

Other operating data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total terminal passengers
(thousands of passengers)
(9)

 

11,773

 

12,594

 

13,292

 

14,695

 

16,922

 

N/A

 

Total air traffic movements
(thousands of movements)

 

336

 

332

 

321

 

337

 

345

 

N/A

 

Aeronautical and non-aeronautical revenues per terminal passenger(10)

 

209

 

224

 

231

 

233

 

245

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31,

 

 

 

2011

 

2012

 

2013

 

2014

 

2015

 

 

 

(in thousands of pesos)

 

(in thousands
of dollars)
(1)

 

Statement of Financial Position data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

523,634

 

1,152,433

 

1,534,006

 

2,808,149

 

2,605,196

 

150,244

 

Other investments held to maturity

 

 

 

 

 

60,445

 

3,486

 

Total current assets

 

1,163,381

 

1,696,415

 

2,276,938

 

3,404,343

 

3,216,774

 

185,514

 

Property, leasehold improvements and equipment, net

 

2,118,450

 

2,150,327

 

2,165,766

 

2,284,314

 

2,370,975

 

136,736

 

Investment in airport concessions

 

5,769,688

 

5,942,989

 

6,092,046

 

6,180,277

 

6,348,605

 

366,129

 

Total assets

 

9,295,154

 

10,010,410

 

11,011,453

 

12,417,880

 

12,510,336

 

721,481

 

Current liabilities

 

824,945

 

1,216,881

 

956,989

 

830,680

 

968,782

 

55,870

 

Total liabilities

 

3,210,653

 

3,594,454

 

4,614,059

 

6,301,277

 

6,559,809

 

378,309

 

Total shareholders’ equity

 

6,084,501

 

6,415,956

 

6,397,394

 

6,116,603

 

5,950,527

 

343,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended December 31,

 

 

 

2011

 

2012

 

2013

 

2014

 

2015

 

 

 

(in thousands of pesos)

 

(in thousands
of dollars)
(1)

 

Statement of Cash Flows data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flows from operating activities

 

749,144

 

1,260,413

 

1,005,246

 

1,610,772

 

2,069,331

 

119,340

 

Net cash flows used in investing activities

 

(454,475)

 

(393,884)

 

(270,880)

 

(371,844)

 

(493,235)

 

(28,445)

 

Net cash flows (used in) from financing activities

 

(83,873)

 

(237,730)

 

(352,793)

 

35,215

 

(1,779,049)

 

(102,599)

 

Increase in cash and cash equivalents

 

210,796

 

628,799

 

381,573

 

1,274,143

 

(202,953)

 

(11,704)

 

 

(1)

Translated into dollars at the rate of Ps. 17.3398 per U.S.$ 1.00, the FIX exchange rate as reported by the Mexican Central Bank on December 31, 2015.  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:  (i) revenues from commercial activities, such as, car parking charges, advertising, leasing of commercial space to tenants, food and beverage services, car rentals and retail; (ii) revenues from diversification activities, such as hotel services, revenues from OMA Carga and real estate services; and (iii) revenues from complementary activities, such as revenues from our checked baggage-screening services, among other sources of revenues.  Pursuant to our concessions and to the Mexican Airport Law (Ley de Aeropuertos) and the regulations thereunder, parking services are currently excluded from aeronautical services under our maximum rates, although the Mexican Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes) could decide to regulate such rates, and such rates may be regulated by other authorities.

 

 

(4)

Each of our subsidiary concession holders is required to pay a concession tax to the Mexican government under the Mexican Federal Duties Law (Ley Federal de Derechos) for the use of public domain assets pursuant to the terms of its concession.  The concession tax is currently equal to 5% of each concession holder’s gross annual revenues.

 

 

(5)

We pay Servicios de Tecnología Aeroportuaria, S.A. de C.V. (“SETA”) a technical assistance fee under the technical assistance agreement entered into with SETA providing for management and consulting services (the “Technical Assistance Agreement”), entered into in connection with SETA’s purchase of its Series BB shares.  This fee is described in “Item 7. Major Shareholders and Related-Party Transactions—Related-Party Transactions—Arrangements with SETA.”

 

 

(6)

Reflects depreciation of fixed assets and amortization of airport concessions and rights to use airport facilities.

 

 

(7)

Based on net income attributable to controlling interest for each year and on 399,039,231 weighted average common shares in 2011, 399,060,153 weighted average common shares in 2012, 399,052,350 weighted average common shares in 2013, 396,493,090 weighted average common shares in 2014 and 393,826,266 weighted average common shares in 2015.  Earnings per ADS are based on the ratio of eight Series B shares per ADS.

 

 

(8)

Declared dividends per share for the period based on 400,000,000 shares.  Includes reimbursements of capital per share.

 

 

(9)

Arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft).  Excludes transit passengers (passengers who arrive at our airports but generally depart without changing aircraft).

 

 

(10)

Aeronautical plus non-aeronautical revenues divided by terminal passengers for the period.  Expressed in pesos (not thousands of pesos).

 

6



Table of Contents

 

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.

 

For the Year Ended December 31,

 

High

 

Low

 

Period End

 

Average(1)

 

 

 

 

 

 

 

 

 

 

 

2011

 

14.25

 

11.51

 

13.95

 

12.43

 

2012

 

14.37

 

12.63

 

12.96

 

13.15

 

2013

 

13.43

 

11.98

 

13.10

 

12.76

 

2014

 

14.79

 

12.85

 

14.75

 

13.30

 

2015

 

17.36

 

14.56

 

17.20

 

15.87

 

October

 

16.89

 

16.38

 

16.53

 

16.57

 

November

 

16.85

 

16.37

 

16.60

 

16.63

 

December

 

17.36

 

16.53

 

17.20

 

17.07

 

2016

 

 

 

 

 

 

 

 

 

January

 

18.59

 

17.36

 

18.21

 

18.06

 

February

 

19.19

 

18.02

 

18.07

 

18.43

 

March

 

17.94

 

17.21

 

17.21

 

17.63

 

April (through April 15)

 

17.91

 

17.32

 

17.56

 

17.58

 

 

(1)

Average of month-end rates or daily rates, as applicable.

 

Source:  U.S. Federal Reserve noon buying rate.

