UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20092012
Commission File Number: 001-32751
Grupo Aeroportuario del Pacífico, S.A.B. de C.V.
(Exact name of registrant as specified in its charter)
Pacific Airport Group | United Mexican States | |
(Translation of registrant’s name into English) | (Jurisdiction of incorporation or organization) |
Avenida Mariano Otero No. 1249-B
Torre Pacífico, Piso 6
Col. Rinconada del Bosque
44530 Guadalajara, Jalisco
Mexico
(Address of principal executive offices)
Miguel Aliaga
Investor Relations Officer
maliaga@aeropuertosgap.com.mx
Grupo Aeroportuario del Pacífico, S.A.B. de C.V.
Avenida Mariano Otero No. 1249-B
Torre Pacífico, Piso 6
Col. Rinconada del Bosque
44530 Guadalajara, Jalisco
Mexico
Telephone: + 52 (33) 38801100 ext 202
Fax: + 52 (33) 36714582
(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 | |
Series B Shares | New York Stock Exchange, Inc.* | |
American Depositary Shares (ADSs), each representing ten Series B Shares | New York Stock Exchange, Inc. |
* | Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act:None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:N/A
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Title of each class: | Number of Shares | |
Series B Shares | 476,850,000 | |
Series BB Shares | 84,150,000 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨ No x
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x
Note: Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
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).N/A
N/A
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 filerx Accelerated filer ¨Non-accelerated filer¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP IFRSx Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ¨Item 18x
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
1 | ||||||
Identity of Directors, Senior Management and Advisers | 2 | |||||
Offer Statistics and Expected Timetable | 2 | |||||
Key Information | 2 | |||||
2 | ||||||
6 | ||||||
7 | ||||||
Information on the Company | 28 | |||||
28 | ||||||
35 | ||||||
62 | ||||||
80 | ||||||
81 | ||||||
Unresolved Staff Comments | 81 | |||||
Operating and Financial Review and Prospects | 82 | |||||
Directors, Senior Management and Employees | 112 | |||||
Major Shareholders and Related Party Transactions | 120 | |||||
120 | ||||||
122 | ||||||
123 | ||||||
123 | ||||||
132 | ||||||
Item 9. | The Offer and Listing | 134 | ||||
134 | ||||||
135 | ||||||
135 | ||||||
135 | ||||||
146 | ||||||
146 | ||||||
147 | ||||||
150 |
i
Quantitative and Qualitative Disclosures About Market Risk | 150 | |||||
Description of Securities Other Than Equity Securities | 151 | |||||
Item 13. | Defaults, Dividend Arrearages and Delinquencies | 154 | ||||
Material Modifications to the Rights of Security Holders and Use of Proceeds | 154 | |||||
Controls and Procedures | 154 | |||||
156 | ||||||
Audit Committee Financial Expert | 156 | |||||
Code of Ethics | 156 | |||||
Principal Accountant Fees and Services | 157 | |||||
Exemptions from the Listing Standards for Audit Committees | 157 | |||||
Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 158 | |||||
Change in Registrant’s Certifying Accountant | 158 | |||||
158 | ||||||
163 | ||||||
163 | ||||||
163 |
ii
This annual report on Form 20-F contains forward-looking statements. We may from time to time make forward-looking statements in our reports to the Securities and Exchange Commission, or the SEC, on Forms 20-F and 6-K, in our annual reports 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 financial analysts, institutional investors, representatives of the media and others. Examples of such forward-looking statements include:
projections of revenues, operating income, net income (loss), net income (loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios,
statements of our plans or objectives,
changes in our regulatory environment,
statements about our future economic performance or that of Mexico, and
statements of assumptions underlying such statements.
Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from the projections, plans, objectives, expectations, estimates and intentions expressed in forward-looking statements. These factors, some of which are discussed abovebelow 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 eventualities related to other risks and uncertainties may cause actual results to differ materially from those expressed 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.
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 |
The following tables present a summary of our consolidated financial information for each of the periods indicated. This information should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements referred to in Item 18 hereof and included elsewhere in this document, including the notes thereto. Our audited consolidated financial statements are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our date of transition to IFRS was January 1, 2011. These consolidated annual financial statements are our first financial statements prepared in accordance with IFRS. IFRS 1—“First-time Adoption of International Financial Reporting Standards” has been applied in preparing these financial statements. A description of the effects on our financial information due to our transition from our previous generally accepted accounting principles, Mexican Financial Reporting Standards, or MFRS, (individually referred to as NIFs for their initialsIFRS is presented in Spanish), which differ in certain significant respects from accounting principles generally accepted in the United States of America, or U.S. GAAP. A reconciliation to U.S. GAAP of our net income and total shareholders’ equity is also provided in the following tables. Note 2831 to our audited consolidated financial statements provides a description of the principal differences between MFRS and U.S. GAAP as they relate to our business.
Through December 31, 2007, MFRS Bulletin B-10,Comprehensive Effects of Inflation on Financial Information, provided for recognition of certain effects of inflation on non-monetary assets and non-monetary liabilities as well as the restatement of all financial statements to constant pesos as of the date of the most recent balance sheet presented. Beginning on January 1, 2008, NIF B-10,Effects of Inflation, became effective and provides that if the cumulative inflation in Mexico measured by the Mexican Consumer Price Index (Índice Nacional de Precios al Consumidor, or NCPI) in the most recent three-year period is below 26%, we are required to cease recognizing the effects of inflation in our financial statements. Because the NCPI in each of the three-year periods ended December 31, 2008 and December 31, 2009 was below 26%, we ceased recognizing the effects of inflation in our financial statements as of January 1, 2008.
References in this annual report on Form 20-F to “dollars,” “U.S. dollars” or “U.S.$” are to the lawful currency of the United States of America. References in this annual report on Form 20-F to “pesos,” “Mexican pesos” or “Ps.” are to the lawful currency of Mexico. We publish our audited consolidated financial statements in Mexican pesos.
This annual report on Form 20-F contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps. 13.057612.9635 to U.S.$ 1.00, the noon buying rate for pesos on December 31, 2009,2012, as published by the U.S. Federal Reserve Board. On June 25, 2010April 5, 2013 the exchange rate for pesos as published by the U.S. Federal Reserve Board was Ps. 12.7012.2390 to U.S.$ 1.00.
This annual report on Form 20-F contains references to “workload units,” which are units measuring an airport’s passenger traffic volume and cargo volume. A workload unit currently is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo. When we refer to “terminal passengers” we mean the sum of all arriving and departing passengers on commercial and general aviation flights, other than transit passengers. “Transit passengers,” or “through passengers,”passengers” are those who are generally not required to change aircraft while on a multiple-stop itinerary and who generally do not disembark from their aircraft to enter the terminal building. When we refer to “total passengers,” we mean the sum of terminal passengers and transit passengers. When we refer to “commercial aviation passengers,” we mean the sum of terminal and transit passengers, excluding general aviation passengers, such as those on private, non-commercial aircraft. Country-wide data for Mexico presented herein are based on commercial aviation passengers, but we generally measure our operations based on terminal passengers.
This annual report on Form 20-F contains references to “air traffic movements”movements,” which represent the sum of all aircraft arrivals and departures of any kind at an airport.
International Financial Reporting Interpretation Committee 12 (IFRIC 12)Service Concession Arrangements arose from the need to provide clarification on the accounting treatment to be followed for service concession contracts for services that are considered public in nature.
IFRIC 12 requires, subject to certain conditions, that the infrastructure of a service concession contract falling within its scope not be recognized as property, plant and equipment. It also requires that revenues obtained when the operator performs both construction or upgrade services and operating services under a single contract be recognized according to each type of service provided, based on the fair value of consideration received at the time the service is rendered. We recognize revenues and the associated costs of improvements to concession assets that we are obligated to perform at the airports as established by the Master Development Programs. Revenues represent the value of the exchange between ourselves and the government with respect to the improvements, given that we construct or provide improvements to the airports as required by the Master Development Programs, and in exchange, the government grants the Company the right to obtain benefits for services provided using those assets, which are recognized as intangible assets. We have determined that our obligations per the Master Development Programs should be considered to be a revenue-earning activity as all expenditures incurred to fulfill the Master Development Programs are included in the maximum tariff we charge our customers. Therefore we recognize the revenue and expense in profit or loss when the expenditures are performed. The cost for such additions and improvements to concession assets is based on actual costs incurred by us in the execution of the additions or improvements, considering the investment requirements in the Master Development Programs. Through a bidding process, we contract third parties to carry out such construction. The amount of revenues for these services are equal to the amount of costs incurred, as we do not obtain any profit margin for these construction services. The amounts paid are set at market value. As a result, revenues from improvements to concession assets do not have a cash impact on our results. Furthermore, they are not directly related to our passenger traffic, which is the main driver of our revenues.
In reviewing this annual report, you should take into account the fact that certain margin and ratio calculations that utilize “Total revenues” or “Total operating costs” will reflect the effects of IFRIC 12. Consequently, changes in total revenues, total operating costs, EBITDA margin, operating margin, total revenues per terminal passenger and other ratios included in this annual report, as well as other ratios potentially useful to investors, may not be comparable between periods. In those instances we have included a parenthetical notation with comparable amounts or measures. Nominal results for amounts used in calculating certain margins, such as operating income, are not affected by the adoption of IFRIC 12 and are comparable.
Furthermore, in several sections of this annual report we take into account only revenues that resulted in actual cash inflows (which we categorize as aeronautical and non-aeronautical revenues, or the sum of the two) for ratios or comparative calculations. Both of these categories of revenues are dependent, either directly or indirectly, on passenger traffic, while revenues generated from improvements to concession assets under IFRIC 12 are not dependent upon passenger traffic, but rather stem 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 stem from the key drivers of our business, passenger traffic, and our maximum tariffs. The use of aeronautical and non-aeronautical revenues is more common in our industry as they represent the revenues generated from our core operations, that being services provided to passengers, airlines and other third parties based on passenger traffic at our airports. We indicate each instance in which we use only aeronautical and non-aeronautical revenues by indicating the category of revenues used.
The summary financial and other information set forth below reflects our financial condition, results of operations and certain operating data according to IFRS for the periods indicated. The selected financial information for 2011 differs from the information we previously published in our annual report for 2011, because it is presented in accordance with IFRS.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2009 | 2011 | 2012 | 2012 | ||||||||||||||||||||||||||
(thousands of pesos)(1) | (thousands of dollars)(2) | (thousands of pesos) | (thousands of dollars) (1) | |||||||||||||||||||||||||||||||
Income statement data: | ||||||||||||||||||||||||||||||||||
MFRS: | ||||||||||||||||||||||||||||||||||
Comprehensive Income statement data: | ||||||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||
Aeronautical services(3) | Ps. | 2,281,135 | Ps. | 2,480,210 | Ps. | 2,812,869 | Ps. | 2,762,198 | Ps. | 2,537,262 | U.S.$ | 194,313 | ||||||||||||||||||||||
Non-aeronautical services(4) | 516,509 | 565,983 | 664,455 | 728,587 | 728,978 | 55,828 | ||||||||||||||||||||||||||||
Aeronautical services(2) | Ps. | 3,077,927 | Ps. | 3,365,982 | U.S.$ | 259,651 | ||||||||||||||||||||||||||||
Non-aeronautical services(3) | 824,580 | 1,008,452 | 77,791 | |||||||||||||||||||||||||||||||
Improvements to concession assets(4) | 1,036,227 | 570,233 | 43,988 | |||||||||||||||||||||||||||||||
Total revenues | 2,797,644 | 3,046,193 | 3,477,324 | 3,490,785 | 3,266,240 | 250,141 | 4,938,734 | 4,944,667 | 381,430 | |||||||||||||||||||||||||
Operating costs: | ||||||||||||||||||||||||||||||||||
Costs of services: | ||||||||||||||||||||||||||||||||||
Employee costs | 308,529 | 323,104 | 351,699 | 363,417 | 335,628 | 25,704 | 369,386 | 402,607 | 31,057 | |||||||||||||||||||||||||
Maintenance | 131,581 | 127,430 | 142,361 | 165,604 | 179,406 | 13,740 | 179,455 | 200,022 | 15,430 | |||||||||||||||||||||||||
Safety, security & insurance | 91,891 | 102,728 | 106,251 | 110,950 | 110,666 | 8,475 | 131,168 | 159,379 | 12,294 | |||||||||||||||||||||||||
Utilities | 72,331 | 85,397 | 90,307 | 113,078 | 91,267 | 6,990 | 122,095 | 139,479 | 10,759 | |||||||||||||||||||||||||
Other | 98,231 | 121,088 | 148,501 | 199,680 | 152,348 | 11,667 | 184,834 | 158,515 | 12,228 | |||||||||||||||||||||||||
Total costs of services | 702,563 | 759,747 | 839,119 | 952,729 | 869,315 | 66,575 | 986,938 | 1,060,002 | 81,768 | |||||||||||||||||||||||||
Technical assistance fees(5) | 99,718 | 109,277 | 125,857 | 118,226 | 111,721 | 8,556 | 136,191 | 155,072 | 11,962 | |||||||||||||||||||||||||
Concession taxes(6) | 138,944 | 151,333 | 172,846 | 173,533 | 162,507 | 12,445 | 193,802 | 217,295 | 16,762 | |||||||||||||||||||||||||
Depreciation and amortization: | ||||||||||||||||||||||||||||||||||
Depreciation(7) | 46,498 | 94,050 | 81,299 | 87,180 | 82,455 | 6,315 | 110,314 | 151,176 | 12,570 | |||||||||||||||||||||||||
Amortization(8) | 619,778 | 650,087 | 672,798 | 711,071 | 746,380 | 57,161 | 632,655 | 676,054 | 51,243 | |||||||||||||||||||||||||
Total depreciation and amortization | 666,276 | 744,137 | 754,097 | 798,251 | 828,835 | 63,475 | 742,969 | 827,230 | 63,813 | |||||||||||||||||||||||||
Other expense | 6,587 | 1,333 | 103 | |||||||||||||||||||||||||||||||
Cost of improvements to concession assets(4) | 1,036,227 | 570,233 | 43,988 | |||||||||||||||||||||||||||||||
Total operating costs | 1,607,500 | 1,764,494 | 1,891,919 | 2,042,739 | 1,972,378 | 151,052 | 3,102,714 | 2,831,165 | 218,395 | |||||||||||||||||||||||||
Income from operations | 1,190,143 | 1,281,699 | 1,585,405 | 1,448,046 | 1,293,862 | 99,089 | 1,836,020 | 2,113,502 | 163,035 | |||||||||||||||||||||||||
Net comprehensive financing income | 12,484 | 30,189 | 97,343 | 214,878 | 58,209 | 4,458 | ||||||||||||||||||||||||||||
Other income (expense) | (1,602 | ) | 245 | (2,352 | ) | 7,543 | (11,710 | ) | (897 | ) | ||||||||||||||||||||||||
Finance income | 37,318 | (14,023 | ) | (1,082 | ) | |||||||||||||||||||||||||||||
Income before income taxes | 1,201,026 | 1,312,133 | 1,680,396 | 1,670,467 | 1,340,361 | 102,650 | 1,873,338 | 2,099,479 | 161,953 | |||||||||||||||||||||||||
Income tax expense | 489,757 | 384,108 | 277,577 | 129,625 | 140,917 | 10,792 | 261,758 | 327,449 | 25,259 | |||||||||||||||||||||||||
Consolidated net income | 711,269 | 928,025 | 1,402,819 | 1,540,842 | 1,199,444 | 91,858 | 1,611,580 | 1,772,030 | 136,694 | |||||||||||||||||||||||||
Basic and diluted earnings per | Ps. | 1.2679 | Ps. | 1.6542 | Ps. | 2.5000 | Ps. | 2.7486 | Ps. | 2.1400 | U.S.$ | 0.1639 | Ps. | 2.9969 | Ps. | 3.3389 | U.S.$ | 0.2576 | ||||||||||||||||
Basic and diluted earnings per | Ps. | 12.6790 | Ps. | 16.5425 | Ps. | 25.0000 | Ps. | 27.4860 | Ps. | 21.4005 | U.S.$ | 1.6389 | Ps. | 29.9687 | Ps. | 33.3891 | U.S.$ | 2.5756 | ||||||||||||||||
Dividends per share(10) | Ps. | 2.0249 | Ps. | 1.3802 | Ps. | 2.0884 | Ps. | 2.0000 | Ps. | 2.1390 | U.S.$ | 0.1638 | Ps. | 1.9231 | Ps. | 2.1292 | U.S.$ | 0.1642 | ||||||||||||||||
Dividends per ADS(10) | Ps. | 20.2494 | Ps. | 13.8024 | Ps. | 20.8840 | Ps. | 20.0000 | Ps. | 21.3904 | U.S.$ | 1.6382 | Ps. | 19.2310 | Ps. | 21.2918 | U.S.$ | 1.6424 | ||||||||||||||||
U.S. GAAP: | ||||||||||||||||||||||||||||||||||
Revenues | Ps. | 2,766,163 | Ps. | 3,039,294 | Ps. | 3,486,430 | Ps. | 3,580,027 | Ps. | 3,231,628 | U.S.$ | 247,490 | ||||||||||||||||||||||
Income from operations | 1,540,412 | 1,595,564 | 1,975,322 | 2,017,296 | 1,627,626 | 124,650 | ||||||||||||||||||||||||||||
Consolidated net income | 959,348 | 1,141,292 | 1,756,760 | 1,961,180 | 1,476,420 | 113,070 | ||||||||||||||||||||||||||||
Basic earnings per share(9) | 1.7230 | 2.0498 | 3.1551 | 3.5248 | 2.6542 | 0.2033 | ||||||||||||||||||||||||||||
Diluted earnings per share(11) | 1.7101 | 2.0344 | 3.1315 | 3.4984 | 2.6342 | 0.2017 | ||||||||||||||||||||||||||||
Basic earnings per ADS(9) | 17.2300 | 20.4978 | 31.5510 | 35.2480 | 26.5416 | 2.0327 | ||||||||||||||||||||||||||||
Diluted earnings per ADS(11) | 17.1011 | 20.3442 | 31.3150 | 34.9840 | 26.3423 | 2.0174 | ||||||||||||||||||||||||||||
Other operating data: | ||||||||||||||||||||||||||||||||||
Total terminal passengers (thousands of passengers)(11) | 20,208 | 21,287 | 21,287 | |||||||||||||||||||||||||||||||
Total air traffic movements (thousands of movements) | 395 | 395 | 395 | |||||||||||||||||||||||||||||||
Total revenues per terminal passenger(12) | Ps. | 244 | Ps. | 232 | U.S.$ | 18 | ||||||||||||||||||||||||||||
Aeronautical and non-aeronautical services per terminal passenger | Ps. | 193 | Ps. | 205 | U.S.$ | 16 | ||||||||||||||||||||||||||||
Statement of financial position: | ||||||||||||||||||||||||||||||||||
Cash and cash equivalents | Ps. | 2,135,010 | Ps. | 1,663,683 | U.S.$ | 128,336 | ||||||||||||||||||||||||||||
Total current assets | 2,885,072 | 2,459,168 | 189,699 | |||||||||||||||||||||||||||||||
Airport concessions, net | 10,463,499 | 10,179,422 | 785,237 | |||||||||||||||||||||||||||||||
Rights to use airport facilities, net | 1,327,189 | 1,270,490 | 98,005 | |||||||||||||||||||||||||||||||
Total assets | 24,719,675 | 24,533,637 | 1,892,517 | |||||||||||||||||||||||||||||||
Current liabilities | 1,062,027 | 1,132,711 | 87,377 | |||||||||||||||||||||||||||||||
Total liabilities | 3,038,492 | 3,080,424 | 237,623 | |||||||||||||||||||||||||||||||
Total shareholders’ equity | 21,681,183 | 21,453,213 | 1,654,894 | |||||||||||||||||||||||||||||||
Other data: | ||||||||||||||||||||||||||||||||||
Net cash flows provided by operating activities | Ps. | 2,256,718 | Ps. | 2,661,274 | U.S.$ | 205,290 | ||||||||||||||||||||||||||||
Net cash flows used in investing activities | (1,253,470 | ) | (983,785 | ) | (75,889 | ) | ||||||||||||||||||||||||||||
Net cash flows used in financing activities | (1,217,045 | ) | (2,148,816 | ) | (165,759 | ) | ||||||||||||||||||||||||||||
Decrease in cash and cash equivalents | (213,797 | ) | (471,327 | ) | (36,358 | ) |
Other operating data : Total terminal passengers (thousands of passengers)(12) Total air traffic movements (thousands of movements) Total revenues per terminal passenger(13) Balance sheet data: MFRS: Cash and cash equivalents Total current assets Airport concessions, net Rights to use airport facilities, net Total assets Current liabilities Total liabilities Total shareholders’ equity(14) U.S. GAAP: Cash and cash equivalents Total current assets Assets under concession (“Rights to use airport facilities” under MFRS) Total assets Current liabilities Total liabilities Total shareholders’ equity(14) Other data: MFRS: (15) Net resources provided by operating activities Net resources used in financing activities Net resources used in investing activities Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Increase (decrease) in cash and cash equivalents U.S. GAAP:(16) Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Effect of inflation accounting Increase (decrease) in cash and cash equivalents Year ended December 31, 2005 2006 2007 2008 2009 2009 (thousands of pesos)(1) (thousands of
dollars)(2) 19,135 20,514 23,565 22,252 19,286 19,286 415 446 509 465 405 405 Ps. 146 Ps. 148 Ps. 148 Ps. 157 Ps. 169 U.S.$ 13 Ps. 845,712 Ps. 931,109 Ps. 1,426,683 Ps. 1,506,004 Ps. 1,821,150 U.S.$ 139,470 1,382,491 1,707,940 2,313,484 2,730,299 2,817,240 215,755 18,483,014 18,051,504 17,619,994 17,188,483 16,756,973 1,283,312 2,583,549 2,483,565 2,383,582 2,283,598 2,188,235 167,583 26,283,952 26,475,100 27,526,277 28,141,694 28,381,915 2,173,594 251,158 276,734 600,352 673,872 612,457 46,904 307,303 344,738 1,164,712 1,404,048 1,601,361 122,639 25,976,649 26,130,362 26,361,565 26,737,646 26,780,554 2,050,955 845,712 931,109 1,426,683 1,506,004 1,821,150 139,470 1,392,973 1,719,498 2,342,739 2,768,115 2,862,816 219,245 2,407,618 2,279,855 2,152,093 2,024,330 1,901,188 145,600 12,743,850 13,212,582 14,622,023 15,570,870 16,124,951 1,234,910 258,820 290,453 598,267 673,872 612,457 46,904 356,272 410,216 1,208,751 1,423,068 1,614,174 123,620 12,387,577 12,802,366 13,413,272 14,147,802 14,510,777 1,111,290 Ps. 1,559,611 Ps. 1,525,469 Ps. 2,020,236 N/A N/A N/A (1,135,979 ) (774,311 ) (593,045 ) N/A N/A N/A (634,210 ) (665,760 ) (931,617 ) N/A N/A N/A N/A N/A N/A Ps. 1,614,567 Ps. 2,212,375 U.S.$ 169,431 N/A N/A N/A (521,974 ) (542,114 ) (41,517 ) N/A N/A N/A (1,013,272 ) (1,002,679 ) (76,789 ) (210,578 ) 85,397 495,574 79,321 667,582 51,126 1,536,515 1,531,671 1,938,034 1,570,465 2,161,892 165,566 (593,041 ) (649,195 ) (807,504 ) (546,861 ) (925,511 ) (70,879 ) (1,135,979 ) (774,312 ) (593,045 ) (944,283 ) (921,235 ) (70,552 ) (18,073 ) (22,767 ) (41,911 ) N/A N/A N/A (210,578 ) 85,397 495,574 79,321 315,146 24,135
Translated into dollars at the rate of Ps. |
Revenues from aeronautical services principally consist of a fee for each departing passenger except diplomats, infants and |
Revenues from non-aeronautical services consist of revenues not subject to regulation under our maximum rates, which are primarily revenues from car parking charges, leasing of commercial space to tenants, advertisers, certain ground transportation providers and other miscellaneous sources of revenues. Pursuant to our operating concessions and Mexico’s Airport Law (Ley de Aeropuertos) and the regulations thereunder, car parking services are currently regulated under the Mexican Airport Law but |
are excluded from regulated services under our maximum rates, although the Ministry of Communications and Transportation (Secretaría de Comunicaciones y Transportes) could decide to regulate such rates. |
5. | We pay Aeropuertos Mexicanos del Pacífico, |
Reflects depreciation of |
Reflects amortization of concessions, improvements to concession assets, rights to use airport facilities, recovered long-term leases and parking lots. |
Based on a weighted average of 537,755,093 and 530,720,600 common shares outstanding for the years ended December 31, 2011 and 2012 respectively, due to our stock repurchase program. Earnings per ADS are based on the ratio of 10 Series B shares per ADS. |
Dollar amounts per share were |
Includes arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft). Excludes transit passengers (passengers who arrive at our airports but generally depart without changing aircraft). |
Total revenues for the period divided by terminal passengers for the period, expressed in pesos (not thousands of pesos). |
The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rate expressed in pesos per U.S. dollar. The average annual rates presented in the following table were calculated using the average of the exchange rates on the last day of each month during the relevant period. The data provided in this table is based on noon buying rates published by the Federal Reserve Bank of New York for cable transfers in Mexican pesos for the years ended December 31, 2005 through December 31, 2008. The Federal Reserve Bank of New York discontinued the publication of foreign exchange rates on December 31, 2008, and therefore, the data provided for the periods beginning January 1, 2009, are based on the rates published by the U.S. Federal Reserve Board in its H.10 Weekly Release of Foreign Exchange Rates. All amounts are stated in pesos and have not been restated in constant currency units. We make no representation that the Mexican peso amounts referred to in this annual report could have been or could be converted into U.S. dollars at any particular rate or at all.
Exchange Rate | ||||||||
Year ended December 31, | High | Low | Period End | Average(1) | ||||
2005 | 11.41 | 10.41 | 10.63 | 10.88 | ||||
2006 | 11.46 | 10.43 | 10.80 | 10.91 | ||||
2007 | 11.27 | 10.67 | 10.92 | 10.97 | ||||
2008 | 13.94 | 9.92 | 13.83 | 11.14 | ||||
2009 | 15.41 | 12.63 | 13.06 | 13.58 | ||||
December 2009 | 13.08 | 12.63 | 13.06 | 12.86 | ||||
2010: | ||||||||
January 2010 | 13.03 | 12.65 | 13.03 | 12.81 | ||||
February 2010 | 13.19 | 12.76 | 12.76 | 12.94 | ||||
March 2010 | 12.74 | 12.30 | 12.30 | 12.57 | ||||
April 2010 | 12.41 | 12.16 | 12.24 | 12.23 | ||||
May 2010 | 13.14 | 12.27 | 12.86 | 12.73 |
Exchange Rate | ||||||||||||||||
Year ended December 31, | High | Low | Period End | Average(1) | ||||||||||||
2011 | 14.25 | 11.50 | 13.95 | 12.43 | ||||||||||||
2012 | 14.37 | 12.63 | 12.96 | 13.15 | ||||||||||||
November 2012 | 13.25 | 12.92 | 12.92 | 13.06 | ||||||||||||
December 2012 | 13.01 | 12.72 | 12.96 | 12.87 | ||||||||||||
2013: | ||||||||||||||||
January 2013 | 12.96 | 12.59 | 12.73 | 12.71 | ||||||||||||
February 2013 | 12.88 | 12.63 | 12.78 | 12.72 | ||||||||||||
March 2013 | 12.80 | 12.32 | 12.32 | 12.50 | ||||||||||||
April 2013(2) | 12.34 | 12.24 | 12.24 | 12.30 |
Sources: |
(1) | Average of month-end rates or daily rates, as applicable. |
(2) | Through April 5, 2013. |
On June 25, 2010,April 5, 2013, the exchange rate for pesos was Ps. 12.7012.2390 per U.S. $1.00$ 1.00 as published by the U.S. Federal Reserve Board.
Fluctuations in the exchange rate between the peso and the U.S. dollar affect the U.S. dollar value of securities traded on the Mexican Stock Exchange (Bolsa Mexicana de Valores, S.A.B. de C.V., “BMV”), and, as a result, will likely affect the market price of our American Depositary Shares, or ADSs. Such fluctuations may also affect the U.S. dollar conversion by The Bank of New York Mellon, the depositary for our ADSs, of any cash dividends paid in pesos.
Risks Related to Our Operations
The global economic and financial crisis has adversely affected our business and may continue to do so.
The global economic and financial crisis that began in 2007 and continued through 2009 led to high volatility and lack of liquidity in the global credit and other financial markets. Such downturns in the U.S. and global economies have led to increased commercial and consumer delinquencies, lack of consumer confidence, decreased market valuations, increased market volatility, high financial risk premiums and a widespread reduction of business activity generally. These conditions have also limited the availability of credit and increased financial costs for companies around the world, including in Mexico and the United States. The volatility of the credit and capital markets can significantly affect our ability to access credit to finance our future projects, therefore adversely affecting our business.
If the global economy does not recover as expected or falls back into a recession, our business and results of operations may continue to be adversely affected.
Our revenues are highly dependent on levels of passenger and cargo traffic volumes and air traffic, which depend in part 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. Our principal source of aeronautical servicesservice revenues is passenger charges. Passenger charges are payable for each passenger (other than diplomats, infants and transit and transfer and transit passengers)passengers, if the transfer of the passenger occurs within 24 hours of the passenger’s arrival at the airport) departing from the airport terminals we operate and are collected by the airlines and paid to us. In 2007, 20082011 and 2009,2012 passenger charges represented 67.2%, 65.3%51.8% and 64.0%57.1%, respectively, of our total revenues.revenues (in 2011 and 2012, passenger charges represented 65.5% and 64.5%, respectively, of the sum of our aeronautical and non-aeronautical revenues).
Passenger and cargo traffic volumes and air traffic movements depend in part on many factors beyond our control, including economic conditions in Mexico and the United States, the political situation in Mexico and elsewhere in the world, public health crises, the attractiveness of the destinations that our airports serve relative to those of other competing airports, fluctuations in petroleum prices, disruptions of global debt markets and changes in regulatory policies applicable to the aviation industry. Any decreases in air traffic to or from our airports as a result of factors such as these could adversely affect our business, results of operations, prospects and financial condition.
A global economic and financial crisis may affect our business.
The global economic and financial crisis that began in 2007 and continued through 2009, led to high volatility and lack of liquidity in the global credit and other financial markets. The downturn in the U.S. and global economies led to increased commercial and consumer delinquencies, lack of consumer confidence, decreased market valuations, increased market volatility, high financial risk premiums and a widespread reduction of business activity generally. These conditions also limited the availability of credit and increased financial costs for companies around the world, including companies 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.
Negative economic developments in Mexico could reduce domestic passenger traffic at our airports, which would adversely affect our business and results of operations.
Although a substantial portion of our revenues is derived from foreign tourism, Mexican domestic passengers in recent years have represented approximately two-thirds of the passenger traffic volume inat our airports. In addition, all of our assets are located, and all of our operations are conducted, in Mexico. Because our revenues are largely dependent on the level of passenger traffic inat our airports, any decline in domestic traffic could have an adverse effect on our business, results of operations, prospects and financial conditions. Therefore, if inflation or interest rates increase significantly or the Mexican economy is otherwise adversely impacted, our business, financial condition and results of operations could be materially and adversely affected because, among other things, domestic demand for transportation services may decrease. For more information on the ongoing recessionpotential impact of negative economic developments in Mexico, see also “—– Risks Related to Mexico—Mexico – Adverse economic conditions in Mexico may adversely affect our financial condition or results of operations” in this section and “Item 5,Operating and Financial Review and Prospects—Recent Developments—Economic Downturn.”section.
Our business is particularly sensitive to economic conditions and other developments in the United States.
Our business is particularly sensitive to trends in the United States relating to leisure travel, consumer spending and international tourism. In 2009, 87.7%2011 and 2012, 88.5% and 88.0%, respectively, of the international terminal passengers served by our airports arrived and departed on flights originating in or departing primarily to the United States.
Thus, our business is highly dependent on the condition of the U.S. economy, and events affecting the U.S. economy may adversely affect our business, results of operations and financial condition. In 20092011, the U.S. gross domestic product decreased(“GDP”) increased at an annualized rate of 2.4%, and1.7%. In 2012, the U.S. GDP grew 2.2%. Therefore, although the U.S. economy has shown signsgrown every year since the economic crisis that lasted from the end of improvement,2007 until the middle of 2009, if the U.S. economy fails to continue improving or if it falls back into a recession, it would likely have a material adverse effect on our results of operations due to decreased passenger traffic travel to and from the United States.
Other trends and developments in the United States may also adversely impact the frequency and pattern of our international passenger traffic. For example, any development that could make travel to and from the United States less attractive to our passengers, including legislative developments related to immigration policy in the United States, could negatively affect the level of passenger traffic in our airports, which may adversely affect our business, financial condition or results of operations.
Levels of passenger and cargo traffic volumes and air traffic at our airports are highly sensitive to the impact on airlines of international petroleum prices and access to credit.
Our revenues are closely linked to passenger and cargo traffic volumes and air traffic movements at our airports, which are determined by the operating levels of airlines at our airports. Airlines’ costs are highly sensitive to the price of petroleum and their access to credit to finance their operations. Increased costs may increase ticket prices and reduce fleets, thereby decreasing flight frequencies and negatively impacting passenger and cargo traffic volumes.
International petroleum prices have experienced significant volatility in the recent past, reaching record highs in the third quarter of 2008. TheAlthough prices have remained below the highs of 2008, the price of fuel ismay be subject to further fluctuations resulting from a reduction or increase in output of petroleum, voluntary or otherwise, by oil-producing countries, other market forces, a general increase in international hostilities, or any future terrorist attacks. Increases in airlines’ costs as a result of higher petroleum prices may lead to airline bankruptcies, higher ticket prices, cancellations of routes and decreases in frequencies of flights, and may decrease demand for air travel generally, which may reduce passenger and cargo traffic at our airports.
Most airlines also depend on reliable access to credit at interest rates they can afford to finance their fleet of aircraft and make other large investments. As evidenced by the recent global recession and financial crisis, high interest rates and disruptions in the global debt markets had an adverse effect on airlines’ ability to operate their fleets, forcing many to raise ticket prices, cancel routes, decrease the frequencies of flights or forego scheduled investments. Such reductions in operations by airlines has led to lower passenger and cargo traffic volumes at our airports, which has had an adverse impact on our resultresults of operations.
See “—“–The loss of or suspension of operations by one or more of our key customers could result in a loss of a significant amount of our revenues” belowin this section for a more detailed description of which of our major airline customers have recently reduced or cancelled operations at our airports.
Our business is highly dependent upon revenues from four of our airports and could be adversely impacted by any condition affecting those airports.
In 2009,2012, approximately 80.6%82.0% of ourthe sum of aeronautical and non-aeronautical revenues werewas generated from four of our 12 airports. The following table lists the percentage of totalthe sum of aeronautical and non-aeronautical revenues generated at our airports in that year:2012:
Airport | For year ended December 31, | |||
Guadalajara International Airport | 35.7 | % | ||
| 18.6 | % | ||
Puerto Vallarta International Airport | 14.0 | % | ||
| 13.7 | % | ||
Eight other airports | 18.0 | % | ||
Total | 100.0 | % | ||
As a result of the substantial contribution to our aeronautical and non-aeronautical revenues from these four airports, any event or condition affecting these airports could have a material adverse effect on our business, results of operations, prospects and financial condition.
Competition from other tourist destinations could adversely affect our business.
The principal factor affecting our results of operations and business is the number of passengers using our airports. The number of passengers using our airports (particularly our Los Cabos International Airport and our Puerto Vallarta International Airport) 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 CancúnAcapulco and Acapulco,Cancun, or elsewhere, such as Hawaii, Puerto Rico, Florida, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America. The attractiveness of the destinations we serve is also likely to be affected by perceptions of travelers as to the safety and political and social stability of Mexico, particularly as a result of the uncertainty and safety concerns resulting from the government’s ongoing effort against drug cartels. There can be no assurance that tourism levels, and therefore the number of passengers using our airports, in the future will match or exceed current levels, and alevels. A reduction in tourism to the destinations served by our airports could directly and indirectly affect our revenues from aeronautical and non-aeronautical services.
International events, including acts of terrorism, wars and global epidemics, could have a negative impact on international air travel.
International events such as the terrorist attacks on the United States on September 11, 2001, wars such as the one in Iraq and public health crises such as the recent Influenza A/H1N1 epidemic have negatively affected the frequency and pattern of air travel worldwide in recent years.
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 1.4% in 2001 and an additional 5.3% in 2002 (in each case as compared to the prior year). Any future terrorist attacks, whether or not involving aircraft, will likely adversely affect our business, results of operations, prospects and
financial condition. Moreover, we cannot predict what effect any future terrorist attacks or threatened attacks on the United States or any retaliatory measures taken by the United States in response to these events may have on the U.S. economy or leisure travel trends, which may negatively affect our results of operations.
In April 2009, Mexico, as well as several other countries, was affected by an outbreak of Influenza A/H1N1. As a result of the outbreak, a number of countries, including the United States, Great Britain and France, as well as the European Union advised against nonessential travel to Mexico, although these advisories had been lifted by the end of May 2009. While we cannot completely isolate the impact on travel of the advisories and restrictions imposed by national and international governments from other potential factors such as the economy, our domestic passenger traffic and international passenger traffic declined by 33.3% and 43.7%, respectively, during May 2009 (in each case compared to May 2008). As a result of these declines, our results of operations have been adversely affected. Moreover, we have also been required by Mexican authorities to undertake certain safety measures at our airports to prevent the further spread of Influenza A/H1N1, which may further deter passengers from traveling and increase our cost of operation. Although as of January 2010, the World Health Organization reported that outbreaks of Influenza A/H1N1 continued to decline or remained low in Mexico, aA new outbreak could once again disrupt our operations and significantly affect passenger and cargo traffic levels. For more information on the Influenza A/H1N1, please see “Item 5,Operating and Financial Review and Prospects—Recent Developments—Influenza A/H1N1.”
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 armed conflict around the world, outbreaks of health epidemics or other events of general international concern (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition.
If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.
Although we currently believe we maintain good relations with our labor force, if any conflicts with our employees were to arise in the future, including with our unionized employees (which accounted for approximately 51.7% of our total employees as of December 31, 2009), resulting events such as strikes or other disruptions that could arise with respect to our workforce could have a negative impact on our results of operations.
Security enhancements have resultedand requirements may require additional investments or result in increased costs and may expose us to greater liability.additional expenses.
The air travel business is susceptible to, and has experienced, increased costs resulting from enhanced security and higher insurance. Following the events of September 11, 2001, we reinforced security at our airports. As a result,airports, and our general liability insurance premiums for 2002 and 2003 increased substantially relative to our 2001 premiums, and we cannot predict whether there may be additional increases in the future. In 2004, our aggregate insurance cost was more than double our aggregate insurance cost for 2001.substantially. Since August 1, 2003, we have carried a Ps. 500 million insurance policy covering damages to our property resulting from terrorist acts. Since January 2003, we have carried anWe carry a U.S.$ 150 million insurance policy covering personal and property damages to third parties resulting from terrorist acts. The coverage provided by this policy since 2007 is U.S.$ 150 million. Because our insurance policies do not cover all losses and liabilities resulting from war or terrorism, we could incur significant costs if we were to be directly affected by events of this nature. Any such increase in our operating costs would have an adverse effect on our results of operations.
The users of airports, principally airlines, also have been subject to increased costs sincefollowing the events of September 11, 2001. Airlines have been required to adopt additional security measures and may be required to comply with more rigorous security rules or guidelines in the future. Premiums for aviation insurance have increased substantially and could escalaterise further. While governments in other countries have agreed to indemnify airlines for liabilities they might incur resulting from terrorist attacks, the Mexican government has not done so and has given no indication of any intention to do the same. In addition, fuel prices, supplies and interest rates for airlines’ aircraft lease agreements, which constitute a significant cost for airlines using our airports, may be subject to increases resulting from any future terrorist attacks, a general increase in international hostilities or a reduction in output of fuel, voluntary or otherwise, by oil producing countries. Such increases in airlines’ costs have resulted in higher airline ticket prices and decreased demand for air travel generally, thereby having an adverse effect on our revenues and results of operations. In addition, because a substantial majority of our international flights involve travel to the United States, we may be required to comply with security directives of the U.S. Federal Aviation Authority, in addition to the directives of Mexican aviation authorities.
If authorities require security enhancements or require us to adopt additional security measures, we may be required to undertake significant additional expenses and capital expenditures, and we cannot guarantee that those expenses and/or capital expenditures will be taken in to account in our Maximum Tariff and Master Development Programs negotiations. Therefore, these additional expenses could negatively affect our cash flows and affect our results of operations.
The operation of new baggage screening equipment could increase our expenses and may expose us to greater liability.
In 2005, the Mexican government issued a policy letter (carta de política) calling for all checked baggage on internationalall commercial flights beginning in January 2006, and on domestic commercial flights beginning in July 2006, to undergo a new comprehensive screening process. The new screening process required the installation of dedicated screening equipment and the manual inspection of baggage if such equipment signals the potential presence of prohibited items. Because of uncertainty over the policy letter’s implementation, the new screening process hashad been initially delayed. Although the Mexican Airport Law expressly provides that airlines bear the responsibility for baggage screening, the fact that the policy letter is silent as to responsibility caused some of our airline customers to contend that the policy letter’s intent is for airport concessionaires, such as us, to bear responsibility for the new screening process. In addition, certain questions have been raised regarding the constitutionality of the new screening process. TheSince the issuance of the policy letter, the Mexican Bureau of Civil Aviation ishas been expected to issue regulations implementing regulations. On November 23, 2012, the policy letter, but these may not addressMexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil, or“DGAC”) published a recommendation, titled a “Circular Obligatoria,” on the questionsMinistry of Communications and Transportation website that, instead of modifying the legal responsibilities set forth in the Mexican Airport Law, attempted to facilitate contracts between parties through certain recommendations regarding issues of responsibility and constitutionality that have been raised. These recommendations are not binding and would have no legal effect unless incorporated into a valid contract.
The new process is expectedWe currently have agreements to require the installation of new screening equipment and that baggage be checked manually if the equipment signals the potential presence of prohibited items. In December 2009 the Company signed a supply contract with Rapiscan Systems for the purchase and installation of newoperate baggage screening equipmentsystems with the following airlines: Magnicharters, Westjet, Airtransat, Sunwing, Jazz, Delta, AirTran, Alaska, Virgin, Frontier, American Airlines, Sun Country, U.S. Airways and, as of April 1, 2013, United Airlines. Under these agreements, these airlines agree to hold harmless and indemnify us against certain types of liability that might arise in 2010. Although we will incur significant capital expenditures installing this screening system, we believe thatconnection with the operation of this equipment is the responsibilitybaggage screening system, in accordance with the provisions of the Mexican Airport Law. At the end of 2012, 30.0% of the passengers travelling through our airports were using the system. We expect that by the end of 2013, most of our total passenger traffic will be using baggage screening equipment. Consequently, we expect to sign agreements with most of our airline customers underduring 2013 on substantially the Mexican Airport Law. However, if it is decided that it issame terms and conditions as those already signed.
The checked baggage screening equipment has been operational in our responsibility10 busiest airports since 2011; only the Aguascalientes and Los Mochis airports continue to perform only manual inspection.
We are incurring ongoing expenses to maintain and operate this equipment. Currently, the operational costs of the screening systems,system have been limited to the level necessary to provide the required services to airlines, and we would do so only after we reachexpect to continue recovering those costs, which could increase if more airlines sign a written agreement withcontract to use our airline customers regarding the allocation of cost and responsibility. If that occurs, our exposure to liability could increase.equipment. We also expect to incur ongoing expenses to maintain any equipment purchased, and we could be required to undertake significant additional capital expenditures for items such as a new screening technology or additional equipment whichif screening guidelines are expanded further and require that additional steps be taken to comply with the requirements. These additional expenses could restrict our liquidity and adversely affect our results of operations.
While enhanced security at In addition, if it is determined that we are responsible for all or a portion of the cost or that we are liable for certain issues arising from our airports has not resulted in a significantoperation of the screening systems, our exposure to liability could increase in our operating costs to date other than as mentioned above, we may be required to adopt additional security measures in the future.significantly. For more information on screening equipment, see “Item 4:Regulatory Framework – Scope of Concessions”.
Our revenues and profitability may be adversely affected if we fail in our business strategy.
Our ability to increase our revenues and profitability depends in part on our business strategy, which consists of setting prices as close as possible to our regulatory maximum rates for any given year, reducing operating costs, controlling our capital expenditure commitments under our Master Development Programs with the Mexican government, increasing passenger and cargo traffic at our airports and increasing revenues from commercial activities.
Our ability to increase our commercial revenues is significantly dependent, among other factors, upon increasing passenger traffic at our airports and on our ability to renegotiate rental agreements with our tenants to provide for contractual terms more favorable to us. Our ability to increase revenues from commercial activities is also dependent on our ability to continue the remodeling and modernization of the commercial areas we operate within our airports. We cannot provide assurance that we will be successful in
implementing our strategy of increasing our passenger traffic or our revenues from commercial activities. The passenger traffic volume in our airports depends on factors beyond our control, such as the attractiveness of the commercial, industrial and tourist centers that the airports serve. Accordingly, there can be no assurance that the passenger traffic volume in our airports will increase or that our profitability will increase.
If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.
Although we currently believe we maintain good relations with our labor force, if any conflicts with our employees were to arise in the future, including with our unionized employees (which accounted for approximately 49.0% of our total employees as of December 31, 2012), resulting events such as strikes or other disruptions that could arise with respect to our workforce could have a negative impact on our results of operations.
The loss of or suspension of operations by one or more of our key customers could result in a loss of a significant amount of our revenues.
Consorcio Aeroméxico,A majority of our revenues are driven by the operations of a few key customer airlines. Concesionaria Vuela Compañía de Aviación, S.A. de C.V., or ConsorcioVolaris; Grupo Aeroméxico, (controlled by the Mexican government until October 2007)S.A.B. de C.V., or Grupo Aeroméxico, a holding company that owns Aeroméxico and Aeroméxico Connect (formerly Aerolitoral); Concesionaria Vuela Compañía de Aviación,and ABC Aerolíneas S.A. de C.V., or Volaris;Interjet, accounted—excluding revenues from passenger charges—for 2.9%, 2.0% and Grupo Mexicana (controlled by the Mexican government until December 2005)0.8% respectively, of total revenues in our airports in 2012 (3.3%, a holding company that owns Mexicana, Click Mexicana2.2% and Mexicana Link; accounted for 13.7%, 13.1% and 10.1%,0.9% respectively, of the totalsum of aeronautical and non-aeronautical revenues generated in our airports in 2009.2012).
None of our contracts with our airline customers obligate them to continue providing service to our airports, and we can offer no assurance that, if any of our key customers reduce their use of our airports, competing airlines would add flights to their schedules to replace any flights no longer handled by our principal airline customers.
For example, beginningon August 2, 2010, Mexicana, one of Mexico’s two largest carriers and previously an airline which was among our three largest customers in terms of passenger traffic, filed for bankruptcy protection in Mexico and in the United States. On August 2009, Consorcio Aviaxsa, S.A. de C.V., or Aviacsa, which28, 2010, Mexicana, Mexicana Click (formerly known as Aerovías Caribe) and Mexicana Link (formerly known as Mexicana (Inter) (collectively “Grupo Mexicana”) ceased operations. Mexicana Click and Mexicana Link filed for bankruptcy protection on September 7, 2010. In 2010, Grupo Mexicana was still our third largest carrier and accounted for 2.7%8.9% of the totalsum of aeronautical and non-aeronautical revenues generated in our airports. It was not until 2012 that all seats previously flown by Grupo Mexicana were taken over by other airlines. We can offer no assurance that competing airlines would seek to increase their flight schedules if any of our key customers reduced their use of our airports. In addition, Mexican law prohibits an international airline from transporting passengers from one Mexican location to another, except if the passenger originated travel outside Mexico, thus limiting the number of airlines providing domestic service in Mexico. Accordingly, we expect to continue to generate a significant portion of our revenues from domestic travel from a limited number of airlines.
Additionally, on November 29, 2011, AMR Corporation (“AMR”), parent of American Airlines Inc. (“American”) and AMR Eagle Holding Company (“American Eagle”) filed voluntary petitions for Chapter 11 reorganization in a U.S. Bankruptcy Court. The Chapter 11 process permits American and American Eagle to continue operating flights normally during the reorganization. To date, AMR Corporation, through its two subsidiaries American and American Eagle, operates at 6 of our 12 airports, in 2008, discontinued operations(Aguascalientes, Guanajuato, Guadalajara, Morelia, Puerto Vallarta and Los Cabos). From January to December 2012, AMR Corporation, through its subsidiaries, transported 855,241 total passengers at our airports, duewhich represents 4.0% of our passenger traffic in 2012. During the Chapter 11 process, neither American nor American Eagle has suspended payments for the services provided by us.
Furthermore, passenger charges, which accounted for 57.1% of our revenues in 2012 (64.5% taking into account only the sum of aeronautical and non-aeronautical revenues), are collected by airlines from passengers on our behalf and are later paid to a suspension byus, depending on the Mexican regulatory authorities.airline, within no more than 60 days following the date of each flight. If any of our key airline customers were to become insolvent or seek bankruptcy protection, we would be an unsecured creditor with respect to any unpaid passenger charges, and we might not be able to recover the full amount of such charges.
During 2009, we renegotiated our passenger charges collection agreements with all of our airline customers. See “Item 4,Business Overview—Overview – Our Sources of Revenues—Revenues – Aeronautical Services—Services – Passenger Charges”. According to the new agreements that took effect on November 1, 2009, an airline could have a grace period of up to a maximum of 60 days for payment.payment on a case by case basis (not all airlines received the same grace period). If an airline wanted a grace period of any amount up to the 60-day limit, the airline was required to secure the grace period and the equivalent of 30 additional days with cash, bonds or other collateral equal to the charges the airline would incur during athat period of 30by taking into account the peak operational days beyondfor that specific airline during the length of the agreed-upon graceprevious 12-month period. Thus, in the event of insolvency or suspension of operations by an airline, we would be able to collect passenger charges invoiced to that airline up to the value of the collateral. Although we would have a 30-day buffer beyond the grace period, our cash flows from operations or our results of operations could be negatively affected if such collateral were not sufficient to cover the outstanding debt. Thus, in the event of any suspension of operations by an airline, such as in the case of Grupo Mexicana in 2010, or such insolvency, we would not be assured of collecting 100% of the amounts invoiced to that airline for passenger charges, nor could we be assured that we would recover, in the short term, the traffic they would stop transporting. Both scenarios could negatively affect our cash flows from operations or our results of operations.
Additionally, some of our commercial clients have had difficulty making their payments to our airports. As a result, we have tried to renegotiate terms with many clients to keep them at our airports. Despite our efforts, however, some clients have decided to leave our commercial spaces and cancel their contracts. This could potentially have a negative effect on our revenues.
Our business is dependent on international regulations that affect Mexican airlines.
Airline regulations promulgated by international bodies or regulatory agencies in other countries could affect our operations and potentially affect our revenues or results of operations. For instance, on July 30, 2010, the United States Federal Aviation Administration (“FAA”) announced that, following an assessment of Mexico’s civil aviation authority, it had determined that Mexico was not in compliance with international safety standards set by the International Civil Aviation Organization (“ICAO”), and, as a result, downgraded Mexico’s aviation safety rating from “Category 1” to “Category 2.”
Under FAA regulations, because of this downgrade, Mexican airlines were not permitted to expand or change their current operations between the United States and Mexico except under certain limited circumstances; code-sharing arrangements between Mexican and U.S. airlines were suspended; and operations by Mexican airlines flying to the United States were subject to greater FAA oversight. These additional regulatory requirements resulted in reduced service between our airports and the United States by Mexican airlines, which resulted in a decrease in demand for travel between our airports and the United States. Approximately 6.6% of the passengers that traveled through our airports traveled on flights to or from the United States operated by Mexican airlines in 2012.
The FAA restored Mexico’s Category 1 rating on December 1, 2010. The FAA, however, may downgrade Mexico’s air safety rating in the future. We cannot predict what impact such a downgrade would have on our passenger traffic or results of operations, or on the public perception of the safety of Mexican airports.
The main domestic airlines operating at our airports have in the past refused to pay certain increases in our specific prices for aeronautical services and could refuse to pay additional increases in the future.
From 2000 to mid-2003,In the principalpast, certain of the domestic airlines operating at our 12 airports—Aeroméxico, Mexicana, Aeromar and Aeroméxico Connect—airports refused to pay certain increases in the specific prices we charge for aeronautical services. 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. See “Item 4,Business Overview—Principal Customers—Principal Aeronautical Services Customers—Airline Customers.”
Although these prior disputes were resolved by 2006, because only a few airlines contribute a majoritysubstantial portion of our revenues, our results of operations could be adversely impacted if any of these (or any of our other) airlines should refuse to make payments in the future. Moreover, becauseduring periods of the current economic downturn, the airlines that generally operate at our airports may be more likely to oppose increases in our charges for aeronautical services in future years, which could adversely impact our resultresults of operations. See “Item 4,Business Overview – Principal Customers – Principal Aeronautical Services Customers – Airline Customers”.
The airlines at our airports may refuse to continue collecting passenger charges on our behalf or we may decide to collect passenger charges ourselves, which would result in increased costs for us.
We collect a passenger charge for each departing passenger on an aircraft (other than diplomats, infants and transfer and transit passengers)passengers, if the transfer of the passenger occurs within 24 hours of the passenger’s arrival at the airport). Currently, we have entered into collection agreements with the airlines that operate at our airports to collect those passenger charges on our behalf. As a result, passenger charges are automatically included in the cost of a passenger’s ticketpassengers’ tickets, and we issue invoices for those charges to each airline. See “Item 4,Business Overview—Overview – Our Sources of Revenues—Revenues – Aeronautical Services—Services – Passenger Charges”.”
We and the airlines with which we have these collection agreements have the right to cancel them with prior notice to the other party. If we or one of our airline customers were to cancel a collection agreement, we would have to implement a collection system of our own to collect passenger charges from passengers directly. The installation and operation of such a collection system would result in additional costs for us, which would negatively impact our results of operations.
The operations of our airports may be disrupted due to the actions of third parties, which are beyond our control.
As is the case with most airports, the operation of our airports is largely dependent on the services of third parties, such as air traffic control authorities, airlines and ground transportation providers. We also depend upon the Mexican government or entities of the government for provision of services, such as electricity, supply of fuel tofor aircraft, air traffic control and immigration and customs services for our
international passengers. Additionally, the disruption or stoppage of taxi or bus services at one or more of our airports could also adversely affect our operations. We are not responsible for and cannot control the services provided by these parties. Any disruption in, or adverse consequence resulting from, their services, including a work stoppage or other similar event, may have a material adverse effect on the operation of our airports and on our results of operations.
In addition, we are dependent on third-party providers of certain complementary services such as catering and baggage handling. If these service providers were to halt operations at any of our airports, we would be required to seek a new service provider or provide services ourselves, either of which would likely result in increased capital expenditures or costs and have an adverse impact on our cash generation and results of operations.
Actions by the former holders of land comprising the Tijuana International Airport may limit our ability to expandand the airport andGuadalajara International Airport may disrupt its operations.the operations of these airports.
A portion of the landlands comprising the Tijuana International Airport wasand Guadalajara International Airport were expropriated by the Mexican government in 1970 and 1975 respectively, pursuant to its power of eminent domain. Prior to its expropriation,those expropriations, the land had been held by a group of individuals through a system of communal ownership of rural land known as anejido. The formerejidoejidos’participants have asserted indemnity claims against the Mexican government challenging the 1970 and 1975 expropriation decree. Ourdecrees. See “Item 8,Financial Information – Legal Proceedings – Ejido Participants at Tijuana and Guadalajara Airports”.
As a result of these circumstances, our Tijuana airport subsidiary has beenwas joined in the proceedings,
but only as an interested third party. During 2008, theejido received an unfavorable ruling, which it appealed, and subsequently, received a judgment in its favor.proceedings. The current judgment calls for the restitution of 320 hectares of land, although the precise area affected has yet to be assessed. Depending on which particular arealand parcel is to be restituted,returned, this could affect the airport’s perimeter and could materially disrupt the airport’s current operations. We have contested this latest ruling
Similarly, in a second appeal, the outcomecase of which is currently pending. See “Item 8,the Guadalajara International Airport, two differentLegal Proceedings—Ejido Participants at Tijuana Airportejidos.” commenced proceedings in federal court in 2009 against the Ministry of Communications and Transportation, seeking payment for the land expropriated by decree in 1975.
CertainOur concessions guarantee access to the land by the Ministry of Communications and Transportation and any interruption caused to our operations by any of theejidos is the responsibility of the Mexican Government. Although the Mexican Government must provide restitution for any economic loss resulting from a disruption in access to our airports, there can be no assurance that the formerejido participants will not seek to disrupt the airport’s operations if their legal claims against the Mexican Government are not resolved to their satisfaction. There also can be no assurance that the legal proceedings will be resolved in our favor, which may negatively impact our results of operations.
In addition, certain of the formerejido participants are currently occupying portions of the property on which we operate Tijuana International Airport that areproperty, but the property is not at present essential to the airport’s operations. Although these persons are not currently interfering with the airport’s operations, their presence could limit our ability to expand the airport into the areas they occupy. In addition, thereThere can be no assurance that the formerejido participants will not seek to disrupt the airport’s operations if their legal claims against the Mexican government are not resolved to their satisfaction, which may negatively impact our results of operations.
We may be liable for property tax claims asserted against us by certain municipalities.
We remain subject to ongoing real estate tax claims that have been asserted against us by the municipal authorities of Mexicali, Tijuana, Puerto VallartaGuadalajara and Hermosillo for the payment of property taxes with respect to the property on which we operate our airports in those cities, and similar claims have been and may be asserted by other municipal authorities where we operate our airports. We believe that under the law, the Mexican government, as the owner of the property upon which we operate our airports, would currently be responsible for paying these taxes directly if a court were to determine that these taxes must be paid in response to any future proceedings.paid. See “Item 8,Financial Information—Information – Legal Proceedings—Proceedings – Property tax claims by certain municipalities” for a full discussion of these property tax proceedings.
In addition, on May 28, 2010, the State Legislature of Jalisco sent to the Mexican Congress a legislative initiative in which they requested that Congress consider changing the current Mexican Airport Law so that privately held airports operating on federal land would be subject to municipal taxes. This initiative remains under review by Congress.
If the Mexican government changes the current laws or if we do not prevail in the aforementioned proceedings, these tax liabilities could have a material adverse effect on our financial condition and results of operations.
The actions of squatters on certain portions of the land on which our Guadalajara International Airport operates could disrupt operations and security at that airport.
The Mexican government owns the land on which the Guadalajara International Airport operates and has granted us the right to use that land for the purpose of operating the airport pursuant to our concession. Currently, there are squatters residing on or claiming rights to a portion of the property, at least one of whom has attempted to subdivide and sell off certain portions of the property. As owner of the property, the Mexican government must initiate any actions directed at removing these persons from the property. We are reviewing the actions these persons have taken and are cooperating with the Mexican government to ensure that the actions of these squatters do not adversely affect the operations of the Guadalajara International Airport. However, if the Mexican government or we are unable to successfully remove these persons from the property, their presence could have an adverse impact on our operations and security at the airport and could restrict our ability to expand our operations at the airport.
Our business could be adversely affected by the penalty imposed by the Mexican tax authority on some of our airports.
The Mexican tax authority (Servicio de Administración Tributaria, or SAT)“SAT”), in connection with its review of the year 2005, sent us official notices in 2008 and 2009 stating that, under its criteria, the fiscal amortization rate used for each of the Aguascalientes, La Paz, Los Mochis, Morelia and Mexicali airports’ concession values was incorrect. We initiated legal proceedings in a federal tax court to challenge SAT’s findings, based on our contention that SAT did not take into consideration all the relevant legal matters concerning the Company’sour position on amortization. See “Item 8,Financial Information—Legal Proceedings—Federal tax proceedings against Aguascalientes, La Paz, Los Mochis, Morelia and Mexicali airports”.
If at the conclusion of these legal proceedings, the tax court determines that the airports are in violation,applied the incorrect rate, those airports would be required to modify their tax calculations since 2005, whichbeginning 2005. This modification could negatively affect our net income.
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 those of most airports in other countries. In 2007, 20082011 and 2009,2012, approximately 80.9%, 79.1%62.3% and 77.7%68.1% respectively, of our total revenues were earned from aeronautical services, which are subject to price regulation under our maximum rates.rates (in 2011 and 2012, 78.9% and 76.9% respectively, of the sum of aeronautical and non-aeronautical revenues were earned from aeronautical services). 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)Master Development Programs) or established (as in the case of our maximum rates) by the Ministry of Communications and Transportation for five-year terms. Except under limited circumstances, we generally do not have the ability to unilaterally change our obligations (such as the investment obligations under our master development programsMaster Development Programs or the obligation under our concessions to provide a public service) or increase our maximum rates applicable under those regulations should the passenger traffic or other assumptions on which the regulations were based change during the applicable term. In addition, there can be no assurance that this price regulation system will not be amended in a manner that would cause additional sources of our revenues to be regulated.
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 historyprecedent that would allow us to predict the impact of these legal requirements on our future operations. In addition, although Mexican law establishes ranges of sanctions that might be imposed should we fail to comply with the terms of one of our concessions, the Mexican Airport Law and its regulations or other applicable laws, we cannot predict the sanctions that are likely to be assessed for a given violation within these ranges. We cannot assureprovide assurance that we will not encounter difficulties in complying with these laws, regulations and instruments. Although our maximum rates through 2014 have been set, we cannot predict how our master development programMaster Development Programs for the next five-year period from 2015 to 2019 will be determined. We also cannot provide assurance that other regulatory agencies or the Mexican legislature will not impose regulations adverse to our operations in the future or that the laws and regulations governing our business, including the master development program andMaster Development Programs, the maximum rate-setting process and the Mexican Airport Law, will not change in the future or be applied or interpreted in a way that could have a material adverse effect on our results of operations. For instance, on December 14, 2011, a bill was introduced in Mexico’s Congress to amend the Mexican Airport Law. The bill proposes that the Ministry of Communications and Transportation gain additional authority to plan and apply the standards, policies and programs for the Mexican airport system, to oversee the correct operation of civil aviation in Mexico and to establish rules for airport service providers and the general basis for flight schedules, so as to guarantee the competitiveness of Mexico’s airports. We cannot predict whether this amendment will be adopted or, if adopted, the impact it would have on us.
The regulations pursuant to which the maximum rates applicable to our aeronautical revenues are established do not guarantee that we or any of our airports will be profitable.
The regulations applicable to our aeronautical activities establish an annual maximum rate for each airport, which is the maximum annual amount of revenues per workload unit (which is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from services subject to price regulation. The maximum rates for our airports have been determined for each year through 2014. For a discussion of the framework for establishing our maximum rates and the application of these rates, see “Item 4,Information on the Company—Company – Regulatory Framework—Framework – Aeronautical Services RegulationRegulation”.” Under the terms of our concessions, there is no guarantee that our consolidated results of operations or the results of operations of any airport will be profitable.
Our concessions provide that an airport’s maximum rates will be adjusted periodically for inflation (determineddetermined by reference to the Mexican Producer Price Index (Índice Nacional de Precios al Productor), excluding petroleum).petroleum. Although we are entitled to request additional adjustments to an airport’s maximum rates under certain circumstances, including the amendment of certain provisions of the Mexican laws and regulations that structure and influence our business, our concessions provide that such a request will be approved only if the Ministry of Communications and Transportation determines that certain events specified in our concessions have occurred. The circumstances under which we are entitled to an adjustment are described under “Item 4,Information on the Company—Company – Regulatory Framework—Aeronautical Services Regulation—Framework – Special Adjustments to Maximum Rates”.” Therefore, there can be no assurance that any such request would be made or granted.
Our results of operations may be adversely affected by required efficiency adjustments to our maximum rates.
In addition, our maximum rates are subject to annual efficiency adjustments, which have the effect of reducing the maximum rates for each year to reflect projected efficiency improvements. For the five-year term ending 2014, an annual efficiency adjustment factor of 70 basis points was established by the Ministry of Communications and Transportation. Future annual efficiency adjustments will be determined by the Ministry of Communications and Transportation in connection with the setting of each airport’s maximum rates every five years. For a description of these efficiency adjustments, see “Item 4,Information on the Company—Company – Regulatory Framework—Aeronautical Services Regulation—Framework – Methodology for Determining Future Maximum Rates.Rates”. We cannot provide assurance that we will achieve efficiency improvements sufficient to allow us to maintain or increase our operating income as a result of the progressive decrease in each airport’s maximum rate.
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 to come as close as possible to the authorized maximum rate for that airport in any given year. We expect to continue to pursue this pricing strategy in the future. For example, in 2007, 20082011 and 20092012 our revenues subject to maximum rate regulation represented 99.7%, 99.2%99.9% and 99.7%,100.0% respectively, of the amount we were entitled to earn under the maximum rates for all of our airports. However, there can be no assurance that we will be able to establish prices in the future that allow us to collect virtually 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 petroleum, 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 for the same cause. In the event that any one of our airport concessions is terminated, our other airport concessions may also be terminated.
In prior years, in order to ensure our compliance with the maximum rate at a particular airport when the possibility of exceeding that maximum rate has arisen, we have taken actions in the latter part of the year, such as reducing our specific prices and offering discounts. We can offer no assurance that, should external factors cause us to risk exceeding our maximum rates close to or at the end of any given year, we will have sufficient time to take the actions described above in order to avoid exceeding our maximum rates prior to year-end.
If we fail to fulfill the requirements of our Master Development Programs during a given five-year period, we could be subject to sanctions from the Mexican government.
Historically, our capital expenditure commitments under our Master Development Programs are determined by reference to the Mexican Producer Price Index, construction sector, materials, equipment rental and fees segment (Índice Nacional de Precios al Productor, sector construcción, materiales, alquiler de maquinaria y remuneraciones). Using the index we aim to be as close as possible to the five-year period capital expenditure commitments at any time. We expect to continue this capital expenditure control strategy in the future. Using this strategy, our capital expenditure during 2011 and 2012 was 100.4% and 101.1%, respectively, of the commitment for all of our airports during that period. However, there can be no assurance that our capital expenditure control strategy will be sufficiently accurate and that we will not fall below our capital expenditure commitments. If as a consequence of the annual maximum tariff fulfillment review the Ministry of Communications and Transportation determines that we are not in compliance with the committed investments, the Ministry of Communications and Transportation may assess a fine and may reduce the maximum rate of that airport in the subsequent year. Non-compliance with committed investments could also result in the termination of the concession if the relevant term has been violated and sanctions have been imposed at least three times for the same cause. In the event that any one of our concessions is terminated, our other concessions may also be terminated.
Although in prior years, in order to ensure compliance with our Master Development Programs, we have taken actions in the latter part of the year, such as increasing the amount or pace of certain construction projects, we can give no assurance that, should external factors cause us to risk failing to meet our investment levels, we will have sufficient time to take actions to comply with our Master Development Programs.
The Mexican government may terminate or reacquire our concessions under various circumstances, some of which are beyond our control.
Our concessions are our principal assets, and we would be unable to continue operations without them. A concession may be revoked by the Mexican government for certain prescribed reasons, including failure to comply with our master development programs,Master Development Programs, a temporary or permanent halt in our operations, actions affecting the operations of other concession holders in Mexico, failure to pay damages resulting from our operations, exceeding our maximum rates or failure to comply with any other material term of our concessions. Violations of certain terms of a concession (including violations for exceeding the applicable maximum rate) can result in revocation of a concession only if sanctions have been imposed for violations of the relevant term at least three times. Violations of other terms of a concession can result in the immediate termination of the concession. Our concessions may also be terminated upon our bankruptcy or insolvency.
We would face similar sanctions for violations of the Mexican Airport Law or the regulations thereunder. 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,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 revoke 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 aforce 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. In the case of a mandated change in our operations, the Mexican government is required to compensate us for the cost of that change. Similarly, in the event of an assumption of our operations, other than in the event of war, the government is required to compensate us and any other affected parties for any resulting damages. There can be no assurance that we would receive compensation equivalent to the value of our investment in, or any additional damages related to, our concessions and related assets in the event of such action.
In the event that any one of our airports’ 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, authorize the construction of new airports or allow existing privately held domestic airports to change into international airports and permit them to receive regular domestic and international flights, all of which could lead to increased competition for our airports.
One factor that may significantly increase competition from other airports is the expansion of the permits of existing private airports that are currently not permitted to operate regular commercial routes. Under Mexican law, any privately held airport that has operated with a permit to give public service for at least five years automatically acquires the right to also operate regularly scheduled commercial flights and to receive a concession to operate as a public service airport. In addition, through an amendment proposed by the Ministry of Communications and Transportation and confirmed by the Presidency, an airport operating with a permit to giveprovide public service could become an international airport. For example, the owner of a small private airport near Cabo San Lucas received a permit to offer public service in March 2008 from the Ministry of Communications and Transportation. On November 4, 2009, in response to a petition to the Ministry of Communications and Transportation, this airport was authorized to operate regular commercial routes for domestic and international flights. Accordingly, this airport could eventually begin operating commercial flights, domestic or international, and compete with our Los Cabos International Airport.
Any competition from other such airports could have a material adverse effect on our business and results of operations. Under certain circumstances, the grant of a concession for a new or existing airport must be made pursuant to a public bidding process. In the event that a competing concession is offered in a public bidding process, we cannot provide assurance that we would participate in such process, or that we would be successful if we were to participate. Please see “Item 4,Information on the Company—Company – Regulatory Framework—Framework – Penalties and Termination and Revocation of Concessions and Concession Assets—Assets – Grants of New Concessions” below..
The Ministry of Communications and Transportation could require us to monitor certain aircraft movements at our airports that we do not currently control, which could result in increased costs.
The Mexican Air Traffic Control Authority (Servicios a la Navegación en el Espacio Aéreo Mexicano) currently requires us to manage and control aircraft movements in and out of our arrival and departure gates and remote boarding locations directly at our Guadalajara and Puerto Vallarta International Airport and our Guadalajara International Airport.Airports. At our other airports, these aircraft movements are monitored directly by the Mexican Air Traffic Control Authority. Should the Mexican Air Traffic Control Authority require us to control these aircraft movements directly at any or all of our other ten airports in the future, our results of operations could be negatively impacted by increased operating insurance and liability costs resulting from taking on these obligations.
Risks Related to Our Controlling Shareholder
AMP controls our management, and AMP’s interests may differ from those of other shareholders. In the past, disputes among AMP’s shareholders have affected us.
AMP holds Series BB shares currently representing 15% of our outstanding capital stock. The Series BB shares have certain special rights that allow AMP to exercise significant control over our management. Through its right to appoint and remove members of our senior management, AMP has the ability to direct the actions of our management in areas such as business strategy, operations, financing, acquisitions and dispositions of assets or business.
Pursuant to our bylaws, AMP (as holder of our Series BB shares) has the right to appoint and remove our top-level executive officers, (upon consultation with our Nominations and Compensation Committee) to appoint and remove our top-level executive officers,, to elect four members of our board of directors and their alternates and to designate three of
the members of our Operating Committee and 20% of the members of each other board committee (or one member of any committee consisting of fewer than five members), except for the Audit Committee whose members are selected according to Mexican and U.S. independence standards. AMP (as holder of our Series BB shares) also has the right pursuant to our bylaws to veto certain actions requiring the approval of our shareholders (including the approval of our financial statements, increases or decreases of our capital stock, the payment of dividends, the amendment of our bylaws and any decision that has the objective to modify or annul its right to appoint our top-level executive officers). These rights are not conditioned on whether or not the technical assistance agreement and the participation agreement remain in force. Pursuant to our bylaws, if at any time AMP (as the holder of our Series BB shares) were to hold less than 7.65% of our capital stock in the form of Series BB shares, it would lose its veto rights (but not other special rights). If at any time after August 25, 2014, AMP were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares would be mandatorily converted into Series B shares, which would cause AMP to lose all of its special rights. In addition, shareholdersShareholders of AMP have allocated among themselves certain veto rights relating to the exercise by AMP of its veto and other rights, which increases the risk of impasse at the shareholders’ meeting of AMP and ultimately at our shareholders’ meetings. For example, recent disputesDifferences in points of view among AMP’s shareholders have prevented voting on certain resolutions at our April 27, 2010 Shareholders’ Meetings, and eventually ledwith respect to the suspension of trading of our shares on the Mexican Stock Exchange and NYSE from June 2, 2010 until June 14, 2010. See “Item 7,Major Shareholders and Related Party Transactions—Major Shareholders”. We cannot predict the consequences that could result from these conflicts or from any similar conflicts in the future. It is also not possible to predict the effects that such events might have on the price of our stock or our market value.
AMP’s veto, appointment and other rights 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 appoint and remove members of our senior management, AMP directs the actions of our management in areas such as business strategy, financing, distributions, acquisitions and dispositionscould affect our results of assets or businesses. operations.
The interests of AMP may differ from those of our other shareholders and be contrary to the preferences and expectations of our other shareholders, and we can offer no assurance that AMP and the officers appointed by AMP will exercise their rights in ways that favor the interests of our other shareholders.
In the past, disputes among AMP’s shareholders affected our shareholders’ meetings throughout 2010 and 2011 and trading of our shares on the Mexican Stock Exchange and the NYSE; as well as involving us in litigation. Notwithstanding those disputes, on December 1, 2011, we were advised by AMP’s shareholders that they had entered into an agreement to end their dispute and to terminate their legal proceedings. As a result, during 2012, all proceedings among AMP’s shareholders including
proceedings brought against us were terminated. Additionally, we were informed that AMP’s shareholders agreed to a comprehensive mechanism for decision-making (primarily by consensus, but with specific mechanisms aimed at avoiding deadlocks that could affect our operations), and AMP’s shareholders will continue developing our business. They also affirmed their intent to defend the rights granted to them by the Mexican Government. The agreement further confirms the original ownership percentage in AMP of each of its three shareholders.
On April 25, 2011, we received a formal notice from theComisión Nacional Bancaria y de Valores (National Banking and Securities Commission or the “CNBV”) by which it initiated an administrative proceeding against us for alleged violations of Mexican disclosure statutes primarily in connection with the disputes among AMP’s shareholders during 2010. The formal notice was the first stage in an administrative proceeding by the CNBV to impose economic sanctions on us. On June 3, 2011, we exercised our right to appeal the CNBV’s determination and presented evidence to respond to the notification. As of the date of this report, a final resolution with the CNBV is pending.
In addition, a criminal investigation was commenced nearly simultaneously based on the same allegations as above. Our external counsel responsible for representing us in the criminal investigation has informed us that the CNBV issued a notice of no action with regards to potential criminal infractions; subsequently, the Attorney General of Mexico (Procuraduría General de la República, or PGR) issued an administrative act by which the criminal procedure was concluded. See “Item 8,Financial Information – Legal Proceedings — Infractions of the Mexican Securities Law alleged by the CNBV”.
If any disputes among AMP’s shareholders were to occur in the future, it is not possible to predict if they would result in deadlock at our shareholders’ meetings or distract our management, or what effects such events might have on the price of our stock, its liquidity or our market value and the effects that these conflicts could have on our business or results of operations.
In addition, AMP’s veto, appointment and other rights could adversely impact our operations and constitute an obstacle for us to bring in a new strategic shareholder and/or operator.
If AMP should decide to sell all or a portion of its interest in us, our operations could be adversely affected.
AMP currently exercises a substantial influence over our management, as described above. Our bylaws and certain of the agreements executed in connection with the privatization process prohibited AMP from transferring any of its Series BB shares before August 25, 2004. Since that date, AMP has been permitted to transfer up to 49% of its Series BB shares without restriction. After August 25, 2009, AMP may additionally sell in any year up to 20% of its remaining 51% interest in our Series BB shares. Presently, therefore, AMP is able to sell nearly all of the shares that it owns. Our bylaws provide that, subject to certain exceptions, Series BB shares must be converted into Series B shares prior to transfer. Should AMP divest its interest in us or cease to hold Series BB shares, our management could change significantly and our operations could be adversely and significantly affected as a result. The termination of the technical assistance agreement with AMP may also adversely and significantly affect or disrupt our operations. See “Item 4,Information on the Company—Company – History and Development of the Company—Company – Investment by AMP”.”
Official inquiries relating to certain requirements of the privatization guidelines and the participation agreement relating to our privatization could have a material and adverse effect on our operations or the value of our securities.
In 1999, as part of the first stage in the process of opening Mexico’s airports to private investment, the Mexican government sold a 15% equity interest in us to AMP pursuant to a public bidding process.
Pursuant to the guidelines published by the Mexican government during the first phase of our privatization and the participation agreement setting forth the rights and obligations of each of the parties involved in our privatization, AMP assumed certain rights and obligations.
In 2004 and 2005, various reports in the Mexican press alleged that AMP did not comply with certain of its obligations under the privatization guidelines and the participation agreement, specifically the requirements related to the nationality of AMP’s Mexican partner. In June 2005, the Permanent Commission of the Mexican Federal Congress (Comisión Permanente del Congreso Federal) requested that the Ministry of Communications and Transportation and other agencies of the federal government investigate these allegations and report on our share ownership structure and certain related matters.
In January 2006, the previous Mexican partner sold its 25.5% interest in AMP to Controladora Mexicana de Aeropuertos, S.A. de C.V., or Controladora Mexicana, a Mexican joint venture company 50% owned by Pal Aeropuertos, S.A. de C.V., and 50% owned by Promotora Aeronáutica del Pacífico, S.A. de C.V. The Ministry of Communications and Transportation approved the sale to Controladora Mexicana, including its role as AMP’s Mexican partner pursuant to the privatization guidelines and the participation agreement relating to our privatization.
Although we believe AMP satisfies all their requirements under the privatization guidelines and the participation agreement, there can be no assurance that future allegations or official inquiries relating to AMP’s compliance with its obligations under those requirements will not take place. In the event of future inquiries or an official finding that AMP is or was not in compliance with the requirements of the privatization guidelines or the participation agreement, AMP could be subject to fines and the technical assistance agreement between us and AMP could be terminated, which could have a material effect on our operations. In addition, there can be no assurance that any such developments would not result in a material decrease in the market value of our shares or ADSs.ADSs or their liquidity.
Certain actions by Grupo México, S.A.B. de C.V. may affect our management, financial condition or results of operations.
On June 13, 2011, Grupo México, S.A.B. de C.V. (“Grupo México”) announced that its board of directors had approved the acquisition, directly or indirectly, of at least 30%, and up to 100%, of our shares outstanding at that time, excluding treasury shares, through a public tender offer. At that time, Grupo México had disclosed that it owned 20% of our total outstanding capital stock, all in the form of Series B shares. On March 29, 2012, Grupo México informed its shareholders that it had withdrawn its request for the authorization for a public tender offer from the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores).
In its most recent filing on Form 13D with the SEC on January 25, 2012, Grupo México disclosed that it owned 28.7% of our total outstanding capital stock. According to Grupo México´s financial statements published for the third and fourth quarters of 2012 with the Mexican Stock Exchange, it holds 29.59% of our total outstanding capital stock, in Series B shares.
Articles X and XII of our bylaws, among others, limit the ability of Series B shareholders, directly or with related parties, other than AMP, to hold more than 10% of our outstanding capital stock, and any shares held in excess of that amount must be sold in a public offering. In accordance with our bylaws, until the public offering of such shares takes place, such excess shares have no voting power and cannot be represented in any Shareholders’ Meeting.
Grupo México commenced two legal proceedings, among others, seeking (i) to modify our bylaws to eliminate the foregoing limitations and (ii) to terminate AMP’s special rights that stem from AMP’s ownership of our Series BB shares. The proceeding regarding AMP’s special rights is currently pending.
If successful, these proceedings could affect AMP’s special rights (for additional information, see “—AMP controls our management, and AMP’s interests may differ from those of other shareholders” in this section). The proceeding regarding the modification of our bylaws is also pending. Initially, Grupo México obtained a favorable decision from a civil court in Mexico City. We appealed this decision; however, on February 25, 2013 we were notified that the decision was affirmed on appeal by the appellate court. This decision is not yet final, as we filed a directamparo appeal on March 19, 2013, which will be resolved by a federal court. On April 10, 2013, we were informed that the court ordered the suspension of the civil courts’ decisions, pending the resolution of our appeal.
Although Grupo México prevailed in the first instance in the proceeding regarding our bylaws, these above-mentioned legal proceedings are not yet final and subject to appeal; consequently, until a final decision is issued, our by-laws remain valid and binding upon our shareholders, including the obligation to dispose of shares held by Grupo México above the 10% threshold specified in our by-laws. Although we cannot predict the content and scope of any judicial decision, a final decision that is not subject to appeal that is adverse to our bylaws could materially and adversely affect AMP’s special rights and our future management, policies, strategies and results of operations. See “Item 8,Financial Information – Legal Proceedings – Grupo México, S.A.B. de C.V. seeks to void certain of our bylaws”.