 

Except for the period from September through December 1982, during a liquidity crisis, the Mexican Central Bank has consistently made foreign currency available to Mexican private-sector entities (such as us) to meet their foreign currency obligations.  Nevertheless, in the event of renewed shortages of foreign currency, foreign currency may not continue to be available to private-sector companies, and we may not be able to purchase foreign currency that we need to service foreign currency obligations or to import goods 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, 2015, the U.S. Federal Reserve noon buying rate was Ps. 17.20 per U.S.$ 1.00.  On April 15, 2016, the U.S. Federal Reserve noon buying rate was Ps. 17.56 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.”

 

7



Table of Contents

 

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 2013, 2014 and 2015, approximately 66.4%, 67.9% and 67.5%, respectively, of our total revenues, and approximately 74.0%, 74.0% and 73.2%, respectively, of the sum of our aeronautical and non-aeronautical revenues were earned from aeronautical 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, this price regulation system may be amended in the future in a manner that would cause additional sources of our revenues to be regulated.

 

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 may encounter difficulties in complying with these laws, regulations and instruments.

 

Although our master development programs and maximum rates through 2020 have been set, we cannot predict what our master development program for 2021 and following years will establish.  When determining our maximum rates for the next five year period (from 2021 to 2025), the Ministry of Communications and Transportation may be solicited by different entities (for example, the Mexican Federal Competition Commission (Comisión Federal de Competencia Económica, or the “Competition Commission”) and the carriers operating at our airports) to modify our maximum rates, thus reducing our profitability.  Therefore, the laws and regulations governing our business, including the rate-setting process and the Mexican Airport Law, may 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.

 

Additionally, the Ministry of Communications and Transportation has announced that it intends to establish a new, independent regulatory agency, the Federal Agency of Civil Aviation, that is expected to serve a similar role as the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil) of establishing, coordinating, overseeing and controlling international and national air transportation, as well as the airports, complementary services and generally all activities related to civil aviation.  We cannot predict whether or when this new agency will be organized, the scope of its authority, the actions that it will take in the future or the effect of any such actions on our business.

 

On February 20, 2014, a bill of the new Federal Economic Competition Law (Ley Federal de Competencia Económica) was submitted to Mexico’s Congress in furtherance and as a result of certain amendments to Mexico’s Constitution passed in 2013.  The bill was enacted and published on May 23, 2014.  The new law grants broader powers to the Competition Commission, including the abilities to regulate essential facilities, order the divestment of assets and eliminate barriers to competition in order to promote access to the market.  The new law also sets forth important changes in connection with mergers and anti-competitive behavior, increases liabilities that may be incurred for violations of the law, increases the amount of fines that may be imposed for violations of the law and limits the availability of legal defenses against the application of the law.  The Mexican Competition Commission may therefore determine that the services that we provide at our airports are essential and require us to implement significant changes to our business operations and thus generate a significant impact on our results of operations.

 

Our business is dependent upon international regulations that affect Mexican airlines.

 

The U.S. 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 an ICAO Category 1 rating to an ICAO Category 2 rating, as a result of the FAA’s visit to the Mexican Bureau of Civil Aviation between January and July 2010.  The

 

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downgrade was attributable to an insufficient number of flight inspectors and administrative and organizational elements in the Mexican Bureau of Civil Aviation.

 

The consequences of the downgrade from a Category 1 rating to a Category 2 rating were the suspension of the right to operate code-shared flights and 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 would not be flown by any Mexican carrier with a Category 2 rating.

 

Mexico regained its Category 1 safety rating on December 1, 2010; however, Mexico may be downgraded in the future, and 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.  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.”  On December 21, 2015, the Ministry of Communications and Transportation determined, based on the terms of our concessions, the maximum rates for our airports from January 1, 2016 through December 31, 2020.  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 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, such a request may not be granted in the future.  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.

 

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 2015, our revenues subject to maximum rate regulation represented approximately 99.4% of the amounts we were entitled to earn under the maximum rates for all of our airports.  We may not 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

 

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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, 2013 to December 31, 2014, the peso depreciated by approximately 12.6%, from Ps. 13.10 per U.S.$ 1.00 on December 31, 2013, to Ps. 14.75 per U.S.$ 1.00 on December 31, 2014.  From December 31, 2014 to December 31, 2015, the peso depreciated by approximately 16.6%, from Ps. 14.75 per U.S.$ 1.00 on December 31, 2014, to Ps. 17.20 per U.S.$ 1.00 on December 31, 2015.  On April 15, 2016, the exchange rate was Ps. 17.56 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.  We may not 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.

 

On February 5, 2014, the Mexican government announced in the Official Gazette of the Federation that the Ministry of Communications and Transportation granted to Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V., a concession for 20 years to construct, operate and exploit a civil-aviation airport in the municipality of Bocoyna, Chihuahua, located 250 kilometers (144 miles) from the city of Chihuahua, within an area of 95.5 hectares (0.4 square miles).  The government of the state of Chihuahua owns 98% of the capital stock of Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V.  The Bocoyna airport is expected to operate daily public and private domestic flights.  The airport has an ICAO Category 3C rating and could present competition to our airport located in the municipality of Chihuahua, which has a higher ICAO Category 4D rating and is located 18 kilometers (11.2 miles) from the city of Chihuahua.  The Ministry of Communications and Transportation has the capacity to upgrade the category of the airport depending on improvements to infrastructure made by the concessionaire or could downgrade the category if the concessionaire does not maintain adequate conditions in the airport.  To date, the airport has not announced the commencement date of operations.

 

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, the Ministry of Communications and Transportation may authorize such an amendment and commercial aviation flights may operate from Aeropuerto del Norte in the future.

 

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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 may not participate in such a process, or we may not 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.  These 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, in the U.S. and global economies.  These conditions also limited the availability of credit and increased financial costs for companies around the world, including in Mexico and the United States.  Although economic conditions improved starting in 2010 and the availability of credit has increased while interest rates remained stable, another recession could significantly affect our ability to access credit to finance our future projects, therefore adversely affecting our business.