It is not possible to predict the extent to which these disputes with Grupo México will distract our management, the effects that future developments in this dispute might have on the price of our stock, its liquidity or our market value or the effects that these conflicts could have on our business or results of operations.
We filed a suit against all Mexican stock brokers requiring them to adhere to our bylaws and to enjoin them from acquiring our capital stock for Grupo México and its subsidiaries. Actions by the Mexican stock brokers in response to this suit may affect us.
In accordance with a decision of a Mexican court that instructs us and our directors and officers to take all necessary legal measures to maintain and protect our bylaws, on February 15, 2012 we initiated a lawsuit against all Mexican stock market brokers seeking that the stock market brokers strictly adhere to our bylaws and to restrict the sale of our shares to Grupo México and its subsidiaries if, in violation of our bylaws, they hold, individually or in the aggregate, more than 10% of our total outstanding capital stock .
On February 29, 2012, we were informed that a court issued preliminary injunctions that constrained Mexican stock brokers to, among other things, refrain from trading our shares for an individual, group or group of related entities, that could result in any way in the acquisition of an ownership position that exceeds the 10% maximum allowed by Article X of our bylaws. On December 14, 2012, the State of Jalisco’s Fifth Mercantile Court issued a new ruling that lifted the injunctions. Consequently, we appealed the ruling before the appropriate judicial authority. See “Item 8,Financial Information – Legal Proceedings – We filed legal action against all the Mexican stock market brokers seeking adherence to our bylaws”.
We cannot predict the consequences from this proceeding or the future actions of the Mexican stock brokers, including any limitations on our access to financing. It is also not possible to predict what effects future developments in this dispute might have on the price of our stock, its liquidity or our market value and the effects that this conflict could have on our business or results of operations.
Risks Related to Mexico
Adverse economic conditions in Mexico may adversely affect our financial condition or results of operations.
All of our operations are conducted in Mexico and are dependent upon the performance of the Mexican economy. As a result, our business, financial condition or results of operations may be affected by the general condition of the Mexican economy, over which we have no control. 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. We cannot assumeassure that such conditions will not return or that such conditions will not have a material adverse effect on our business, financial condition or results of operations.
Mexico began to enter a recession in the fourth quarter of 2008, during which GDP fell by approximately 1.6% and inflation increased by 2.5%. According to the Mexican National Statistical, GeographicInstitute for Statistics and Information InstituteGeography (INEGI), GDP fell by an additional 6.5% and inflation increased by an additional 3.6% in 2009. Although theThe Mexican economy has recently shown signs of improvement, the Mexican economy is still recoveringsince rebounded, and gross domestic product in the fourth quarter of 2009 decreased 2.3%2010 increased 4.6%, 3.9% in 2011 and 3.6% in 2012, in each case compared with the fourth quarter of 2008. For the first quarter of 2010 gross domestic product increased 4.3% compared to the first quarter of 2009 but decreased 0.35% in seasonally adjusted terms compared to the fourth quarter of 2009.previous year.
While interest rates in Mexico have recently decreased,remained at historical lows, Mexico historically has had, and in the future may have, high real and nominal interest rates. The annualized interest rates for Mexican Treasury Bills (Cetes), issued for 28-day period averaged
approximately 9.2%4.4%, 7.2%, 7.2%, 7.7%4.3% and 5.4%4.2% for 2005, 2006, 2007, 20082010, 2011 and 2009,2012 respectively. As of April 30, 2010,5, 2013, the Interbank Equilibrium Interest Rate ((Tasa de Interés IntercambiariaInterbancaria de Equilibrio; or “TIIE”) issued for 28-day period was 4.95%4.3%. To the extent that we incur Peso-denominatedpeso-denominated debt in the future, it could be at high interest rates.
If the Mexican economy does not continue to recover, if inflation or interest rates increase significantly or if the Mexican economy is otherwise adversely impacted, our business, financial condition or results of operations could be materially and adversely affected.
Depreciation or fluctuation of the peso relative to the U.S. dollar could adversely affect our results of operations and financial condition.
Any future significant appreciation or depreciation of the peso could impact our aggregate passenger traffic volume, which could have a material adverse effect on our results of operations. 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 that more than offset an increase in international passenger traffic volume. In 2008, the peso decreased substantially in value against the U.S. dollar, and while the peso has been gaining value against the dollar, it is possible that anotherAnother substantial decrease in value could occur, whichand it could (notwithstanding other factors) lead to a decrease in domestic passenger traffic that may not be offset by any increase in international passenger traffic. In 2010 the peso appreciated by 5.2%, as compared to the previous year; however, in 2011, the peso depreciated 12.7% against the dollar. In 2012, the peso appreciated 7.1% against the dollar. Any future significant appreciation of the peso could impact our aggregate passenger volume by increasing the cost of travel for international passengers. Depreciation of the peso could impact our aggregate passenger traffic volume by increasing the cost of travel for domestic passengers.
Although all of our current indebtedness is denominated in pesos, depending on economic and credit market conditions in Mexico, we may incur dollar-denominated debt to finance investments we make in the future. Under this scenario, a devaluation of the peso would increase the debt service cost of such dollar-denominated indebtedness and result in foreign exchange losses.
In addition, fluctuations in the exchange rate between the peso and the U.S. dollar, particularly depreciations, may adversely affect the U.S. dollar equivalent of the peso price of the Series B shares on the Mexican Stock Exchange. As a result, such peso depreciations will likely affect the market price of the ADSs. Exchange rate fluctuations would also affect the ADS depositary’s ability to convert into U.S. dollars, and make timely payment of, any peso cash dividends and other distributions paid in respect of the Series B shares.
The value and prices of securities issued by Mexican companies may be adversely affected by developments in other countries.
The Mexican economy may be, to varying degrees, affected by economic and market conditions in other countries. Although economic conditions in other countries may differ significantly from economic conditions in Mexico, investors’ reactions to adverse developments in other countries may have an adverse effect on the market value of securities of Mexican issuers. In October 1997, pricesFor instance, the credit freeze and global recession that began in 2007 and continued into 2009 had a significant impact in Mexico. Mexico’s stock market fell 48% during that period. Similarly, the European debt crisis which began in Greece and then spread to other countries such as Italy and Spain as well as European financial institutions, affected financial markets around the world and in Mexico. More recently, in September and December 2012, the third and fourth rounds, respectively, of both Mexican debtquantitative easing by the United States Federal Reserve were announced; this produced a significant increase in Mexico’s stock market and equity securities decreased substantially as a result of the sharp drop in Asian securities markets. Similarly, in the second halfprice of 1998commodities during the fourth quarter of 2012 and in early 1999, pricesthe first quarter of Mexican securities were adversely affected by the economic crises in Russia and Brazil. The Mexican debt and equities markets were also adversely affected by the recent global recession and financial crisis.2013.
In addition, in recent years economic conditions in Mexico have become increasinglyare strongly correlated with economic conditions in the United States as a result of NAFTA and increased economic activity between the two countries. Therefore, adverse economic conditions in the United States, the termination of NAFTA or other related events could have a material adverse effect on the
Mexican economy. We cannot provide assurance that events in other emerging market countries, in the United States or elsewhere, will not materially adversely affect our business, financial condition or results of operations.
Political conditions in Mexico could materially and adversely affect Mexican economic policy or business conditions and, in turn, our operations.
The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Mexican governmental actions concerning the economy could have a significant impact on Mexican private sector entities in general, as well as on market conditions and prices and returns on Mexican securities, including our securities.
National elections held on July 2, 2000 ended 71 yearsEnrique Peña Nieto, a member of rule by the Institutional Revolutionary Party (PRI)(“PRI”), began a six-year term as president of Mexico on December 1, 2012, after being elected to office on July 1, 2012. As with any governmental change, this change to the election of President Vicente Fox Quesada, a membercountry’s administration may lead to significant 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 National Action Party (PAN)Mexican capital markets and resultedin securities issued by Mexican companies. In addition, because in the increased representation of opposition parties in the MexicanJuly 1, 2012 election for Congress, and in mayoral and gubernatorial positions. On July 2, 2006, Felipe Calderon Hinojosa, also of the PAN, was elected to succeed him. While no single party currently hasobtained a clear majority, in the Congress or Senate, the Congressional elections in July 2009 resulted in the PRI more than doubling its presence in the lower chamber of Mexico’s Congress, winning 237 of the 500 seats. This shift ingovernmental gridlock and political power has transformed Mexico from a one-party state to a pluralist democracy. Multiparty rule is still relatively new in Mexico and could result in economic or political conditions that could materially and adversely affect our operations. The lack of a majority party in the legislature and the current lack of alignment between the legislature and the President could result in instability or deadlock.uncertainty may occur.
We cannot provide assuranceany assurances that changes in the policies of Mexico’s federal government will not have an adverse effect on our business, financial conditions and results of operations. Consequently we cannot provide assurances that Mexican political events,or social developments, over which we have no control, will not have an adverse effect onadversely affect our financial conditions, results of operations, our ability to make dividend payments to our shareholders or the market price of our securities.
High incidences of crime in Mexico and violence related to drug trafficking in particular, could adversely affect our business.
A travel alertTravel alerts issued by the U.S. Department of State (Bureau of Consular Affairs) on May 6, 2010, the most recent as of November 20, 2012 (the “Travel Alert”Warnings”), recommended the departureinformed of dependents of U.S. government personnel from U.S. consulatesincreased violence in the Northern Mexican bordermany towns and cities of Tijuana, Nogales,across Mexico but mostly occurring in certain cities in northern Mexico, including Ciudad Juarez, Nuevo Laredo, MonterreyTijuana, Chihuahua City, Nogales, Matamoros, Reynosa and Matamoros.Monterrey. According to the Travel Alert,Warnings, while millions of U.S. citizens safely visit Mexico each year, some are victims of violence. The Travel Alert reported that gunfights involving the Mexican army, police and drug cartels have taken place in many towns and cities across Mexico but occur mostly in certain cities in northern Mexico, including Ciudad Juárez, Tijuana, Chihuahua City, Nogales, Matamoros, Reynosa and Monterrey.
According to the Travel Alert,Warnings, a number of areasstates along the border and south-western Mexico continue to experience a rapid growth inhigh levels of many types of crimes. Robberies, homicides, petty thefts, and carjackings have all increased over the last year across Mexico,crimes with notable spikes in Chihuahua, Sinaloa, and northern Baja California.
Higher incidences of crime throughout Mexico and drug trafficking in particular,related violence could have an adverse affecteffect on our business as it may decrease the international passenger traffic directed to Mexico from abroad.Mexico.
Natural disasters could adversely affect our business.
From time to time, the Pacific and Central regions of Mexico experience torrential rains and hurricanes (particularly during the months of July through September), as well as earthquakes. Natural disasters may impede operations, damage infrastructure necessary
to our operations or adversely affect the destinations served by our airports. For example, in December 2009 and April 2010,October 2011, our Tijuana and Mexicali airportsPuerto Vallarta airport suffered the effects of an earthquakea hurricane but experienced only minor damage.damage, while our Manzanillo airport was closed for a week due to damage to the roads to and from the airport but not because of damage to the airport’s infrastructure. Any of these events could reduce our passenger traffic volume. The occurrence of natural disasters in the destinations we serve could adversely affect our business, results of operations, prospects and financial condition. We have insured the physical facilities at our airports against damage caused by natural disasters, accidents or other similar events, but do not have insurance covering losses due to resulting business interruption. Moreover, should losses occur, there can be no assurance that losses caused by damages to the physical facilities will not exceed the pre-established limits on any of our insurance policies.
Increased environmental regulation and enforcement in Mexico may affect us.
The level of environmental regulation in Mexico has significantly increased in recent years,is increasing and the enforcement of environmental laws is becoming substantiallyhas become more stringent. We expect this trend to continue and to be stimulated by international agreements between Mexico and the United States.common. There can be no assurance that environmental regulations or their enforcement will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition.
Changes to Mexican laws, regulations and decrees applicable to us could have a material adverse impact on our results of operations.
The Mexican government has in recent years implemented various changes to the tax laws applicable to Mexican companies, including us. The terms of our concessions do not exempt us from any changes to the Mexican tax laws. Should the Mexican government implement changes to the tax laws that result in our having significantly higher tax liability, we would 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. In addition, changes to the Mexican constitution or to any other Mexican laws could also have a material adverse impact on our results of operations.
The Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil) is responsible for establishing the official operating schedules of our airports. Outside of our airports’ official hours of operation, we are permitted to double our airport charges for services that we provide. Currently, our airports at Guadalajara, Puerto Vallarta and Morelia have official operating schedules of 24 hours per day. The Mexican Bureau of Civil Aviation can issue a decree extending the official operating schedule of one or more of our other airports to 24 hours per day,from its current schedule, which would deprive us of the ability to double our airport charges for off-hour services at airports for which such a decree has been issued. As of January 18, 2013 and February 8, 2013, the Mexican Bureau of Civil Aviation expanded the operating schedules of our Aguascalientes and Hermosillo airports, respectively, moving those schedules from 7:00 a.m. to 7:00 p.m. to 6:00 a.m. and 8:00 p.m. at our Aguascalientes airport and from 6:00 a.m. to 8:00 p.m. to 6:00 a.m. to 00:00 a.m. at our Hermosillo airport. There can be no assurance that upon issuance we will be successful in avoiding the consequences of such a decree.
Minority shareholders may be less able to enforce their rights against us, our directors, or our controlling shareholders in Mexico.
Under Mexican law, the protections afforded to minority shareholders are different from those afforded to minority shareholders in the United States. For example, because provisions concerning fiduciary duties of directors have only recently been incorporated into the new Securities Market Law, it may be difficult for minority shareholders to bring an action against directors for breach of this duty and achieve the same results as in most jurisdictions in the United States. ProceduresIn addition, the procedures for class action lawsuits do not exist under applicablewere incorporated into Mexican law.law and became effective in March 2012; however, certain rules and procedures could be different than the ones in the United States. Therefore, in some cases it may be more difficult for minority shareholders to enforce their rights against us, our directors, or our controlling shareholders than it would be for minority shareholders of a U.S. company.
We are subject to different corporate disclosure and accounting standards than U.S. companies.
A principal objective of the securities laws of the United States, Mexico, and other countries is to promote full and fair disclosure of all material corporate information, including accounting information. However, there may be different or less publicly available information about issuers of securities in Mexico than is regularly made available by public companies in countries with highly developed capital markets, including the United States.
In addition, accounting standards and disclosure requirements in Mexico differ from those of the United States. In particular, ourOur Financial Statements are prepared in accordance with MFRS,IFRS, which differdiffers from U.S. GAAP in a number of respects. Items on the financial statements of a company prepared in accordance with MFRSIFRS may not reflect its financial position or results of operations in the way they would be reflected, hadif such financial statements had been prepared in accordance with U.S. GAAP. Please see Note 28 to our audited consolidated financial statements and “Item 3.Key Information—Selected Financial Data.”
Item 4. | Information on the Company |
HISTORY AND DEVELOPMENT OF THE COMPANY
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 has been set at 100 years. We hold concessions to operate, maintain and develop 12 airports in the Pacific and central regions of Mexico. Each of our concessions has a term of 50 years beginning on November 1, 1998. The term of each of our concessions may be extended by the Ministry of Communications and Transportation under certain circumstances for up to 50 additional years. As operator of the 12 airports under our concessions, we charge airlines, passengers and other users fees for the use of the airports’ facilities. We also derive rental and other income from commercial activities conducted at our airports, such as the leasing of space to restaurants and retailers. For a description of our capital expenditures, see ““—Master Development Programs”Programs” below.
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. is a corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico. The address of our registered office is as set forth on the cover of this annual report on Form 20-F. Our telephone number is (52) (33) 3880-1100. Our U.S. agent is Puglisi & Associates. Our U.S. agent’s address is 850 Library Avenue, Suite 204, Newark, Delaware 19711.
Opening of Mexican Airports to Investment
In February 1998, the Mexican government issued the Investment Guidelines for the Opening of Investment in the Mexican Airport System. Under these guidelines, the Ministry of Communications and Transportation identified 35 of Mexico’s 58 principal airports as being suitable for investment. These 35 airports were divided into four groups: Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (currently consisting of our 12 airports),Grupo Aeroportuario del Sureste, or the Southeast Group (currently consisting of nine airports),Grupo Aeroportuario de la Ciudad de México, D.F., or the Mexico City Group (currently consisting of one airport) andGrupo Aeroportuario del Centro-Norte, or the Central-North Group (currently consisting of 13 airports). The guidelines generally provided for the airport groups to become open to investment through a two-stage program. All of the groups except the Mexico City Group have completed both stages of the program.
In the first stage, a series of public bidding processes were conducted to award a minority interest in each airport group to a strategic shareholder. In the second stage, all or a portion of the remaining interest in each airport group was sold through public offerings in the Mexican and international capital markets.
As a result of the opening of Mexico’s airports to investment, we and our subsidiaries are no longer subject to the Mexican regulations applicable to government wholly-owned companies. We believe that this provides us greater flexibility to develop and implement our business strategy and to respond to potential business opportunities.
Investment by AMP
In 1999, as part of the first stage in the process of opening Mexico’s airports to investment, the Mexican government sold a 15% equity interest in us to AMP, pursuant to a public bidding process.
The following are AMP’s current shareholders:
AENA Desarrollo Internacional, S.A. (“AENA”), or AENA, owns 33.33% of AMP. AENA is a wholly-ownedprivate company that is a subsidiary of Aena Aeropuertos, Españoles y Navegación Aérea,S.A., a subsidiary of Grupo AENA, a Spanish state-owned company that manages all airport operations in Spain. Aeropuertos Españoles y Navegación Aérea operates 47 airports in Spain and is one of the largest airport operators in the world. Pursuant to the privatization guidelines published by the Mexican government during the first phase of our privatization, requiring our strategic shareholder to have, among other qualifications,characteristics, an operating partner and a Mexican partner (each, a “key partner”), AENA is one of AMP’s two key partners, acting as its operating partner. In addition to its investment in AMP, AENA also directly manages four other airports in Latin America. In addition, AENA owns 10.0% of Airport Concessions and Development Limited, which owns a British airport company that operates thirteen airports in Europe, North America and Latin America through ownership, concession or management arrangements.
Controladora Mexicana (CMA)(“CMA”) owns 33.33% of AMP. Controladora Mexicana is a Mexican joint ventureprivate company 50% owned-owned by Pal Aeropuertos, S.A. de C.V. and 50% owned-owned by Promotora Aeronáutica del Pacífico, S.A. de C.V.; Pal Aeropuertos, S.A. de C.V. is a Mexican special purpose vehicle owned by Eduardo Sánchez Navarro Redo, an individual Mexican investor with substantial interests in Mexican real estate;Redo; Promotora Aeronáutica del Pacífico, S.A. de C.V. is a Mexican special purpose vehicle owned by Laura Diez Barroso Azcárraga and her husband, Carlos Laviada Ocejo. Mrs. Diez Barroso, has extensive experience in the magazine publishing industry and currently serves on the boards of directors of Teléfonos de México, S.A. de C.V., Grupo Financiero Inbursa, S.A. and Royal Caribbean Cruises, Ltd.; Mr. Laviada Ocejo, an individualand Mr. Sánchez Navarro are Mexican investorinvestors with substantial business interests in a variety of industries, including real estate development and automobile dealerships in Mexico City, currently serves on the board of directors of Toyota Mexico Dealers, A.C.estate. Pursuant to the privatization guidelines described above, Controladora Mexicana is AMP’s second key partner, acting as its Mexican partner.
• | Desarollo de Concesiones Aeroportuarias, S.A. (“DCA”), |
In 1999, AMP paid the Mexican government a total of Ps. 2,453.4 million2.45 billion (nominal pesos, excluding interest) (U.S.$ 261 million based on the exchange rates in effect on the datesdate of payment)AMP’s bid) in exchange for:
all of our Series BB shares, representing 15% of our outstanding capital stock;
an option to subscribe for up to 5% of newly issued Series B shares (since expired without being exercised); 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 AMP,(including AMP), a 15-year technical assistance agreement setting forth AMP’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 bidding process. These agreements are described in greater detail in Item 7 hereof.
Under the technical assistance agreement, AMP provides management and consulting services and transfers industry expertise and technology to us in exchange for a fee. In 2009,2012, this fee amounted to Ps. 111.7155.1 million. The agreement provides us an exclusive license in Mexico to use all technical assistance and expertise transferred to us by AMP or its shareholders during the term of the agreement. The agreement is scheduled to expire on August 29,25, 2014, and terminates on the date of the expiration ofsame day the participation agreement.agreement expires. The agreement automatically renews for successive five-year terms unless one party provides the other a notice of termination at least 60 days prior to a scheduled expiration date. Under our bylaws, a decision by us to renew or cancel the technical assistance agreement is subject to the approval of 51% of Series B shareholders other than AMP or any related party of AMP (to the extent that AMP or any such related party holds Series B shares). A party may terminate the technical assistance agreement prior to its expiration date upon non-compliance with its terms by the other party. AMP provides us assistance in various areas, including development of our commercial activities, preparation of marketing studies focusing on increasing passenger traffic, assistance with the preparation of the master development programsMaster Development Programs that we are required to submit to the Ministry of Communications and Transportation and the improvement of our airport operations.
The technical assistance fee for 2000 and 2001 was fixed at U.S.$ 7.0 million (adjusted annually for U.S. inflation since August 25, 2000). Since January 1, 2002, the technical assistance fee has been equal to the greater of U.S.$ 4.0 million adjusted annually for U.S. inflation since August 25, 2000 (measured by the U.S. Consumer Price Index) or 5% of our annual consolidated income from operations (calculated prior to deducting the technical assistance fee, income taxes and depreciation and amortization, and in each case determined in accordance with MFRS). We believe that this structure creates an incentive for AMP to increase our annual consolidated earnings. AMP is also entitled to reimbursement for the out-of-pocket expenses it incurs in its provision of services under the agreement.
The technical assistance agreement allows AMP, its shareholders and their affiliates to render additional services to us only if our Acquisitions Committee determines that these related parties have submitted the most favorable bid in a public bidding process involving at least three unrelated parties. For a description of this Committee, see Item 6 herein.
Pursuant to our bylaws, AMP (as holder of our Series BB shares) has the right to appoint and remove our top-level executive officers (upon consultation with our Nominations and Compensation Committee) to appoint and remove our top-level executive officers,, to elect four members of our board of directors and their alternates and to designate three of the members of our Operating Committee and 20% of the members of each other board committee (or one member of any committee consisting of fewer than five members). According to Mexican and United States independence standards, the members of our Audit Committee must be independent. AMP (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 any decision that has the objective to modifyof modifying or annulannulling its right to appoint our top-level executive officers). Pursuant to our bylaws, if at any time AMP (as the holder of our Series BB shares) were to hold less than 7.65% of our capital stock in the form of Series BB shares, it would lose its veto rights (but not other special rights). If at any time after August 25, 2014 AMP were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares would be mandatorily converted into Series B shares, which would cause AMP to lose all of its special rights. In addition, shareholders of AMP have allocated among themselves certain veto rights relating to the exercise by AMP of its veto and other rights, which increases the risk of impasse at the shareholders’ meeting of AMP and ultimately at our shareholders’ meetings.
Our bylaws, the participation agreement and the technical assistance agreement also contain certain provisions designed to avoid conflicts of interest between AMP and us, such as approval of certain related-party transactions by designated committees.
Our bylaws and certain of the agreements executed in connection with the privatization process prohibited AMP from transferring any of its Series BB shares before August 25, 2004. Since that date, AMP has been permitted to transfer up to 49% of its Series BB shares without restriction. Since August 25, 2009, AMP has been permitted to sell in any year up to 20% of its remaining 51% interest in our Series BB shares. Our bylaws provide that, subject to certain exceptions, Series BB shares must be converted into Series B shares prior to transfer.
AMP Shares in Bancomext Trust
As required under the participation agreement entered into in connection with the Mexican government’s sale of our Series BB shares to AMP, AMP has transferred its Series BB shares to a trust, the trustee of which is Banco Nacional de Comercio Exterior, S.N.C., or Bancomext. For a description of this trust, see “Item 7,Major Shareholders and Related Party Transactions—Transactions – Major Shareholders—Shareholders – AMP Trust, Bylaws and Stockholders’ Agreement”.”
Pursuant to the terms of the trust, AMP may direct the trustee to vote only shares representing up to 10% of our capital stock. Any shares in excess of 10% are voted by the trustee in accordance with the vote of the majority of Series B shares. The trust does not affect the veto and other special rights granted to the holders of Series BB shares described above.
Global Offering and Establishment of ADR Facility with New York Stock Exchange Listing
In 1999, 85% of our capital stock was transferred from the Mexican government to a trust established in Nacional Financiera, S.N.C., or NAFIN, a Mexican government-owned entity. In February 2006, we conducted an initial public offering to allow NAFIN to dispose of its 85% interest in us. Through this offering, all of our outstanding Series B shares were sold to the public in Mexico, the United States and elsewhere, and NAFIN ceased to be a shareholder. The net proceeds from the sale of shares were remitted entirely to the Mexican government. We received no proceeds from this offering. At the same time, we established an American Depositary Receipt facility with the Bank of New York Mellon (formerly the Bank of New York) and obtained approval to list our ADSs on the New York Stock Exchange. In addition, we registered our Series B shares with the National Securities Registry (Registro Nacional de Valores) and listed our Series B shares on the Mexican Stock Exchange.
Master Development Programs
Under the terms of our concessions, each of our subsidiary concession holders is required to present a master development programMaster Development Program for approval by the Ministry of Communications and Transportation every five years. Each master development programMaster Development Program includes investment commitments (including capital expenditures and improvements) applicable to us as concession holder for the succeeding five-year period. Once approved by the Ministry of Communications and Transportation, these commitments become binding obligations under the terms of our concessions.
In December 2009, the Ministry of Communications and Transportation approved our master development programsMaster Development Programs for each of our airports for the 2010 to 2014 period. This 5-year program took effect on January 1, 2010 and will be in effect from January 1, 2010 untilthrough December 31, 2014.
The following table below sets forth our historical capital expenditures. Capital expenditures whichare calculated on a cash flow basis, meaning that capital expenditures are equal to those investments actually paid for by each airport during a given year and not including investments allocated for by the airport during that year but not paid for during the given year. The investments shown in the table below therefore reflect our actual expenditures (asactually paid for by our airports for the years indicated. In order to be compared towith our committed investments which are presented further below), by airport, for a given year, the years indicated.investments made in the previous year but paid for in the given year need to be subtracted while the investments allocated but not paid for in the given year need to be added. For the 2011 and 2012, the total of our investments allocated but unpaid were Ps. 276.4 million and Ps. 163.6 million respectively. The substantial majority of these investments were made under the terms of our master development programs.Master Development Programs.
Historical Capital Expenditures by Airport
Year ended December 31, | |||||||||
2007 | 2008(1) | 2009(1) | |||||||
(thousands of pesos) | |||||||||
Guadalajara | Ps. | 238,682 | Ps. | 160,491 | Ps. | 112,905 | |||
Tijuana | 25,401 | 38,512 | 70,814 | ||||||
Puerto Vallarta | 178,223 | 26,723 | 35,718 | ||||||
Los Cabos | 318,842 | 181,211 | 72,782 | ||||||
Hermosillo | 17,330 | 22,271 | 57,904 | ||||||
Guanajuato | 11,637 | 20,942 | 44,940 | ||||||
La Paz | 8,594 | 10,215 | 27,036 | ||||||
Morelia | 2,164 | 8,040 | 31,534 | ||||||
Mexicali | 12,256 | 19,499 | 22,715 | ||||||
Aguascalientes | 22,147 | 6,948 | 26,658 | ||||||
Los Mochis | 15,254 | 13,120 | 17,924 | ||||||
Manzanillo | 8,323 | 8,608 | 17,152 | ||||||
Other | 72,764 | 5,394 | 4,032 | ||||||
Total | Ps. | 931,617 | Ps. | 521,974 | Ps. | 542,114 | |||
Year ended December 31, | ||||||||
2011 | 2012 | |||||||
(thousands of pesos) | ||||||||
Guadalajara | Ps. | 223,636 | Ps. | 198,807 | ||||
Tijuana | 224,802 | 81,751 | ||||||
Los Cabos | 356,923 | 384,284 | ||||||
Puerto Vallarta | 247,673 | 147,428 | ||||||
Hermosillo | 48,033 | 31,638 | ||||||
Guanajuato | 58,371 | 37,834 | ||||||
La Paz | 17,420 | 14,820 | ||||||
Morelia | 24,301 | 13,551 | ||||||
Mexicali | 11,797 | 9,980 | ||||||
Aguascalientes | 8,922 | 766 | ||||||
Los Mochis | 13,759 | 27,208 | ||||||
Manzanillo | 10,267 | 18,957 | ||||||
Other | 9,132 | 11,990 | ||||||
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Total | Ps. | 1,255,036 | Ps. | 979,014 | ||||
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The following table sets forth our historical capital expenditures by type of investment across all of our airports for the years indicated:
Historical Capital Expenditures by Type
Year ended December 31, | Year ended December 31, | ||||||||||||||||
2007 | 2008(1) | 2009(1) | 2011 | 2012 | |||||||||||||
(thousands of pesos) | (thousands of pesos) | ||||||||||||||||
Terminals | Ps. | 406,804 | Ps. | 138,161 | Ps. | 152,230 | Ps. | 501,982 | Ps. | 549,287 | |||||||
Runways and aprons | 276,597 | 312,754 | 262,511 | 372,888 | 86,856 | ||||||||||||
Machinery and equipment | 65,966 | 39,470 | 85,148 | 346,846 | 296,626 | ||||||||||||
Other | 182,250 | 31,589 | 42,225 | 33,320 | 46,245 | ||||||||||||
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| ||||||||||||||||
Total | Ps. | 931,617 | Ps. | 521,974 | Ps. | 542,114 | Ps. | 1,255,036 | Ps. | 979,014 | |||||||
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During 2007, 72.8%2011 and 2012, 38.1% and 19.7%, respectively, of our capital expenditures were funded by cash flows from operations, while the balance was funded with bank loans. Meanwhile, during 2008 and 2009, 27.3% and 26.6% respectively, of our capital expenditures were funded by cash flows
from operations, while the balance was funded with bank loans. We expect to continue funding the most significant portion of our capital expenditures in the future with new bank loans,loans; however, our ability to incur debt may be restricted by our existing bank loans. See “Item 5.5,Operating and Financial Review and Prospects—Prospects – Liquidity and Capital Resources”.
During 2011 and 2012, we paid Ps. 147.3 million and Ps. 34.1 million, respectively, for the baggage screening equipment using funds placed in a trust for this purpose in 2009. For more information on equipment screening, see “Item 4,Business Overview – Regulatory Framework – Scope of Concession”.
Our capital expenditures from 2007 through 20092011 and 2012 were allocated to the following types of investments at the majority of our airports:
• |
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• | Runways and |
• | Machinery and equipment.We invested in machinery and equipment such as fire extinguishing vehicles, emergency back-up electricity generators, metal detectors and other security-related equipment, ambulances, |
• |
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The following tables set forth our estimated committed investments for each airport for 2005 through 2009 and for 2010 through 2014 under our master development programs.Master Development Programs. These amounts are based on investment commitments approved by the Ministry of Communications and Transportation and have beenTransportation. Because the amounts are expressed in constant pesos as of December 31, 2007, the figures for investments periods not yet elapsed are adjusted by us to take into consideration increases in petroleumthe Mexican Producer Price Index, construction sector, materials, equipment rental and steel pricesfees segment (Índice Nacional de Precios al Productor, sector construcción, materiales, alquiler de maquinaria y remuneraciones) since the date of the Ministry’s approval.approval of the Master Development Program then in effect. We are required to comply with the investment obligations under these programs on a year-by-yearyear-to-year basis.
Estimated Committed Investments by Airport (2005-2009)(2010-2014)
Year ended December 31, | Year ended December 31, | ||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||
(thousands of pesos)(1)(2)(3) | (thousands of pesos)(1) | ||||||||||||||||||||||||||||||||||
Guadalajara | Ps. | 221,029 | Ps. | 162,231 | Ps. | 182,321 | Ps. | 156,512 | Ps. | 26,719 | Ps. | 102,144 | Ps. | 197,050 | Ps. | 138,683 | Ps. | 210,340 | Ps. | 171,416 | |||||||||||||||
Tijuana | 73,242 | 29,178 | 24,668 | 51,270 | 58,659 | 96,721 | 167,515 | 27,304 | 8,300 | 3,432 | |||||||||||||||||||||||||
Puerto Vallarta | 190,673 | 102,525 | 157,102 | 29,395 | 19,774 | 113,328 | 186,583 | 92,500 | 24,200 | 21,800 | |||||||||||||||||||||||||
Los Cabos | 54,501 | 178,569 | 155,249 | 227,932 | 199,996 | 151,232 | 342,352 | 192,200 | 38,010 | 30,800 | |||||||||||||||||||||||||
Hermosillo | 51,656 | 44,820 | 14,578 | 22,912 | 47,906 | 18,173 | 24,675 | 12,900 | 2,032 | 13,300 | |||||||||||||||||||||||||
Guanajuato | 38,032 | 21,368 | 14,563 | 34,424 | 29,316 | 13,311 | 35,464 | 37,687 | 6,495 | 3,000 | |||||||||||||||||||||||||
La Paz | 40,906 | 20,359 | 9,119 | 13,903 | 20,637 | 2,200 | 2,800 | 8,500 | 41,290 | 2,750 | |||||||||||||||||||||||||
Morelia | 43,038 | 24,714 | 8,166 | 10,212 | 35,389 | 14,106 | 10,270 | 13,468 | 2,758 | 634 | |||||||||||||||||||||||||
Mexicali | 65,763 | 17,603 | 14,362 | 17,573 | 16,487 | 7,700 | 6,900 | 7,295 | 10,684 | 1,680 | |||||||||||||||||||||||||
Aguascalientes | 16,157 | 9,178 | 7,794 | 16,798 | 29,861 | 6,329 | 4,846 | 1,450 | 7,144 | 550 | |||||||||||||||||||||||||
Los Mochis | 16,308 | 11,630 | 8,682 | 14,687 | 11,216 | 13,400 | 8,300 | 19,300 | 24,910 | 2,700 | |||||||||||||||||||||||||
Manzanillo | 34,888 | 25,214 | 11,917 | 10,807 | 16,027 | 15,260 | 2,701 | 10,930 | 35,186 | 1,669 | |||||||||||||||||||||||||
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Total | Ps. | 846,193 | Ps. | 647,389 | Ps. | 608,521 | Ps. | 606,425 | Ps. | 511,987 | Ps. | 553,904 | Ps. | 989,456 | Ps. | 562,217 | Ps. | 411,349 | Ps. | 253,731 | |||||||||||||||
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(1) | Figures expressed in constant pesos as of December 31, |
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Estimated Committed Investments by Airport (2010-2014)
Year ended December 31, | |||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||
(thousands of pesos)(1) | |||||||||||||||
Guadalajara | Ps. | 102,144 | Ps. | 197,050 | Ps. | 138,683 | Ps. | 210,340 | Ps. | 171,416 | |||||
Tijuana | 96,721 | 167,515 | 27,304 | 8,300 | 3,432 | ||||||||||
Puerto Vallarta | 113,328 | 186,583 | 92,500 | 24,200 | 21,800 | ||||||||||
Los Cabos | 151,232 | 342,352 | 192,200 | 38,010 | 30,800 | ||||||||||
Hermosillo | 18,173 | 24,675 | 12,900 | 2,032 | 13,300 | ||||||||||
Guanajuato | 13,311 | 35,464 | 37,687 | 6,495 | 3,000 | ||||||||||
La Paz | 2,200 | 2,800 | 8,500 | 41,290 | 2,750 | ||||||||||
Morelia | 14,106 | 10,270 | 13,468 | 2,758 | 634 | ||||||||||
Mexicali | 7,700 | 6,900 | 7,295 | 10,684 | 1,680 | ||||||||||
Aguascalientes | 6,329 | 4,846 | 1,450 | 7,144 | 550 | ||||||||||
Los Mochis | 13,400 | 8,300 | 19,300 | 24,910 | 2,700 | ||||||||||
Manzanillo | 15,260 | 2,700 | 10,930 | 35,186 | 1,669 | ||||||||||
Total | Ps. | 553,904 | Ps. | 989,455 | Ps. | 562,217 | Ps. | 411,349 | Ps. | 253,731 | |||||
The following tables set forth our estimated committed investments for 2005 through 2009 and for 2010 through 2014 by type of investment:
Estimated Committed Investments by Type (2005-2009)(2010-2014)
Year ended December 31, | Year ended December 31, | ||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||||||||
(thousands of pesos)(1)(2)(3) | (thousands of pesos)(1) | ||||||||||||||||||||||||||||||||||
Terminals | Ps. | 220,943 | Ps. | 121,055 | Ps. | 247,043 | Ps. | 298,476 | Ps. | 225,305 | Ps. | 98,518 | Ps. | 453,053 | Ps. | 285,725 | Ps. | 164,669 | Ps. | 101,914 | |||||||||||||||
Runways and aprons | 154,424 | 350,617 | 212,660 | 187,384 | 180,045 | 241,492 | 328,073 | 140,743 | 144,501 | 105,523 | |||||||||||||||||||||||||
Machinery and equipment | 52,483 | 36,853 | 17,690 | 11,011 | 8,387 | 117,655 | 83,700 | 62,630 | 38,902 | 33,225 | |||||||||||||||||||||||||
Baggage screening systems—initial investments | 333,224 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Baggage screening systems—additional investments | 20,358 | 64,042 | 64,042 | 64,042 | 64,042 | ||||||||||||||||||||||||||||||
Other | 64,761 | 74,822 | 67,086 | 45,512 | 34,208 | 96,239 | 124,630 | 73,119 | 63,277 | 13,069 | |||||||||||||||||||||||||
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Total | Ps. | 846,193 | Ps. | 647,389 | Ps. | 608,521 | Ps. | 606,425 | Ps. | 511,987 | Ps. | 553,904 | Ps. | 989,456 | Ps. | 562,217 | Ps. | 411,349 | Ps. | 253,731 | |||||||||||||||
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(1) | Figures expressed in constant pesos as of December 31, |
Estimated Committed Investments by Type (2010-2014)
Year ended December 31, | |||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||
(thousands of pesos)(1) | |||||||||||||||
Terminals | Ps. | 98,518 | Ps. | 453,053 | Ps. | 285,725 | Ps. | 164,669 | Ps. | 101,914 | |||||
Runways and aprons | 241,492 | 328,073 | 140,743 | 144,501 | 105,523 | ||||||||||
Machinery and equipment | 117,655 | 83,700 | 62,630 | 38,902 | 33,225 | ||||||||||
Other | 96,239 | 124,629 | 73,119 | 63,277 | 13,069 | ||||||||||
Total | Ps. | 553,904 | Ps. | 989,455 | Ps. | 562,217 | Ps. | 411,349 | Ps. | 253,731 | |||||
In 2005, the Mexican government issued a policy letter (carta de política) calling for all checked baggage on international commercial flights beginning in January 2006, and on domestic commercial flights beginning in July 2006, to undergo a new comprehensive screening process. Because of uncertainty over the policy letter’s implementation, the new screening process has been delayed. In particular, the policy letter does not specify which parties should bear responsibility for the new screening process. Although the Mexican Airport Law expressly provides that airlines bear the responsibility for baggage screening, the fact that the policy letter is silent as to responsibility has caused some of our airline customers to contend that the policy letter’s intent is for airport concessionaires, such as us, to bear responsibility for the new screening process. In addition, certain questions have been raised regarding the constitutionality of the new screening process. The Mexican Bureau of Civil Aviation is expected to issue regulations implementing the policy letter, but these may not address the questions of responsibility and constitutionality that have been raised.
The new process is expected to require the installation of new screening equipment and that baggage be checked manually if the equipment signals the potential presence of prohibited items. In December 2009, we entered into an Agreement with Rapiscan Systems for the installation of a new baggage screening system. The system is expected to be in operation at our 12 airports no later than November 2010. We do not, however, expect to operate the screening systems because we believe this to be the responsibility of our airline customers under the Mexican Airport Law. We would operate the screening systems only if we reach a written agreement with our airline customers regarding the allocation of cost and responsibility. If we are required to operate the new screening systems, our exposure to liability could increase. We expect to incur ongoing expenses to maintain the equipment we have purchased.
Differences between estimated committed investments and historical capital expenditures for 2011 and 2012 are due primarily to: i) the capital expenditures made but unpaid during the prior year less the investments made but unpaid during the current year, ii) adjustments for inflation (as described above), iii) advancing and delaying certain committed investments that were approved by the Mexican Bureau of Civil Aviation in response to our not having yet installed thisneeds related to the G20 meeting held in Los Cabos and iv) investments in the installation of new baggage screening equipment. As of December 31, 2009, funds of Ps. 352.4 million were placed in a trust in order to guarantee the funds for necessary capital expenditures for the period and the payment to the supplier of the baggage screening system. See Note 7 to our audited consolidated financial statements for a discussion of the trust. The installation of the new equipment was originally contemplated under our master development programs, but as a result of the issues outlined above, we do not believe that we are, or at any time have been, in legal breach of our master development programs.
We expect to continue fundingfund the majoritymost significant portion of our operationscapital investments in the short-term and long-term through cash flow from operations, although we have incurred indebtedness.bank loans. We allocated a majority of our investments for the 2010–2014 period 2005 through 2009 to our fivefour largest airports and our new master development program does the same.airports. In particular, investments have been, and will continue to be, dedicated to expanding and remodeling the Guadalajara, Puerto Vallarta, Tijuana and Los Cabos international terminals.airports.
Our Operations
We hold concessions to operate 12 airports, which serve two major metropolitan areas (Guadalajara and Tijuana), several tourist destinations such as Puerto(Puerto Vallarta, Los Cabos, La Paz and Manzanillo,Manzanillo), and a number of mid-sized cities such as Hermosillo,(Hermosillo, Guanajuato, Morelia, Aguascalientes, Mexicali and Los Mochis.Mochis). Our airports are located in nine of the 32 Mexican states, covering a territory of approximately 566,000 square kilometers, with a population of approximately 26.728.2 million according to the INEGI. All of our airports are designated as international airports under Mexican law, meaning that they are all equipped to receive international flights and maintain customs, refueling and immigration services managed by the Mexican government.
All revenue amounts in this “Business Overview” section for 2011 and 2012 include revenues from improvements to concession assets; however, in some cases we include discussion surrounding only aeronautical and non-aeronautical revenues or the sum of both. See the introduction to Item 3, “Selected Financial Data,” for a discussion of the reasons for using aeronautical and non-aeronautical revenues for certain comparisons. We specifically state when either aeronautical or non-aeronautical revenues are being used. Because aeronautical and non-aeronautical revenues are derived from our business operations, we believe these figures may in some cases be more useful to you because those revenues stem from the key drivers of our business, passenger traffic and our maximum rates.
Our airports handled approximately 22.320.2 million and 19.321.3 million terminal passengers in 20082011 and 2009,2012, respectively, which we believe makesplaces us among the largest private airport operatoroperators in the Americas. As of December 31, 2009,2012, five of our airports ranked among the top ten busiest airports in Mexico based on commercial aviation passenger traffic, according to data published by the Mexican Airport and Auxiliary Services Agency. According to figures of the Mexican Airport and Auxiliary Services Agency, our commercial aviation passenger traffic accounted for approximately 21.4%25.1% and 26.7%24.5% of all arriving and departing commercial aviation passengers in Mexico in 20082011 and 2009,2012, respectively. In 2009,2012, we recorded total revenues of Ps. 3,266.24.9 billion, of which Ps. 4.4 billion corresponds to the sum of aeronautical and non-aeronautical revenues and Ps. 570.2 million corresponds to the improvements to concession assets, and we recorded net income of Ps. 1,199.4 million.1.8 billion.
Our airports serve several major international routes, including Guadalajara-Los Angeles, which, in 2009,2012, ranked as the third busiest international route in Mexico by total number of passengers according to the Mexican Bureau of Civil Aviation. In addition, our airports serve major resort destinations such as Puerto Vallarta and Los Cabos, which are among the most popular destinations in Mexico visited by tourists from California.the United States. Our airports also serve major domestic routes, including Guadalajara-Mexico City, which was the country’s third busiest route in 2009,2012, according to the Mexican Bureau of Civil Aviation. Other top domestic routes in terms of total passenger traffic include Guadalajara-TijuanaMexico City-Tijuana and Mexico City-TijuanaGuadalajara-Tijuana which ranked fourth and fifthsixth among the busiest domestic routes in Mexico in 2009,2012, according to the Mexican Bureau of Civil Aviation.
Mexico and the United States are party to a bilateral aviation agreement, which was last amended on December 12, 2005 (the amendment was published in the Mexican Federal GazetteDiario Oficial de la Federación on July 18, 2006). The most recent amendment increased, from two each to three each, the number of Mexican and U.S. carriers eligible to operate routes between fourteen cities in Mexico and any U.S. city. The amendment had immediate effect for twelve specified cities in Mexico, including the following cities in which we operate: Manzanillo, Puerto Vallarta and San JoséJose del Cabo (the site of our Los Cabos International Airport). The amendment took effect with respect to the cities of Monterrey and Guadalajara on October 27, 2007. We believe that our business has benefited from and will continue to benefit from the amendment to the bilateral aviation agreement.
Principal Mexican Airports by Passenger Traffic
Airport | Aviation Passengers(1) (in thousands) | |||
Mexico City | 29,481.3 | |||
| 14,480.9 | |||
Guadalajara* | 7,436.4 | |||
Monterrey | 6,105.9 | |||
Tijuana* | 3,759.7 | |||
Los Cabos* | 3,018.5 | |||
Puerto Vallarta* | ||||
| ||||
| ||||
Hermosillo* | 1,288.7 | |||
| 1,245.3 | |||
Culiacan | 1,168.4 |
* | Indicates airports operated by us. |
(1) | Excluding general aviation passengers. |
Source: | Mexican Airport and Auxiliary Services Agency and |
Guadalajara and Tijuana are among Mexico’s most important manufacturing, industrial and commercial centers. Both cities have significant maquiladoraindustries. A maquiladoraplant is a manufacturing facility to which mostly raw materials are imported and from which finished products are exported, with the manufacturer paying tariffs only on the value added in Mexico.Maquiladoraplants were originally concentrated along the Mexico-U.S. border, but more recently have moved farther south in
order to access lower labor costs and a larger and more diverse labor pool, and to take greater advantage of certain inputs available from Mexican suppliers. In 2009,2012, our Guadalajara International Airport and our Tijuana International Airport constitutedwere Mexico’s third and fifth busiest airports, respectively, in terms of passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 20082011 and 2009,2012, our Guadalajara International Airport and Tijuana International Airport together represented approximately 50.2%53.0% and 51.1%52.6%, respectively, of our terminal passenger traffic and 46.7% and 47.1%47.4% of our total revenues, respectively (in 2011 and 2012, they represented 50.2% and 49.4%, respectively, of our total revenues.the sum of aeronautical and non-aeronautical revenues).
Four of our airports, Puerto VallartaLos Cabos International Airport, Los CabosPuerto Vallarta International Airport, La Paz International Airport and Manzanillo International Airport, serve popular Mexican tourist destinations. Of these tourist destinations, Puerto Vallarta and Los Cabos are the largest, with Puerto Vallarta constituting Mexico’s third largest international tourist destination and Los Cabos the fourthsecond in terms of visitors in 2009,2012, according to the Mexican National Institute of Migration (Instituto Nacional de Migraciónor INM“INM”). Los Cabos and Puerto Vallarta and Los Cabos attracted approximately 3.0 million and 2.6 million terminal passengers, each,respectively, in 2009.2012. In 2009,2011 and 2012, our Los Cabos International Airport and Puerto Vallarta International Airport and Los Cabos International Airport together represented 27.3%in each year 26.4% of our terminal passengers and 33.5%36.8% and 34.1%, respectively, of our total revenues.revenues (in 2011 and 2012, they represented 31.8% and 32.5%, respectively, of the sum of aeronautical and non-aeronautical revenues).
Mexico is one of the main tourist destinations in the world. Mexico has historically ranked in the top ten countries worldwide in terms of foreign visitors, with 21.523.1 million international tourists in 2009,2012, according to the Mexican Ministry of Tourism. Within Latin America and the Caribbean, Mexico ranked first in 2009 in terms of number of foreign visitors and income from tourism, according to the World Tourism Organization. The tourism industry is one of the largest generators of foreign exchange in the Mexican economy. Within Mexico, the region bordering the Pacific Ocean (where several of our airports are located) is a principal tourist destination due to its beaches and cultural and archeological sites, which are served by numerous hotels and resorts.
The remaining six airports in our group serve mid-sized cities—Hermosillo, León,Leon, Morelia, Aguascalientes, Mexicali and Los Mochis—with diverse economic activities. These cities are industrial centers (Hermosillo, León,Leon, Aguascalientes and Mexicali) and/or
serve as the hubs for important agricultural regions (León,(Leon, Morelia and Los Mochis). In 2012, our six airports serving mid-sized cities accounted for approximately 17.6% of our terminal passenger traffic and 15.4% of our total revenues (15.0% of the sum of our aeronautical and non-aeronautical revenues). In 2011, our six airports serving mid-sized cities accounted for approximately 17.1% of our terminal passenger traffic and 13.8% of our total revenues (14.8% of the sum of our aeronautical and non-aeronautical revenues). Of these six airports, Hermosillo has the greatest passenger traffic volume. In 2009,2012, Hermosillo accounted for approximately 6.1% of our terminal passenger traffic and 4.6%4.3% of our total revenues.revenues (4.6% of the sum of aeronautical and non-aeronautical revenues). In 2009, our six airports serving mid-sized citiesthe previous year 2011, Hermosillo accounted for approximately 18.0%5.9% of our terminal passenger traffic and 15.9%4.2% of our total revenues.revenues (4.5% of the sum of aeronautical and non-aeronautical revenues).
Our Sources of Revenues
Aeronautical Services
Aeronautical services represent the most significant source of our revenues. In 2007, 20082011 and 20092012 aeronautical services revenues represented approximately 80.9%, 79.1%62.3% and 77.7%68.1% respectively, of our total revenues.revenues (in 2011 and 2012, aeronautical services represented 78.9% and 76.9% respectively, of the sum of aeronautical and non-aeronautical revenues). All of our revenues from aeronautical services are regulated under the maximum-rate price regulation system applicable to our airports.
Our revenues from aeronautical services are derived principally from the charges listed below. Aeronautical services revenues are principally dependent on the following factors: passenger traffic volume, the number of air traffic movements, the weight of the aircraft, the duration of an aircraft’s stay at the airport and the time of day the aircraft operates at the airport.
Passenger Charges
We collect a passenger charge for each departing passenger on an aircraft (other than diplomats, infants and transit and transfer and transit passengers)passengers, if the transfer of the passenger occurs within 24 hours of the passenger’s arrival at the airport). We do not collect passenger charges from arriving passengers. Passenger charges are automatically included in the cost of a passenger’s ticket, and we issue invoices for those charges to each airline on a weekly basis and record an account receivable for the invoice corresponding to a flight during the actual month of the flight.
Before the opening of Mexico’s airports to private investment, all airports in Mexico had entered into agreements with national and foreign airlines under which the airlines were obligated to collect all passenger charges on behalf of the airports in exchange for being given a period of time in which to reimburse those passenger charges to the airports. The length of the reimbursement period was tied to the interest rate on short-term Mexican Treasury Bills, or “Cetes”, in order to allow airlines to accumulate interest that would compensate them for the costs they incurred in collecting those passenger charges.
In 2003 and 2005, we renegotiated these agreements and set payment periods of 26 to 152 days after our invoice delivery date. During 2008 and 2009 (through October 31, 2009), on average, we received payment within 75 to 86 days and 79 to 136 days, respectively. The passenger charges collection agreement that was in effect through October 31, 2009 maintained a term for payment which depended on the interest rates on theCetes, with longer payment periods during periods of lower interest rates (within a defined range).
During 2009, however, we again renegotiated our passenger charges collection agreements with all of our airline customers. By November 2009 we had reached agreements with all of our airline customers. Under the new agreements, airlines requesting payment period extensions are obligated to: i) reimburse passenger charges collected on behalf of our airports during a period no greater than 60 days (depending on each airline) after the “operational average date” (no longer than the invoice date) for such charges,charges; and ii) provide cash, bonds, a stand bystandby letters of credit or other similar instruments as a guarantee for passenger charges in an amount equal to the highest passenger charges received by the airline on an airport by airport basis for the previous year during a period of time equal to the requested payment period plus 30 additional days. Each airline with a payment grace period is obligated to maintain the guarantee at an agreed uponagreed-upon level, with respect to each airport and if it does not do so, must reimburse the passenger charges on the
day the applicable flight departs from our airports without any grace period. If the airline pays one of our airports on time, the airport is obligated to give the airline an allowance of 3% of the value of each invoice billed no later than 7 days after payment date. The airline can then apply this allowance to cover airport services, leases for ticket counters and back-office and passenger charges. During 2011 and 2012, under the new agreement we received payments within an average period of 65 and 57 days, respectively.
In December 2006February 2010, we renewed oursigned an agreement with the Air Transportation Chamber pursuant to which, in March 2007, we increased domestic passenger charges by amounts ranging from 7.28% to 17.28% at all of our airports and increased international passenger charges by amounts ranging from 7.28% to 15.28% at all of our airports. In February 2010, we signed a new agreement that allowsallowed a 10.1% increase in the maximum passenger charges rate for 2010 and an increase in the rest of our specific tariffs equal to the average increases of the Mexican Consumer Price Index (Índice Nacional de Precios al Consumidor)and the Mexican Producers Price Index excluding petroleum (Índice Nacional de Precios al Productor, excluyendo petróleo)published by the Mexican Central BankNational Institute for 2011.Statistics and Geography (INEGI) for 2010. In June 2012, we published our rate for passenger charges and specific tariffs for 2012, which increased by an average of 5.5% at all of our airports in accordance with the Mexican Consumer Price Index and the Mexican Producers Price Index excluding petroleum published by the INEGI. In March 2012, we signed a new agreement for the 2012–2014 period, which maintained essentially the same terms and conditions as our previous contract.
Additionally, onOn December 30, 2009, the new maximum tariffs for our airports for the 2010 – 20142010-2014 five-year period were published in the Official Gazette of the Federation (Diario Oficial de la Federación). The combined maximum tariffs are expressed in workload units for each airport and were determined based onon: i) projected workload units (expressed in cargo-work units, whereby(whereby each cargo-workworkload unit is equivalent to one passenger, or 100 kilograms (220 pounds) of cargo, including those transported in passenger airplanes), ii) the capital investments and iii) the operating expenses included in the master development programMaster Development Program authorized for
the 2010-2014 period. The maximum tariffs for the 2010-2014 period are expressed in pesos as of December 31, 2007 and arewill be adjusted according toby the efficiency factor. The maximum tariffs, however, are only adjusted forlevel of inflation according to the National ProducerProducers Price Index excluding petroleum and by the efficiency factor at the end of any given period based onyear within the National2010-2014 period. Since the inflation for each applicable year as measured in terms of the variation of the Producer Price Index excluding petroleum is not known at such date. Therefore the adjustmentsbeginning of the application of the maximum tariffs negotiated with the DGAC, the adjustment for inflation areis not included in the current maximum rates as set at the beginning of each five-year period.
Although the Ministry of Communications and Transportation may in some cases authorize an increase in our maximum rates, we must negotiate with our principal airline customers the specific rates applicable to each aeronautical activity. As a result, we are not always able to increase prices up to the amount of maximum rates.
International passenger charges are currently dollar-denominated, but are invoiced and collected in pesos based on the average exchange rate during the month prior to the flight. Domestic passenger charges are peso-denominated. In 2007, 20082011 and 2009,2012, passenger charges represented approximately 83.2%, 82.5%83.1% (of which domestic passenger charges represented 45.7% and 82.4%international passenger charges represented 37.4%) and 83.9% (of which domestic passenger charges represented 45.8% and international passenger charges represented 38.1%), respectively, of our aeronautical services revenues and approximately 67.3%, 65.3%51.8% (of which domestic passenger charges represented 28.5% and 64.0%international passenger charges represented 23.3%) and 57.1% (of which domestic passenger charges represented 31.2% and international passenger charges represented 25.9%), respectively, of our total revenues. In 2011 and 2012, passenger charges represented 65.5% (of which domestic passenger charges represented 36.0% and international passenger charges represented 29.5%) and 64.5% (of which domestic passenger charges represented 35.2% and international passenger charges represented 29.3%), respectively, of the sum of aeronautical and non-aeronautical revenues. Passenger charges vary at each of our airports and are baseddepending on whether the destination of each flight.is national or international. Because passenger charges for international flights are denominated in U.S. dollars, the value of our revenues from those charges is therefore affected by fluctuations in the value of the U.S. dollar as compared to the peso.
Aircraft Landing Charges
We collect landing charges from carriers for their use of our runways, illumination systems on the runways and other visual landing assistance services. Our landing charges are different for each of our airports and are based on each landing aircraft’s weight (determined as an average of the aircraft’s weight without fuel and maximum takeoff weight), the time of the landing, the origin of the flight and the nationality of the airline or client. In 2007, 20082011 and 2009,2012, aircraft landing charges represented approximately 4.8%5.1%, 5.3% and 5.5%, respectively,each year, of our aeronautical revenues and 3.9%3.2% and 3.5%, 4.2% and 4.2%,respectively, of our total revenues.revenues (in 2011 and 2012, aircraft landing charges represented 4.0% and 3.9%, respectively, of the sum of aeronautical and non-aeronautical revenues).
Aircraft Parking Charges
We collect various charges from carriers for the use of our facilities by their aircraft and passengers after landing. We collect aircraft parking charges for aircraft that are loading and unloading passengers or cargo as well as for long-term aircraft parking that does not involve the loading or unloading of passengers or cargo. Aircraft parking charges that involve loading and unloading passengers or cargo vary based on the time of day or night that the relevant service is provided (with higher fees generally charged during peak usage periods and at night), the aircraft’s maximum takeoff weight, the origin and destination of the flight and the nationality of the airline or client, while charges for long-term parking vary based on the time of day or night the aircraft is parked at our facilities, the length of time the aircraft is parked at our facilities and the nationality of the airline or client. We collect aircraft parking charges
the entire time an aircraft is on our aprons. During 2007, 20082011 and 20092012 these charges represented 4.1%,4.7% and 4.6% and 4.8%, respectively, of our aeronautical revenues and 3.3%, 3.6%2.9% and 3.8%3.1%, respectively, of our total revenues.revenues (in 2011 and 2012, aircraft parking charges represented 3.7% and 3.5%, respectively, of the sum of aeronautical and non-aeronautical revenues).
Passenger Walkway Charges
Airlines are also assessed charges for the connection of their aircraft to our terminals through a passenger walkway and for the transportation of passengers between terminals and aircraft via mini-buses and other vehicles. Until March 2005, these charges were based on the amount of time each service was used, the number of these services used, the time of day the services were used, the origin and destination of the flight and the nationality of the airline or client. Since April 1, 2005, chargesCharges for use of passenger walkways continueare based on each unit or service rendered, which are limited to be assessed as described above,a period of 30 minutes each, but charges for the transportation of customers between terminals and aircraft via mini-buses and other vehicles have beenare determined based on the number of trips taken between the terminal and the aircraft. Passenger walkways are only available at our Guadalajara, Tijuana, Puerto Vallarta and Guanajuato international airports. During 2007, 20082011 and 2009,2012, these charges represented approximately 0.8%, 0.6% and 0.8%0.7%, respectively, of our aeronautical services revenues and approximately 0.7%0.5%, 0.5%each year, of our total revenues (in 2011 and 2012, charges for the use of passenger walkways represented 0.6% and 0.5%, respectively, of the sum of aeronautical and non-aeronautical revenues). Beginning in November 2012, operation of our total revenues.passenger walkways and our airbuses, which had previously been provided by us, began being provided by an independent third party. This third party will also maintain the relationships with the airlines for their use of this equipment. Therefore, we will no longer receive revenues for this service; instead, in the future, we will receive only a recovery of costs associated with the energy use of the walkways and a per-unit fee for the use of the walkways.
Airport Security Charges
We also assess an airport security charge, which is collected from each airline, based on the number of its departing terminal passengers (excluding infants, diplomats and transit passengers), for use of our x-ray equipment, metal detectors and other security equipment and personnel. These charges are based on the time of day the services are used, the number of departing passengers and the destination of the flight. We provide airport security services at our airports directly. In 2007, 20082011 and 2009,2012, these charges represented approximately 1.4%1.3%, each year, of our aeronautical services revenues and approximately 1.1%0.8% and 0.9%, respectively, of our total revenues.revenues (in 2011 and 2012, security charges represented 1.0%, each year, of the sum of aeronautical and non-aeronautical revenues).
The Mexican Bureau of Civil Aviation, Mexico’s federal authority on aviation, and the Ministry of Public Security (Secretaría de Seguridad Pública) issue guidelines for airport security in Mexico. In response to the September 11, 2001 terrorist attacks in the United States, we took additional steps to increase security at our airports. At the request of the Federal Aviation Authority of the United States, the Mexican Bureau of Civil Aviation issued directives in October 2001 establishing new rules and procedures to be adopted at our airports. Under these directives, these rules and procedures were implemented immediately and for an indefinite period of time.
To comply with these directives, we reinforced our security by:
adding security personnel, some of which is contracted with third-party providers;
updating and amending our emergency security and contingency plans and the responsibilities of security personnel relating thereto;
establishing security supervision committees at each of our airports;
increasing the sensitivity and technology of metal detectors and introducing new procedures for x-ray inspection of hand baggage and screening for explosives;
increasing and improving the training of security personnel;
coordinating security measures and emergency plans with operators of complementary and commercial services at our airports;
implementing a higher-security employee identification system;
hiring third-party providers of security equipment installation services;
establishing security review procedures at all of our airports; and
installing a closed-circuit television security monitoring system at our Guadalajara International Airport, Tijuana International Airport and Puerto Vallarta International Airport, with plans to install similar systems in the remaining airports.
Several of our airline customers have also contributed to the enhanced security at our airports as they have adopted new procedures and rules issuedAdditional regulations by the Mexican Bureau of Civil Aviation applicableissued in 2011 established rules and procedures for the inspection of carry-on baggage. To fulfill these requirements, we improved our security by providing new training and operating procedures, adding new equipment and security personnel, most of them from third party providers, in addition to increasing our coordination with other airports and airlines. SomeHowever, as security is a primary concern in our industry, the possibility of new threats may require frequent updates to the security measures adopted by the airlines include adding more points for verification of passenger identification, inspecting baggage prior to check-in and reinforcing controls over access to airplanes by various service providers (such as baggage handlers and food service providers). In the future, we hope to reach a global agreement with the airlines regardingat our and their respective responsibilities for checked baggage screening and the allocation of the costs thereof.airports.
Complementary Services
At each of our airports, we earn revenues from charging access and other fees to third-party providers of baggage handling services, catering services, aircraft maintenance and repair services and fuel services. These fees are included in the revenues that are regulated under our maximum-rate price regulation system and are determined for each third-party service provider based on a percentage of its total revenues. In 2007, 20082011 and 2009,2012, revenues from complementary service fees represented approximately 1.9%, 1.7% and 1.6%, respectively, of our aeronautical revenues services, respectively 1.5%and approximately 1.1%, each year, of our total revenues (in 2011 and 2012, revenues from complementary service fees represented 1.4% and 1.2%, respectively, of our total revenues.the sum of aeronautical and non-aeronautical revenues).
We currently maintain contracts with 2627 companies that provide the majority of these complementary services at our 12 airports.
Under the Mexican Airport Law, we are required to provide complementary services at each of our airports if there are no third parties providing such services. For example, SEAT, which is controlled by AeroméMenzies Aviation México, and Mexicana through a joint venture,S.A. de C.V. currently provides the majority of the baggage handling services at our airports. If the third parties currently providing these services ceased to do so, we would be required to provide these services or find other third parties to provide such services.
The Mexican Airport and Auxiliary Services Agency (Aeropuertos y Servicios Auxiliares) maintains an exclusive contract to sell fuel at all of our airports, and we charge the Mexican Airport and Auxiliary Services Agency a nominal access fee. The Mexican
Airport and Auxiliary Services Agency in turn is required to purchase all of its fuel fromPetróleos Mexicanos, or Pemex. In the event that the Mexican government privatizes fuel supply activities in the future, the terms of our concessions provide that it will do so through a competitive bidding process.
While we have been required to provide screening services for checked baggage since 2006, we have not provided any such services and therefore received no revenues for baggage screening in 2008 and 2009. In December 2009 we entered into a supply agreement with Rapiscan Systems in order to provide and install a system for the screening of all of checked baggage, and we are in the process of installing such equipment.
Leasing of Space to Airlines
In addition, we derivereceive regulated revenues from leasing to airlines space in our airports that is necessary for their operations, such as ticket counters, monitors and back offices. In 2007, 20082011 and 2009,2012, leasing of space to airlines represented approximately 3.8%3.3% and 2.9%, 3.9% and 3.6 %respectively, of our aeronautical revenues services, respectively, and approximately 3.1%2.0%, 3.1%each year, of our total revenues (in 2011 and 2.8%2012, revenues from leasing of space to airlines represented 2.6% and 2.2%, respectively, of our total revenues.the sum of aeronautical and non-aeronautical revenues).
Cargo Handling
In 2009,2012, our 12 airports handled approximately 126.3161.7 thousand metric tons of cargo. Guadalajara International Airport represents the most significant portion of our cargo volume, accounting for approximately 78.2%78.9% of the cargo handled by our 12 airports in 2009.2012. Increases in our cargo volume are beneficial to us for purposes of maximum rate calculations, as cargo increases the number of our workload units.
Cargo-related revenues include revenues from the leasing of space in our airports to handling agents and shippers, landing fees for each arriving aircraft carrying cargo and a portion of the revenues derived from other complementary services for each workload unit of cargo. Cargo-related revenues are largely regulated and therefore subject to maximum rates applicable to regulated revenues sources.
Revenues from cargo handling in our airports historically have represented a negligible portion of our total revenues, but we believe that Mexico has significant potential for growth in the volume of cargo transported by air. A substantial portion of cargo originating in the United States and destined for Latin America is currently handled in the Miami and Los Angeles international airports, and we believe that a portion of this cargo could instead be routed more efficiently through our Guadalajara International Airport or our Tijuana International Airport.
Permanent Ground Transportation
We receive revenues from ground transportation vehicles and taxi companies who pay an access fee to operate on our airports’ premises. Our revenues from providers of ground transportation services deemed “permanent” under applicable Mexican law, such as access fees charged to taxis, are subject to price regulation.
Non-aeronautical Services
General
Non-aeronautical services historically have generated a significantly smaller portion of our revenues as compared to aeronautical services, although the contribution to the sum of our totalaeronautical and non-aeronautical revenues from non-aeronautical services has increased in recent years from approximately 18.5%20.4% in 20052010 to approximately 22.3%23.1% in 2009 (revenues from non-aeronautical services represented approximately
20.9% of total revenues in 2008).2012. We estimate that this contribution will continue to increase because we continue to expand commercial spaces inside our terminals, and weterminals. We are additionally beginning to focusalso focusing on developing commercial spaces outside of our terminal buildings.buildings and developing businesses operated directly by us, such as advertising, VIP lounges and convenience stores in our airports. Our revenues from non-aeronautical services are principally derived from commercial activities.
None of our revenues from non-aeronautical services are regulated under our maximum-rate price regulation system.
Revenues from Commercial Activities
Leading privatized airports generally generate an important portion of their revenues from commercial activities. An airport’s revenues from commercial activities are largely dependent on passenger traffic, its passengers’ level of spending, terminal design, the mix of commercial tenants and the basis of fees charged to businesses operating in the airport. Revenues from commercial activities also depend substantially on the percentage of traffic represented by international passengers, who tend to spend greater amounts at our airports, particularly on duty-free items.
We currently have the following types of commercial activities in each of our airports:
• | Parking facilities— We directly operate the car parking facilities at all of our airports. Our main car parking facilities are at the Guadalajara International Airport and Tijuana International Airport, which together represented |
• | Leasing of space—Revenues that we derive from the leasing of space in our terminals to airlines and complementary service providers for certain non-essential activities such as first class/VIP lounges are not subject to price regulation under our maximum rates and are classified by us as non-aeronautical commercial activities. In the last quarter of 2011, we opened our first directly operated VIP lounges in Terminal 1 and Terminal 2 of the Los Cabos airport. During 2012, we began operations of similar lounges at the Guadalajara, Puerto Vallarta and Hermosillo airports. In 2013, we will begin offering this service at the Tijuana airport. |
• | Retail stores—In recent years we have completed renovation projects to improve the product mix of retail stores in the commercial areas at our Guadalajara, Puerto Vallarta, Los Cabos, Guanajuato, Tijuana, Manzanillo, Morelia and La Paz international airports. We will continue developing more specialized retail space in order to attract more customers. |
• | Food and beverage services—In recent years we have completed “clean up” projects with respect to our restaurant and bar leases, |
• | Car rentals—We have recently remodeled the areas used by car rental agencies to which we lease space at our airports and have sought to bring in a greater percentage of internationally known name-brand car rental providers. |
• | Time-share marketing and sales—We receive revenues from time-share developers to which we rent space in our airports for the purpose of marketing and sales of time-share units. |
• | Duty-free stores—We currently have duty-free stores at four of our 12 airports. These stores are most lucrative at our Los Cabos, Puerto Vallarta |
• | Advertising— |
• | Communications—We have consolidated all of the telephone and |
• | Financial services—In recent years we have expanded and modernized the spaces we lease to financial services providers such as currency exchange bureaus and have additionally improved our contracts with several of the financial services providers at our airports to reflect a percentage of the revenues recorded by those providers rather than fixed yearly fees. |
• | Ground transportation—Our revenues from providers of ground transportation services deemed “non-permanent” under applicable Mexican law, such as access fees charged to charter buses, are not subject to price regulation under our maximum rates and are classified by us as non-aeronautical commercial activities. |
• | Convenience stores— Whereas our conveniences stores were previously managed by third parties, in April 2012, we began our own operation of a convenience store at the Aguascalientes airport, in which we sell magazines, soft drinks, candy and groceries, among other items, directly to our passengers; subsequently, we opened another store in Terminal 2 in the Los Cabos airport. We expect to open additional stores in other airports during 2013. |
Domestic passengers represented approximately 65.7%65.6% of our terminal passenger traffic in 2009.2012. In addition, we estimate that a significant minority of our international passengers are lower-income Mexicans traveling to or from the United States. WeBased on surveys and studies to understand the consumption habits of our passengers completed during 2010 and 2011 at the Guadalajara International Airport, we believe that the spending habits of these Mexican international passengers are more similar to the spending habits of our domestic passengers, who generally purchase fewer products than other international passengers.
During 2011, we completed the installation of new screening equipment at all 12 of our airports. The operation of this equipment is the responsibility of our airline customers under the Mexican Airport Law. Because the Mexican Airport Law expressly provides that airlines bear the responsibility for checked baggage screening, if an airline wants us to operate the baggage screening system for them, they must enter into a contract with us that allows us to recover the cost of operating the equipment. Our contract with the airlines also indemnifies us and holds us harmless from most types of liability arising in connection with the operation of the baggage screening system. As of the date of this report, we have signed agreements with airlines that transported approximately 20.3% of our total passenger traffic. On November 23, 2012, the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil, or “DGAC”) published a recommendation, titled a “Circular Obligatoria,” on the Ministry of Communications and Transportation website that, instead of modifying the legal responsibilities set forth in the Airport Law, attempted to facilitate contracts between parties through certain recommendations regarding issues of responsibility that have been raised. These recommendations are not binding and would have no legal effect unless incorporated into a valid contract. We expect to sign agreements with the rest of our airline customers during 2013 on substantially the same terms and conditions as those already signed. Therefore, we have agreed to operate the screening equipment in exchange for the recovery of costs associated with the delivery of the service. For more information on equipment screening, see “Item 4,Business Overview – Regulatory Framework – Scope of Concession”.
Recent Expansion and Development of Commercial Areas
We believe that leading privatized airports typically generate a greater portion of their revenues from commercial activities than we currently do. In 2009,2012, revenues from non-aeronautical services in our airports accounted for 22.3%20.4% of our total revenues (23.1% of the total revenuessum of aeronautical and non-aeronautical revenues) generated by our airports. As the main part of our business strategy, since we took over control of our airports we have made it a priority to
increase our revenues from commercial activities in our airports from a combination of:by:
• Redesigning and expanding the space available in our airport terminals allocated to commercial activities.
• | Redesigning and expanding the space available in our airport terminals allocated to commercial activities. |
In order to increase our revenues from commercial activities, we have focused on expanding and redesigning the layout of certain terminals in our airports to allow for the inclusion of more commercial businesses, as well as to redirect the flow of passengers through our airports, increasing their exposure to the commercial businesses that are operating atareas of our airports.
In 2007,
During 2011, we added approximately 1,500 square meters of commercial space at thea new international building in Puerto Vallarta, including two stores fully integrated with the passenger flows. One is a duty-free store and the other is the first convenience store in Mexico that all passengers must pass through in order to reach their gate. We also opened commercial areas at the Terminal 2 buildingfood court area at the Guadalajara International Airport. In 2007, we prepared two ambitiousThis project created an additional 200 square meters of commercial redesign projects that were completed and started full operation at the end of 2008space. On November 1, 2012, Terminal 2 at the Los Cabos Terminal 1airport began operations with 900 square meters of commercial areas, which include 500 square meters for a central restaurant, 70 square meters for a cafeteria and in the domestic departures area in the Guadalajara International Airport. In 2008, we completed the expansion of the parking building in Guadalajara bringing the number of parking spaces from 1,500 to 3,000.In 2009, new space became available in the Guadalajara International Airport’s new domestic arrivals area and allowed us to create330 square meters for various retail stores (including a 200 squareconvenience store directly operated by us); additionally, there is a 500-square meter retail area.VIP Lounge.
• Renegotiating agreements with terminal tenants to be more consistent with market practices.
• | Renegotiating agreements with terminal tenants to be more consistent with market practices. |
We have also continued improving our lease arrangements with existing tenants through the usage of royalty-based lease contracts, whereby lease amounts are based on tenants’ revenues, subject to minimum fixed amounts related to the square footage. We estimate that approximately 89.5%80.0% of current commercial revenues could be arranged as royalty-based contracts based on the nature of our tenants’ operations. Approximately 97.2%98.0% of the contracts that could be arranged as royalty-based have already been executed under those conditions.
• Recovering the rights to several retail and car parking businesses at our airports previously operated by third parties.
• | Recovering the rights to several retail and car parking businesses at our airports previously operated by third parties. |
Prior to 1999, our predecessor entered into several contracts with third-party operators to develop new space and modernize existing space at our 12 airports. Several of these contracts were long-term lease agreements pursuant to which the third-party service provider, in exchange for assuming all risks during the construction and modernization phase of each development project, acquired the exclusive right to operate the new commercial areas once developed. Many of the most lucrative commercial areas within our principal airports were leased by our predecessor to third parties on a long-term basis.
In some cases these long-term leases also gave the third-party operators the right to operate not only commercial activities, but also passenger walkways, transportation and other activities in the commercial areas subject to the leases. We acquired our concessions from our predecessor subject to these long-term lease obligations and have sought to recover the third parties’ lease rights. In recentprior years we have recovered, by compensating leaseholders for early termination of their leases, several significant leases previously held by third parties who managed our commercial areas and received all revenues from the operations in those areas. We now manage several of those areas, directly and have thereby increasedin addition to the car parking infrastructure in our revenues from commercial activities.airports.
As of June 25, 2010today the only material commercial activity at our airports that remains subject to a third-party leaseslease under which we receive only nominal revenue is the hotel at Guadalajara International Airport. A third party, Coco Club Hoteles y Morandas de México, S.A. de C.V. (“Coco Club”), was granted the right by
the Mexican Airport and Auxiliary Services Agency to operate the following commercial spacehotel at our Guadalajara International Airport in exchange for the construction and remodeling of certain commercial areas and infrastructure at the airport: (i) the commercial space located in the hallway leading to the gate area for domestic flights, (ii) the majority of the commercial space in the gate area itself, (iii) the commercial space in the bridge connecting the airport to the airport hotel and (iv) the hotel itself. In September 1998, Coco Club transferred all of these rights to another third party except for the right to operate the hotel for a period of 15 years from March 1993 in exchange for its obligation to construct such hotel. In May 2004, we recovered the right to operate the commercial areas previously operated by the third party that received its rights from Coco Club.Airport. Subject to the satisfaction of certain conditions, under the lease to operate the hotel,and only if those specific conditions were satisfied, Coco Club was grantedhad the right to renew the contract and continue operating the hotel for another 15-year period fromstarting in March 2008 at below-market rates.rents. Because we do not believe that Coco Club has satisfied all such conditions, we havedid not renewedrenew the lease.lease in 2008. However, Coco Club maintained possession of the hotel. As a result,consequence, in April 2008 we initiated legal proceedings against Coco Club to declareregain possession of the lease to operate the hotel null and void due to Coco Club’s failure to satisfy all conditions in the prior lease agreement. These legal proceedings remain pending.On October 31, 2011, we received a favorable decision ordering the return of the hotel. The decision was appealed by Coco Club on December 14, 2011. On October 19, 2012 the court ordered the eviction of Coco Club and instructed the airport to take possession of the hotel. Currently, we are in the process of taking the necessary steps to repossess the hotel.
Marketing Activities
OurWe focus our marketing activities, focus, with respect to aeronautical services, on participation in business conferences organized by the International Air Transport Association (IATA)(“IATA”), including the annual “Schedules” and “Commercial Strategy” conferences. These conferences provide a forum for the exchange of information relating to airlines’ decisions about changes in routes and flights. For leasing ofTo lease properties and obtain related non-aeronautical services revenues, we principally rely on advertising through traditional local distribution channels, including newspapers.
Recognition of revenues from improvements to concession assets
IFRIC 12 requires, subject to certain conditions, that the infrastructure of a service concession contract falling within its scope not be recognized as property, plant and equipment. It also requires that revenues obtained when the operator performs both construction or upgrade services and operating services under a single contract be recognized according to each type of service provided, based on the fair value of consideration received at the time the service is rendered. We recognize revenues and the associated costs of improvements to concession assets that it is obligated to perform at the airports as established by the Master Development Programs. Revenues represent the value of the exchange between ourselves and the government with respect to the improvements, given that we construct or provide improvements to the airports as obligated under the Master Development Programs, and in exchange, the government grants us the right to obtain benefits for services provided using those assets, which are recognized as intangible assets. We have determined that our obligations per the Master Development Programs should be considered to be a revenue-earning activity as all expenditures incurred to fulfill the Master Development Programs are included in the maximum tariff we charge our customers. Therefore we recognize the revenue and expense in profit or loss when the expenditures are performed. The cost for such additions and improvements to concession assets is based on actual costs incurred by us in the execution of the additions or improvements, considering the investment requirements in the Master Development Programs. Through bidding processes, we contract third parties to carry out such construction. The amount of revenues for these services is equal to the amount of costs incurred, as we do not obtain any profit margin for these construction services. The amounts paid are set at market value. As a result, revenues from improvements to concession assets do not have a cash impact on our results. Furthermore, they are not directly related to our passenger traffic, which is the main driver of our revenues.
Our Airports
In 2009,2012, our airports served a total of approximately 19.321.3 million terminal passengers. In 2009,2012, our two principal airports that serve important metropolitan areas, Guadalajara International Airport and Tijuana International Airport, together represented approximately 51.1%52.6% of our total terminal passenger traffic. Puerto Vallarta International Airport and Los Cabos International Airport, our main airports serving popular tourist destinations, together accounted for approximately 27.3%26.4% of our total terminal passenger traffic in 2009.2012. Hermosillo International Airport, which is our largest airport serving a mid-sized city, accounted for approximately 6.1% of our total terminal passenger traffic in 2009.2012.
All of our airports are designated as international airports under applicable Mexican law, meaning that they are equipped to receive international flights and maintain customs and immigration facilities operated by the Mexican government.
The following table shows the sum of aeronautical and non-aeronautical revenues for each of the airports for the years indicated.
RevenuesSum of aeronautical and non-aeronautical revenues by Airportairport
Year ended December 31, | Year ended December 31, | ||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | |||||||||||||
(thousands of Pesos) | (thousands of Pesos) | ||||||||||||||||
Guadalajara | Ps. | 1,163,027 | Ps. | 1,163,847 | Ps. | 1,115,670 | Ps. | 1,428,342 | Ps. | 1,561,107 | |||||||
Tijuana | 477,779 | 465,185 | 422,710 | 529,248 | 599,831 | ||||||||||||
Los Cabos | 676,490 | 811,929 | |||||||||||||||
Puerto Vallarta | 528,527 | 585,226 | 527,723 | 566,114 | 611,314 | ||||||||||||
Los Cabos | 556,151 | 585,935 | 566,592 | ||||||||||||||
Hermosillo | 156,333 | 156,487 | 151,856 | 175,954 | 200,522 | ||||||||||||
Guanajuato | 192,119 | 177,688 | 148,654 | 166,998 | 191,755 | ||||||||||||
La Paz | 93,578 | 81,916 | 81,754 | 95,326 | 100,947 | ||||||||||||
Mexicali | 75,523 | 82,652 | |||||||||||||||
Morelia | 92,239 | 80,880 | 79,677 | 71,703 | 82,178 | ||||||||||||
Mexicali | 77,236 | 70,700 | 65,873 | ||||||||||||||
Aguascalientes | 63,753 | 58,626 | 44,614 | 56,255 | 70,311 | ||||||||||||
Los Mochis | 38,652 | 29,963 | 30,243 | 32,025 | 29,952 | ||||||||||||
Manzanillo | 37,930 | 34,332 | 30,874 | 28,529 | 31,936 | ||||||||||||
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Total | Ps. | 3,477,324 | Ps. | 3,490,785 | Ps. | 3,266,240 | Ps. | 3,902,507 | Ps. | 4,374,434 | |||||||
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The following tables set forth the passenger traffic volume for each of our airports for the years indicated:
Passenger Traffic
Year endedEnded December 31,
2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||
Terminal(1) | Transit(2) | Total | Terminal(1) | Transit(2) | Total | Terminal(1) | Transit(2) | Total | Terminal(1) | Transit(2) | Total | Terminal(1) | Transit(2) | Total | Terminal(1) | Transit(2) | Total | |||||||||||||||||||||||||||||||||||||
Total passengers: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Passengers: | Total Passengers: |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Guadalajara | 7,332,502 | 465,989 | 7,798,491 | 7,193,217 | 216,138 | 7,409, 355 | 6,453,078 | 68,252 | 6,521,330 | 6,953,861 | 40,830 | 6,994,691 | 7,201,669 | 48,926 | 7,250,595 | 7,436,352 | 38,952 | 7,475,304 | ||||||||||||||||||||||||||||||||||||
Tijuana | 4,739,715 | 31,842 | 4,771,557 | 3,968,725 | 42,808 | 4,011,533 | 3,407,420 | 33,943 | 3,441,363 | 3,649,477 | 48,507 | 3,697,984 | 3,500,767 | 42,218 | 3,542,985 | 3,759,773 | 55,658 | 3,815,431 | ||||||||||||||||||||||||||||||||||||
Los Cabos | 2,745,528 | 18,259 | 2,763,787 | 2,806,977 | 15,204 | 2,822,181 | 3,018,516 | 1,379 | 3,019,895 | |||||||||||||||||||||||||||||||||||||||||||||
Puerto Vallarta | 3,139,143 | 9,028 | 3,148,171 | 3,280,692 | 18,983 | 3,299,675 | 2,645,332 | 8,242 | 2,653,574 | 2,735,272 | 7,883 | 2,743,155 | 2,535,876 | 10,181 | 2,546,057 | 2,597,685 | 5,556 | 2,603,241 | ||||||||||||||||||||||||||||||||||||
Los Cabos | 2,901,234 | 33,203 | 2,934,437 | 2,989,024 | 38,848 | 3,027,872 | 2,620,403 | 35,286 | 2,655,689 | |||||||||||||||||||||||||||||||||||||||||||||
Hermosillo | 1,338,145 | 160,629 | 1,498,774 | 1,284,794 | 139,441 | 1,424,235 | 1,174,372 | 91,652 | 1,266,024 | 1,138,308 | 77,346 | 1,215,654 | 1,200,922 | 67,368 | 1,268,290 | 1,288,735 | 65,352 | 1,354,087 | ||||||||||||||||||||||||||||||||||||
Guanajuato | 1,274,076 | 21,022 | 1,295,098 | 1,102,782 | 14,438 | 1,117,220 | 886,127 | 4,189 | 890,316 | 853,828 | 5,570 | 859,398 | 854,215 | 3,840 | 858,055 | 950,319 | 6,914 | 957,233 | ||||||||||||||||||||||||||||||||||||
La Paz | 630,171 | 109,517 | 739,688 | 519,834 | 44,414 | 564,248 | 512,555 | 11,060 | 523,615 | 558,820 | 9,397 | 568,217 | 546,474 | 1,261 | 547,735 | 553,130 | 2,246 | 555,376 | ||||||||||||||||||||||||||||||||||||
Mexicali | 461,356 | 12,118 | 473,474 | 493,047 | 7,541 | 500,588 | 521,855 | 3,353 | 525,208 | |||||||||||||||||||||||||||||||||||||||||||||
Morelia | 599,360 | 25,569 | 624,929 | 524,195 | 27,804 | 551,999 | 447,578 | 6,021 | 453,599 | 429,677 | 3,652 | 433,329 | 376,171 | 2,063 | 378,234 | 409,256 | 2,118 | 411,374 | ||||||||||||||||||||||||||||||||||||
Mexicali | 607,886 | 4,925 | 612,811 | 533,756 | 3,907 | 537,663 | 470,909 | 3,644 | 474,553 | |||||||||||||||||||||||||||||||||||||||||||||
Aguascalientes | 463,674 | 8,072 | 471,746 | 421,877 | 11,038 | 432,915 | 284,539 | 914 | 285,453 | 294,125 | 1,093 | 295,218 | 328,490 | 737 | 329,227 | 400,094 | 216 | 400,310 | ||||||||||||||||||||||||||||||||||||
Los Mochis | 289,928 | 84,956 | 374,884 | 213,792 | 46,499 | 260,291 | 206,017 | 27,066 | 233,083 | 243,272 | 23,041 | 266,313 | 205,800 | 17,466 | 223,266 | 183,518 | 15,918 | 199,436 | ||||||||||||||||||||||||||||||||||||
Manzanillo | 249,232 | 3,549 | 252,781 | 219,102 | 1,990 | 221,092 | 178,120 | 688 | 178,808 | 159,677 | 2,912 | 162,589 | 157,168 | 6,233 | 163,401 | 168,045 | 3,540 | 171,585 | ||||||||||||||||||||||||||||||||||||
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Total | 23,565,066 | 958,301 | 24,523,367 | 22,251,790 | 606,308 | 22,858,098 | 19,286,450 | 290,957 | 19,577,407 | 20,223,201 | 250,608 | 20,473,809 | 20,207,576 | 223,038 | 20,430,614 | 21,287,278 | 201,202 | 21,488,480 | ||||||||||||||||||||||||||||||||||||
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2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | |||||||||||||||||||||||||||||||||||||
Terminal departing passengers: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Terminal Departing Passengers: | Terminal Departing Passengers: |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Guadalajara | 2,534,079 | 1,195,703 | 3,729,782 | 2,493,236 | 1,157,072 | 3,650,308 | 2,180,481 | 1,072,057 | 3,252,538 | 2,357,845 | 1,159,774 | 3,517,619 | 2,339,153 | 1,285,806 | 3,624,959 | �� | 2,478,647 | 1,275,558 | 3,754,205 | |||||||||||||||||||||||||||||||||||
Tijuana | 2,214,389 | 19,353 | 2,233,742 | 1,890,714 | 21,143 | 1,911,857 | 1,644,882 | 19,355 | 1,664,237 | 1,755,332 | 20,138 | 1,775,470 | 1,689,793 | 16,470 | 1,706,263 | 1,813,459 | 16,583 | 1,830,042 | ||||||||||||||||||||||||||||||||||||
Los Cabos | 365,441 | 1,013,982 | 1,379,423 | 391,053 | 1,015,916 | 1,406,969 | 439,469 | 1,074,424 | 1,513,893 | |||||||||||||||||||||||||||||||||||||||||||||
Puerto Vallarta | 398,116 | 1,179,195 | 1,577,311 | 427,843 | 1,224,550 | 1,652,393 | 351,938 | 978,315 | 1,330,253 | 346,305 | 1,026,329 | 1,372,634 | 345,445 | 926,796 | 1,272,241 | 385,817 | 917,409 | 1,303,226 | ||||||||||||||||||||||||||||||||||||
Los Cabos | 381,780 | 1,071,320 | 1,453,100 | 437,177 | 1,064,752 | 1,501,929 | 402,907 | 918,345 | 1,321,252 | |||||||||||||||||||||||||||||||||||||||||||||
Hermosillo | 559,273 | 50,389 | 609,662 | 546,149 | 53,078 | 599,227 | 513,466 | 41,650 | 555,116 | 506,784 | 41,548 | 548,332 | 545,650 | 41,351 | 587,001 | 584,765 | 44,816 | 629,581 | ||||||||||||||||||||||||||||||||||||
Guanajuato | 384,768 | 261,991 | 646,759 | 324,597 | 234,453 | 559,050 | 246,088 | 196,940 | 443,028 | 237,786 | 188,951 | 426,737 | 220,009 | 204,231 | 424,240 | 257,028 | 215,743 | 472,771 | ||||||||||||||||||||||||||||||||||||
La Paz | 295,779 | 29,200 | 307,744 | 242,692 | 23,550 | 266,242 | 244,816 | 15,537 | 260,353 | 274,016 | 12,026 | 286,042 | 264,118 | 15,026 | 279,144 | 266,158 | 15,840 | 281,998 | ||||||||||||||||||||||||||||||||||||
Mexicali | 217,716 | 2,154 | 219,870 | 233,496 | 2,018 | 235,514 | 247,554 | 2,530 | 250,084 | |||||||||||||||||||||||||||||||||||||||||||||
Morelia | 202,522 | 105,222 | 324,979 | 167,866 | 97,249 | 265,115 | 117,224 | 104,832 | 222,056 | 118,324 | 98,712 | 217,036 | 112,103 | 75,221 | 187,324 | 104,690 | 99,855 | 204,545 | ||||||||||||||||||||||||||||||||||||
Mexicali | 269,389 | 2,852 | 272,241 | 243,857 | 3,234 | 247,091 | 221,385 | 2,528 | 223,913 | |||||||||||||||||||||||||||||||||||||||||||||
Aguascalientes | 168,967 | 65,794 | 234,761 | 158,498 | 56,112 | 214,610 | 105,934 | 37,640 | 143,574 | 106,161 | 41,423 | 147,584 | 112,007 | 53,623 | 165,630 | 128,797 | 72,157 | 200,954 | ||||||||||||||||||||||||||||||||||||
Los Mochis | 138,785 | 7,319 | 146,104 | 100,446 | 7,170 | 107,616 | 96,593 | 4,781 | 101,374 | 117,433 | 4,170 | 121,603 | 100,522 | 4,322 | 104,844 | 88,029 | 3,981 | 92,010 | ||||||||||||||||||||||||||||||||||||
Manzanillo | 59,299 | 65,886 | 125,185 | 54,963 | 55,507 | 110,470 | 45,291 | 44,078 | 89,369 | 37,016 | 42,661 | 79,677 | 36,866 | 41,891 | 78,757 | 42,552 | 41,271 | 83,823 | ||||||||||||||||||||||||||||||||||||
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Total | 7,607,146 | 4,054,224 | 11,661,370 | 7,088,038 | 3,997,870 | 11,085,908 | 6,171,005 | 3,436,058 | 9,607,063 | 6,440,159 | 3,651,868 | 10,092,027 | 6,390,215 | 3,682,671 | 10,072,886 | 6,836,965 | 3,780,167 | 10,617,132 | ||||||||||||||||||||||||||||||||||||
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2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | Domestic | International | Total | |||||||||||||||||||||||||||||||||||||
Terminal arriving passengers: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Terminal Arriving Passengers: | Terminal Arriving Passengers: |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
Guadalajara | 2,511,583 | 1,091,137 | 3,602,720 | 2,544,231 | 998,678 | 3,542,909 | 2,253,081 | 947,459 | 3,200,540 | 2,414,670 | 1,021,572 | 3,436,242 | 2,376,723 | 1,199,987 | 3,576,710 | 2,511,683 | 1,170,464 | 3,682,147 | ||||||||||||||||||||||||||||||||||||
Tijuana | 2,498,308 | 7,665 | 2,505,973 | 2,049,892 | 6,976 | 2,056,868 | 1,733,952 | 9,231 | 1,743,183 | 1,864,854 | 9,153 | 1,874,007 | 1,786,576 | 7,928 | 1,794,504 | 1,924,659 | 5,072 | 1,929,731 | ||||||||||||||||||||||||||||||||||||
Los Cabos | 385,763 | 980,342 | 1,366,105 | 402,040 | 997,968 | 1,400,008 | 446,180 | 1,058,443 | 1,504,623 | |||||||||||||||||||||||||||||||||||||||||||||
Puerto Vallarta | 445,876 | 1,115,956 | 1,561,832 | 480,668 | 1,147,631 | 1,628,299 | 386,649 | 928,430 | 1,315,079 | 384,855 | 977,783 | 1,362,638 | 369,677 | 893,958 | 1,263,635 | 413,698 | 880,761 | 1,294,459 | ||||||||||||||||||||||||||||||||||||
Los Cabos | 401,873 | 1,046,261 | 1,448,134 | 457,342 | 1,029,753 | 1,487,095 | 407,339 | 891,812 | 1,299,151 | |||||||||||||||||||||||||||||||||||||||||||||
Hermosillo | 684,802 | 43,681 | 728,483 | 641,407 | 44,160 | 685,567 | 581,883 | 37,373 | 619,256 | 556,121 | 33,855 | 589,976 | 583,063 | 30,858 | 613,921 | 626,754 | 32,400 | 659,154 | ||||||||||||||||||||||||||||||||||||
Guanajuato | 419,322 | 207,995 | 627,317 | 356,976 | 186,756 | 543,732 | 281,679 | 161,420 | 443,099 | 272,015 | 155,076 | 427,091 | 254,113 | 175,862 | 429,975 | 294,665 | 182,883 | 477,548 | ||||||||||||||||||||||||||||||||||||
La Paz | 277,225 | 27,967 | 305,192 | 230,582 | 23,010 | 253,592 | 236,670 | 15,532 | 252,202 | 261,167 | 11,611 | 272,778 | 254,387 | 12,943 | 267,330 | 260,040 | 11,092 | 271,132 | ||||||||||||||||||||||||||||||||||||
Mexicali | 240,598 | 888 | 241,486 | 256,684 | 849 | 257,533 | 270,886 | 885 | 271,771 | |||||||||||||||||||||||||||||||||||||||||||||
Morelia | 182,177 | 109,439 | 291,616 | 160,173 | 98,907 | 259,080 | 117,896 | 107,626 | 225,522 | 124,207 | 88,434 | 212,641 | 117,950 | 70,897 | 188,847 | 113,392 | 91,319 | 204,711 | ||||||||||||||||||||||||||||||||||||
Mexicali | 334,359 | 1,286 | 335,645 | 285,375 | 1,290 | 286,665 | 245,900 | 1,096 | 246,996 | |||||||||||||||||||||||||||||||||||||||||||||
Aguascalientes | 172,163 | 56,750 | 228,913 | 165,021 | 42,246 | 207,267 | 112,356 | 28,609 | 140,965 | 115,119 | 31,422 | 146,541 | 121,391 | 41,469 | 162,860 | 138,763 | 60,377 | 199,140 | ||||||||||||||||||||||||||||||||||||
Los Mochis | 140,448 | 3,376 | 143,824 | 104,074 | 2,102 | 106,176 | 104,136 | 507 | 104,643 | 121,189 | 480 | 121,669 | 100,515 | 441 | 100,956 | 91,085 | 423 | 91,508 | ||||||||||||||||||||||||||||||||||||
Manzanillo | 61,420 | 62,627 | 124,047 | 54,666 | 53,966 | 108,632 | 45,852 | 42,899 | 88,751 | 39,837 | 40,163 | 80,000 | 42,060 | 36,351 | 78,411 | 45,965 | 38,257 | 84,222 | ||||||||||||||||||||||||||||||||||||
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Total | 8,129,556 | 3,774,140 | 11,903,696 | 7,530,407 | 3,635,475 | 11,165,882 | 6,507,393 | 3,171,994 | 9,679,387 | 6,780,395 | 3,350,779 | 10,131,174 | 6,665,179 | 3,469,511 | 10,134,690 | 7,137,770 | 3,532,376 | 10,670,146 | ||||||||||||||||||||||||||||||||||||
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(1) | Includes arriving and departing passengers as well as transfer passengers (passengers who arrive on one aircraft and depart on a different aircraft). |
(2) | Terminal passengers who arrive at our airports but generally depart without changing aircraft. |
The following table sets forth the air traffic movement capacity of each of our airports as of December 31, 2009.2012.
Capacity by Airport(1) (2012)
Airport | Peak air traffic movements per hour(2) | Runway capacity(3) | Peak air traffic movements per hour(1) | Runway capacity(2) | ||||||||
Guadalajara | 37 | 39 | 36 | 39 | ||||||||
Tijuana | 17 | 30 | 16 | 31 | ||||||||
Los Cabos | 25 | 37 | ||||||||||
Puerto Vallarta | 26 | 30 | 25 | 29 | ||||||||
Los Cabos | 26 | 33 | ||||||||||
Hermosillo | 20 | 28 | 19 | 29 | ||||||||
Guanajuato | 11 | 23 | 13 | 13 | ||||||||
La Paz | 11 | 19 | 10 | 18 | ||||||||
Mexicali | 7 | 19 | ||||||||||
Morelia | 8 | 16 | 9 | 11 | ||||||||
Mexicali | 8 | 18 | ||||||||||
Aguascalientes | 6 | 22 | 9 | 16 | ||||||||
Los Mochis | 11 | 19 | 9 | 12 | ||||||||
Manzanillo | 6 | 13 | 6 | 11 |
(1) |
Includes Commercial and General Aviation |
Air traffic movements per |
The following table sets forth the air traffic movements for each of our airports for the years indicated.
Air Traffic Movements by Airport(1)
For the year ended December 31, | For the year ended December 31, | |||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||
Guadalajara | 164,244 | 152,354 | 131,721 | 133,323 | 129,979 | 127,012 | ||||||||||||
Tijuana | 65,460 | 55,104 | 45,218 | 46,283 | 42,393 | 42,963 | ||||||||||||
Los Cabos | 36,175 | 34,288 | 36,523 | |||||||||||||||
Puerto Vallarta | 50,501 | 49,899 | 41,633 | 42,705 | 39,689 | 39,056 | ||||||||||||
Los Cabos | 44,485 | 41,529 | 36,423 | |||||||||||||||
Hermosillo | 48,297 | 45,944 | 43,514 | 42,584 | 44,005 | 46,954 | ||||||||||||
Guanajuato | 32,263 | 28,741 | 26,183 | 26,537 | 24,920 | 25,598 | ||||||||||||
La Paz | 25,011 | 21,996 | 19,162 | 20,510 | 18,957 | 17,175 | ||||||||||||
Mexicali | 11,798 | 11,573 | 10,312 | |||||||||||||||
Morelia | 19,395 | 17,716 | 15,060 | 14,914 | 14,906 | 13,747 | ||||||||||||
Mexicali | 13,877 | 12,237 | 11,177 | |||||||||||||||
Aguascalientes | 12,174 | 12,782 | 10,878 | 12,262 | 12,965 | 14,729 | ||||||||||||
Los Mochis | 24,445 | 18,973 | 17,577 | 17,346 | 14,402 | 13,596 | ||||||||||||
Manzanillo | 8,809 | 7,799 | 6,461 | 7,237 | 7,341 | 7,254 | ||||||||||||
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Total | 508,961 | 465,074 | 405,007 | 411,674 | 395,418 | 394,919 | ||||||||||||
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(1) | Includes departures and arrivals. |
The following table sets forth the average number of passengers per air traffic movement for each of our airports for the years indicated:
Average Passengers per Air Traffic Movement by Airport(1)
Year ended December 31, | Year ended December 31, | |||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||
Guadalajara | 47.48 | 48.63 | 49.51 | 52.46 | 55.78 | 58.86 | ||||||||||||
Tijuana | 72.89 | 72.79 | 76.10 | 79.90 | 83.57 | 88.81 | ||||||||||||
Los Cabos | 76.40 | 82.31 | 82.68 | |||||||||||||||
Puerto Vallarta | 62.34 | 66.12 | 63.74 | 64.23 | 64.15 | 66.65 | ||||||||||||
Los Cabos | 65.97 | 72.90 | 72.91 | |||||||||||||||
Hermosillo | 31.03 | 30.99 | 29.09 | 28.55 | 28.82 | 28.84 | ||||||||||||
Guanajuato | 40.14 | 38.87 | 34.00 | 32.38 | 34.43 | 37.39 | ||||||||||||
La Paz | 29.58 | 25.65 | 27.32 | 27.70 | 28.89 | 32.34 | ||||||||||||
Mexicali | 40.13 | 43.25 | 50.93 | |||||||||||||||
Morelia | 32.22 | 31.15 | 30.11 | 29.06 | 25.37 | 29.92 | ||||||||||||
Mexicali | 44.16 | 43.93 | 42.45 | |||||||||||||||
Aguascalientes | 38.75 | 33.86 | 26.24 | 24.08 | 25.39 | 27.18 | ||||||||||||
Los Mochis | 15.34 | 13.71 | 13.26 | 15.35 | 15.50 | 14.67 | ||||||||||||
Manzanillo | 28.70 | 28.34 | 27.67 | 22.46 | 22.26 | 23.65 | ||||||||||||
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Average of all airports | 48.18 | 49.14 | 48.34 | 49.73 | 51.67 | 54.41 | ||||||||||||
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(1) | Includes number of total passengers within the total number of air traffic movements. |
The following table sets forth the air traffic movements in our airports for the years indicated in terms of commercial, charter and general aviation:
Air Traffic Movements by Aviation Category(1)
Year ended December 31, | Year ended December 31, | |||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||
Commercial Aviation | 403,962 | 355,985 | 301,179 | 301,421 | 281,710 | 284,283 | ||||||||||||
Charter Aviation | 18,786 | 19,623 | 16,569 | 17,753 | 15,887 | 16,453 | ||||||||||||
General Aviation and other | 86,213 | 89,466 | 87,259 | 92,500 | 97,821 | 94,183 | ||||||||||||
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Total | 508,961 | 465,074 | 405,007 | 411,674 | 395,418 | 394,919 | ||||||||||||
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(1) | Includes departures and landings for all 12 airports. |
Changes in Principal Airlines Operating at our Airports
In 2005, the Ministry of Communications and Transportation awarded domestic airline licenses to four new low-cost carriers. In 2006, one new low-cost carrier (VivaAerobus) received a license from the Ministry of Communications and Transportation and started operations in November 2006. In addition, in 2009 a new regional carrier (Mexicana Inter) based at our Guadalajara International Airport, obtained a license from the Ministry of Communications and Transportation and started operations in March 2009. By the end of 2009, Volaris operated in 10 of our 12 airports, VivaAerobus in eight, Click of Mexicana in five, Interjet in six airports and Mexicana Inter in six airports.
During 2008 several legacy airlines and low-cost carriers ceased operations either due to insolvency or suspension by the regulatory authorities. Three of these airlines, Avolar, Alma and Aerocalifornia were based in our Tijuana International Airport, Guadalajara International Airport and La Paz International Airport, respectively. In 2009, Aviacsa, which was not based in any of our airports, also ceased operations. The suspension of operations by these three airlines had a material impact on the routes and passenger traffic at all of our airports other than our Mexicali and Manzanillo airports. On the dates on which they suspended operations, Avolar, Alma, and Aerocalifornia represented 5.1%, 3.8% and 6.1%, respectively, of our terminal traffic. The impact on
terminal passengers from their suspension of operations was primarily felt during 2009. Aviacsa alone represented 3.6% of our terminal traffic when they suspended operations, which primarily impacted terminal passengers during the second half of 2009.
Guadalajara International Airport
Guadalajara International Airport is our most important airport in terms of passenger traffic, air traffic movements and contribution to the sum of aeronautical and non-aeronautical revenues. In 2009,2012, the Guadalajara International Airport was the third busiest in Mexico in terms of commercial aviation passenger traffic, according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, the Guadalajara International Airport accounted for approximately 33.5%34.9% of our terminal passenger traffic.
In 2009,2012, a total of 6.57.4 million terminal passengers were served by Guadalajara International Airport. Of the terminal passengers in 2009, 68.7%2012, 67.1% were domestic passengers and 31.3%32.9% were international passengers. Of the airport’s international passengers, we estimate that a significant portion are Mexicans living in the United States visiting Guadalajara. This airport also serves many business travelers traveling to and from Guadalajara. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of 1911 airlines operate at the airport,airport; the principal ones being Volaris, Aeroméxico Aeroméxico Connect, Mexicana Link, InterjetGroup and Volaris.Interjet. The main non-Mexican airlines operating at the airport are ContinentalUnited Airlines, AmericanAlaska Airlines, US Airways, Delta Airlines and US Airways.American Airlines. Airlines operating at the airport reach 4440 destinations. Of these destinations Mexico City, Tijuana and Los Angeles are the most popular.
Guadalajara International Airport is located approximately 20 kilometers from the city of Guadalajara, which has a population (including its suburbs) of approximately 5 million inhabitants. Guadalajara is Mexico’s second largest city in terms of population and is the capital of the state of Jalisco, the country’s fourthsecond largest state in terms of population. As a major hub for the Mexican national highway system, the city of Guadalajara is an important center for both ground and air transportation. Other major cities in the state of Jalisco include Puerto Vallarta and Lagos de Moreno. Jalisco is an important agricultural producer, making Guadalajara an important center for agricultural commerce. The state is an important contributor to Mexico’smaquiladora industry, most notably in the electronic, computer equipment and clothing industries. Themaquiladora industry in Jalisco grew significantly in the 1990’s asmaquiladoras moved away from the U.S.-Mexico border seeking lower labor costs and a more diverse labor pool.
Guadalajara International Airport operates 24 hours daily. The airport has two operating runways, one with a length of 4,000 meters and a full parallel taxiway and the other with a length of 1,770 meters, as well aswith a full parallel taxiway.threshold displacement of 300 meters at the runway, which permits a landing distance of 1,470 meters. The runway capacity at this airport is 39 air traffic movements per hour. The airport also has an instrument landing systemInstrument Landing System (ILS) that assists pilots in poor weather. The airport’s facilities include a main commercial terminal with a large parking facility and a general aviation building. The airport’s main commercial terminal has a total area of approximately 24,85061,938 square meters, as well as parking facilities consisting of an additional 46,000 square meters. The general aviation building has an additional 1,825 square meters. The main commercial terminal has 1820 gates (four of which are in our regional Terminal 2) and 21 remote boarding positions. Of the 1820 gates, eightnine serve international flights and ten11 serve domestic flights. Of the international gates, three have air bridges, and of the domestic gates, five have air bridges. Additionally there are eleven remote positions used for the regional flights commonly used by Aeroméxico Connect and Mexicana Link.VivaAerobus.
On May 31, 2004, we recovered the rights to operate the most lucrative commercial space (comprising approximately 1,300 square meters) in and leading to the domestic departure area, which had been operated by a third party under a long-term agreement. As part of our business strategy, during 2010 we intendbegan changing the profile and category of service of almost all of the stores to renovatebetter-known brands. We completed this area and better integrate it withinprocess during the other commercial space at the airport.second quarter of 2012. The airport has an onsite hotel operated by a third party from which we derive no revenues.revenues, but through legal actions we are in the process of recovering the hotel from the third party.
We have continued to take significant steps to modernize and expand the Guadalajara International Airport in order to improve its operations and image. These steps have included the improvement of the airport’s runways and platforms, an increase in the number of remote boarding positions, the installation of an improved computer system and expansion of the main commercial terminal, including the installation and/or modernization of air bridges, the baggage claim area, ticket counters, restrooms, hallways and gate areas. In addition, between 20072010 and 20092011 we completed the
expansion of the international baggage claim area, we expanded the expansion ofaccess point areas for departing passengers, and we upgraded the domesticdepartures hall. Also, during 2011, we completed the new food court, which adds another 250 square meters for food and international gate areas, the international arrival area and the opening of a ground transportation terminal with an area of 8,116 square meters.beverage sales. We also remodeled an additional 2,120100 square meters in these areas to provide better service to our passengers and to expand some commercial spaces in the domestic arrival area. We also completed the expansion of the main parking facility in August 2008. Approximately 2,150 square meters of these renovations are devoted to commercial activities.for specialty retail stores.
Tijuana International Airport
Tijuana International Airport is our second most important airport in terms of passenger traffic, the third in air traffic movements and the fourth in contribution to revenuesthe sum of aeronautical and the second in air traffic movements.non-aeronautical revenues. In 2009,2012, Tijuana International Airport was the fifth busiest airport in Mexico in terms of commercial aviation traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, it accounted for approximately 17.7% of our terminal passenger traffic.
In 2009,2012, Tijuana International Airport served a total of 3.43.8 million terminal passengers. We estimate that almost allApproximately 99.4% of thethose terminal passengers were domestic passengers. Since Tijuana is located near the Mexico-U.S. border and is therefore a popular entry point to the United States, a majority of the airport’s passengers consists of Mexican migrant workers traveling to Tijuana in order to seek work in the United States. Accordingly, the airport’s passenger traffic and results of operations are affected by Mexican and U.S. economic conditions. A highway connecting the city of Tijuana to the airport also extends directly to the U.S.-Mexico border crossing, providing convenient access to San Diego, California (which is located approximately 30 kilometers from Tijuana International Airport) and other areas of southern California, particularly Los Angeles.
Tijuana International Airport serves the city of Tijuana and surrounding areas in the State of Baja California, including the municipalities of Ensenada, Tecate and Rosarito. With a population of approximately 1.51.6 million, Tijuana is the largest city in the state. Currently, in terms of population, the state of Baja California is the second largestmaquiladora center in Mexico, according to the Mexican National Institute of Statistics.for Statistics and Geography (INEGI).
A total of sevenfive airlines operate at the airport,airport; the principal ones of which are Volaris and Aeroméxico.xico Group. Airlines operating at this airport provide service to 2328 destinations. Of these destinations Guadalajara, Mexico City, Guadalajara, and TolucaCuliacan are the most popular. In addition, Aeroméxico flies twice weekly from Tijuana to Tokyo and Shanghai.
Tijuana International Airport currently operates 17 hours daily between the hours of 7:00 a.m. and 12:00 a.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for other aeronautical services provided outside normal business hours. The airport has one runway with a length of 2,960 meters and a full parallel taxiway. The runway capacity at this airport is 3031 air traffic movements per hour. The airport also has an instrument landing systemInstrument Landing System (ILS) that assists pilots in poor weather. It has 1823 gates serving both domestic and international travelers and sixteensix remote boarding positions. Of the 1823 gates, ten have air bridges.
In 2009,2012, approximately 12.715.8 thousand metric tons of cargo werewas transported through the airport.
A portion of the land comprising Tijuana International Airport was expropriated by the Mexican federal government in 1970 pursuant to its power of eminent domain and is subject to certain legal proceedings by its former landholders. For a description of these legal proceedings and their potential impact on our operations, see “Item 8,Financial Information – Legal Proceedings—Proceedings – Ejido Participants at Tijuana and Guadalajara Airport”.”
Puerto Vallarta International Airport
Puerto Vallarta International Airport is our third most important airport in terms of passenger traffic contribution to revenues and fourth in terms of air traffic movements. In 2009, Puerto Vallarta International Airport was the sixth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009, it accounted for approximately 13.7% of our terminal passenger traffic.
In 2009, 2.6 million terminal passengers traveled through Puerto Vallarta International Airport. We estimate that 72.1% of these terminal passengers were international passengers and 27.9% were domestic passengers. The airport primarily serves foreign tourists and is a popular tourist destination in Mexico.
A total of 26 airlines operate at the airport, the principal ones of which are Alaska Airlines, American Airlines and US Airways. Airlines operating at this airport provide service to 35 destinations. Of these destinations, the most popular are Mexico City, Phoenix and Los Angeles. During 2009, new routes from our Puerto Vallarta airport to Montreal, Kelowna and Austin were opened by airlines such as Westjet and VivaAerobus.
Puerto Vallarta International Airport is located on the Pacific coast in the state of Jalisco. Puerto Vallarta’s tourist attractions include the natural beauty of the Bay of Banderas, the area’s many beaches and abundant marine wildlife. Puerto Vallarta is a mature tourist destination, and the completion of new resort areas including hotels and golf courses in the areas known as Nuevo Vallarta and Punta Mita is expected to bring more tourists to the area in subsequent years. We believe that a significant portion of the tourists visiting Puerto Vallarta consist of time-share owners who make frequent trips to the area.
Puerto Vallarta International Airport operates 24 hours daily. The airport has one runway with a length of 3,100 meters as well as a parallel taxiway. The runway capacity at this airport is 30 air traffic movements per hour. This airport has one main commercial terminal, a fixed-base operation, or FBO, terminal and a general aviation building. FBOs are specialized, full service operations offered to general aviation aircraft. The services offered to FBO users include refueling, cleaning, and catering. The airport has 15 gates serving domestic and international flights, nine remote boarding positions and seven air bridges.
During 2005 and at the beginning of 2006, the terminal building of the Puerto Vallarta International Airport was improved through expansion and remodeling projects. The projects included the construction of a new building that will house the documentation areas of the regular and charter airlines, the expansion of baggage claim areas (particularly for international arrivals), the expansion of the immigration area and the expansion of the final waiting areas, as well as some improvements, for a total of 8,140 square meters of total expansions. Approximately 1,100 square meters of this expansion is used for commercial space. Additionally, we built a 13,400 square meter satellite building during 2007, which became operational in December 2007.
Los Cabos International Airport
Los Cabos International Airport is our second most important airport in terms of contribution to revenues, fourththird most important airport in terms of passenger traffic, and our fifth most important airport in terms of air traffic movements.movements and second most important airport in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2009,2012, Los Cabos
International Airport was the seventhsixth busiest airport in Mexico in terms of commercial aviation passenger traffic, according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, Los Cabos International Airport accounted for approximately 13.6%14.2% of our terminal passenger traffic.
Approximately 2.63.0 million terminal passengers were served by the airport in 2009.2012. Approximately 69.1%70.7% of the terminal passengers were international passengers. The airport serves primarily tourists visiting San JoséJose del Cabo, Cabo San Lucas and other coastal destinations along the Trans-Peninsular highway of the state of Baja California Sur.
A total of 2422 airlines operate at the airport with Alaska Airlines, United Airlines, American Airlines, Interjet, US Airways and ContinentalVolaris being the principal ones. Airlines operating at this airport provide service to 2937 destinations. Of these destinations, Mexico City, Los Angeles Mexico City and Phoenix are the most popular.
Los Cabos International Airport is located approximately 13 kilometers from the city of San JoséJose del Cabo, in the state of Baja California Sur. In 2009,2012, the number of visitors to Los Cabos (San José del Cabo and the nearby city of Cabo San Lucas) was 1.8approximately 1.4 million, according to the Mexican Immigration Institute. Visitors to this area are generally affluent and include golfers who enjoy world-class courses, as well as sports fishing and scuba diving enthusiasts who are drawn by the rich marine life in the region’s coastal waters. We believe a growing percentage of visitors to Los Cabos consist of recurring visitors as the popularity and availability of time-shares in the area has increased over recent years.
Los Cabos International Airport’s standard operatingAirport currently operates 11 hours are fromdaily between 7:00 a.m. toand 6:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 3,000 meters, and a full parallel taxiway to the runway. The runway capacity at this airport is 3337 air traffic movements per hour. The existing runway allows us to serve planes flying to any destination in the United States and Canada. The airport has two commercial aviation terminals. Terminal 1 occupies approximately 14,600 square meters, (157,200 square feet) and the new Terminal 32, which opened on November 1, 2012, occupies approximately 10,60035,000 square meters (114,100 square feet).meters. The airport has 1216 gates (eight in Terminal 1 and 12eight in Terminal 2), including four gates with air bridges, and 14 remote boarding positions. In addition, the airport has a general aviation and an FBOa Fixed Base Operations terminal Terminal 2, occupying 1,961 square meters. During 2007 and 2008, we developed a new FBO building to redistribute commercial and private flight flows, and to provide additional space for future growth.(FBO). We operate commercial space of approximately 2,000 square meters at Los Cabos International Airport. In 2009,2012, approximately 28.9%33.1% of the sum of our totalaeronautical and non-aeronautical revenues generated at the Los Cabos International Airport werewas derived from commercial businesses, a percentage that is higher than at any other airport in our group.
Puerto Vallarta International Airport
Puerto Vallarta International Airport is our fourth most important airport in terms of passenger traffic and in terms of air traffic movements, and third in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2012, Puerto Vallarta International Airport was the seventh busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2012, it accounted for approximately 12.2% of our terminal passenger traffic.
In 2012, 2.6 million terminal passengers traveled through Puerto Vallarta International Airport. We estimate that 69.2% of these terminal passengers were international passengers and 30.8% were domestic passengers. The airport primarily serves foreign tourists and is a popular tourist destination in Mexico.
A total of 19 airlines operate at the airport; the principal ones are Alaska Airlines, United Airlines, Aeroméxico Group, Interjet and WestJet. Airlines operating at this airport provide service to 40 destinations. Of these destinations, the most popular are Mexico City, San Francisco and Phoenix.
Puerto Vallarta International Airport is located on the Pacific coast in the state of Jalisco. Puerto Vallarta’s tourist attractions include the natural beauty of the Bay of Banderas, the area’s many beaches and abundant marine wildlife. Puerto Vallarta is a mature tourist destination, and the completion of new resort areas including hotels and golf courses in the areas known as Nuevo Vallarta and Punta Mita is expected to bring more tourists to the area in subsequent years. We believe that a significant portion of the tourists visiting Puerto Vallarta are time-share owners who make frequent trips to the area.
Puerto Vallarta International Airport operates 24 hours daily. The airport has one runway with a length of 3,100 meters as well as a parallel taxiway. The runway capacity at this airport is 29 air traffic movements per hour. This airport has one main commercial terminal, a Fixed Base Operations terminal, or FBO, and a general aviation building. FBOs are specialized, full service operations offered to general aviation aircraft. The services offered to FBO users include refueling, cleaning, and catering. The airport has 20 gates, of which six serve domestic flights and 14 serve international flights, seven remote boarding positions and eleven air bridges. During 2012, we added 6,000 square meters to the terminal building, of which 200 square meters is dedicated to commercial use.
Hermosillo International Airport
Hermosillo International Airport is our fifth most important airport in terms of passenger traffic, and contribution to revenues and our thirdsecond most important airport in terms of air traffic movements.movements and our fifth most important in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2009,2012, Hermosillo International Airport was the nintheighth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, it accounted for approximately 6.1% of our terminal passenger traffic.
In 2009,2012, Hermosillo International Airport served approximately 1.21.3 million terminal passengers, and approximately 93.3 %94.0% of those terminal passengers were domestic.domestic passengers. Many of the airport’s passengers use the airport as a hub for connecting flights between other Mexican cities, particularly Mexico City, Tijuana, Guadalajara and Monterrey. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of ninesix airlines operate at the airport,airport; the principal ones of which are Aeroméxico Aeroméxico ConnectGroup, Volaris and Volaris.VivaAerobus. Airlines operating at this airport provide service to 1812 destinations. Of these destinations, Mexico City, Guadalajara, Monterrey and MonterreyTijuana are the most popular.
Hermosillo International Airport serves the city of Hermosillo and four other nearby municipalities, which together have a population of approximately 11.0 million, according to the Mexican National Population Council. The city of Hermosillo, which is the capital of the state of Sonora, is located approximately 260 kilometers south of the border town of Nogales and 130 kilometers east of the Gulf of California. The airport is located approximately 13 kilometers west of the city of Hermosillo. The airport is an important hub in a primarily agricultural and industrial region. Approximately 5.49.2 thousand metric tons of cargo passed through the airport in 2009.2012. Currently, cargo transport services at this airport primarily serve the nearby Ford factory, which receives components via the airport.
Hermosillo International Airport operates 1418 hours daily between the hours of 6:00 a.m. and 8:00:00 p.m.a.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has two runways, one with a length of 2,300 meters and the other with a length of 1,100 meters. The runway capacity at this airport is 2829 air traffic movements per hour. The airport has nine gates and eightten remote positions and includes both a commercial aviation building and a general aviation building for small private airplanes.
Guanajuato International Airport
Guanajuato International Airport is our sixth most important airport in terms of passenger traffic, air traffic movements and contribution to the sum of aeronautical and non-aeronautical revenues. In 2009,2012, Guanajuato International Airport was the twelfththirteenth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, it accounted for approximately 4.6%4.5% of our terminal passenger traffic. During 2009,2012, the airport served 886.1950.3 thousand terminal passengers, 59.6%58.1% of which were domestic.domestic passengers.
A total of tensix airlines operate at the airport,airport; the principal ones of which are Aeroméxico AeromarGroup, Volaris and Continental.United Airlines. Airlines operating at this airport provide service to 128 destinations. Of these destinations, Mexico City, TijuanaHouston and HoustonTijuana are the most popular.
Guanajuato International Airport is located in the central state of Guanajuato near the cities of León,Leon, Irapuato, Silao and Guanajuato, approximately 315 kilometers northwest of Mexico City. The state of Guanajuato has a population of approximately 4.85.5 million people according to the Mexican National Population Council and is located in Mexico’s GuanajuatoBajio region, best known for its rich colonial history, its agricultural sector and manufacturing industry. General Motors has an assembly plant in Silao, Guanajuato. The local government is developing a “dry dock” or truck loading service terminal near the airport that we believe will increase cargo demand.
Guanajuato International Airport operates 20 hours daily between the hours of 4:00 a.m. and 12:00 midnight. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway with a length of 3,500 meters. The runway capacity at this airport is 2313 air traffic movements per hour. It has two terminals (one commercial and one general aviation), with six gates, and threefive remote boarding positions. Of the six gates,positions and three have air bridges.
La Paz International Airport
La Paz International Airport is our seventh most important airport in terms of passenger traffic, air traffic movements and contribution to the sum of aeronautical and non-aeronautical revenues. In 2009,2012, La Paz International Airport was the twenty-thirdtwenty-first busiest airport in Mexico in terms of commercial
aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 20092012 it accounted for approximately 2.7%2.6% of our terminal passenger traffic.
During 2009,2012, La Paz International Airport served 512.6553.2 thousand terminal passengers. We estimate that approximately 93.9%95.1% of these terminal passengers were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of five airlines operate at the airport,airport; the principal ones of which are Volaris and Aeroméxico Connect and Mexicana Link, which started operations in 2009.Group. Airlines operating at this airport provide service to 11seven destinations. Of these destinations, Guadalajara, Mexico City, Guadalajara and Tijuana are the most popular.
La Paz International Airport serves the city of La Paz, located along the coast of the Gulf of California in the state of Baja California Sur, of which La Paz is the capital. Eco-tourism is a growing industry in La Paz due to the abundance of marine life found in the Gulf of California.
La Paz International Airport operates 16 hours daily between the hours of 7:00 a.m. and 11:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,500 meters in length and a single main commercial terminal. The runway capacity at this airport is 1918 air traffic movements per hour. It also has three gates and seven remote boarding positions.
Mexicali International Airport
Mexicali International Airport is our eighth most important airport in terms of passenger traffic and in terms of contribution to the sum of aeronautical and non-aeronautical revenues, and our eleventh most important airport in terms of air traffic movements. In 2012, Mexicali International Airport was the twenty-third busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2012, it accounted for approximately 2.5% of our terminal passenger traffic. During 2012, Mexicali International Airport served 521.9 thousand terminal passengers. We estimate that approximately 99.3% of passengers served by this airport in 2012 were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of three airlines operate at the airport; the principal ones are Volaris and Aeroméxico. Airlines operating at this airport provide service to five destinations. Of these destinations, Mexico City and Guadalajara are the most popular.
Mexicali International Airport serves the city of Mexicali, in the Mexican state of Baja California, as well as the U.S. cities of Yuma, Arizona and Calexico, California. The city of Mexicali is located along the U.S.-Mexico border approximately 150 kilometers east of Tijuana and 80 kilometers west of Yuma, Arizona. Manufacturing forms the basis of the area’s economy, most notably in the form ofmaquiladorafactories, which have proliferated along the California-Baja California border.
Mexicali International Airport operates 19 hours daily between 6:00 a.m. and 1:00 a.m. the following day. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,600 meters in length as well as a main commercial terminal and a smaller general aviation terminal. The runway capacity at this airport is 19 air traffic movements per hour. The main commercial terminal has two gates and four remote boarding positions.
Morelia International Airport
Morelia International Airport is our ninth most important airport in terms of passenger traffic, air traffic movements and its contribution to revenues,the sum of aeronautical and our eighth most important in terms of air traffic movements.non-aeronautical revenues. In 2009,2012, Morelia International Airport was the twenty-sixthtwenty-ninth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, it accounted for approximately 2.3%1.9% of our terminal passenger traffic. In 2009,2012, the Morelia International Airport served 447.6409.3 thousand terminal passengers. We estimate that approximately 52.5%53.3% of the terminal passengers were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of sixfive airlines operate at the airport,airport; the principal ones of which are Mexicana,Volaris, Aeroméxico Group and Continental.United Airlines. Airlines operating at this airport provide service to 86 destinations. Of these destinations, Los Angeles,Tijuana, Mexico City and ChicagoLos Angeles are the most popular.
Morelia International Airport serves the city of Morelia and ten other municipalities in the immediate vicinity. The city of Morelia is the capital of the state of Michoacán,Michoacan, which has a population of approximately 4.14.4 million according to the Mexican National Population Council. Michoacán’sMichoacan’s principal industry is agriculture, and it has a developing eco-tourism industry (primarily due to the seasonal presence of monarch butterflies).
Morelia International Airport operates 24 hours a day. Extended hours of operation serve the needs of passengers seeking off-hour, discount flights.
The airport has one runway with a length of 3,400 meters and a single main terminal building. The runway capacity at this airport is 1611 air traffic movements per hour. The airport has twofour gates and nine remote boarding positions.
MexicaliAguascalientes International Airport
MexicaliAguascalientes International Airport is our eighthtenth most important airport in terms of passenger traffic ninth most important airport in termsand contribution to the sum of contribution toaeronautical and non-aeronautical revenues and our tentheighth most important airport in terms of air traffic movements. In 2009, Mexicali2012, Aguascalientes International Airport was the twenty-fourththirtieth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, it accounted for approximately 2.4%1.9% of our terminal passenger traffic. During 2009, Mexicali International Airport2012, the airport served 470.9400.1 thousand terminal passengers. WeOf these passengers, we estimate that approximately 99.2% of passengers served by this airport in 200966.9% were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of five airlines operate at the airport,airport; the principal ones of which are Click Mexicana,Volaris, Aeroméxico Connect, Volaris and Mexicana. Airlines operating at this airport provide service to six destinations. Of these destinations, Mexico City and Guadalajara are the most popular.
Mexicali International Airport serves the city of Mexicali, in the Mexican state of Baja California, as well as the U.S. cities of Yuma, Arizona and Calexico, California. The city of Mexicali is located along the U.S.-Mexico border approximately 150 kilometers east of Tijuana and 80 kilometers west of Yuma, Arizona. Manufacturing forms the basis of the area’s economy, most notably in the form ofmaquiladorafactories, which have proliferated along the California-Baja California border.
Mexicali International Airport operates 19 hours daily between the hours of 6:00 a.m. and 1:00 a.m. the following day. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,600 meters in length as well as a main commercial terminal and a smaller general aviation terminal. The runway capacity at this airport is 18 air traffic movements per hour. The main commercial terminal has two gates and four remote boarding positions.
Aguascalientes International Airport
Aguascalientes International Airport is our tenth most important airport in terms of passenger traffic and contribution to revenue and eleventh most important in terms of air traffic movements. In 2009, Aguascalientes International Airport was the thirty-first busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009, it accounted for approximately 1.5% of our terminal passenger traffic. During 2009, the airport served 284.5 thousand terminal passengers. Of these passengers, we estimate that approximately 76.7% were domestic passengers. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of five airlines operate at the airport, the principal ones of which are Aeroméxico Connect, Continental, AeromarGroup and American Eagle.Airlines. Airlines operating at this airport provide service to six destinations. Of these destinations Mexico City, Tijuana, Dallas and HoustonLos Angeles are the most popular.
Aguascalientes International Airport serves the city of Aguascalientes and eight surrounding municipalities in the central state of Aguascalientes, which is located roughly 513 kilometers northwest of Mexico City. Manufacturing forms the basis of the region’s economy. One of Nissan��sNissan’s main manufacturing plants in Mexico is located in the city of Aguascalientes.
Aguascalientes International Airport operates 1214 hours daily between the hours of 7:6:00 a.m. and 7:8:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. It has two runways, one measuring 3,000 meters in length and the other (which is closed temporarily)
measuring 1,000 meters, and a single main commercial terminal. The runway capacity at this airport is 2216 air traffic movements per hour. The airport has three gates and four remote boarding locations.
Los Mochis International Airport
Los Mochis International Airport is our eighth most important airport in terms of air traffic movements, eleventh most important airport in terms of passenger traffic, andthe twelfth in terms of contribution to revenues.the sum of aeronautical and non-aeronautical revenues and our tenth most important in terms of air traffic movements. In 2009,2012, Los Mochis International Airport was the thirty-sixththirty-seventh busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, it accounted for approximately 1.1%0.9% of our terminal passenger traffic.
Los Mochis International Airport serves the city of Los Mochis, in the Pacific coastal state of Sinaloa, an important agricultural state. During 20092012 the airport served 206.0183.5 thousand terminal passengers, approximately 97.4%97.6% of which were domestic passengers. The area’s sport fishing and hunting attract both Mexican and foreign visitors. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations particularly are affected by economic conditions in Mexico.
A total of fivefour airlines operate at the airport, the principal ones of which are Aeroméxico Connect, Mexicana LinkVolaris, Aerocalafia and Transportes Aeropacífico. Airlines operating at this airport provide service to eightseven destinations. Of these destinations, Guadalajara, Mexico City, Tijuana and TijuanaGuadalajara are the most popular.
Los Mochis International Airport operates 14 hours daily between the hours of 7:00 a.m. and 9:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we are authorized to charge double our regular passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,000 meters in length as well as a single main commercial terminal. The runway capacity at this airport is 1912 air traffic movements per hour. The airport has three gates and four remote boarding positions.
Manzanillo International Airport
Manzanillo International Airport is our eleventhtwelfth most important airport in terms of contribution to revenues and our twelfth most important in terms of passenger traffic and air traffic movements.movements, and our eleventh in terms of contribution to the sum of aeronautical and non-aeronautical revenues. In 2009,2012, Manzanillo International Airport was the thirty-ninth busiest airport in Mexico in terms of commercial aviation passenger traffic according to the Mexican Airport and Auxiliary Services Agency. In 2009,2012, it accounted for approximately 0.9%0.8% of our terminal passenger traffic.
During 2009,2012, the airport served 178.1168.0 thousand terminal passengers. We estimate that approximately 51.2%52.7% of these passengers were domestic passengers and 48.8%47.3% of these passengers were international passengers.
A total of nineeight airlines operate at this airport, of which airport; the principal ones are Aeromar,Alaska Airlines Continental, Aeromar and Westjet operate on a regular basis.Aeroméxico Group. The other airlines operate only during the high tourist season (November to April). The principal destinations served by airlines at this airport are Mexico City, Los Angeles and Houston.
Manzanillo International Airport serves the city of Manzanillo and six surrounding municipalities in the small Pacific coastal state of Colima. The city is located on the coast approximately 230 kilometers southeast of Puerto Vallarta and 520 kilometers northwest of Acapulco. The airport serves primarily tourists visiting coastal resorts in Colima and neighboring Jalisco. In recent years, passenger traffic at the Manzanillo International Airport has remained stable due todespite the increased popularity of Puerto Vallarta asand other tourist destinations due to a tourist destination and a decreasedecline in investmentinvestments, in the tourism sector in Manzanillo.
Manzanillo International Airport operates 12 hours daily between the hours of 8:00 a.m. and 8:00 p.m. However, it is equipped to operate 24 hours daily if necessary, and we double our passenger charges and fees for aeronautical services provided outside normal business hours. The airport has one runway measuring 2,200 meters. The runway capacity at this airport is 1311 air traffic movements per hour. The airport has four gates and five remote boarding positions.
Our Non-Airport Subsidiaries:
Although we are a holding company that has subsidiaries operating each of our 12 airports, we also have three employee service company subsidiaries. The employee service companies are responsible for providingprovide part of the labor force operatingthat works in our airports. The airport subsidiaries themselves do not directly employ any personnel. Our employee service companies are i) Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V. (“SIAP”), ii) Corporativo de Servicios Aeroportuarios, S.A. de C.V. (“CORSA”), and iii) Puerta Cero Parking, S.A. de C.V. (“PCP”).
SIAP
SIAP was incorporated as a subsidiary in June 1998 to provide technical assistance and corporate services to our airport operating subsidiaries. SIAP was set up as part of the Mexican Government’sgovernment’s privatization plan for the airports operated by us. SIAP invoices our airports for three types of services:
SIAP employs the senior management at our corporate headquarters and at our airports, and charges our airport operating subsidiaries for these personnel-related coststhe services rendered according to each airport operating subsidiary’s individual performance;
• | As part of the privatization plan that was implemented by the Mexican |
OurSIAP employs non-unionized employees, who were previously employed directly by the airports, were transferredpersonnel to SIAP in May 2006. These employees are assigned to work on-siteperform services at each of our airports according to their capabilities and the costs for these employees are billed by SIAP to each airport subsidiaryexpertise and collects fees on a monthly basis.
CORSA
CORSA was incorporated as a subsidiary on November 8, 2007 and began operations in January 2008. CORSA hired allemploys unionized employees that had been previously employed bypersonnel to perform services at our airports according to their capabilities and expertise and collects fees on a monthly basis for the airport subsidiaries. CORSA’s employees work on-site at each of our airports.services performed.
PCP
PCP was incorporated as a subsidiary on November 28, 2007 and began operations in January 2008. PCP provides operating and administrative services for the airport parking lots that are part of our airport concessions.lots. PCP currently employs both unionized and non-unionized personnel and unionized employees.collects fees on a monthly basis for the services performed.
Principal Customers
Principal Aeronautical Services Customers
Airline Customers
As of December 31, 2009, 142012, 19 international airlines and 128 Mexican airlines operated flights at our 12 airports. Aeroméxico operates the most flightsVolaris is our principal airline customer in terms of total passengers at our airports, with MexicanaAeroméxico and VolarisAeroméxico Connect (together the “Aeroméxico Group”) and Interjet providing the second and third highest number of flights.total passengers. In 2009,2012, revenues from AeroméxicoVolaris and the passengers
they moved through our airports totaled Ps. 449.5966.1 million, of which Ps. 421.8917.2 million was derived fromwere paid to the airports for the passengers they moved in form of passenger charges, representing 13.8%21.0% of the sum of our totalaeronautical and non-aeronautical revenues for 2009.2012. Revenues from Mexicanathe Aeroméxico Group and Volaristhe passengers they moved through our airports were Ps. 415.5613.5 million and Ps. 429.7 million respectively,during 2012, of which Ps. 403.2577.4 million and Ps. 405.2 million respectively was derived from passengerwere paid to the airports for the passengers they moved in form of passengers charges, representing 12.7% and 13.2%, respectively, of the sum of our totalaeronautical and non-aeronautical revenues for 2009.2012. In addition to passenger charges (revenues generated by the services provided by airports to passengers), we also earned revenues are earned from landing charges, aircraft parking charges and the leasing of space to these airlines.
On July 15,As a result of certain disputes with our airline customers, beginning in 2003, we entered into an agreementagreements with the National Air Transportation Chamber of Commerce and the Ministry of Communications and Transportation pursuant to which we resolved certain existing disputes with our airlinesairline customers and established specific prices applicable to those airlines for 2003 and 2004 and a method for retroactively applying those prices from 2000, since these airlines had refused to pay certain of our charges since that year. In March 2005, we entered into a renewal agreement with the National Air Transportation Chamber of Commerce for 2005 and 2006. The National Air Transportation Chamber of Commerce agreed to cause our principal airline customers to enter into (a)(i) contracts governing charges for aeronautical services, (b)(ii) lease contracts for property used by the airlines and (c)(iii) contracts governing collection of passenger charges. As of December 31, 2005, these airlines had entered into agreements with us such that proceedings against us were either resolved or dismissed and no fees remained subject to further dispute. In December 2006 we renewed our agreement for the 2007-2009 period, and in February 2010 we renewed our agreement for the 2010-2011 period. These agreements represented (a)represented: (i) virtually all of the relevant contracts governing the collection of passenger charges, (b)(ii) a substantial majority of the agreements for the leasing of space in our terminals and (c)(iii) a substantial majority of the contracts governing our aeronautical services, in each case in terms of the total number agreements to be entered into. In March 2012, we signed a new agreement which maintained essentially the same terms as our previous contracts.
Changes in Principal Airlines Operating at our Airports
On August 28, 2010, Grupo Mexicana, which operated through its three subsidiaries, Mexicana, Mexicana Click, and Mexicana Link, suspended operations indefinitely. On the day Grupo Mexicana suspended operations, they were operating at 10 of our 12 airports. During the first half of 2010, Grupo Mexicana transported 1,869,636 total passengers in our network representing 18.3% of our total passengers. This made Grupo Mexicana our third most important airline group in terms of the number of passengers transported within our airports. During 2009 and the first half 2010, aeronautical revenues from Grupo Mexicana and from the passengers they moved through our airports represented 16.2% and 17.0% of our total aeronautical revenues, respectively. As of August 28, 2010, we had a pending balance due from Grupo Mexicana of Ps. 49.9 million. Of this amount, Ps. 38.6 million corresponds to passenger charges, which Grupo Mexicana collected on behalf of our airports from passengers of Mexicana, Click or Link through August 27, 2010. We have yet to receive this amount; therefore as of December 31, 2012, we have an allowance for doubtful accounts for Ps. 70.0 million.
On November 29, 2011, AMR Corporation, parent of American and American Eagle, publicly announced that AMR Corporation and certain of its U.S.-based subsidiaries (including American and American Eagle) filed voluntary petitions for Chapter 11 reorganization in a U.S. Bankruptcy Court. To date, AMR Corporation, through its two subsidiaries American and American Eagle, operates at 6 of our 12 airports (Aguascalientes, Guanajuato, Guadalajara, Morelia, Puerto Vallarta and Los Cabos). From January to December 2012, AMR Corporation, through its subsidiaries, transported 855,241 total passengers at our airports, which corresponds to 4.0% of our passenger traffic in 2012. This made AMR Corporation our seventh most important airline group in terms of the number of passengers transported within our airports. During 2011 and 2012, aeronautical revenues from AMR Corporation and the passengers they moved through our airports represented 5.4% and 5.1% of our total aeronautical revenues, respectively. Although the Chapter 11 process permits American and American Eagle to continue operating flights normally during the reorganization, we may in the future need to take necessary reserves to ensure the payment of any pending balances should AMR Corporation fail to emerge from Chapter 11 bankruptcy. As of the date of this report, American and American Eagle have not suspended payments for the services we have performed for them during their Chapter 11 process.
Complementary Services Customers
Our principal complementary services clients are our three principal providers of baggage handling services, Menzies Aviation, S.A. de C.V., SEATAdministradora Especializada en Negocios, S.A. de C.V. (a subsidiary of ConsorcioGrupo Aeroméxico and Grupo Mexicana)xico) and AGN Aviation Services, S.A. de C.V., which provided Ps. 21.622.7 million, Ps. 10.46.8 million and Ps. 5.54.1 million of the sum of aeronautical and non-aeronautical revenues, respectively, each in the form of access fees, in 2009.2012. Our primary catering clients are Aerococina, S.A. de C.V. and Gate Gourmet & Maasa México, S. de R.L. de C.V., which provided Ps. 5.84.7 million and Ps. 1.21.4 million of revenues, respectively, in the form of access fees, in 2009.2012.
While we receive a fee from our complementary services clients equivalent to 10% to 15% of their reported sales, we receive only a fixed fee when a company is a subsidiary or affiliate of an airline. Among our three principal providers of baggage handling, Administradora Especializada en Negocios, S.A. de C.V. is SEAT, athe only subsidiary of Consorcio Aeroméxico and Grupo Mexicana.airlines.
Principal Non-Aeronautical Services Customers
AtAs of December 31, 2009,2012, we were party to approximately 791960 contracts (9.4% less than the 1,059 contracts we were party to in 2011) with providers of commercial services in the commercial spacespaces in our airports, including retail store operators, duty-free store operators, food and beverage providers, time share developers, financial services providers, car rental companies, telecommunications providers, VIP lounges, advertising, travel agencies and tourist information and promotion services. As a result, our revenues from non-aeronautical services commercial customers are spread across a largeThe decrease in the number of customerscontracts is due to an increase in the average square meters per contract in the Los Cabos airport, as the former Terminal 3 had smaller stores, while the new Terminal 2 has fewer stores but larger spaces and are therefore not dependent on a limited number of principal customers.higher revenues per store. In 2009,2012, our largest commercial customers in terms of revenues paid to us were Dufry México, S.A. de C.V. (duty-free stores; Ps. 79.4 million), Aldeasa México, S.A. de C.V. (duty-free stores; Ps. 36.0 million), Operadora Aeroboutiques, S.A. de C.V. (convenience stores;(retail; Ps. 49.736.0 million), Dufry México (duty-free stores; Ps. 39.4 million), Unidad de Diseño y Comunicación, S.A. de C.V. (advertising; Ps. 33.8 million), Desarrolladores de los Cabos, S.A. de C.V. (time-share developer; Ps. 18.3 million), Estrategia Comercializadora del Pacífico, S.A. de C.V. (time-share developer; Ps. 18.1 million), Desarrolladores de Baja California Sur, S.A. de C.V. (time-share developer; Ps. 17.8 million), and Aerocomidas, S.A. de C.V. (food and beverages; Ps. 15.222.4 million), Compañía Mexicana de Tiempos Compartidos, S.A. de C.V. (time-share developer; Ps. 16.8 million), Teléfonos de México, S.A.B. de C.V. (communications and advertising; Ps. 12.5 million) and Servicios Inmobiliarios ALSEA, S.A. de C.V. (food and beverage; Ps. 12.5 million).
Seasonality
Our business is subject to seasonal fluctuations. In general, demand for air travel is typically higher during the summer months and during the winter holiday season, particularly in international markets, because there is more vacation travel during these periods. Our results of operations generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal, including economic conditions, war or threat of war, terrorism or threat of terrorism, weather, air traffic control delays, health crises and general economic conditions, as well as the other factors discussed above. As a result, our results of operations for a quarterly period are not necessarily indicative of results of operations for an entire year, and historical results of operations are not necessarily indicative of future results of operations.
Competition
Excluding our airports servicing tourist destinations, our airports generally are natural monopolies in the geographic areas that they serve and generally do not face significant competition.
However, since our Puerto Vallarta, Los Cabos, La Paz and Manzanillo international airports are substantially dependent on tourism, these airports face competition from competing tourist destinations. We believe that the main competitors to these airports are those airports serving vacation destinations in Mexico, such as Acapulco and Cancún,Cancun, and abroad such as in Hawaii, Puerto Rico, Florida, Cuba, Jamaica, the Dominican Republic, other Caribbean islands and Central America.
Additionally, in the future our Los Cabos airport may experience greater competition from the owner of a small private airport near CabosCabo San Lucas which received a permit to operate public service in March 2008 from the Ministry of Communications and Transportation. On November 4, 2009, this airport received authorization to operate regular commercial routes for domestic and international flights. During 2009, we commenced certain legal actions in order to preserve our market position. Additionally,position, however, once the airport received authorization to operate commercial flights we are continuing tocould not continue our legal action against it. Therefore, we will implement commercial strategies to improve our level of service in order to ensure that we remain the best airport option for airlines serving the San Jose del Cabo and Cabo San Lucas corridor. Also, in order to serve the private aviation market, we started operations at our new state-of-the-art Fixed Base of Operations in Los Cabos Airport. This allowed us to increase our capacity, and we redesigned our fee structure in order to make our service the most attractive in the region.
In addition, the Mexican government announced in the National Infrastructure Plan 2007-2012 (Programa Nacional de Infraestructura 2007-2012) (published in July 2007) that at least three new airports would be constructed between 2007 and 2012: the Riviera Maya airport, the Ensenada airport and the Mar de Cortés airport. As of the date of this report, none of these airports have been constructed.
On May 12, 2010 the Mexican government announced through the Ministry of Communications and Transportation the commencement ofbegan the bidding process for the Riviera Maya airport and issued the requirements for that process.airport. The Mexican government received proposals in April 2011. On April 25, 2011, we submitted a bid, as part of a consortium with Grupo México, S.A.B. de C.V. On May 20, 2011, the Ministry of Communications and Transportation released a communication saying that all proposals for this concession were found deficient and voided, including ours. Consequently, the international public bidding process for the construction, administration and operation of the Riviera Maya airport was declared deserted or void. As of the date of this filing, the Ministry of Communications and Transportation has not announced it expects to concludewhether or not there will be a new bidding process for the process no later than December 31, 2010.Riviera Maya airport project.
As of the date of this filing, the government has not provided further information in respect toof the Ensenada airport and the Mar de Cortés airport as to the expected type or the size of these airports, and we cannot predict whether these airports, if they are constructed, will compete with our airports. Also see “Item 3,Risk Factors—Factors – Risk Related to the Regulation of our Business—Business – The Mexican government could grant new concessions that compete with our airports”.”
The relative attractiveness of the locations we serve is dependent on many factors, some of which are beyond our control. These factors include the general state of the Mexican economy and the attractiveness of other commercial and industrial centers in Mexico that may affect the attractiveness of Guadalajara, Tijuana and other growing industrial centers in our group, such as Hermosillo, León,Leon, Aguascalientes and Mexicali. In addition, with respect to Puerto Vallarta, Los Cabos, La Paz and Manzanillo, these factors include promotional activities and pricing policies of hotel and resort operators, weather conditions, natural disasters (such as hurricanes and earthquakes), security concerns, health crises and the development of new resorts that may be considered more attractive. There can be no assurance that the locations we serve will continue to attract the same level of passenger traffic in the future.
The Mexican Airport and Auxiliary Services Agency currently operates seven small airports in Mexico’s Pacific and central regions. We believe that these airports collectively account for only a small fraction of the passenger traffic in these regions.
Sources of Regulation
The following are the principal laws, regulations and instruments that govern our business and the operation of our airports:
the Mexican Airport Law, enacted December 22, 1995;
• | the Mexican Airport Law (Ley de Aeropuertos), enacted December 22, 1995; |
• | the regulations under the Mexican Airport Law (Reglamento de la Ley de Aeropuertos), enacted February 17, 2000; |
• | the Mexican Communications Law (Ley de Vías Generales de Comunicación), enacted February 19, 1940; |
• | the Mexican Civil Aviation Law (Ley de Aviación Civil), enacted May 12, 1995; |
• | the Mexican Federal Duties Law (Ley Federal de Derechos), revised on an annual basis; |
• | the Mexican National Assets Law (Ley de Bienes Nacionales), enacted May 20, 2004; and |
the concessions that entitle our subsidiaries to operate our 12 airports, which were granted on June 29, 1998 and amended on November 15, 1999.
The Mexican Airport Law and the regulations under the Mexican Airport Law establish the general framework regulating the construction, operation, maintenance and development of Mexican airport facilities. The Mexican Airport Law’s stated intent is to promote the expansion, development and modernization of Mexico’s airport infrastructure by encouraging investment and competition.
Under the Mexican Airport Law, a concession granted by the Ministry of Communications and Transportation is required to construct, operate, maintain and develop a public service airport in Mexico. A concession generally must be granted pursuant to a public bidding process, except for: (i) concessions granted to (a) entities considered part of “the federal public administration” as defined under Mexican law and (b) any private company the principal shareholder of which is a state or municipal government; (ii) concessions granted to operators of private airports (that have operated privately for five or more years) wishing to begin operating their facilities as public service airports and complying with certain requirements; and (iii) complementary concessions granted to existing concession holders that comply with certain requirements. Complementary concessions may be granted only under certain limited circumstances, such as where an existing concession holder can demonstrate, among other things, that the award of the complementary concession is necessary to satisfy passenger demand. On June 29, 1998, the Ministry of Communications and Transportation granted 12 concessions to operate, maintain and develop the 12 principal airports in Mexico’s Pacific and central regions to our subsidiaries. Because our subsidiaries were considered entities of the federal public administration at the time the concessions were granted, the concessions were awarded without a public bidding process. However, the process of selling 15% of our capital stock to our strategic shareholder pursuant to the privatization process was conducted through a public bidding process. Each of our concessions was amended on November 15, 1999 in order to, among other things, incorporate each airport’s maximum rates and certain other terms as part of the concession.
On February 17, 2000, the regulations under the Mexican Airport Law were issued. We believe we are currently complying with the material requirements of the Mexican Airport Law and its regulations. Non-compliance with these regulations could result in fines or other sanctions being assessed by the Ministry of Communications and Transportation and are among the violations that could result in termination of a concession if they were to occur three or more times.
On May 20, 2004, a new Mexican National Assets Law was adopted and published in the Mexican Federal Gazette which,that, among other things, established regulations relating to concessions granted with respect to property held in the public domain, including the airports that we operate. The new Mexican National Assets Law established new grounds for revocation of concessions for failure to pay applicable taxes, but does not specify which taxes must be paid, including whether certain taxes to municipalities must be paid by a concessionaire.
To the best of our knowledge as of the date hereof, the constitutionality of the new Mexican National Assets Law has not been challenged in Mexico’s court system. If challenged in the future, a court could declare a contested application of a given tax to be void or determine an alternate amount.
Role of the Ministry of Communications and Transportation
The Ministry of Communications and Transportation is the principal regulator of airports in Mexico and is authorized by the Mexican Airport Law to perform the following functions:
plan, formulate and establish the policies and programs for the development of the national airport system;
construct, administer and operate airports and airport-related services for the public interest;
grant, modify and revoke concessions for the operation of airports;
establish air transit rules and rules regulating take offtake-off and landing schedules through the Mexican Air Traffic Control Authority;
take all necessary action to create an efficient, competitive and non-discriminatory market for airport-related services, and set forth the minimum operating conditions for airports;
establish safety regulations;
close airports entirely or partially when safety requirements are not being satisfied;
monitor airport facilities to determine their compliance with the Mexican Airport Law, other applicable laws and the terms of the concessions;
maintain the Mexican aeronautical registry for registrations relating to airports;
impose penalties for failure to observe and perform the rules under the Mexican Airport Law, the regulations thereunder and the concessions;
approve any transaction or transactions that directly or indirectly may result in a change of control of a concession holder;
approve the master development programsMaster Development Programs prepared by each concession holder every five years;
determine each airport’s maximum rates;
approve any agreements entered into between a concession holder and a third party providing airport or complementary services at its airport; and
perform any other function specified by the Mexican Airport Law.
In addition, under the Mexican Organic Law of the Federal Public Administration (Ley Orgánica de la Administración Pública Federal), the Mexican Airport Law and the Mexican Civil Aviation Law, the Ministry of Communications and Transportation is required to provide air traffic control, radio assistance and aeronautical communications at Mexico’s airports. The Ministry of Communications and Transportation provides these services through the Mexican Air Traffic Control Authority, which is a division of the Ministry of Communications and Transportation. Since 1978, the Mexican air traffic control authority has provided air traffic control for Mexico’s airports.
Regulatory Initiatives
The Ministry of Communications and Transportation intended to establish a new regulatory agency. This new agency was expected to be authorized to monitor our activities and those of the other airport groups, enforce applicable regulations, propose amendments to concessions, set maximum rates, resolve disputes between concession holders and airport users (such as airlines) and collect and distribute information relating to the airport sector. An initiative was introduced in Mexico’s Congress on February 26, 2009 to establish such an agency and reform a substantial part of the current Mexican Airport Law, but it was rejected by the legislature on April 20, 2010.See2010. On December 14, 2011, a new bill was introduced in Mexico’s Congress to amend the Mexican Airport Law. On December 19, 2012, the bill was approved and sent to the Senate for review. As of the date of this report the Senate has not voted on the bill. See “—– Report of the Federal Competition Commission on Mexico’s Airports” further below.
Concession Tax
Under the Mexican Federal Duties Law, each of our subsidiary concession holders is required to pay the Mexican government a concession tax based on its gross annual revenues (excluding revenues from improvements to concession assets) from the use of public domain assets pursuant to the terms of its concession. Currently, this concession tax is set at a rate of 5% and may be revised annually by the Mexican Congress. Our concessions provide that we may request an amendment of our maximum rates if there is a change in this concession tax.
Scope of Concessions
We hold concessions granted to us by the Mexican government to use, operate, maintain and develop 12 airports in the Pacific and central regions of Mexico in accordance with the Mexican Airport Law. As authorized under the Mexican Airport Law, each of the concessions is held by our subsidiaries for an initial 50-year term, each of which terms began on November 1, 1998. This initial term of each of our concessions may be renewed for one or more terms for up to an additional 50 years, subject to the concession holder’s acceptance of any new conditions imposed by the Ministry of Communications and Transportation and to its compliance with the terms of its concession. Each of the concessions held by our subsidiary concession holders allows the relevant concession holder, during the term of the concession, to: (i) operate, maintain and develop its airport and carry out any necessary construction in order to render airport, complementary and commercial services as provided under the Mexican Airport Law and the regulations thereunder; and (ii) use and develop the assets that comprise the airport that is the subject of the concession (consisting of the airport’s real estate and improvements but excluding assets used in connection with fuel supply and storage). These assets are government-owned assets, subject to the Mexican National Assets Law. Upon expiration of a concession, these assets, together with any improvements thereto, automatically revert to the Mexican government.
Concession holders are required to provide airport security, which must include contingent and emergency plans in accordance with the regulations under the Mexican Airport Law. The security regulations must be implemented in accordance with the requirements set forth in the National Program for Airport Security (Plan Nacional de Seguridad Aeroportuaria). In addition, the regulations pertaining to the Mexican Airport Law specify that an airport concession holder is responsible for inspecting passengers and their carry-on baggage before they approachreach the departure gates, and specify thatwhile the transporting airline is responsible for the inspection of checked baggage and cargo. If public order or national security is endangered, the competentresponsible federal authorities are authorized to act to protect the safety of aircraft, passengers, cargo, mail, installations and equipment.
In 2005, the Mexican government issued a policy letter (carta de política) calling for all checked baggage on internationalall commercial flights beginning in January 2006, and on domestic commercial flights beginning in July 2006, to undergo a new comprehensive screening process. The new screening process required the installation of dedicated screening equipment and the manual inspection of baggage if such equipment signals the potential presence of prohibited items. Because of uncertainty over the policy letter’s implementation, the new screening process hashad been initially delayed. In particular, the policy letter does not specify which parties should bear responsibility for the new screening process. Although the Mexican Airport Law specifiesexpressly provides that airlines bear the responsibility for baggage screening, the fact that the policy letter is silent as to responsibility has caused some of our airline customers to contend that the policy letter’s intent is for airport concessionaires, such as us, to bear responsibility for the new screening process. In addition, certain questions have been raised regarding the constitutionality of the new screening process (particularly with respect to searchesprocess. Since the issuance of baggage outside the presence of their owners). Thepolicy letter, the Mexican Bureau of Civil Aviation ishas been expected to issue regulations implementing regulations. On November 23, 2012, the policy letter, but these may not addressMexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil, or “DGAC”) published a recommendation, titled a “Circular Obligatoria,” on the questionsMinistry of Communications and Transportation website that, instead of modifying the legal responsibilities set forth in the Mexican Airport Law, attempted to facilitate contracts between parties through certain recommendations regarding issues of responsibility and constitutionality that have been raised.
The new process is expected to require the installation of new screening equipment These recommendations are not binding and that baggage be checked manually if the equipment signals the potential presence of prohibited items. In December 2009, we enteredwould have no legal effect unless incorporated into a supply agreement with Rapiscan
Systems for the purchase and installation of newWe currently have agreements to operate baggage screening equipmentsystems with the following airlines: Magnicharters, Westjet, Airtransat, Sunwing, Jazz, Delta, AirTran, Alaska, Virgin, Frontier, American Airlines, Sun Country, U.S. Airways and, as of April 1, 2013, United Airlines. Under these agreements, these airlines agree to hold harmless and indemnify us against certain types of liability that might arise in 2010. Although we will incur significant capital expenditures installing thisconnection with the operation of the baggage screening system, in accordance with the provisions of the Mexican Airport Law. At the end of 2012, 30.0% of the passengers travelling through our airports were using the system. We expect that by the end of 2013, most of our total passenger traffic will be using baggage screening equipment. Consequently, we do not expect to operate the screening systems because we believe this to be the responsibilitysign agreements with most of our airline customers underduring 2013 on substantially the Mexican Airport Law. However, we wouldsame terms and conditions as those already signed.
The checked baggage screening equipment has been operational in our 10 busiest airports since 2011; only the Aguascalientes and Los Mochis airports continue to have solely manual inspection equipment.
We are incurring ongoing expenses to maintain and operate this equipment. Currently, the operational costs of the screening systems oncesystem has been limited to the level necessary to provide the required services to airlines, and we reachexpect to continue recovering those costs, which could increase if more airlines sign a written agreement withcontract to use our airline customers regarding the allocation of cost and responsibility. If we are required to operate the new screening systems, our exposure to liability could increase.equipment. We also expect to incur ongoing expenses to maintain theany equipment we have purchased, and we could be required to undertake significant additional capital expenditures in the form of investments infor items such as a new screening technologiestechnology or additional equipment.equipment if screening guidelines are expanded further and require that additional steps be taken to comply with the requirements.
The shares of a concession holder and the rights under a concession may be subject to a lien only with the approval of the Ministry of Communications and Transportation. No agreement documenting liens approved by the Ministry of Communications and Transportation may allow the beneficiary of a pledge to become a concession holder under any circumstances.
A concession holder may not assign any of its rights or obligations under its concession without the authorization of the Ministry of Communications and Transportation. The Ministry of Communications and Transportation is authorized to consent to an assignment only if the proposed assignee satisfies the requirements to be a concession holder under the Mexican Airport Law, undertakes to comply with the obligations under the relevant concession and agrees to any other conditions that the Ministry of Communications and Transportation may require.
General Obligations of Concession Holders
The concessions impose certain obligations on the concession holders, including, among others,others: (i) the obligation to pay the concession tax described above, (ii) the obligation to deliver concession services in a continuous, public and non-discriminatory manner, (iii) the obligation to maintain the airports in good working condition and (iv) the obligation to make investments with respect to the infrastructure and equipment in accordance with the master development programsMaster Development Programs and the concessions.
Each concession holder and any third party providing services at an airport is required to carry insurance in specified amounts and covering specified risks, such as damage to persons and property at the airport, in each case as specified by the Ministry of Communications and Transportation. To date, the Ministry of Communications and Transportation has not specified the required amounts of insurance. We may be required to obtain additional insurance once these amounts are specified.
We and our subsidiary concession holders are jointly and severally liable to the Ministry of Communications and Transportation for the performance of all obligations under the concessions held by our subsidiaries. Each of our subsidiary concession holders is responsible for the performance of the obligations set forth in its concession and in the master development programs,Master Development Programs, including the obligations arising from third-party contracts, as well as for any damages to the Mexican government-owned assets that they use and to third-party airport users. In the event of a breach of the concession held by any one of our subsidiaries, the Ministry of Communications and Transportation is entitled to revoke the concessions held by all of our subsidiaries.
Substantially all of the contracts entered into prior to August 25, 1999 by the Mexican Airport and Auxiliary Services Agency with respect to each of our airports were assigned to the relevant concession holder for each airport. As part of this assignment, each concession holder agreed to indemnify the Mexican Airport and Auxiliary Services Agency for any loss suffered by the Mexican Airport and Auxiliary Services Agency due to the concession holder’s breach of its obligations under an assigned agreement.
Classification of Services Provided at Airports
The Mexican Airport Law and the regulations thereunder classify the services that may be rendered at an airport into the following three categories:
• | Airport Services. Airport services may be rendered only by the holder of a concession or a third party that has entered into an agreement with the concession holder to provide such services. These services include the following: |
the use of airport runways, taxiways and aprons for landing, aircraft parking and departure;
the use of hangars, passenger walkways, transport buses and car parking facilities;
the provision of airport security services, rescue and firefighting services, ground traffic control, lighting and visual aids;
the general use of terminal space and other infrastructure by aircraft, passengers and cargo; and
the provision of access to an airport to third parties providing complementary services (as defined in the Mexican Airport Law) and third parties providing permanent ground transportation services (such as taxis).