 

During the second half of 2011, global 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.  In 2010, the U.S. economy showed certain improvement; however, in 2011, the recovery of the U.S. economy slowed slightly, with the gross domestic product increasing at an annualized real rate of 1.7% and our international passenger traffic decreasing by 7.4%.  In 2012, the recovery of the U.S. economy improved slightly, with the gross domestic product increasing at an annualized real rate of 2.2% and our internal passenger traffic increasing by 2.3%.  Finally, in 2013, 2014 and 2015, the U.S. economy continued to improve, with the gross domestic product increasing at an annualized rate of 2.2%, 2.4% and 2.4%, respectively, in real terms and our international passenger traffic increasing 0.4%, 9.3% and 18.4%, respectively.  The Congressional Budget Office forecasts that the real GDP will grow by 2.7% in 2016.  Our business is particularly dependent on the condition of the U.S. economy and is particularly influenced by trends in the United States relating to leisure travel, consumer spending and international tourism.  In 2015, 82.7% of the international passengers served by our airports arrived or departed on flights originating in or departing to the United States.

 

In the event of a new economic downturn, 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 2015, exports from Mexico to the United States represented approximately 81.1% of Mexican exports, 53.1% of foreign direct investment in Mexico originated in the United States, and secondary income, which includes government and private transfers, received from the United States were approximately U.S.$ 13.9 billion, according to the U.S. Bureau of Economic Analysis.

 

Recent international events such as decreases in oil prices and the slower growth in the Chinese economy have led to volatility in the international markets and adversely affected the Mexican economy, which has been forced to cut public expenses, as oil output is one of the main source of revenues in Mexico.  In February 2016, the Mexican government announced a cut of Ps. 132.3 billion to the 2016 federal annual budget, equivalent to 0.7% of the Mexican GDP.  In addition, the persistent weakness in the European banking system could have an adverse impact on the global economy and the availability of credit, which could in turn have an adverse impact on consumer spending and the Mexican economy in general.

 

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 and/or in the Mexican economy would also adversely affect our business, results of operations, prospects and financial condition.  See also “—Risks Related to Mexico—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 globally, 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 could cause airlines to increase tariffs and have a negative impact on traffic as a result of increased fuel costs), changes in regulatory policies applicable to the aviation industry and an increase or decrease in Mexican airlines’ fleets.

 

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Any decreases in passenger and cargo traffic volumes and the number of air traffic movements to or from our airports as a result of these factors could adversely affect our business, results of operations, prospects and financial condition.

 

Our business is highly dependent on the operations of Mexico City International Airport.

 

In 2013, 2014 and 2015, approximately 51.6%, 51.5% and 50.7%, respectively, of our domestic passengers flew to or from our airports via Mexico City International Airport.  As a result, our domestic traffic is highly dependent upon the operations of Mexico City International Airport.

 

In 2015, domestic passenger traffic to and from Mexico City International Airport increased 12.8% mainly as a result of an increase in flight frequencies by Volaris, Interjet and VivaAerobus.  The airport’s operations may not remain at existing levels or increase in the future.

 

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.  On May 1, 2014, the Mexican Bureau of Civil Aviation published mandatory circular CO SA-17.2/10 R3, which requires that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines.  Recent world events such as the terrorist attacks in Paris and Brussels and other attacks attributed to the Islamic State of Iraq and Syria or any other organization could lead to additional security measures taken by the FAA or the ICAO and could require us to incur in additional costs to comply with these measures.  Similarly, our airport operations and passenger volume could be negatively impacted by terrorist attacks on aircrafts, such as those which occurred with international airlines’ aircraft operating over Egypt and the Ukraine in 2015.

 

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 and our revenues.

 

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 2013, 2014 and 2015, passenger charges represented 54.2%, 55.5% and 55.6%, respectively, of our total revenues and 60.5%, 60.4% and 60.2%, respectively, of the sum of our aeronautical and non-aeronautical revenues.  Events such as the conflicts in the Middle East, recent terrorist attacks in Europe and public health crises such as the Severe Acute Respiratory Syndrome, or SARS crisis, the Influenza A(H1N1) crisis and the Ebola crisis have negatively affected in the past the frequency and pattern of air travel worldwide.

 

On February 1, 2016, the World Health Organization designated the Zika virus and its suspected complications in newborns an international public health emergency.  The U.S. Department of Health and Human Services’ Centers for Disease Control and Prevention has issued a travel advisory for people traveling to regions within the Zika virus outbreak, which include popular vacation destinations in Mexico.  These travel advisories to Mexico could negatively affect the frequency and pattern of travel to our airports.

 

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), Ebola, Zika and Chikungunya, 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.

 

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Adverse domestic events could negatively impact our operations.

 

On November 20, 2014, a peaceful demonstration in the city of Acapulco, in which demonstrators marched toward the Acapulco airport, generated minor flight delays and cancellations.  On February 24, 2015, demonstrators marched on the access road to the Acapulco airport and blocked access to the airport, which caused a number of passengers to miss their flights, though the airport continued to operate regularly.  Although the airport facilities were not materially damaged during these demonstrations, future demonstrations and riots taking place in cities where our airports are located and where they are either a potential target or in the path of such demonstrations could generate flight cancellations and the suspension of our operations and could materially adversely affect 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 April 15, 2016 (the “Travel Warning”) urges U.S. citizens to defer non-essential travel to the states of Tamaulipas, Chihuahua (except Ciudad Juarez and Chihuahua City), Coahuila (particularly along the border between Piedras Negras and Nuevo Laredo), areas of the state of Jalisco that border the states of Michoacán and Zacatecas, Sinaloa (except the city of Mazatlán), the eastern edge of Sonora, which borders the state of Chihuahua (as well as the city of Ciudad Obregón and south of the city of Navojoa), among others.  The travel warning also recommends to be aware of security when visiting these cities and other regions, such as Durango, the metropolitan area of Monterrey, northeast section of Ciudad Juárez, San Luis Potosí, the cities of Mazatlán, Zacatecas, and several states. Guerrero (including the cities of Acapulco, Ixtapa, Taxco and Zihuatanejo) remains as a place prohibited for U.S. government personnel, with the exception of trips to Ixtapa/Zihuatanejo by air, where they must exercise caution and remain in tourist areas.

 

Variations in international fuel prices could directly or indirectly adversely affect our business and results from operations.

 

Although international fuel prices, which represent a significant cost for airlines using our airports, have decreased in recent months, in the past, increased costs were among the factors leading to cancellations of routes, decreases in frequencies of flights and in some cases even contributed to filings for bankruptcy by some airlines.  Likewise, recent decreases in international fuel prices have led to budgetary cuts in Mexico, affecting economic growth and consumer spending.  Any substantial variation in fuel prices could have an adverse effect on our results of operations and financial condition.