• | Complementary Services. Complementary services may be rendered by an airline, by the airport operator or by a third party under agreements with airlines and the airport operator. These services include: ramp and handling services, passenger check-in, aircraft security, catering, cleaning, maintenance, repair and fuel supply and related activities that provide support to air carriers. |
• | Commercial Services. Commercial services are services that are not considered essential to the operation of an airport or aircraft, and include, among other things, retailers, restaurants, banks and advertisers to which we lease space. |
A third party rendering airport,providing complementary or commercial services to an airport is required to do so only pursuant to a written agreement with the relevant concession holder. We have notOn November 1, 2012, we entered into anyan agreement with a third party with respect to the provision of airportairbus and passenger walkway services asin all of our airports. Accordingly, we will no longer provide these services ourselves.directly. As of the date of this report, this is the only agreement with a third party regarding the provision of regulated services. All agreements relating to airport or complementary services are required to be approved by the Ministry of Communications and Transportation. The Mexican Airport Law provides that the concession holder is jointly liable with these third parties for compliance with the terms of the relevant concession with respect to the services provided by such third parties. All third-party service providers are required to be corporations incorporated under Mexican law.
Airport and complementary services are required to be provided to all users in a uniform and regular manner, without discrimination as to quality, access or price. Concession holders are required to provide airport and complementary services on a priority basis to military aircraft, disaster support aircraft and aircraft experiencing emergencies. Airport and complementary services are required to be provided at no cost to military aircraft and aircraft performing national security activities. The concession holders have not and do not provide complementary services, as these services are provided by third parties.
In the event offorce majeure, the Ministry of Communications and Transportation may impose additional regulations governing the provision of services at airports, but only to the extent necessary to address theforce majeureevent. The Mexican Airport Law allows the airport administrator appointed by a concession holder to suspend the provision of airport services in the event offorce majeure.
A concession holder is also required to allow for a competitive market for complementary services. A concession holder may only limit the number of providers of complementary services in its airport due to space, efficiency and safety considerations. If the number of complementary service providers must be limited due to these considerations, contracts for the provision of complementary services must be awarded through competitive bidding processes.
Master Development Programs
Each concession holder is required to submit to the Ministry of Communications and Transportation a master development programMaster Development Program describing, among other things, the concession holder’s construction and maintenance plans.
Each master development programMaster Development Program is required to be updated every five years and resubmitted for approval to the Ministry of Communications and Transportation. Upon such approval, the master development programMaster Development Program is deemed to constitute a part of the relevant concession. Any major construction, renovation or expansion of an airport may only be made with the approval of the Ministry of Communications and Transportation, typically provided pursuant to a concession holder’s master development program.Master Development Program. Information required to be presented in the master development programMaster Development Program includes:
airport growth and development expectations;
15-year projections for air traffic demand (including passenger, cargo and operations);
construction, conservation, maintenance, expansion and modernization programs for infrastructure, facilities and equipment;
a binding five-year detailed investment program and planned major investments for the following ten years;
descriptive airport plans specifying the distinct uses for the corresponding airport areas;
any financing sources; and
environmental protection measures.
Each concession provides for a 24-month period for the preparation and submission of the concession holder’s master development program,Master Development Program, and requires the concession holder to engage recognized independent consultants to conduct polls among airport users with respect to current and expected quality standards and to prepare air traffic projections and assess investment requirements. The concession holder must submit a draft of the master development programMaster Development Program to an operations committee (Comité de Operación y Horarios)Horarios),composed of each of the airport’s principal users, for their review and comments six months prior to its submission for approval to the Ministry of Communications and Transportation. Further, the concession holder must submit, six months prior to the expiration of the five-year term, the new master development programMaster Development Program to the Ministry of Communications and Transportation. The Ministry of Communications and Transportation may request additional information or clarification as well as seek further comments from airport users. The Ministry of Defense (Secretaría de Defensa Nacional) may also opine on the master development programs.Master Development Programs.
Any major construction project, renovation or expansion relating to an airport can only be done pursuant to the master development programMaster Development Program of the concession holder or with the approval of the Ministry of Communications and Transportation. We are required to spend the full amounts set forth in each investment program under our master development programs.Master Development Programs.
Changes to a master development programMaster Development Program including the related investment program require the approval of the Ministry of Communications and Transportation, except for emergency repairs and minor works that do not adversely affect an airport’s operations.
In December 2004,
Once the Ministry of Communications and Transportation approvedcapital expenditures related with the master development programs for each of our subsidiary concession holders for the 2005-2009 period. We allocated 71.5% of our investments for the 2005-2009 periodMaster Development Programs are established, it is adjusted annually according to the Guadalajara, Los Cabos, Puerto Vallartaincreases in the Mexican Producer Price Index, construction sector, materials, equipment rental and Tijuana airports.fees segment (Índice Nacional de Precios al Productor, sector construcción, materiales, alquiler de maquinaria y remuneraciones), and the concessionaire is obligated to meet the adjusted amounts.
In December 2009, the Ministry of Communications and Transportation approved the master development programsMaster Development Programs for each of our subsidiary concession holders for the 2010-2014 period. We plan to allocateallocated 83.6% of our investments for the 2010-2014 period to the Guadalajara, Los Cabos, Puerto Vallarta and Tijuana airports.
Our master development programsMaster Development Programs are approved by the Ministry of Communications and Transportation for periods of five years, as stated in our concessions. We are required to comply with the five-year period investment obligations under master development programs,the Master Development Programs, and the Ministry of Communications and Transportation may apply sanctions if we do not so comply. Recently, the Ministry of Communications and Transportation has reviewed our compliance on an annual basis. The Ministry of Communications and Transportation may choose to do this revision officially and apply sanctions on an annual basis if it determines that we have failed in our investment obligations. The Ministry of Communications and Transportation has annually certified our compliance with our master development programMaster Development Program for 2011. As of the date of this filing, the Ministry of Communications and Transportation has not completed our certification process for 2012, which we expect to obtain in the current five-year periodsecond quarter of 2005-2009.2013.
Aeronautical Services Regulation
The Mexican Airport Law directs the Ministry of Communications and Transportation to establish price regulations for services for which there is no competitive market, as determined by the Mexican Antitrust Commission. In 1999, the Mexican Antitrust Commission issued a ruling stating that competitive markets generally do not exist for airport services and airport access provided to third parties rendering complementary services. This ruling authorized the Ministry of Communications and Transportation to establish regulations governing the prices that may be charged for airport services and access fees that may be charged to third parties rendering complementary services in our airports. On November 15, 1999, a new regulation, the Rate Regulation (Regulación Tarifaria), was incorporated within the terms of each of our concessions. This regulation provides a framework for the setting by the Ministry of Communications and Transportation of five-year maximum rates.
Regulated Revenues
The majority of our revenues are derived from providing aeronautical services, which generally are related to the use of airport facilities by airlines and passengers and principally consist of a fee for each departing passenger, aircraft landing fees based on an aircraft’s weight and arrival time, an aircraft parking fee, a fee for the transfer of passengers from an aircraft to the terminal building, a security charge for each departing passenger and the leasing of space and access fees collected from third parties that provide complementary services at our airports.
Since January 1, 2000, all of our revenues from aeronautical services have been subject to a price regulation system established by the Ministry of Communications and Transportation. Under this price regulation system, the Ministry of Communications and Transportation establishes a maximum rate for each airport for every year in a five-year period. The maximum rate is the maximum amount of revenues per workload unit that may be earned at an airport each year from regulated revenue sources. Under this regulation, a workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo. We are able to set the specific prices for each aeronautical service every six months (or more frequently if accumulated inflation since the last adjustment exceeds 5%), as long as the combined
revenues from regulated services at an airport do not exceed the maximum rate per workload unit at that airport. Each year, the Ministry of Communications and Transportation certifies that our regulated revenues divided by workload units are equal to or below the established maximum rate for the period. For the four-yearfive-year period from 2005 to 2008,2009, the Ministry of Communications and Transportation certified that we have not collected revenues in excess of the permitted levels. The Ministry of Communications and Transportation’s review ofTransportation also has reviewed our maximum rates and certified that we have not collected revenues in excess of the permitted level for 2009 is still pending.2010 and 2011. The review for 2012 will take place during the second quarter of 2013. Since our aggregate revenues resulting from regulated services are not otherwise restricted, increases in passenger and cargo traffic permit greater revenues overall within each five-year interval for which maximum rates are established.
On July 15, 2003, we entered into an agreement with the National Air Transportation Chamber of CommerceIn 2011 and the Ministry of Communications2012, approximately 62.3% and Transportation pursuant to which we resolved existing disputes with our principal airline customers and established specific prices for aeronautical services applicable to those airlines for 2003 and 2004 and a methodology for retroactively applying those prices from 2000, since these airlines had refused to pay certain of our charges since that year. In March 2005, we renewed an agreement with these customers that expired at year-end 2006. In December 2006 a new agreement was signed that covers an increasing percentage of total passenger charges over the years 2007, 2008 and 2009 and has set prices for each aeronautical service over this three-year period, with increases only possible as a result of the average of increases in the Mexican Consumer Price Index (Índice Nacional de Precios al Consumidor) and the Mexican Producer Price Index (Índice Nacional de Precios al Productor) excluding petroleum, published by the Mexican Central Bank. In December 2006 we renewed our agreement for the 2007-2009 period, and in February 2010 we renewed our agreement for the 2010-2011 period. These agreements represented (a) virtually all of the relevant contracts governing the collection of passenger charges, (b) a substantial majority of the agreements for the leasing of space in our terminals and (c) a substantial majority of the contracts governing our aeronautical services, in each case in terms of the total number agreements to be entered into.
In 2009, approximately 77.7%68.1%, respectively, of our total revenues were earned from aeronautical services subject to price regulation under our maximum rates.rates (78.9% and 76.9%, respectively, of the sum of aeronautical and non-aeronautical revenues were earned from aeronautical services subject to price regulation under our maximum rates).
Our revenues from non-aeronautical services, including revenues that we earn from most commercial activities in our terminals, are not regulated under our maximum-rate price regulation system and are therefore not subject to a ceiling under any regulation. For a description of how we classify our revenues into aeronautical and non-aeronautical services, see “Item 5,Operating and Financial Review and Prospects—Prospects – Classification of Revenues”.”
Maximum Rates
Each airport’s maximum rate is determined by the Ministry of Communications and Transportation based on a general framework established in our concessions. This framework reflects, among other factors, projections of an airport’s revenues, operating costs and capital expenditures, as well as the estimated cost of capital related to regulated services and projected annual efficiency adjustments determined by the Ministry of Communications and Transportation. The schedule of maximum rates for each airport is established every five years.
Maximum Rates for 2005 through 2009
In December 2004, the Ministry of Communications and Transportation set airport maximum rates for the prior five-year period from January 1, 2005 through December 31, 2009. The following table sets forth the maximum rates for each of our airports under the master development programs from 2005 to 2009 that went into effect as of January 1, 2005. These maximum rates are subject to adjustment only as described above or under the limited circumstances described below under “Special Adjustments to Maximum Rates.”
2005-2009 Maximum Rates(1)
Year ended December 31, | ||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||
Guadalajara | 96.39 | 95.67 | 94.95 | 94.24 | 93.53 | |||||
Tijuana | 76.88 | 76.30 | 75.73 | 75.17 | 74.61 | |||||
Puerto Vallarta | 117.70 | 116.82 | 115.94 | 115.07 | 114.20 | |||||
Los Cabos | 122.30 | 121.38 | 120.47 | 119.56 | 118.67 | |||||
Hermosillo | 83.72 | 83.08 | 82.47 | 81.84 | 81.24 | |||||
Guanajuato | 111.05 | 110.21 | 109.39 | 108.57 | 107.75 | |||||
La Paz | 110.85 | 110.02 | 109.19 | 108.38 | 107.57 | |||||
Morelia | 123.22 | 122.30 | 121.38 | 120.47 | 119.56 | |||||
Mexicali | 90.52 | 89.84 | 89.16 | 88.49 | 87.83 | |||||
Aguascalientes | 103.08 | 102.31 | 101.53 | 100.77 | 100.02 | |||||
Los Mochis | 105.88 | 105.09 | 104.30 | 103.51 | 102.74 | |||||
Manzanillo | 116.93 | 116.05 | 115.18 | 114.32 | 113.46 |
Maximum Rates for 2010 through 2014
In December 2009, the Ministry of Communications and Transportation set new airport maximum rates for the five-year period from January 1, 2010 through December 31, 2014. The following table sets forth the maximum rates for each of our airports under the master development programsMaster Development Programs that went into effect as of January 1, 2010. These maximum rates are subject to adjustment only as described above or under the limited circumstances described below under “Special Adjustments to Maximum Rates”.”
Current Maximum Rates(1)
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||||||||
Guadalajara | 112.00 | 111.22 | 110.44 | 109.66 | 108.90 | 112.00 | 111.22 | 110.44 | 109.66 | 108.90 | ||||||||||||||||||||
Tijuana | 99.18 | 98.49 | 97.80 | 97.11 | 96.43 | 99.18 | 98.49 | 97.80 | 97.11 | 96.43 | ||||||||||||||||||||
Los Cabos | 143.14 | 142.14 | 141.14 | 140.16 | 139.17 | |||||||||||||||||||||||||
Puerto Vallarta | 137.91 | 136.94 | 135.98 | 135.03 | 134.09 | 137.91 | 136.94 | 135.98 | 135.03 | 134.09 | ||||||||||||||||||||
Los Cabos | 143.14 | 142.14 | 141.14 | 140.16 | 139.17 | |||||||||||||||||||||||||
Hermosillo | 97.63 | 96.95 | 96.27 | 95.60 | 94.93 | 97.63 | 96.95 | 96.27 | 95.60 | 94.93 | ||||||||||||||||||||
Guanajuato | 130.69 | 129.77 | 128.87 | 127.96 | 127.07 | 130.69 | 129.77 | 128.87 | 127.96 | 127.07 | ||||||||||||||||||||
La Paz | 122.34 | 121.48 | 120.63 | 119.79 | 118.95 | 122.34 | 121.48 | 120.63 | 119.79 | 118.95 | ||||||||||||||||||||
Mexicali | 99.65 | 98.95 | 98.26 | 97.57 | 96.89 | |||||||||||||||||||||||||
Morelia | 136.01 | 135.06 | 134.11 | 133.17 | 132.24 | 136.01 | 135.06 | 134.11 | 133.17 | 132.24 | ||||||||||||||||||||
Mexicali | 99.65 | 98.95 | 98.26 | 97.57 | 96.89 | |||||||||||||||||||||||||
Aguascalientes | 113.38 | 112.59 | 111.80 | 111.02 | 110.24 | 113.38 | 112.59 | 111.80 | 111.02 | 110.24 | ||||||||||||||||||||
Los Mochis | 116.85 | 116.03 | 115.22 | 114.41 | 113.61 | 116.85 | 116.03 | 115.22 | 114.41 | 113.61 | ||||||||||||||||||||
Manzanillo | 128.37 | 127.47 | 126.58 | 125.69 | 124.81 | 128.37 | 127.47 | 126.58 | 125.69 | 124.81 |
(1) | Expressed in constant pesos as of December 31, 2007 (applying the efficiency factor year over year). |
Methodology for Determining Future Maximum Rates
The Rate Regulation provides that each airport’s annual maximum rates are to be determined in five-year intervals based on the following variables:
Projections for the following fifteen years of workload units, (each of which is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo), operating costs and expenses related to services subject to price regulation and pre-tax earnings from services subject to price regulation. The concessions provide that projections for workload units and expenses related to regulated services are to be derived from the terms of the relevant concession holder’s master development programMaster Development Program for the following fifteen years;
Projections for the following fifteen years of capital expenditures related to regulated services, based on air traffic forecasts and quality standards for services to be derived from the master development programs;Master Development Programs;
Reference values, which initially were established in the concessions and are designed to reflect the net present value of the regulated revenues minus the corresponding regulated operating costs and expenses (excluding amortization and depreciation), and capital expenditures related to the provision of regulated services plus a terminal value;
A discount rate to be determined by the Ministry of Communications and Transportation. The concessions provide that the discount rate shall reflect the cost of capital to Mexican and international companies in the airport industry (on a pre-tax basis), as well as Mexican economic conditions. The concessions provide that the discount rate shall be at least equal to the average yield of long-term Mexican government debt securities quoted in the international markets during the 24 months prior to the date of the negotiations plus a risk premium to be determined by the Ministry of Communications and Transportation based on the inherent risk of the airport business in Mexico; and
An efficiency factor to be determined by the Ministry of Communications and Transportation. The maximum rates applicable to our airports reflect a projected annual efficiency improvement of 0.75% for the five-year period from January 1, 2005 through December 31, 2009 and 0.70% for the five-year period from January 1, 2010 through December 31, 2014.
Our concessions specify a discounted cash flow formula to be used by the Ministry of Communications and Transportation to determine the maximum rates that, given the projected pre-tax earnings the efficiency adjustment,before interest, taxes, depreciation and amortization, capital expenditures and discount rate, would result in a net present value equal to the reference values established in connection with the last determination of maximum rates. We prepareprepared a proposal to submit to the Ministry of Communications and Transportation establishing the values we believe should be used with respect to each variable included in the determination of maximum rates, including the efficiency factor, projected capital expenditures and the discount rate. The maximum rates ultimately established by the Ministry of Communications and Transportation historically have resulted from a negotiation between the Ministry of Communications and Transportation and us regarding these variables. Once the maximum rates are established, they must be adjusted each year by the efficiency factor and by the Mexican Producer Price Index (Índice Nacional de
Precios al Productor) excluding petroleum. Also, once the maximum rates are established based in part on the capital expenditures included in our Master Development Programs, the capital expenditures must be adjusted according to the Mexican Producer Price Index, construction sector, materials, equipment rental and fees segment (Índice Nacional de Precios al Productor, sector construcción, materiales, alquiler de maquinaria y remuneraciones).
The concessions provide that each airport’s reference values and discount rate and the other variables used in calculating the maximum rates do not in any manner represent an undertaking by the Ministry of Communications and Transportation or the Mexican government as to the profitability of any concession holder. Therefore, whether or not the maximum rates (or the amounts up to the maximum rates that we are able to collect) multiplied by workload units at any airport generate a profit or exceed our profit estimates, or reflect the actual profitability, discount rates, capital expenditures or productivity gains at that airport over the five-year period, we are not entitled to any adjustment to compensate for any shortfall.
To the extent that such aggregate revenues per workload unit exceed the relevant maximum rate, the Ministry of Communications and Transportation may proportionately reduce the maximum rate in the immediately subsequent year and assess penalties equivalent to 1,000 to 50,000 times the general minimum wage in the Federal District (Mexico City). On January 1, 2010,2013, the daily minimum wage in Mexico City was Ps. 57.46.64.76. As a result, the maximum penalty at such date could have been Ps. 2.93.2 million (U.S.$ 220,025)0.25 million) per airport.
As established by the Ministry of Communications and Transportation, the calculation of workload units does not include transit passengers for subsequent years. The current workload unit calculation is therefore equal to one terminal passenger or 100 kilograms (220 pounds) of cargo.
Special Adjustments to Maximum Rates
Once determined, each airport’s maximum rates are subject to special adjustment only under the following circumstances:
• | Change in law or natural disasters.A concession holder may request an adjustment in its maximum rates if a change in law with respect to quality standards or safety and environmental protection results in operating costs or capital expenditures that were not contemplated when its maximum rates were determined. In addition, a concession holder may also request an adjustment in its maximum rates if a natural disaster affects demand or requires unanticipated capital expenditures. There can be no assurance that any request on these grounds would be approved. |
• | Macroeconomic conditions.A concession holder may request an adjustment in its maximum rates if, as a result of a decrease of at least 5% in Mexican gross domestic product in a 12-month period, the workload units processed in the concession |
• | Increase in concession tax under Mexican Federal Duties Law.An increase in duty payable by a concession holder under the Mexican Federal Duties Law entitles the concession holder to request an adjustment in its maximum rates. There can be no assurance that any request on these grounds would be approved. |
• | Failure to make required investments or improvements.The Ministry of Communications and Transportation |
• | Excess revenues.In the event that revenues subject to price regulation per workload unit in any year exceed the applicable maximum rate, the maximum rate for the following year will be decreased to compensate airport users for overpayment in the previous year. Under these circumstances, the Ministry of Communications and Transportation is also entitled to assess penalties against the concession holder. |
Ownership Commitments and Restrictions
The concessions require us to retain a 51% direct ownership interest in each of our 12 concession holders throughout the term of these concessions. Any acquisition by us or by one of our concession holders of any additional airport concessions or of a beneficial interest of 30% or more of another concession holder requires the consent of the Mexican Antitrust Commission. In addition, the concessions prohibit us and our concession holders, collectively or individually, from acquiring more than one concession for the operation of an airport along each of Mexico’s southern and northern borders.
Air carriers are prohibited under the Mexican Airport Law from controlling or beneficially owning 5% or more of the shares of a holder of an airport concession. We, and each of our subsidiaries, are similarly restricted from owning 5% or more of the shares of any air carrier.
Foreign governments acting in a sovereign capacity are prohibited from owning any direct or indirect equity interest in a holder of an airport concession.
Reporting, Information and Consent Requirements
Concession holders and third parties providing services at airports are required to provide the Ministry of Communications and Transportation access to all airport facilities and information relating to an airport’s construction, operation, maintenance and development. Each concession holder is obligated to maintain statistical records of operations and air traffic movements in its airport and to provide the Ministry of Communications and Transportation with any information that it may request. Each concession holder is also required to publish its annual audited consolidated financial statements in a principal Mexican newspaper within the first four months of each year.
The Mexican Airport Law provides that any person or group directly or indirectly acquiring control of a concession holder is required to obtain the consent of the Ministry of Communications and Transportation for such control acquisition. For purposes of this requirement, control is deemed to be acquired in the following circumstances:
if a person acquires 35% or more of the shares of a concession holder;
if a person has the ability to control the outcome of meetings of the shareholders of a concession holder;
if a person has the ability to appoint a majority of the members of the board of directors of a concession holder; and
if a person by any other means acquires control of an airport.
Pursuant to the regulations under the Mexican Airport Law, any company acquiring control of a concession holder is deemed to be jointly and severally liable with the concession holder for the performance of the terms and conditions of the concession.
The Ministry of Communications and Transportation is required to be notifiedrequires notification upon any change in a concession holder’s chief executive officer, board of directors or management. A concession holder is also required to notify the Ministry of Communications and Transportation at least 90 days prior to the adoption of any amendment to its bylaws concerning the dissolution, corporate purpose, merger, transformation or spin-off of the concession holder.
Penalties and Termination and Revocation of Concessions and Concession Assets
Termination of Concessions
Under the Mexican Airport Law and the terms of the concessions, a concession may be terminated upon any of the following events:
the expiration of its term;
its surrender by the concession holder;
the revocation of the concession by the Ministry of Communications and Transportation;
• | the reversion (rescate) of the Mexican government-owned assets that are the subject of the concession (principally real estate, improvements and other infrastructure); |
• | the inability to achieve the purpose of the concession, except in the event offorce majeure; |
the dissolution, liquidation or bankruptcy of the concession holder; or
the failure by the concession holder to satisfy the shareholding obligations set forth in the concession.
Following a concession’s termination, the concession holder remains liable for the performance of its obligations during the term of the concession.
Revocation of Concessions
A concession may be revoked by the Ministry of Communications and Transportation under certain conditions, including:
the failure by a concession holder to operate, maintain and develop an airport pursuant to the terms established in the concession;
the failure by a concession holder to maintain insurance as required under the Mexican Airport Law;
the assignment, encumbrance, transfer or sale of a concession, any of the rights thereunder or the assets underlying the concession in violation of the Mexican Airport Law;
any alteration of the nature or condition of an airport’s facilities without the authorization of the Ministry of Communications and Transportation;
use, with a concession holder’s consent or without the approval of air traffic control authorities, of an airport by any aircraft that does not comply with the requirements of the Mexican Civil Aviation Law, that has not been authorized by the Mexican Air Traffic Control Authority, or that is involved in the commission of a felony;
knowingly appointing a chief executive officer or board member of a concession holder that is not qualified to perform his functions under the law as a result of having violated criminal laws;
the failure by the concession holder to pay the Mexican government the airport concession tax;
failure to own at least 51% of the capital stock of subsidiary concession holders;
violation of the safety regulations established in the Mexican Airport Law and other applicable laws;
total or partial interruption of the operation of an airport or its airport or complementary services without justified cause;
the failure to maintain an airport’s facilities;
the provision of unauthorized services;
the failure to indemnify a third party for damages caused by the provision of services by the concession holder or a third-party service provider;
charging prices higher than those registered with the Ministry of Communications and Transportation for regulated services or exceeding the applicable maximum rate;
any act or omission that impedes the ability of other service providers or authorities to carry out their functions within an airport; or
any other failure to comply with the Mexican Airport Law, its regulations and the terms of a concession.
The Ministry of Communications and Transportation is entitled to revoke a concession without prior notice as a result of the first six events described above. In the case of other violations, a concession may be revoked as a result of a violation only if sanctions have been imposed at least three times with respect to the same violation.
Pursuant to the terms of our concessions, in the event the Ministry of Communications and Transportation revokes one of our concessions, it is entitled to revoke all of our concessions.
According to the Mexican National Assets Law, the surface area of our airports and improvements on such space are government-owned assets. A concession concerning government-owned assets may be “rescued,” or revert to the Mexican government prior to the concession’s expiration, when considered necessary for the public interest. In exchange, the Mexican government is required to pay compensation as determined by expert appraisers. Following a declaration of reversion (rescate), the assets that were subject to the concession are automatically returned to the Mexican government.
In the event of war, public disturbances or threats to national security, the Mexican government may assume the operation (requisa) of any airport, airport and complementary services as well as any other airport assets. Such government action may exist only during the duration of the emergency. Except in the case of war, the Mexican federal government is required to compensate all affected parties for any damages or losses suffered as a result of such government action. If the Mexican government and a concession holder cannot agree as to the appropriate amount of damages or losses, the amount of damages must be determined by experts jointly appointed by both parties and the amount of losses must be determined based on the average net income of the concession holder during the previous year.
The Mexican Airport Law provides that a sanction of up to 200,000 times the minimum daily wage in Mexico City may be assessed for a failure to comply with the law or terms of a concession. Such sanction may be duplicated in the event of reiterative failures to comply. On January 1, 2010, the daily minimum wage in Mexico City was Ps. 57.46. As a result, the maximum penalty at such dateon January 1, 2013 was Ps. 11.512.9 million (U.S.$ 0.91.0 million) for an individual failure to comply.
Consequences of Termination or Revocation of a Concession
Upon termination, whether as a result of expiration or revocation, the real estate and fixtures that were the subject of the concession automatically revert to the Mexican government. In addition, upon termination, the Mexican federal government has a preemptive right to acquire all other assets used by the concession holder to provide services under the concession at prices determined by expert appraisers appointed by the Ministry of Communications and Transportation. Alternatively, the Mexican government may elect to lease these assets for up to five years at fair market rates as determined by expert appraisers appointed by the Mexican government and the concession holder. In the event of a discrepancy between appraisals, a third expert appraiser must be jointly appointed by the Mexican government and the concession holder. If the concession holder does not appoint an expert appraiser, or if such appraiser fails to determine a price, the determination of the appraiser appointed by the Mexican government will be conclusive. If the Mexican government chooses to lease the assets, it may thereafter purchase the assets at their fair market value, as determined by an expert appraiser appointed by the Mexican government.
The Mexican Communications Law, however, provides that upon expiration, termination or revocation of a concession, all assets necessary to operate the airports will revert to the Mexican government, at no cost and free of any liens or other encumbrances. There is substantial doubt as to whether the provisions of our concessions would prevail over those of the Mexican Communications Law. Accordingly, there can be no assurance that upon expiration or termination of our concessions the assets used by our subsidiary concession holders to provide services at our airports will not revert to the Mexican government, free of charge, together with government-owned assets and improvements permanently attached thereto.
Grants of New Concessions
The Mexican government may grant new concessions to manage, operate, develop and construct airports. Such concessions may be granted through a public bidding process in which bidders must demonstrate their technical, legal, managerial and financial capabilities. The Federal Competition Commission has the power, under certain circumstances, to prohibit a party from bidding and to cancel an award after the process has concluded. In addition, the government may grant concessions without a public bidding process to the following entities:
any person who holds a permit to operate a civil aerodrome and intends to transform the aerodrome into an airport so long asas: (i) the proposed change is consistent with the national airport development programs and policies, (ii) the civil aerodrome has been in continuous operation for the previous five years and (iii) the permit holder complies with all requirements of the concession;
a current concession holder when necessary to meet increased demand so long asas: (i) a new airport is necessary to increase existing capacity, (ii) the operation of both airports by a single concession holder is more efficient than other options and (iii) the concession holder complies with all requirements of the concession;
a current concession holder when it is in the public interest for its airport to be relocated;
entities in the federal public administration; and
commercial entities in which local or municipal governments have a majority equity interest if the entities’ corporate purpose is to manage, operate, develop and/or construct airports.
Environmental Regulation
Our operations are subject to Mexican federal, state and municipal laws and regulations relating to the protection of the environment. The major federal environmental laws applicable to our operations are: (i) the General Law of Ecological Balance and Environmental Protection (Ley General de Equilibrio Ecológico y Protección Ambiental, or the General Environmental Law) and its regulations, which are administered by the Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) and enforced by the Ministry’s enforcement branch, the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente); (ii) the General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos, or the Law on Waste), which is also administered by the Ministry of the Environment and Natural Resources and enforced by the Federal Office for the Protection of the Environment; and (iii) the National Waters Law (Ley de Aguas Nacionales) and its regulations, which are administered and enforced by the National Waters Commission (Comisión Nacional del Agua), also a branch of the Ministry of the Environment and Natural Resources.
Under the General Environmental Law, regulations have been enacted concerning air pollution, environmental impact, land use, soil contamination, noise control, hazardous waste, environmental audits and natural protected areas. The General Environmental Law also regulates, among other things, vibrations, thermal energy soil contamination and visual pollution, although the Mexican government has not yet issued enforceable regulation on the majority of these matters. The General Environmental Law also provides that companies that contaminate soils are responsible for their clean-up. Further, according to the Law on Waste, which was enacted in January 2004, owners and/or possessors of property with soil contamination are jointly and severally liable for the remediation of such contaminated sites, irrespective of any recourse or other actions such owners and/or possessors may have against the contaminating party, and aside from the criminal or administrative liability to which the contaminating party may be subject. Restrictions on the transfer of contaminated sites also exist. The Law on Waste also regulates the generation, handling and final disposal of hazardous waste.
Pursuant to the National Waters Law, companies that discharge waste waters into national water bodies must comply with, among other requirements, maximum permissible contaminant levels in order to preserve water quality. Periodic reports on water quality must be provided to competent authorities. Liability may result from the contamination of underground waters or recipient water bodies. The use of underground waters is subject to restrictions pursuant to our concessions and the National Waters Commission.
In addition to the foregoing, Mexican Official Norms (Normas Oficiales Mexicanas), which are technical standards issued by competent regulatory authorities pursuant to the General Normalization Law (Ley General de Metrología y Normalización) and to other laws that include the environmental laws described above,General Law of Ecological Balance and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección al Ambiente), establish standards relating tolimits on air emissions, waste water discharges, the generation, handling and disposal of hazardous waste and noise control, among other matters. As of December 31, 2009,2012, Mexican Official Norms on soil contamination and waste management were in the process ofstill being developed. Although not enforceable, the internal administrative criteria on soil contamination of the Federal Office for the Protection of the Environment are widely used as guidance in cases where soil remediation, restoration or clean-up is required.
The Federal Office for the Protection of the Environment can bring administrative, civil and criminal proceedings against companies that violate environmental laws, and it also has the power to close non-complying facilities and impose a variety of sanctions. Companies in Mexico are required to obtain proper authorizations, licenses, concessions or permits from competent environmental authorities for the performance of activities that may have an impact on the environment or that may constitute a source of contamination. Companies in Mexico are also required to comply with a variety of reporting obligations that include, among others, providing the Ministry of the Environment and Natural Resources, the Federal Office for the Protection of the Environment and the National Waters Commission, as applicable, with periodic reports regarding compliance with various environmental laws.
Prior to the opening of Mexico’s airports to private investment, the Federal Office for the Protection of the Environment required that environmental audits had to be performed at each of our airports. Based on the results of these audits, the Federal Office for the Protection of the Environment issued recommendations for improvements and corrective actions to be taken at each of our airports. In connection with the transfer of the management of our airports from our predecessor, we entered into environmental compliance agreements with the Federal Office for the Protection of the Environment on January 1, 1999 and July 12, 2000 pursuant to which we agreed to comply with a specific action plan and adopt specific actions within a determined time frame.
The Federal Office for the Protection of the Environment has confirmed that we have complied with all of the relevant environmental requirements derived from the aforementioned environmental audits at, and has issued compliance certificates for all of our airports other than Guadalajara International Airport.airports. These certificates, which are known as Environmental Quality Certificates (Certificados de Calidad Ambiental) certify compliance with applicable Mexican environmental laws, regulations and applicable Mexican Official Norms and must be renewed periodically.
Our environmental management system has been re-certificated at our Aguascalientes, Hermosillo, Los Mochis, Guanajuato, La Paz and Morelia airports under ISO 14001:2004. During 2012, with these certifications, we now have six airports operating under our environmental management system.
Liability for Environmental Noncompliance
The legal framework of environmental liability applicable to our operations is generally outlined above. Under the terms of our concessions, the Mexican government has agreed to indemnify us for any environmental liabilities arising prior to November 1, 1998 and for any failure by the Mexican Airport and Auxiliary Services Agency prior to November 1, 1998 to comply with applicable environmental laws and with its agreements with Mexican environmental authorities. Although there can be no assurance, we believe that we are entitled to indemnification for any liabilities related to the actions our predecessor was required to perform or refrain from performing under applicable environmental laws and under its agreements with environmental authorities. For further information regarding these liabilities, see Note 22.c26 to our audited consolidated financial statements.
The level of environmental regulation in Mexico has significantly increased in recent years, and the enforcement of environmental laws is becoming substantially more stringent. We expect this trend to continue and expect additional norms to be imposed by the North American Agreement on Environmental Cooperation entered into by Canada, the United States and Mexico in the context of the North American Free Trade Agreement, as well as by other international treaties on environmental matters. We do
not expect that compliance with Mexican federal, state or municipal environmental laws currently in effect will have a material adverse effect on our financial condition or results of operations. However, there can be no assurance that environmental regulations or the enforcement thereof will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition.
Report of the Federal Competition Commission on Mexico’s Airports
On October 1, 2007, the Chairman of Federal Competition Commission (Comisión Federal de Competencia, or the Competition Commission) released an independent report on the competitiveness of Mexico’s airports relative to each other and to international airports. The report alleged that, between 2001 and 2007, operating income (expressed as a percentage of total revenues) of Mexican airports was relatively high when compared with a sample of fifty international airports. In addition, the report suggested that aeronautical services charges at Mexican airports were more expensive than at most of the fifty comparison airports. The report also claimed that operating income at Mexican airports had increased principally as a result of increased passenger traffic, rather than increases in operating efficiency. To that end, the Competition Commission Chairman’s report made the following recommendations as ways to increase efficiency at Mexican airports:
make economic efficiency a basis of tariff regulation for new concessions;
include commercial services income as one of the factors in determining tariffs for new concessions;
strengthen the independence of the regulatory agency, and increase the transparency of airport regulation;
promote greater efficiency in scheduling at saturated airports;
promote greater competition between airports;
eliminate the Mexican Airport and Auxiliary Services Agency’s, or ASA, role as exclusive fuel service provider;
eliminate barriers to entry for taxi providers at airports; and
be mindful of vertical integration among airports and airlines.
The Ministry of Communications and Transportation issued a response to the Competition Commission Chairman’s report that noted, among other matters, that according to its own calculations, Mexico’s airport charges were lower than 36 of the 50 international airports against which they were compared. We also issued a joint press release along with the other two Mexican airport groups, Grupo Aeroportuario del Sureste and Grupo Aeroportuario del Centro Norte, questioning the calculations and the comparisons drawn in the Competition Commission Chairman’s report and stating that we are committed to participating in a comprehensive review of the report in order to demonstrate our commitment to the efficient development of the airport sector.
In addition, initiatives in the past have been introduced in the Mexican Congress to make certain reforms to the Mexican AirportsAirport Law that, if enacted, could have a material adverse effect on us. For instance, on February 26, 2009, a legislative initiative was filed with the Chamber of Representatives (Cámara de Diputados) of the Mexican Congress. This initiative sought to reform a substantial part of the current Mexican Airport Law. It would have (i) shifted the focus of current regulation from airlines to airports and (ii) set up a
new regulatory authority specifically for airports, the Federal Airport Services Commission, transferring to this new regulatory authority the power to negotiate our master development programs and maximum rates. On March 25, 2010, the Transportation and Communications Commission of Congress released a negative opinion letter on this initiative, and on April 20, 2010 Congress officially rejected the initiative.
There can be no assurance, however, thatOn December 14, 2011, a bill was introduced in Mexico’s Congress will not file other initiatives that seek to reformamend the current Mexican Airport Law, or that other changeson December 19, 2012, the bill was approved and sent to the Senate for review. Among other items, the bill proposes that the Ministry of Communications and Transportation will gain additional authority to plan and apply the standards, policies and programs for the Mexican airport regulatory framework willsystem, to oversee the correct operation of civil aviation in Mexico, and to establish rules for airport service providers and the general basis for flight schedules, so as to guarantee the competitiveness of Mexico’s airports. As of the date of this report the Senate has not occur invoted on the future. See “Item 3,Risk Factors—Risks Related to the Regulation of Our Business—bill. We cannot predict howwhether the regulations governing our businessbill will be applied.”
We have 16 subsidiaries in Mexico: one operating subsidiary for each of our 12 airports, along with two subsidiaries (SIAP and CORSA) that provide administrative and operational services and one subsidiary (PCP) that provides parking services across our 12 airports. Additionally, in 2010, another subsidiary, Pacific GA Partipacoes do Brasil LTDA, was established in Brazil; however, this subsidiary has thus far remained inactive and has no capital contributions.
The following table sets forth our subsidiaries as of December 31, 2009.2012.
Name of Company | Jurisdiction | Percentage | Description | |||
Aeropuerto de Guadalajara, S.A. de C.V. | Mexico | 100% | Holds concession for Guadalajara International Airport | |||
Aeropuerto de Tijuana, S.A. de C.V. | Mexico | 100% | Holds concession for Tijuana International Airport | |||
Aeropuerto de Puerto Vallarta, S.A. de C.V. | Mexico | 100% | Holds concession for Puerto Vallarta International Airport | |||
Aeropuerto de San José del Cabo, S.A. de C.V. | Mexico | 100% | Holds concession for Los Cabos International Airport | |||
Aeropuerto de Hermosillo, S.A. de C.V. | Mexico | 100% | Holds concession for Hermosillo International Airport | |||
Aeropuerto del Bajío, S.A. de C.V. | Mexico | 100% | Holds concession for Guanajuato International Airport | |||
Aeropuerto de Morelia, S.A. de C.V. | Mexico | 100% | Holds concession for Morelia International Airport | |||
Aeropuerto de La Paz, S.A. de C.V. | Mexico | 100% | Holds concession for La Paz International Airport | |||
Aeropuerto de Aguascalientes, S.A. de C.V. | Mexico | 100% | Holds concession for Aguascalientes International Airport | |||
Aeropuerto de Mexicali, S.A. de C.V. | Mexico | 100% | Holds concession for Mexicali International Airport | |||
Aeropuerto de Los Mochis, S.A. de C.V. | Mexico | 100% | Holds concession for Los Mochis International Airport | |||
Aeropuerto de Manzanillo, S.A. de C.V. | Mexico | 100% | Holds concession for Manzanillo International Airport | |||
Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V. | Mexico | 100% | Provider of administrative services to our other subsidiaries | |||
Corporativo de Servicios Aeroportuarios, S.A. de C.V. | Mexico | 100% | Provider of operational services to our other subsidiaries | |||
Puerta Cero Parking, S.A. de C.V. | Mexico | 100% | Provider of car parking administration services to our other subsidiaries | |||
GA del Pacífico Partipacoes do Brasil LTDA | Brazil | 100% | Holding company for other acquisitions (incorporated in 2010; not operational through the date of this filing) |
(1) | Grupo Aeroportuario del Pacífico, S.A.B. de C.V. directly holds 99.99% of the shares in each of our subsidiaries. The remaining shares of Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V. are held by Aeropuerto de Guadalajara, S.A. de C.V., while the remaining shares of our other subsidiaries are held by Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V. As a result, Grupo Aeroportuario del Pacífico, S.A.B. de C.V. directly or indirectly holds 100% of the shares of each of our subsidiaries. |
Pursuant to the Mexican National Assets Law (Ley General de Bienes Nacionales), all real estate and fixtures in our airports are owned by the Mexican government. Each of our concessions is scheduled to terminate in 2048, although each concession may be extended one or more times for up to an aggregate of an additional 50 years. The option to extend a concession is subject to our acceptance of any changes to such concession that may be imposed by the Ministry of Communications and Transportation and our compliance with the terms of our current concessions. Upon expiration of our concessions, these assets automatically revert to the Mexican government, including improvements we may have made during the terms of the concessions, free and clear of any liens
and/or encumbrances, and we will be required to indemnify the Mexican government for damages to these assets, except for those caused by normal wear and tear.
Our corporate headquarters are located in Guadalajara, Jalisco. We lease the office space for our corporate headquarters, located on the fifth and sixth floors of La Torre Pacífico, from Guadalajara World Trade Center, S.A. de C.V.Center. In addition to our corporate offices in Guadalajara, we also lease office space in Colonia Los Morales, in Mexico City from Racine, S.A. de C.V.
We maintain comprehensive insurance coverage that covers the principal assets of our airports and other property, subject to customary limits, against damage due to natural disasters, accidents, terrorism or similar events. We also maintain general liability insurance, but do not maintain business interruption insurance. Among other insurance policies, we carry a Ps. 500 million insurance policy covering damages to our property and a U.S.$ 150 million policy covering personal and property damages to third parties, in each case applicable only to damages resulting from certain terrorist acts. We also carry a general Ps. 2.25 billion insurance policy covering damage to our assets and infrastructure and a U.S.$ 500 million insurance policy covering personal and property damages to third parties.
Item 4A. | Unresolved Staff Comments |
None.
Item 5. | Operating and Financial Review and Prospects |
The following discussion should be read in conjunction with, and is entirely qualified by reference to, our consolidated financial statements and the notes to those financial statements, which are included elsewhere in this annual report. It does not include all of the information included in our consolidated financial statements. You should read our consolidated financial statements to gain a better understanding of our business and our historical results of operations.
Our consolidated financial statements were prepared in accordance with MFRS, which differs in certain significant respects from accounting principles generally accepted in the United StatesIFRS, as issued by IASB. Our date of America, or U.S. GAAP. Note 28transition to ourIFRS was January 1, 2011. These consolidated annual financial statements provides aare our first financial statements prepared in according with IFRS. IFRS 1—“First-time Adoption of International Financial Reporting Standards” has been applied in preparing these financial statements. A description of the principal differences betweeneffects on our financial information due to our transition from our previous generally accepted accounting principles, Mexican Financial Reporting Standards, or MFRS, and U.S. GAAP as they relate to us. Also see “—Principal Differences Between MFRS and U.S. GAAP.”IFRS is presented in Note 31 to our audited consolidated financial statements. The financial information for 2011 differs from the information we previously published for 2011, because it is presented in accordance with IFRS.
Overview
We operate 12 airports in the Pacific and Central regions of Mexico pursuant to concessions granted by the Mexican government. The majority of our revenues are derived from providing aeronautical services, which generally are related to the use of our airport facilities by airlines and passengers. For example, in 2007, 20082011 and 2009,2012, approximately 80.9%, 79.1%62.3% and 77.7%68.1%, respectively, of our total revenues were derived from aeronautical services.services (in 2011 and 2012, aeronautical services represented 78.9% and 76.9%, respectively, of the sum of our aeronautical and non-aeronautical revenues). Changes in our revenues from aeronautical services are principally driven by the passenger and cargo volumes at our airports. Our revenues from aeronautical services are also affected by the maximum rates we are allowed to charge under the price regulation system established by the Ministry of Communications and Transportation. The system of price regulation that applies to our aeronautical revenues allows us to charge up to a maximum rate for each unit of traffic volume (which is measured in workload units) at each airport. Thus, increases in aeronautical services, such as passenger and cargo volume, and therefore the number of workload units that we handle, generate greater revenues.
We also derive revenue from non-aeronautical activities, principally related to the commercial services offered at our airports, such as the leasing of space to restaurants, retailers and service providers. Revenues from non-aeronautical activities are not subject to the system of price regulation established by the Ministry of Communications and Transportation. Thus, our non-aeronautical revenues are primarily affected by the passenger volume at our airports and the mix of commercial services offered at our airports, the contracts that we have with the providers of those commercial services and our ability to increase the rates we charge to those service providers. While we expect that aeronautical revenues will continue to represent a majority of our future totalaeronautical and non-aeronautical revenues, growth of our revenues from commercial activities generally has exceeded, and we expect will continue to exceed, the growth rate of our aeronautical revenues. As a result, in recent years we have completed renovation projects to improve the product mix of retail stores in the commercial areas at our Guadalajara, Puerto Vallarta, Los Cabos, Guanajuato, Tijuana, Manzanillo, Morelia and La Paz international airports. Similarly, we intend to redesign and expand the space available to commercial activities in our other airports’ terminals. We also expect to continue renegotiating agreements with terminal tenants to be more consistent with market practices and to recover the rights to non-aeronautical businesses at our airports previously or currently operated by third parties.parties and developing new sources of non-aeronautical revenues through the direct operation of certain businesses such as our VIP lounges. Also see “Item 4,Business Overview—Overview – Our Sources of Revenues—Revenues – Non-aeronautical Services—Services – Recent Expansion and Development of Commercial Areas”.”
Traffic at our airports has been adversely affected by increased levels of competition as a result of the attractiveness, affordability and accessibility of competing tourist destinations in Mexico, such as CancúnAcapulco and Acapulco,Cancun, or elsewhere, such as Hawaii, Puerto Rico, Florida, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America. In addition, we expect increased competition as a result of the government granting new concessions or amending existing permits for other airports that may compete with our airports. See “Item 3,Risk Factors—Factors – Risks Related to Our Operations—Operations – Competition from other tourist destinations could adversely affect our business” and “Item 3,Risk Factors—Factors – Risks Related to the Regulation of Our Business—Business – The Mexican government could grant new concessions that compete with our airports” for more information.
Recent Developments
Shareholder Dispute
On May 27, 2010, the members of the Nominations and Compensation Committee, through their President, announced that, in their opinion: (i) given that the time period, as required by the Mexican Securities Law as well as by our by-laws, for the election of our independent board members had passed since the last election held on April 28, 2009, in the view of the Nominations and Compensation Committee, the term of our independent board members had ended; and (ii) given that the Chairman of the Board was neither nominated nor confirmed during the Ordinary Shareholders’ Meeting held on April 27, 2010, the term for the person holding this position had also ended. As a result, the Committee believed that the position of Chairman automatically corresponded to the first board member named during the deliberation of Item VII of the Ordinary Shareholders’ Meeting held on April 27, 2010, Mr. Demetrio Ullastres Llorente. Mr. Ullastres will remain in this position until our shareholders elect a new Chairman of the Board.
Our Board of Directors held a meeting on June 2, 2010. This meeting was attended only by board members representing the Series BB shareholders, since the independent board members’ terms had ended as per the notification by the Nominations and Compensation Committee. At the meeting, the following independent board members were provisionally and unanimously elected: José Manuel Rincón Gallardo Purón, Ernesto Vega Velasco, Francisco Javier Fernández Carbajal, Francisco Glennie y Graue, León Falic, Jaime Cortés Rocha, and Carlos Eduardo Bravo Almenar. The first four independent board members have held the position of independent board members since 2006.
The shareholders of CMA, holder of 33% of the shares of Aeropuertos Mexicanos del Pacífico, S.A. de C.V., our Strategic Shareholder and owner of 15% of our outstanding shares represented by all of the Series BB shares, are questioning the validity of the June 2, 2010 Board of Directors’ Meeting and the decisions by the Nominations and Compensation Committee declaring that the terms of the directors and the Chairman had expired.
On June 17, 2010, the Board of Directors held a meeting attended by the members of the Series BB shares and also by all the independent members named to the Board of Directors at the Board of Directors’ Meeting held on June 2, 2010. At this meeting, it was decided to:
Designate José Manuel Rincón Gallardo Purón, Ernesto Vega Velasco and Francisco Javier Fernández Carbajal as members of the Audit Committee. These members have served on the Audit Committee since 2008.
Designate Carlos Eduardo Bravo Almenar as a member of the Acquisitions Committee.
Hold an Ordinary and Extraordinary Shareholders’ Meeting on July 22, 2010.
Propose at the Ordinary Shareholders’ Meeting the ratification of all the independent members named provisionally to the Board of Directors at the Board of Directors’ Meeting held on June 2, 2010.
Propose at the Ordinary Shareholders’ Meeting a new Chairman of the Board of Directors.
Propose at the Ordinary Shareholders’ Meeting a member to represent the Series B shares on the Nominations and Compensation Committee.
As a result of this uncertainty, the Mexican Stock Exchange and the NYSE temporarily suspended trading of our shares from June 2, 2010 until June 14, 2010. To address these doubts, on June 14, 2010, we announced that under Mexican law, all corporate actions are presumed to be legal and valid unless challenged through the appropriate channels and held to be invalid by a judge. Additionally, unless declared null and void by a judge, all consequences of such corporate actions are also presumed to be legal and valid under Mexican corporate law. Consequently, we believe that as of the date hereof our Board of Directors and board committees, including the Audit Committee, are duly organized. In addition, our officers, including our Chief Executive Officer, Chief Financial Officer, General Counsel, and the remaining members of our management team, are continuing with their normal responsibilities and our business continues to operate without material interference from the proceedings and disputes among certain of our shareholders.
For more information regarding the shareholder dispute see, “Item 7,Major Shareholders and Related Party Transactions—Major Shareholders” and “Item 9,The Offer and Listing—Trading on the Mexican Stock Exchange—Suspension of Trading.”
Economic Downturn
The U.S. and Mexican economies are currently recovering from a recession. In the third and fourth quarters of 2008, according to the U.S. Bureau of Economic Analysis, the U.S. gross domestic product decreased at annualized rates of 0.1% and 1.9%, respectively. In 2009, the U.S. gross domestic product continued to decline at an annualized rate of 2.4%, although the U.S. economy has shown signs of improvement and in the fourth quarter of 2009 the U.S. gross domestic product increased 0.1% from the fourth quarter of 2008. Likewise, according to the INEGI, Mexico’s gross domestic product decreased at an annualized rate of 1.1% during the fourth quarter of 2008 and an additional 6.5% in 2009. The Mexican economy has recently shown signs of improvement as the gross domestic product rose 3.9% in the fourth quarter of 2009 from the third quarter of 2009. In the first quarter of 2010, the U.S. gross domestic product increased 0.8%, whereas Mexico’s gross domestic product decreased 0.4%. The air travel industry and, as a
consequence, our results of operations, are substantially influenced by economic conditions in Mexico and the United States. In 2008 and 2009, approximately 91.1% and 87.7% respectively of the international passengers in our airports arrived or departed on flights originating in or departing to the United States. Similarly, in both 2008 and 2009, approximately 65.7% of our passengers traveled on domestic flights, and approximately 37.6% and 34.4% respectively, of our revenues in those years were derived from domestic passenger charges.
Fluctuation in the Peso
International passengers and international flights pay tariffs denominated in U.S. dollars. However, these tariffs are generally invoiced and collected in Mexican pesos. Because such tariffs may not be collected until upare invoiced taking into account the average of the exchange rate for the 30 days prior to 60 days following the date of a flight, a significant depreciation of the peso during the final two months of any year could result in our exceeding our maximum rates, which would be a violation of our concession. If a significant depreciation in the peso occurred, we could be required to issue rebates to airline customers to avoid exceeding our maximum rates. On the other hand, a significant appreciation in the peso could result in us collectinginvoicing substantially less than our maximum rate per terminal passenger.workload unit. We do not have any means of recovering lost revenue if we charge less than the maximum rate as a result of a significant appreciation in the peso. We attempt to set our dollar-denominated tariffs so as to avoid exceeding our maximum rates while attempting to charge as close to the maximum rate as possible. Since the beginning of our concessions, fluctuations in the peso have not caused us to exceed our maximum rates or required us to issue rebates to avoid exceeding our maximum rates.
As long as we are able to ensure that our revenues do not exceed our maximum rates as discussed above, the depreciation in the peso has a positive effect on our revenues from a commercial and aeronautical operations perspective while appreciation in the peso has a negative effect. Tariffs on international passengers and international flights and manysome of our contracts with commercial services providers are denominated in U.S. dollars, but only in the case of charges for international passengers and international flights are charges invoiced and collected in Mexican pesos. Therefore, depreciation in the peso against the dollar results in us collecting more pesos than before the depreciation, whereas appreciation of the peso results in us collecting fewer pesos. As the peso appreciates against the dollar, we collect fewer pesos, than prior to any such appreciation, which may result in lower commercial revenues in the future, especially if the appreciation continues unabated or surpasses historic levels of appreciation. In addition, although most of our operating costs are denominated in pesos, we cannot predict whether our cost of services will increase as a result of the depreciation of the peso or as a result of other factors.
From September 30, 2008 to MarchDecember 31, 2009 to December 30, 2010 the peso depreciatedappreciated by approximately 29.4%5.4%, from 10.9813.06 pesos per U.S. dollar to 14.21 pesos per U.S. dollar. Between Marchon December 31, 2009 and November 25, 2009, the peso fluctuated between Ps. 12.82 and Ps. 13.89 per U.S. dollar, and then began to appreciate, reaching a low of Ps. 12.1612.38 pesos per U.S. dollar on December 30, 2010. The peso then depreciated to Ps. 13.95 pesos per U.S. dollar on December 30, 2011. In 2012, the peso appreciated, to Ps. 12.96 per U.S. dollar on December 31, 2012. On April 26, 2010.5, 2013, the exchange rate for pesos was Ps. 12.24 per U.S. $1.00.
Master Development Programs and Maximum RatesAdoption of IFRS
The Ministry of Communications and Transportation approved our new five-year master development programs and maximum rates for each of our airports on December 28, 2009. The master development program for each airport provides for committed investments at that airport for each calendar year through 2014, and indicative investments at that airport for each calendar year from 2015 through 2024. In addition, in connection with the approval of our master development program, the Ministry of Communications and Transportation also approved the maximum rates we are allowed to charge per workload unit (which is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) for regulated services. For more details on the newly approved master development programs and maximum rates, see “Item 4.Information on the Company—Regulatory Framework—Master Development Programs” and “Item 4.Information on the Company—Regulatory Framework—Aeronautical Services Regulation—Maximum Rates.”
Influenza A/H1N1
On March 18, 2009, the Mexican government reported its first cases of Influenza A/H1N1. On April 25, 2009, the Mexican government declared a state of emergency, closing schools and giving the government various powers to contain the epidemic. Using these powers, the government cancelled nearly all public events and closed most museums and tourist attractions from April 24 to May 5, 2009. We have also been required by the Mexican authorities to establish passenger screening programs and undertake certain safety measures at our airports to prevent the further spread of Influenza A/H1N1, which may increase our cost of operation.
Although a number of countries, such as the United States, the United Kingdom, and France, as well as the Health Council of the EU initially recommended that travelers avoid non-essential travel to Mexico, all of these advisories were lifted by the end of May 2009. Likewise, restrictions on travel to Mexico imposed by other countries as a result of A/H1N1 were lifted by June 1, 2009. As a result of the Influenza A/H1N1 outbreak, we experienced substantial declines in revenues from domestic and international passengers as well as cargo traffic in the second and third quarters of 2009, which had a material adverse effect on our revenues and financial results.
As of January 2010, the World Health Organization reported that outbreaks of Influenza A/H1N1 continued to decline or remained low in Mexico. With the abatement of the outbreak and the lifting of travel restrictions, we believe that the Influenza A/H1N1 outbreak no longer continues to significantly affect passenger or cargo traffic levels.
Mayan Riviera Airport Bidding Process
The Mexican government, acting through the Ministry of Communications and Transportation is carrying out a public bidding process for the award of the concession for the construction, operation and management of an international airport in the Mayan Riviera in the state of Quintana Roo. The bidding process for the concession for the airport was announced on May 11, 2010 with a final decision expected by the end of 2010. This airport would be located in Tulum, approximately 101 kilometers from Cancún. We are interested in participating in this bidding process, and we will conduct the appropriate financial analysis of the project in order to determine whether or not to submit a bid. However, even if our analysis indicates we should submit a bid, there can be no assurance that we will be permitted to do so, or that we would be the winning bidder.
Transition to IFRS
Beginning in 2012, Mexican issuers with securities listed on athe Mexican securities exchange will bewere required to prepare financial statements for periods beginning after January 1, 2012 in accordance with International Financial Reporting Standards (IFRS)(“IFRS”) as adopted by the International Accounting Standards Board (IASB)(“IASB”). Mexican issuers may voluntarily report usingAccordingly, we adopted IFRS before the change in the reporting standards becomes mandatory.as of January 1, 2012.
The U.S. Securities and Exchange Commission permits foreign private issuers to prepare their financial statements in accordance with IFRS without having to provide a reconciliation to U.S. GAAP.
The consolidated financial statements for the year ending December 31, 2012 are our first annual financial statements that comply with IFRS. The transition date was January 1, 2011, and, therefore, the year ended December 31, 2011 is the comparative period established by IFRS 1—“First-Time Adoption of International Financial Reporting Standards”. According to IFRS 1, we have applied the relevant mandatory exceptions and certain optional exemptions to the retroactive application of IFRS, as well as the required additional disclosures.
Mandatory exceptions
We expecthave applied the relevant mandatory exceptions to begin reportingthe retroactive applications of IFRS as follows. With regards to calculations of estimates, our estimates prepared under IFRS are consistent with the estimates recognized under MFRS as of the same date, unless we are required to adjust such estimates to conform with IFRS. We estimated that the following mandatory exceptions had no effect on our consolidated financial informationstatements at the date of transition to IFRS: i) derecognition and transfer of financial assets and liabilities, ii) hedge accounting and iii) non-controlling interests.
Optional exemptions
We opted to apply the following optional exemptions to the retroactive application of IFRS. We applied the deemed cost exemption; therefore, we have opted to use the MFRS revaluation at December 31, 2007 of machinery, equipment and improvements on leased buildings as the deemed cost at the transition date to IFRS, which represents the cost or depreciated cost in accordance with IFRS, adjusted to reflect changes in the NCPI or CPI as applicable. We recognized improvements to concession assets, airport concessions, rights to use airport facilities, other acquired rights and other assets at their historical cost. These intangible assets are directly related with the concession, which is also presented as an intangible asset. Additionally, we have opted to recognized the fair value recognized for purposes of MFRS at the date of the airports’ privatization process at its deemed cost (that is, its event-driven fair value), and therefore we have eliminated the inflation effects recognized through December 31, 2007, as the cumulative inflation recognized under MFRS occurred during periods that were not considered to be hyperinflationary under IFRS. Further, we applied the exemption in IFRS 1 regarding post-employment benefits, recognizing all the accrued actuarial gains and losses against retained earnings at the transition date. We also began capitalizing our borrowing costs as of the transition date under IAS 23—Borrowing Costs. The borrowing costs included previously under MFRS were subject to the deemed cost option mentioned above.
A description of the effects on January 1, 2012.our financial information due to our transition from MFRS to IFRS is presented in Note 31 to our audited consolidated financial statements.
Passenger and Cargo Volumes
The majority of the passenger traffic volume in our airports is made up of domestic passengers. In 2009,2012, approximately 65.7%65.6% of the terminal passengers using our airports were domestic. The total number of domestic terminal passengers for 2009 decreased 13.3%2012 increased 7.0% as compared to 2008.2011. In addition, of the international passengers traveling through our airports, a majority have historicallyapproximately 30.3% traveled on flights originating in or departing to the United States.States during 2012. Accordingly, our results of operations are influenced strongly by changes to Mexican economic conditions and to a lesser extent influenced by U.S. economic and other conditions, particularly trends and events affecting leisure travel and consumer spending. Many factors affecting our passenger traffic volume and the mix of passenger traffic in our airports are beyond our control.
The following table sets forth certain operating and financial data relating to certain of our revenues and passenger and cargo volumes for the years indicated.
Year ended December 31, | Year ended December 31, | |||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | ||||||||||||
Change in Mexican gross domestic product(1) | 3.3 | % | 1.5 | % | (6.5 | )% | 3.9% | 3.9% | ||||||||
Change in Mexican Consumer Price Index(2) | 3.8 | % | 6.5 | % | 3.6 | % | 3.8% | 3.6% | ||||||||
Domestic terminal passengers(6) | 15,736.7 | 14,618.5 | 12,678.4 | 13,055.4 | 13,974.7 | |||||||||||
International terminal passengers(6) | 7,828.4 | 7,633.3 | 6,608.1 | 7,152.2 | 7,312.5 | |||||||||||
Total terminal passengers(6) | 23,565.1 | 22,251.8 | 19,286.5 | 20,207.6 | 21,287.3 | |||||||||||
Cargo units(3) | 1,608.2 | 1,460.2 | 1,262.8 | 1,568.2 | 1,618.0 | |||||||||||
Total workload units(3) | 25,173.3 | 23,712.0 | 20,549.3 | 21,775.8 | 22,905.2 | |||||||||||
Change in total terminal passengers(4) | 14.9 | % | (5.6 | )% | (13.3 | )% | (0.1)% | 3.2% | ||||||||
Change in workload units(4) | 13.8 | % | (5.8 | )% | (13.3 | )% | (0.2)% | 5.2% | ||||||||
Aeronautical revenues(5) | Ps. | 2,812.9 | Ps. | 2,762.2 | Ps. | 2,537.3 | Ps. 3,077.9 | Ps. 3,366.0 | ||||||||
Change in aeronautical revenues(4) | 13.4 | % | (1.8 | )% | (8.1 | )% | n/a | 9.4% | ||||||||
Aeronautical revenues per workload unit | Ps. | 111.7 | Ps. | 116.5 | Ps. | 123.5 | Ps. 141.3 | Ps. 147.0 | ||||||||
Change in aeronautical revenues per workload unit(3)(4) | (0.3 | )% | 4.3 | % | 6.0 | % | ||||||||||
Change in aeronautical revenues per workload unit(4) | n/a | 4.0% | ||||||||||||||
Non-aeronautical revenues(5) | Ps. | 664.5 | Ps. | 728.6 | Ps. | 729.0 | Ps. 824.6 | Ps. 1,008.5 | ||||||||
Change in non-aeronautical revenues(4) | 17.4 | % | 9.7 | % | 0.1 | % | n/a | 22.3% | ||||||||
Non-aeronautical revenues per terminal passenger | Ps. | 28.2 | Ps. | 32.7 | Ps. | 37.8 | Ps. 40.8 | Ps. 47.4 | ||||||||
Change in non-aeronautical revenues per terminal passenger(4) | 2.2 | % | 16.0 | % | 15.6 | % | n/a | 16.1% |
(1) | In real terms, as reported by the Mexican National Institute |
(2) | As reported by |
(3) |
(4) | In each case, as compared to the previous period. Due to our adoption of IFRS, we have not calculated a percent change from 2010 to 2011 for the relevant revenue item. |
(5) | In millions of pesos. |
(6) | In thousands. |
In 2009,2012, we had 19.321.3 million terminal passengers (12.7(14.0 million domestic and 6.67.3 million international), of which 120.2162.5 thousand were on general aviation flights, and an additional 291.0201.2 thousand were transit passengers. Approximately 23.4%19.3% of our transit passengers arewere handled at the Guadalajara International Airport.
Classification of Revenues
We classify our revenues into two categories:three categories; revenues from aeronautical services, revenues from non-aeronautical services and revenues from non-aeronautical services.improvements to concession assets. Historically, a majority of our revenues have been derived from aeronautical services.services; however, with the inclusion of revenues from improvements to concession assets, revenues from aeronautical services and from non-aeronautical services will account for a smaller percentage of total revenues. For example, in 2007, 20082011 and 2009, 80.9%2012, with the inclusion of revenues from improvements to concession assets, aeronautical revenues represented 62.3% and 68.1%, 79.1%respectively, of total revenues. In 2011 and 77.7%2012, with the inclusion of revenues from improvements to concession assets, non-aeronautical revenues represented 16.7% and 20.4%, respectively, of total revenues. Aeronautical revenues and non-aeronautical revenues, however, represented 78.9% and 21.1%, respectively, of the sum of aeronautical and non-aeronautical revenues in 2011 and 76.9% and 23.1%, respectively, of the sum of aeronautical and non-aeronautical revenues in 2012. In 2011 and 2012, revenues from improvements to concession assets accounted for 21.0% and 11.5%, respectively, of our revenues were derived from aeronautical services and the remainder of our revenues was derived from non-aeronautical services.total revenues.
Our revenues from aeronautical services are subject to price regulation under the applicable maximum rate at each of our airports, and principally consist of passenger charges, aircraft landing and parking charges, airport security charges, passenger
walkway charges, leasing of space in our airports to airlines (other than first class/VIP lounges and other similar non-essential activities) and complementary services (i.e., fees from handling and catering providers, permanent ground transportation operators and access fees from fuel providers at our airports).
Our revenues from non-aeronautical services are not subject to price regulation under our maximum rates and generally include revenues earned from car parking, leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and similar non-essential activities), rental and royalty payments from third parties operating stores, providing commercial services at our airports (such as car rental agencies, food and beverage providers and retail and duty-free store operators), as well as advertising and fees collected from other miscellaneous sources, such as vending machines and time-share companies.developers.
Our revenues from improvements to concession assets represent the fair value of the additions and upgrades to the concession that we undertake in accordance with our Master Development Programs. In exchange for making those additions and upgrades, the Government grants us the right to obtain benefits for services provided using those assets, which are recognized as intangible assets. This represents an exchange of dissimilar goods or services rather than an actual cash exchange since we receive an intangible asset for the construction services we provide. Through a bidding process, we hire third parties to make the additions and upgrades. The amount of revenues for these services is equal to the costs of making the additions and upgrades since those values represent the fair value of the goods or services received as there is no profit margin stemming from these construction services. Although these revenues do not generate actual cash inflows, IFRS requires that they be recorded given that revenue generation is inherent in an exchange of dissimilar services, similar to a barter transaction. These revenues do not have a cash impact on our results.
For a detailed description of the components of our aeronautical and non-aeronautical revenuesrevenue categories, see “Item 4, Information on the Company—Company – Business Overview—Overview – Our Sources of Revenues”.”
Aeronautical Revenues
The system of price regulation applicable to our aeronautical revenues establishes a maximum rate in pesos for each airport for each year in a five-year period, which is the maximum annual amount of revenues per workload unit (which is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from aeronautical services. As of December 31, 2009, the Ministry of Communications and Transportation had determined the maximum rates for our airports for each year through December 31, 2014. Our aeronautical revenues are determined largely by the number of workload units at each of our airports, which is primarily driven by passenger traffic levels.levels, multiplied by the value of the maximum tariffs approved by the Ministry of Communication and Transportation. In addition, aeronautical revenues differ among our airports to the extent passenger traffic levels differ among these airports. See “Item 4,Regulatory Framework—Framework – Aeronautical Services Regulation” for a description of our maximum rates and the rate-setting procedures for future periods.
Our concessions provide that our maximum rates must be adjusted on an annual basis as determined by the efficiency factor and by changes in inflation. See “Item 4,Regulatory Framework—Framework – Aeronautical Revenues Regulation—Regulation – Methodology for Determining Future Maximum Rates”.”
Under the regulatory system applicable to our aeronautical revenues, we can set the specific price for each category of aeronautical services every six months (or more frequently if accumulated inflation since the last adjustment exceeds 5%), as long as the total aeronautical revenues per workload unit each year at each of our airports do not exceed the maximum rate set for such airport for that year. We currently set the specific price for each category of aeronautical services after negotiations with our principal airline customers.
Aeronautical revenue per workload unit is an indicator that is calculated by dividing average revenuetotal aeronautical revenues by the workload units for a given period. This indicator is affected annually, except for years in which the new maximum tariffs are set, by:
• | Adjustment in the maximum rates for the efficiency factor and the Mexican Producer Price Index(Índice Nacional de Precios al Productor,excluding petroleum); |
Increases and decreases in the relative number of workload units at each airport; and
Changes in total workload units per airport.
During the period from 2005 to 2009Beginning in 2010, the efficiency factor to be applied to our maximum tariffs was 0.75%, which caused our0.70% and will remain at this level until December 31, 2014. Our weighted average maximum tariffs, as determined by the Ministry of Communications and Transportation (prior to inflation adjustments using the Mexican Producer Price Index, excluding petroleum) to decrease by 1.56%Index), decreased 0.86% in 2007, increase by 6.03%2011 and decreased 0.72% in 2008 and decrease by 0.97%2012, mainly as a result of variation in 2009.the percentage that each airport’s workload units represent of our total workload units. At the same time, the Mexican Producer Price Index, excluding petroleum increased by 3.69%,
10.48%7.2% and 1.99%0.9% in 2007, 20082011 and 20092012, respectively. This led to increases in our weighted average maximum tariffs as adjusted by the efficiency factor and the Mexican Producer Price Index, excluding petroleum of 2%, 11%6.3% and 1%,0.2% in 2007, 20082011 and 20092012, respectively. In the same period theThe total workload units at our airports were 25.2 million, 23.721.8 million and 20.522.9 million in 2007, 20082011 and 20092012 respectively, a decrease of 0.2% in 2011 and an increase of 13.8%5.2% in 2007 and decreases of 5.8% and 13.3% in 2008 and 2009 in workload units.
2012. Accordingly, when calculating aeronautical revenue per workload units, the result will fluctuate depending on the relative changes in the aforementioned factors. During 2007, 20082011 and 20092012 average aeronautical revenues per workload unit were Ps. 111.7, Ps. 116.5141.3 and Ps. 123.5147.0 respectively, which represented a decrease of 0.3% in 2007, and an increase of 4.3% and 6.0%4.0% in 20082011 and 2009,2012, respectively. The decrease in 2007 is mainly attributable to the proportionately larger increase in passenger traffic compared to the2012 resulted mainly from increases in maximum tariffs whiledue to adjustments for inflation and the increasesdistribution in 2008 and 2009 result from proportionately larger decreasesincrease in passenger traffic compared to tariff increases.workload units among our airports.
Historically, we have set our prices for regulated services at our airports as close as possible to the maximum rates allowed in any given year, and we expect to pursue this pricing strategy in the future. However, there can be no assurance that we will be able to collect virtually all of the revenues we are entitled to earn from services subject to price regulation in the future or that we will not be sanctioned in case we exceed our maximum rates. For a discussion of risks relating to our ability to set specific prices, see “Item 3,Risk Factors—Factors – Risks Related to the Regulation of Our Business—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” and “Item 3,Risk Factors—Factors – Risks Related to the Regulation of Our Business—Business – If we exceed the maximum rate at any airport at the end of any year, we could be subject to sanctions.sanctions”.
The following table sets forth our revenues from aeronautical services for the years indicated.
Aeronautical Revenues
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | ||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||
(millions of pesos, except percentages and workload unit data) | (millions of pesos, except percentages and workload unit data) | |||||||||||||||||||||||||||||||||
Aeronautical Revenues: | ||||||||||||||||||||||||||||||||||
Passenger charges | Ps. | 2,339.1 | 83.2 | % | Ps. | 2,278.3 | 82.5 | % | Ps. | 2,089.7 | 82.4 | % | Ps. | 2,556.4 | 83.1 | % | Ps. | 2,822.8 | 83.9 | % | ||||||||||||||
Aircraft landing charges | 136.2 | 4.8 | 146.7 | 5.3 | 138.3 | 5.5 | 157.7 | 5.1 | 170.7 | 5.1 | ||||||||||||||||||||||||
Aircraft parking charges | 115.2 | 4.1 | 127.0 | 4.6 | 122.9 | 4.8 | 144.3 | 4.7 | 154.1 | 4.6 | ||||||||||||||||||||||||
Airport security charges | 39.4 | 1.4 | 37.9 | 1.4 | 35.2 | 1.4 | 40.9 | 1.3 | 44.6 | 1.3 | ||||||||||||||||||||||||
Passenger walkway charges | 23.3 | 0.8 | 18.2 | 0.6 | 19.7 | 0.8 | 24.3 | 0.8 | 22.6 | 0.7 | ||||||||||||||||||||||||
Leasing of space to airlines | 107.7 | 3.8 | 106.8 | 3.9 | 90.7 | 3.6 | 101.0 | 3.3 | 97.2 | 2.9 | ||||||||||||||||||||||||
Revenues from complementary service providers(1) | 52.0 | 1.9 | 47.3 | 1.7 | 40.8 | 1.6 | 53.4 | 1.7 | 54.0 | 1.6 | ||||||||||||||||||||||||
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Total Aeronautical Revenues | Ps. | 2,812.9 | 100.0 | % | Ps. | 2,762.2 | 100.0 | % | Ps. | 2,537.3 | 100.0 | % | Ps. | 3,077.9 | 100.0 | % | Ps. | 3,366.0 | 100.0 | % | ||||||||||||||
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Other Information: | ||||||||||||||||||||||||||||||||||
Total workload units(2) | 25.2 | 23.7 | 20.5 | 21.8 | 22.9 | |||||||||||||||||||||||||||||
Total aeronautical revenues per workload unit | Ps. | 111.7 | Ps. | 116.5 | Ps. | 123.5 | Ps. | 141.3 | Ps. | 147.0 | ||||||||||||||||||||||||
Change in aeronautical revenues(3) | 13.4 | % | (1.8 | )% | (8.1 | )% | n/a | 9.4 | % | |||||||||||||||||||||||||
Change in total aeronautical revenues per workload unit(3) | (0.3 | )% | 4.3 | % | 6.0 | % | n/a | 4.0 | % |
(1) | Revenues from complementary service providers consist of access and other fees charged to third parties providing handling, catering and other services at our airports. |
(2) | In millions. Under the regulation applicable to our aeronautical revenues, a workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo. |
(3) | In each case, as compared to the previous year. Due to our adoption of IFRS, we have not calculated a percent change from 2010 to 2011. |
Under the relevant agreements with airlines, our specific prices are structured such that the substantial majority of our aeronautical revenues are derived from passenger charges, and we expect that this will continue to be the case in any future agreements. In 2007, 20082011 and 2009,2012, passenger charges represented 83.2%, 82.5%83.1% and 82.4%83.9%, respectively, of our aeronautical services revenues and 67.3%, 65.3%51.8% and 64.0%57.1%, respectively, of our total revenues.revenues (in 2011 and 2012, passenger charges represented 65.5% and 64.5%, respectively, of the sum of aeronautical and non-aeronautical revenues).
In prior years, in order to ensure our compliance with the maximum rate at a particular airport when the possibility of exceeding that maximum rate arose, we have taken actions in the latter part of the year, such as reducing our specific prices for aeronautical services and offering discounts or rebates, to ensure our compliance with the applicable maximum rate. In the future, we intend to continue to adjust our rates in the latter part of each year to ensure compliance with our maximum rates.
The following table sets forth the number of passengers paying passenger charges for the years indicated. We earn passenger charges from each departing passenger at our airports, other than transit and transfer passengers (if the transfer of the passenger occurs within 24 hours of the passenger’s arrival at the airport), diplomats and infants.
Passengers Paying Passenger Charges
Year ended December 31, | Year ended December 31, | ||||||||||||||||||||||||||||||||||
Airport | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||||||||||||||||||
Amount | % change | Amount | % change | Amount | % change | Amount | Amount | % change | Amount | % change | |||||||||||||||||||||||||
(in thousands, except percentages) | (in thousands, except percentages) | ||||||||||||||||||||||||||||||||||
Guadalajara | 3,447.9 | 13.5 | % | 3,332.2 | (3.4 | )% | 2,977.3 | (10.7 | )% | 3,224.7 | 3,384.7 | 5.0 | % | 3,488.5 | 3.1 | % | |||||||||||||||||||
Tijuana | 2,168.3 | 29.0 | 1,857.0 | (14.4 | ) | 1,612.4 | (13.2 | ) | 1,726.6 | 1,664.5 | (3.6 | ) | 1,777.3 | 6.8 | |||||||||||||||||||||
Los Cabos | 1,350.7 | 1,386.2 | 2.6 | 1,486.0 | 7.2 | ||||||||||||||||||||||||||||||
Puerto Vallarta | 1,535.7 | 5.2 | 1,610.5 | 4.9 | 1,289.7 | (19.9 | ) | 1,329.3 | 1,237.0 | (6.9 | ) | 1,268.7 | 2.6 | ||||||||||||||||||||||
Los Cabos | 1,426.0 | 6.2 | 1,463.4 | 2.6 | 1,287.9 | (12.0 | ) | ||||||||||||||||||||||||||||
Hermosillo | 513.7 | 21.9 | 489.2 | (4.8 | ) | 455.9 | (6.8 | ) | 455.3 | 476.0 | 4.6 | 533.3 | 12.0 | ||||||||||||||||||||||
Guanajuato | 620.3 | 10.6 | 532.6 | (14.1 | ) | 422.0 | (20.8 | ) | 408.1 | 408.3 | 0.1 | 453.9 | 11.2 | ||||||||||||||||||||||
La Paz | 309.6 | 38.8 | 254.7 | (17.7 | ) | 250.4 | (1.7 | ) | 268.5 | 265.8 | (1.0 | ) | 269.0 | 1.2 | |||||||||||||||||||||
Mexicali | 211.6 | 227.6 | 7.5 | 242.8 | 6.7 | ||||||||||||||||||||||||||||||
Morelia | 295.5 | 0.7 | 254.7 | (13.8 | ) | 211.4 | (17.0 | ) | 207.6 | 177.5 | (14.5 | ) | 194.1 | 9.4 | |||||||||||||||||||||
Mexicali | 262.0 | 30.1 | 236.8 | (9.6 | ) | 215.2 | (9.1 | ) | |||||||||||||||||||||||||||
Aguascalientes | 227.5 | 20.3 | 206.7 | (9.1 | ) | 137.5 | (33.5 | ) | 141.9 | 158.3 | 11.6 | 193.7 | 22.3 | ||||||||||||||||||||||
Los Mochis | 134.1 | 39.2 | 101.1 | (24.6 | ) | 93.9 | (7.1 | ) | 115.4 | 99.0 | (14.2 | ) | 86.6 | (12.5 | ) | ||||||||||||||||||||
Manzanillo | 120.5 | 6.5 | 106.1 | (12.0 | ) | 85.0 | (19.9 | ) | 76.3 | 74.7 | (2.1 | ) | 79.1 | 5.9 | |||||||||||||||||||||
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Total | 11,061.1 | 15.0 | % | 10,445.0 | (5.6 | )% | 9,038.6 | (13.5 | )% | 9,516.1 | 9,559.6 | 0.5 | % | 10,073.0 | 5.4 | % | |||||||||||||||||||
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Non-aeronautical Revenues
Non-aeronautical services historically have generated a smaller portion of our total revenues as compared to aeronautical services. However, the contribution to ourNon-aeronautical revenues represented 16.7% and 20.4% of total revenues fromin 2011 and 2012, respectively (in 2011 and 2012, non-aeronautical services has steadily increased inrevenues represented 21.1% and 23.1%, respectively, of the past few years, from 19.1% in 2007 to 22.3% in 2009, reflecting our business strategysum of developing our commercial activities. From 2007 to 2009, ouraeronautical and non-aeronautical revenues). Non-aeronautical revenues per terminal passenger increased, fromwere Ps. 28.2 to40.8 and Ps. 37.8.47.4 in 2011 and 2012, respectively. Our revenues from non-aeronautical services are principally derived from commercial activities. None of our revenues from non-aeronautical services are subject to price regulation under our maximum-rate price regulation system.
The majority of our non-aeronautical revenues is derived from commercial activities such as car parking, advertising, leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and similar non-essential activities) and rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as time-share developers, retail stores, food and beverage providers, car rental agencies and duty-free store operators, as well as advertising and fees collected from other miscellaneous sources, such as vending machines.
The following table sets forth our revenues from non-aeronautical services for the years indicated.
Non-aeronautical Revenues
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | ||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||
(millions of pesos, except percentages and workload unit data) | (millions of pesos, except percentages and workload unit data) | |||||||||||||||||||||||||||||||||
Non-aeronautical Services: | ||||||||||||||||||||||||||||||||||
Commercial activities: | ||||||||||||||||||||||||||||||||||
Car parking charges | Ps. | 134.9 | 20.3 | % | Ps. | 161.5 | 22.2 | % | Ps. | 142.8 | 19.6 | % | Ps. | 169.8 | 20.6 | % | Ps. | 193.7 | 19.2 | % | ||||||||||||||
Leasing of space(1) | 101.2 | 15.2 | 104.2 | 14.3 | 112.7 | 15.5 | 115.7 | 14.0 | % | 126.5 | 12.5 | % | ||||||||||||||||||||||
Car rentals | 60.2 | 9.1 | 64.8 | 8.9 | 71.6 | 9.8 | 81.7 | 9.9 | % | 92.3 | 9.2 | % | ||||||||||||||||||||||
Food and beverage operations | 66.8 | 10.1 | 73.4 | 10.1 | 73.0 | 10.0 | 74.3 | 9.0 | % | 86.0 | 8.5 | % | ||||||||||||||||||||||
Retail operations | 69.0 | 10.4 | 73.2 | 10.0 | 70.1 | 9.6 | 78.8 | 9.6 | % | 80.3 | 8.0 | % | ||||||||||||||||||||||
Duty-free operations | 55.2 | 8.3 | 60.8 | 8.3 | 62.1 | 8.5 | 71.2 | 8.6 | % | 112.9 | 11.2 | % | ||||||||||||||||||||||
Advertising | 37.2 | 5.6 | 46.4 | 6.4 | 37.3 | 5.1 | 54.0 | 6.6 | % | 76.2 | 7.6 | % | ||||||||||||||||||||||
Communications | 10.3 | 1.5 | 10.1 | 1.4 | 9.7 | 1.3 | 7.6 | 0.9 | % | 5.7 | 0.6 | % | ||||||||||||||||||||||
Financial services | 6.6 | 1.0 | 9.0 | 1.2 | 12.1 | 1.7 | 13.1 | 1.6 | % | 15.0 | 1.5 | % | ||||||||||||||||||||||
Time-sharing | 71.9 | 10.8 | 73.6 | 10.1 | 88.3 | 12.1 | 82.4 | 10.0 | % | 98.8 | 9.8 | % | ||||||||||||||||||||||
VIP lounges | 7.6 | 0.9 | % | 19.7 | 2.0 | % | ||||||||||||||||||||||||||||
Other | 27.9 | 4.2 | 25.9 | 3.6 | 27.7 | 3.8 | 27.7 | 3.4 | % | 29.1 | 2.9 | % | ||||||||||||||||||||||
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Total commercial activities | 641.2 | 96.5 | 702.9 | 96.5 | 707.4 | 97.0 | 784.0 | 95.1 | % | 936.2 | 92.8 | % | ||||||||||||||||||||||
Recovery of costs(2) | 23.3 | 3.5 | 25.7 | 3.5 | 21.6 | 3.0 | 40.6 | 4.9 | % | 72.2 | 7.2 | % | ||||||||||||||||||||||
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Total Non-aeronautical Revenues | Ps. | 664.5 | 100.0 | % | Ps. | 728.6 | 100.0 | % | Ps. | 729.0 | 100.0 | % | Ps. | 824.6 | 100.0 | % | Ps. | 1,008.5 | 100.0 | % | ||||||||||||||
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Other Information: | ||||||||||||||||||||||||||||||||||
Total terminal passengers(3) | 23.6 | 22.3 | 19.3 | 20.2 | 21.3 | |||||||||||||||||||||||||||||
Non-aeronautical revenues per terminal passenger | Ps. | 28.2 | Ps. | 32.7 | Ps. | 37.8 | Ps. | 40.8 | Ps. | 47.4 | ||||||||||||||||||||||||
Change in non-aeronautical revenues per terminal passenger(4) | 2.2 | % | 16.0 | % | 15.6 | % | n/a | 16.1 | % | |||||||||||||||||||||||||
Car parking charges per terminal passenger | Ps. | 5.7 | Ps. | 7.2 | Ps. | 7.4 | Ps. | 8.4 | Ps. | 9.1 | ||||||||||||||||||||||||
Change in car parking charges per terminal passenger(4) | 3.6 | % | 26.3 | % | 2.8 | % | n/a | 8.3 | % |
(1) | Includes leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and other similar non-essential activities). |
(2) | Recovery of costs consists of utility, fuel and maintenance charges that are transferred to airlines and other tenants in our airports. |
(3) | In |
(4) | In each case, as compared to the previous year. Due to our adoption of IFRS, we have not calculated a percent change from 2010 to 2011. |
In 2009,2012, revenues from non-aeronautical services in our airports accounted for 22.3%20.4% of the total revenues generated by our airports.airports (in 2012, non-aeronautical revenues represented 23.1% of the sum of aeronautical and non-aeronautical revenues). In contrast, we believe that revenues from commercial activities may account for up to 40% or more of the consolidated revenues of many leading privatized airports. While we believe that aeronautical revenues will continue to represent a substantial majority of our future revenues, we currently estimate that the growth rate of our revenues from commercial activities will likely exceed the growth rate of our aeronautical revenues (as was the case during the period from 20002011 to 2009).2012), except in the years in which the maximum tariffs are reset.
In recent years, non-aeronautical revenues per terminal passenger have increased 34.0%16.1% (from Ps. 28.240.8 in 20072011 to Ps. 37.847.4 in 2009)2012, while terminal passengers increased only 5.3%), while our cost of services per workload unit has increased 27.0% (Ps. 33.32.1% (from Ps. 45.3 in 2007, as compared2011 to Ps. 42.346.3 in 2009)2012), resulting in non-aeronautical services contributing increasinglymore to our results of operations.
Non-aeronautical revenues per terminal passenger shows the average revenue generated by the commercial areas of our airports, and it is calculated by dividing total non-aeronautical revenues by the number of terminal passengers during the same period. Therefore if non-aeronautical revenues decline proportionately less than the decline in the number of terminal passengers during a period, as was the case in 2008 and 2009, non-aeronautical revenues per terminal passenger will increase despite the decrease in non-aeronautical revenues. Similarly, the cost of services per workload unit would increase in periods in which the workload unit declines because the majority of an airport’s costs are fixed. Non-aeronautical revenues per terminal passenger are principally affected by:
Recovery of rights to certain business that we previously did not operate;
Opening of new commercial space at our airports;
The level of passenger traffic; and
The exchange rate between the Mexican peso and the US dollar. This exchange rate affects the contracts denominated in U.S. dollars, which mainly consist of lease contracts for time-share developers, car rentals, duty free services and certain lease contracts for food and beverages and retail operations.
Certain categories of non-aeronautical revenues are directly impacted by passenger traffic (for example car parking and rental, and food and beverage providers) while others are not (for example leasing of space, on which we earn at least a minimum fixed rent indexed to inflation each year, which may be increased by royalty-based payments as discussed below). Accordingly, non-aeronautical revenues do not always behave in the same manner as passenger traffic or workload units.
We estimate that approximately 89.5%78% of our current commercial agreements could beare arranged as royalty-based contracts based on the nature of our tenants’ operations, representing approximately 55.0%72% of our total non-aeronautical revenues. Under a royalty-based contract the amount tenants must pay is based on tenants’ revenues, subject to minimum guaranteed fixed amounts related to the square footage of the space leased. When the royalty-based amount is lower than the minimum guaranteed amount, the tenant must still pay the latter. Therefore, a decrease in passenger traffic volumes would result in a reduction in non-aeronautical revenues from such tenants only if, prior to such decrease in passenger traffic, the sales of royalty-based tenants were higher than the minimum guaranteed amount. As a result, during periods in which airports experience a reduction in passenger traffic volumes, non-aeronautical revenues may remain stable due to the minimum guaranteed amount received by the airport under the lease contract, thereby resulting in a potential increase in non-aeronautical revenues per workload unit.
For example, during 2007, 2008 During 2011 and 2009,2012, non-aeronautical revenues were Ps. 664.5 million, Ps. 728.6824.6 million and Ps. 729.01,008.5 million respectively, representing an increase of 9.6% and 0.05%22.3% in 2008 and 2009, respectively. The increase in 2008 as compared to 2007 was mainly due to the recovery in January 2008 of the parking facilities in our Tijuana International Airport that we did not operate previously. Additionally, during the last quarter of 2008, the Mexican peso depreciated versus US dollar by 26.7%; therefore, for our U.S. dollar-denominated contracts, we received a higher peso equivalent amount of revenues. At the same time, total2012. In 2012 non-aeronautical revenues increased more than terminal passenger volume declined in 2008 and 2009 by 5.5% and 13.3%, respectively. This generated an increase inpassengers, which increased 5.3%. In 2012, non-aeronautical revenues per terminal passenger increased from Ps. 28.240.8 per passenger in 20072011 to Ps. 32.747.4 per passenger in 20082012, representing an increase of 16.1% mainly due to the fact that total terminal passenger volume remained almost unchanged while non-aeronautical income increased 22.3% as compared to 2011.
Recognition of revenues from improvements to concession assets
International Financial Reporting Interpretation Committee 12 (IFRIC 12)Service Concession Arrangements requires, subject to certain conditions, that the infrastructure of a service concession contract falling within its scope not be recognized as property, plant and equipment. It also requires that revenues obtained when the operator performs both construction or upgrade services and operating services under a single contract be recognized according to each type of service provided, based on the fair value of consideration received at the time the service is rendered. We recognize revenues and the associated costs of improvements to concession assets in relation with the concession’s obligation to perform improvements as established in the Master Development Programs. Revenues represent the value of the exchange between ourselves and the government with respect to the improvements, given that we construct or provide improvements to the airports as obligated under the Master Development Programs, and in exchange, the government grants us the right to obtain benefits for services provided using those assets, which are recognized as intangible assets. We have determined that our obligations per the Master Development Programs should be considered to be a revenue-earning activity as all expenditures incurred to fulfill the Master Development Programs are included in the maximum tariffs. Therefore we recognize the revenue and expense in profit or loss when the expenditures are performed. The cost for such additions and improvements to concession assets is based on actual costs incurred by us in the execution of the additions or improvements, considering the investment requirements in the Master Development Programs. Through bidding processes, we contract third parties to carry out such construction. The amount of revenues for these services is equal to the amount of costs incurred, as we do not obtain any profit margin for these construction services. The amounts paid are set at market value. As a result, revenues from improvements to concession assets do not have a cash impact on our results. Furthermore, they are not directly related to our passenger traffic, which is the main driver of our revenues. As a result, revenues from improvements to concession assets do not have a cash impact on our results. Furthermore, they are not directly related to our passenger traffic (the main driver of our revenues). In 2011, we recognized Ps. 37.8 per passenger1.0 billion in 2009, representing increasesrevenues from improvements to concession assets. In 2012, we recognized Ps. 570.2 million in revenues from improvements to concession assets. This represented a decrease of 2.2%, 16.0% and 15.6%, respectively.45.0% as compared to 2011 due to lower investment commitments under our Master Development Programs for 2012.
Operating Costs
The following table sets forth our operating costs and certain other related information for the years indicated.
Operating Costs
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | ||||||||||||||||||||||||||
Amount | Amount | % change | Amount | % change | Amount | Amount | % change | |||||||||||||||||||||||
(millions of pesos, except percentages and passenger data) | (millions of pesos, except percentages and passenger data) | |||||||||||||||||||||||||||||
Operating Costs: | ||||||||||||||||||||||||||||||
Cost of services: | ||||||||||||||||||||||||||||||
Employee costs | Ps. | 351.7 | Ps. | 363.4 | 3.3 | % | Ps. | 335.6 | (7.6 | )% | Ps. | 369.4 | Ps. | 402.6 | 9.0 | % | ||||||||||||||
Maintenance | 142.4 | 165.6 | 16.3 | 179.4 | 8.3 | 179.5 | 200.0 | 11.5 | ||||||||||||||||||||||
Safety, security and insurance | 106.3 | 111.0 | 4.5 | 110.7 | (0.3 | ) | 131.2 | 159.4 | 21.5 | |||||||||||||||||||||
Utilities | 90.3 | 113.1 | 25.2 | 91.3 | (19.3 | ) | 122.1 | 139.5 | 14.2 | |||||||||||||||||||||
Other | 148.5 | 199.7 | 34.5 | 152.3 | (23.7 | ) | 184.8 | 158.5 | (14.2 | ) | ||||||||||||||||||||
Total cost of services | 839.2 | 952.8 | 13.5 | 869.3 | (8.8 | ) | 986.9 | 1,060.0 | 7.4 | |||||||||||||||||||||
Technical assistance fees | 125.9 | 118.2 | (6.1 | ) | 111.7 | (5.5 | ) | 136.2 | 155.1 | 13.9 | ||||||||||||||||||||
Concession taxes | 172.8 | 173.5 | 0.4 | 162.5 | (6.3 | ) | 193.8 | 217.3 | 12.1 | |||||||||||||||||||||
Depreciation and amortization: | ||||||||||||||||||||||||||||||
Depreciation(1) | 81.3 | 87.2 | 7.3 | 82.5 | (5.4 | ) | 110.3 | 151.2 | 27.6 | |||||||||||||||||||||
Amortization(2) | 672.8 | 711.0 | 5.7 | 746.4 | 5.0 | 632.7 | 676.0 | 8.0 | ||||||||||||||||||||||
Total depreciation and amortization | 754.1 | 798.2 | 5.8 | 828.8 | 3.8 | 743.0 | 827.2 | 11.3 | ||||||||||||||||||||||
Other expense (income) | 6.6 | 1.3 | (79.8 | ) | ||||||||||||||||||||||||||
2,066.5 | 2,260.9 | 9.8 | ||||||||||||||||||||||||||||
Cost of improvements to concession assets | 1,036.2 | 570.2 | (45.0 | ) | ||||||||||||||||||||||||||
Total operating costs | Ps. | 1,892.0 | Ps. | 2,042.7 | 8.0 | % | Ps. | 1,972.4 | (3.4 | )% | Ps. | 3,102.7 | Ps. | 2,831.2 | (8.6 | )% | ||||||||||||||
Other Information: | ||||||||||||||||||||||||||||||
Total workload units(3) | 25,173.3 | 23,712.0 | (5.8 | )% | 20,549.2 | (13.3 | )% | 21,775.8 | 22,905.2 | 5.2 | % | |||||||||||||||||||
Cost of services per workload unit | 33.3 | 40.2 | 20.7 | % | 42.3 | 5.2 | % | Ps. | 45.3 | Ps. | 46.3 | 2.1 | % | |||||||||||||||||
Cost of services margin(4) | 24.1 | % | 27.3 | % | 26.6 | % | ||||||||||||||||||||||||
Cost of services / the sum of aeronautical and non-aeronautical revenues(4) | 25.3 | % | 24.2 | % |
(1) | Reflects depreciation of |
(2) | Reflects amortization of our improvements of concession assets, concessions and |
(3) | In thousands. Under the regulation applicable to our aeronautical revenues, a workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo. |
(4) | Cost of services divided by |
Cost of Services
Our cost of services consists primarily of employee costs, maintenance, safety, security and insurance costs, as well as utilities (a portion of which we recover from our tenants) and various other operating costs. In recent years, ourmiscellaneous expenses. Cost of services per workload unit is an indicator that is calculated by dividing cost of services by the workload units for a given period. This indicator is affected annually by:
Therefore, if the cost of services increases less in proportion to the increase in workload units, the cost of service per workload unit decreases. Similarly, cost of service per workload units increases in periods in which the costs of service remains stable but workload units declined.
Our cost of services per workload unit has increased from Ps. 33.345.3 in 20072011 to Ps. 40.246.3 in 2008 and Ps. 42.3 in 2009, mainly2012, an increase of 2.1%. In 2012, cost of services per workload unit increased 2.1%, as a result of a 7.4% increase in the declinecost of services, due to an increase in employee costs of Ps. 20.8 million, maintenance costs of Ps. 20.6 million and security and insurance costs of Ps. 28.2 million, while the workload units from 25.2 million in 2007 to 23.7 million in 2008 and 20.5 million in 2009. Despite strict services controls, a reduction in passenger traffic unfavorably affected our cost per workload unit. As a result, our operating margins (defined asremained relatively stable. Our income from operations divided by total revenues) decreased by 600the sum of aeronautical and non-aeronautical revenues (operating margin) increased 130 basis points from 45.6%47.0% in 20072011 to 39.6%48.3% in 2009.2012.
Technical Assistance Fee and Concession Tax
Under the technical assistance agreement, AMP provides management and consulting services as well as technical assistance and technological and industry knowledge and experience to us in exchange for a fee. This agreement is more fully described in Item 7 hereof. Since January 1, 2002, the fee has been equal to the greater of U.S.$ 4.0 million (adjusted annually for U.S. inflation since August 25, 2000)inflation) and 5% of our annual consolidated operating income, defined as earnings before interest income or expense
(calculated (calculated prior to deducting the technical assistance fee, income taxes, depreciation and amortization and in each case determined in accordance with MFRS). In 2009, 20082011 and 2007,2012, this fee was Ps. 111.7 million, Ps. 118.2136.2 million and Ps. 125.9155.1 million, respectively.
We are subject to the Mexican Federal Duties Law, which requires each of our airports to pay a concession tax to the Mexican government, which is currently equal to 5% of the gross annual revenues (excluding revenues from improvements to concession assets) of each concession holder obtained from the use of public domain assets pursuant to the terms of its concession. In 2009,2011 and 2012, this tax was Ps. 162.5 million.193.8 million and Ps. 217.3 million, respectively. The concession tax rate may vary on an annual basis as determined solely by the Mexican Federal Congress, and there can be no assurance that this rate will not increase in the future. If the Mexican Federal Congress increases the concession tax rate, we are entitled to request an increase in our maximum rates from the Ministry of Communications and Transportation; however, there can be no assurance that the Ministry of Communications and Transportation would honor our request.
Depreciation and Amortization
Our depreciation and amortization expenses primarily reflect primarily the amortization of our investment in our 12 concessions, which we began amortizing for accounting purposes in August 1999, the date on which the value of our concessions was determined based on the value assigned by AMP to our Series BB shares as part of its winning bid to acquire its 15% interest in us. In addition, we amortize the value of certain fixed assets we acquire or build at our airports pursuant to the investment requirements under our master development programs.Master Development Programs. Moreover, in 20072011 and 2008,2012, we wrote off the remaining balance of certain additions to and construction upon facilities carried out since the beginning of our concession, as they were replaced with new investments as required under the master development program.Master Development Program. The amounts of these effectswrite offs were Ps. 10.927.5 million in 2011 and Ps. 8.317.2 million respectively.in 2012. For further information regarding to depreciation and amortization expenses, refer to Notes 8, 9, 10, 11 and 12 to our audited consolidated financial statements.
Cost of improvements to concession assets
In conformity with out Master Development Programs we have to invest in additions and upgrades to our concession assets, and these investments are reflected according to IFRIC 12. In our case, because we hire third parties to provide construction and upgrade services, our costs reflect the amounts paid to third parties, and we do not recognize a premium on the cost of services. Because revenues from improvements to concession assets are equal to the cost of improvements to concession assets, the application of IFRIC 12 does not have a cash impact on our results.
Taxation
We and each of our subsidiaries pay taxes on an individual (rather than consolidated) basis. Through 2007, Mexican companies were generally required to pay the greater of their income tax liability (determined at a rate of 28% for 2007 to 2009, and will be 30% for 2010 to 2012, 29% for 2013 and 28% thereafter) or their asset tax liability (determined at a rate of 1.25% in 2007—of the average tax value of virtually all of their assets including, in our case, our concessions), less the average tax value of certain liabilities (through December 2006; beginning in 2007, no liabilities are deducted).
Beginning January 1, 2008, as a result of changes in the Mexican tax law, Mexican companies must pay the greater of their income tax liability(currently determined at a rate of 30% for 2011 to 2013, 29% for 2014 and 28% thereafter) or a new business flat tax rate (Impuesto Empresarial a Tasa Única, or IETU), which replaced the asset tax. Due to changes in tax legislation, effective January 1, 2007, taxpayers who file tax reports and meet certain requirements may obtain a tax credit equivalent to 0.50% or 0.25% of taxable income. Prior to the date of the enactment of the new business flat tax (IETU), the asset tax law established that if in any year the asset tax liability exceeded the income tax liability, the asset tax payment for such excess may be reduced by the amount by which the income tax exceeded the asset tax in the three preceding years. In addition, any required payment of asset tax was creditable against the excess of income tax over asset tax of the following ten years.
In 2007, we and our subsidiaries paid an aggregate of Ps. 81.9 million in asset taxes.
On October 1, 2007, the IETU was enacted and became effective as of January 1, 2008, and the Asset Tax Law was repealed effective January 1, 2008. As a result of these changes in the Mexican tax law, the new IETU tax law established that the asset tax balance may be recovered through rebates over the following ten years of up to 10% of the total asset tax paid out and pending
recovery, provided that this sum does not exceed the difference between the income tax paid during the period and the asset tax paid during the three previous years, whichever is lower, when the income tax exceeds asset tax in any of those years.
In addition, the Tax Benefits Decree and the Third Omnibus Tax Bill were published on November 5 and December 31, 2007, respectively, clarifying or expanding the transitory application of the law regarding transactions carried out in 2007 that had an impact in 2008. This law, which eliminated the asset tax and replaced it with the IETU, applies to individuals and companies with permanent establishment in Mexico. Such individuals and companies are required to pay the greater of the IETU or the income tax. IETU is calculated by applying a tax rate, of 16.5% in 2008, 17.0% in 2009 andwhich since 2010 has been 17.5% thereafter, to an income determined based on cash flows. This cash flow income is determined by decreasingtaking authorized deductions (excluding wages, social security contributions, interest expense and certain investment expenditures) from total income earned from taxable activities. IETU tax credits are deducted according to procedures established in the IETU tax law. The IETU tax law established that the excess of the income tax over the asset tax could be recovered during the ten years following the implementation of the IETU tax law by up to 10% of the total asset tax carryforward at December 31, 2007 each year, provided that this amount does not exceed the difference between the income tax paid in the year and the lowest amount of asset tax paid during each of the three years preceding December 31, 2007.
We regularly review our deferred tax assets for recoverability, and, ifwhich are reduced as necessary establishto the extent that a valuation allowancefuture tax benefit is no longer probable, based on an analysis of historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences. Mexican tax law allows Mexican companies utilizing tax amortization rates that are lower than the maximum allowable rates to modify their tax amortization rates every five years, without exceeding the maximum allowable rate. Beginning in 2000, we utilized rates lower than the 15% maximum allowable rate to amortize our airport concessions and rights to use airport facilities for tax purposes.
Our effective tax rates in 2007, 20082011 and 20092012 were 17%, 8%14% and 11%16%, respectively. Our effective tax rate in 2007 was lower than the statutory rate of 28% because of the enactment of the IETU which reduced the valuation allowance for recoverable tax on assets paid in previous years to Ps. 354.9 million, mainly from our Tijuana International Airport. In 2008, our effective tax rate of 8% was significantly lower than the Mexican corporate tax rate of 28% solely due to the changes in NIF B-10,Effects of Inflation, which resulted in discontinuing recognizing the effects of inflation in our financial statements beginning 2008, while the corresponding tax values of assets and liabilities continue to be adjusted for inflation. This new accounting treatment resulted in a discrepancy between the tax basis and accounting basis of our assets and liabilities, making the tax basis significantly higher than the accounting basis that generated an increase in the deferred income tax asset. In 20092012, our effective tax rate increased to 11% (or more than 30016% or 200 basis points) mainly duepoints as compared to a decrease in the rate of inflation used2011, resulting from an increase in our basecurrent tax expense derived from an increase in our earnings before income taxes of comparison for accounting purposes to12.1%, whereas our deferred tax purposes from 6.5% to 3.6%. The increase was also partially due to a change in the valuation allowance for asset taxes.income remained relatively stable. We paid Ps. 369.5550.3 million and Ps. 531.8 million in corporate taxtaxes in 2009,2011 and 2012, respectively, representing 27.6%29.4% and 25.3% of our earnings before taxes.
The IETU Law alsoAccording to the mechanism established a mechanism to recover existing asset tax credit carryforwards, thatwhich ultimately benefited the Company. The Company now hasbenefit us, we have ten years beginning in 2008 to recover those existing asset tax credit carryforwards.credits. Every year, we review and adjust, as necessary, our financial projections based on new expectations of revenues, expenses and capital expenditures, whether for our Master Development Programs, for new maximum tariffs or new passenger traffic projections. Based on these changes which resulted in the Company’sour ability to recover tax on assets that was previously determined to be unrecoverable, coupled with the Company’sour financial projections from 2008 to 2017, we recognized in 2007 the Company recognizedPs. 354.9 million associated with a significant decrease in the valuation allowance of recoverable tax on assets paid in previous years foryears. In 2011, we increased the recoverable asset by Ps. 354.9 million. This reserve was increased slightly in 2008 to Ps. 79.119.0 million, based on revised financial projections from 20092012 to 2017 coupled with actual results in 2008 with respect to certain of our airports. In 2009, we increased the reserve of the valuation allowance related to2017. The recoverable tax on assets paiddecreased Ps. 32.3 million due to a refund request we made in 2011 to the tax authorities, which has been already received in its entirety. In 2012, we decreased the recoverable asset by Ps. 23.916.1 million, based on revised financial projections from 20102013 to 2017. The recoverable tax on assets paid decreased to Ps. 21.949.5 million due to its recoverya refund request we made in 2009.2012 to the tax authorities, which as of the date of this report has been fully received.
Employee Profit Sharing
We are subject to the statutory employee profit sharing regime established under the Mexican Federal Labor Law (Ley Federal del Trabajo). Under this regime, 10% of each unconsolidated company’s annual profits (as calculated for tax purposes) must be distributed among its employees, other than its chief executive officer.
Employee Retirement Plans
Under Mexican legislation, we must make payments equivalent to 2% of our workers’ comprehensive daily integrated salary to a defined contribution plan that is part of the retirement savings system. The expense was Ps. 3.94.3 million in 2009, Ps. 4.0 million in 20082011 and Ps. 3.5 million in 2007.2012.
Effects of Devaluation and Inflation
The following table sets forth, for the periods indicated, the percentage that the Mexican peso depreciated or appreciated against the U.S. dollar, the Mexican inflation rate, the U.S. inflation rate, and the percentage that the Mexican gross domestic product, or GDP, changed as compared to the previous period.
Year ended December 31, | Year ended December 31, | ||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | |||||||||||||
Depreciation (appreciation) of the Mexican peso as compared to the U.S. dollar(1) | 1.0 | % | 26.7 | % | (5.6 | )% | 13.1 | % | (6.9 | )% | |||||||
Mexican inflation rate(2) | 3.8 | % | 6.5 | % | 3.6 | % | 3.8 | % | 3.6 | % | |||||||
U.S. inflation rate(3) | 4.1 | % | 0.1 | % | 2.7 | % | 2.9 | % | 1.7 | % | |||||||
Increase in Mexican gross domestic product(4) | 3.3 | % | 1.5 | % | (6.5 | )% | 3.9 | % | 3.9 | % |
(1) | Based on changes in the rates for calculating foreign exchange liabilities, as reported by Banco de México, the Mexican Central Bank, at the end of each period, which were as follows: Ps. |
(2) | Based on changes in the Mexican consumer price index from the previous period, as reported by the |
(3) | As reported by the U.S. Department of Labor, Bureau of Labor Statistics. |
(4) | In real terms, as reported by |
The general condition of the Mexican economy, changes in the value of the peso as compared to the dollar, inflation and high interest rates have in the past adversely affected, and may in the future adversely affect, our:
• | Depreciation and amortization expense. |
• | Passenger charges. Passenger charges for international passengers are currently denominated in dollars, but are invoiced and collected in pesos. Meanwhile, passenger charges for domestic passengers are denominated in pesos. |
against the U.S. dollar could cause declines in our revenues from passenger charges for |
• |
|
• | Maximum rates in pesos.Our tariffs for the services we provide to international flights or international passengers are denominated in U.S. dollars, but are generally invoiced and paid in Mexican pesos based on the average exchange rate for the month prior to each flight. During |
In accordance with the new NIF B-10,Effects of Inflation, we ceased recognizing the effects of inflation in our financial statements for the fiscal year beginning January 1, 2008.
• | Non-aeronautical revenues.In addition, some of our non-aeronautical revenue contracts are denominated and invoiced in U.S. dollars; however, some of them are collected in Mexican pesos. Consequently, an appreciation of the peso against the U.S. dollar would cause declines in our revenues from these U.S. dollar-denominated contracts. |
Results of operations by subsidiary
The following table sets forth our results of operations for the years indicated for each of our principal airports and our other subsidiaries.
Results of Operations by Subsidiary
Subsidiary Operating Results | Subsidiary Operating Results | |||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | ||||||||||||||||
(millions of pesos, except percentages) | (thousands of pesos, except percentages) | |||||||||||||||||||
Guadalajara: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 930.1 | Ps. | 930.6 | Ps. | 884.7 | Ps. | 1,141,167 | Ps. | 1,221,886 | ||||||||||
Non-aeronautical services | 232.9 | 233.2 | 231.0 | 287,174 | 339,221 | |||||||||||||||
1,428,342 | 1,561,107 | |||||||||||||||||||
Improvements to concession assets | 189,794 | 132,211 | ||||||||||||||||||
Total revenues | 1,163.0 | 1,163.8 | 1,115.7 | 1,618,136 | 1,693,318 | |||||||||||||||
Operating costs | 538.8 | 588.5 | 579.4 | |||||||||||||||||
Total costs | 771,067 | 778,299 | ||||||||||||||||||
Costs of operations(4) | 298.1 | 345.0 | 321.3 | 367,965 | 405,500 | |||||||||||||||
Cost of improvements to concession | 189,794 | 132,211 | ||||||||||||||||||
Depreciation and amortization | 240.7 | 243.5 | 258.1 | 210,171 | 240,538 | |||||||||||||||
Other expense | 3,137 | 50 | ||||||||||||||||||
Income from operations | 624.2 | 575.3 | 536.2 | 847,069 | 915,019 | |||||||||||||||
Operating margin(1) | 53.7 | % | 49.4 | % | 48.1 | % | 52.35 | % | 54.04 | % | ||||||||||
Tijuana: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 424.3 | Ps. | 368.4 | Ps. | 334.8 | Ps. | 437,238 | Ps. | 486,674 | ||||||||||
Non-aeronautical services | 92,010 | 113,157 | ||||||||||||||||||
529,248 | 599,831 | |||||||||||||||||||
Improvements to concession assets | 157,310 | 49,762 | ||||||||||||||||||
Total revenues | 686,558 | 649,593 | ||||||||||||||||||
Total costs | 474,492 | 408,030 | ||||||||||||||||||
Costs of operations(4) | 200,089 | 227,948 | ||||||||||||||||||
Cost of improvements to concession | 157,310 | 49,762 | ||||||||||||||||||
Depreciation and amortization | 117,077 | 130,316 | ||||||||||||||||||
Other expense | 16 | 4 | ||||||||||||||||||
Income from operations | 212,066 | 241,563 | ||||||||||||||||||
Operating margin(1) | 30.89 | % | 37.19 | % | ||||||||||||||||
Los Cabos: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 485,138 | Ps. | 543,341 | ||||||||||||||||
Non-aeronautical services | 191,352 | 268,588 | ||||||||||||||||||
676,490 | 811,929 | |||||||||||||||||||
Improvements to concession assets | 366,186 | 173,878 | ||||||||||||||||||
Total revenues | 1,042,676 | 985,807 | ||||||||||||||||||
Total costs | 637,479 | 498,479 | ||||||||||||||||||
Costs of operations(4) | 177,637 | 209,106 | ||||||||||||||||||
Cost of improvements to concession | 366,186 | 173,878 | ||||||||||||||||||
Depreciation and amortization | 93,048 | 115,384 | ||||||||||||||||||
Other expense | 608 | 111 | ||||||||||||||||||
Income from operations | 405,197 | 487,328 | ||||||||||||||||||
Operating margin(1) | 38.86 | % | 49.43 | % |
Subsidiary Operating Results | Subsidiary Operating Results | |||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | ||||||||||||||||
(millions of pesos, except percentages) | (thousands of pesos, except percentages) | |||||||||||||||||||
Non-aeronautical services | 53.5 | 96.8 | 87.9 | |||||||||||||||||
Total revenues | 477.8 | 465.2 | 422.7 | |||||||||||||||||
Operating costs | 304.9 | 322.5 | 321.6 | |||||||||||||||||
Costs of operations(4) | 168.4 | 185.5 | 182.2 | |||||||||||||||||
Depreciation and amortization | 136.5 | 137.0 | 139.4 | |||||||||||||||||
Income from operations | 172.9 | 142.7 | 101.1 | |||||||||||||||||
Operating margin(1) | 36.2 | % | 30.7 | % | 23.9 | % | ||||||||||||||
Puerto Vallarta: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 418.0 | Ps. | 454.1 | Ps. | 387.4 | Ps. | 423,820 | Ps. | 451,560 | ||||||||||
Non-aeronautical services | 110.5 | 131.1 | 140.3 | 142,293 | 159,754 | |||||||||||||||
566,114 | 611,314 | |||||||||||||||||||
Improvements to concession assets | 207,288 | 88,139 | ||||||||||||||||||
Total revenues | 528.5 | 585.2 | 527.7 | 773,402 | 699,453 | |||||||||||||||
Operating costs | 245.7 | 285.4 | 270.0 | |||||||||||||||||
Total costs | 497,407 | 401,100 | ||||||||||||||||||
Costs of operations(4) | 144.1 | 175.3 | 155.3 | 175,741 | 194,550 | |||||||||||||||
Cost of improvements to concession | 207,288 | 88,139 | ||||||||||||||||||
Depreciation and amortization | 101.6 | 110.1 | 114.7 | 111,430 | 118,503 | |||||||||||||||
Income from operations | 282.8 | 299.8 | 257.7 | |||||||||||||||||
Operating margin(1) | 53.5 | % | 51.2 | % | 48.8 | % | ||||||||||||||
Los Cabos: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 403.6 | Ps. | 432.5 | Ps. | 398.0 | ||||||||||||||
Non-aeronautical services | 152.6 | 153.4 | 168.6 | |||||||||||||||||
Total revenues | 556.2 | 585.9 | 566.6 | |||||||||||||||||
Operating costs | 219.2 | 231.8 | 233.4 | |||||||||||||||||
Costs of operations(4) | 151.4 | 144.5 | 145.1 | |||||||||||||||||
Depreciation and amortization | 67.8 | 87.3 | 88.3 | |||||||||||||||||
Other expense (income) | 2,948 | (92 | ) | |||||||||||||||||
Income from operations | 337.0 | 354.1 | 333.2 | 275,995 | 298,353 | |||||||||||||||
Operating margin(1) | 60.6 | % | 60.4 | % | 58.8 | % | �� | 35.69 | % | 42.66 | % | |||||||||
Hermosillo: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 132.2 | Ps. | 132.3 | Ps. | 126.9 | Ps. | 149,920 | Ps. | 168,732 | ||||||||||
Non-aeronautical services | 24.1 | 24.2 | 25.0 | 26,034 | 31,790 | |||||||||||||||
175,954 | 200,522 | |||||||||||||||||||
Improvements to concession assets | 33,792 | 11,564 | ||||||||||||||||||
Total revenues | 156.3 | 156.5 | 151.9 | 209,746 | 212,086 | |||||||||||||||
Operating costs | 111.0 | 119.6 | 118.6 | |||||||||||||||||
Total costs | 146,517 | 143,766 | ||||||||||||||||||
Costs of operations(4) | 70.6 | 78.5 | 76.1 | 74,274 | 88,279 | |||||||||||||||
Cost of improvements to concession | 33,792 | 11,564 | ||||||||||||||||||
Depreciation and amortization | 40.4 | 41.1 | 42.5 | 38,453 | 43,364 | |||||||||||||||
Other (income) expense | (2 | ) | 559 | |||||||||||||||||
Income from operations | 45.3 | 36.9 | 33.3 | 63,229 | 68,320 | |||||||||||||||
Operating margin(1) | 29.0 | % | 23.6 | % | 21.9 | % | 30.15 | % | 32.21 | % | ||||||||||
Guanajuato: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 160.7 | Ps. | 144.8 | Ps. | 122.4 | Ps. | 135,946 | Ps. | 156,768 | ||||||||||
Non-aeronautical services | 31.4 | 32.9 | 26.3 | 31,053 | 34,987 | |||||||||||||||
166,999 | 191,755 | |||||||||||||||||||
Improvements to concession assets | 43,739 | 45,211 | ||||||||||||||||||
Total revenues | 192.1 | 177.7 | 148.7 | 210,738 | 236,966 | |||||||||||||||
Operating costs | 107.7 | 116.4 | 108.4 | |||||||||||||||||
Total costs | 152,526 | 162,998 | ||||||||||||||||||
Costs of operations(4) | 69.7 | 79.4 | 68.7 | 71,558 | 79,129 | |||||||||||||||
Cost of improvements to concession | 43,739 | 45,211 | ||||||||||||||||||
Depreciation and amortization | 38.0 | 37.0 | 39.7 | 37,153 | 38,835 | |||||||||||||||
Other expense (income) | 76 | (177 | ) | |||||||||||||||||
Income from operations | 84.4 | 61.3 | 40.3 | 58,212 | 73,968 | |||||||||||||||
Operating margin(1) | 44.0 | % | 34.5 | % | 27.1 | % | 27.62 | % | 31.21 | % | ||||||||||
Other Airport Subsidiaries(2): | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 344.0 | Ps. | 299.5 | Ps. | 283.0 | Ps. | 304,697 | Ps. | 337,021 | ||||||||||
Non-aeronautical services | 59.4 | 57.0 | 50.0 | 54,664 | 60,956 | |||||||||||||||
359,361 | 397,977 | |||||||||||||||||||
Improvements to concession assets | 38,119 | 69,468 | ||||||||||||||||||
Total revenues | 403.4 | 356.5 | 333.0 | 397,480 | 467,445 | |||||||||||||||
Operating costs | 365.1 | 391.3 | 364.5 | |||||||||||||||||
Total costs | 400,893 | 455,345 | ||||||||||||||||||
Costs of operations(4) | 239,790 | 258,167 | ||||||||||||||||||
Cost of improvements to concession | 38,119 | 69,468 | ||||||||||||||||||
Depreciation and amortization | 123,054 | 127,124 | ||||||||||||||||||
Other (income) expense | (70 | ) | 586 | |||||||||||||||||
(Loss) income from operations | (3,413 | ) | 12,100 | |||||||||||||||||
Operating margin(1) | (0.86 | )% | 2.59 | % | ||||||||||||||||
Other Subsidiaries(3): | ||||||||||||||||||||
Total costs | 22,333 | (16,852 | ) | |||||||||||||||||
Costs of operations(4) | 241.3 | 269.3 | 235.5 | 9,877 | (30,310 | ) | ||||||||||||||
Depreciation and amortization | 123.8 | 122.0 | 129.0 | 12,583 | 13,166 | |||||||||||||||
Income (loss) from operations | 38.3 | (34.8 | ) | (31.6 | ) | |||||||||||||||
Operating margin(1) | 9.5 | % | (9.8 | )% | (9.5 | )% | ||||||||||||||
Other (income) expense | (126 | ) | 292 | |||||||||||||||||
(Loss) income from operations | (22,335 | ) | 16,851 |
Subsidiary Operating Results | Subsidiary Operating Results | |||||||||||||||||||
Year ended December 31, | Year ended December 31, | |||||||||||||||||||
2007 | 2008 | 2009 | 2011 | 2012 | ||||||||||||||||
(millions of pesos, except percentages) | (thousands of pesos, except percentages) | |||||||||||||||||||
Other Subsidiaries(3): | ||||||||||||||||||||
Operating costs | Ps. | (0.5) | Ps. | (12.7 | ) | Ps. | (23.6 | ) | ||||||||||||
Costs of operations(4) | (5.8 | ) | (32.9 | ) | (40.7 | ) | ||||||||||||||
Depreciation and amortization | 5.3 | 20.2 | 17.1 | |||||||||||||||||
Income from operations | 0.5 | 12.7 | 23.6 | |||||||||||||||||
Total: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Aeronautical services | Ps. | 2,812.9 | Ps. | 2,762.2 | Ps. | 2,537.2 | Ps. | 3,077,927 | Ps. | 3,365,982 | ||||||||||
Non-aeronautical services | 664.4 | 728.6 | 729.0 | 824,580 | 1,008,452 | |||||||||||||||
3,902,507 | 4,374,434 | |||||||||||||||||||
Improvements to concession assets | 1,036,227 | 570,233 | ||||||||||||||||||
Total revenues | 3,477.3 | 3,490.8 | 3,266.2 | 4,938,734 | 4,944,667 | |||||||||||||||
Operating costs | 1,891.9 | 2,042.8 | 1,972.3 | |||||||||||||||||
Total costs | 3,102,714 | 2,831,165 | ||||||||||||||||||
Costs of operations(4) | 1,137.8 | 1,244.6 | 1,143.5 | 1,316,931 | 1,432,369 | |||||||||||||||
Cost of improvements to concession | 1,036,227 | 570,233 | ||||||||||||||||||
Depreciation and amortization | 754.1 | 798.2 | 828.8 | 742,969 | 827,230 | |||||||||||||||
Other expense | 6,587 | 1,333 | ||||||||||||||||||
Income from operations | 1,585.4 | 1,448.0 | 1,293.9 | 1,836,020 | 2,113,502 | |||||||||||||||
Operating margin(1) | 45.6 | % | 41.5 | % | 39.6 | % | ||||||||||||||
Operating margin(1) | 37.2 | % | 42.7 | % |
(1) | We determine operating margin per airport by dividing income from operations at each airport or group of airports by total revenues for that airport or group of airports. |
(2) | Reflects the results of operations of our |
(3) | Other subsidiaries data reflects the results of operations of our administrative, operating and car parking services providers. |
(4) | Cost of operations includes cost of services, technical assistance fees and concession taxes. |
Historically, our most profitable airports have been our Guadalajara, Los Cabos Guadalajara and Puerto Vallarta international airports, which handle the majority of our international passengers. We determine profitability per airport by dividing income from operations at each airport by total revenues for that airport. Operating margins at our Tijuana International Airport historically have been lower than at our other principal airports because the maximum rates applicable to aeronautical services provided at our Tijuana International Airport are lower than those applicable to our other principal airports. This is because the amortization of our concession relative to the level of revenues is much higher at our Tijuana International Airport than at our other principal airports because the original concession value assigned to the Tijuana International Airport was proportionately higher.
Summary Historical Results of Operations
The following table sets forth a summary of our consolidated results of operations for the years indicated.
Summary Consolidated Operating Results | ||||||||||||||||||||||||||||||
Year ended December 31, | Summary Consolidated Operating Results | |||||||||||||||||||||||||||||
2007 | 2008 | 2009 | Year ended December 31, | |||||||||||||||||||||||||||
Amount | Amount | % change | Amount | % change | 2011 | 2012 | ||||||||||||||||||||||||
(thousands of pesos, except percentages) | Amount | Amount | % change | |||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||
Aeronautical services | Ps. | 2,812,869 | Ps. | 2,762,198 | (1.8 | )% | Ps. | 2,537,262 | (8.1 | )% | Ps. | 3,077,927 | Ps. | 3,365,982 | 9.4 | % | ||||||||||||||
Non-aeronautical services | 664,455 | 728,587 | 9.7 | 728,978 | 0.1 | 824,580 | 1,008,452 | 22.3 | ||||||||||||||||||||||
3,902,507 | 4,374,434 | 12.1 | ||||||||||||||||||||||||||||
Improvements to concession assets | 1,036,227 | 570,233 | (45.0 | ) | ||||||||||||||||||||||||||
Total revenues | 3,477,324 | 3,490,785 | 0.4 | 3,266,240 | (6.4 | ) | 4,938,734 | 4,944,677 | 0.1 | |||||||||||||||||||||
Operating costs: | ||||||||||||||||||||||||||||||
Cost of services | 839,119 | 952,729 | 13.5 | 869,315 | (8.8 | ) | 986,938 | 1,060,002 | 7.4 | |||||||||||||||||||||
Technical assistance fees | 125,857 | 118,226 | (6.1 | ) | 111,721 | (5.5 | ) | 136,191 | 155,072 | 13.9 | ||||||||||||||||||||
Concession taxes | 172,846 | 173,533 | 0.4 | 162,507 | (6.4 | ) | 193,802 | 217,295 | 12.1 | |||||||||||||||||||||
Depreciation and amortization | 754,097 | 798,251 | 5.9 | 828,835 | 3.8 | 742,969 | 827,230 | 11.3 | ||||||||||||||||||||||
Total operating costs | 1,891,919 | 2,042,739 | 8.0 | 1,972,378 | (3.4 | ) | ||||||||||||||||||||||||
Other expense | 6,587 | 1,333 | (79.8 | ) | ||||||||||||||||||||||||||
Cost of improvements to concession assets | 1,036,227 | 570,233 | (45.0 | ) | ||||||||||||||||||||||||||
Total costs | 3,102,714 | 2,831,165 | (8.8 | ) | ||||||||||||||||||||||||||
Income from operations | 1,585,405 | 1,448,046 | (8.7 | ) | 1,293,862 | (10.6 | ) | 1,836,020 | 2,113,502 | 15.1 | ||||||||||||||||||||
Net comprehensive financing income: | ||||||||||||||||||||||||||||||
Finance (cost) income | ||||||||||||||||||||||||||||||
Interest income, net | 152,806 | 105,553 | (30.9 | ) | 109,779 | 4.0 | 14,692 | 759 | (94.8 | ) | ||||||||||||||||||||
Exchange (loss) gain, net | (2,078 | ) | 92,402 | (4,546.7 | ) | (26,149 | ) | (128.3 | ) | |||||||||||||||||||||
Monetary position loss | (59,117 | ) | 0 | (100.0 | ) | 0 | 0.0 | |||||||||||||||||||||||
Gain (loss) from embedded derivatives | 5,732 | 16,923 | 195.2 | (25,421 | ) | (250.2 | ) | |||||||||||||||||||||||
Net comprehensive financing income | 97,343 | 214,878 | 120.7 | 58,209 | (72.9 | ) | ||||||||||||||||||||||||
Other (expense) income | (2,352 | ) | 7,543 | (420.7 | ) | (11,710 | ) | (255.2 | ) | |||||||||||||||||||||
Exchange gain (loss), net | 22,626 | (14,782 | ) | (165.3 | ) | |||||||||||||||||||||||||
Net finance (cost) income | 37,318 | (14,023 | ) | (137.6 | ) | |||||||||||||||||||||||||
Income before income taxes | 1,680,396 | 1,670,467 | (0.6 | ) | 1,340,361 | (19.8 | ) | 1,873,338 | 2,099,479 | 12.1 | ||||||||||||||||||||
Income tax expense | 277,577 | 129,625 | (53.3 | ) | 140,917 | 8.7 | (261,758 | ) | (327,449 | ) | 25.1 | |||||||||||||||||||
Consolidated net income | 1,402,819 | 1,540,842 | 9.8 | 1,199,444 | (22.2 | ) | 1,611,580 | 1,772,030 | 10.0 | |||||||||||||||||||||
Other operating data (unaudited): | ||||||||||||||||||||||||||||||
Operating margin(1) | 45.6 | % | 41.5 | % | 39.6 | % | 37.2 | % | 42.7 | % | ||||||||||||||||||||
Net margin(2) | 40.3 | % | 44.1 | % | 36.7 | % | 32.6 | % | 35.8 | % |
(1) | Income from operations divided by total revenues, expressed as a percentage. |
(2) | Net income divided by total revenues, expressed as a percentage. |
Results of operations for the year ended December 31, 20092012 compared to the year ended December 31, 20082011
Revenues
Total revenues for 2009 decreased 6.4%2012 increased 0.1%, from Ps. 3,490.84,938.7 million in 20082011 to Ps. 3,266.24,944.7 million in 2009. This decrease was mainly2012, due to a decreasean increase of Ps. 288.0 million in aeronautical services revenues, whilean increase of Ps. 183.9 million in non-aeronautical services revenues. This was partially offset by a Ps. 466.0 million decrease in revenues remained stable.from improvements to concession assets as a result of the committed investments outlined in our Master Development Programs, which for 2012 were less than the corresponding amounts in 2011.
Aeronautical services revenues decreased 8.1%increased 9.4%, from Ps. 2,762.23,077.9 million in 20082011 to Ps. 2,537.33,365.9 million in 2009. This decrease was partially2012, primarily due to a 5.3% increase in passenger traffic compared to 2011, a 0.9% increase in the suspensionMexican Producer Price Index excluding petroleum and a 5.5% increase in specific tariffs as of operationsJune 2012. Revenues from passenger charges increased 10.4% or Ps. 266.4 million primarily driven by Aerocalifornia, Avolar, Aladia and Almaa 5.4% increase in July, August, October and November 2008, respectively,passengers that paid passenger charges and the suspensionincrease in specific tariffs as of operations of Aviacsa in July 2009. From the beginning of 2008 until the date in which Aerocalifornia, Avolar, Alma ceased operations, these airlines represented 6.1%, 5.1% and 3.8%, respectively, of our total traffic and represented 4.0%, 3.3%, 2.4%, respectively, of the total revenues. From the beginning of 2009 until the date in which Aviacsa ceased operations, it represented 3.6% of our total traffic and 1.4% of the total revenues. In addition, there was a temporary suspension of routes and a reduction in the frequency of certain flights caused by the global economic crisis and the health alert issued in April 2009 for the A/H1N1 virus, which resulted in a 7.4% (Ps. 167.1 million) decrease in passenger charges (as a consequence of a 13.3% reduction in terminal passenger traffic). RevenuesJune 2012. During 2012, revenues from aircraft landing and parking fees declined 4.6%increased 7.5%, or Ps. 12.522.8 million, while the leasing of spaces to airlines for ticket counter spacesand back office space and complementary services to airlines declined 14.6%decreased 2.0%, or Ps. 22.63.2 million. The reduction in passenger charges was proportionally lower than the reduction in passenger traffic due to the fact that fees for airport usage increased in 2009 compared to 2008. In addition, Los Cabos International Airport (which has the second-highest of our maximum tariffs) and the Guadalajara International Airport reported lower declines in passenger traffic than those reported at the other two airports with the highest traffic in the Company (Tijuana and Puerto Vallarta).
Non-aeronautical services revenues for 20092012 increased Ps. 0.4183.9 million, or 0.1%22.3%, from Ps. 728.6824.6 million in 20082011 to Ps. 729.01,008.5 million in 2009. Although2012. The primary factor influencing the change in non-aeronautical revenues from 2011 to 2012 was a combined Ps. 118.3 million increase in our duty-free operations, recovery of costs revenues, car parking and advertising revenues. The increase in duty-free operations revenue was mainly due to the opening of the new Terminal 2 in the Los Cabos airport, where a new duty-free contract was entered into, which included a one-time payment of Ps. 26.6 million (which under the contract cannot be returned to the tenant under any circumstances) as well as higher rents than those paid by the previous tenant. The increase in recovery of cost revenues is related to the operation of the baggage screening systems which began in the fourth quarter of 2011. The increase in car parking is due to the increase in total non-aeronautical revenues was minor, there were significant changespassenger traffic as well as the new parking fee structure implemented at the beginning of 2012. The increase in advertising is the compositionresult of non-aeronautical revenues. Revenues from the leasingfact that since May 2011 we have been directly operating the advertising at all of time-share sales spaces, rental car services, financial services and theour airports. Additionally, during 2012, our leasing of space to local retailers increasedtime share developers, food and beverages, car rentals and VIP lounges (lounges operated directly by us) contributed a combined increase of Ps. 33.149.2 million mostlyas compared to 2011.
Revenues from improvements to concession assets in 2012 decreased Ps. 466.0 million, or 45.0%, from Ps. 1,036.2 million in 2011 to Ps. 570.2 million in 2012. The main factor that determines the change in revenues from improvements to concession assets from 2011 to 2012 was a decrease in our commitments under the Master Development Programs for 2012, mainly due to the fact that rental amounts are updated for inflation on an annual basis, while revenues from car parking, advertisingcompletion of construction of: (i) the new terminal at the Los Cabos airport, (ii) the expansion of the main terminal at the Tijuana airport, (iii) the construction of the overhanging cover at the Guadalajara airport and (iv) the royalties from commercial spaces decreased Ps. 30.9 million. This decrease is due toexpansion of the fact that revenues from car parking and royalties from commercial spaces are directly correlated to
passenger traffic, and passenger traffic decreased in 2009. Additionally advertising revenues decreased due to reduced rental rates which had been renegotiated when renewing contracts.satellite building at the Puerto Vallarta airport.
Revenues by Airport
Total revenues at each of our airports increased, mainly due to the increase in aeronautical services revenues.
At the Guadalajara airport, revenues decreasedincreased by 4.1%4.6% or Ps. 75.2 million, from Ps. 1,163.81,618.1 million in 20082011 to Ps. 1,115.71,693.3 million in 2009.2012. Aeronautical revenues decreased by 4.9%increased 7.1% or Ps. 80.7 million, from Ps. 930.61,141.2 million in 20082011 to Ps. 884.71,221.9 million in 20092012, due to a Ps. 81.1 million or 7.1% increase in passenger charges caused by a 3.3% increase in passenger traffic and a 5.5% increase in tariffs due to inflation. Non-aeronautical revenues, at the Guadalajara airport, due to a 10.3% decrease in passenger traffic during the same period. Non-aeronautical revenues decreased at the Guadalajara airport by 0.9%increased 18.1% or Ps. 52.0 million, from Ps. 233.2287.2 million in 20082011 to Ps. 231.0339.2 million in 2009,2012, due principally to a decreasean increase of Ps. 44.2 million in car parking, revenuesadvertising, VIP lounges, recovery of costs and the decrease in passenger traffic.other commercial revenues. The decreaseincrease was partially offset by an increasea Ps. 57.6 million decrease in the revenues of commercial leasingfrom improvements to concession assets (revenues increased 9.3% taking into account only revenues from aeronautical and rental car services.non-aeronautical services).
At the Tijuana airport, revenues decreased by 9.1%5.4% or Ps. 37.0, from Ps. 465.2686.6 million in 20082011 to Ps. 422.7649.6 million in 2009.2012, mainly due to a Ps. 107.5 million decrease in revenues from improvements to concession assets (revenues increased 13.3% taking into account only revenues from aeronautical and non-aeronautical services). Aeronautical revenues decreasedincreased by 9.1%11.3% or Ps. 49.4 million, from Ps. 368.4437.2 million in 20082011 to Ps. 334.8486.7 million in 20092012 at the Tijuana airport, due to a 14.1% decreasean increase in passenger traffic during the same period.charges of Ps. 45.4 million. Non-aeronautical revenues decreasedincreased at the Tijuana airport by 9.2%23.0% or Ps. 21.2 million, from Ps. 96.892.0 million in 20082011 to Ps. 87.9113.2 million in 2009,2012, principally due principallyto a Ps. 16.5 million increase in revenues from car parking, recovery of costs and advertising.
At the Los Cabos airport, revenues decreased by 5.5% or Ps. 56.9 million, from Ps. 1,042.7 million in 2011 to Ps. 985.8 million in 2012, mainly due to a decrease of Ps. 192.3 million in car parking revenues from improvements to concession assets (revenues increased 20.0% taking into account only revenues from aeronautical and non-aeronautical services). Aeronautical revenues increased by 12.0% or Ps. 58.2 million, from Ps. 485.1 million in 2011 to Ps. 543.3 million in 2012 at the Los Cabos airport, due to lowera 7.5% increase in passenger traffic.and the 5.5% increase in tariffs due to inflation. Non-aeronautical revenues increased at the Los Cabos airport by 40.4% or Ps. 77.2 million, from Ps. 191.4 million in 2011 to Ps. 268.6 million in 2012, mainly due to a Ps. 58.1 million increase in revenues from duty-free operations, recovery of costs and leasing of spaces to time-share developers.
At the Puerto Vallarta airport, revenues decreased by 9.8%9.6% or Ps. 73.9 million, from Ps. 585.2773.4 million in 20082011 to Ps. 527.7699.5 million in 2009, largely2012, mainly due to a decrease of Ps. 119.1 million in passenger traffic, partly offsetrevenues from improvements to concession assets (revenues increased by an increase in8.0% taking into account only revenues from aeronautical and non-aeronautical revenues.services). Aeronautical revenues decreasedincreased by 14.7%6.6% or Ps. 27.8 million, from Ps. 454.1423.8 million in 20082011 to Ps. 387.4451.6 million in 20092012 at the Puerto Vallarta airport, due to a 19.4% decrease2.4% increase in passenger traffic during the same period.and a 5.5% increase in tariffs due to inflation. Non-aeronautical revenues increased at the Puerto Vallarta airport by 7.0%12.3% or Ps. 17.5 million, from Ps. 131.1142.3 million in 20082011 to Ps. 140.3159.8 million in 2009,2012, due principally to an increasea Ps. 10.7 million increases in recovery of costs, revenues from rental car services, time-share developersduty-free operations and other commercial revenues.
At the Los Cabos airport, revenues decreased by 3.3% from Ps. 585.9 million in 2008 to Ps. 566.6 million in 2009, largely due to the decrease in aeronautical revenues, partly offset by an increase in non-aeronautical revenues. Aeronautical revenues decreased by 8.0% from Ps. 432.5 million in 2008 to Ps. 398.0 million in 2009 at the Los Cabos airport, due to a 12.3% decrease in passenger traffic during the same period. Non-aeronautical revenues increased at the Los Cabos airport by 9.9% from Ps. 153.4 million in 2008 to Ps. 168.6 million in 2009, due principally to an increase in the revenues from rental car services and time-share services.advertising.
At the Hermosillo airport, revenues decreasedincreased by 3.0%1.1% or Ps. 2.4 million, from Ps. 156.5209.7 million in 20082011 to Ps. 151.9212.1 million in 2009, largely2012 primarily due to the decrease in passenger traffic, partly offset by the increase in non-aeronautical revenues. Aeronautical revenues decreased by 4.1% from Ps. 132.3 million in 2008 to Ps. 126.9 million in 2009 at the Hermosillo airport, due to an 8.6% decrease in passenger traffic during the same period. Non-aeronautical revenues increased at the Hermosillo airport by 3.1% from Ps. 24.2 million in 2008 to Ps. 25.0 million in 2009, due principally to an increase in theaeronautical revenues resulting from a 7.3% increase in passenger traffic and a 5.5% increase in tariffs related to inflation (revenues increased 14.0% taking into account only revenues from foodaeronautical and beverage services.non-aeronautical services). Aeronautical revenues increased by 12.5% or Ps. 18.8 million, from Ps. 149.9 million in 2011 to Ps. 168.7 million in 2012 at the Hermosillo airport. Non-aeronautical revenues increased by 22.1% or Ps. 5.8 million, from Ps. 26.0 million in 2011 to Ps. 31.8 million in 2012, due to a Ps. 3.5 million increase in revenues from car parking, advertising and car rentals. The increase in aeronautical and non-aeronautical revenues was partially offset by a decrease of Ps. 22.2 million in revenues from improvements to concession assets in 2012 as compared to 2011.
At the Guanajuato airport, revenues decreasedincreased by 16.3%12.4% or Ps. 26.3 million, from Ps. 177.7210.7 million in 20082011 to Ps. 148.7237.0 million in 2009.2012, mainly due to an increase of Ps. 20.8 million in aeronautical revenues (revenues increased 14.8% taking into account only revenues from aeronautical and non-aeronautical services). Aeronautical revenues decreasedincreased by 15.5%15.3% from Ps. 144.8135.9 million in 20082011 to Ps. 122.4156.8 million in 20092012 at the Guanajuato airport, mainly due to a 19.6% decreasean 11.3% increase in passenger traffic during the same period.and a 5.5% increase in tariffs related to inflation. Non-aeronautical revenues decreasedincreased at the Guanajuato airport by 20.1%12.7% or Ps. 3.9 million, from Ps. 32.931.1 million in 20082011 to Ps. 26.335.0 million in 2009,2012, due principallyprimarily to a decreasePs. 3.9 million increase in revenues from car parking, revenuesrecovery of costs and advertising. Revenues from improvements to concession assets increased 3.4% or Ps. 1.5 million from Ps. 43.7 million in part due2011 to lower passenger traffic.Ps. 45.2 million in 2012.
Revenues at our other 6 airports decreasedincreased by 6.6%17.6% or Ps. 69.9 million, on an aggregate basis from Ps. 356.5397.5 million in 20082011 to Ps. 333.0467.4 million in 2009,2012, largely due to a decreasePs. 32.3 million increase in passenger traffic.aeronautical revenues (revenues increased 10.7% taking into account only revenues from aeronautical and non-aeronautical services). Aeronautical revenues at these airports decreasedincreased by 5.5%10.6% or Ps. 32.3 million, from Ps. 299.5304.7 million in 20082011 to Ps. 283.0337.0 million in 2009,2012, mainly due to a 13.7% decrease6.1% increase in passenger traffic during the same period.and a 5.5% increase in tariffs due to inflation. Non-aeronautical revenues decreasedincreased by 12.3%11.5% or Ps. 6.3 million, from Ps. 57.054.7 million in 20082011 to Ps. 50.061.0 million in 2009,2012, due principallyprimarily to a decreasePs. 6.4 million increase in passenger traffic.revenues from car parking, advertising, recovery of costs, and other commercial revenues. Revenues from improvements to concession assets increased 82.2% or Ps. 31.4 million from Ps. 38.1 million in 2011 to Ps. 69.5 million in 2012.
OperatingTotal Costs
Cost of Services
Cost of services, which is comprised of employee costs, maintenance, safety, security, insurance, utilities and other expenses, decreasedincreased by Ps. 83.473.1 million, or 8.8%7.4%, from Ps. 952.8986.9 million in 20082011 to Ps. 869.3 million1.0 billion in 2009. Of the total decrease, 35.7% was mainly due to a Ps. 29.8 million smaller provision for doubtful accounts recognized in 2009 compared to the Ps. 45.3 million provision made in 2008, which related to doubtful payments from certain airlines that suspended operations at our airports during 2008. Service costs, such as utilities cost, declined 19.9%2012. Safety, security and insurance expenses increased 21.5%, or Ps. 22.528.2 million, mainly asdue to the outsourcing of certain of our check-point staff, the increase in implementation of additional security measures required by airport authorities related to checking for liquids carried by boarding passengers and outsourcing to a result of energy saving efforts implemented inthird party to operate the second half of 2008, and all of 2009, as well as a reduction in electricity fees during 2009.new baggage screening system equipment at our airports. Employee costs declined 7.6%increased 5.4%, or Ps. 27.820.8 million, mainly due to severance payments of Ps. 14.4 million related to the personnel responsible for operating our airbuses and walkways, because beginning on November 1, 2012 we outsourced the entire operation to a third party, which assumed full responsibility. In addition, increases in salaries, annual incentives, labor union fees and other employee costs together amounted to Ps. 18.37.0 million. Maintenance expenses increased 11.4% or Ps. 20.6 million reductionmainly due to routine maintenance on runways, security equipment, machinery and equipment, in wagesaddition to major maintenance undertaken in certain operational areas. Utility expenses increased 14.2%, or Ps. 17.4 million, mainly due to an increase in electricity rates and salarieshigher consumption of electricity as a result of the corporate restructuring that took place duringexpansion of our terminals, the last quarteroperation of 2008, as well as certain cost-cutting measures taken by usnew baggage screening system equipment, in 2009, in addition to Ps. 10.4 million in compensation associatedpart related with the corporate restructuring that affected costs in 2008, but not in 2009. Maintenance costs increased 8.3%, or Ps. 13.8 million, principally due to an increase in the costfulfillment of maintaining the baggage claim areas, the Common Use Terminal Equipment (CUTE) system, security equipment and walkways.our Master Developments Programs during 2012.
The main airports that contributed to the decreaseincrease in the cost of services for the year ended December 31, 20092012 were Guadalajara (cost of services decreased 6.9%increased 9.7%, to Ps. 272.7 million in 2012 from Ps. 345.0248.5 million toin 2011, as a result of an increase in advertising commissions of Ps. 321.34.9 million, an increase in the provision for doubtful accounts of Ps. 4.0 million and an increase in security and insurance Ps. 7.2 million), Puerto VallartaLos Cabos (cost of services decreased 11.4%increased 17.6%, to Ps. 149.4 million in 2012 from Ps. 175.3127.1 million in 2011, as a result of the increase in electricity consumption due to Ps. 155.3 million), Guanajuato (costthe operation of services decreased 13.5%new Terminal building), from Ps. 79.4 million to Ps. 68.7 million) and Tijuana (cost of services decreased 1.8%increased 14.1%, to Ps. 169.4 million in 2012 from Ps. 185.5148.5 million toin 2011, as a result of increases in security costs of Ps. 182.25.9 million, maintenance expenses of Ps. 5.3 million, the provision for doubtful accounts of Ps. 4.4 million and an increase in electricity consumption of Ps. 3.0 million).
Technical Assistance Fee and Concession Tax
The technical assistance fee decreased 5.6%increased 13.9%, or Ps. 18.9 million, from Ps. 118.2136.2 million in 20082011 to Ps. 111.7155.1 million in 2009.2012. This decreaseincrease was mainly due to a decrease in operating income, principally resulting from a decreasean increase in our revenuesconsolidated income from operations, which is used to calculate this fee. See “Item 4, Information on the Company – History and costDevelopment of services.the Company – Investment by AMP”.
As a result of decreasedincreased revenues (excluding revenues from improvements to concession assets as they do not form part of income for purposes of the government concession tax), government concession taxes decreased by 6.4%increased 12.1%, from Ps. 173.5193.8 million in 20082011 to Ps. 162.5217.3 million in 2009.2012.
Depreciation and Amortization
Depreciation and amortization increased 3.8%,11.3% or Ps. 84.2 million, from Ps. 798.2743.0 million in 20082011 to Ps. 828.8827.2 million in 2009,2012, mainly due to the increasegrowth in infrastructure resulting from our infrastructure to fulfill the master development programsfulfillment of our Master Development Programs and our commitment to provide better services to our clients. The amortization of concessions did not fluctuate materially.
Cost of improvements to concession assets
Cost of improvements to concession assets in 2012 decreased Ps. 466.0 million, or 45.0%, from Ps. 1.0 billion in 2011 to Ps. 570.2 million in 2012. The primary factor influencing the decrease in cost of improvements to concession assets from 2011 to 2012 was the change in amounts allocated in our Master Development Programs for 2012 as compared to 2011.
Operating Costs by Airport
Operating costs at most of our airports decreased, mainly due to the 45.0% decrease in the cost of improvements to concession assets described above.
Operating costs for the Guadalajara airport were Ps. 579.4778.3 million in 2009,2012, a 1.5% decrease0.9% or Ps. 7.2 million increased from the Ps. 588.5771.1 million recorded in 2008,2011. This increase was primarily asdue to a result14.4% or Ps. 30.4 million increase in depreciation and amortization, from Ps. 210.2 million in 2011 to Ps. 240.5 million in 2012. Additionally the cost of maintenance, security, professional services and utilities increased 34.4% or Ps. 16.6 million. The increase in operating costs was partially offset by a smaller provision for doubtful accounts recognized during 2009.Ps. 57.6 million decrease in the cost of improvements to concession assets from Ps. 189.8 million in 2011 to Ps. 132.2 million in 2012 (operating costs increased 11.2% or Ps. 64.8 million, without including improvements to concession assets).
Operating costs for the Tijuana airport decreased only slightlyPs. 66.5 million or 14.0%, to Ps. 321.6408.0 million in 20092012 from the Ps. 322.5474.5 million recorded in 2008.2011. This decrease was due to a 68.4% or Ps. 107.5 million decrease in the cost of improvements to concession assets from Ps. 157.3 million in 2011 to Ps. 49.8 million in 2012. The decrease was partially offset by a Ps. 20.9 million increase in the cost of services and a Ps. 13.2 million increase in depreciation and amortization (operating costs increased 13.0% or Ps. 41.1 million, without including improvements to concession assets).
Operating costs for the Los Cabos airport decreased 21.8% or Ps. 139.0 million, to Ps. 498.5 million in 2012 from the Ps. 637.5 million recorded in 2011. This decrease was mainly due to a 52.5% or Ps. 192.3 million decrease in the cost of improvements to concession assets from Ps. 366.2 million in 2011 to Ps. 173.9 million in 2012. This decrease was partially offset by a Ps. 22.3 million increase in the cost of services and a Ps. 22.3 million increase in depreciation and amortization (operating costs increased 19.6% or Ps. 53.3 million without including improvements to concession assets).
Operating costs for the Puerto Vallarta airport were Ps. 270.0401.1 million in 2009,2012, a 5.4%19.4% or Ps. 96.3 million decrease from the Ps. 285.4497.4 million recorded in 2008,2011. This decrease was primarily asdue to a result of several factors including a reduction57.5% or Ps. 119.2 million decrease in the cost of employees asimprovements to concession assets from Ps. 207.3 million in 2011 to Ps. 88.1 million in 2012. The decrease was partially offset by a result of the corporate restructuring that took place during the last quarter of 2008, a reductionPs. 14.0 million increase in the cost of electricity asservices and a resultPs. 7.1 million increase in depreciation and amortization (operating costs increased 7.9% or Ps. 22.8 million without including of energy saving efforts as well as a smaller provision for doubtful accounts recognized during 2009.
Operating costs for the Los Cabos airport increased only slightlyimprovements to Ps. 233.4 million in 2009 from the Ps. 231.8 million recorded in 2008.concession assets).
Operating costs for the Hermosillo airport decreased only slightly1.8% or Ps. 2.7 million, to Ps. 118.6143.8 million in 20092012 from the Ps. 119.6146.5 million recorded in 2008.2011. This decrease was due to a 65.7% or Ps. 22.2 million decrease in the cost of improvements to concession assets from Ps. 33.8 million in 2011 to Ps. 11.6 million in 2012. This decrease was partially offset by a Ps. 11.7 million increase in the cost of services and a Ps. 4.9 million increase in depreciation and amortization (operating costs increased 17.3% or Ps. 19.5 million without including improvements to concession assets).
Operating costs for the Guanajuato airport wereincreased 6.9% or Ps. 108.410.5 million, in 2009, a 6.9% decrease from the Ps. 116.4152.5 million recorded in 2008,2011 to Ps. 163.0 million in 2012. This increase was primarily asdue to a result of several factors including a reduction3.4% or Ps. 1.5 million increase in the cost of employees as a resultimprovements to concession assets from Ps. 43.7 million in 2011 to Ps. 45.2 million in 2012. Additionally the cost of the corporate restructuring that took place during the last quarter of 2008services increased Ps. 5.4 million and a smaller provision for doubtful accounts recognized during 2009.depreciation and amortization increased Ps. 1.7 million (operating costs increased 8.3% or Ps. 9.0 million without including improvements to concession assets).
Operating costs for our 6 other airports wereincreased 13.6% or Ps. 364.554.4 million, in 2009, a 6.8% decrease from the Ps. 391.3400.9 million recorded in 2008,2011 to Ps. 455.3 million in 2012. This increase was primarily asdue to a result of several factors including a reduction82.2% or Ps. 31.3 million increase in the cost of employees as a result of the corporate restructuring that took place during the last quarter of 2008, a reductionimprovements to concession assets from Ps. 38.1 million in 2011 to Ps. 69.5 million in 2012 (operating costs increased 6.4% or Ps. 23.1 million without including improvements to concession assets). Additionally, the cost of electricity as a result of energy saving efforts, a reduction in rental fees related to the CUTE systemservices increased Ps. 14.3 million and a smaller provision for doubtful accounts recognized during 2009.depreciation and amortization increased Ps. 4.1 million.
Income from Operations
Operating income decreased 10.6%increased 15.1%, or Ps. 277.5 million, from Ps. 1,448.0 million1.8 billion in 20082011 to Ps. 1,293.9 million2.1 billion in 2009.2012. This decreaseincrease was primarily due to a decreasehigher revenue in passenger traffic2012, which was partially offset by a reductionincreases in several cost items.expenses. Our operating margin decreased 190increased 557 basis points, from 41.5%37.2% in 20082011 to 39.6%42.7% in 2009, mainly due2012 (taking into account only the sum of aeronautical and non-aeronautical revenues, the operating margin increased 130 basis points from 47.0% to a proportionately larger decrease48.3% in our revenues when compared to the decrease in operating expenses.2012).
Income from Operations by Airport
Operating margin is calculated by dividing income from operations at each airport by total revenues for that airport.
Operating income for the Guadalajara airport decreasedincreased by 6.8%8.0% or Ps. 67.9 million, from Ps. 847.1 million in 2011 to Ps. 536.2915.0 million in 2009 from Ps. 575.3 million in 2008, primarily2012, mainly due to a decreasean increase in passenger trafficaeronautical and non-aeronautical revenues of Ps. 132.8 million. This increase was partially offset by a reductionan increase in several cost items.the costs of operations of Ps. 37.5 million and an increase in depreciation and amortization of Ps. 30.4 million. The operating margin decreased 130increased 169 basis points, from 49.4%52.3% to 48.1%54.0% (operating margin decreased 69 basis points from 59.3% to 58.6%, taking into account the sum of aeronautical and non-aeronautical revenues only).
Operating income for the Tijuana airport decreasedincreased by 29.2% to Ps.101.113.9% or Ps. 29.5 million, from Ps. 212.1 million in 2009 from2011 to Ps. 142.7241.6 million in 2008,2012, primarily due to a decreaseslightly greater increase in aeronautical and non-aeronautical revenues as a result of an increase in passenger traffic partially offset by a reductionthen the corresponding increase in several cost items.operating costs. The operating margin decreased 680increased 630 basis points from 30.7%30.9% to 23.9%37.2% (operating margin increased 20 basis points to 40.1% from 40.3%, taking into account the sum of aeronautical and non-aeronautical revenues only).
Operating income for the Puerto Vallarta airport decreasedincreased by 14.0%8.1% or Ps. 22.4 million, from Ps. 276.0 million in 2011 to Ps. 257.7298.4 million in 2009 from Ps. 299.8 million in 2008,2012, primarily due to a decreaseslightly greater increase in the aeronautical and non-aeronautical revenues as a result of the increase in passenger traffic partially offset by a reductionthen the corresponding increase in several cost items.operating costs. The operating margin decreased 240increased 697 basis points from 51.2%35.7% to 48.8%42.7% (operating margin increased 5 basis points to 48.75% from 48.80%, taking into account the sum of aeronautical and non-aeronautical revenues only).
Operating income for the Los Cabos airport decreasedincreased by 5.9%20.3% or Ps. 82.1 million, from Ps. 405.2 million in 2011 to Ps. 333.2487.3 million in 2009 from Ps. 354.1 million in 2008,2012, primarily due to a decreasean increase in passenger traffic.the aeronautical and non-aeronautical revenues. The operating margin decreased 160increased 1,057 basis points from 60.4%38.9% to 58.8%49.4% (operating margin increased 12 basis points to 59.9% from 60.0%, taking into account the sum of aeronautical and non-aeronautical revenues only).
Operating income for the Hermosillo airport decreasedincreased by 9.8%8.1% or Ps. 5.1 million, from Ps. 63.2 million in 2011 to Ps. 33.368.3 million in 2009 from Ps.36.9 million in 2008,2012, primarily due to a decreasean increase in passenger traffic partially offset by a reduction in several cost items.the aeronautical and non-aeronautical revenues. The operating margin decreased 170increased 207 basis points from 23.6%30.1% to 21.9%32.2% (operating margin decreased 186 basis points from 35.9% to 34.1%, taking into account the sum of aeronautical and non-aeronautical revenues only).
Operating income for the Guanajuato airport decreasedincreased by 34.3%27.1% or Ps. 15.8 million, from Ps. 58.2 million in 2011 to Ps. 40.374.0 million in 2009 from Ps. 61.3 million in 2008,2012, primarily due to a decreasean increase in passenger traffic partially offset by a reduction in several cost items.the aeronautical and non-aeronautical revenues. The operating margin decreased 740increased 359 basis points from 34.5%27.6% to 27.1%31.2% (operating margin increased 372 basis points from 34.9% to 38.6% taking into account the sum of aeronautical and non-aeronautical revenues only).
Loss from operationsOperating income for our 6 other airports decreasedincreased by 9.2%454.5% or Ps. 15.5 million, to a gain of Ps. 12.1 million in 2012 from a loss of Ps. 3.4 million in 2011. The change in operating income was primarily due to a higher percentage increase in the sum of aeronautical and non-aeronautical revenues as compared to our fixed costs.
Finance income (cost)
The finance income (cost) experienced a negative variation of Ps. 51.3 million in 2012 with respect to 2011, from an income of Ps. 37.3 million in 2011 to an expense of Ps. 14.0 million in 2012. This decrease was mainly due to the impact of exchange rate variations, which went from a gain of Ps. 22.6 million in 2011 to a loss of Ps. 31.614.8 million in 2009 from2012, resulting in a lossnegative impact of Ps. 34.837.4 million. This decline occurred due to the 13.1% devaluation of the Mexican peso versus the U.S. dollar during 2011, while during 2012, the Mexican peso appreciated 6.9%; additionally, the Company held a larger dollar position. Furthermore, interest income declined from Ps. 14.7 million in 2008. The decrease2011 to Ps. 0.8 million in the loss was primarily2012, due to a proportionally higherdecline in interest capitalization for qualifying assets as a result of a decrease in the cost of services thancommitted investments in revenues.
Comprehensive Financing Result
Net comprehensive financing income in 2009 decreased by Ps. 156.7 million, or 72.9%, to Ps. 58.2 million2012 compared to Ps. 214.9 million in 2008. This decrease resulted mainly from an exchange loss of Ps. 26.1 million in 2009, compared to an exchange gain of Ps. 92.4 million during 2008. During the fourth quarter of 2009, the peso appreciated against the U.S. dollar by 4.1% compared to fourth quarter of 2008. Given our net monetary asset position in U.S. dollars and this appreciation of the peso, the peso value of our net monetary assets denominated in U.S. dollars decreased in 2009, thereby causing an exchange loss in 2009. In addition, we had a loss in embedded derivates of Ps 25.4 million in 2009 compared with a gain of Ps. 16.9 million in 2008, given the appreciation of the Mexican peso.These decreases were offset by the increase of Ps. 4.2 million in net interest income.2011.
Income Taxes and Asset Tax
Income taxes for 2009 resulted in a expense of2012 were Ps. 140.9327.4 million, which principally consisted of the following: (a)(i) current income tax expense for the year of Ps. 370.4551.8 million; it was partially offset with deferred income tax derived from the concession value, other assets and tax loss carryforwards of Ps. 208.2 million and (b)(ii) an increase in the valuation allowance for therecoverable asset tax recovery of Ps. 16.616.1 million, stemming from revised financial projections at certain of our airports, both offset by a deferred income tax benefit of Ps. 246.1 million. Theairports. Our effective tax rate for the Company increased from 8%14% for 20082011 to 11%16% in 20092012. As compared with 2011, income taxes increased Ps. 65.7 million, from Ps. 261.8 million in 2011 to Ps. 327.4 million in 2012. Additionally, current income tax increased Ps. 71.2 million from 2011 to 2012 mainly due to the inflationary effects recognized only for the tax basis of our assets and liabilities and no longer for the accounting values of our assets and liabilities. Although overall income tax expense increased from 2008 driven by the foregoing factors, current income tax decreased Ps. 71.8 million from 2008 to 2009 mainly due to the 19.8% decrease12.1% increase in income before taxes.
Net Income
Net income decreasedincreased by 10.0% or Ps. 341.4160.4 million, from Ps. 1.6 billion in 2011 to Ps. 1.8 billion in 2012, mainly due to the decreasePs. 277.5 million increase in operating income, of Ps. 154.2 million, coupled with a decrease in comprehensive financing income of Ps. 156.7 million and increase in income tax expense of Ps. 11.3 million. The Company’s net income decreased 22.2%, from Ps. 1,540.8 million in 2008 to Ps. 1,199.4 million in 2009. Net margin decreased from 44.1% in 2008 to 36.7% in 2009, due to the aforementioned factors.
Results of operations for the year ended December 31, 2008 compared to the year ended December 31, 2007
Revenues
Total revenues for 2008 increased 0.4%, from Ps. 3,477.3 million in 2007 to Ps. 3,490.8 million in 2008. This increase was mainly due to a 9.7% increase in non-aeronautical services revenues offset by a 1.8% decrease in aeronautical services revenues.
Aeronautical services revenues decreased 1.8%, from Ps. 2,812.9 million in 2007 to Ps. 2,762.2 million in 2008. This decrease was due primarily to decreased revenues from passenger charges, which decreased Ps. 60.8 million, driven by a 5.6% decrease in total passenger traffic (representing 119.9% of the decrease in aeronautical services revenues, contributing a 450.4% decrease in total revenues). However, this decrease was partially offset by the increase of Ps. 22.351.3 million negative variation in revenues from airplane landing and parking fees, an increase of 8.9% compared to 2007. This was the result of the different mix of incentives offered in 2008 when compared to 2007 to all airlines to attract new routes and frequencies to and from our airports. As a result of the aforementioned and according to the concession agreements for the recognition of the effect of inflation and the application of the efficiency factor, both under the maximum tariff, aeronautical revenues per workload unit increased from Ps. 111.7 in 2007 to Ps. 116.5 in 2008.