 

We could be exposed to additional risks if we pursue business opportunities in other countries.

 

From time to time, we may consider strategic participation in airport assets located in other countries.  We may evaluate international expansion opportunities through capital investment in other concessions.  Expansion into a market outside of Mexico could require significant capital expenditures.  If we pursue an international expansion opportunity, we could face internal or external risks, including, without limitation:  (i) a lack of market experience in the relevant country, (ii) foreign exchange and economic volatility, (iii) the dedication of significant management resources to 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, including our capital structure.

 

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 Terminal 2 of Mexico City International Airport, under a lease with Mexico City International Airport that expires in 2029.  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, 2015, was Ps. 260,900 thousand.

 

In September 2014, the federal government presented the new Mexico City International Airport project, which will be built on 4,430 hectares (17.1 square miles) of land owned by the federal government located in the eastern part of the Mexico Valley.  The new airport will be built in several stages.  The first stage consists of three runways with the ability to have simultaneous operations and a capacity to transport 50 million passengers annually and is expected to start operations in 2020.  In September 2015 the Ministry of Communications and Transportation started the bidding for the first package of preliminary works for the construction of the new Mexico City International Airport.  The first tender of 21 packages is related to the construction of temporary access roads, leveling and cleaning of the terrain.  Although the Mexican government reduced the federal budget destined for this project during 2015 and 2016, the new airport is expected to start operations pursuant to its original schedule and, as a result, the current Mexico City International Airport could be closed before the expiration of our lease; therefore, we may not be able to continue operating the hotel and the commercial space, which could impact our ability to recover our investment.  In addition, under certain circumstances, the operating lease agreement with the Mexico City International Airport can be terminated by such party with partial or no compensation

 

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to us.  If the current Mexico City airport is closed, or the Mexico City International Airport terminates our operating lease agreement, we may not be able to fully recover our investment in the Terminal 2 NH Hotel.

 

The Terminal 2 NH Hotel faces the challenge of maintaining enough market participation as it continues with its operations.  The occupancy rate of the hotel may not be sufficient to recover our investment.  For the year ended December 31, 2015, annual average occupancy increased to 80.5% from 79.6% in 2014.  Additionally, total revenues amounted to Ps. 212,488 thousand, as compared to Ps. 195,742 thousand in 2014, and average rates per room were Ps. 1,968 in 2015, as compared to Ps. 1,817 in 2014.  The occupancy rate of the hotel or that the annual average rate may not continue to increase or it may 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.

 

On February 16, 2016, the United States and Cuba signed an agreement that provides for the re-establishment of scheduled air services between these countries.  As a consequence, the U.S. Department of Transportation invited U.S. carriers to apply for an allocation of the routes to provide scheduled passenger and cargo flights.  The new agreement provides U.S. carriers with the opportunity to operate up to 110 daily roundtrip flights between the U.S. and Cuba.

 

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.  Tourism levels may decrease, and therefore the number of passengers using our airports in the future may not exceed or match current levels, which could have a direct and indirect impact on our aeronautical and non-aeronautical revenues.

 

Our business is highly dependent upon revenues from seven of our airports and the Terminal 2 NH Hotel and could be adversely impacted by any condition affecting those businesses.

 

In 2015, approximately 81.7% of the sum of our aeronautical and non-aeronautical revenues, were generated from seven of our 13 airports and the Terminal 2 NH Hotel operations.  The Monterrey airport generated the most significant portion of our revenues.  The following table lists the percentage of the sum of aeronautical and non-aeronautical revenues generated at our airports, including the percentage of total revenues generated by our hotel services:

 

Airport

 

For Year Ended
December 31, 2015

 

 

 

 

 

Monterrey

 

46.5%

 

Culiacán

 

7.1%

 

Chihuahua

 

5.7%

 

Terminal 2 NH Hotel

 

5.1%

 

Mazatlán

 

5.1%

 

Ciudad Juárez

 

4.2%

 

Tampico

 

4.0%

 

Acapulco

 

4.0%

 

Six other airports, Servicios Complementarios del Centro Norte and OMA Logística, S.A. de C.V. (“OMA Logística”)

 

18.3%

 

Total

 

100.0%

 

 

As a result of the substantial contribution to our revenues from these seven airports and the operation of the Terminal 2 NH Hotel, any event or condition affecting these principal airports or the NH Hotel could have a material adverse effect on our business, results of operations, prospects and financial condition.

 

We face risks associated with our diversification activities, which could lead to our inability to recover our investment as planned.

 

We face risks associated with the nature of the diversification projects that we have developed and in which we participate as shareholders, which could impact our results of operations, prospects and financial condition.  Our NH Terminal 2 Hotel and our Hilton Garden Inn Hotel depend on passenger traffic travel to and from the Mexico City International Airport and the Monterrey airport, respectively, and any event that reduces passenger volume in these airports could adversely affect the results of operations of these hotels.  The passenger traffic volume in such airports depends on factors beyond our control, such as the attractiveness of the commercial, industrial and tourist centers that the airports serve.  Accordingly, there can be no assurance that the passenger traffic volume in such airports will increase or maintain the current level.

 

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In addition, both of the hotels that we operate and our OMA-VYNMSA industrial park could face additional competition from third parties developing similar projects in areas adjacent to the Mexico City and the Monterrey airports, which could adversely affect the profitability of our non-aeronautical businesses and our ability to recover our investments in such projects.

 

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 53.0% of our total employees as of December 31, 2015), 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 unionized employees 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 2015, Aeroméxico and its affiliates represented 28.3%, Interjet represented 17.5%, VivaAerobus represented 16.3%, and Volaris represented 12.1%.  None of our contracts with our airline customers obligate them to continue providing service from our airports and, if any of our key customers reduced their use of our airports, competing airlines may not add flights to their schedules to replace any flights no longer handled by our principal airline customers.  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.

 

In addition, Mexican law prohibits an international airline from transporting passengers from one Mexican location to another (unless the flight originated outside Mexico), which limits the number of airlines providing domestic service in Mexico.  Mexico and the United States are party to a bilateral aviation agreement that was last amended on November 21, 2014 and signed on December 18, 2015 for further approval by the Mexican Senate (as of April 15, 2016, the amendment has not been published in the Official Gazette of the Federation).  This amendment provides for the increase of services in existing routes between both nations, as well as the addition of new routes and an increase in the frequency of flights on existing routes.  The agreement also grants Mexican airlines the ability to further penetrate international markets.  This amendment will enter into force upon approval by the Mexican Senate.  This agreement may be modified in the future to provide for international airlines to operate domestic flights in our airports, but until then we expect to continue to generate a significant portion of our revenues from domestic travel from a limited number of airlines.

 

Due to increased competition, volatility in fuel prices and the general decrease in demand because of global volatility in the financial and exchange markets and economic crises, many airlines are operating in adverse conditions.  Should fuel prices increase or in the event of other adverse economic developments, one or more of our principal carriers could become insolvent, cancel routes, suspend operations or file for bankruptcy.  All such events could have a material adverse effect on our results from operations.

 

Revenues from passenger and other charges are not secured, and we may not be able to collect amounts invoiced in the event of the insolvency of one of our principal airline customers.

 

In recent years, many airlines have reported substantial losses.  In all cases, our revenues from passenger charges and other aeronautical services are secured by a performance bond or other types of guarantees; however, guarantees may not fully cover the amount owed by an airline at a certain date.  In the event of the insolvency of any of these airlines, we would not be certain of the collection of any amounts invoiced to that airline in respect of passenger charges.

 

The main domestic airlines operating at our airports have in the past refused to pay certain increases in our specific prices for regulated aeronautical services and could refuse to pay additional increases in the future.

 

From January 2002 to November 2002, several domestic airlines operating at our 13 airports—Aeroméxico, Mexicana de Aviación, Aeromar and Aeroméxico Connect—refused to pay certain increases in our airport service charges.  As part of this dispute, these airlines brought proceedings challenging the privatization of the Mexican airport sector and the methodology for calculating the maximum rate system applicable under the privatization of all of the airport groups in Mexico.

 

Subsequently, we entered into a series of agreements with the Mexican National Air Transportation Board (Cámara Nacional de Aerotransportes) and the Ministry of Communications and Transportation (most recently in January 2013, covering the period from January 1, 2013 to December 31, 2015), pursuant to which we settled the existing disputes with our principal airline customers and established specific prices for regulated aeronautical services applicable to those airlines.  Although this agreement has not been renewed as of April 15, 2016, all benefits continue to be provided on the same terms.  From time to time, we have also entered into

 

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similar arrangements with certain airlines on an individual basis.  Historically, amounts paid under these agreements have not been material, and we do not expect any current agreement or any similar future agreements with the National Air Transportation Board or any airline to have a material effect on our results of operations.

 

Although passenger traffic volume (and therefore overall revenues) may increase, any agreed incentives and/or discounts offered to airlines as a means to prevent or settle any potential dispute could reduce our aeronautical revenues per terminal passenger in the future.  In addition, should any of our principal airline customers refuse to continue to make payment to us, or should they refuse to pay increases in our charges for aeronautical services in future years, our results of operations could be adversely impacted by decreased cash flows from operations.

 

Our operations could be adversely affected due to changes in the collection of passenger charges.

 

Passenger charges are collected by the airlines and then paid to us on the basis of contracts entered into with each airline operating at our airports.  We cannot guarantee that all airlines will continue collecting the passenger charges for us.  Should one or more airlines stop collecting passenger charges for us, we would have to collect these charges directly ourselves, which would result in additional costs for us.

 

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, if any service providers were to halt operations at any of our airports, we could be required to seek a new provider of these services or to provide these services ourselves, either of which may result in increased costs and have an adverse impact on our results of operations.

 

We may be liable for property taxes as a result of claims asserted against us by certain municipalities.

 

Various municipalities have 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.  In addition, if we are required to pay for additional state or municipal rights, we could face costs, limiting our flexibility and our ability to pay dividends.

 

Future changes in applicable laws with respect to property or other 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 November 19, 2014 and March 3, 2015, proposed amendments to Article 115 of the Constitution to eliminate the exemption from the payment of property taxes for the use of public domain assets were filed before the Mexican 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 15, 2016, 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.

 

On October 27, 2015, an initiative to amend certain articles of the Mexican Airport Law was filed with the House of Deputies, in order to make a distinction between assets related to the provision of aeronautical services from assets destined to the provision of commercial services.  The proposed amendment includes the obligation to pay municipal taxes and to obtain municipal authorizations in connection with assets related to commercial activities and incorporates a new cause of revocation of concessions if the concessionaire fails to pay any taxes, including the municipal taxes that would become effective if the reform is adopted.  This initiative is being reviewed by the Transportation Commission (Comisión de Transportes) of the House of Deputies and, if approved, will be returned and submitted for approval with the House of Deputies.  As of April 15, 2016, the Transportation Commission has not

 

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issued a determination.  However, if this amendment is adopted, we would incur additional costs to pay the corresponding taxes, and our current ability to develop commercial and diversification activities would be impacted.

 

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 Official Gazette of the Federation.  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.

 

For instance, on November 19, 2013, the Apodaca municipality executed an inspection order and closed the commercial premises located in the Monterrey airport, which include a strip mall, gas station and industrial park, because they did not have multiple licenses for ground use and/or construction.  A constitutional claim (juicio de amparo) lawsuit was filed against these acts challenging this shutdown and the constitutionality of the municipal order.  The court granted a provisional suspension ordering that municipal authorities remove the barriers and enable the businesses to continue operations.  On October 14, 2014, the District Court ruled in favor of the Monterrey airport.  On November 19, 2014, the Apodaca municipality filed an appeal before the Federal Circuit Court against the judgment, which is still outstanding.

 

On February 4, 2015, the Apodaca municipality filed an appeal (recurso de revisión) with the Federal District Circuit Court to exercise its competence to hear and determine the appeal against the October 14, 2014 judgment of the District Court.  On March 6, 2015, the First Chamber of the Mexican Supreme Court decided to consider exercising its competence to hear the appeal.

 

Moreover, in February 2014, the Apodaca municipality filed a constitutional controversy lawsuit against the federal government for its approval of the Monterrey airport’s 2011-2015 master development program as well as the authorization of the construction projects, including the Hilton Garden Inn Hotel, protected under amparo.  The Mexican Supreme Court agreed to hear the constitutional controversy claim but denied the Apodaca municipality’s petition for the suspension of the challenged authorizations.  However, this challenge was decided against the Apodaca municipality denying their petition to suspend the construction projects carried out at the Monterrey airport under the master development program.