Non-aeronautical services revenues for 2008 increased Ps. 64.1 million, or 9.7% compared to 2007. This increase is mainly attributable to revenues derived from car parking services, which rose by Ps. 26.6 million, mainly due to the recovery of the parking facility in our Tijuana International airport that occurred in January 2008, revenues from advertising, which increased Ps. 9.2 million, revenues from the leasing of commercial spaces, which increased Ps. 7.2 million, revenues from the leasing of spaces to food and beverage vendors, which increased by Ps. 6.6 million, revenues from the leasing of spaces to duty-free stores, which increased by Ps. 5.6 million and revenues from the leasing of spaces to car rentals, which increased Ps. 4.6 million. Overall revenue from non-aeronautical services per passenger during 2008 was Ps. 32.7, compared to Ps. 28.2 in 2007, an increase of 16.0%finance income (cost).
Revenues by Airport
At the Guadalajara airport, revenues increased from Ps. 1,163.0 million in 2007 to Ps. 1,163.8 million in 2008. Aeronautical revenues increased modestly from Ps. 930.1 million in 2007 to Ps. 930.6 million in 2008 at the Guadalajara airport. Non-aeronautical revenues increased at the Guadalajara airport from Ps. 232.9 million in 2007 to Ps. 233.2 million in 2008.
At the Tijuana airport, revenues decreased by 2.6% from Ps. 477.8 million in 2007 to Ps. 465.2 million in 2008. Aeronautical revenues decreased by 13.2% from Ps. 424.3 million in 2007 to Ps. 368.4 million in 2008 at the Tijuana airport, largely due to a 16.3% decrease in passenger traffic during the same period. Non-aeronautical revenues increased at Tijuana airport by 80.9% from Ps. 53.5 million in 2007 to Ps.96.8 million in 2008, largely due to the operation of car parking facilities beginning in 2008.
At the Puerto Vallarta airport, revenues increased by 10.7% from Ps. 528.5 million in 2007 to Ps. 585.2 million in 2008. Aeronautical revenues increased by 8.6% from Ps. 418.0 million in 2007 to Ps. 454.1 million in 2008 at the Puerto Vallarta airport, largely due to a 4.5% increase in passenger traffic during the same period. Non-aeronautical revenues increased at Puerto Vallarta airport by 18.6% from Ps. 110.5 million in 2007 to Ps.131.1 million in 2008, largely due to the increase in revenues of duty free, food and beverage services and retail operations.
At the Los Cabos airport, revenues increased by 5.3% from Ps. 556.2 million in 2007 to Ps. 585.9 million in 2008. Aeronautical revenues increased by 7.2% from Ps. 403.6 million in 2007 to Ps. 432.5 million in 2008 at the Los Cabos airport, largely due to a 3.0% increase in passenger traffic during the same period. Non-aeronautical revenues increased slightly at Los Cabos airport from Ps. 152.6 million in 2007 to Ps. 153.4 million in 2008.
At the Hermosillo airport, revenues increased from Ps. 156.3 million in 2007 to Ps. 156.5 million in 2008. Aeronautical revenues increased slightly from Ps. 132.2 million in 2007 to Ps. 132.3 million in 2008 at the Hermosillo airport. Non-aeronautical revenues increased slightly at the Hermosillo airport from Ps. 24.1 million in 2007 to Ps. 24.2 million in 2008.
At the Guanajuato airport, revenues decreased by 7.5% from Ps. 192.1 million in 2007 to Ps. 177.7 million in 2008. Aeronautical revenues decreased by 9.9% from Ps. 160.7 million in 2007 to Ps. 144.8 million in 2008 at the Guanajuato airport, largely due to a 13.4% decrease in passenger traffic during the same period. Non-aeronautical revenues increased at Guanajuato airport by 4.8% from Ps. 31.4 million in 2007 to Ps. 32.9 million in 2008.
Revenues at our other 6 airports decreased by 11.6% from Ps. 403.4 million in 2007 to Ps. 356.5 million in 2008 at these airports. Aeronautical revenues at these airports decreased by 12.9% from Ps. 344.0 million in 2007 to Ps. 299.5 million in 2008, due to 14.4% decrease in passenger traffic during the same period. Non-aeronautical revenues decreased by 4% from Ps. 59.4 million in 2007 to Ps. 57.0 million in 2008.
Operating Costs
Cost of Services
Cost of services for 2008 increased by Ps. 113.6 million, or 13.5%, from Ps. 839.1 million in 2007 to Ps. 952.7 million in 2008. Of the total increase, 39.9% was due to a Ps. 45.3 million reserve for doubtful accounts relating to several airlines that discontinued operations in 2008 due to insolvency or suspension by the regulatory authorities. Prior to 2008, the last airline to suspend or discontinue operations in Mexico was Allegro in 2003. See “Item 4,Business Overview—Our Airports—Changes in Principal Airlines Operating at our Airports.” The increase in cost of services was also due to a Ps. 23.2 million increase in the cost of airport maintenance (mainly in terminal, runway and parking facilities), increased utilities costs of Ps. 22.8 million, an increase in wages and salaries by approximately Ps. 15.8 million resulting primarily from a personnel restructuring and an increase in provisions for labor obligations and personnel benefits of Ps. 5.2 million.
Technical Assistance Fee and Concession Tax
The technical assistance fee decreased 6.1%, from Ps. 125.9 million in 2007 to Ps. 118.2 million in 2008. This decrease was mainly due to a decrease in operating income, principally resulting from a Ps. 45.3 million increase in the reserve for doubtful accounts discussed in costs of services above. The decrease in the technical assistance fee was also due to the fact that operating costs and expenses grew in a greater proportion than total revenues in 2008.
As a result of increased revenues, government concession taxes increased by 0.4%, from Ps. 172.8 million in 2007 to Ps. 173.5 million in 2008.
Depreciation and Amortization
Depreciation and amortization increased 5.9%, from Ps. 754.1 million in 2007 to Ps. 798.2 million in 2008, mainly due to the increase in our infrastructure to fulfill the master development programs and our commitment to provide better services to our clients. The amortization of the concessions did not fluctuate materially.
Operating Costs by Airport
Operating costs for the Guadalajara airport were Ps. 588.5 million in 2008, a 9.2% increase from the Ps. 538.8 million recorded in 2007, primarily as a result of an increase in the provisions in the reserve of doubtful accounts during 2008 due to the discontinuation of operations by several airlines and a personnel restructuring cost in 2008.
Operating costs for the Tijuana airport were Ps. 322.5 million in 2008, a 5.8% increase from the Ps. 304.9 million recorded in 2007, primarily as a result of an increase in the provisions in the reserve of doubtful accounts during 2008 due to the discontinuation of operations by several airlines.
Operating costs for the Puerto Vallarta airport were Ps. 285.4 million in 2008, a 16.2% increase from the Ps. 245.7 million recorded in 2007, primarily as a result of an increase in the provisions in the reserve of doubtful accounts during 2008 due to the discontinuation of operations by several airlines, an increase in maintenance costs and an increase in the cost of electricity.
Operating costs for the Los Cabos airport were Ps. 231.8 million in 2008, a 5.7% increase from the Ps. 219.2 million recorded in 2007, primarily as a result of an increase in the provisions in the reserve of doubtful accounts during 2008 due to the discontinuation of operations by several airlines, an increase in maintenance costs and an increase in depreciation and amortization given significant improvements undertaken at this airport.
Operating costs for the Hermosillo airport were Ps. 119.6 million in 2008, a 7.7% increase from the Ps. 111.0 million recorded in 2007, primarily as a result of an increase in the provisions in the reserve of doubtful accounts during 2008 due to the discontinuation of operations by several airlines and an increase in maintenance costs.
Operating costs for the Guanajuato airport were Ps. 116.4 million in 2008, an 8.1% increase from the Ps. 107.7 million recorded in 2007, primarily as a result of an increase in the provisions in the reserve of doubtful accounts during 2008 due to the discontinuation of operations by several airlines and an increase in maintenance costs.
Operating costs for our 6 other airports were Ps. 391.3 million in 2008, a 7.2% increase from the Ps. 365.1 million recorded in 2007, primarily as a result of an increase in the provisions in the reserve of doubtful accounts during 2008 due to the discontinuation of operations by several airlines.
Income from Operations
Operating income decreased 8.7%, from Ps. 1,585.4 million in 2007 to Ps. 1,448.0 million in 2008. This decrease was primarily due to increases in our operating cost. Our operating margin decreased 410 basis points, from 45.6% in 2007 to 41.5% in 2008, mainly due to the proportionately larger increase in operating expenses when compared to the increase in revenues.
Income from Operations by Airport
Operating income for the Guadalajara airport decreased by 7.8% to Ps. 575.3 million in 2008 from Ps. 624.2 million in 2007, primarily due to increases in our cost of services compared to relatively stable revenues. The operating margin decreased 430 basis points, from 53.7% to 49.4%.
Operating income for the Tijuana airport decreased by 17.5% to Ps. 142.7 million in 2008 from Ps. 172.9 million in 2007, due to a decrease in our revenues and an increase in the costs of operation. The operating margin decreased 550 basis points, from 36.2% to 30.7%.
Operating income for the Puerto Vallarta airport increased by 6.0% to Ps. 299.8 million in 2008 from Ps. 282.8 million in 2007, primarily due to an increase in our revenues. The operating margin decreased 230 basis points, from 53.5% to 51.2% due to a proportionately larger increase in operating costs.
Operating income for the Los Cabos airport increased by 5.1% to Ps. 354.1 million in 2008 from Ps. 337.0 million in 2007, primarily due to an increase in our revenues. The operating margin decreased 20 basis points, from 60.6% to 60.4%, given the proportionately higher operating costs as compared to the increase in revenue, as a result of significant improvements made at this airport.
Operating income for the Hermosillo airport decreased by 18.5% to Ps. 36.9 million in 2008 from Ps. 45.3 million in 2007, primarily due to an increase in our costs of operation compared to relatively stable revenues. The operating margin decreased 540 basis points, from 29.0% to 23.6%.
Operating income for the Guanajuato airport decreased by 27.4% to Ps. 61.3 million in 2008 from Ps. 84.4 million in 2007, primarily due to a decrease in our revenues and an increase in the costs of operation. The operating margin decreased 950 basis points, from 44.0% to 34.5%.
Operating results for our 6 other airports decreased by 190.9% to a loss from operations of Ps. 34.8 million in 2008 from operating income of Ps. 38.3 million in 2007, primarily due to a decrease in our revenues and an increase in the costs of operation.
Comprehensive Financing Result
Comprehensive financing income in 2008 increased by Ps. 117.6 million, or 120.7%, reaching an income of Ps. 214.9 million compared to the Ps. 97.3 million reported in 2007. This increase resulted mainly from an exchange gain of Ps. 92.4 million in 2008, compared to an exchange loss of Ps. 2.1 million during the same period in 2007, due to a net monetary asset position in dollars of U.S.$28.2 million at the end of 2008, combined with a depreciation of 26.7% of the peso against the dollar in the last quarter of 2008. In addition, NIF B-10, which no longer permits the recognition of inflation, resulted in the Company not recognizing the effect on its monetary position for 2008, while in 2007 the Company had a monetary loss of Ps. 59.1 million.These benefits were offset by the decrease of Ps. 47.2 million in net interest income.
Income Taxes and Asset Tax
Income taxes for 2008 resulted in a expense of Ps. 129.6 million, which consists of the following: (a) current income tax expense for the year of Ps. 439.4 million, (b) an increase in the valuation allowance for the asset tax recovery of Ps. 79.1 million, stemming from revised financial projections at certain of our airports and (c) cancellation of recoverable income tax of Ps. 8.5 million, all offset by a deferred income tax benefit of Ps. 397.4 million. The effective tax rate for the Company decreased from 17% for 2007 to 8% in 2008 mainly due to inflationary effects recognized only for the tax basis of our assets and liabilities and no longer for the accounting values of our assets and liabilities. The income tax decrease of Ps. 147.9 million was mainly driven by the aforementioned factors, as well as the 0.6% decrease in income before taxes.
Net Income
Net income increased Ps. 138.0 million, mainly due to the increase in comprehensive financing income of Ps. 117.6 million and a significant decrease in income tax expense of Ps. 148.0 million, offset by a decrease of Ps. 137.4 million in operating income. The Company’s net income increased 9.8%, from Ps. 1,402.8 million in 2007 to Ps. 1,540.8 million in 2008. Net margin increased from 40.3%32.6% in 20072011 to 44.1%35.8% in 2008, due2012 (net margin decreased to 40.5% from 41.3%, taking into account the aforementioned factors.sum of aeronautical and non-aeronautical revenues only).
Liquidity and Capital Resources
Historically, our operations had been funded through cash flow from operations, and we did not incur any significant indebtedness until 2007. The cash flow generated from our operations has generally been used to fund operating costs and capital expenditures, including expenditures under our master development programs,Master Development Programs, and the excess of our cash flow has been added to our accumulated cash balances. In addition, in 2007, 20082011 and 2009,2012, we used Ps. 1,171.6 million, Ps. 1,122.0 million1.0 billion and Ps. 1,200.0 million,1.1 billion, respectively, of our cash balances for the payment of dividends.
At December 31, 2007, 20082011 and 2009,2012, we had Ps. 1,426.7 million, Ps. 1,506.0 million2.1 billion and Ps. 1,821.2 million1.7 billion of cash and cash equivalents, and Ps. 239.4 million, Ps. 275.2278.3 million and Ps. 279.6433.6 million of financial investments held for trading purposes, respectively; additionally we had cash equivalents designated for expenditure held in trust for Ps. 352.4 million as of December 31, 2009.respectively. These increases in 20092012 were due in part to new funds from a bank loan of Ps. 413.8601.3 million, which is expected to be used for capital expenditures in 2010.2012. We believe our working capital and resources expected to be generated from operations, in conjunction with the proceeds from theour credit agreement described below,agreements, will continue to meet our present operating requirements.
Cash Flows
In 2009,2012, we generated Ps. 2,212.4 million2.7 billion from operating activities, principally reflecting income from operations after taking into consideration non-cash chargesthe effect of our non-monetary assets, such as depreciation and amortization. Income generated from operations was mainly used to makemake: i) dividend payments of Ps. 870.0847.5 million on May 25, 200931, 2012 and Ps. 330.0282.5 million on November 3, 20091, 2012, ii) a capital reduction of Ps. 870.0 million, and to investiii) capital expenditures of approximately Ps. 542.1 million in machinery, equipment and improvements to our airport facilities.
In 2008, we generated Ps. 1,614.6 million from operating activities, principally reflecting income from operations discussed above after taking into consideration non-cash charges such as depreciation, amortization and deferred income tax. Income generated from operations was mainly used to make a dividend payment of Ps. 864.0 million on May 12, 2008 and Ps. 258.0 on October 31, 2008, as well as to invest approximately Ps. 522.0193.3 million in machinery, equipment and improvements to our airport facilities.
In 2007,2011, we generated Ps. 2,020.2 million2.3 billion from operating activities, principally reflecting income from operations discussed above after taking into consideration non-cash chargesthe effect of our non-monetary assets, such as depreciation amortization and deferred income tax.amortization. Income generated from operations was mainly used to make amake: i) dividend paymentpayments of Ps. 837.7780.0 million on May 18, 200731, 2011 and Ps. 333.9255.1 million on October 31, 2007, as well as to investNovember 29, 2011, ii) capital expenditures of approximately Ps. 931.6238.8 million in machinery, equipment and improvements to our airport facilities.facilities, and iii) a repurchase of Ps. 777.5 million in shares.
Indebtedness
We entered into an unsecured peso-denominated credit agreement with Banamex on August 31, 2007, which provides financing in an amount of Ps. 1,214.0 million, which we have been using to fund capital expenditures at our Los Cabos, Puerto Vallarta, Hermosillo and Guanajuato international airports. This amount was disbursed in three separate tranches as follows: (i) Ps. 600.0 million which was disbursed on September 7, 2007, (ii) Ps. 344.0 million which was disbursed on January 30, 2008, and (iii) Ps. 270.0 million which was disbursed on January 30, 2009.
On September 7, 2007, January 30, 2008 and January 30, 2009, loans were disbursed in three tranches as follows: Los Cabos International Airport borrowed Ps. 330.0 million, Ps. 273.0 million and Ps. 202.0 million, Puerto Vallarta International Airport borrowed Ps. 193.0 million, Ps. 26.0 million and Ps. 8.0 million, Hermosillo International Airport borrowed Ps. 44.0 million, Ps. 17.0 million and Ps 41.0 million, and Guanajuato International Airport borrowed Ps. 33.0 million, Ps. 28.0 million and Ps. 19.0 million. The loans mature in seven years from the date of the borrowing and bear a fixed interest rate of 8.52% on unpaid balances. Interest payments and amortization of principal are required to be made in 28 consecutive quarterly payments. We have been paying the amortization of principal and interest on each maturity date on each tranche. We have to comply with the following covenants, among others: (i) limitation on the use of proceeds for the financing of capital expenditures and working capital, (ii) restriction on the incurrence of other debt by any subsidiary, (iii) prohibition on the merger of our Company (or any of its subsidiaries) with any other company, (iv) prohibition on the sale or transfer of assets in an amount greater than Ps. 1.0 million, without previous authorization from Banamex, (v) maintenance of certain financial ratios and (vi) prohibition of dividends if the airports are unable to fulfill their obligations under the credit agreement.
On December 9, 2009, our Guanajuato, Guadalajara, Hermosillo and Puerto Vallarta and San José del Cabo airports entered into unsecured credit agreements with cross guarantees provided by the individual airports with Banamex and HSBC for Ps. 325.7 million from each institution, for a total of Ps. 651.4 million. The loans accrue interest at a variable 91-day TIIE rate plus 350 basis points, with principal and interest to be paid quarterly for a period of seven years. The loans will be disbursed in two tranches and the proceeds will be used to pay for committed investments. We expect to allocate the total amount of the loans among our airports as follows: Ps. 343.1 million to Guadalajara International Airport, Ps. 168.5 million to Puerto Vallarta International Airport, Ps. 76.0 million to Guanajuato International Airport and Ps. 63.8 million to Hermosillo International Airport. Under these contracts with both banks, the airports have to comply with the following covenants, among others: (i) limitation on the use of proceeds for the financing of capital expenditures and working capital, (ii) do not constitute, assume or permit that any obligation exist on any of its goods (iii) restrictions on the incurrence of other debt by any subsidiary of each airport receiving a disbursements, if any, (iv) prohibition on the merger of our Companythe airport receiving the disbursement (or any of its subsidiaries) with any other company, (v) prohibition on the sale or transfer of assets from each airport receiving a disbursement in an amount greater than Ps. 1.0 million, unless the sale occurs in the regular course of business, (vi) maintenance of certain financial ratios and (vii) prohibition of dividends or reimbursement of capital if the airports are unable to fulfill their obligations under the credit agreement.
In December 2009, the first tranche was disbursed to Guadalajara International Airport (Ps. 97.0 million), Guanajuato International Airport (Ps. 27.0 million) and Hermosillo International Airport (Ps. 19.8 million). The second tranche was disbursed on February 3, 2010 to Guadalajara International Airport (Ps. 246.1 million), Guanajuato International Airport (Ps. 49.0 million), Hermosillo International Airport (Ps. 44.1 million) and Puerto Vallarta International Airport (Ps. 168.5 million).
In connection with thesethe loans entered into on December 9, 2009, each of those airports entered into a cash flow hedge with Banamex to hedge interest rate risk, which sets a ceiling of 7% on the TIIE, stipulated in the loan agreements (representing the strike price of the hedge), which when added to the 350 basis points established in the loan agreements and the related hedge agreement, results in an effective maximum interest rate of 10.50%. The effective date of the hedge begins in the fourth year of the related debt agreement and extends to the end of the term of the debt. This hedge applies to both loans issued by Banamex and HSBC.
The fair value of our hedging derivative financial instrument was an asset of Ps. 13.64.5 million as of December 31, 2009.2011 and of Ps. 1.0 million as of December 31, 2012.
On February 7, 2009, ourMay 26, 2011, we entered into an additional line of credit for the issuanceGuadalajara, Puerto Vallarta, Los Cabos, Hermosillo and Guanajuato airports, to finance working capital and capital investments previously committed pursuant to our Master Development Programs at these airports for the years 2011 and 2012, for a total amount of lettersPs. 1.0 billion with HSBC, represented by unsecured credit agreements with cross guarantees provided by the individual airports. The loans bear interest at the variable 28-day TIIE rate plus 165 basis points and require quarterly principal and interest payments over a period of seven years. During 2011 and 2012 a total of Ps. 913.1 million was disbursed under the line of credit, the remaining Ps. 110.8 million will be disbursed during 2013.
On June 6, 2011, we entered into an additional line of credit for the Guadalajara, Puerto Vallarta, Los Cabos, Hermosillo and Guanajuato airports, to finance working capital and capital investments previously committed pursuant to our Master Development Programs at these airports for the years 2011 and 2012, for a total amount of Ps. 551.4 million with Banamex, represented by unsecured credit agreements with cross guarantees provided by the individual airports. The loans bear interest at the variable 91-day TIIE rate plus 135 basis points for the 2011 disbursements and at the variable 91-day TIIE rate plus 143 basis points for the 2012 disbursements. The loan requires quarterly principal and interest payments over a period of seven years from the date of the disbursement. Ps. 355.1 million in connectionfunds from this line were disbursed on different dates during 2011. The remaining Ps. 196.3 million was to be disbursed during 2012. However, on March 16, 2012, Banamex notified the Guadalajara, Puerto Vallarta, Los Cabos, Hermosillo and Guanajuato airports that based on article 294 of Mexico’s Negotiable Instruments and Credit Operations Law (Ley General de Títulos y Operaciones de Crédito) and pursuant to clause XXIV of the credit agreement entered into with these airports, Banamex would not make any future disbursements outlined in clause V of the credit agreement. On November 7, 2012, the Company notified Banamex that the remaining balance of the loan would be prepaid. Ps. 77.9 million of the remaining balance was prepaid on December 7, 2012 and Ps. 105.3 million was prepaid on December 23, 2012. A final payment was made on January 11, 2013 for Ps.104.6 million, for a Tijuana tax claimtotal of Ps. 287.8 million; thereby repaying the loan balance in full. With these payments credit loans will be completely liquidated. This prepayment was cancelled.financed by a new loan from BBVA Bancomer for a line of credit for the Guadalajara, Los Cabos, Puerto Vallarta, Hermosillo and Guanajuato airports for Ps. 287.8 million, which was contracted on November 23, 2012 and which bears interest at the variable 91-day TIIE rate plus 120 basis points at quarterly principal and interest payments for a period of seven years. This is an unsecured credit agreement with crossed guarantees between the airports receiving the credit. As of December 31, 2012, we were in compliance with all covenants stipulated by these credit agreements.
Capital Expenditures
Under the terms of our concessions, each of our subsidiary concession holders is required to present a master development programMaster Development Program for approval by the Ministry of Communications and Transportation every five years. Each master development programMaster Development Program includes investment commitments (including capital expenditures and improvements) applicable to us as concession holder for the succeeding five-year period. Once approved by the Ministry of Communications and Transportation, these commitments become binding obligations under the terms of our concessions.
In December 2009, the Ministry of Communications and Transportation approved our master development programsMaster Development Programs for each of our airports for the 2010 to 2014 period. This 5-year program will be in effect from January 1, 2010 until December 31, 2014.
The following table below sets forth our historical capital expenditures. Capital expenditures are calculated on a cash flow basis, meaning that capital expenditures are equal to those investments actually paid for by each airport during a given year and not including investments allocated for by the airport during that year but not paid for during the given year. The investments shown in the table below therefore reflect our expenditures actually paid for by our airports for the years indicated. In order to be compared with our committed investments for a given year, the investments made in the previous year but paid for in the given year need to be subtracted while the investments allocated but not paid for in the given year need to be added. For the 2011 and 2012, the total of our investments allocated but unpaid were Ps. 276.4 million and Ps. 163.6 million respectively.
Capital Expenditures
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Year ended December 31, | (thousands of pesos) (1) | |||
2012 | Ps. | 979,014 | ||
2011 | 1,255,036 |
(1) |
Expressed in nominal pesos. |
In 2009,2012, we spent Ps. 542.1979.0 million on capital expenditures, principally for terminals, and runways and aprons. In 2008,2011, we spent Ps. 521.9 million1.3 billion on capital expenditures, principally for terminals, equipment for the inspection of checked baggage, runways and aprons. In 2007,On December 15, 2011, we spent Ps. 931.6 million on capital expenditures, principallyestablished two trusts to set aside the financing needs for the expansion of terminals.the main terminal at our Tijuana airport and for the new Terminal 2 at our Los Cabos airport, respectively. The funds set aside in these trusts will be used exclusively to make payments from work on each of the projects and are available for immediate use. See “Item 4.4,History and Development of the Company—Company – Master Development Programs”for more detail on our historical capital expenditures. We expect that our capital expenditures in 2010 will be approximately Ps. 553.9 million.
During 2007, 72.8%2011 and 2012, 38.1% and 19.7% respectively, of our capital expenditures were funded by cash flows from operations, while the balance was funded with bank loans. Meanwhile, during 2008 and 2009, 27.3% and 26.6% respectively, of our capital expenditures were funded by cash flows from operations, while theremaining balance was funded with bank loans. We currently intend to fund the investments and working capital required by our business strategy through cash flowflows from operations and from the indebtedness described above.
Share Repurchase Program
At the General Ordinary Shareholders’ Meeting held on April 28, 2008,July 22-25, 2010, a stock buy-back program for Series B shares was approved under the Mexican Securities Law rules, for a maximum amount of Ps. 55 million for the period1.00 billion from April 28, 2008July 25, 2010 to April 27, 2009. The share repurchases began in July 2008 and ended in April 2009. At the General Ordinary Shareholders’ Meeting held on
April 28, 2009, a stock buy-back program for Series B2011. During that period we purchased 20,217,600 shares was approved under the Mexican Law rules, for a maximum amountat an average price of Ps. 864.6 million45.20 for the period from April 28, 2009 to April 27, 2010. During this period the Company did not repurchase anyPs. 913.8 million. These shares represent 3.6% of our total outstanding shares. At the General Ordinary Shareholders’ Meeting held on April 27, 2010, the2011, a stock buy-back program for Series B shares was approved for a maximum amount of Ps. 473.5 million for the twelve months following April 27, 2011. During that period we purchased 10,061,800 shares at an average price of Ps. 47.06 for Ps. 473.5 million. These shares represent 1.8% of our total outstanding shares. At the General Ordinary Shareholders’ Meeting held on April 16, 2012, a stock buy-back program for Series B shares was approved for repurchasea maximum amount of Ps. 280.0 million for the twelve months following April 16, 2012. No shares, or credit instruments that represent these shares was cancelled.however, were repurchased during 2012.
Critical Accounting Policies
We prepare our audited consolidated financial statements in conformity with MFRS. As such, we are required to make estimates, judgments and assumptions that affect (i) certain reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the date of the financial statements, (iii) recoverability of deferred tax assets as well as tax contingencies and (iv) certain reported amounts of revenues and expenses during the reporting period. IFRS.
We base our estimates and judgments on our historical experience, on technical merits for tax positions, on financial projections and on various other reasonable factors that together form the basis for making judgments about the carrying values of our assets and liabilities. Our actual results may differ from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Our significant accounting policies are described in Note 32.g to our audited consolidated financial statements.
We believe our most critical accounting policies that result in the application of estimates and/or judgments are the following:
Contingencies and Provisions
We are a party to a number of legal proceedings. Under generally accepted accounting principles,IFRS, liabilities are recognized in the financial statements when a loss is both estimable and probable. If the loss is neither probable nor estimable or if the likelihood of a loss is remote, no amounts are recognized in the financial statements.
Allowance for doubtful accounts
We systematically and periodically review the aging and collection of our accounts receivable and record an allowance for doubtful accounts when evidence exists that they will not be fully recoverable. We believe such risk is adequately covered by guarantee deposits in cash or other kind of guarantees by clients.
Income Taxes
In conformity with NIF D-4,Income Taxes, of MFRS,IFRS, we recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. At December 31, 2009,year-end for 2011 and 2012, we recorded, within the long-term deferred income tax asset, an estimated amount of recoverable asset tax paid (Ps. 345.0 million and Ps. 335.3 million, respectively), based on financial projections that show that we will recover the excess of asset tax over income tax relating to our Guanajuato, Guadalajara, Puerto Vallarta and Tijuana airports. As a result of changes in Mexican tax law, (See “Item 5—5,Operating and Financial Review and Prospects—Prospects – Taxation”), the asset tax balance may be recovered through rebates of up to 10% of the total asset tax paid out and pending recovery over the next ten years (starting in 2008), provided that this sum does not exceed the difference between the income tax paid during the period and the asset tax paid during the years 2007, 2006 and 2005, whichever is lower, whenever the income tax exceeds asset tax in any of those years. Additionally, we have recorded a tax loss carryforward, expiring on 2048 as permitted by the Mexican tax authorities for concession operation relating to our Aguascalientes and Morelia airports.airports and GAP itself, which has ten years to apply its tax loss. We regularly review our deferred tax assets for recoverability and, if necessary, establish a valuation allowance based on historical taxable income, projected future taxable
income and related income tax expense compared to future estimated asset tax and the expected timing of the reversals of existing temporary differences. If these estimates and related assumptions change in the future, we may be required to make additional adjustments to our deferred tax assets, which may result in a reduction of, or an increase in, income tax expense. Beginning October 2007, and according to Interpretation of Financial Reporting Standard 8,Effects of the Business Flat Tax, basedBased on our financial projections, from 2009-2012, we must determine whether we will incur regular income tax or the new Business Flat Tax, or IETU, and, accordingly, recognize deferred taxes based on that expectation. In 2011, we canceled the recoverable income taxes paid on dividends for a total amount of Ps. 0.6 million, as we did not believe we would recover that amount in future years. In 2012, we canceled the recoverable income taxes paid on dividends for a total amount of Ps. 0.2 million, as we do not believe we will recover that amount in future years. Every year we review the amount of income taxes paid on dividends according to our financial projections and determine the amount that could be recovered.
In accordance with the Income Tax Law of 2010,for 2012, income tax rate was 30% for 2011 and 2012. In 2012, the income tax rate applicable will be 30% for the years 2010 through 2012, 29%rates for 2013 and 2014 were modified, from 29% to 30% and from 28% from 2014 onwards.to 29%, respectively. The income tax rate will be 28% for 2015 and thereafter. Additionally, beginning in 2010, the IETU rate is 17.5%. We have recalculated our deferred tax assets and liabilities using the appropriate tax rates depending on when the tax differences triggering the deferred tax asset or liability will be reversed.
Impairment in the Value of Long-Lived Assets
We must test for impairment when indicators of potential impairment in the carrying amount of tangible and intangible long-lived assets in use exist, unless there is conclusive evidence that the indicators of impairment are temporary. An impairment is recorded when the carrying amount of long-lived assets exceeds the greater of the present value of future net cash flows provided by the assets or the net sales price upon disposal. Present value of future net cash flows is based on management’s projections of future operations, discounted using current interest rates. Our evaluations throughout the year and up to the date of this filing did not reveal any impairment of tangible and intangible long-lived assets. We can give no assurance that our evaluations will not change as a result of new information or developments which may change our future projections of net cash flows or the related discount rates and result in future impairment charges.
Principal Differences Between MFRSAccounting for the Concession
We believe we have carried out a comprehensive implementation of the standards applicable to the accounting treatment of our concession and U.S. GAAP
Our audited consolidated financial statementshave determined that, among others IFRIC 12 is applicable to us. We treat our investments related to improvements and upgrades to be performed in connection with our Master Development Programs under the intangible asset model established by IFRIC 12 and do not recognize a provision for maintenance, as all investments required by the Master Development Programs, regardless of their nature, directly increase the maximum tariff per traffic unit. Accordingly, all amounts invested under the Master Development Programs have a direct correlation to the amount of fees we will be able to charge each passenger or cargo service provider, and thus, a direct correlation to the amount of revenues we will be able to generate. As a result, we define all expenditures associated with investments required by the Master Development Programs as revenue generating activities given that they ultimately provide future benefits, whereby subsequent improvements and upgrades made to the concession are preparedrecognized as intangible assets based on the principles of IFRIC 12. Additionally, compliance with the committed investments per the Master Development Programs is mandatory, as well as the fulfillment of the maximum tariff and therefore, in accordance with MFRS, which differs in certain respects from U.S. GAAP. See Note 28case of a failure to our audited consolidated financial statements for a discussionmeet any one of these differencesobligations (Master Development Program amounts or maximum tariff), we could be subject to sanctions and our concessions could be revoked. See “Item 4, Regulatory Framework – General Obligations of Concession Holders”.
Depreciation and Amortization
In light of the nature of our business and our concessions, we make certain assumptions and professional judgments regarding recognition of depreciation and amortization of our tangible and intangible assets. Depreciation of our tangible assets is calculated under the straight-line method based on the useful lives of the related assets. The estimated useful life and the depreciation method are reviewed at the end of each year, and the effect of any changes in the estimate recorded is recognized on a prospective basis. To determine the amortization period of intangible assets, we focus either on the period over which they will generate future economic benefits or the concession term, whichever is less. We believe that the decisions made are the most reasonable based on information available, on the judgments made and the way in which we manage our resultoperations.
Recently Issues Accounting Standards
New or revised International Financial Reporting Standards:
Standard | Effective as of | |
IFRS 13Fair Value Measurement | January, 1, 2013 | |
Amendments to IFRS 7Disclosures — Offsetting Financial Assets and Financial Liabilities | January, 1, 2013 | |
Amendments to IFRSAnnual improvements to IFRS 2009-2011, except for the amendments to IAS 1 | January, 1, 2013 | |
Amendments to IAS 1Presentation of Concepts From Other Comprehensive Income | January, 1, 2013 | |
Amendments to IAS 32 Disclosures –Offsetting Financial Assets and Financial Liabilities | January, 1, 2014 | |
IFRS 9 Financial Instruments | January, 1, 2015 | |
Amendments to IFRS 9 and IFRS 7Mandatory effective date of IFRS 9 and Transition Disclosures | January, 1, 2015 |
Following is a summary of operations. Consolidated net incomethese standards; for a full description see Note 32 in our consolidated financial statements.
IFRS 13Fair Value Measurement– Establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements.
Amendments to the IFRS 7 Disclosures — Offsetting Financial Assets and Financial Liabilities– The amendment requires disclosure of information about recognized financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under U.S. GAAP was Ps. 1,756.8 million, Ps. 1,961.2 million and Ps. 1,476.4 millionIAS 32.
Amendments to IFRS Annual improvements to IFRS 2009-2011, except for the years endedamendments to IAS 1– The amendment makes amendments to several standards. Amendments are effective for annual periods beginning on or after January 1, 2013. The amendments include:
• | Amendments to IAS 16Property, Plant and Equipment – Clarifies the recognition of spare parts, stand-by equipment and servicing equipment in accordance with IAS 16 when they meet the definition of as property, plant and equipment. Otherwise, such items are classified as inventory. |
• | Amendments to IAS 32 Financial Instruments: Presentation – Clarify that tax effect of a distribution to holders of equity instruments should be accounted for in accordance with IAS 12Income Taxes. |
Amendments to IAS 1 Presentation of Concepts from Other Comprehensive Income – The amendment retains the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section.
Amendments to IAS 32 Disclosures – Offsetting Financial Assets and Financial Liabilities – The amendments clarify certain aspects because of diversity in application of the requirements on offsetting.
IFRS 9Financial Instruments – Issued in November 2009 introduces new requirements for the classification and measurement of financial assets. IFRS 9 amended in October 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.
Amendments to IFRS 9 and IFRS 7Mandatory effective date of IFRS 9 and Transition Disclosures – On December 31, 2007, 200816, 2011, the IASB issuedMandatory Effective Date and 2009, respectively.
The principal differences between MFRSTransition Disclosures (Amendments to IFRS 9 and U.S. GAAP as they relateIFRS 7), which amended the effective date of IFRS 9 to us are i)annual periods beginning on or after 1 January 2015, and modified the treatment of our investments in our concessionsrelief from restating comparative periods and the rights to use our airport facilities, ii) the recognition of the fair value of embedded derivatives, iii) the treatment of AMP’s portion of shares heldassociated disclosures in trust, which are forfeitable, iv) the treatment of employee postretirement benefits and v) the effects of these adjustments on deferred income taxes. Each of these differences affects both consolidated net income and shareholders’ equity.IFRS 7.
Off-balance Sheet Arrangements
We are not party to any off-balance sheet arrangements.
Tabular Disclosure of Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2009.2012.
Payments due by period | Payments due by period | |||||||||||||||||||||||||||||||||
Contractual Obligations | Total | Less than 1 year(4) | 1-3 years | 3-5 years | More than | Total | Less than 1 year(4) | 1-3 years | 3-5 years | More than 5 years | ||||||||||||||||||||||||
(in millions of pesos) | (in millions of pesos) | |||||||||||||||||||||||||||||||||
Master Development Programs(1)(5) | Ps. | 2,770.6 | Ps. | 553.9 | Ps. | 1,963.0 | Ps. | 253.7 | Ps.N/A | Ps. | 665.0 | Ps. | 411.3 | Ps. | 253.7 | Ps. | n/a | Ps. | n/a | |||||||||||||||
Purchase Obligations(2) | 380.8 | 72.0 | 230.0 | 78.8 | N/A | 115.5 | 57.1 | 58.4 | n/a | n/a | ||||||||||||||||||||||||
Bank Loans | 1,050.0 | 194.0 | 582.0 | 274.0 | N/A | 2,012.7 | 555.9 | 749.2 | 481.1 | 226.5 | ||||||||||||||||||||||||
Interest from Bank Loans(6) | 271.6 | 87.5 | 159.2 | 24.9 | N/A | 356.7 | 127.6 | 154.2 | 62.3 | 12.6 | ||||||||||||||||||||||||
Operating Lease Obligations(3) | 31.2 | 6.4 | 18.5 | 6.3 | N/A | 20.9 | 7.5 | 13.4 | n/a | n/a | ||||||||||||||||||||||||
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Total | Ps. | 4,504.2 | Ps. | 913.8 | Ps. | 2,952.7 | Ps. | 637.7 | Ps.N/A | Ps. | 3,170.8 | Ps. | 1,159.5 | Ps. | 1,228.9 | Ps. | 543.4 | Ps. | 239.1 | |||||||||||||||
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(1) | Figures expressed in constant pesos as of December 31, 2007 based on the Mexican |
(2) | Reflects a minimum fixed annual payment of U.S.$ 4.0 million required to be paid under our technical assistance agreement, assuming an average exchange rate of Ps. |
(3) | Includes leasing of buildings and vehicles. |
(4) | Amount for less than one year corresponds to obligations for |
(5) | In the fifth year of the |
(6) | For the interest calculations, we determined the interest payments using a fixed interest rate of 8.52% for the loans contracted in 2007, |
New Accounting Pronouncements
Our financial statements are prepared in accordance with MFRS, which differs in certain respects from U.S. GAAP. Notes 27 and 28 to our audited consolidated financial statements discuss new accounting pronouncements under MFRS and U.S. GAAP that came into effect in 2010.
Item 6. | Directors, Senior Management and Employees |
Directors
The Boardboard of Directorsdirectors is responsible for the management of our business. Pursuant to our bylaws, our Boardboard of Directorsdirectors generally must consist of 11 members. Under Mexican law, at least 25 percent of our directors must be independent (as determined by our shareholders at each annual general ordinary shareholders’ meeting in applying the provisions of our bylaws and relevant Mexican and other law).laws); under the Securities Market Law, the National Banking and Securities Commission may object to such designation of independence. Currently, the Boardour board of Directorsdirectors consists of 11 directors.
Our bylaws provide that the holders of Series BB shares are entitled to elect four members to the Boardboard of Directorsdirectors and their alternates. Our remaining directors are elected by the holders of our Series B shares (who do not elect alternates). Under our bylaws, each shareholder or group of shareholders owning at least 10% of our capital stock in the form of Series B shares is entitled to elect one member to the Boardboard of Directors.directors. Also our bylaws prevent any Series B shareholders, individually, or together with related parties, from appointing more than one board member, even if the shareholder owns more than 10% of our outstanding capital stock (because any shares in excess of the 10% maximum do not have any voting
rights under our bylaws). The other directors to be elected by the holders of our Series B shares are elected by majority vote of all holders of Series B shares present at the shareholders’ meeting.meeting, except for those Series B shareholders that already participated in any 10% board member designation. Directors are elected for one-year terms at the ordinary shareholders’ meeting.
At our April 16, 2012 General Shareholders’ Meeting.
On May 27, 2010,Meeting, several changes were approved to the members of the Nominations and Compensation Committee, through their President, announced that, in their opinion: (i) given that the time period, as required by the Mexican Securities Law as well as by our by-laws, for the electioncomposition of our independent board members had passed since the last election held on April 28, 2009,of directors, including a change in the view of the Nominations and Compensation Committee, the term of our independent board members had ended; and (ii) given that the Chairman of the Board, was neither nominated nor confirmed during the Ordinary Shareholders’ Meeting held on April 27, 2010, the term for the person holding this position had also ended. As a result, the Committee believed that the positionand three new members were ratified. The composition of Chairman automatically corresponded to the first
our board member named during the deliberation of Item VIIdirectors as of the Ordinary Shareholders’ Meeting held on April 27, 2010, Mr. Demetrio Ullastres Llorente. Mr. Ullastres will remain indate of this position until our shareholders elect a new Chairman of the Board.
Our Board of Directors held a meeting on June 2, 2010. This meeting was attended only by board members representing the Series BB shareholders, since the independent board members’ terms had ended as per the notification by the Nominations and Compensation Committee. At the meeting, board members representing the Series BB shares provisionally elected to our Board of Directors the independent directors asreport is set forth in the following table, which lists the title, date of appointment, age and alternate, as applicable, of each of our current directors. The following table reflectsIn the past, certain of our shareholders have challenged the composition of our Boardboard of Directors as it is understood by our management. Future developments relateddirectors. For more information see “Item 8,Financial Information – Legal Proceedings – Grupo México, S.A.B. de C.V. seeks to the events discussed in “Item 5,Operating and Financial Review and Prospects—Recent Developments—Shareholder Dispute at Shareholder Meetings” might affect the compositionvoid certain of our board.bylaws”.
Name | Title | Director since | Age | Alternate | ||||
| Chairman and Director (AMP) | |||||||
José Vicente Corta Fernández* | Director (AMP) | April 16, 2012 | 48 | Maria de los Reyes Escrig Tegeiro | ||||
Javier Marín San Andrés* | Director (AMP) | August 1, 2001 | Rodrigo Marabini | |||||
| ||||||||
Carlos Francisco del Río Carcañ | Director (AMP) | April | ||||||
| Director (Independent) | April 16, 2012 | 59 | — | ||||
Carlos Cárdenas Guzmán** | Director (Independent) | 62 | — | |||||
Enrique Luis Castillo Sanchez Mejorada** | Director (Independent) | April 16, 2012 | 56 | — | ||||
Alfredo Elías Ayub** | Director (Independent) | April 16, 2012 | 63 | — | ||||
| Director (Independent) | April | — | |||||
| Director (Independent) | — | ||||||
| Director (Independent) | |||||||
| ||||||||
| ||||||||
| — |
* | Elected by AMP as holder of Series BB shares, which represents 15% of our capital stock. |
** | Independent directors elected to comply with the Securities Market Law (Ley del Mercado de Valores). |
*** | Director representing Grupo México as shareholder or group of shareholders owning 10% of our capital stock. |
Demetrio Ullastres LlorenteEduardo Sánchez Navarro Redo. Mr. Demetrio Ullastres LlorenteEduardo Sánchez Navarro Redo is the chairman of our board of directors. He is currently also the Chairmanchairman of AMP. He is the founder of Grupo Questro, a real estate investment group with substantial holdings in Los Cabos, including luxury resorts and residential developments such as Cabo Real and Puerto Los Cabos. He is also a member of the Boardboard of Directorsdirectors and vice chairman of Cultiva (the holding company for GEPP and Grupo Aeroportuario del Pacífico, S.A.B. de C.V.Azucarero) and a member of the Mexican Resort Development Association (AMDETUR) since 1991, which is an organization that includes 90% of tourism real estate developers in the country. He is the vice president of the National Tourist Business Counsel (CNET) and has served as a member of our Board of Directors since 2002. Since 2004, he has been the president of the ServicesHotels and Concessions DivisionTourism Companies Investors Association (AIHET). He is also the president and founder of the ACS Group.Coordinating Counsel of Los Cabos.
José Vicente Corta Fernández. Mr. Corta Fernández was elected by AMP to the Company’s board of directors on April 16, 2012. He received his Bacheloris currently a partner of ArtsWhite & Case, S.C. He is also a chairman of the National Saving System for retirement (Comision Nacional de Ahorro para el Retiro), and he serves as executive secretary of the Institute for the Protection of Bank Savings (Instituto para la Protección al Ahorro Bancario). He has worked with the International Monetary Fund and the World Bank as a consultant on international financial matters. Mr. Corta Fernández holds a Bachelor’s degree in transportation engineeringlaw from the Colegio del PilarUniversidad Iberoamericana in Madrid, Spain, and has since workedMexico City, Mexico. The World Economic Forum named him a “Young Global Leader” in various capacities with Grupo Dragados, S.A. in Cadiz, including, most recently, president of Dragados Industrial, S.A. and president of Dragados Construcción. In 2001, he was named the General Director of Grupo Dragados, S.A., responsible for the areas of construction and concessions. In 2002, he was awarded a medal of Professional Merit by the Colegio de Ingenieros de Caminos, Canales y Puertos.2006.
Javier Marín San Andrés. Javier Marín San Andrés ishas been a member of our Boardboard of Directors and has beendirectors since 2001. He is currently a director of Aeropuertos Españoles y Navegación Aérea, S.A. (AENA) and is in charge of the management and development of the airport network in Spain.. He is also a member of the board of directors of Centro Logísticos Aeroportuarios, S.A. (serving as Vice President) and Ingeniería y Economía del Transporte, S.A.,the engineering company INECO, as well as several Mexican companies, including Aeropuertos Mexicanos del Pacífico, S.A. and Colombian companies such as Aeropuertos del Caribe, S.A., Sociedad AeroportuariaS.A.P.I. de la Costa, S.A., Aerocali, S.A. and Compañía de Extinción General de Incendios, S.A. In 1999, he was appointed Chief Executive Officer and General Director ofC.V. He joined AENA which he joined in 1991 and where he served inhas occupied various executive capacities until his appointment from 1993 to 1996 asposts since then, including Director General Director of Air Navigation, and in 1997 as Director of Corporate Development responsible for strategic planning of the initial international developmentand Director General of AENA as an airport operator.
International, a public limited company that manages AENA’s activity abroad. He has also served in various positions at the Technical University of Madrid, including as theDirectorate General Director of Civil Aviation, and at the Universidad Politécnica de Madrid, in the Experimental Center of the Eurocontrol Organization in Paris as well as inand the Indra Corporation Group.business group Indra. He holds a degree in Aeronautical Engineering from the Universidad Politécnica deTechnical University of Madrid, a master’s degree in Finance Management from the Official Chamber of Commerce and hasIndustry of Madrid and a degree in Finance and EconomicsExecutive Management from the Chamber of Commerce in Madrid and a graduate degree in management from the IESE Universidad de Navarra.
Guillermo Gerardo Díaz de Rivera Alvarez. Mr. Guillermo Gerardo Díaz de Rivera Alvarez is a member of our Board of Directors and has been since 2010. He is a partner with the law firm Diaz de Rivera y Mangino. He has served as professor of commercial law at the Universidad Nacional Autónoma de México since 1981 and at the Universidad Panamericana since 1980. He is a professor of commercial law and stock market law at the Instituto Mexicano del Mercado de Capitales, A.C., as well as having served as a visiting professor the Universidad Bonaterra and the Universidad de La Habana. He is a legal consultant for various securities issuers and other market participants. He received his law degree from the Universidad Panamericana.Business School.
Carlos Francisco del Río Carcaño.Mr. del Río Carcaño. was elected to the Company’s board of directors on April 16, 2012, as a director nominee. Mr. del Río has been a member of our Board of Directors since 2007 after serving asCarcaño is the Chairman and Chief Executive Officer since August 2001of TBI and replaced by our current CEO, Jorge Sales Martínez, on July 1, 2007. Previously, he was Director General of Control y Montajes Industriales CYMI S.A., President of CAE ASIA in Singapore, Executive Advisor to ENELEC in Portugal, and Advisor to the Mexican Airport and Auxiliary Services Agency, DYCTEL and MAKIBER. He was also head of Communications and Energy Works D.R. Cataluña, head of construction work for Lineas Telefonicas for Barcelona and Lerida, head of Channeling Works in Baleares, and head of Planning and Control of the Mediterranean Highway for the Tramos Vinaroz and Benisa sections, CurrentlyAbertis Airports; he is CEOresponsible for a portfolio of 26 airports in 7 countries, including London Luton, Belfast International and Cardiff Airport in the UK; Stockholm Skavsta in Sweden; Orlando Sanford International in the United States; and an airport management business in the United States that operates airports and airport facilities, including the international terminal at the world’s busiest airport, Atlanta. Mr. del Río’s portfolio also extends to Sangster International in Montego Bay, Jamaica; Aeropuerto de Santiago in Santiago de Chile; and Aeropuerto Internacional Alfonso Bonilla Aragón in Cali, Colombia. Before joining TBI Airports.and Abertis Airports in 2007, Mr. del Río served as our CEO. Mr. del Río received a telecommunications engineering degree from ETSIS Madrid.
Francisco Glennie y GraueJoaquin Vargas Guajardo.. Francisco Glennie y Graue Mr. Vargas Guajardo was elected to the Company’s board of directors on April 16, 2012 as an independent director nominee. He is Chairman of the board of directors of Grupo MVS Comunicaciones, S.A. de C.V., which includes, among others, radio stations such as MVS News, EXA FM and La Mejor, as well as DISH satellite television services and the television channel 52MX. He currently serves on the board of directors of the following publically traded companies: Vitro, Grupo Financiero Santander and Medica Sur. He is also a member of the board of directors of El Universal newspaper and Costamex. He is also a board member of the Panamericana University and of the Patronage of the National Nutrition Institute, among others.
Carlos Cárdenas Guzmán.Mr. Cárdenas has been a member of our Boardboard of Directors and has beendirectors since 2006. He has served previously as an alternate member of our Board of Directors and as a member of our audit committee. Since 2003, he has been affiliated with Challenger, Gray and Christmas, Inc., a U.S. human resources consulting firm, as its representative in Mexico City following several years as an independent executive search consultant. He had previously served as vice-president of human resources for Pepsi Cola, Inc. in Mexico and as the director of human resources for the Latin America region of Frito Lay. Mr. Glennie y Graue has also served in human resources positions of increasing seniority at such companies as Unilever and Sabritas, one of Mexico’s leading snack food companies, following several years in various human resources positions at Ford Motor Company, Inc. Mr. Glennie y Graue obtained his B.A. in industrial relations at the Universidad Iberoamericana in Mexico City and has completed the Senior Management Program at the Instituto Panamericano de Alta Dirección de Empresa in Mexico City.
Francisco Javier Fernández Carbajal. Francisco Javier Fernández Carbajal is a member of our Board of Directors and has been since April 27, 2005. Mr. Fernández Carbajal has worked as a consultant for public and private investment transactions and a wealth management advisor since January 2002. From July 2000 to January 2002, Mr. Fernández Carbajal was General Director of the Corporate Development Division of Grupo Financiero BBVA Bancomer, S.A. de C.V., a financial institution in Mexico. Prior to serving in this role, he served in other senior executive positions since joining Grupo Financiero BBVA Bancomer, S.A. de C.V. in September 1991. Mr. Fernández Carbajal currently serves as Chairman of the Board of Primero Fianzas, S.A. de C.V. and Primero Seguros, S.A. de C.V., a surety company and a car insurance company in Mexico. He is also a director of Fomento Económico Mexicano, S.A. de C.V., a beverage company in Latin America, of Visa Inc., a company that operates the world’s largest retail electronic payments network and of Fresnillo PLC, a precious metal mining company operating in Mexico. Mr. Fernández Carbajal holds a degree in Mechanical & Electrical Engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and a Master of Business Administration degree from the Harvard Business School.
José Manuel Rincón Gallardo Purón. José Manuel Rincón Gallardo Purón is a member of our Board of Directors and has been since 2006.2011. He also serves as the “audit committee financial expert” for the Company and is a memberpresident of our Audit Committee, subject to ratification atCommittee. Mr. Cárdenas is a Certified Public Accountant with a degree from the General Ordinary Shareholders’ Meeting to be held on July 22, 2010. Mr. RincónUniversidad Autónoma de Guadalajara and a master’s degree in Tax Law from the Universidad Panamericana (IPADE). He is an accountant whoa retired partner of Ernst & Young Mexico. He also currently serves on the boards of directors and audit committees of numerous large Mexican companies. He serves as chairmanpresident of the ABC Medical Center board, as a board member and audit committee president of CHG-MERIDIAN México, S.A.P.I. de C.V., as a board member of Reaseguradora Patria, S.A.B. and as a board member and audit committee member of General de Seguros, S.A.B. He is also a member of several professional and business associations; most notably, he serves as president of the Instituto Mexicano de Contadores Públicos, A.C. (IMCP).
Enrique Luis Castillo Sánchez Mejorada.Mr. Castillo Sánchez Mejorada was elected to the Company’s board of directors on April 16, 2012 as an independent director nominee. From April 2011 to present, Mr. Castillo Sánchez Mejorada has acted as a senior advisor of Grupo Financiero Banorte, S.A.B. de C.V. From October 2000 to March 2011, Mr. Castillo Sánchez Mejorada was the Chairman of the board and Chief Executive Officer of Ixe Grupo Financiero, S.A.B. de C.V., a Mexican financial holding company that merged into Grupo Financiero Banorte in April 2011. In addition, Mr. Castillo Sánchez Mejorada was the president of the Mexican Banking Association (Asociación de Bancos de México) from March 2007 to March 2009. Currently, Mr. Castillo Sánchez Mejorada serves as an independent director on the boards of (i) Grupo Herdez, S.A.B. de C.V., a Mexican holding company for the manufacture, sale and distribution of food products; (ii) Alfa, S.A.B. de C.V., a Mexico-based holding company that,
through its subsidiaries, is engaged in the petrochemical, food processing, automotive and telecommunication sectors; (iii) Organización Cultiba, S.A.B. de C.V., a Mexico-based holding company primarily engaged in the beverages industry; (iv) Médica Sur, S.A.B. de C.V., a Mexico-based company engaged in the hospital business; (v) Grupo Casa Saba, S.A.B. de C.V., a Mexican wholesale distributor of pharmaceutical, health, beauty and other consumer products; and (vi) Southern Copper Corporation, a U.S.-based mining company that is one of the largest integrated copper producers in the world. Mr. Castillo Sánchez Mejorada holds a Bachelor’s degree in Business Administration from the Universidad Anáhuac in Mexico City, Mexico.
Alfredo Elías Ayub.Mr. Elías Ayub was elected to our board of directors on April 16, 2012. From 1996 to 1999, Mr. Elías Ayub served as CEO of Airports and Auxiliary Services (ASA), the operator of the International Airport of Mexico City (AICM), during which he was responsible for the management of 58 airports in Mexico. He was also CEO of the Electricity Federal Commission (CFE) from 1999 to April 2011. Currently, he serves on the board of the Harvard Business School. Mr. Elías Ayub has a degree in civil engineering from the Universidad Anahuac and a Master’s degree in business administration from Harvard University, from which he graduated with honors. In 2008, he received the National Engineering Award, and in 2011, he was awarded the Medal of Merit of the Red Cross.
Angel Losada Moreno. Mr. Losada Moreno has a degree in Business Administration from the Universidad Anahuac. He is currently Chairman of the board and CEO of Grupo Gigante, S.A.B. de C.V. He is a member of the boards of directors of Sonocoseveral well-known Mexican and American companies and organizations, including Teléfonos de México, S.A. de C.V., memberGrupo Financiero Banamex – Citigroup, Hospital Infantil de México Federico Gómez, Laboratorios Novag and MD Anderson. He has also served as Chairman of the board of directorsthe Mexican National Association of Retailers (Asociación Nacional de Tiendas de Autoservicio y Departamentales, A.C., or “ANTAD”), director and audit committee of Grupo Financiero Banamex, S.A. de C.V., Grupo Herdez, S.A. de C.V., General de Seguros, S.A.B., Cemex, S.A.B., de C.V., Kansas City Southern, and is a member of the board of directors of Laboratorio Sanfer-Hormona.the Food Marketing Institute of the United States and member of the board of Mexico City’s National Chamber of Commerce (Cámara Nacional de Comercio de la Ciudad de México).
Roberto Servitje Achutegui. Mr. Servitje Achutegui was elected to the Company’s board of directors on April 16, 2012 as an independent director nominee. He has also served24 years of experience in the food and beverage industry in Grupo Bimbo, S.A. and as president of Grupo Altex S.A., a managing partner of KPMG Mexicodiversified agro-industrial group, since January 2000. He received an MBA degree with a double major in Marketing and has served on various committees of KPMG at a national and international level. Prior to joining KPMG, he was a partner at Ernst & Young in Mexico.Finance from Northwestern University (Kellogg). He is also a member of the Mexican Instituteboard in various companies such as Grupo Elektra, Banco Azteca, Grupo Lacrem (in Barcelona) and Financiera Independencia. He also serves as co-chair of Public Accountants and the Mexican Institute of Financial Executives. He received a degree in accounting from the Universidad Nacional Autónoma de Mexico and has studied administration and financeMexico’s “Vision for Sustainable Agriculture” at the Wharton SchoolWorld Economic Forum and as Treasurer of the University of Pennsylvania, Stanford UniversityPatronato de Arte Contemporáneo and the University of California at Los Angeles.Fundación Olga y Rufino Tamayo.
León FalicEduardo J. Gallastegui Armella. Mr. León Falic isEduardo Gallastegui has been a member of our Boardboard of Directors and has beendirectors since 2010. He is President of Duty Free Americas, Inc., the largest duty-free operator in North America, which he acquired with his brothers in 2001. He is also a principal and the President of UETA Inc., a Panamanian wholesale distributor of luxury goods. Mr. Falic and his brothers also maintain significant investments in high-end fashion. In 2007, Mr. Falic and his brothers acquired a worldwide license to manufacture fragrances and cosmetics under the Perry Ellis brand name. They also acquired Christian Lacroix, the French fashion design house, in 2002, and Hard Candy LLC and Urban Decay, cosmetics manufacturers, in 2005, all from Louis Vuitton Moet Hennessy. In 1990, Mr. Falic partnered with Softbank and the Steinmetz Group to create proprietary software related to the cross-border movement of luxury goods. Mr. Falic also owns a store dedicated to the sale of high-end jewelry and watches.
Ernesto Vega Velasco. Mr. Vega Velasco is a member of our Board of Directors and has been since 2006. He is a Public Accountant with a degree from the Instituto Tecnológico Autónomo de México and further business management education from IPADE. He is now in retirement, but still serves as an independent board member of Wal-Mart dewas appointed by Grupo México, S.A.B. de C.V. (Chairman and memberin July 2010. In 1985, he became a founding partner of the Audit Committee), Grupo Desc, S.A. de C.V., América Móvil, S.A.B. de C.V. and Industrias Peñoles, S.A. de C.V. (as an alternate director).
Jaime Cortés Rocha. Mr. Jaime Cortés Rocha is member of our Board of Directors and has been since 2010. He is a partner at the law firm of Cortés, Núñez Sarrapy. Mr. Cortés joinedGallestegui y Lozano, S.C. In 1998, his law firm formed a partnership with Holland & Knight, LLP, an international law firm headquartered in the United States. Prior to founding his own law firm, in 2007. Hehe was previously a partner at Mijares, Angoitia, CortésVazquez Pando, Celis Azuela y Funtes, which he joined in 1995.Asociados from 1982 to 1985. Previously Mr. Cortés served as General Counsel at Grupo Financiero GBM Atlántico beginning in 1992,Gallastegui was an attorney with Noriega y Escobedo, S.C. and as Partner at Santamarina y Steta beginning in 1975.Gillette de México, S.A. de C.V. Mr. CortésGallastegui has a wide range of professional experience inadvising Mexican and foreign companies on matters of corporate governance, commercial and financial law, including significant internationalmergers and acquisitions, arbitration, telecommunications, antitrust, pharmaceuticals and cross-border transactional experience.foreign investments in Mexico. Mr. CortésGallastegui received his law degree from Universidad Nacional Autónoma de México in 1969, his L.LMNovember 1978 from the University of MississippiUniversidad Iberoamericana in 1970, and his M.B.A. from the Instituto Tecnológico de Monterrey in 1982. Mr. Cortés has lectured on commercial and financial law in several universities and is also widely published in these subject areas.
Carlos Eduardo Bravo Almenar. Mr. Carlos Eduardo Bravo Almenar is a member of our Board of Directors and has been since 2010. He is a private investor and strategic advisor to both startups and established corporations. Mr. Bravo is the CEO of Karlhaus LLC, an investment vehicle with activities in real estate brokerage and business acquisitions. He currently serves on the Boards of Embry Riddle Aeronautical University, EagleNet Ventures, Otto Aviation and Karlhaus. He also serves on the Executive Advisory Boards of the Embry Riddle Aeronautical Research Park and the Daytona Beach International Airport Partnership. Mr. Bravo previously served as Executive Officer at USinternetworking Inc., having led the merger that built that company.Mexico City.
Previously, Mr. Bravo was a co-founder of IIT Holding Inc., a management consulting company. Prior to that, Mr. Bravo was a Vice President and Principal of Comdisco Inc.’s Systems Integration Division, and the Founder, Chairman, and CEO of Bravo International Corporation, which he founded in 1990. Mr. Bravo attended the University of Florida and the schools of law and business at Northwestern University. He holds advanced degrees in Aerospace Engineering, Applied Mathematics and Business.
Executive Officers
Pursuant to our bylaws, the directors appointed by the holders of Series BB shares are entitled to appoint and remove our top-level executive officers.
The following table lists our top-level executive officers, their current positions and their dates of appointment as executive officers:
Name | Current position | Executive | Age | |||
| Chief Executive Officer | |||||
Rodrigo Guzmán Perera | Chief Financial Officer | August 1, 2001 | ||||
Sergio Enrique Flores Ochoa | General Counsel | February 8, 2002 | ||||
Miguel Aliaga Gargollo | Investor Relations and Public Relations Officer | May 8, 2006 | ||||
Jorge Luis Valdespino Rivera | Director of Human Resources and Quality Control | August 21, 2006 | ||||
| ||||||
| Director of Commercial Activities | September 1, 2009 | ||||
José Ignacio Ascacíbar Martínez | Director of Technical Operations | April 1, 2010 |
Jorge Manuel Sales Martínez. Fernando Bosque Mohíno.Mr. Sales is currentlyBosque was named our Chief Executive Officer effective January 1, 2011. Fernando Bosque is a graduate in Economics and Business from the Universidad Autónoma de Madrid and has over 35 years of experience in the airport sector. He began his career in 1976 the Federal Aviation and Transportation Department in Spain. Recently, he served as the CEO of MBJ Airports Limited, in Montego Bay, Jamaica, appointed by Abertis. He has extensive knowledge of the Companyairport industry having previously been the Chief Financial Officer of AENA Internacional, one of our strategic partners. He served as a member of ASUR’s Board, working as Ferrovial’s concession director, and is also Directorconsequently has a strong understanding of Airports for Abertis Airports, S.A. (a subsidiarythe privatization structure of ACS Group). He has worked for the Dragados Group (now ACS Group) for 35 years in management during the last 15 years as CEO, Managing Director and President of different subsidiaries within the Group, including broad international experience in South America, the Caribbean and Middle East and East Asia, having lived in the Philippines, Chile, Ecuador, Jamaica and Mexico for a total of 11 years. Mr. Sales received a bachelor’s degree in civil engineering from Madrid Polytechnic University.Mexican Airports.
Rodrigo Guzmán Perera. Mr. Guzmán was named our Chief Financial Officer in August 2001. In 1999, Mr. Guzmán represented Union FENOSA, S.A. in its participation in AMP. Previously, he was the General Comptroller and Director of Tax Planning of Union FENOSA México, the Chief Financial Officer of Ibertec México, S.A. de C.V. (controlled by Union FENOSA) and the Chief Financial Officer of Ibersis México, S.A. de C.V. (controlled by Union FENOSA). Mr. Guzmán also served as Chief Financial Officer of Inversora del Noroeste, S.A. de C.V. and Fuerza y Energía de Hermosillo, S.A. de C.V. in 1998 and 1999. Mr. Guzmán received a degree in business from the Instituto Tecnológico Autónomo de México (ITAM).; he is currently participating in a joint Master’s program between the Instituto Tecnológico y de Estudios Superiores de Monterrey and the Thunderbird School of Global Management in Phoenix, Arizona, after which he will receive a Master’s degree in business administration.
Sergio Enrique Flores Ochoa. Mr. Flores was named our General Counsel in February 2002. Previously, he was the Manager of legal matters for the Mexican Airport and Auxiliary Services Agency and the Assistant District Attorney for the Federal District of Mexico. In addition, he was head of the legal department of INFONAVIT and Manager of legal matters for NAFIN. Mr. Flores received a degree in law as well as a master’s degree from the Universidad Nacional Autónoma de México (UNAM).
Miguel Aliaga Gargollo. Mr. Aliaga Gargollo was named our Director of Investor Relations in May 2006. He also serves as the Director of Public Relations. He has 12 years of experience in corporate finance and investor relations. Previously he served in various capacities at Grupo Financiero del Sureste, S.A. de C.V., including in the position of Risk Management Director. He also
worked as the Investor Relations Officer at Industrias Bachoco, S.A.B. de C.V. Finally, he was formerly responsible for collections and portfolio development at Grupo Costamex, S.A. de C.V. Mr. Aliaga holds a degree in industrial engineering from the Universidad Nuevo Mundo in Mexico City and has an MBA degree from the Instituto de Empresa in Madrid, Spain.
Jorge Luis Valdespino Rivera. Mr. Valdespino was named our Director of Human Resources and Quality Control in August 2006. He has 1314 years of experience as a human resources executive. He worked in the pharmaceutical industry at Searle de México, S.A. de C.V. as Human Resources Manager, and in the automotive industry at Valeo Group as Human Resources Director, and at Hella de México, S.A. de C.V. as Human Resources Corporate Director. Mr. Valdespino received an undergraduate degree in business administration and a postgraduate degree in human resources from the Universidad Tecnológica de México.
Vicente Emilio Alonso Diego. Mr. Alonso is the Project Development Director. He has also served as the Chief Executive Officer of AMP since 2002. Mr. Alonso served on our Board of Directors and as a member of the Acquisition Committee from 2002-2006. Currently, he continues to serve as a member of the Operating Committee. He joined AENA in 1992 and has played a key role in the development of their Financial and Business Strategy Areas, holding different positions within the Airport, Air Traffic, and Corporate Units. In his various functions he has contributed to the expansion of AENA as an international airport group. Prior to joining AENA, Mr. Alonso also worked for 4 years as a transport and IT consultant at Arthur Andersen Consulting (Accenture). Mr. Alonso has a degree on Economics from the Universidad Complutense of Madrid, Masters in Business Administration from the Escuela de Organización Industrial (Madrid), and several top management programs from IESE (Universidad de Navarra).
RaulRaúl Revuelta Musalem. Mr. Revuelta was named our Director of Commercial Activities in September 2009. He has broad experience in the federal concessions industry. Mr. Revuelta joined the Companyour team in January 2006 as the Aeronautical Revenue and Airport Marketing Manager. Prior to that, he served as the Head of Finance at the Ministry of Communications and Transportation’s Privatization Unit (UACE) for six years. Mr. Revuelta holds a Bachelor’s Degree in Economics from the Instituto Tecnológico de Estudios Superiores de Monterrey (ITESM).
José Ignacio Ascacíbar Martínez. Mr. Ascacíbar was named our Chief Technical Officer in April 2010. Mr. Ascacíbar holds a degree in Aeronautical Engineering from the Universidad Politécnica de Madrid, as well as an MBA from the Instituto de Empresa in Madrid, a Certificate in Business Development from IESE in Madrid, a Masters in Airport Operations from ETSIA in Madrid and a Certificate in European Studies from C.I.F.E. in Madrid. In 1989, Mr. Ascacíbar began his career at Iberia, Líneas Aéreas de España, S.A., where he was Manager of Flight Programs. In 1995, Mr. Ascacíbar was the Director of Information Systems at Aeropuertos Españoles de AENA, in addition to being a member of Aeropuertos Españoles’ Executive Committee.
The business address of our directors and executive officers is our principal executive headquarters.
Compensation of Directors and Executives
For 2009,2012, the aggregate compensation earned by our directors, alternate directors and executive officers was approximately Ps. 24.627.3 million, including compensation paid to the directors, alternate directors and executive officers of our operating subsidiaries (23(19 people in total). We have not established any pension, retirement or similar benefits or arrangements for these individuals.
None of our directors, alternate directors or executive officers is the beneficial owner of more than 1% of any class of our capital stock.
None of our directors or executive officers areis entitled to benefits upon termination under their service contracts with us, except for what is due to them according to the Mexican Federal Labor Law.
Board Committees
Our bylaws provide for four committees to assist the board of directors with the management of our business: an Operating Committee, an Audit and Corporate Practices Committee, an Acquisitions Committee and a Nominations and Compensation Committee. The Audit Committee, to which our bylaws have granted the duties provided for in the Securities Market Law for Mexican corporate practices committees, is the only legally required committee. The other committees have been established to assist the board of directors. The board of directors may establish further committees from time to time.
Operating Committee
The Operating Committee, which, pursuant to our bylaws, should have six members and three alternates, is responsible for, among other matters, proposing and approving certain plans and policies relating to our business, investments and administration, including approval of the master development programsMaster Development Programs of our subsidiary concession holders, our dividend policy and investments of less than U.S.$ 3.0 million that are not provided for in our annual budget. Pursuant to our bylaws, the board of directors is authorized to appoint the six members of the Operating Committee. Board members elected by the holders of Series BB shares have the right to appoint three of the committee members. Jorge Sales,As of the date of this report, the proprietary members of the Operating Committee are Fernando Bosque Mohíno, the chief executive officer who presides over the committee, and Eduardo Sánchez-Navarro Redo, Rodrigo Marabini Ruíz, Carlos PorróLaviada Ocejo, Rodrigo Guzmán Suárez, Angel Lerma GaudePerera, the chief financial officer, Raúl Revuelta Musalem, director of commercial activities and Christian Checa Levien† are the other five proprietary members withJosé Ignacio Ascacíbar Martínez, director of Technical Operations. Carlos del Río Carcaño, Laura Diez Barroso AzcárragaCarlos Porrón Suárez and Vicente Emilio Alonso Diego,Eduardo Sánchez-Navarro Redo serve as alternate membersalternates for Jorge Sales, Eduardo Sanchez Navarro andFernando Bosque Mohíno, Rodrigo Marabini Ruíz and Carlos Laviada Ocejo, respectively.
Audit and Corporate Practices Committee
The Audit and Corporate Practices Committee, which must have a minimum of three members, the majority of whom must be members of our board of directors, is responsible, among other things, forfor: (i) monitoring the compliance of our directors, officers and employees (and those of our subsidiaries) with our (and their) bylaws (estatutos sociales) and applicable law, (ii) naming, and supervising the work of, our independent auditors and (iii) receiving and investigating internal complaints or other information concerning our systems of internal control and other such matters. The Audit and Corporate Practices Committee is also responsible for reviewing our corporate governance and all related-party transactions (according to the requirements of our bylaws and the Mexican Market Law), including transactions with AMP. The committee also names a special delegate, whose responsibility it is to ensure AMP’s compliance with the technical assistance agreement. The members of the board of directors elected by the holders of Series BB shares are entitled to propose the appointment to the Audit and Corporate Practices Committee of the number of members representing 20% of the committee’s total members, orbut at least one member who must also fulfill applicable independence requirements. The president of this committee is elected at the annual shareholders’ meeting. The composition of the Audit and Corporate Practices Committee must at all times be compliant with all applicable laws and regulations, including independence requirements, for every jurisdiction in which our securities are listed or quoted. The currentAs of the date of this report, the members of the Audit and Corporate Practices Committee are José Manuel RincóCarlos Cárdenas Guzmán, Gallardo Purón, Francisco Javier Fernández CarbajalEnrique Luis Castillo Sánchez Mejorada and Ernesto Vega Velasco. The current members of the Audit Committee were provisionally appointed by our Board of Directors at its meeting held on June 17, 2010 and have full power and authority. Their appointment is subject to ratification at the General Ordinary Shareholders’ Meeting to be held on July 22, 2010. A secretary has also been appointed, who is not a member of the committee. See “Item 5,Operating and Financial Review and Prospects—Recent Developments—Shareholder Dispute at Shareholder Meetings.”Angel Losada Moreno.
Acquisitions Committee
The Acquisitions Committee is responsible for ensuring compliance with our procurement policies set forth in our bylaws. The committee is formed by two members and one alternate. Among other things, these policies require that the Acquisitions Committee approve any transaction or series of related transactions between us and a third party involving consideration in excess of U.S.$ 400,000 and that any contract between us, on the one hand, and AMP or any of its related parties, on the other hand, be awarded pursuant to a bidding process, which, in the case of AMP, must involve at least three other bidders. Our bylaws provide that a shareholders’ meeting will determine the number of members of the Acquisitions Committee, which must be composed primarily of members of the board of directors. The members of the board of directors elected by the holders of Series BB shares are entitled to appoint to the committee the number of members representing 20% of its total members. Themembers but at a minimum, one member. As of the date of this report, the members of the Acquisitions Committee are Carlos E. Bravo Almenar and Rodrigo Marabini Ruíz.Ruiz and Joaquin Vargas Guajardo. Carlos del Río Carcaño has beenwas elected to serve as an alternate member to Rodrigo Marabini Ruíz beginning June 17, 2010.Ruiz. A secretary has also been appointed who is not a member of the committee. In the case of a proposed transaction between us and AMP or any related party, we are required to invite, pursuant to the bylaws, at least three contractors to bid on the transaction and, in the case that a third-party contractor’s bid is equal to or less than AMP’s bid, the transaction is awarded to the third-party contractor.
Nominations and Compensation Committee
The Nominations and Compensation Committee is responsible for nominating candidates for election to our board of directors and making recommendations regarding the compensation of our directors and officers. The committee also serves in a corporate governance role within its subject-matter ambit. Our bylaws provide that a shareholders’ meeting will determine the number of members of the committee. The holders of the Series B and Series BB shares, each acting as a class, are each entitled to name one member of the Nominations and Compensation Committee. The remaining members of the committee, if any, are designated by the two members who were selected by the Series B and Series BB shareholders. If these two members are unable to reach agreement, the remaining members of the committee will be designated by the majority of the votes in the shareholders’ meeting, provided that, in such case, holders of the Series BB Shares will be entitled to appoint 20% of the members.members but at a minimum, one member. Members of the committee serve for a term of one year. At each annual shareholders’ meeting, the Nominations and Compensation Committee is required to present a list of candidates for election as directors for the vote of the Series B shareholders. TheAs of the date of this report, the members of the Nominations and Compensation Committee are Demetrio Ullastres LlorenteCarlos del Río Carcaño and Francisco Glennie y Graue (who is nominated for election at the Ordinary Shareholders MeetingAlfredo Elías Ayub. Laura Diez Barroso Azcárraga had been elected to be held July 22, 2010).serve as an alternate member to Carlos del Río Carcaño.
Employees
The following table sets forth the number of employees and a breakdown of employees by main category of activity and geographic location as of the end of each year indicated.
Employees
December 31, | December 31, | |||||||||||||||||
2007 | 2008 | 2009(2) | 2010 | 2011 | 2012(2) | |||||||||||||
Categories of activity: | ||||||||||||||||||
Airport operations | 754 | 690 | 727 | 779 | 720 | 583 | ||||||||||||
Airport maintenance | 149 | 141 | 138 | 138 | 138 | 133 | ||||||||||||
Administration(1) | 183 | 162 | 172 | 169 | 185 | 185 | ||||||||||||
Geographic location: | ||||||||||||||||||
Guadalajara | 226 | 205 | 241 | 245 | 194 | 142 | ||||||||||||
Tijuana | 116 | 127 | 127 | 127 | 127 | 86 | ||||||||||||
Los Cabos | 90 | 88 | 80 | |||||||||||||||
Puerto Vallarta | 115 | 97 | 107 | 107 | 107 | 76 | ||||||||||||
Los Cabos | 84 | 75 | 82 | |||||||||||||||
Hermosillo | 73 | 57 | 59 | 67 | 66 | 63 | ||||||||||||
Guanajuato | 78 | 64 | 61 | 68 | 66 | 62 | ||||||||||||
La Paz | 49 | 43 | 42 | 47 | 47 | 47 | ||||||||||||
Mexicali | 46 | 47 | 48 | |||||||||||||||
Morelia | 63 | 57 | 51 | 56 | 57 | 56 | ||||||||||||
Mexicali | 48 | 45 | 44 | |||||||||||||||
Aguascalientes | 55 | 46 | 47 | 51 | 50 | 49 | ||||||||||||
Los Mochis | 39 | 40 | 38 | 42 | 41 | 40 | ||||||||||||
Manzanillo | 37 | 32 | 33 | 36 | 36 | 35 | ||||||||||||
|
|
| ||||||||||||||||
Total(1) | 1,086 | 993 | 1,037 | 1,086 | 1,043 | 901 | ||||||||||||
|
|
|
(1) |
(2) |
As of December 31, 2009, there2012, 51% of our employees were 501 non-unionized employees working for the Company.employees. The remaining 53649% employees were unionized. All of our unionized employees are members of local chapters of the Mexican National Union of Airport Workers (Sindicato Nacional de Trabajadores de la Industria Aeroportuaria y Servicios Similares y Conexos de la República Mexicana), an organization formed in 1998 whose members include employees of the Mexican Airport and Auxiliary Services Agency as well as of the three other airport groups (the Southeast Group, the Mexico City Group and the Central-North Group) operating in Mexico. Labor relations with our employees are governed by 12 separate collective bargaining agreements, each relating to one of our 12 airport subsidiaries, and negotiated by the local chapter of the union. As is typical in Mexico, wages are renegotiated every year, while other terms and conditions of employment are renegotiated every two years. In 20092012, we successfully renegotiated our collective bargaining agreement, within our budget projections and for the next two years securedthereby securing a favorable and productive work environment for our employees.employees for 2013 and 2014. We believe that our relations with our employees are good. We believegood, and the wages we pay our employees are similar to those paid to employees of similar airport operating companies in Mexico. During 2014, we will renegotiate the collective bargaining agreement.
We maintainoffer a savings plan available to all of our employees pursuant to which our employees may make bi-weekly contributions of up to 13% of their pre-tax salaries. We make bi-weekly contributions matching each employee’s contribution. Employees are entitled to withdraw the funds infrom their accounts on an annual basis. In 2007, 20082011 and 2009,2012, we made a total of Ps. 13.8 million, Ps. 14.315.1 million and Ps. 13.515.3 million, respectively, in payments to employees’ accounts pursuant to the savings plan.
Funds in the savings plan may be used to make loans to employees and are otherwise invested in securities listed on the Mexican Stock Exchange or in treasury bills issued by the Mexican Treasury Department.
Item 7. | Major Shareholders and Related Party Transactions |
Prior to our initial public offering in 2006, the Mexican government owned 476,850,000 Series B shares, representing 85% of our issued and outstanding capital stock. After the offering, the Mexican government ceased to be a shareholder.
The following table sets forth information with respect to beneficial ownership of our capital stock as of May 31, 2010.April 9, 2013.
Number of Shares | Percentage of total share capital(4) | |||||||||
Identity of shareholder | B Shares | BB Shares | B Shares | BB Shares | ||||||
AMP | — | 84,150,000 | — | 15.0 | % | |||||
Fidelity Management & Research Company(1) | 28,833,360 | — | 5.1 | % | — | |||||
Fidelity Management & Research (UK), Inc(2) | 28,458,000 | — | 5.1 | % | — | |||||
Mondrian Investment Partners, LTD(3) | 27,107,300 | — | 4.8 | % | — | |||||
Public | 392,451,340 | — | 70.0 | % | — |
Number of Shares | Percentage of total share capital | |||||||||||||||
Identity of shareholder | B Shares | BB Shares | B Shares | BB Shares | ||||||||||||
AMP | — | 84,150,000 | — | 15.0 | % | |||||||||||
Grupo México S.A.B. de C.V.(1) | 166,003,673 | — | 29.59 | % | — | |||||||||||
Weston Hill Equity Holdings, LP(2) | 25,676,290 | — | 4.58 | % | — | |||||||||||
Public(3) | 285,170,037 | — | 50.83 | % | — |
(1) | Based on Grupo México’s fourth quarter report of 2012, filed with the Mexican Stock Exchange. Based on the Form |
(2) | Based on |
(3) |
Based on reports of beneficial ownership filed with the SEC, (i) |
AMP holds all of our Series BB shares, representing 15% of our total share capital. Special rights and restrictions attached to our Series BB shares are described under“Item “Item 4, Information on the Company—Company – History and Development of the Company”Company” and “Item 10,“Item 10, Additional Information—Information – Corporate Governance — Voting Rights and Shareholders’ Meetings.Meetings”. As of May 31, 2010,April 9, 2013, approximately 42.3%17.28% of our Series B shares were held in the form of ADSs. 20.2%52.28% of the holders of our ADSs (80 holders, including The Depository Trust Company) had registered addresses in the United States.
Grupo México, S.A.B. de C.V. withdraws request from the CNBV to make a tender offer for our shares
On June 13, 2011, Grupo México, S.A.B. de C.V. (“Grupo México”) announced that it intended to acquire at least 30% and up to 100% of our shares outstanding at that time, excluding treasury shares. At the time, Grupo México had disclosed that it owned 20% of our total outstanding capital stock; in its most recent filing on Form 13D with the SEC on January 25, 2012, it disclosed that it owned 28.7% of our total outstanding capital stock. According to the information published for the fourth quarter of 2012 with the Mexican Stock Exchange, Grupo México holds 29.59% of our total outstanding capital stock.
Certain of our bylaws, however: (i) limit the ability of Series B shareholders, directly or with related parties, other than AMP, to hold more than 10% of our outstanding capital stock, and any shares held in excess of that amount must be sold in a public offering, (ii) limit the voting rights of our Series B shareholders, individually or together with related parties, to 10% of our outstanding corporate stock, other than AMP and (iii) limit the ability of any Series B shareholders, individually, or together with related parties, to appoint more than one board member (because any shares in excess of the 10% maximum do not have any voting rights under our bylaws), even if the shareholder owns more than 10% of our outstanding corporate stock. Grupo México commenced various legal proceedings seeking to modify our bylaws to eliminate the foregoing limitation and seeking the termination of AMP’s special rights that stem from AMP’s ownership of our Series BB shares in order to challenge our corporate structure. See “Item 8,Financial Information – Legal Proceedings –Grupo México, S.A.B. de C.V. seeks to void certain of our bylaws”.
Under Mexican law, before Grupo México’s tender offer could occur, the CNBV had to review and approve the request by Grupo México. In compliance with a court decision requiring us to defend our bylaws, we initiated a protection proceeding in federal court in order to defend our bylaws. We also initiated various suits against the CNBV to prevent it from making a determination with respect to Grupo México’s tender offer.
On March 29, 2012, Grupo México announced that it had ended its tender offer for our shares, but it made no announcement regarding the various legal proceedings it has initiated against us.
AMP Trust, Bylaws and Shareholders’ Agreement
The rules governing the sale of our Series BB shares to AMP required that AMP place all of its Series BB shares in trust in order to guarantee AMP’s performance of its obligations under the technical assistance agreement and AMP’s commitment to maintain its interest in us for a specified period. Accordingly, AMP has placed its shares in trust with Bancomext. This trust provides that AMP may instruct Bancomext with respect to the voting of the shares held in trust that represent up to 10% of our capital stock; the remaining 5% is required to be voted in the same manner as the majority of all shares voted at the relevant shareholders’ meeting. Under our bylaws and the trust, AMP could not sell any of its Series BB shares before August 25, 2004. Since the end of this no-sale period, AMP has been permitted to transfer up to 49% of its Series BB shares without restriction. After August 25, 2009, AMP may sell in any year up to 20% of its remaining 51% ownership interest in us represented by Series BB shares. The terms of the trust will be extended for an additional 15 years if, at the end of the initial 15-year term, AMP holds shares representing more than 10% of our capital stock. AMP may terminate the trust before the second 15-year term begins if: (i) AMP holds less than 10% of our capital stock
at the end of the initial term; and (ii) the technical services agreement has been terminated. AMP is required to deposit in the trust any additional shares of our capital stock that it acquires.
AMP’s shareholders have entered into a shareholders’ agreement that provides that AENA will have the right to appoint our director of technical operations, anduntil August 25, 2014, meanwhile: i) the appointment of AMP’s representatives to our Boardboard of Directorsdirectors and board committees as well asshall be made on a rotating basis; and ii) any right of AMP regarding the appointment of our chief executive officer, chief financial officer, director of investor relations, general counsel, director of human resources, director of commercial activities, the secretary of our board of directors and most other matters relating to AMP’s participation in us, must be agreed upon by holdersmade, in principle, pursuant the unanimous consent of at least 60%AMP’s shareholders. Other mechanisms exist in aggregate of the equity of AMP.case unanimous consent is not obtained to avoid deadlocks that might affect our operations.
Under the terms of the participation agreement and the trust agreement, AMP’s key partners are required to maintain their current 25.5% ownership interest in AMP until August 25, 2014. To the extent that a key partner acquires shares of AMP in excess of its current 25.5% interest, this additional interest may be sold without restriction. There can be no assurance that the terms of the participation agreement or the trust would not be amended to reduce or eliminate these ownership commitments. If AMP or any of its shareholders defaults on any obligation contained in the trust agreement, or if AMP defaults on any obligation contained in the participation agreement or the technical assistance agreement, after specified notice and cure provisions, the trust agreement provides that the trustee may sell 5% of the shares held in the trust and pay the proceeds of such sale to us as liquidated damages.
Shareholder Dispute and Resolution
AtDisputes among AMP’s shareholders had prevented voting on certain resolutions at our annual General Ordinary and Extraordinary Shareholders’ Meetings held on April 27, 2010 our shareholders were askedshareholders’ meetings, and eventually led to approve certain items, among them our financial statements, our dividend payments, a reduction in capital, and a modificationthe suspension of trading of our bylaws that this capital reduction would have required. Some of our shareholders alleged that these measures were not validly approved for lack of quorum because AMP’s voting rights had allegedly been suspended by a temporary injunction issued by a civil court in Mexico City. Because it was unclear which items had been validly approved,shares on May 7, 2010, our Audit Committee called new General Ordinarythe Mexican Stock Exchange and Extraordinary Shareholders’ Meetings, which were held onNYSE from June 2, 2010 to resolve this uncertainty. Weuntil June 14, 2010. The disputes among AMP’s shareholders also voluntarily submitted these matters for consideration to a commercial law judge, who later dismissedaffected our petition when he determinedshareholders’ meetings throughout 2010 and 2011, as certain of the shareholders of AMP argued that our board of directors was improperly constituted and consequently that the questionmeetings were invalid. Additionally, AMP’s shareholders commenced litigation among each other and in some instances against us. On December 1, 2011, we received notice from AMP’s shareholders that they had become mootentered into an agreement to end the dispute amongst each other and to terminate the legal proceedings they had commenced as a result of the June 2, 2010 Shareholders’ Meetings.
At the Shareholders’ Meetings on June 2, 2010, our shareholders approved our financial statements as well as the payment oftheir conflicts. As a dividend of Ps. 1,000.0 million or Ps. 1.7825 per common share. At the General Ordinary Shareholders’ Meeting, the nominated representatives of the Series BBconsequence, during 2012 civil and commercial proceedings among AMP’s shareholders were announced. The capital reductionterminated. Additionally, AMP’s shareholders agreed to a comprehensive mechanism for decision-making (primarily by consensus, but with specific mechanisms aimed at avoiding deadlocks that could affect our operations), and accompanying modification ofAMP’s shareholders will continue developing our by-laws, however, were not approved at this meeting, asbusiness through the representative oftechnical assistance agreement. They also affirmed their intent to defend the Series BB shares stated that he did not have instructions on howrights granted to vote on these items.
On May 27, 2010, the members of the Nominations and Compensation Committee, through their President, announced that, in their opinion: (i) given that the time period, as requiredthem by the Mexican Securities Law as well as by our by-laws, forGovernment. The agreement further confirms the electionoriginal ownership percentage in AMP of our independent board members had passed since the last election held on April 28, 2009, in the vieweach of the Nominations and Compensation Committee, the term of our independent board members had ended; and (ii) given that the Chairman of the Board was neither nominated nor confirmed during the Ordinary Shareholders’ Meeting held on April 27, 2010, the term for the person holding this position had also ended. As a result, the Committee believed that the position of Chairman automatically corresponded to the first board member named during the deliberation of Item VII of the Ordinary Shareholders’ Meeting held on April 27, 2010, Mr. Demetrio Ullastres Llorente. Mr. Ullastres will remain in this position until our shareholders elect a new Chairman of the Board.its three partners.
Our Board of Directors held a meeting on June 2, 2010. This meeting was attended only by board members representing the Series BB shareholders, since the independent board members’ terms had ended as per the notification by the Nominations and Compensation Committee. At the meeting, the following independent board members were provisionally and unanimously elected: José Manuel Rincón Gallardo Purón, Ernesto Vega Velasco, Francisco Javier Fernández Carbajal, Francisco Glennie y Graue, León Falic, Jaime Cortés Rocha and Carlos Eduardo Bravo Almenar. The first four independent board members have held the position of independent board members since 2006.
The shareholders of CMA, holder of 33% of the shares of Aeropuertos Mexicanos del Pacífico, S.A. de C.V., our Strategic Shareholder and owner of 15% of our outstanding shares represented by all of the Series BB shares, are questioning the validity of the June 2, 2010 Board Meeting and the decisions by the Nominations and Compensation Committee declaring that the terms of the directors and the Chairman had expired.
On June 17, 2010, our Board of Directors held a meeting attended by the members of the Series BB shares and also by all the independent members named to the Board of Directors at the Board of Directors’ Meeting held on June 2, 2010. At this meeting, it was decided to:
Designate José Manuel Rincón Gallardo Purón, Ernesto Vega Velasco and Francisco Javier Fernández Carbajal as members of the Audit Committee. These members have served on the Audit Committee since 2008.
Designate Carlos Eduardo Bravo Almenar as a member of the Acquisitions Committee.
Hold an Ordinary and Extraordinary Shareholders’ Meetings on July 22, 2010.
Propose at the Ordinary Shareholders’ Meeting the ratification of all the independent members named provisionally to the Board of Directors at the Board of Directors’ Meeting held on June 2, 2010.
Propose at the Ordinary Shareholders’ Meeting a new Chairman of the Board of Directors.
Propose at the Ordinary Shareholders’ Meeting a member to represent the Series B shares on the Nominations and Compensation Committee.
Despite allegations by certain shareholders, under Mexican law, which governs in this case, all corporate actions are presumed to be legal and valid unless challenged through the appropriate channels and held to be invalid by a judge. Additionally, unless declared null and void by a judge, all consequences of such corporate actions are also presumed to be legal and valid under Mexican Corporate law. Consequently, we believe that our Board of Directors and board committees, including the Audit Committee, are duly organized. In addition, our officers, including our Chief Executive Officer, Chief Financial Officer, General Counsel, and the remaining members of our management team, are continuing with their normal responsibilities and our business continues to operate without material interference from the proceedings and disputes among certain of our shareholders.
To address these doubts, on June 14, 2010, we announced that under Mexican law all corporate actions are presumed to be legal and valid unless challenged through the appropriate channels and held to be invalid by a judge. Additionally, unless declared null and void by a judge, all consequences of such corporate actions are also presumed to be legal and valid under Mexican Corporate law.
For more information on the current composition of the board and board committees see Item 6 herein.
Arrangements with AMP and its Affiliates
The rules for the sale of the Series BB shares required AMP, us and the Ministry of Communications and Transportation to enter into a participation agreement, which established the framework for the technical assistance agreement and the Banco Nacional de Comercio Exterior, S.N.C., or Bancomext, trust agreement.
Pursuant to the technical assistance agreement and the participation agreement, AMP and its shareholders agreed to provide management and consulting services and transfer to us technical assistance and technical and industry expertise related to the operation of airports. The agreements have initial terms of approximately 15 years, expiring on August 25, 2014. The technical assistance agreement automatically renews for successive five-year terms unless one party provides the other a notice of termination at least 60 days prior to a scheduled expiration date. A decision by us to renew or cancel the technical assistance agreement is subject to the approval of 51% of Series B shareholders other than AMP or any related party of AMP (to the extent that AMP or any such related party holds Series B shares). The agreement will only remain in effect if AMP continues to hold at least 7.65% of our capital stock.
Subsequent to January 1, 2002, the technical assistance fee has been required to equal the greater of U.S.$ 4.0 million adjusted annually for inflation (measured by the U.S. Consumer Price Index) or 5% of our annual consolidated income from operations (calculated prior to deducting the technical assistance fee and depreciation and amortization and in each case determined in accordance with MFRS). We believe that this structure creates an incentive for AMP to increase our annual consolidated earnings.
The technical assistance agreement allows AMP, its shareholders and their affiliates to render additional services to us only if our Acquisitions Committee determines that these related parties have submitted the most favorable bid in a bidding process.process with at least three unrelated parties. This process is described in “Item 6,“Item 6, Directors, Senior Management and Employees—Employees – Board Committees”.”
In 2007, 20082011 and 2009,2012, we recognized expenses of U.S.$ 11.5 million,17,526 and U.S.$ 8.5 million and U.S.$8.6 million,101,075, respectively, pursuantthat were paid to AMP. Pursuant to the technical assistance agreement, plus additional expensesthe fee paid to AMP and its affiliates ofwas approximately U.S.$ 4,466, U.S.$ 32,8369.8 million and U.S.$ 459,502, respectively.
Through a competitive bidding process, in 2008 we contracted a project for the master development program for the period 2010-2014 with Aena Desarrollo Internacional, S.A. (AMP’s shareholder) for the amount of U.S.$ 0.7 million. During 2009 we paid U.S.$0.511.9 million for the project2011 and the remaining balance was paid in 2010. Additionally, in 2010 the Company paid to Aena U.S.$0.1 million for travel expenses incurred in 2009.2012, respectively.
Item 8. | Financial Information |
See “Item 18, Financial Statements” and our consolidated financial statements beginning on page F-1. Since the date of the financial statements, no significant change has occurred.
General
We are periodically involved in certain legal proceedings from time to time that are incidental to the normal conduct of our business, none of which is expected to have a material or adverse effect on our business. In addition to those legal proceedings in the ordinary course of our businesses, in recent years, we have also been subject, directly and indirectly, to the litigation proceedings that are summarized below.
Litigation related to Grupo México, S.A.B. de C.V. and suits seeking to void certain of our bylaws
On June 13, 2011, Grupo México announced that it intended to acquire more than 30% and up to 100% of our shares outstanding at that time, excluding treasury shares. Grupo México subsequently announced on March 29, 2012 that it was withdrawing its intention to make a tender offer for our shares.
Articles X and XII of our bylaws, among others, limit the ability of Series B shareholders, directly or with related parties, other than AMP, to hold more than 10% of our outstanding capital stock, and any shares held in excess of that amount must be sold in a public offering. In accordance with our bylaws, until the public offering of such shares takes place, such excess shares have no voting power and cannot be represented in any Shareholders’ Meeting.
Grupo México and certain of its subsidiaries commenced two legal proceedings, among others, seeking (i) to modify our bylaws to eliminate the foregoing limitations and (ii) to terminate AMP’s special rights that stem from AMP’s ownership of our Series BB shares. In particular, one subsidiary of Grupo México, Infraestructura y Transportes México, S.A. de C.V. (“ITM”), filed a legal proceeding against us on November 4, 2011, seeking to void AMP’s ownership of our Series BB shares as granted by the participation agreement between AMP and us, which would result in the termination of AMP’s veto,
appointment and other special rights. Additionally, ITM’s suit sought the repayment of all economic benefits conferred by us upon AMP during the period in which AMP has held our shares. We filed an initial reply in this proceeding on November 25, 2011. On March 7, 2012, we were notified by our external legal counsel that a ruling was issued in our favor, which found a lack of jurisdiction by the civil court due to the administrative nature of the claim. Although we received notice that this proceeding had concluded, a federal court later granted a directamparo appeal that had been filed by Grupo México on June 6, 2012. Therefore, on July, 13 2012, the legal proceeding was recommenced in the appropriate federal civil court. As of the filing of this report, this proceeding is in the notice stage and is still pending.
In October 2010, a legal proceeding was filed against us in a civil court in Mexico City. The complaint sought to have the court grant relief by, among others, declaring Articles X and XII of our bylaws null and void. The plaintiffs are Grupo México and its subsidiary, Infraestructura y Transportes México, S.A. de C.V. (“ITM”). On September 30, 2011, the court issued a favorable decision for the plaintiffs, and we appealed this decision. On February 25, 2013, we were notified that an intermediate appellate court had confirmed the lower court’s decision holding certain of our by-laws to be invalid. This decision is not yet final, as we filed a directamparo appeal on March 19, 2013, which will be resolved by a federal court. On April 10, 2013, we were informed that the court ordered the suspension of the civil courts’ decisions, pending the resolution of our appeal. Until a final decision not subject to appeal is issued, our by-laws remain valid and binding upon our shareholders. However, a final decision not subject to appeal that is adverse to our bylaws could adversely affect our operations in a manner that we cannot predict. Additionally, if successful, a final decision in the proceeding by ITM could affect AMP’s special rights. For additional information, see “Item 3,Risk Factors – AMP controls our management, and AMP’s interests may differ from those of other shareholders”.
As a result of the actions initiated by Grupo México, on July 12, 2011, an individual shareholder who represents 0.00001% of our total outstanding capital stock filed a lawsuit against us and our directors and officers and obtained a decision ordering us and our directors and officers to take all legal measures necessary to maintain and protect our bylaws, specifically Articles X and XII, and to ensure that shareholders adhere to them. The decision granted injunctive relief and ordered us and our directors and officers to take all legal measures necessary to maintain and protect our bylaws.
Under Mexican law, tender offers must be reviewed and approved by the CNBV. In compliance with the decision of the court requiring us to defend our bylaws, we initiated a protection proceeding in federal court in order to defend our bylaws. On March 1, 2012, a federal court of last resort upheld a preliminary injunction prohibiting the CNBV from issuing a decision regarding the public tender offer by Grupo México until this proceeding is resolved. In addition, on March 13, 2012, one of our subsidiaries obtained a preliminary injunction from a federal court of last resort also preventing the CNBV from making a decision with respect to Grupo México’s tender offer. These preliminary injunctions ensured that the CNBV would be prevented from issuing any decision regarding the public tender offer until the protection proceeding is resolved. On March 29, 2012, Grupo México announced that it had ended its tender offer for our shares; as a result, the proceedings were subsequently dismissed in federal court. We cannot predict how the courts will decide the pending proceedings concerning the validity of our bylaws and AMP’s control in relation to our operations nor the content or reach of any decision rendered.
Grupo México, S.A.B. de C.V. seeks to void certain resolutions adopted at our Corporate Shareholders’ Meetings
April 27, 2011 – Annual General Ordinary Shareholders’ Meeting
Prior to our General Shareholder’s Meeting held on April 27, 2011, Grupo México indicated its intent to appoint two members to our board of directors, one for each 10% ownership interest it held in us at the time. However, according to our bylaws as in effect on that date, ownership of our common stock is limited to 10%, and consequently, the right of representation on our board of directors and the right to
vote at our shareholders’ meetings is also limited to 10%. During the April 27, 2011 General Shareholder’s Meeting, Grupo México’s request was rejected, and Grupo México was asked to appoint a single board member in accordance with their rights under our bylaws. In response, Grupo México initiated legal action seeking to nullify the resolutions adopted regarding the designation of representatives of our Series B shares to our board directors. On May 27, 2011, a Civil Court provisionally suspended the related resolutions. We appealed the decision on June 17, 2011. Subsequently, the parties filed several legal proceedings, which have yet to be decided. As of the time of the filing of this report, this legal proceeding remains pending. However, although Grupo México may have the right to appoint two directors, we consider the influence on our control and decisions to be limited.
April 16, 2012 – Annual General Ordinary Shareholders’ Meeting
Following the annual General Ordinary Shareholders’ Meeting that took place April 16, 2012, we announced on June 4, 2012 that we had become aware of a lawsuit filed by Grupo México and Infraestructura y Transporte, S.A. de C.V., seeking to have the resolutions with respect to items VII, VIII and IX, adopted at the April 16, 2012 Shareholders’ Meeting, declared null and void. The resolution for item VII relates to the appointment of members of the board of directors that represent 10% or more of our Series “B” shares; the resolution for item VIII is relates to the appointment of members of the board of directors by Series “B” shareholders; and the resolution for item IX is related to the composition of the our board of directors. Similarly to the lawsuit filed by Grupo México following our April 27, 2011 shareholders’ meeting, this lawsuit relates to the limitations dictated by our bylaws, pursuant to which Grupo México was permitted to appoint only one director.
As a result of this lawsuit, a civil judge from the Sixteenth Civil Court in Mexico City suspended the above-mentioned resolutions that had been adopted at the April 16, 2012 meeting. The decision bars the person named at the meeting to replace the second director proposed by Grupo México from participating in any event as a member of the board of directors. Additionally, one of our directors, Laura Diez Barroso Azcárraga, was barred from undertaking any functions as alternate to the chairman, Mr. Eduardo Sánchez Navarro Redo.
We have both responded to the lawsuit and appealed the decision regarding the suspension of the resolutions. These actions have not been resolved, and we cannot predict how they will be resolved. However, although Grupo México may have the right to appoint two directors, we consider the influence on our control and decisions to be limited.
September 25, 2012 – Extraordinary Shareholders’ Meeting
On October 4, 2012, we announced that on October 3, 2012, we complied with the capital reduction approved at the Extraordinary Shareholders’ Meeting held on September 25, 2012. At the Extraordinary Shareholders’ Meeting, we succeeded in reaching a quorum of 75% of the shares entitled to vote in accordance with the provisions in our bylaws for calculating such percentages. Accordingly, a reduction in the amount of our fixed capital stock proportionally between the historical value of the capital stock and the value of the amount as adjusted for inflation through December 31, 2007 was approved, for a total amount of Ps. 870.0 million payable in cash in a proportional manner among the number of shares outstanding representing our capital stock on a date no later than October 3, 2012. In accordance with the approved capital reduction, we made a payment to Indeval (Institución para el Depósito de Valores), which was equivalent to Ps. 1.639281 per share outstanding.
In connection with the approved capital reduction and its impending disbursements, we complied with the resolutions of the Shareholders’ Meeting and made a payment to Indeval on October 3, 2012. However, after our payment to Indeval, Grupo México issued a press release announcing that the Fiftieth Judge from the Mexico City Civil Court had issued a decision that ordered us to immediately and
unconditionally suspend the resolution related to the capital reduction, although we were not properly notified by the court of the injunction. We thereby became aware of the lawsuit filed by Grupo México seeking the suspension of the resolutions adopted at the Extraordinary Shareholders’ Meeting held September 25, 2012. Despite not being notified by the competent court, and after we had complied with the resolutions and completed the required payment, we were then informed by Indeval that Indeval would suspend the disbursement of the funds deposited by us, as Indeval had been notified of this judicial injunction that presumably ordered us, not Indeval, to suspend the resolution related to the capital reduction. As of the date of this report, Indeval continues to hold the funds allocated for the capital reduction; we expect that Indeval will continue holding the funds until the injunction is resolved judicially.
We have answered the lawsuit and also appealed the decision regarding the suspension of the capital reduction approved at the Extraordinary Shareholders’ Meeting. The matters are still pending, and we cannot provide any assurance as to any outcome or the content of any final ruling.
We filed legal action against all the Mexican stock market brokers seeking adherence to our bylaws
In accordance with the decision of the Mercantile Judge that instructs us and our directors and officers to take all necessary legal measures to maintain and protect our bylaws (as described above), on February 15, 2012 we initiated a lawsuit against all Mexican stock market brokers seeking to defend our bylaws.
On February 29, 2012, we were informed that the court issued preliminary injunctions that require all Mexican stock market brokers, to:
1. Act in accordance with Mexican law, our bylaws and market regulations.
2. Uphold our bylaws, including Article X.
3. Not trade our shares for an individual, group or group of related entities, that could result in any way in the acquisition of an ownership position that exceeds the 10% maximum allowed by Article X of our bylaws.
4. Not acquire or, in any way, negotiate transactions involving our shares for Grupo México and ITM and any other entity that forms part of their business conglomerate, or is related thereto, since these entities have made known that they own an amount of our shares that is in excess of the maximum allowed by Article X of our bylaws.
On December 14, 2012, the State of Jalisco’s Fifth Mercantile Court issued a new ruling that lifted the injunctions restricting Mexican stock market brokers. On January 3, 2013, we appealed the decision before the appropriate judicial authority.
Based on the above, we, in defense of our corporate bylaws, had contested the ruling before the appropriate judicial authority. As of the date of this annual report, this proceeding remains pending.
We cannot predict the consequences from this proceeding or the future actions of the Mexican stock brokers.
Ejido Participants at Tijuana Airportand Guadalajara Airports
A portion of the landlands comprising the Tijuana International Airport wasand Guadalajara International Airport were expropriated by the Mexican government in 1970 and 1975 respectively, pursuant to its power of eminent domain. Prior to its expropriation, the land had been held by a group of individuals through a system of communal ownership of rural land known as anejido. The formerejidoejidos’ participants have asserted indemnity claims against the Mexican government challenging the 1970 and 1975 expropriation decree. Ourdecrees.
In the case of the Tijuana International Airportairport, our airport subsidiary has been joined in the proceedings, but only as an interested third party. During 2008, theejido received an unfavorable ruling, which it appealed, and subsequently, it received a judgment in its favor.The current judgment calls for the restitution of 320 hectares of land, although the precise area affected has yet to be assessed.determined. Depending on which particular arealand parcel is to be restituted,returned, this could affect the airport’s perimeter and could materially disrupt the airport’s current operations. We have contested this latest ruling in a second appeal, the outcome of which is currently pending. The terms of our concession require the Mexican government to provide us restitution for any loss of our use of the land subject to our concessions. Although no assurance can be given, we believe that the Mexican government would be liable for any operational disruption caused by theejido and would have to restore our rights of use of the public property assigned to us under the concession if we were to lose the second appeal.
Certain of the formerejido participants are currently occupying portions of the property on which we operate Tijuana International Airport that are not at present essential to the airport’s operations. Although these people are not currently interfering with the airport’s operations, their presence could limit our ability to expand the airport into the areas they occupy. In addition, there can be no assurance that the formerejido participants will not seek to disrupt the airport’s operations if their legal claims against the Mexican government are not resolved to their satisfaction.
Deductibility of certain payments toSimilarly, in the Mexican Airport and Auxiliary Services Agency
Pursuant to a management services agreement, our predecessor, the Mexican Airport and Auxiliary Services Agency, agreed to provide certain services to our airports for a temporary transition period in exchange for a management fee of 26.5%case of the gross monthly revenuesGuadalajara International Airport, two differentejidos have commenced proceedings in federal court during 2009, against the Ministry of eachCommunications and Transportation seeking to void the expropriation decree of our subsidiary1975. In November 2010, the Third District Court for Administrative Matters and Labor found in favor of theejidos. The ruling ordered the return of all expropriated property to theejidos and declared as null and void the concession holders. Pursuantgranted to the terms of this agreement, the Mexican Airport and Auxiliary Services Agency was only to provide these services until the date on which our strategic shareholder (AMP) acquired its 15% equity interestus in our capital stock on August 25, 1999. However, AMP was unable to provide these services starting on August 25, 1999 and, as a result, the Mexican Airport and Auxiliary Services Agency continued to provide these services after August 25, 1999 through November 15, 1999 without an agreed management fee for this period.
An agreement1998 specifically with respect to the management fee owedland expropriated by the 1975 decree. Although our Guadalajara airport has been joined only as an interested third party in the proceedings, we appealed the decision on November 10, 2011. On July 10, 2012, the court overturned the decision and remanded the proceedings in order to collect more material evidence. As of the date of this report, a final decision is still pending.
The terms of our concession require the Mexican government to provide us restitution for any loss of our use of the land provided for in our concessions. Although no assurance can be given, we believe that the Mexican government would be liable for any operational disruption caused by the proceedings with theejidos and would have to restore our rights of use for the period from August 25, 1999public property assigned to November 15, 1999 was not reached between us andunder the Mexican Airport and Auxiliary Services Agency until early in 2003. Upon reaching this agreement,concessions if we paid a total fee of Ps. 70.9 million (including value-added tax) for these services. A deduction for this expense was taken in 2003.
One of the requirements under Mexican income tax lawwere to deduct an expense in a fiscal period is that the service be rendered in the same period in which it is deducted. In light of this requirement, we requested confirmation from the Mexican Treasury Department that a deduction for the management fee for the period from August 25, 1999 through November 15, 1999 could be claimed in 2003, since an agreement with respect to the amount of this fee was not reached until 2003. During 2004, the Mexican Treasury Department responded to the request rejecting the criteria for deduction in 2003 that we proposed. In 2004, we initiated an annulment proceeding. In 2005, we received a favorable ruling with respect to the claim relating tolose our Aguascalientes International Airport, but received an unfavorable ruling in the first instance on the claims with respect to the Guanajuato, Guadalajara, Tijuana, Puerto Vallarta and Los Cabos airports. Subsequently, during 2006, we received a favorable sentence in the ultimate instance at the La Paz International Airport and unfavorable rulings in the ultimate instance at the Aguascalientes, Hermosillo, Mexicali and Los
Mochis airports. In June 2007, we received an unfavorable ruling in the ultimate instance for the Morelia International Airport. At the Aguascalientes and Morelia airports, the unfavorable rulings were based on the merits of the claim, for which reason the Company has recognized provisions of Ps. 1.7 million and Ps. 2.6 million, respectively, which include penalties and interest; the unfavorable sentences received at the Hermosillo, Mexicali and Los Mochis airports were based on deficiencies in form. In 2009, we have received favorable rulings for the Guanajuato, Guadalajara, La Paz, Puerto Vallarta, Los Cabos, Tijuana and Manzanillo airports. In May 2010, the Hermosillo International Airport received a favorable ruling, which dismissed the airport’s obligation to pay statutory employee profit sharing in the amount of Ps. 4.3 million.appeals.
Proceedings before the Mexican Treasury Department regarding asset tax
On December 31, 2003, we commenced two administrative proceedings before the Mexican Treasury Department seekingseeking: (i) a reduction of the asset basis of, or the applicable rate for purposes of calculating asset tax liability on, our airport concessions, so that such base only includes 15% of the concession valuevalue; and (ii) an increase of the recovery period of any asset tax paid. Both proceedings seek to reduce our effective tax rate. Based on the advice of our tax advisors, our board of directors agreed during its meeting on April 29, 2004 to commence legal proceedings if the Mexican Treasury Department rejected our position. The Mexican Treasury Department eventually rejected our position, and we commenced such proceedings in Mexican Federal Tax Court.In 2005, the tax court reached the decision to obligateruled that the Mexican Treasury Department to accept our method of calculating the asset tax base or grant us a specific tax benefit. The Mexican Treasury Department appealed this decision in federal court.
On May 12, 2006, the federal court with jurisdiction over six of our airports declared the appeal by the Mexican Treasury Department unfounded, finding that it was correct to base the asset tax applicable with respect to the Aguascalientes, Hermosillo, La Paz, Los Mochis, Morelia and Manzanillo airports only on 15% of the value of the concessions at those airports as requested by us (equivalent to
AMP’s pro rata interest in those concessions as a result of AMP’s 15% interest in us). As a result of this resolution, on August 29, 2006, the Mexican Treasury Department issued a notice confirming this methodology for those airports. On September 1, 2006, the federal court with jurisdiction over our remainingGuadalajara, Mexicali, Guanajuato, Los Cabos, Puerto Vallarta and Tijuana airports reached the same decision as for the aforementioned six airports;favorable decision; however, the Mexican Treasury Department appealed that decision and legal proceedings are still pending.decision.
As a result of the federal court decision and the final notice delivered to us by the Mexican Treasury Department with respect to our Aguascalientes, Hermosillo, La Paz, Los Mochis, Morelia and Manzanillo airports, in the last quarter of 2006 we recorded the effect of that resolution,decision, which resulted in an overall benefit of Ps. 208.6 million nominal pesos and was recognized in the income statement as a reduction of the valuation allowance (see Note 20.b14 of our audited consolidated financial statements). During 2009,From 2007 to 2010, we received a refund of Ps. 19.3158.5 million related to these airports, resulting inPs. 24.3 million were denied by the Mexican Treasury Authority. This decision was appealed by us without a favorable outcome; therefore there remains a pending balance of Ps. 42.925.8 million. At December 31, 2009,2012, the balances in aggregate for all six airports were: (i) asset taxes of Ps. 13.251.9 million; and (ii) a valuation allowance of Ps. 23.926.1 million, representing those amountsthe amount which we do not expect to recover.
In 2007, we petitioned the Mexican Treasury Department for a refund of the remaining taxes and interest we had overpaid with respect to the airports at Aguascalientes, Hermosillo, La Paz, Los Mochis, Morelia and Manzanillo for the period between 2002 and 2006. The Mexican Treasury Department refused to refund certain outstanding amounts that we had previously paid for five airports. We are currently in legal proceedings against the Mexican Treasury DepartmentConsequently, we filed a claim to recover these outstanding amounts.the amounts refused by the authorities.
In connection withDuring 2009, the legal proceedings overLa Paz International Airport was refunded the outstanding tax balances foramount it claimed, but the Manzanillo International Airport on March 6, 2009, an appeals court issued a resolution adverse to our interests by requiring the court of first instance to issue a new ruling
declaring that the authorities are not required to reimburse the amounts claimed by us. In May 11, 2009, the court issued a final ruling adverse to us and the Manzanillo airport paid the outstanding tax balance.
On March 31, 2009, the Morelia International Airport received an unfavorable resolution in the ultimate instance, denying thetheir request of the airport to recover the asset taxes previously paid from the period from January to May 2003. As of December 31, 2009, the amount of Ps. 9.0 million has beenwas eliminated from our accounts receivable and instead is accounted for in the tax line of the profit and loss statement. In January 2010, the Los Mochis International Airport received a refund for the recoverable tax in the amount of Ps. 25.6 million (including penalties and interest). In September 2010, the Aguascalientes International Airport received a refund for the recoverable tax in the amount of Ps. 1.0 million (including interest).
On January 22, 2010 the Hermosillo International Airport filed a judicial annulment against the unfavorable court resolution that denied the recovery of the asset tax from the years 2005 and 2006.
In January 2010, The amount that remains pending is Ps. 25.8 million. As of the Los Mochis International Airport receiveddate of this report, a refund for the recoverable tax in the amount of Ps. 25.6 million (including penalties and interest).resolution is still pending.
On May 7,June 5, 2009, our other six airports, the Guanajuato, Guadalajara, Mexicali, Los Cabos, Puerto Vallarta and Tijuana international airports received favorable resolutions in the second instance, allowing them to apply an asset tax base of only 15% of the value of the concessions, which represents the amount paid by AMP. The effect of this resolution iswas to force the lower court to review the case using the applicable tax laws. AtHowever, on May 20 and 24, 2011, we received certain resolutions related to a ruling issued on June 5, 2009. In these resolutions, the end of 2009,tax authority concluded that the six airports are still awaiting outcomeshave to calculate the asset tax base considering 100% of the review.assets utilized as part of their operations. Our management believes that these conclusions are based on improper arguments related to ownership percentages and apply tax consolidation rules that are not applicable to our airports. There are no additional instances to appeal this resolution. Based on the advice of certain of our external legal counsel, we do not believe that there are sufficient elements to recover the amounts paid and have therefore not recognized assets for such amounts in our audited consolidated statement of financial position.
Property tax claims by certain municipalities
We remain subject to ongoing real estate tax claims that have been asserted against us by the municipal authorities of Mexicali, Tijuana, Puerto VallartaGuadalajara and Hermosillo for the payment of property taxes with respect to the property on which we operate our airports in those cities.
The municipalitiesmunicipality of Puerto Vallarta and Hermosillo havehas initiated efforts to survey the area of our airportsairport there in order to determine the amount of property taxes owed. We challenged their actions through administrative proceedings, which are currently pending.
On May 19, 2010, the municipality of Tlajomulco, the municipality in which our Guadalajara airport is located, delivered a notice to the airport in which it seeks payment of property taxes. The notice, however, iswas factually inaccurate with respect to a number of items including ownership of the property, and asproperty. As a result, no further action on our part is needed at this time.time, and no proceeding was properly commenced.
In the case of the Tijuana airport, the municipal authority issued a second real estate tax claim against the airport on June 8, 2005. The court hadthen ordered the temporary encumbrance of certain of our assets, including our concession to operate the Tijuana International Airport, pending our deposit of a bond with the court as provisional security, in accordance with Mexican judicial procedures, pending the final resolution of the underlying claims. Although the encumbered assets did not affect the operation of the airport, on February 9, 2006, a bond was issued by a financial institution on behalf of the Tijuana airport for Ps. 141.8 million (nominal pesos) in order to release the encumbrance. On March 25, 2008, the Tijuana airport received an initial ruling declaring null and void the tax claim by the municipal authority but upholding the right of the municipal authorities to assess real estate taxes over commercial areas. We filed a legal proceeding againstAlthough we appealed the resolution but limitedruling with respect to the court’s decision to sustain the municipal authorities’ right to claimassessment of real estate taxes over the commercial areas. Although this initial ruling is currently being appealed by us,areas, we also petitioned that the bond be refunded in the interim because the municipality did not appeal any matter in the resolution. Accordingly, on February 7, 2009, the Company’sour line of credit for the issuance of the bond was cancelled. Our challenge to the second request is still pending. On October 20, 2010, the municipal authority of Tijuana issued a third request for the repayment of real estate taxes for 2000 through 2010. We and our legal counsel believe that this request for payment of taxes is not valid since local courts had already ruled the tax claims for the years 2005 and 2006 null and void. In conjunction with its third request, the Tijuana municipal authority requested that we make a full payment of the claimed taxes of Ps. 269.2 million within three days of receiving the request. The municipal authority also listed a number of assets that they believed could be seized if payment was not made. Because we and our legal counsel believe that this request for repayment is also null and void, we commenced legal proceedings against the municipal authority. The legal proceeding is currently pending. On February 7, 2013, the Tijuana municipal authority filed a fourth real estate tax claim for the period from 2008 to 2012 against the Tijuana airport in the amount of Ps. 15.2 million, demanding payment within three business days. On February 28, 2013, we began an annulment proceeding against the claim. On March 5, 2013 the authority established the amount to be guaranteed, and on March 8, 2013 we presented a bond to guarantee the amount claimed.
We have also achieved the dismissal of certain claims by the municipal government of Mexicali for Ps. 89.0 million. A court had ordered the temporary encumbrance of 25% of the revenues from the parking garage that we operate at the Mexicali airport to guarantee the property tax claims of the Mexicali municipal government. The cumulative amount of such encumbrances iswas Ps. 6.3 million. During 2006, we obtained a favorable ruling in the first instance, which the municipality appealed. In March 2008, the courts resolved the appeal in our favor and ordered that the Mexicali municipal government return to us the revenues that were improperly seized by the Mexicali municipal authority. Accordingly, the Company haswe have claimed a refund for the outstanding amount, a part of which was received in April 2011; however, there is still pending.a remaining balance of Ps. 1.3 million which continues to be contested. On February 21, 2013, the Mexicali
municipal authority once again filed a real estate tax claim for the 2008-2012 period against the Mexicali airport in the amount of Ps. 0.3 million, demanding payment within three business days. We will file an annulment against this claim and will present a bond to guarantee this amount once the authority states the amount to be guaranteed. In the case of our La Paz airport, the court declared the tax claim null. With regards to our Puerto Vallarta airport, the outstanding claims by the municipal authority were dismissed on February 16, 2012.
We do not believe that liabilities related to any claims or proceedings against us are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition or results of operations because, should a court determine that these taxes must be paid in response to any future proceedings, we believe that the Mexican government, as the owner of the property upon which we operate our airports, would be responsible for paying these taxes directly, and the obligation to pay these taxes is not otherwise contemplated in the terms of our concessions.
Other claims by certain municipalities
InThe Guadalajara we areairport is subject to claims by the municipality regarding our failure to obtain certain municipal licenses. We do not believe that we are subject to the license requirements at issue, and we have initiated proceedings to challenge the municipality’s claims, which to date have been resolved in our favor.
Federal tax proceedings against Aguascalientes, La Paz, Morelia, Los Mochis and Mexicali airports
The Mexican Tax Authority (Servicio de Administración Tributaria, or SAT), in connection with its review of year 2005, sent us official notices in 2008 and 2009 stating that under its criteria the Aguascalientes, La Paz, Morelia, Los Mochis and Mexicali airports incorrectly applied the fiscal amortization rates with regard to the value of their concessions.
With respect to the Aguascalientes International Airport, in April 2009 we initiated legal proceedings in tax court against the Aguascalientes SAT’s local offices to challenge SAT’s findings, based on our contention that SAT did not take into consideration all the relevant legal matters concerning our position on amortization. In 2009, the SAT imposed a fine of Ps. 1.7 million, which was paid by the airport. However, on February 24, 2010, the airport filed for an annulment againstof the resolution issued by the tax authorities that establishes the airport inappropriately applied the fiscal amortization tax rate over the value of its concession. We obtained an unfavorable decision. On January 17, 2011 the airport filed an appeal, but on June 16, 2011 the claim was denied. We filed an appeal for review by the Mexican Supreme Court, and we subsequently lost the appeal in 2012. Therefore, the fine previously paid was recorded in our consolidated statement of comprehensive income, resulting in a decrease of our net income by Ps. 1.7 million in 2012.
On February 12, 2010, the Morelia International Airport filed an administrative proceeding against the resolution issued by the tax authority that establishes that Morelia International Airport applied a fiscal amortization rate in excess of its concession value. Our external counsel believesIn August 2010, the tax authority required payment of the back taxes and ordered a temporary encumbrance of some of our assets to guarantee payment of any potential amounts owed. We paid a fine and secured a bond to guarantee the back taxes in order to avoid the temporary encumbrance. On October 5, 2011, the Morelia airport received an unfavorable ruling; therefore, on October 26, 2011, it filed an appeal on constitutional grounds against that unfavorable decision, which was partially ruled in favor of the airport in September 2012. Subsequently, the tax authority filed an appeal against this decision, which was resolved negatively for the airport on February 28, 2013. Accordingly, on March 14, 2013, we have sufficient evidencepaid Ps. 2.9 million to obtainthe authority, after which this proceeding was concluded.
On August 18, 2011, the Mexicali International Airport received a final unfavorable decision, and the tax adjustment resulted in a decrease of our net income by Ps. 3.4 million in 2011.
On October 3, 2011, the La Paz International Airport received a favorable resolution.
Claim against our Guadalajara airport subsidiary
In August 2005, we entered into a construction contract with Grupo de Ingeniería Universal, S.A. de C.V., or GIUSA, fordecision in the development of a new segment of the Guadalajara International Airport’s apron. GIUSA delayed the project and we therefore executed the performance bond posted by GIUSA in an amount equal to 20% of the total contract value. However, we were not able to obtain such execution, because GIUSA initiated legal proceedings against us in September 2006, claiming breach of contract and seeking the full contract amount and additional damages, for a total of Ps. 43.0 million. During 2007, we obtained a favorable sentence in first instance, which was appealed by GIUSA. Thethe tax authority. On September 7, 2012, the Court issued a resolution in favor of the tax authority and remanded the case to the lower court with instructions to modify its decision based on the applicable law in 2005. On November 14, 2012, the lower court issued its modified resolution. We will file an appeal also resultedagainst this decision, in order to have the law of 1998 recognized.
On October 3, 2011, the Los Mochis International Airport filed an appeal of the tax authority resolution establishing a favorable decisionfiscal amortization rate lower than we believe is applicable, which was concluded unfavorably for the Companyairport in 2008.July 2012. As a result, GIUSAthe airport filed a second appeal. On May 3, 2010, the Company received a final favorable decision against the GIUSA claims.legal proceeding in August 2012, which is still pending.
Renewal of Hotel Lease at Guadalajara International Airport
Coco Club was granted the right by the Mexican Airport and Auxiliary Services Agency to operate the following commercial space at our Guadalajara International Airport in exchange for the construction and remodeling of certain commercial areas and infrastructure at the airport: (i) the commercial space located in the hallway leading to the gate area for domestic flights, (ii) the majority of the commercial space in the gate area itself, (iii) the commercial space in the bridge connecting the airport to the airport hotel and (iv) the hotel itself. In September 1998, Coco Club transferred all of these rights to a third party except for the right to operate the hotel for a period of 15 years from March 1993 in exchange for its obligation to construct such hotel. In May 2004, we recovered the right to operate the commercial areas previously operated by the third party that received its rights from Coco Club. Subject to the satisfaction of certain conditions, under the lease to operate the hotel, Coco Club was granted the right to renew the contract and continue operating the hotel for another 15-year period from March 2008 at below-market rates. Because we do not believe that Coco Club has satisfied all such conditions, we have not renewed the lease to operate the hotel. As a result, in April 2008 we initiated legal proceedings against Coco Club to declare the lease null and void due to Coco Club’s failure to satisfy all conditions in the prior lease agreement. TheseOn October 31, 2011, we received a favorable decision for the return of the hotel to the airport. The decision was appealed by Coco Club on December 14, 2011. On October 19, 2012, the court ordered the eviction of Coco Club and instructed the airport to take possession of the hotel. Currently, we are in the process of taking the necessary steps to repossess the hotel.
Litigation related to the dispute among our shareholders
In the past, we had become party, either directly or as a third party, to a number of proceedings of different types derived from, or related to, certain disputes among AMP’s shareholders. Notwithstanding these proceedings, on December 1, 2011, we were advised by AMP’s shareholders that they had entered into an agreement to end their dispute and to terminate the legal proceedings remainthey had commenced as a result of their conflicts. As a result, during 2012, all proceedings among AMP’s shareholders, including legal proceedings brought against us, were terminated. Additionally, we were informed that AMP’s shareholders agreed to a comprehensive mechanism for decision-making (primarily by consensus, but with specific mechanisms aimed at avoiding deadlocks that could affect our operations), and AMP’s shareholders will continue developing our business. They also affirmed their intent to defend the rights granted to them by the Mexican Government. The agreement further confirms the original ownership percentage in AMP of each of its three shareholders.
Infractions of the Mexican Securities Law alleged by the CNBV
On April 25, 2011, we received a formal notice from the CNBV in which it initiated a proceeding against us for alleged violations of Mexican disclosure statutes primarily in connection with disputes among AMP’s shareholders during 2010.
This notice was the first stage of an administrative proceeding required to impose a fine on us. On June 3, 2011, we exercised our right to appeal the determination of the CNBV and to file evidence to contest this determination. As of the date of the filing of this annual report, a determination by the CNBV is still pending. See “Item 3,Risk Factors — Risks Related to Our Controlling Shareholder — AMP controls our management, and AMP’s interests may differ from those of other shareholders” and “Item 7,Major Shareholders and Related Party Transactions — Major Shareholders”.
In addition, a criminal investigation was commenced nearly simultaneously based on the same allegations as above. Our external counsel responsible for representing us in the criminal investigation has informed us that the CNBV issued a notice of no action with regards to potential criminal infractions; subsequently, the Attorney General of Mexico (theProcuraduría General de la República, or PGR) issued an administrative order by which the criminal procedure was concluded.
Despite the conclusion of the criminal investigation, the administrative proceeding is still pending. We can provide no assurances as to what, if any, additional actions the CNBV may take in the administrative matter. Nor can we provide assurances that we will be successful in any subsequent legal actions we may take in response to the CNBV. If we are not successful in any subsequent legal actions that we may take, the maximum amount of the fine that could be levied against us for all alleged violations is approximately Ps. 31.1 million (approximately U.S. 2.4 million).
The declaration, amount and payment of dividends are determined by a majority vote of our shareholders present at a shareholders’ meeting and generally, but not necessarily, on the recommendation of the board of directors, which is empowered by Article 18 of our bylaws to set our dividend policies. So long as the Series BB shares represent at least 7.65% of our outstanding capital stock, the declaration and payment of dividends will require the approval of the holders of a majority of the Series BB shares.
Mexican law requires that at least 5% of a company’s net income each year (after profit sharing and other deductions required by Mexican law) be allocated to a legal reserve fund until such fund reaches an amount equal to at least 20% of the company’s capital stock from time to time (without adjustment for inflation). Our legal reserve fund was Ps. 344.3553.5 million (historical value) at December 31, 20092012 (excluding reserve amounts corresponding to 20092012 net income).
Mexican companies may pay dividends only out of earnings (including retained earnings after all losses have been absorbed or paid up) and only after such allocation to the legal reserve fund. The reserve fund is required to be funded on a stand-alone basis for each company, rather than on a consolidated basis. The level of earnings available for the payment of dividends is determined under MFRS. Our subsidiaries are required to allocate earnings to their respective legal reserve funds prior to paying dividends to Grupo Aeroportuario del Pacífico, S.A.B. de C.V. We are also required to allocate earnings to our legal reserve fund prior to distributing any dividend payments to our shareholders.
Dividends paid to non-resident holders with respect to our Series B shares and ADSs are currently not subject to Mexican withholding tax. Dividends that are paid from a company’s distributable earnings that have not been subject to corporate income tax will be subject to a corporate-level dividend tax (retained against cumulative net income and payable by us) calculated on a gross-up basis by applying a factor of 1.38891.4286 for 2007, 2008 and 2009. Corporate tax rates of 28% for 2007, 2008 and 2009 were applied2011 to 2013. From 2011 to 2013 the results. From 2010 to 2012 thecorporate tax rate will be 30%,; for 2014, it will
be 29% for 2013 and 28% for 20142015 and thereafter andthereafter; as a result, the gross-up factor will be 1.4286, 1.4085 and 1.3889, respectively. This corporate-level dividend income tax on the distribution of earnings may be applied as a credit against Mexican corporate income tax corresponding to the fiscal year in which the dividend was paid or against the Mexican corporate income tax of the two fiscal years following the date on which the dividend was paid.
Distributions made by us to our shareholders other than as dividends (in the manner described above), including capital reductions, amortization of shares or otherwise, would be subject to taxation in Mexico, including withholding taxes. The tax rates applicable and the method of assessing and paying taxes applicable to any such non-dividend distributions will vary depending on the nature of the distributions.
We paid aggregate dividends of Ps. 1,171.6 million1.04 billion in 2007, Ps. 1,122.0 million in 20082011 and Ps. 1,200.0 million1.13 billion in 2009.
At the General Ordinary Shareholders’ Meetings held on June 2, 2010, we declared a dividend of Ps. 1,000.0 million or Ps. 1.7825 per common share. The first dividend payment of Ps. 750.0 million was made on June 15, 2010. The second dividend payment of Ps. 250.0 million will be made on or before November 30, 2010.2012.
Under our dividend policy adopted at the General Extraordinary Shareholders’ Meeting held on April 15, 2005, our annual dividend is expected to consist of two components. The first component is a fixed amount, which was Ps. 450 million for 2005 (for the dividend paid in 2006) and is intended to increase gradually in future years. Second, the dividend policy contemplates that our annual dividend will include any cash and cash equivalents we hold (as reflected in our balance sheet as of the month-end prior to the dividend payment, after deducting the fixed component) in excess of our “minimum cash balance.” For purposes of our policy, the “minimum cash balance” is the amount of cash and cash equivalents that our board of directors determines is necessary to cover the minimum amount of expenses and investments expected to be incurred in the fiscal year during which the dividend payment is made and the subsequent fiscal year. Dividends are expected to be made payable in cash and in one or more payments as determined in the relevant general ordinary shareholders meeting approving dividends.
The declaration, amount and payment of dividends pursuant to the policy described above are subject toto; (i) compliance with applicable law regarding the declaration and payment of dividends with respect to any year including the establishment of the statutory legal reserve fund,fund; and (ii) the absence of any adverse effect on our business plan for the current or subsequent fiscal year as a result of the payment of any dividend. We cannot provide assurance that we will continue to pay dividends or that future dividends will be comparable to our previous dividends. Our ability to pay dividends may be restricted under the unsecured peso-denominated credit agreements with Banamex, HSBC and HSBC,BBVA, to which some of our operating subsidiaries are parties. See “Item 5,Operating and Financial Review and Prospects—Prospects – Liquidity and Capital Resources.Resources”. Our dividend policy may also be amended at any time by our shareholders.
As of December 31, 2009,2012, we had accumulated approximately Ps. 1,006.9 million1.3 billion of distributable earnings that had been subject to the corporate income tax and that could be declared at the relevant shareholders’ meeting and paid to shareholders free of the corporate level dividend tax.
We pay dividends in pesos. In the case of Series B shares represented by ADSs, the cash dividends are paid to the depositary and, subject to the terms of the Deposit Agreement, converted into and paid in U.S. dollars at the prevailing rate of exchange, net of conversion expenses of the depositary and applicable Mexican withholding tax. Fluctuations in exchange rates will affect the amount of dividends that ADS holders receive.
Item 9. | The Offer and Listing |
The following table sets forth, for the periods indicated, the high and low closing prices for (i) the ADSs on the New York Stock Exchange in U.S. dollarsdollars; and (ii) our common shares on the Mexican Stock Exchange in pesos. See “Item 3,Key Information—Information – Exchange Rates” for the exchange rates applicable during the periods set forth below. The information set forth in the table below reflects actual historical amounts at the trade dates and has not been restated in constant pesos.
Year ended December 31, | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||
Low | High | Low | High | |||||
2006 | 28.30 | 39.75 | 30.03 | 43.6 | ||||
Year ended December 31, | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||
Low | High | Low | High | |||||
2007 | 38.00 | 57.63 | 41.66 | 62.25 | ||||
Year ended December 31, | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||
Low | High | Low | High | |||||
2008 | 15.42 | 48.92 | 21.08 | 52.45 | ||||
First Quarter | 39.69 | 48.92 | 41.08 | 52.45 | ||||
Second Quarter | 29.37 | 48.24 | 30.41 | 50.90 | ||||
Third Quarter | 24.55 | 32.22 | 26.96 | 31.96 | ||||
Fourth Quarter | 15.42 | 24.93 | 21.08 | 31.46 | ||||
Year ended December 31, | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||
Low | High | Low | High | |||||
2009 | 13.95 | 32.68 | 21.57 | 42.23 | ||||
First Quarter | 13.95 | 23.44 | 21.57 | 32.15 | ||||
Second Quarter | 17.98 | 25.84 | 23.00 | 33.81 | ||||
Third Quarter | 24.23 | 30.49 | 32.50 | 40.31 | ||||
Fourth Quarter | 24.95 | 32.68 | 32.80 | 42.23 | ||||
Monthly Prices | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||
Low | High | Low | High | |||||
December 2009 | 28.19 | 32.68 | 36.50 | 42.23 | ||||
January 2010 | 30.88 | 35.49 | 40.41 | 45.00 | ||||
February 2010 | 30.40 | 34.34 | 40.25 | 44.80 | ||||
March 2010 | 33.69 | 37.98 | 43.11 | 47.97 | ||||
April 2010 | 33.79 | 37.71 | 42.01 | 46.40 | ||||
May 2010 | 30.27 | 35.53 | 37.00 | 46.00 |
Year ended December 31, | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||||||||||
Low | High | Low | High | |||||||||||||
2008 | 15.42 | 48.92 | 21.08 | 52.45 | ||||||||||||
2009 | 13.95 | 32.68 | 21.57 | 42.23 | ||||||||||||
2010 | 28.18 | 41.99 | 37.07 | 51.00 | ||||||||||||
Year ended December 31, | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||||||||||
Low | High | Low | High | |||||||||||||
2011 | 32.18 | 42.72 | 44.80 | 51.13 | ||||||||||||
First Quarter | 36.92 | 42.49 | 44.85 | 51.13 | ||||||||||||
Second Quarter | 39.43 | 42.72 | 46.25 | 50.51 | ||||||||||||
Third Quarter | 33.21 | 41.08 | 45.64 | 48.44 | ||||||||||||
Fourth Quarter | 32.18 | 35.66 | 44.80 | 47.90 | ||||||||||||
Year ended December 31, | U.S.$ per ADR(1) | Pesos per Series B Share | ||||||||||||||
Low | High | Low | High | |||||||||||||
2012 | 34.13 | 62.58 | 44.00 | 74.70 | ||||||||||||
First Quarter | 34.51 | 39.23 | 46.77 | 51.00 | ||||||||||||
Second Quarter | 34.13 | 40.41 | 44.00 | 53.10 | ||||||||||||
Third Quarter | 34.87 | 43.62 | 49.59 | 55.00 | ||||||||||||
Fourth Quarter | 41.77 | 62.58 | 51.43 | 74.70 | ||||||||||||
U.S.$ per ADR(1) | Pesos per Series B Share | |||||||||||||||
Low | High | Low | High | |||||||||||||
Monthly Prices | ||||||||||||||||
November 2012 | 46.76 | 52.14 | 61.67 | 68.84 | ||||||||||||
December 2012 | 50.78 | 57.49 | 65.91 | 74.70 | ||||||||||||
January 2013 | 56.69 | 62.58 | 72.53 | 80.00 | ||||||||||||
February 2013 | 60.08 | 64.16 | 74.70 | 81.70 | ||||||||||||
March 2013 | 54.52 | 61.69 | 68.20 | 78.67 | ||||||||||||
April 2013(2) | 60.75 | 65.95 | 74.95 | 79.85 |
(1) | 10 Series B shares per ADR. |
(2) | As of April 9, 2013. |
Temporary Suspension of Trading
On June 2, 2010, due to the events and uncertainties surrounding the April 27, 2010 General Ordinary and Extraordinary Shareholders’ Meetings and the subsequent period leading up to the suspension, trading of our shares on the Mexican Stock Exchange was suspended until uncertainties were clarified. As a result, trading of our shares was also halted on the New York Stock Exchange. After we issued press releases on June 11, 2010 and June 14, 2010, explaining the events surrounding the shareholders’ meetings, trading of our shares resumed on both the Mexican Stock Exchange and the New York Stock Exchange on June 14, 2010. See “Item 7,Major Shareholders and Related Party Transactions – Major Shareholders – Shareholder Dispute”.
TRADING ON THE MEXICAN STOCK EXCHANGE
The Mexican Stock Exchange, located in Mexico City, is the only stock exchange in Mexico. Founded in 1894 and in continuous operations since 1907, the Mexican Stock Exchange is organized as a Mexican corporation (sociedad anónima bursatil de capital variable) operating under a concession granted by the Ministry of Finance and Public Credit (SHCP). Securities trading on the Mexican Stock Exchange occurs each business day from 8:30 a.m. to 3:00 p.m., Mexico City time.
Since January 1999, all trading on the Mexican Stock Exchange has been effected electronically. The Mexican Stock Exchange may impose a number of measures to promote orderly and transparent trading in securities, including the operation of a system of automatic suspension of trading in shares of a particular issuer when price fluctuation exceeds certain limits. The Mexican Stock Exchange may also suspend trading in shares of a particular issuer as a result of:
non-disclosure of material events; or
changes in the offer or demand, volume traded, or prevailing share price that are inconsistent with the shares’ historical performance and cannot be explained through publicly available information.
The Mexican Stock Exchange may reinstate trading in suspended shares when it deems that the material events have been adequately disclosed to public investors or when it deems that the issuer has adequately explained the reasons for the changes in offer and demand, volume traded, or prevailing share price. Under current regulations, the Mexican Stock Exchange may consider the measures adopted by the other stock exchanges in order to suspend and/or resume trading in an issuer’s shares in cases where the relevant securities are simultaneously traded on a stock exchange outside of Mexico.
Settlement on the Mexican Stock Exchange is effected three business days after a share transaction. Deferred settlement is not permitted without the approval of the Mexican National Banking and Securities Commission, even where mutually agreed. Most securities traded on the Mexican Stock Exchange are on deposit with theS.D. Indeval, S.A. de C.V. Institución para el Depósito de Valores, or INDEVAL,Indeval, a privately owned securities depositary that acts as a clearinghouse, depositary, and custodian, as well as a settlement, transfer, and registration agent for Mexican Stock Exchange transactions, eliminating the need for physical transfer of securities.
Suspension of Trading
On June 2, 2010, due to the events and uncertainties surrounding the April 27, 2010 General Ordinary and Extraordinary Shareholders’ Meetings and the subsequent period up until the suspension, trading of our shares on the Mexican Stock Exchange was suspended. As a result, trading of our shares was also halted on the New York Stock Exchange. After we issued press releases on June 11, 2010 and June 14, 2010, explaining the events surrounding the Shareholders’ Meetings, trading of our shares resumed on both the Mexican Stock Exchange and the New York Stock Exchange on June 14, 2010. See “Item 7,Major Shareholders and Related Party Transactions—Major Shareholders—Shareholder Dispute.”
Item 10. | Additional Information |
Organization and Register
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. is a corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico under the Mexican Companies Law (Ley General de Sociedades Mercantiles) and the Mexican Securities Market Law. It is registered with the Public Registry of Commerce of Mexico City under the number 238,578.
Purpose
Our main corporate purpose is to operate airports pursuant to 12 airport concessions.
Bylaws
This section summarizes certain provisions of Mexican law and ourestatutos sociales(bylaws).
At our Extraordinary Shareholders’ Meeting held on October 27, 2006, our shareholders adopted resolutions amending and restating of our bylaws to organize the company as asociedad anónima bursátil(a form newly required by law for publicly traded companies in Mexico), and to conform our bylaws to the provisions of the new Securities Market Law. Many of the changes related to the enhancement of our corporate governance.
During 2010, our Audit Committee proposed, to our board of directors, an amendment to our bylaws relating to the Corporate Practices articles (Practicas Societariasas described in the Mexican Securities Market Law) in order to more closely align our bylaws with the terms of the Mexican Securities Market Law with respect to Corporate Practices. After reviewing the amendment proposal, our board of directors instructed the Audit Committee to submit the proposal to the CNBV to obtain their opinion regarding how the amended articles compared with the Mexican Securities Market Law, specifically as it relates to Corporate Practices. In response, the CNBV provided their recommendations both with respect to the specific consultation as well as with respect to other articles contained in the proposed amendment. We accepted the CNBV’s recommendations and re-submitted the proposed amendments to the CNBV. As of the date of this report, we have not received a response from the CNBV.
Board of Directors
Our bylaws provide that our board of directors will generally have 11 members (increasing to 12 or 13 members only when necessary to preserve minority shareholders’ voting rights in cases of multiple appointments by persons with 10% interests (as described below)).
At each shareholders’ meeting for the election of directors, the holders of Series BB shares are entitled to elect four directors. The remaining members of the board of directors are to be elected by the holders of the Series B shares.
Each person (or group of persons acting together) holding 10% of our capital stock in the form of Series B shares is entitled to appoint one director. The remaining positions on the board of directors will be filled based on the vote of all holders of Series B shares that have not elected to appoint a director by virtue of owning 10% of our capital stock. The candidates to be considered for election as directors by the Series B shareholders are proposed to the shareholders by the Nominations and Compensation Committee. All directors are elected based on a simple majority of the votes cast at the relevant shareholders’ meeting. Our bylaws do not currently require mandatory retirement of directors after they reach a certain age. The compensation of our directors is proposed by the Nominations and Compensation Committee to all of our shareholders at shareholders’ meetings for their approval.
Pursuant to the Securities Market Law, 25% of our directors must be independent within the definition of that term specified therein.
Authority of the Board of Directors
The board of directors is our legal representative. The powers of the board include, among others, the following:
to define our strategic planning decisions and approve our annual business plans and investment budgets,
to approve our master development programsMaster Development Programs and modifications thereto,
to call shareholders’ meetings and act upon shareholders’ resolutions, and
to create special committees and grant them the powers and authority as it sees fit, provided that said committees will not be vested with the authorities which by law or under our bylaws are expressly reserved for the shareholders or the board of directors.
Meetings of the board of directors will be validly convened and held if a majority of the members are present. Resolutions at said meetings will be valid if approved by a majority of the members of the board of directors, unless our bylaws require a higher number. Notwithstanding the board’s authority, under general principles of Mexican law, our shareholders, pursuant to a decision validly taken at a shareholders’ meeting, may at any time override the board.
Powers of Series BB Directors
The Series BB directors are entitled to: (i) appoint and remove our chief executive officer and our other top-level executive officers (upon consultation with our Nominations and Compensation Committee);, (ii) appoint three members of the Operating Committee and their respective alternates;alternates, (iii) appoint 20% of the total members of the Audit Committee, the Acquisitions Committee and the Nominations and Compensation Committee (a minimum of one member per committee), and their respective alternatives;alternatives and (iv) consent to the appointment of individuals appointed to the Operating Committee who are not members of our board of directors or our officers.
In addition to the foregoing, each of the following actions of our board of directors, among certain others, may only occur with the approval of the Series BB directors:
approval of our airports’ five-year master development programsMaster Development Programs or amendments thereto;
approval of our annual business and investment plans;
approval of capital expenditures outside of our annual investment plans;
approval of any sale of our fixed assets, individually or jointly, in an amount exceeding U.S$3.0 million;
approval for us to enter into any type of loan or credit agreement, other than for certain loans granted by us to our subsidiaries;
• | approval of the granting by us of guarantees (avales) or other security interests other than for the benefit of our subsidiaries; |
proposing to increase our capital stock or that of our subsidiaries;
approval of sales of shares in our subsidiaries;
approval of our dividend policies; and
proposing individuals to join our Audit Committee or our Nominations and Compensation Committee.
Our Capital Stock
The following table sets forth our authorized capital stock and our issued and outstanding capital stock as of June 25, 2010:April 5, 2013:
Capital Stock
Authorized | Issued and outstanding | |||||||
Capital stock: | ||||||||
Series B shares | 476,850,000 | 476,850,000 | ||||||
Series BB shares | 84,150,000 | 84,150,000 | ||||||
Total | 561,000,000 | 561,000,000 |
All ordinary shares confer equal rights and obligations to holders within each series. The Series BB shares have the voting and other rights described below.
Our bylaws provide that our shares have the following characteristics:
Series B:Series B shares currently represent 85% of our capital, and may represent up to 100% of our share capital. Series B shares may be held by any Mexican or foreign natural person, company or entity, except for foreign governments.
Series BB:Series BB shares currently represent 15% of our capital and may not represent a greater percentage of our share capital. Like Series B shares, Series BB shares may be held by any Mexican or foreign natural person, company or entity, except for foreign governments and subject to the other requirements of our bylaws.
Under the Mexican Airport Law and the Mexican Foreign Investments Law (Ley de Inversión Extranjera), foreign persons may not directly or indirectly own more than 49% of the capital stock of a holder of an airport concession unless an authorization from the Mexican Commission of Foreign Investments is obtained. We have obtained this authorization, and as a consequence these restrictions do not apply to our Series B or Series BB shares.
Series BB shares are subject to transfer restrictions under our bylaws and generally must be converted to Series B shares before they can be transferred. Up to 49% of the Series BB shares can be converted into Series B shares at any time. The remaining 51% of Series BB shares could not be converted into Series B shares before August 25, 2009 absent prior approval by the Ministry of Communications and Transportation. Thereafter and until August 25, 2014, one fifth of such 51% may be converted each year. On or after August 25, 2014, all of the Series BB shares may be converted into Series B shares if (i) the Technical Assistance Agreement between AMP and us has not been renewedrenewed; and (ii) the Series BB shareholders so request. Notwithstanding the foregoing, if at any time after August 25, 2014, Series BB shares represent less than 7.65% of our share capital, those shares will be mandatorily converted into Series B shares and the Technical Assistance Agreement will be terminated.
Voting Rights and Shareholders’ Meetings
Each Series B share and Series BB share entitles the holder to one vote at any general meeting of our shareholders. Holders of Series BB shares are entitled to elect four members of our board of directors and holders of Series B shares are entitled to elect the remaining members of the board of directors.
Under Mexican law and our bylaws, we may hold three types of shareholders’ meetings: ordinary, extraordinary, and special. Ordinary shareholders’ meetings are those called to discuss any issue not reserved for extraordinary shareholders’ meeting. An annual ordinary shareholders’ meeting (our annual general meeting) must be convened and held within the first four months following the end of each fiscal year to discuss, among other things, the report prepared by the board on our financial statements, the appointment of members of the board of directors, the declaration of dividends and the determination of compensation for members of the board.
Extraordinary shareholders’ meetings are those called to consider any of the following matters:
the extension of our duration or our voluntary dissolution;
an increase or decrease in our minimum fixed capital;
a change in corporate purpose or nationality;
any transformation, merger or spin-off involving the company;
any stock redemption or issuance of preferred stock or bonds;
the cancellation of the listing of our shares with the National Securities Registry or on any stock exchange;
amendments to our company’s bylaws; and
any other matters for which applicable Mexican law or the bylaws specifically require an extraordinary meeting.
Special shareholders’ meetings are those called and held by shareholders of the same series or class to consider any matter particularly affecting the relevant series or class of shares.
Shareholders’ meetings are required to be held in our corporate domicile, which is Mexico City. Calls for shareholders’ meetings must be made by the board of directors or the Audit Committee. Any shareholder or group of shareholders representing at least 10% of our capital stock has the right to request that the board of directors or the Audit Committee call a shareholders’ meeting to discuss the matters indicated in the relevant request. In certain circumstances specified in Mexican law, any individual shareholder may also make such a request. If the board of directors or the Audit Committee fails to call a meeting within 15 calendar days following receipt of the request, the shareholder or group of shareholders may request that the call be made by a competent court.
Calls for shareholders’ meetings must be published in the Mexican Federal Gazette or in one newspaper of general circulation in Mexico at least 15 calendar days prior to the date of the meeting. Each call must set forth the place, date and time of the meeting and the matters to be addressed. Shareholders’ meetings will be validly held and convened without the need for a prior call or publication whenever all the shares representing our capital are duly represented.
To be admitted to any shareholders’ meeting, shareholders must be registered in our share registry and comply with the requirements set forth in our bylaws. Shareholders may be represented at any shareholders’ meeting by one or more attorneys-in-fact who may not be our directors.
At or prior to the time of the publication of any call for a shareholders’ meeting, we will provide copies of the publication to the depositary for distribution to the holders of ADSs. Holders of ADSs are entitled to instruct the depositary as to the exercise of voting rights pertaining to the Series B shares.
Quorums
Ordinary meetings are regarded as legally convened pursuant to a first call when more than 50% of the shares representing our capital are present or duly represented. Resolutions at ordinary meetings of shareholders are valid when approved by a majority of the shares present or duly represented at the meeting. Any number of shares represented at an ordinary meeting of shareholders convened pursuant to a second or subsequent call constitutes a quorum. Resolutions at ordinary meetings of shareholders convened in this manner are valid when approved by a majority of the shares represented at the meeting.
Extraordinary and special shareholders’ meetings are regarded as legally convened pursuant to a first or subsequent call when at least 75% of the shares representing our capital (or 75% of the relevant series) are present or duly represented. Resolutions at extraordinary meetings of shareholders are valid if taken by the favorable vote of shares representing more than 50% of our capital (or 50% of the relevant series).
Notwithstanding the foregoing, resolutions at extraordinary meetings of shareholders called to discuss any of the issues listed below are valid only if approved by a vote of shares representing at least 75% of our capital:
any amendment to our bylaws which:that: (i) changes or deletes the authorities of our committees; or (ii) changes or deletes the rights of minority shareholders,
any actions resulting in the cancellation of the concessions granted to us or our subsidiaries by the Mexican government or any assignment of rights arising therefrom,
termination of the participation agreement between us and AMP,
a merger by us with an entity the business of which is not directly related to the business of us or our subsidiaries, or
a spin-off, dissolution or liquidation of us.
Our bylaws also establish the following voting requirements:
the amendment of the restrictions in our bylaws on ownership of shares of our capital stock requires the vote of holders of 85% of our capital stock,
a delisting of our shares requires the vote of holders of 95% of our capital stock, and
the amendment of the provisions in our bylaws requiring that a shareholder exceeding our share ownership limits conduct a public sale of his excess shares requires the vote of holders of 85% of our capital stock.
Veto Rights of Holders of Series BB Shares
So long as the Series BB shares represent at least 7.65% of our capital stock, resolutions adopted at shareholders’ meetings with respect to any of the issues listed below will only be valid if approved by a vote of a majority of the Series BB shares:
approval of our financial statements;
liquidation or dissolution;
capital increases or decreases;
declaration and payment of dividends;
amendment to our bylaws;
mergers, spin-offs or share-splits;
grant or amendment of special rights to any series of shares; and
any decision amending or nullifying a resolution validly taken by the board of directors with respect toto: (i) appointment of our top-level executive officers, (ii) appointment of the three members of our Operating Committee and of the members of the Audit, Acquisitions and Nominations and Compensation committees to be designated by the directors elected by the holders of the Series BB shares and (iii) appointment of the members of the Operating Committee whose appointment requires the consent of the directors elected by the holders of the Series BB shares, and decisions of the board of directors that require the affirmative vote of the directors elected by the holders of our Series BB shares.
Dividends and Distributions
At our Annual Ordinary General Shareholders’ Meeting, the board of directors will submit to the shareholders for their approval our audited consolidated financial statements for the preceding fiscal year. Five percent of our net income (after profit sharing and other deductions required by Mexican law) must be allocated to a legal reserve fund until the legal reserve fund reaches an amount equal to at least 20% of our capital stock (without adjustment for inflation). Additional amounts may be allocated to other reserve funds as the shareholders may from time to time determine including a reserve to repurchase shares. The remaining balance, if any, of net earnings may be distributed as dividends on the shares of common stock. A full discussion of our dividend policy may be found in “Item 8,Financial Information—Information – Dividends”.” At the General Ordinary Shareholders’ Meetings held on April 27, 2011, we declared a dividend of Ps. 1.04 billion or Ps. 1.9231 per common share. The first dividend payment of Ps. 780.0 million was made on May 31, 2011. The second dividend payment of Ps. 255.1 million was made on November 29, 2011. At the General Ordinary Shareholders’ Meeting held on April 28, 2009,16, 2012 we declared a dividend of Ps. 1,200.0 million that was paid on May 25, 2009 (Ps. 870.0 million) and on October 31, 2009 (Ps. 330.0 million). At the General Ordinary Shareholders’ Meetings held on June 2, 2010 we declared a dividend of1.13 billion, or Ps. 1,000.0 million.2.1292 per common share. The first payment for that dividend in the amount of Ps. 750.0847.5 million was made on June 15, 2010.May 31, 2012, and the remaining Ps. 282.5 million was paid on November 1, 2012.
In an Extraordinary General Stockholders’ Meeting held on September 25, 2012, the stockholders approved a capital distribution to be paid in cash for Ps. 870.0 million, which is comprised of Ps. 572.5 million for common stock with a historical value and Ps. 297.5 million for the value of inflation recognized through December 31, 2007 in according with Mexican Financial Reporting Standards. This is because for legal and tax purposes in Mexico, Grupo Aeroportuario del Pacífico, S.A.B. de C.V., as an individual entity, will continue preparing and presenting separate financial information under MFRS. Therefore, for any transaction related to Stockholders’ Equity, the Company must take into consideration the accounting balances prepared under MFRS and determine the tax effects under applicable laws in Mexico, which require financial information prepared using MFRS.
As a part of the adoption of IFRS, the effects of inflation recognized in the Stockholders’ Equity under MFRS until December 31, 2007, were reclassified to retained earnings, as the cumulative inflation recognized under IFRS occurred during periods that were not considered to be hyperinflationary in IFRS. As a result, the effects of inflation for the common stock reduction of Ps. 297.5 million recorded under MFRS is presented as a reduction to retained earnings for IFRS purposes, which is the account where these effects were reclassified at the date of transition to IFRS (January 1, 2011).
Registration
Our shares have been registered with the National Securities Registry, as required under the Securities Market Law and regulations issued by the Mexican National Banking and Securities Commission. If we wish to cancel our registration, or if it is cancelled by the Mexican National Banking and Securities Commission, we will be required to make a public offer to purchase all outstanding shares, prior to such cancellation. Unless the Mexican National Banking and Securities Commission authorizes otherwise, the price of the offer to purchase will be the higher of: (i) the average of the trading price of our shares during the prior thirty trading days (during a period of no more than six months); or (ii) the book value of the shares in accordance with the most recent quarterly report submitted to the Mexican National Banking and Securities Commission and to the Mexican Stock Exchange. Any waiver to the foregoing provisions included in our bylaws requires the prior approval of the Mexican National Banking and Securities Commission and the approval, at an extraordinary shareholders’ meeting, of 95% of our outstanding capital stock.
Shareholder Ownership Restrictions and Antitakeover Protection
Holders of our shares are subject to the following restrictions:
holders of Series B shares, either individually or together with their related parties, may not directly or indirectly own more than 10% of our Series B shares;
although there is no limit on individual holdings of Series BB shares, Series BB shares may represent no more than 15% of our outstanding capital stock;
holders of Series BB shares may also own Series B shares;
no shareholder may vote more than 10% of our capital stock. Shares in excess of this threshold will be voted in the same manner as the majority of our shares;
the aforementioned limits may not be circumvented by means of any special trust; collective ownership or voting agreement or any other scheme that could confer a higher percentage of share ownership or voting powers; and
foreign governments acting in a sovereign capacity may not directly or indirectly own any portion of our capital stock.
A person exceeding the 10% threshold described above with respect to our Series B shares must conduct a public offer of his excess shares.
Any amendment to the ownership restrictions described above requires the vote of shares representing 85% of our capital stock.
Changes in Capital Stock
Increases and reductions of our minimum fixed capital must be approved at an extraordinary shareholders’ meeting, subject to the provisions of our bylaws and the Mexican General Law of Business Corporations. Increases or reductions of the variable capital must be approved at an ordinary shareholders’ meeting in compliance with the voting requirements of our bylaws.
Pursuant to Article 53 of the Securities Market Law, we may issue unsubscribed shares that will be kept in treasury, to be subsequently subscribed by the investing public, provided that:that
the general extraordinary shareholders’ meeting approves the maximum amount of the capital increase and the conditions upon which the corresponding placement of shares shall be made,
the subscription of issued shares is made through a public offer following registration in the National Securities Registry and complying with the provisions of the Securities Market Law and other applicable law, and
the amount of the subscribed and paid-in capital of the company is announced when the company makes the authorized capital increase public.
The preferential subscription right provided under Article 132 of the General Law of Business Entities (Ley General de Sociedades Mercantiles) is not applicable to capital increases through public offers.
Subject to the individual ownership limitations set forth in our bylaws, in the event of an increase of our capital stock our shareholders will have a preemptive right to subscribe and pay for new stock issued as a result of such increase in proportion to their shareholder interest at that time, unless: the capital increase is made under the provisions of Article 53 of the Securities Market Law. Said preemptive right shall be exercised by any method provided in Section 132 of the Mexican General Corporations Law, by subscription and payment of the relevant stock within fifteen business days after the date of publication of the corresponding notice to our shareholders in the Mexican Federal Gazette and in one of the newspapers of greater circulation in Mexico, provided that if at the corresponding meeting all of our shares are duly represented, the fifteen business day period shall commence on the date of the meeting.
Our capital stock may be reduced by resolution of a shareholders’ meeting taken generally pursuant to the rules applicable to capital increases. Our capital stock may also be reduced upon repurchase of our own stock in accordance with the Securities Market Law (SeeLaw. See “—– Share Repurchases” below).below.
Share Repurchases
We may choose to acquire our own shares or negotiable instruments representing such shares through the Mexican Stock Exchange on the following terms and conditions:
The acquisition and sale on the Mexican Stock Exchange is made at market price (except when dealing with public offerings or auctions authorized by the National Banking and Securities Commission).
If the acquisition is charged against shareholder’s equity, the shares may be kept by us without the need to make a reduction in our capital stock. Otherwise, if the acquisition is charged against our capital stock, the shares will be converted into unsubscribed shares kept in our treasury, without need for a resolution by our shareholders’ at a shareholders’ meeting.
The company must announce the amount of the subscribed and paid-in capital when the amount of the authorized capital represented by the issued and unsubscribed shares is publicly announced.
The general ordinary shareholders’ meeting will expressly determine for each fiscal year the maximum amount of resources that we may use to purchase our own shares or negotiable instruments that represent such shares, with the only limitation that the sum or total of the resources that may be used for such purpose may not exceed, at any time, the total balance of the net profits of the company, including retained profits.
We must be up to date in the payment of obligations under debt instruments issued and registered in the National Securities Registry that we may have issued.
Shares of the company belonging to us may not be represented or voted in shareholders’ meetings, nor may corporate or economic rights of any kind be exercised, nor will the shares be considered as outstanding for the purpose of determining the quorum or voting in shareholders’ meetings.