 

On February 18, 2015, the constitutional controversy claim was decided against the Apodaca municipality.  The judgment determined that the constitutional controversy claim was unfounded and declared the federal government’s authorizations to be valid.

 

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 or cause the suspension of 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 2013, the equivalent of the average rainfall over a one-year period caused the overflow of Cacahuateles and Nogales rivers and the partial cessation of operations for 14 hours at the Chihuahua airport.  Additionally, in September 2013, Hurricane Manuel struck the Pacific coast of Mexico, affecting the Acapulco and Zihuatanejo airports.  The Acapulco airport ceased operations for five days and implemented “air bridge” operations to evacuate a total of 28,724 stranded passengers and did not collect fees from

 

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the airlines or passengers during these operations.  The costs related to the air bridge and damage to the physical facilities at the Acapulco, Chihuahua and Zihuatanejo airports as a result of these storms did not have any material impact on our financial results.  At the Acapulco airport, we had Ps. 51,561 thousand in estimated damages.

 

We have insurance for the physical facilities at our airports against damage caused by natural disasters, accidents or other similar events, but we do not have insurance covering losses due to resulting business interruption.  Moreover, should losses occur, losses caused by damages to the physical facilities may exceed the pre-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.  The operation of our runways may be disrupted due to required maintenance or repairs.  In addition, our runways may require unscheduled repair or maintenance due to natural disasters, aircraft accidents and other factors that are beyond our control.  The closure of any runway for a significant period of time could have a material adverse effect on our business, results of operations, prospects and financial condition.

 

We are exposed to risk related to construction projects.

 

The building requirements under our master development programs could encounter delays or cause us to exceed our budgeted costs for such projects, which could limit our ability to expand capacity at our airports, increase our operating or capital expenditures and could adversely affect our business, results of operations, prospects and financial condition.  Such delays or budgetary overruns also could limit our ability to comply with our master development programs, which are established as a necessary requirement to our concessions.

 

In accordance with applicable labor laws, subcontractors are required to register their employees with the Mexican Social Security Institute (Instituto Mexicano del Seguro Social), and anyone employing the services of subcontractors that have failed to comply with these laws is jointly liable for the payment of social security obligations as well as any applicable penalties.  Therefore, if subcontractors providing services at our airports do not have their employees registered at the Mexican Social Security Institute, we could be held jointly liable for the payment of social security obligations that such contractors may have, as well as any applicable penalties.

 

We are exposed to certain risks inherently associated with the rental of real property.

 

We are exposed to risks generally associated with properties rented to third parties, such as a decline in rental market demand, occupancy rates or rent levels, non-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.

 

To allow the 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), including the construction of a second runway, for an aggregate price of Ps. 1,559,381 thousand (U.S.$ 121.3 million).  Improvements made to airport facilities at our expense may be recognized by the Mexican Bureau of Civil Aviation as part of the Company’s investment in the airport concession.  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 are currently reviewing various possibilities for the recovery of the remaining land with the Mexican Bureau of Civil Aviation at a cost of Ps. 695,759 thousand (amount expressed

 

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in nominal 2009 pesos), which was not recognized under the 2016–2020 master development program for the Monterrey airport.  The remaining amount of the investments may not 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.

 

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, our insurance policies may not 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.

 

According to the Mexican Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) norm NOM-SEMARNAT-059-2010, mangroves are protected species, and it is a criminal offense to remove such species.  Within the grounds of our Acapulco and Zihuatanejo airports we have extended areas with mangroves, which may limit our potential to expand such airports.

 

The Mexican National Water Commission (Comisión Nacional del Agua) has the authority to restrict water use in some of our airports due to water shortage in the north of Mexico.  The Monterrey airport is affected by these regulations that could limit its future growth of infrastructure as well as its operations.  In order to mitigate the impact of these restrictions, we signed an indefinite-term contract to get water supply for this airport from the municipal network, effective as of September 2015.  However, future restrictions may be imposed affecting this or other of our airports located in that region and their access to the water required for future growth or their operations.

 

Furthermore, the General Law on Climate Change (Ley General de Cambio Climático) was adopted and published in the Official Gazette of the Federation on June 6, 2012, which, among other objectives:  (i) regulates greenhouse gases and emissions so as to stabilize their concentrations in the atmosphere to a point where they will not increase climate change, in consideration of the goals set forth by the UN Framework Convention on Climate Change; (ii) promotes the education, research, development and technology transfer, innovation and promotion with respect to adapting to and mitigating climate change; and (iii) promotes the transition to a competitive, sustainable and low-carbon economy.

 

The regulations regarding climate change in effect or their enforcement may have a material adverse effect on our business, results of operations, prospects and financial condition.

 

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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.  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.  We completed the purchase and installation of screening equipment in all of our airports in 2015 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.  On May 1, 2014, the Mexican Bureau of Civil Aviation published mandatory circular CO SA-17.2/10 R3, which 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 detect terrorist and criminal threats have been put in place, such as an x-ray machine certified by the TSA in the bonded OMA Carga area at the Monterrey airport, or are under consideration.

 

We may be subject to risks related to the integrity of our facilities or the reduction of our cargo traffic volume.  The occurrence of such events could adversely affect our business, results of operations, prospects and financial condition.

 

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

 

Controladora de Operaciones de Infraestructura, S.A. de C.V. (“CONOISA”), and Servicios de Tecnología Aeroportuaria, S.A. de C.V. (defined above), control our management, and their interests may differ from those of other shareholders.

 

As of the date of this report, CONOISA, successor in interest to Aeroinvest, S.A. de C.V. (“Aeroinvest”) (see “Item 5. Operating and Financial Review and Prospects—Recent Developments—Aeroinvest’s Merger with CONOISA”) is the beneficial owner of 14.3% of our total capital stock.  CONOISA directly owns Series B shares representing 1.9% 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.  SETA and CONOISA are each subsidiaries of Empresas ICA, S.A.B. de C.V. (“Empresas ICA”).  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 after June 14, 2015,

 

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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, all of its special rights will remain in place.  On September 15, 2015, we, at the request of SETA, converted 9,034,000 of our Series BB shares held by SETA to Series B shares.  After this conversion, SETA’s shareholding of Series BB shares remains at 12.4%, and its special rights were not affected by this conversion.  The rights and obligations of SETA in our management are explained in “Item 7. Major Shareholders and Related-Party Transactions—Major Shareholders.”

 

The termination of the Technical Assistance Agreement would also trigger the conversion of SETA’s Series BB shares 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 was extended for a term that ends on December 31, 2020 and will be automatically extended for successive one-year periods unless any party thereto elects otherwise, so long as each of CONOISA and Aéroports de Paris Management, S.A. (“ADPM”), individually retain at least 12.75% of SETA’s capital .  For further information on the renewal of the Technical Assistance Agreement, see “Item 7. Major Shareholders and Related-Party Transactions—Related-Party Transactions—Arrangements Relating to SETA.”

 

SETA’s continuing veto rights as holder of at least 7.65% of our capital stock in the form of Series BB shares and its right to nominate, appoint and remove certain directors and officers as holder of Series BB shares, which will continue for 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.

 

The interests of SETA and CONOISA may differ from those of our other shareholders and can be contrary to the preferences and expectations of our other shareholders.  SETA and CONOISA and the officers nominated or appointed by them may not 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.  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.

 

Future sales of shares by our shareholders may depress the price of our Series B shares and ADSs.

 

On May 15, 2013, we filed a shelf registration statement on Form F-3 with the U.S. Securities and Exchange Commission (“SEC”), which permits the selling shareholder named therein, Aeroinvest (currently CONOISA), to offer, from time to time, up to 100,000,000 Series B shares, directly or in the form of ADSs.  On July 12, 2013, Aeroinvest (currently CONOISA) sold 69,000,000 shares, representing approximately 17.25% of our total capital stock.

 

During 2015, Aeroinvest (currently CONOISA) sold approximately 3.02% of outstanding Series B shares through a block trade on the Mexican Stock Exchange to a third party through Barclays Bank, PLC, and during 2016, CONOISA made additional sales of approximately 1.1% of outstanding Series B shares.  Future sales of substantial amounts of our capital stock, or the perception that such future sales may occur, may depress the price of our Series B shares and ADSs.  See “Item 7. Major Shareholders and Related-Party Transactions—Major Shareholders—Arrangements Relating to CONOISA (as Successor in Interest to Aeroinvest).”

 

In addition, a number of our Series B shares had been granted as collateral under certain financing and derivatives transactions entered into by Aeroinvest (currently CONOISA), or an affiliate, with various creditors.  During the first quarter of 2016, the creditors in such transactions either exercised their right to sell or foreclose on the shares granted as collateral. As a result, this indebtedness was repaid in full, and Aeroinvest’s (currently CONOISA’s) holding of Series B shares decreased to 1.9% of our outstanding Series B shares.  See “Item 5. Operating and Financial Review and Prospects—Recent Developments—CONOISA’s Pledges of Series B Shares.”

 

As of the date of this report, none of the Series B shares directly held by CONOISA are pledged or granted as collateral.  However, any future pledge and subsequent sale of our shares may lead to a decline in the price of our Series B shares and ADSs.  The price of our Series B shares and ADSs may not recover from any such decline in value.

 

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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 2013, 2014 and 2015, domestic terminal passengers have represented approximately 86.2%, 86.4% and 86.0%, 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.

 

In 2013, GDP increased by 1.1%, and inflation was 4.0%.  In 2014, GDP increased by 2.6%, and inflation was 4.1%.  In 2015, GDP increased by 2.5%, and inflation was 2.1%.

 

During 2015, average reference interest rates in Mexico increased by 7.2% compared to 2014.  The annualized interest rates on 28-day short-term Mexican treasury bills, or Cetes (Certificados de la Tesorería de la Federación), averaged approximately 4.2%, 4.2%, 3.8%, 3.0% and 3.0% for 2011, 2012, 2013, 2014 and 2015, 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.

 

Since the beginning of 2011, Grupo Aeroméxico, Interjet, VivaAerobus and Volaris have gradually increased the number of operations to recover the domestic market left after Grupo Mexicana entered bankruptcy proceedings in 2010 (see “Item 8. Financial Information—Legal Proceedings- Bankruptcy Proceedings of Grupo Mexicana”) and started flying with higher-capacity equipment.  As for the international market left by Grupo Mexicana, only the Zacatecas-Oakland route has not been taken over by another 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.  Similar events may occur, and the recurrence of such events may 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.

 

Changes in laws, public policies or regulations, may affect the political and economic environment in Mexico, and consequently they may contribute to economic uncertainty and to heightened volatility of the Mexican capital markets and in securities issued by Mexican companies.

 

In 2013, Mexico’s Congress passed an energy reform plan and a comprehensive tax reform plan.  Any changes in the Mexican economy or the Mexican government’s economic policies may have a negative effect on our business, financial condition and results of operations.  Political or social developments in Mexico, over which we have no control, may have an adverse effect on Mexico’s economic situation and on our business, results of operations, financial condition and ability to repay our indebtedness.  Finally, drug-related violence and crime may not be contained, which could have a material adverse effect on our business, results of operations, prospects and financial condition.

 

Depreciation of the peso relative to the U.S. dollar could adversely affect our results of operations and our financial condition.

 

Following the devaluation of the peso and the economic crisis beginning in 1994, the aggregate passenger traffic volume in our airports in 1995 (then operated by our predecessor) decreased as compared to prior years, reflecting a decrease in Mexican passenger traffic volume.  From December 31, 2013 to December 31, 2014, the peso depreciated by approximately 12.6%, from Ps. 13.10 per U.S.$ 1.00 on December 31, 2013, to Ps. 14.75 per U.S.$ 1.00 on December 31, 2014.  From December 31, 2014 to December 31, 2015, the peso depreciated by approximately 16.6%, from Ps. 14.75 per U.S.$ 1.00 on December 31, 2014, to Ps. 17.20 per U.S.$ 1.00 on December 31, 2015.  The peso continued to depreciate, reaching Ps. 17.56 per U.S.$ 1.00 on April 15, 2016.

 

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A depreciation of the peso affects our business in the following ways:  (i) international passengers and international flights pay tariffs reported in U.S. dollars, while these tariffs are generally collected in Mexican pesos up to 60 days following the date of each flight; thus, any depreciation of the Mexican peso has a positive impact on our results from operations, which are reported in Mexican pesos; and (ii) we have financial liabilities denominated in U.S. dollars; a depreciation in the Mexican peso results in higher debt balances when converted to Mexican pesos thus causing foreign exchange losses.  As of December 31, 2015, we had U.S.$ 14.2 million of liabilities denominated in U.S. dollars, representing 5.2% of our debt.

 

Moreover, the depreciation of the peso also affects 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.

 

In recent years, the Mexican government has 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 income tax, we will be required to pay the higher amounts due pursuant to any such changes, which could have a material adverse impact on our results of operations.  For example, the issuance of the Business Flat Tax (Impuesto Empresarial a Tasa Única), which was published on October 1, 2007 and repealed in 2013, adversely impacted our results of operations in each of the years from 2007 through 2013.  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.

 

On November 1, 2013, Mexico’s Congress approved several tax reforms that became effective at the beginning of 2014.  These reforms included changes to the Income Tax Law (Ley del Impuesto Sobre la Renta), Value Added Tax Law (Ley del Impuesto al Valor Agregado) and the Tax Code (Código Fiscal de la Federación).  The tax reforms also repealed the Business Flat Tax Law and the Tax on Cash Deposits Law (Ley del Impuesto a los Depósitos en Efectivo).

 

The main result of the tax reforms was the elimination of a previously recognized deferred Business Flat Tax liability and the recognition of deferred asset taxes based only on the Corporate Income Tax at a number of our airports representing Ps. 339,325 thousand.  We cannot predict the impact that future federal tax legislation reforms in Mexico may have on our financial condition and results of operations.

 

Economic 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, 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.  The market value of our securities may 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.

 

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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 SEC, with respect to that future issuance of shares, or the offering qualifies for an exemption from the registration requirements of the Securities Act of 1933, as amended.

 

At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC and any other factors that we consider important to determine whether we will file such a registration statement.

 

We may not file a registration statement with the SEC in the future to allow holders of ADSs or shares in the United States to participate in a preemptive rights offering.  In addition, under current Mexican law, sales by the 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 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.

 

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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 to SETA in a public bidding process.  Pursuant to this transaction, SETA paid the Mexican government a total of Ps. 864,055,578 (amount in nominal pesos, excluding interest) (U.S.$ 76.0 million based on the exchange rate in effect on the date of SETA’s bid) in exchange for:

 

·                 all of our Series BB shares, which, following the conversion of Series BB shares described under “Item 5. Operating and Financial Review and Prospects—Recent Developments,” currently represent 12.4% 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 (currently CONOISA), 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 exercised in September 2006); and

 

·                 the right and obligation to enter into various agreements with us and the Mexican government, including a participation agreement setting forth the rights and obligations of each of the parties involved in the privatization (including SETA) (the “Participation Agreement”), a 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:

 

·                 CONOISA, which owns 74.5% of SETA.  CONOISA is a subsidiary of Empresas ICA.  CONOISA also directly owns Series B shares representing 1.9% of our total capital stock.  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 CONOISA, 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 and mining services.  In addition, Empresas ICA is engaged in the development and marketing of real estate, the construction, maintenance and operation of highways, social infrastructure and tunnels and in the management and operation of water supply

 

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systems and solid waste disposal systems.  Empresas ICA is listed on the Mexican Stock Exchange and the New York Stock Exchange.

 

·                 ADPM, which owns 25.5% of SETA.  ADPM is a wholly-owned subsidiary of Aéroports de Paris, S.A. (“Aéroports de Paris”), a French company recognized as a leading European airport group.  Aéroports de Paris was previously the direct owner of the 25.5% participation in SETA until August 2006 when it transferred its participation in SETA to ADPM.  For more than 40 years, Aéroports de Paris has operated the Charles de Gaulle and Orly airports in France, managing 95.4 million passengers in 2015.  Aéroports de Paris is listed on the Eurolist Market of Euronext Paris S.A.

 

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 2015 amounted to approximately Ps. 97,818 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

 

Master Development Program

 

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, and in December 2015, the Ministry of Communications and Transportation approved the master development programs for each of our subsidiary concession holders for the 2016 to 2020 period.  These five-year master development programs will be in effect from January 1, 2016 until December 31, 2020, and we will be required to comply with them on a year-by-year basis.

 

The following table sets forth our 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

 

 

 

For the Year Ended December 31,

 

 

 

 

 

2011

 

2012

 

2013

 

2014

 

2015

 

Total
2011–2015

 

 

 

(in thousands of pesos)

 

Acapulco

 

33,679

 

65,554

 

62,983

 

127,276

 

34,714

 

324,206

 

Ciudad Juárez

 

19,587

 

40,638

 

97,339

 

21,259

 

17,265

 

196,088

 

Culiacán

 

60,098

 

60,875

 

100,333

 

78,243

 

60,487

 

360,036

 

Chihuahua

 

26,591

 

40,571

 

60,761

 

16,122

 

11,658

 

155,703

 

Durango

 

40,887

 

24,816

 

13,265

 

24,113

 

4,245

 

107,326

 

Mazatlán

 

21,764

 

31,115

 

54,470

 

113,128

 

31,603

 

252,080

 

Monterrey

 

296,690

 

99,547

 

268,235

 

272,411

 

130,006

 

1,066,889

 

Reynosa

 

36,833

 

42,827

 

38,585

 

28,034

 

6,962

 

153,241

 

San Luis Potosí

 

21,587

 

23,136

 

61,203

 

56,010

 

46,580

 

208,516

 

Tampico

 

35,537

 

51,423

 

49,833

 

19,589

 

14,886

 

171,268

 

Torreón

 

34,730

 

15,096

 

39,451

 

27,945

 

4,681

 

121,903

 

Zacatecas

 

20,130

 

43,217

 

28,988

 

11,630

 

12,653

 

116,618

 

Zihuatanejo

 

19,697

 

51,188

 

28,914

 

54,844

 

29,963

 

184,606

 

Total

 

667,810

 

590,003

 

904,360

 

850,604

 

405,703

 

3,418,480

 

 

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The following table sets forth our 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

 

 

 

For the Year Ended December 31,

 

 

 

 

 

2011

 

2012

 

2013

 

2014