At the General Ordinary Shareholders’ Meeting held on April 28, 2008, a stock buy-back program was approved under the Mexican Law rules, for a maximum amount of Ps. 55 million for the period from April 28, 2008 to April 27, 2009. The share repurchases began in July 2008 and finished in April 2009. See “Item 16E—Purchases of Equity Securities by the Issuer and Affiliated Purchasers”. At the General Ordinary Shareholders’ Meeting held on April 28, 2009, a stock buy-back program was approved under the Mexican Law rules, for a maximum amount of Ps. 864.6 million for the period from April 28, 2009 to April 27, 2010. During that period, the Company did not make any repurchase. At the General Ordinary Shareholders’ Meeting held on April 27, 2010, the maximum amount approved for repurchase of shares or credit instruments that represent these shares was cancelled.cancelled and no stock buy-back program for Series B shares was approved for the period from April 27, 2010 to April 27, 2011. However, at the subsequent General Ordinary Shareholders’ Meeting held July, 22 – 25, 2010, a stock buyback program was approved under the Mexican Securities Market Law, for a maximum amount of Ps. 1.00 billion for the period from July 22, 2010 until April 27, 2011. During that period we purchased 20,217,600 shares at an average price of Ps. 45.20, paying Ps. 913.8 million. These shares represent 3.6% of our total outstanding shares. At the General Ordinary Shareholders’ Meeting held on April 27, 2011, a stock buy-back program for Series B shares was approved for a maximum amount of Ps. 473.5 million for the twelve months following April 27, 2011. During that period we purchased 10,061,800 shares at an average price of Ps. 47.06 for Ps. 473.5 million. These shares represent 1.8% of our total outstanding shares. At the General Ordinary Shareholders’ Meeting held on April 16, 2012, a stock buy-back program for Series B shares was approved for a maximum amount of Ps. 280.0 million for the twelve months following April 16, 2012. However, we did not make any repurchases during this period. See “Item 16E,Purchases of Equity Securities by the Issuer and Affiliated Purchasers”.
Ownership of Capital Stock by Subsidiaries
Our subsidiaries may not, directly or indirectly, invest in our shares, except for shares of our capital stock acquired as part of any employee stock option plan, which may not exceed 25% of our capital stock, or through asset managers (sociedades de inversión).
Liquidation
Upon our dissolution, one or more liquidators must be appointed at an extraordinary shareholders’ meeting to wind up our affairs. All fully paid and outstanding shares will be entitled to participate equally in any distribution upon liquidation. Partially paid shares participate in any distribution in the same proportion that such shares have been paid at the time of the distribution.
Other Provisions
Liabilities of the members of the Board of Directors
As in any other Mexican corporation, and due to the provisions contained in Article 38 of the Securities Market Law, any shareholder or group of shareholders holding at least 5% of our capital stock may directly exercise a civil liability action under Mexican law against the members of the board of directors.
In addition to the foregoing, our bylaws provide that, a member of the board of directors will be liable to us and our shareholders for breaching his or her duties, as provided under articles 29 to 37 of the Securities Market Law.
Our by-lawsbylaws provide that the members of the board of directors, or the board committees, and the secretary shall be indemnified by us in case of violations of their duty of care (deber de diligencia), as long as they did not act in bad faith, violate their duty of loyalty or commit an illicit act under the Securities Market Law or other applicable law. Additionally, our bylaws provide that we shall indemnify the members of the board of directors and the secretary for any indemnification liability which they may incur as long as they have not acted in bad faith, violated their duty of loyalty or committed an illicit act under the Securities Market Law or other applicable law.
Information to Shareholders
The Securities Market Law establishes that we, acting through our boards of directors, must annually present a report at a shareholders’ meeting that includes the following:
A report prepared by the chairman of our Audit Committee, as required by Article 43 of the Securities Market Law, which must cover, among other things: (i) the performance of our top-level officers, (ii) transactions with related parties, (iii) the compensation packages for our directors and officers, (iv) waivers granted by the board of directors regarding corporate opportunities, (v) the situation of our, and our subsidiaries’ internal controls and internal auditing, (vi) preventive and corrective measures adopted in connection with non-compliance with operational and accounting guidelines, (vii) the performance of our external auditor, (viii) additional services provided by our external auditor and independent experts, (ix) the main results of the review of our and our subsidiaries’ financial statements and (x) the effects of changes to our accounting policies.
• | The report prepared by the chief executive officer under article 44, paragraph XI of the Securities Market Law. This report must be accompanied by the report (dictamen) of the external auditor, and should include, among other things: (i) a report of the directors on the operations of the company during the preceding year, as well as on the policies followed by the directors and on the principal existing projects of the company, (ii) a statement of the financial condition of the company at the end of the fiscal year, (iii) a statement regarding the results of operations of the company during the preceding year, as well as changes in the company’s financial condition and capital stock during the preceding year, and (iv) the notes which are required to complete or clarify the foregoing information. |
The board’s opinion on the contents of the report prepared by the chief executive officer and mentioned in the preceding paragraph.
A report explaining the principal accounting and information policies and criteria followed in the preparation of the financial information.
A report regarding the operations and activities in which the board participated, as provided under the Securities Market Law.
In addition to the foregoing, our bylaws specify additional information obligations of the board of directors, including that the board of directors should also prepare the information referred to in Article 172 of the General Law on Business Entities with respect to any subsidiary that represents at least 20% of our net worth (based on the financial statements most recently available).
Duration
The duration of our corporate existence has been set at 100 years, ending in the year 2098.
Shareholders’ Conflict of Interest
Under Mexican law, any shareholder that has a conflict of interest with respect to any transaction must abstain from voting thereon at the relevant shareholders’ meeting. A shareholder that votes on a transaction in which its interest conflicts with ours may be liable for damages in the event the relevant transaction would not have been approved without such shareholder’s vote.
Directors’ Conflict of Interest
Under Mexican law, any director who has a conflict of interest in any transaction must disclose such fact to the other directors and abstain from voting on such transaction. Any director who violates such provision will be liable to us for any resulting damages or losses. Additionally, under our bylaws, certain conflicts of interest will have the effect of disqualifying a person from serving on our board of directors.
Our subsidiaries are parties to the airport concessions granted by the Ministry of Communications and Transportation under which we are required to construct, operate, maintain and develop the airports in exchange for certain benefits. See “Item 4,, Regulatory Framework—Sources of Regulation” and “ Item“Item 4,Regulatory Framework—Framework – Scope of Concessions” and “ Item“Item 4,Regulatory Framework—Framework – General Obligations of Concession Holders”.”
We are a party to a participation agreement with AMP and the Ministry of Communications and Transportation which establishes the framework for several other agreements to which we are a party. See “Item 7,Major Shareholders and Related Party Transactions—Transactions – Related Party Transactions”.”
We have entered into a Technical Assistance Agreement with AMP providing for management and consulting services. See “Item 7,Major Shareholders and Related Party Transactions—Transactions – Related Party Transactions”.”
Mexico has had free market for foreign exchange since 1991, and the government has allowed the peso to float freely against the U.S. dollar since December 1994.
The following summary contains a description of the material U.S. and Mexican federal income tax consequences of the purchase, ownership and disposition of our Series B shares or ADSs by a beneficial holder that is a citizen or resident of the United States or a U.S. domestic corporation or that otherwise is subject to U.S. federal income tax on a net income basis in respect of our Series B shares or ADSs and that is a “non-Mexican holder” (as defined below) (a “U.S. holder”), but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, hold or dispose of our Series B shares or ADSs. In particular, the summary deals only with U.S. holders that hold our Series B shares or ADSs as capital assets and does not address the tax treatment of special classes of U.S. holders such as dealers in securities or currencies, U.S. holders whose functional currency is not the U.S. dollar, U.S. holders that own or are treated as owning 10% or more of our outstanding voting shares, tax-exempt organizations, financial institutions, U.S. holders liable for the alternative minimum tax, securities traders who elect to account for their investment in Series B shares or ADSs on a mark-to-market basis and investors holding Series B shares or ADSs in a hedging transaction or as part of a straddle, conversion or other integrated transaction for U.S. federal income tax purposes. In addition, the summary does not address any U.S. or Mexican state or local tax considerations that may be relevant to a U.S. holder.
The summary is based upon the federal income tax laws of the United States and Mexicothe United Mexican States (“Mexico”) as in effect on the date of this annual report on Form 20-F, including the provisions of the income tax treaty between the United States and Mexico and protocol thereto (the “Tax Treaty”), all of which are subject to change, possibly with retroactive effect in the case of U.S. federal income tax law. Prospective investors in our Series B shares or ADSs should consult their own tax advisors as to the U.S., Mexican or other tax
consequences of the purchase, ownership and disposition of the Series B shares or ADSs, including, in particular, the effect of any foreign, state or local tax laws and their entitlement to the benefits, if any, afforded by the Tax Treaty.
For purposes of this summary, the term “non-Mexican holder” shall mean a holder that is not a resident of Mexico for federal tax purposes and that does not hold the Series B shares or ADSs or a beneficial interest therein in connection with the conduct of a trade or business through a permanent establishment or fixed base in Mexico.
For purposes of Mexican taxation, the definition of residency is highly technical and residency results in several situations. Generally, an individual is a resident of Mexico if he or she has established his or her home in Mexico, and a corporation is a resident if it has its center of interests in Mexico. An individual who has a home in Mexico and another country will be considered to be a resident of Mexico if Mexico is the individual’s significant center of interest. However, any determination of residence should take into account the particular situation of each person or legal entity.
This summary does not address all of the Mexican tax consequences that may be applicable to specific holders of the shares (including a holder that controls the Company, an investor that holds 10% or more of the shares or holders that constitute a group of persons for purposes of Mexican law). It also does not purport to be a comprehensive description of all the Mexican tax considerations that may be relevant to a decision to purchase, own or dispose of the shares. In particular, this summary does not describe any tax consequences arising under the laws of any state, locality, municipality or taxing jurisdiction other than certain federal laws of Mexico.
In general, for U.S. federal income tax purposes, holders of ADSs are treated as the beneficial owners of the Series B shares represented by those ADSs.
Taxation of Dividends
Mexican Tax Considerations
Under Mexican Income Tax Law provisions, dividends paid to non-Mexican holders with respect to our Series B shares or ADSs are not subject to any Mexican withholding tax.
U.S. Federal Income Tax Considerations
The gross amount of any distributions paid with respect to the Series B shares or ADSs, to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, generally are includible in the gross income of a U.S. holder as ordinary income on the date on which the distributions are received by the depositary and are not eligible for the dividends received deduction allowed to certain corporations under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). To the extent that a distribution exceeds our current and accumulated earnings and profits, it is treated as a non-taxable return of basis to the extent thereof, and thereafter as capital gain from the sale of Series B shares or ADSs. Distributions, which are made in pesos, are includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date they are received by the depositary whether or not they are converted into U.S. dollars. If such distributions are converted into U.S. dollars on the date of receipt, a U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the distributions.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual U.S. holder prior to January 1, 2011 with respect to the ADSs will be subject to taxation at a maximum rate of 15% if the dividends
are “qualified dividends.” Dividends paid on the ADSs will be treated as qualified dividends if: (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service has approved for the purpose of the qualified dividend rules,rules; and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the yearsyear in which the dividend is paid, a passive foreign investment company (PFIC). The Tax Treaty has been approved for the purposes of the qualified dividend rule. In addition, based on our audited consolidated financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2007, 20082011 or 20092012 taxable years. In addition, based on our audited consolidated financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 20102013 taxable year.
Taxation of Dispositions of Shares or ADSs
Mexican Tax Considerations
Gain on the sale of our Series B shares or ADSs by a non-Mexican holder is generally not subject to any Mexican income tax if the transaction is carried out through the Mexican Stock Exchange or other approved securities markets, provided certain requirements set forth by the Mexican Income Tax Law (Ley del Impuesto sobre la Renta) and the Federal Tax Code (Código Fiscal de la Federación) are complied with.
Gain on the sale of our Series BBB shares by a non-Mexican holder is generally not subject to any Mexican income tax if the transaction is carried out through the Mexican Stock Exchange or other securities markets.
The tax exemption described in the previous paragraph will not be applicable to pre-negotiated trades executed through the Mexican Stock Exchange. The exemption also will not be applicable in the case of a person or group of persons that, directly or indirectly, holds 10% or more of the shares representing our capital stock, or that holds a controlling interest in us, if in a period of 24 months, a sale of 10% or more of our fully paid shares, or of a controlling interest in us, is carried out through one or several simultaneous or successive transactions, including those carried out through derivative instruments or other similar transactions.
Sales or other dispositions of Series B shares that are not eligible for the exemption described above generally are subject to Mexican tax, except to the extent that a holder is eligible for benefits under an income tax treaty to which Mexico is a party. Under the Tax Treaty, a holder that is eligible to claim the benefits of the Tax Treaty is exempt from Mexican tax on gains realized on a sale or other disposition of the Series B shares in a transaction that is not carried out through the Mexican Stock Exchange or such other approved securities markets, so long as the holder did not own, directly or indirectly, 25% or more of our capital stock (including ADSs) within the 12-month period preceding such sale or other disposition.
For non-Mexican holders that do not meet the requirements referred to above, gross income realized on the sale of the Series B shares is subject to a 5% Mexican withholding tax if the transaction is carried out through the Mexican Stock Exchange. Alternatively, a non-Mexican holder can choose to be subject to a 20% withholding tax rate on the net gain obtained, as calculated pursuant to Mexican Income Tax Law provisions, if certain conditions and formal requirements are met.
U.S. Federal Income Tax Considerations
Upon the sale or other disposition of the Series B shares or ADSs, a U.S. holder generally must recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or other disposition (in U.S. dollars, determined at the spot
rate on the date of disposition or, for a cash basis U.S. holder (or an electing accrual basis U.S. holder), at the exchange rate in effect on the settlement date, if the amount realized is denominated in a foreign currency)currency and such U.S. holder’s tax basis in the Series B shares or ADSs (in U.S. dollars). Gain or loss recognized by a U.S. holder on such sale or other disposition generally is treated as long-term capital gain or loss if, at the time of the sale or other disposition, the Series B shares or ADSs had been held for more than one year. Long-term capital gain recognized by a U.S. holder that is an individual is subject to lower rates of federal income taxation than ordinary income or short-term capital gain. The deduction of a capital loss is subject to limitations for U.S. federal income tax purposes. Deposits and withdrawals of Series B shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.
Gain, if any, realized by a U.S. holder on the sale or other disposition of the Series B shares or ADSs generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Consequently, if a Mexican withholding tax is imposed on the sale or disposition of the Series B shares, a U.S. holder that does not receive significant foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of these Mexican taxes. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, Series B shares.
Other Mexican Taxes
There are no Mexican inheritance, gift, succession or value added taxes applicable to the ownership, transfer or disposition of the Series B shares or ADSs by non-Mexican holders; provided, however, that gratuitous transfers of the Series B shares or ADSs may in certain circumstances cause a Mexican federal tax to be imposed upon the recipient. There are no Mexican stamp, issue, registration or similar taxes or duties payable by non-Mexican holders of the Series B shares or ADSs.
U.S. Backup Withholding Tax and Information Reporting Requirements
Dividends on, and proceeds from the sale or other disposition of, the shares or ADSs paid to a U.S. holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding unless the holder:
establishes that it is a corporation or other exempt holder; or
provides an accurate taxpayer identification number on a properly completed Internal Revenue Service Form W-9 and certifies that it is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules.
The amount of any backup withholding from a payment to a holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is furnished to the Internal Revenue Service.
We file reports, including annual reports on Form 20-F, and other information electronically with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at its Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Any filings we make are also available to the public over the Internet at the SEC’s website atwww.sec.gov and at our website athttp://www.aeropuertosgap.com.mx/. (This URL is intended to be an inactive textual reference only. It is not intended to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting from this URL, is not and shall not be deemed to be incorporated into this annual report).
Item 11. | Quantitative and Qualitative Disclosures About Market Risk |
Market Risk
We are principally exposedSee Note 4 to our audited consolidated financial statements for disclosure about market risks from fluctuations in foreign currency exchange rates.risk.
Foreign Currency Exchange Rate Risk
Our principal exchange rate risk involves changes in the value of the peso relative to the dollar. Historically, a significant portion of the revenues generated by our airports (principally derived from passenger charges for international passengers) has been denominated in or linked to the U.S. dollar, although such revenues are collected in pesos based on the average exchange rate for the prior month. In 2007, 20082011 and 2009,2012, approximately 27.8%, 27.7%23.3% and 29.6%25.9%, respectively, of our consolidatedtotal revenues were derived from passenger charges for international passengers.passengers (in 2011 and 2012, 29.5% and 29.3%, respectively, of the sum of our aeronautical and non-aeronautical revenues were derived from passenger charges for international passengers). Substantially all of our other revenues are denominated in pesos. We estimate that substantially all of our consolidated costs and expenses are denominated in pesos (other than the technical assistance fee, to the extent paid based on the fixed minimum annual payment). Based upon a 10% depreciation7.1% appreciation of the peso compared to the U.S. dollar as of December 31, 2009,2012, we estimate that our passenger charges revenues from international passengers would have increaseddecreased by Ps. 66.691.1 million.
As of December 31, 2007, 20082011 and 2009, 14.7%, 15.5%2012, 12.5% and 13.9%21.3%, respectively, of our cash and marketable securities were denominated in dollars. Based upon a 10.0%10% depreciation of the peso compared to the U.S. dollar as of December 31, 2009,2012, we estimate that the value of our cash and marketable securities would have increased by Ps. 29.143.7 million.
We did not have any relevant foreign currency indebtedness at December 31, 2007, 20082011 and 2009.2012. In the event that we incur foreign currency denominated indebtedness in the future, decreases in the value of the peso relative to the dollar will increase the cost in pesos of servicing such indebtedness.
At December 31, 2007, 20082011 and 20092012 we did not have any outstanding forward foreign exchange contracts.
Interest Rate Risk
Over the last three years, we have funded the majority of our capital expenditures with bank loans, and we expect to continue to do so. We have entered into bank loans bearing both fixed and variable interest rates. Our fixed-rate debt establishes a fixed interest rate of 8.52%, and the unpaid balance as of December 31, 2012 was Ps. 385.9 million. In 2009, we entered into bank loans bearing variable interest rates, which expose us to interest rate risk. The primary interest rate risk exposure results from changes in the relevant base rates (the banks charge interest at a rate based on theTasa de Interés Interbancaria de Equilibrio, or Interbank Equilibrium Interest Rate (“TIIE”) plus 3.5%). In order to hedge against such interest rate risk, in December 2009, we entered into a cash flow hedge with Banamex for a nominal amount of Ps. 372.2 million, which sets a ceiling of 7% on the TIIE, resulting in a maximum interest rate of 10.5%. This instrument will be in effect from December 2012 until January 2017, and its fair value as of December 31, 2012 was Ps. 1.0 million. In 2011, we entered into bank loans with HSBC and Banamex bearing variable interest rates, which expose us to interest rate risk. The primary interest rate risk exposure results from changes in the relevant base rates. HSBC charges interest at a rate based on the TIIE plus 1.65%. Banamex charges interest base on the TIIE plus 1.35% for the 2011 disbursements and 1.43% for 2012 disbursements. In August and November 2012, we entered into bank loans with BBVA Bancomer with an interest rate based on the TIIE plus 120 basis points. We had approximately Ps. 1.63 billion in variable rate debt at December 31, 2012. For more information regarding our economic hedging transactions, see “Item 5,Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness”.
As of December 31, 2012 we paid Ps. 116.9 million of interest expense under variable interest rate loans, with an average TIIE rate of 4.8% plus basis points contracted as corresponding. Based upon a 10% increase of the TIIE rate, we estimate that our interest expense would have increased by Ps. 14.3 million.
Item 12. | Description of Securities Other Than Equity Securities |
Not applicable.
Item 12A. | Debt Securities |
Not applicable.
Item 12B. | Warrants and Rights |
Not applicable.
Item 12C. | Other Securities |
Not applicable.
Item 12D. American Depositary Shares
The Bank of New York Mellon serves as the depositary for our ADSs. ADS holders are required to pay various fees to the depositary.
The following is a summary of the fees payable by holders of our ADRs. For more complete information regarding ADRs, you should read the entire deposit agreement and the form of ADR.
Service | Fee or Charge Amount | Payee | ||
Execution and delivery of ADRs | U.S. | Bank of New York Mellon | ||
Surrender of ADRs | U.S. | Bank of New York Mellon | ||
Any cash distribution to ADR registered holders | U.S. | Bank of New York Mellon | ||
Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADR registered holders | A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs | Bank of New York Mellon | ||
Registration of transfers of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares | Registration or transfer fees | Bank of New York Mellon | ||
Cable, telex and facsimile transmissions (as expressly provided in the deposit agreement) | Expenses of the depositary | Bank of New York Mellon | ||
Converting foreign currency to U.S. dollars | Expenses of the depositary | Bank of New York Mellon | ||
Taxes and other governmental charges the Bank of New York Mellon or the custodian has to pay on any ADR or share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes | As necessary | Bank of New York Mellon | ||
Other fees, as necessary | Any charges incurred by Bank of New York Mellon or its agents for servicing the deposited securities | Bank of New York Mellon |
The depositary of our ADSs, The Bank of New York Mellon, collects its fees directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects these fees by deducting them from the amounts distributed or by selling a portion of distributable property to pay the fees. For example, the depositary may deduct from cash distributions, directly bill investors or charge the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for these services are paid.
Reimbursements by the Depositary
The Bank of New York Mellon, as depositary of our ADSs, pays us an agreed amount, which includes expenses related to the administration and maintenance of the ADS facility including, but not limited to, investor relations expenses, the annual New York Stock Exchange listing fees (as invoiced in the reimbursement request to the depositary) or any other program related expenses. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors. ForWe did not receive any reimbursements from the year ended December 31, 2009, this amount was U.S.$ 659,601 of whichdepositary during 2011, but we received U.S.$ 499,703174,486.00 in reimbursements from the depository during 2009 and U.S.$ 159,898 in January 2010.2012.
PART II
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
Not applicable.
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
Not applicable.
Item 15. | Controls and Procedures |
(a) Disclosure Controls and Procedures
We have evaluated, with the participation of our chief executive officerChief Executive Officer and chief financial officer,Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2009.2012.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.international financial reporting standards. Our internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with international financial reporting standards, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. Under the supervision of our
Chief Executive Officer and Chief Financial Officer, our management assessed the design and effectiveness of our internal control over financial reporting as of December 31, 2009.2012. In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control—Control — Integrated Framework.
Based on our assessment and those criteria, our management has concluded that our company maintained effective internal control over financial reporting as of December 31, 2009.2012.
The Company’sOur independent registered public accounting firm, Galaz, Yamazaki, Ruiz Urquiza, S.C. (member of Deloitte Touche Tohmatsu)Tohmatsu Limited), has issued an attestation report on the effectiveness of the Company’sour internal control over financial reporting.
(c) Report of Independent Registered Public Accounting Firm on Internal Controls
We have audited the internal control over financial reporting of Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and subsidiaries (the “Company”) as of December 31, 2009,2012, based on criteria established inInternal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3)(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2012, based on the criteria established inInternal Control—Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 20092012 of the Company and our report dated June 24, 2010February 22. 2013 expressed an unqualified opinion on those financial statements and includes explanatory paragraphs regarding (i) the nature and effectadoption of differences between MexicanInternational Financial Reporting Standards and accounting principles generally accepted inas issued by the United StatesInternational Accounting Standards Board with a transition date as of America,January 1, 2011 and (ii) the translation of the Company’s consolidated financial statements into English.
Galaz, Yamazaki, Ruiz Urquiza, S.C. | ||
Member of Deloitte Touche Tohmatsu Limited | ||
/s/ SALVADOR ARTURO SÁNCHEZ BARRAGÁN | ||
| ||
Guadalajara, Jalisco, Mexico | ||
|
(d) Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during 20092012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16. |
Item 16A. | Audit Committee Financial Expert |
José Manuel Rincón Gallardo PuróCarlos Cárdenas Guzmán, an independent director under NYSE listing standards, joined our board of directors and our Audit Committee in 2006,2011, and we believe that he is qualified to serve as our “audit committee financial expert” as defined in Item 16A of Form 20-F under the Securities and Exchange Act of 1934. On June 17, 2008, our BoardOur board of Directors provisionally nominateddirectors appointed Mr. RincóCárdenas Guzmán Gallardo Purón with full power and authority as President of the Audit Committee and also as the financial expert of that Committee. The appointment of Mr. Rincón Gallardo Purón remains subject to ratification at the Ordinary Shareholders’ Meeting on July 22, 2010. See “Item 7,Major Shareholders and Related Party Transactions—Major Shareholders—Shareholder Dispute”. For a discussion of Mr. Rincón Gallardo PuróCárdenas Guzmán’s qualifications, see “Item 6,Directors, Senior Management and Employees—Directors.Employees – Directors”.
Item 16B. | Code of Ethics |
We have adopted a code of ethics, as defined in Item 16B of Form 20-F under the Securities Exchange Act of 1934, as amended. Our code of ethics applies to our chief executive officer, chief financial officer, chief accounting officer and personnel performing similar functions as well as to our other officers and employees. Our code of ethics is an exhibit to this annual report on Form 20-F and is available on our website at www.aeropuertosgap.com.mx. If we amend the provisions of our code of ethics that apply to our
chief executive officer, chief financial officer, chief accounting officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address. The information found on our website, other than as specifically incorporated by reference into this annual report on Form 20-F, is not part of this annual report on Form 20-F.
Item 16C. | Principal Accountant Fees and Services |
Audit and Non-Audit Fees
The following table sets forth the fees billed to us by our independent auditors, Galaz, Yamazaki, Ruíz Urquiza, S.C. (member of Deloitte Touche Tohmatsu)Tohmatsu Limited), during the fiscal years ended December 31, 20082011 and 2009:2012:
Year ended December 31, | Year ended December 31, | |||||||||||||
2008 | 2009 | 2011 | 2012 | |||||||||||
(thousands of pesos) | (thousands of pesos) | |||||||||||||
Audit fees | Ps. | 5,031 | Ps. | 5,710 | Ps. | 5,838 | Ps. | 6,053 | ||||||
Audit-related fees | 2,146 | 2,348 | 2,731 | 2,929 | ||||||||||
Tax fees | 3,124 | 2,973 | 2,111 | 522 | ||||||||||
Other fees | 681 | 485 | 1,364 | 1,430 | ||||||||||
|
| |||||||||||||
Total fees | Ps. | 10,982 | Ps. | 11,516 | Ps. | 12,044 | Ps. | 10,934 | ||||||
|
|
Audit fees in the above table are the aggregate fees billed by Galaz, Yamazaki, Ruíz Urquiza, S.C. in connection with the audit of our annual consolidated financial statements, the review of the financial statements of certain subsidiaries and other statutory audit reports.
Audit-related fees in the above table are fees billed by Galaz, Yamazaki, Ruíz Urquiza, S.C. for services related to the Sarbanes-Oxley Act of 2002 and other audit related-services.
Tax fees in the above table are fees billed by Galaz, Yamazaki, Ruíz Urquiza, S.C. for a monthly review of our tax calculations and for services related to tax refund claims.
Other fees in the above table are fees billed by Galaz, Yamazaki, Ruíz Urquiza, S.C. for transfer pricing services and other services.
Audit Committee Pre-Approval Policies and Procedures
Our audit committee has not established pre-approval policies and procedures for the engagement of our independent auditors for services. Our audit committee expressly approves on a case-by-case basis any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us.
Item 16D. | Exemptions from the Listing Standards for Audit Committees |
Not applicable.
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
The tables below set forth, for the periods indicated, the total number of shares purchased by us or on our behalf, or by or on behalf of an “affiliated purchaser”,purchaser,” the average price paid per share, the total number of shares purchased as a part of a publicly announced repurchase plan or program and the maximum number (or approximate dollar value) of shares that may yet be purchased under our plans and programs.
Shares repurchased by us pursuant to the share repurchase program
2009 | (a) Total number of shares purchased(1)(2) | (b) Average price paid per share in Pesos | (c) Total number of shares purchased as part of publicly announced plans or programs(3) | (d) Approximate dollar value that may yet be purchased under the plans or programs | ||||||
January 1-31 | 360,000 | Ps. | 28.4683 | 360,000 | U.S.$ | 39,447 | ||||
February 1-29 | 39,447 | |||||||||
March 1-31 | 1,607,113 | |||||||||
April 1-30 | 66,188,656 | |||||||||
May 1-31 | 66,188,656 | |||||||||
June 1-30 | 66,188,656 | |||||||||
July 1-31 | 66,188,656 | |||||||||
August 1-31 | 66,188,656 | |||||||||
September 1-30 | 66,188,656 | |||||||||
October 1-31 | 66,188,656 | |||||||||
November 1-30 | 66,188,656 | |||||||||
December 1-31 | 66,188,656 | |||||||||
2009 Total | 360,000 | Ps. | 28.4683 | 360,000 | — | |||||
2012 | (a) Total number of shares purchased(1) (2) | (b) Average price paid per share in Pesos | (c) Total number of shares purchased as part of publicly announced plans or programs(3) | (d) Approximate dollar value that may yet be purchased under the plans or programs (in million) | ||||||||||||
January 1-31 | — | — | — | — | ||||||||||||
February 1-29 | — | — | — | — | ||||||||||||
March 1-31 | — | — | — | — | ||||||||||||
April 1-30 | — | — | — | — | ||||||||||||
May 1-31 | — | — | — | — | ||||||||||||
June 1-30 | — | — | — | — | ||||||||||||
July 1-31 | — | — | — | — | ||||||||||||
August 1-31 | — | — | — | — | ||||||||||||
September 1-30 | — | — | — | — | ||||||||||||
October 1-31 | — | — | — | — | ||||||||||||
November 1-30 | — | — | — | — | ||||||||||||
December 1-31 | — | — | — | — | ||||||||||||
2012 Total | — | — | — | — | ||||||||||||
(1) | We do not repurchase our shares other than through the share repurchase program. |
(2) | During |
(3) | We periodically repurchase our shares on the open market using funds authorized by our shareholders specifically for the repurchase of our shares by us at our discretion. At the General Ordinary Shareholders’ Meeting held on April |
As of December 31, 2008,2011 and 2012, there was a balance of 1,720,00030,279,400 repurchased shares on our Consolidated Balance Sheets. Additionally, during 2009 the Company bought 360,000 shares. These 2,080,000 shares were relocated in the market in 2009. AsStatements of December 31, 2009, there is no balance of repurchased shares on our Consolidated Balance Sheets.Financial Position.
Item 16F. | Change in Registrant’s Certifying |
Not applicable.
Item 16G. | Corporate Governance |
Pursuant to Section 303A.11 of the Listed Company Manual of the New York Stock Exchange, we are required to provide a summary of the significant ways in which our corporate governance practices differ from those required for U.S. companies under the NYSE listing standards. We are a Mexican corporation with shares listed on the Mexican Stock Exchange. Our corporate governance practices are governed by our bylaws, the Securities Market Law and the regulations issued by the Mexican National
Banking and Securities Commission (Comisión Nacional Bancaria y de Valores). We also generally comply on a voluntary basis with the Mexican
Code of Best Corporate Practices (Código de Mejores Prácticas Corporativas), which was created in January 2001 by a group of Mexican business leaders and was endorsed by the Mexican Banking and Securities Commission. On an annual basis, we file a report with the Mexican Banking and Securities Commission and the Mexican Stock Exchange regarding our compliance with the Mexican Code of Best Corporate Practices.
The table below discloses the significant differences between our corporate governance practices and the NYSE standards.
NYSE Standards for Domestic Listed Companies | Our Corporate Governance Practices | |
Director
§303A.01 specifies that listed companies must have a majority of independent directors.
To qualify as independent, a director must satisfy the criteria set forth in §303A.02. In particular, a director is not independent if such director is:
(i) not a person who the board affirmatively determines has
(ii) an employee, or an immediate family member of an executive officer, of the company, its parent or a consolidated subsidiary, other than employment as interim chairman or CEO;
(iii) a person who receives, or whose immediate family member receives, more than
(iv) a person who is affiliated with or employed, or whose immediate family member is affiliated with or employed in a professional capacity, by a present or former internal or external auditor of the company, its parent or a consolidated subsidiary; | Pursuant to the Securities Market Law and Article 15 of our bylaws, at least 25% of the members of our board of directors must be independent. Determinations regarding independence must be made by our shareholders applying the provisions of the Securities Market Law and our bylaws (which incorporate Section 10A-3 of the Exchange Act).
The determination of independence under the Securities Market Law differs in certain respect from the provisions of §303A.02. Under Article 26 of the Securities Market Law, a director is not independent if such director is:
(i) an employee or officer of the company or of another company that is a member of the same corporate group (consorcio o grupo empresarial) as the company (or a person who has been so within the prior year);
(ii) a person that, without being an employee or officer of the company, has influence or authority over the company or its officers, or over another company that is a member of the same corporate group as the company;
(iii) an important client, supplier, debtor or creditor (or a partner, director or employee thereof). A client or supplier is considered important if its sales to or purchases from the company represent more than 10% of its total sales or purchases within the prior year. A debtor or creditor is considered important if the aggregate amount of the relevant loan represents more than 15% of its or the company’s aggregate assets; |
NYSE Standards for Domestic Listed Companies1 | Our Corporate Governance Practices | |
(v) an executive officer, or an immediate family member of an executive officer, of another company whose compensation committee’s membership includes an executive officer of the listed company, its parent or a consolidated subsidiary; or
(vi) an executive officer or employee of a company, or an immediate family member of an executive officer of a company, that makes payments to, or receives payments from, the listed company, its parent or a consolidated subsidiary for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues (charities are not included, but any such payments must be disclosed in the company’s proxy (or, if no proxy is prepared, its Form 10-K / annual report)). | (iv) a shareholder that is a part of the control group of the company; or
(v) a family member, spouse or concubine of any of the persons mentioned in (i) through (iv) above.
Currently, our board of directors consists of 11 directors. Seven of such directors have been qualified as independent by our shareholders in accordance with the Securities Market Law and our bylaws. | |
Executive | ||
§303A.03 specifies that non-management directors must meet at regularly scheduled executive sessions without management. Independent directors should meet alone in an executive session at least once a year. | Mexican law, our bylaws and the Mexican Code of Best Corporate Practices, which we adhere to, do not provide for non-management executive sessions. None of our managers are members of either our board of directors or our other committees, except that our chief executive officer is the chairman of our Operating Committee, as provided for in Article 27 of our bylaws. |
Committees for Director Nominations and Compensation and for Corporate Governance.
§303A.04(a) specifies that listed companies must have a nominating/corporate governance committee composed entirely of independent directors.
§303A.05(a) specifies that listed companies must have a compensation committee composed entirely of independent directors. | We have a “Nominations and Compensation Committee.” We also have an Audit Committee, which, pursuant to Article 31 of our bylaws, has been assigned certain corporate governance (prácticas societarias) oversight obligations mandated by the Securities Market Law. Under Mexican corporate law, a corporation’s “board committees,” except for audit and corporate governance committees, need not be composed only of members of the corporation’s board of directors. Article 28 of our bylaws provides that at least a majority of the members of our Nominations and Compensation Committee must be members of our board of directors. No express independence requirements apply to this committee. Currently, the committee consists of 2 members, both of whom are members of our board of directors, and one of whom is independent as defined under the Securities Market Law and Section 10A-3 of the Exchange Act.
See | |
Audit Committee. | ||
§303A.06 specifies that listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act.
§303A.07 specifies other requirements for audit | Foreign private issuers, such as us, are subject to §303A.06 and thus must comply with Rule 10A-3. We are in compliance with Rule 10A-3 and, as such, our Audit Committee consists entirely of members of our board of directors who meet the independence requirements prescribed in that rule. (The Securities Market Law likewise contains a requirement that our Audit Committee be entirely independent.)
We are not subject to §303A.07. As such, our Audit Committee charter (contained in Article 32 of our bylaws) does not make provision for every one of the specific duties required by §303A.07. | |
Corporate Governance | ||
§303A.09 specifies that listed companies must adopt and disclose corporate governance guidelines. | Mexican law does not require us to disclose corporate governance guidelines and we have not done so. However, pursuant to the Securities Market Law, we have adopted board guidelines covering corporate governance matters such as the use of corporate assets, certain transactions with related parties (including loans to officers), repurchases of shares, communications with shareholders, managers and directors, and other matters. |
Code of Ethics. | ||
§303A.10 specifies that corporate governance guidelines and a code of business conduct and ethics is required, with disclosure of any waiver for directors or executive officers. | We have adopted a code of ethics, which has been accepted by all of our directors and executive officers and other personnel. A copy of our code of ethics is available on our website: www.aeropuertosgap.com.mx | |
Equity compensation plans.
§303A.08 & 312 03 specify that equity compensation plans require shareholder approval, subject to limited exemptions. | Shareholder approval is not expressly required under our bylaws for the adoption and amendment of an equity-compensation plan. No equity-compensation plans have been approved by our shareholders. | |
Shareholder Approval for Issuance of Securities.
§§312 03(b)-(d) specify that issuances of securities (1) that will result in a change of control of the issuer, (2) that are to a related party or someone closely related to a related party, (3) that have voting power equal to at least 20% of the outstanding common stock voting power before such issuance or (4) that will increase the number of shares of common stock by at least 20% of the number of outstanding shares before such issuance require shareholder approval. | Mexican law and our bylaws require us to obtain shareholder approval of the issuance of new equity securities. | |
Conflicts of Interest.
§
§312.03(b) specifies that certain issuances of common stock to a related party require shareholder approval. | Pursuant to Mexican law, our bylaws and applicable internal guidelines, provided that the corporate practices committee of our board of directors has opined favorably, our board of directors must vote on whether or not to grant approval of certain transactions with a related party | |
Solicitation of Proxies.
§§402 01 & 402 04 specifies that the solicitation of proxies and provision of proxy materials is required for all meetings of shareholders. Copies of such proxy solicitations are to be provided to NYSE. | We are not required to distribute proxy materials to, or solicit the return of proxies from, our shareholders. In accordance with Mexican law and our bylaws, we inform shareholders of all meetings by public notice, which states the requirements for admission to the meeting and provides a mechanism by which shareholders can vote through a representative using a power of attorney. Under the new Mexican Securities Market Law, we have to make power of attorney forms available to shareholders at their request. Under the deposit agreements relating to our ADSs, holders of our ADSs receive notices of shareholders’ meetings and, where applicable, instructions on how to vote at the shareholders’ meeting through the depositary. |
PART III
Item 17. | Financial Statements |
Not applicable.The Registrant has responded to Item 18 in lieu of this Item.
Item 18. | Financial Statements |
See our consolidated financial statements beginning on page F-1, incorporated herein by reference. The following is an index to the financial statements:
Consolidated Financial Statements for Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Item 19. | Exhibits |
Documents filed as exhibits to this annual report:
Exhibit No. | Description | |
1.1 | An English translation of the Amended and Restated Bylaws (Estatutos Sociales) of the Company (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2005, filed on May 10, 2007). | |
2.1 | Deposit Agreement among the Company, The Bank of New York Mellon (formerly The Bank of New York) and all registered holders from time to time of any American Depositary Receipts, including the form of American Depositary Receipt (incorporated by reference to our registration statement on Form F-1 (File No. 333-131220) filed on January 23, 2006). |
3.1 | Trust Agreement among the Company, AMP and Bancomext, together with an English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-131220) filed on January 23, 2006). |
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4.1 | Amended and Restated Guadalajara Airport Concession Agreement and annexes thereto, together with an English translation and a schedule highlighting the differences between this concession and the Company’s other concessions (incorporated by reference to our registration statement on Form F-1 (File No. 333-131220) filed on January 23, 2006). | ||
4.2 | Participation Agreement and Amendment No. 1 thereto among the Registrant, the Mexican Federal Government through the Ministry of Communications and Transportation, Nacional Financiera, S.N.C., the Company, Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V., Aeropuerto de Aguascalientes, S.A. de C.V., Aeropuerto del Bajío, S.A. de C.V., Aeropuerto de Guadalajara, S.A. de C.V., Aeropuerto de Hermosillo, S.A. de C.V., Aeropuerto de La Paz, S.A. de C.V., Aeropuerto de Los Mochis, S.A. de C.V., Aeropuerto de Manzanillo, S.A. de C.V., Aeropuerto de Mexicali, S.A. de C.V., Aeropuerto de Morelia, S.A. de C.V., Aeropuerto de Puerto Vallarta, S.A. de C.V., Aeropuerto de San José del Cabo, S.A. de C.V., Aeropuerto de Tijuana, S.A. de C.V., AMP, AENA, Aeropuerto del Pacífico Ángeles, S.A. de C.V., Inversora del Noroeste, S.A. de C.V., Grupo Dragados, S.A., Grupo Empresarial Ángeles, S.A. de C.V., Bancomext, and the Mexican Airport and Auxiliary Services Agency, together with an English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-131220) filed on January 23, 2006). | ||
4.3 | Technical Assistance and Transfer of Technology Agreement among the Registrant, Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V., Aeropuerto de Aguascalientes, S.A. de C.V., Aeropuerto del Bajío, S.A. de C.V., Aeropuerto de Guadalajara, S.A. de C.V., Aeropuerto de Hermosillo, S.A. de C.V., Aeropuerto de La Paz, S.A. de C.V., Aeropuerto de Los Mochis, S.A. de C.V., Aeropuerto de Manzanillo, S.A. de C.V., Aeropuerto de Mexicali, S.A. de C.V., Aeropuerto de Los Mochis, S.A. de C.V., Aeropuerto de Puerto Vallarta, S.A. de C.V., Aeropuerto de San José del Cabo, S.A. de C.V., Aeropuerto de Tijuana, S.A. de C.V., AMP, AENA, Aeropuerto del Pacífico Ángeles, S.A. de C.V., Inversora del Noroeste, S.A. de C.V., Grupo Dragados, S.A., and Grupo Empresarial Ángeles, S.A. de C.V., together with an English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-131220) filed on January 23, 2006). | ||
4.4 | Professional Services Agreement between Aeropuerto de Guadalajara, S.A. de C.V. and AENA Desarrollo Internacional, S.A. dated as of August 4, 2008 (English translation) and a schedule highlighting the differences between this agreement and similar agreements with the Company’s other airport operating | ||
8.1 | List of subsidiaries of the Company.* | ||
11.1 | Code of Ethics of the Company (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2005, filed on May 10, 2007). | ||
12.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | ||
12.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | ||
13.1 | Certifications of Chief Financial Officer and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
* | Filed herewith. |
Omitted from the exhibits filed with this annual report are certain instruments and agreements with respect to our long-term debt, none of which authorizes securities or results in an incurrence of debt in a total amount that exceeds 10% of our total assets. We hereby agree to furnish to the SEC copies of any such omitted instruments or agreements as the SEC requests.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. | ||
By: | /s/ | |
Rodrigo Guzmán Perera | ||
Chief Financial Officer |
Dated: June 29, 2010April 15, 2013
Grupo Aeroportuario del Pacífico,
S.A.B. de C.V. and Subsidiaries
Consolidated Financial Statements as of
December 31, 20092012 and 2008,2011, and for
for the Years Ended December 31, 2009, 20082012 and
2007, 2011, and Report of
Independent Registered
Public Accounting Firm Dated June 24, 2010February 22, 2013
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Report of Independent Registered Public Accounting Firm and 2009, 20082012 and 2007
2011 Consolidated Financial Statements
Contents | Page | |||
| ||||
F-3 | ||||
F-5 | ||||
F-6 | ||||
Consolidated Statements of Cash Flows for the Years Ended December 31, | ||||
| ||||
F-9 |
Report of Independent Registered Public Accounting Firm
Accounting Firm to the Board of Directors
and Stockholders of Grupo Aeroportuario
del Pacífico, S.A.B. de C.V.
We have audited the accompanying consolidated balance sheetsstatements of financial position of Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and subsidiaries (the “Company”) as of December 31, 20092012 and 2008,2011 and as of January 1, 2011, and the related consolidated statements of comprehensive income, and changes in stockholders’shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2009, of cash flows for each of the two years in the period ended December 31, 20092012 and of changes in financial position for the year ended December 31, 2007.2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the financial reporting standardsaccounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and subsidiaries as of December 31, 20092012 and 2008,2011, and theas of January 1, 2011, and their results of their operations, and changes in their stockholders’shareholders’ equity for each of the three years in the period ended December 31, 2009,and their cash flows for each of the two years in the period ended December 31, 20092012 and changes2011, in theirconformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
As disclosed in Note 2 to the accompanying financial positionstatements, the Company’s management adopted International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) for the year ended December 31, 2007,2012 with a transition date of January 1, 2011. These are the Company’s first consolidated financial statements that have been prepared in conformityaccordance with IFRS and accordingly apply the principles of IFRS 1,First-time Adoption of International Financial Reporting Standards. The Company’s consolidated financial statements for the year ended December 31, 2011 were prepared in accordance with Mexican Financial Reporting Standards.
Mexican Financial Reporting Standards vary in certain significant respects(“MFRS”). The transition effects from accounting principles generally accepted inMFRS to IFRS on the United States of America. Information relating to the natureCompany’s consolidated shareholders’ equity, comprehensive income and effect of such differencescash flows is presenteddisclosed in Note 28 to the31.
The accompanying consolidated financial statements.statements have been translated into English solely for the convenience of readers.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009,2012, based on the criteria established inInternal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated June 24, 2010February 22, 2013 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
The accompanying consolidated financial statements have been translated into English solely for the convenienceGalaz, Yamazaki, Ruiz Urquiza, S.C.
Member of readers.Deloitte Touche Tohmatsu Limited
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February 22, 2013
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Balance SheetsStatements of Financial Position
As of December 31, 20092012 and 20082011 and January 1, 2011 (transition date to IFRS)
(In thousands of Mexican Pesos)
2009 | 2008 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents (Note 4) | Ps. | 1,821,150 | Ps. | 1,506,004 | ||
Financial investments held for trading purposes (Note 5) | 279,621 | 275,237 | ||||
Trade accounts receivable—net (Note 6) | 453,856 | 572,058 | ||||
Recoverable taxes, mainly recoverable tax on assets (Note 20.b) | 260,253 | 375,571 | ||||
Embedded derivatives | 109 | 242 | ||||
Other accounts receivable | 2,251 | 1,187 | ||||
Total current assets | 2,817,240 | 2,730,299 | ||||
Cash equivalents designated for expenditure, held in trust (Note 7) | 352,436 | — | ||||
Machinery, equipment and improvements on leased buildings—net (Note 8) | 364,101 | 335,158 | ||||
Improvements to concession assets—net (Note 9) | 3,513,391 | 3,368,848 | ||||
Airport concessions—net (Note 10) | 16,756,973 | 17,188,483 | ||||
Rights to use airport facilities—net (Note 11) | 2,188,235 | 2,283,598 | ||||
Other acquired rights—net (Note 12) | 820,288 | 841,339 | ||||
Recoverable income taxes (Note 20.a) | 23,022 | 23,022 | ||||
Recoverable tax on assets (Note 20.f) | 396,240 | 442,080 | ||||
Embedded derivatives | 16,321 | 41,609 | ||||
Hedging derivative financial instrument (Note 13) | 13,647 | — | ||||
Deferred income taxes (Note 20.e) | 1,072,384 | 826,242 | ||||
Deferred statutory employee profit sharing (Notes 16.c and 19.c) | 6,077 | 4,917 | ||||
Other assets | 41,560 | 56,099 | ||||
Total | Ps. | 28,381,915 | Ps. | 28,141,694 | ||
Assets | ||||||||||||
December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents (Note 5) | Ps. | 1,663,683 | Ps. | 2,135,010 | Ps. | 2,348,807 | ||||||
Financial investments held for trading purposes (Note 6) | 433,573 | 278,349 | 233,915 | |||||||||
Trade accounts receivable – net (Note 7) | 244,796 | 294,503 | 296,146 | |||||||||
Recoverable taxes (Note 14.b) | 114,369 | 174,961 | 142,226 | |||||||||
Other current assets | 2,747 | 2,249 | 1,739 | |||||||||
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Total current assets | 2,459,168 | 2,885,072 | 3,022,833 | |||||||||
Advance payments to suppliers | 65,764 | 114,712 | 113,099 | |||||||||
Machinery, equipment and improvements on leased buildings – net (Note 8) | 951,465 | 836,339 | 447,166 | |||||||||
Improvements to concession assets – net (Note 9) | 4,810,150 | 4,437,652 | 3,846,461 | |||||||||
Airport concessions – net (Note 10) | 10,179,422 | 10,463,499 | 10,747,577 | |||||||||
Rights to use airport facilities – net (Note 11) | 1,270,490 | 1,327,189 | 1,383,887 | |||||||||
Other acquired rights – net (Note 12) | 598,481 | 615,181 | 631,881 | |||||||||
Recoverable income taxes (Note 14.a) | 1,861 | — | 23,022 | |||||||||
Derivative financial instruments (Note 13) | 1,045 | 4,468 | 7,138 | |||||||||
Deferred income taxes – net (Note 14.e) | 4,152,804 | 3,974,518 | 3,808,459 | |||||||||
Other assets | 42,987 | 61,045 | 60,207 | |||||||||
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Total | Ps. | 24,533,637 | Ps. | 24,719,675 | Ps. | 24,091,730 | ||||||
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(Continued)
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Balance SheetsStatement of Financial Position
As of December 31, 20092012 and 20082011 and January 1, 2011 (transition date to IFRS)
(In thousands of Mexican Pesos)
Liabilities and Stockholders’ Equity | |||||||||||||||||||
2009 | 2008 | December 31, 2012 | December 31, 2011 | January 1, 2011 | |||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Bank loans (Note 15) | Ps. | 193,965 | Ps. | 134,857 | |||||||||||||||
Current liabilities | |||||||||||||||||||
Current portion of long-term bank loans (Note 16) | Ps. | 555,925 | Ps. | 411,439 | Ps. | 266,492 | |||||||||||||
Concession taxes payable | 17,140 | 25,785 | 32,227 | 33,493 | 26,791 | ||||||||||||||
Aeropuertos Mexicanos del Pacífico, S.A. de C.V., related party (Note 18) | 50,767 | 62,044 | |||||||||||||||||
Accounts payable | 275,478 | 374,661 | |||||||||||||||||
Taxes payable, other than income and concession taxes payable | 47,652 | 47,206 | |||||||||||||||||
Income tax and business flat tax payable | 27,455 | 29,319 | |||||||||||||||||
Aeropuertos Mexicanos del Pacífico, S.A.P.I. de C.V. (Note 29) | 85,321 | 71,450 | 64,784 | ||||||||||||||||
Accounts payable (Note 15) | 376,225 | 472,645 | 403,724 | ||||||||||||||||
Taxes payable | 19,621 | 18,816 | 18,429 | ||||||||||||||||
Income taxes payable (Note 14) | 63,392 | 54,184 | 123,721 | ||||||||||||||||
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Total current liabilities | 612,457 | 673,872 | 1,132,711 | 1,062,027 | 903,941 | ||||||||||||||
Deposits received | 97,743 | 39,912 | |||||||||||||||||
Employee benefits (Note 14) | 35,158 | 25,121 | |||||||||||||||||
Bank loans (Note 15) | 856,003 | 665,143 | |||||||||||||||||
Deposits received in guarantee (Note 7) | 430,625 | 316,389 | 226,412 | ||||||||||||||||
Liabilities for postemployment benefits (Note 17) | 60,290 | 47,897 | 36,356 | ||||||||||||||||
Long-term bank loans (Note 16) | 1,456,798 | 1,612,179 | 1,042,808 | ||||||||||||||||
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Total liabilities | 1,601,361 | 1,404,048 | 3,080,424 | 3,038,492 | 2,209,517 | ||||||||||||||
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Commitments and contingencies (Notes 21 and 22) | |||||||||||||||||||
Stockholders’ equity (Note 16): | |||||||||||||||||||
Stockholders’ equity (Note 18): | |||||||||||||||||||
Common stock | 24,344,476 | 24,344,476 | 15,447,322 | 16,019,823 | 16,019,823 | ||||||||||||||
Legal reserve | 372,369 | 295,223 | 553,477 | 479,255 | 404,247 | ||||||||||||||
Fund for repurchase of shares | 864,265 | 55,000 | 1,667,302 | 1,387,302 | 1,000,000 | ||||||||||||||
Repurchased shares | — | (43,712 | ) | (1,387,302 | ) | (1,387,302 | ) | (609,809 | ) | ||||||||||
Retained earnings | 1,199,444 | 2,086,659 | 5,172,414 | 5,182,105 | 5,067,952 | ||||||||||||||
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Total stockholders’ equity | 26,780,554 | 26,737,646 | 21,453,213 | 21,681,183 | 21,882,213 | ||||||||||||||
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Total | Ps. | 28,381,915 | Ps. | 28,141,694 | Ps. | 24,533,637 | Ps. | 24,719,675 | Ps. | 24,091,730 | |||||||||
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(Concluded)
See accompanying notes to consolidated financial statements.
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2009, 20082012 and 20072011
(In thousands of Mexican Pesos, except per share amounts)
2012 | 2011 | |||||||
Revenues (Note 19): | ||||||||
Aeronautical services | Ps. | 3,365,982 | Ps. | 3,077,927 | ||||
Non-aeronautical services | 1,008,452 | 824,580 | ||||||
Improvements to concession assets | 570,233 | 1,036,227 | ||||||
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4,944,667 | 4,938,734 | |||||||
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Operating costs: | ||||||||
Cost of services (Note 20) | 1,060,002 | 986,938 | ||||||
Technical assistance fees (Note 29) | 155,072 | 136,191 | ||||||
Concession taxes (Note 1.a) | 217,295 | 193,802 | ||||||
Depreciation and amortization (Note 21) | 827,230 | 742,969 | ||||||
Cost of improvements to concession assets (Note 23) | 570,233 | 1,036,227 | ||||||
Other expenses – net | 1,333 | 6,587 | ||||||
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2,831,165 | 3,102,714 | |||||||
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Income from operations | 2,113,502 | 1,836,020 | ||||||
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Finance (cost) income (Note 24): | ||||||||
Interest income | 122,078 | 108,445 | ||||||
Interest expense | (121,319 | ) | (93,753 | ) | ||||
Exchange (loss) gain – net | (14,782 | ) | 22,626 | |||||
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(14,023 | ) | 37,318 | ||||||
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Income before income taxes | 2,099,479 | 1,873,338 | ||||||
Income tax expense (Note 14.c): | ||||||||
Current | 551,760 | 480,523 | ||||||
Deferred | (224,311 | ) | (218,765 | ) | ||||
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327,449 | 261,758 | |||||||
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Consolidated comprehensive income | Ps. | 1,772,030 | Ps. | 1,611,580 | ||||
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Weighted average number of common shares outstanding | 530,720,600 | 537,755,093 | ||||||
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Basic and diluted earnings per share | Ps. | 3.3389 | Ps. | 2.9969 | ||||
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Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2012 and 2011
(In thousands of Mexican Pesos)
2009 | 2008 | 2007 | ||||||||||
Revenues (Note 24): | ||||||||||||
Aeronautical services | Ps. | 2,537,262 | Ps. | 2,762,198 | Ps. | 2,812,869 | ||||||
Non-aeronautical services | 728,978 | 728,587 | 664,455 | |||||||||
3,266,240 | 3,490,785 | 3,477,324 | ||||||||||
Operating costs: | ||||||||||||
Cost of services (Note 25) | 869,315 | 952,729 | 839,119 | |||||||||
Technical assistance fees (Note 18) | 111,721 | 118,226 | 125,857 | |||||||||
Concession taxes | 162,507 | 173,533 | 172,846 | |||||||||
Depreciation and amortization (Note 26) | 828,835 | 798,251 | 754,097 | |||||||||
1,972,378 | 2,042,739 | 1,891,919 | ||||||||||
Income from operations | 1,293,862 | 1,448,046 | 1,585,405 | |||||||||
Other (expense) income—net (Note 19) | (11,710 | ) | 7,543 | (2,352 | ) | |||||||
Net comprehensive financing income: | ||||||||||||
Interest income | 185,343 | 163,071 | 172,882 | |||||||||
Interest expense | (75,564 | ) | (57,518 | ) | (20,076 | ) | ||||||
Exchange (loss) gain—net | (26,149 | ) | 92,402 | (2,078 | ) | |||||||
Monetary position loss | — | — | (59,117 | ) | ||||||||
(Loss) gain from embedded derivatives | (25,421 | ) | 16,923 | 5,732 | ||||||||
58,209 | 214,878 | 97,343 | ||||||||||
Income before income taxes | 1,340,361 | 1,670,467 | 1,680,396 | |||||||||
Income tax expense (Note 20.c) | 140,917 | 129,625 | 277,577 | |||||||||
Consolidated net income | Ps. | 1,199,444 | Ps. | 1,540,842 | Ps. | 1,402,819 | ||||||
Weighted average number of common shares outstanding | 560,473,972 | 560,594,812 | 561,000,000 | |||||||||
Basic earnings per share (in Mexican Pesos) | Ps. | 2.1400 | Ps. | 2.7486 | Ps. | 2.5006 | ||||||
See accompanying notes to consolidated financial statements.
Number of Shares | Common stock | Legal reserve | Fund for repurchase of share | Repurchased shares | Retained earnings | Total stockholders’ | ||||||||||||||||||||||
Balances as of January 1, 2011 (transition date) | 561,000,000 | Ps. 16,019,823 | Ps. 404,247 | Ps. 1,000,000 | Ps. (609,809 | ) | Ps. 5,067,952 | Ps. 21,882,213 | ||||||||||||||||||||
Transfer of earnings to legal reserve and fund for repurchase of shares (Note 18.b and e) | — | — | 75,008 | 387,302 | — | (462,310 | ) | — | ||||||||||||||||||||
Repurchase of 16,364,500 shares (Note 18.b) | — | — | — | — | (777,493 | ) | — | (777,493 | ) | |||||||||||||||||||
Dividends declared and paid, Ps. 1.9231 pesos per share (Note 18.b) | — | — | — | — | — | (1,035,117 | ) | (1,035,117 | ) | |||||||||||||||||||
Comprehensive income | — | — | — | — | — | 1,611,580 | 1,611,580 | |||||||||||||||||||||
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Balances as of December 31, 2011 | 561,000,000 | 16,019,823 | 479,255 | 1,387,302 | (1,387,302 | ) | 5,182,105 | 21,681,183 | ||||||||||||||||||||
Transfer of earnings to legal reserve (Note 18.e) | — | — | — | — | — | (74,222 | ) | — | ||||||||||||||||||||
Dividends declared and paid, Ps. 2.1292 pesos per share (Note 18.c) | — | — | — | — | — | (1,130,000 | ) | (1,130,000 | ) | |||||||||||||||||||
Fund for repurchase of shares (Note 18.c and f) | — | — | — | 280,000 | — | (280,000 | ) | — | ||||||||||||||||||||
Capital distribution (Note 18.d) | — | (572,501 | ) | — | — | — | (297,499 | ) | (870,000 | ) | ||||||||||||||||||
Comprehensive income | — | — | — | — | — | 1,772,030 | 1,772,030 | |||||||||||||||||||||
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Balances as of December 31, 2012 | 561,000,000 | Ps. | 15,447,322 | Ps. | 553,477 | Ps. | 1,667,302 | Ps. (1,387,302 | ) | Ps. | 5,172,414 | Ps. | 21,453,213 | |||||||||||||||
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Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ EquityCash Flows
For the years ended December 31, 2009, 20082012 and 20072011
(In thousands of Mexican Pesos)
Number of Shares | Common Stock | Legal Reserve | Fund for Repurchase of Shares | Repurchased Shares | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||
Balances as of January 1, 2007 | 561,000,000 | Ps. | 24,344,476 | Ps. | 179,122 | Ps. | — | Ps. | — | Ps. | 1,606,764 | Ps. | 26,130,362 | ||||||||||
Transfer of earnings to legal reserve | — | — | 45,960 | — | — | (45,960 | ) | — | |||||||||||||||
Dividends declared and paid, 2.0884 pesos per share (Note 16.b) | — | — | — | — | — | (1,171,616 | ) | (1,171,616 | ) | ||||||||||||||
Comprehensive income | — | — | — | — | — | 1,402,819 | 1,402,819 | ||||||||||||||||
Balances as of December 31, 2007 | 561,000,000 | 24,344,476 | 225,082 | — | — | 1,792,007 | 26,361,565 | ||||||||||||||||
Transfer of earnings to legal reserve and fund for repurchase of shares (Note 16.d) | — | — | 70,141 | 55,000 | — | (125,141 | ) | — | |||||||||||||||
Repurchase of 1,720,000 shares (Note 16.d) | — | — | — | — | (44,227 | ) | — | (44,227 | ) | ||||||||||||||
Dividends declared and paid, 2.0000 pesos per share (Note 16.d) | — | — | — | — | 515 | (1,122,000 | ) | (1,121,485 | ) | ||||||||||||||
Cumulative initial effect of deferred statutory employee profit sharing (Note 16.c) | — | — | — | — | — | 951 | 951 | ||||||||||||||||
Comprehensive income | — | — | — | — | — | 1,540,842 | 1,540,842 | ||||||||||||||||
Balances as of December 31, 2008 | 561,000,000 | 24,344,476 | 295,223 | 55,000 | (43,712 | ) | 2,086,659 | 26,737,646 | |||||||||||||||
Transfer of earnings to legal reserve (Note 16.e) | — | — | 77,146 | 809,265 | — | (886,411 | ) | — | |||||||||||||||
Repurchase of 360,000 shares (Note 16.e) | — | — | — | — | (10,248 | ) | — | (10,248 | ) | ||||||||||||||
Relocation of repurchased shares (Note 16.e) | — | — | — | — | 53,960 | (248 | ) | 53,712 | |||||||||||||||
Dividends declared and paid, 2.1390 pesos per share (Note 16.e) | — | — | — | — | — | (1,200,000 | ) | (1,200,000 | ) | ||||||||||||||
Comprehensive income | — | — | — | — | — | 1,199,444 | 1,199,444 | ||||||||||||||||
Balances as of December 31, 2009 | 561,000,000 | Ps. | 24,344,476 | Ps. | 372,369 | Ps. | 864,265 | Ps. | — | Ps. | 1,199,444 | Ps. | 26,780,554 | ||||||||||
See accompanying notes to consolidated financial statements.
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2009 and 2008
(In thousands of Mexican Pesos)
2009 | 2008 | |||||||
Operating activities: | ||||||||
Earnings before income taxes | Ps. | 1,340,361 | Ps. | 1,670,467 | ||||
Non-cash activities: | ||||||||
Employee benefits | 10,037 | 11,216 | ||||||
Deferred statutory employee profit sharing | (1,160 | ) | (3,597 | ) | ||||
Loss (gain) from embedded derivatives | 25,421 | (16,923 | ) | |||||
Inflationary effects on recoverable tax on assets | (6,285 | ) | (14,642 | ) | ||||
Financial investments held for trading purposes | (4,384 | ) | (35,870 | ) | ||||
Items related to investing activities: | ||||||||
Depreciation and amortization | 828,835 | 798,251 | ||||||
Loss on sale of fixed assets | 6,859 | 4,480 | ||||||
Allowance for doubtful accounts—long-term | 4,123 | — | ||||||
Items related to financing activities: | ||||||||
Loss on hedging derivative financial instrument | 1,020 | — | ||||||
Interest expense | 53,766 | 47,944 | ||||||
2,258,593 | 2,461,326 | |||||||
(Increase) decrease in: | ||||||||
Trade accounts receivable | 118,202 | (101,748 | ) | |||||
Recoverable income tax and other current assets | 62,771 | (127,849 | ) | |||||
Recoverable tax on assets | 42,313 | 111,847 | ||||||
Recoverable income tax on dividends | 44,663 | (45,952 | ) | |||||
Increase (decrease) in: | ||||||||
Concession taxes payable | (8,645 | ) | 606 | |||||
Aeropuertos Mexicanos del Pacífico, S.A. de C.V., related party | (11,277 | ) | (8,531 | ) | ||||
Accounts payable | 19,770 | (192,425 | ) | |||||
Taxes payable, other than income and concession taxes payable | 446 | 16,484 | ||||||
Reorganization provision | — | (28,000 | ) | |||||
Income taxes paid | (372,292 | ) | (476,490 | ) | ||||
Deposits received | 57,831 | 5,299 | ||||||
Net cash provided by operating activities | 2,212,375 | 1,614,567 | ||||||
Investing activities: | ||||||||
Purchases of machinery, equipment and improvements to concession assets | (541,249 | ) | (524,922 | ) | ||||
Other deferred assets | (865 | ) | 2,948 | |||||
Net cash used in investing activities | (542,114 | ) | (521,974 | ) | ||||
Excess cash to apply to financing activities | 1,670,261 | 1,092,593 |
2012 | 2011 | |||||||
Cash flows from operating activities: | ||||||||
Consolidated net income | Ps. | 1,772,030 | Ps. | 1,611,580 | ||||
Adjustments for: | ||||||||
Postemployment benefit costs | 12,393 | 11,541 | ||||||
Bad debt expense | 16,869 | 10,652 | ||||||
Depreciation and amortization | 827,230 | 742,969 | ||||||
Net loss on derivative financial instruments | 3,424 | 2,670 | ||||||
Interest expense | 102,136 | 57,220 | ||||||
Income tax expense | 327,449 | 261,758 | ||||||
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3,061,531 | 2,698,390 | |||||||
Changes in working capital: | ||||||||
(Increase) decrease in: | ||||||||
Financial investments held for trading purposes | (155,224 | ) | (44,434 | ) | ||||
Trade accounts receivable | 32,838 | (9,009 | ) | |||||
Recoverable income tax and other current assets | 95,385 | 19,695 | ||||||
Recoverable income tax | (1,861 | ) | 23,022 | |||||
Increase (decrease) in: | ||||||||
Concession taxes payable | (1,266 | ) | 6,702 | |||||
Aeropuertos Mexicanos del Pacífico, S.A.P.I. de C.V. | 13,871 | 6,666 | ||||||
Accounts payable | 32,788 | 15,616 | ||||||
Taxes payable | 805 | 387 | ||||||
Deposits received in guarantee | 114,226 | 89,977 | ||||||
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Cash generated by operating activities | 3,193,093 | 2,807,012 | ||||||
Income tax paid | (531,819 | ) | (550,294 | ) | ||||
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Net cash flows provided by operating activities | 2,661,274 | 2,256,718 | ||||||
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Cash flows from investing activities: | ||||||||
Purchases of machinery, equipment, improvements on leased buildings, improvements to concession assets and advance payments to suppliers | (979,014 | ) | (1,255,036 | ) | ||||
Cash flows from sales of machinery and equipment | 4,251 | 4,032 | ||||||
Other investing activities | (9,022 | ) | (2,466 | ) | ||||
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Net cash flows used in investing activities | (983,785 | ) | (1,253,470 | ) | ||||
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(Continued)
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 20092012 and 20082011
(In thousands of Mexican Pesos)
2009 | 2008 | |||||||
Financing activities: | ||||||||
Dividends declared and paid | (1,200,000 | ) | (1,121,485 | ) | ||||
Repurchase of shares | (10,248 | ) | (44,227 | ) | ||||
Sales of repurchased shares | 53,712 | — | ||||||
Bank loans | 413,754 | 344,000 | ||||||
Payments on bank loans | (163,786 | ) | (122,571 | ) | ||||
Interest paid on bank loans | (81,444 | ) | (68,989 | ) | ||||
Hedging derivative financial instrument | (14,667 | ) | — | |||||
Net cash used in financing activities | (1,002,679 | ) | (1,013,272 | ) | ||||
Net increase in cash and cash equivalents | 667,582 | 79,321 | ||||||
Cash and cash equivalents at beginning of year | 1,506,004 | 1,426,683 | ||||||
Cash and cash equivalents at end of year (includes cash equivalents designated for expenditure held in trust for Ps. 352,436) | Ps. | 2,173,586 | Ps. | 1,506,004 | ||||
2012 | 2011 | |||||||
Cash flows from financing activities: | ||||||||
Dividends declared and paid | (1,130,000 | ) | (1,035,117 | ) | ||||
Capital distribution | (870,000 | ) | — | |||||
Repurchase of shares | — | (777,493 | ) | |||||
Proceeds from bank loans | 601,327 | 1,014,626 | ||||||
Payments on bank loans | (612,222 | ) | (300,308 | ) | ||||
Interest paid on bank loans | (137,921 | ) | (118,753 | ) | ||||
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Net cash flows used in financing activities | (2,148,816 | ) | (1,217,045 | ) | ||||
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Net decrease in cash and cash equivalents | (471,327 | ) | (213,797 | ) | ||||
Cash and cash equivalents at beginning of year | 2,135,010 | 2,348,807 | ||||||
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Cash and cash equivalents at the end of year | Ps. | 1,663,683 | Ps. | 2,135,010 | ||||
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Non-cash investing activities: | ||||||||
Purchases of machinery, equipment, improvements on leased buildings and improvements to concession assets on account | Ps. | 163,644 | Ps. | 276,443 | ||||
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(Concluded)
See accompanying notes to consolidated financial statements.
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Changes in Financial Position
For the year ended December 31, 2007
(In thousands of Mexican Pesos)
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See accompanying notes to consolidated financial statements.
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and Subsidiaries
Notes to Consolidated Financial Statements
For the years ended December 31, 2009, 20082012 and 20072011 and January 1, 2011 (transition date to IFRS)
(In thousands of Mexican Pesos)
1. | Activities of the Company and significant events |
a. Activities
Grupo Aeroportuario del Pacífico, S.A.B. de C.V. and subsidiaries (the “Company”Company or “GAP”)GAP) was incorporated in May 1998 as a state-owned entity to manage, operate and develop 12 airport facilities, mainly in Mexico’s Pacific region. The airports are located in the following cities: Guadalajara, Puerto Vallarta, Tijuana, Los Cabos, Silao (Guanajuato), Hermosillo, Mexicali, Los Mochis, La Paz, Manzanillo, Morelia and Aguascalientes. The Company’s principal address is Mariano Otero Avenue 1249 B, six floor, Rinconada del Bosque, zip code 44530, Guadalajara, Jalisco, Mexico.
a. | Activities |
The Company began operations on November 1, 1998. Prior to that date, the Company’s activities were carried out by Aeropuertos y Servicios Auxiliares (“ASA”)(ASA), a Mexican GovernmentGovernmental agency, which was responsible for the operation of all public airports in Mexico.
In June 1998, the subsidiaries of Grupo Aeroportuario del Pacífico, S.A.B. de C.V. were granted concessions by the Ministry of Communications and Transportation (“SCT”)(SCT) to manage, operate and develop each of the Pacific Group’s 12 airports and benefit from the use of the airport facilities, for a 50-year term beginning November 1, 1998. The cost of the concessions, which totaled Ps. 24,210,213 (Ps. 15,938,360 nominal pesos),Ps.15,938,359, was determined by the Mexican Government in August 1999, based upon the price paid by Aeropuertos Mexicanos del Pacífico, S.A.S.A.P.I. de C.V. (“AMP”,(AMP, the strategic stockholder of the Company) for its interests in GAP. On August 20, 1999, GAP entered into a Liabilities Assumption Agreement with each of its subsidiaries, whereby it assumed the liabilities incurred by each subsidiary derived from obtaining the concession. Such liabilities were capitalized by GAP as equity in favor of the Mexican Government on such date.
The term of the concessions may be extended under certain circumstances by the SCT, for terms not to exceed an additional 50 years. Beginning on November 1, 1998, the Company is required to pay an annual tax to the Mexican Government, through the SCT, for use of the public property, equivalent to 5% of each concessionaire’s annual gross revenues, according to the concession terms and the Mexican Federal Duties Law.
Title to all of the long-term fixed assets within the airports is retained by the Mexican Government. Accordingly, upon expiration of the term of the concessions granted to the Company, the assets, including all of the improvements made to the airport facilities during the term of the concessions, shall automatically revert to the Mexican Government. Additionally, ASA and other agencies of the Mexican Government maintain the rights to provide certain services such as air traffic control, fuel supply and immigration control.
On February 24, 2006, the Company made an initial public offering of its Series “B”B shares, under which the Mexican Government, which held 85% of the voting common stock of the Company sold its 100% shares participation, both in the United States of America, via the New York Stock Exchange (under the symbol “PAC”)(NYSE) and in Mexico, via the Mexican Stock Exchange (under the symbol “GAP-B”)(BMV). Consequently, as of such date, the Company became a public entity in both Mexico and in the United States of America and is required to meet various legal obligations and regulations for public entities applicable in each country for public entities.country.
b. |
At an Ordinary General Stockholders’ Meeting held on April 27, 2011, the stockholders approved a dividend payment of Ps.1.4424 pesos per share, which was paid on May 31, 2011 and a dividend payment of Ps.0.4807 pesos per share, which was paid on November 29, 2011. Both payments were made before the due dates, which were on May 31, 2011 and November 30, 2011, respectively, with the total dividends paid of Ps.780,000 and Ps.255,117, as disclosed in Note 18.b.
On August 31, 2007,May 26, 2011, the Company entered into an unsecured credit agreement with HSBC México, S.A. (HSBC), with crossed guarantees provided by the Guadalajara, Los Cabos, Puerto Vallarta, Hermosillo and Guanajuato airports, signedfor a combined amount of Ps. 1,023,980, of which Ps.913,138 has been borrowed against as of December 31, 2012. Funds were disbursed in different dates, as described in Note 16.
On June 6, 2011, the Company entered into an unsecured credit agreement with Banco Nacional de México, S.A. (“Banamex”) for Ps. 1,214,000. Funds were disbursed on three different dates, as described in Note 15.a.
On November 8, 2007, Corporativo de Servicios Aeroportuarios, S.A. de C.V. (“Corsa”) was incorporated as a subsidiary, in order to carry out a corporate restructuring. Corsa began operations in January 2008.
On November 28, 2007, Puerta Cero Parking, S.A. de C.V. (“Parking”) was incorporated as a subsidiary. The purpose of this entity is to render operating and administrative services to(Banamex), with crossed guarantees provided by the public parking lots. Parking began operations in January 2008.
As mentioned in Note 16.d, at an Ordinary General Stockholders’ Meeting held on April 28, 2008, the stockholders approved a buy back stock program up to a maximum amount of Ps. 55,000.
As mentioned in Note 16.e, at an Ordinary General Stockholders’ Meeting held on April 28, 2009, the stockholders approved an increase to a buy back stock program to get up to a maximum amount of Ps. 864,265.
On December 9, 2009, the Guadalajara, Los Cabos, Puerto Vallarta, Hermosillo and Guanajuato airports, for a combined amount of Ps. 551,372, of which Ps.355,119 has been borrowed against as of December 31, 2012. Funds were disbursed in different dates, as disclosed in Note 16.
On December 15, 2011, two trusts were created by the Company to hold the economic resources needed to guarantee payment to the building contractors of the Tijuana and Los Cabos airports for “Expansion of Terminal Building Phase III” and “New Terminal T4”, respectively. The capital held by these trusts will be used to finance advance payments to the suppliers as the construction of the previously mentioned projects proceeds.
At an Ordinary General Stockholder’s Meeting held on April 16, 2012, the stockholders approved a dividend payment of Ps. 1,130,000 to be divided between each of the shares outstanding at the date of payment, excluding shares repurchased by the Company, in each dates of payments in accordance with article 56 of Securities Market Law. The first dividend payment of Ps. 847,500 was made on May 31, 2012 and the second dividend payment of Ps. 282,500 was made on November 1, 2012, as mentioned in Note 18.c.
On August 2, 2012, the Company entered into an unsecured credit agreement with BanamexBBVA Bancomer, S.A. (BBVA Bancomer), with cross guarantees between the airports accredited for Ps.242,747, for Bajio, Guadalajara, Hermosillo, Puerto Vallarta and HSBC Mexico, S.A. (“HSBC”), for a combined amount of Ps. 651,446. FundsSan Jose del Cabo airports, which will be used to finance capital investments committed in the Master Development Plan (MDP) for the year 2012. The credit was disbursed on twoat different dates, as describedwhich are disclosed in Note 15.b.16.
On DecemberOctober 3, 2012, the Company made a payment for Ps. 870,000 of the capital reduction of Ps.1.639281 per outstanding share, which was approved at the Extraordinary General Stockholders’ Meeting on 25 September 2012, as disclosed in Note 18.d.
On November 23, 2009, a Trust was created to guarantee payment under2012, the contract “Turn-Key Design, Supply, Installation and Starting up for a System to Inspect 100% of Documented Baggage”. The Company entered into a contractan unsecured credit agreement with Rapiscan Systems, S.A. de C.V. (“Rapiscan”) to complyBBVA Bancomer with cross guarantees between the requirement of supplying a systemairports accredited for inspection of documentedPs. 287,799, for San Jose del Cabo, Puerto Vallarta, Guadalajara, Hermosillo and in-cabin baggage, a subcontractor whichBajio airports. The credit will be available at different dates, which are disclosed in charge of construction of the entire project.Note 16. As of December 31, 2009, investment2012, Ps. 104,949 has been borrowed against this credit agreement.
On December 7 and 23, 2012 the Company paid in advance the outstanding balances held in the trust totaled Ps. 352,436, comprised of the initial contributioncredit loans disbursed on June 7, 2011 and interest earned.December 23, 2011 for Ps. 77,910 and Ps. 105,329, respectively, relating to the credit agreement signing with Banamex on June 6, 2011.
2. | Basis of presentation |
a. | Statement of Compliance With International Financial Reporting Standards –Beginning on January 1, 2012 the Company adopted International Financial Reporting Standards (IFRS) and their amendments and interpretations as issued by the International Accounting Standards Board (IASB), in effect at December 31, 2012, and consequently applied IFRS 1First-time Adoption of International Financial Reporting Standards. These consolidated financial statements have been prepared in accordance with the standards and interpretations issued and effective as of the date thereof. |
b. | Translation into English – |
c. | Transition to IFRS –The Company’s consolidated financial statements at December 31, 2011 were prepared in accordance with Mexican Financial Reporting Standards (MFRS), which differ in certain respects from IFRS. The differences in the requirements for recognition, measurement and presentation between IFRS and MFRS were reconciled for purposes of the Company’s equity at January 1, 2011 (the Company’s transition date to IFRS), at December 31, 2011, and for purposes of consolidated comprehensive income for the year ended December 31, 2011. |
Reconciliations and explanations of how the transition to IFRS has affected the consolidated financial position, financial performance and cash flows of the Company are provided in Note 31.
d. | Basis of measurement–The consolidated financial statements have been prepared on a historical cost basis, except for the following significant accounts: i) certain financial instruments recognized at fair value, ii) the liability for postemployment benefits, which is recognized net of unrecognized costs for past services and the present value of the obligation for such benefits, and iii) certain financial liabilities recognized at amortized cost. |
The different measurement principles utilized include the following:
Historical cost – Historical cost is generally based on the fair value of the amount given in exchange for assets.
Fair value – The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the valuation date.
Present value – Some financial assets are recorded at the discounted present value of future cash inflows that those assets are expected to generate in the ordinary course of business. Liabilities are recorded at the discounted present value of future cash outflows required to settle these liabilities in the ordinary course of business.
Amortized cost – The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectability.
e. | Consolidation of financial |
Aeropuerto de Aguascalientes, S.A. de C.V.
Aeropuerto del Bajío,Bajio, S.A. de C.V.
Aeropuerto de Guadalajara, S.A. de C.V.
Aeropuerto de Hermosillo, S.A. de C.V.
Aeropuerto de La Paz, S.A. de C.V.
Aeropuerto de Los Mochis, S.A. de C.V.
Aeropuerto de Manzanillo, S.A. de C.V.
Aeropuerto de Mexicali, S.A. de C.V.
Aeropuerto de Morelia, S.A. de C.V.
Aeropuerto de Puerto Vallarta, S.A. de C.V.
Aeropuerto de San José del Cabo, S.A. de C.V.
Aeropuerto de Tijuana, S.A. de C.V.
AeropuertoCorporativo de Manzanillo,Servicios Aeroportuarios, S.A. de C.V. (CORSA)
GA del Pacífico Partipacoes do Brasil LTDA
Puerta Cero Parking, S.A. de C.V. (PCP)
Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V.
Corporativo de Servicios Aeroportuarios, S.A. de C.V.
Puerta Cero Parking, S.A. de C.V. (SIAP)
All significant intercompany balances, transactions and investments have been eliminated in the accompanying consolidated financial statements.
The Company consolidates all entities over which the Company has control, which occurs when it is exposed, or has rights, to variable returns from its involvement with an investee and has the ability to affect those returns through its power over such investee. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Company, and are no longer consolidated from the date that control is lost.The Company early adopted a package of five new and revised standards (IFRS 10,Consolidated Financial Statements, IFRS 11Joint Ventures, IFRS 12Disclosure of Interests in Other Entities, IAS 27 (as revised in 2011)Separate Financial Statements, and IAS 28 (as revised in 2011)Investments in Associates and Joint Agreements), whose related accounting policies have been included in these consolidated financial statements.
Functional and presentation currency –The consolidated financial statements and notes as at December 31, 2012 and 2011 and as of January 1, 2011 and for the years ended December 31, 2012 and 2011, are prepared in pesos, which is the functional currency of the Company and its subsidiaries and are presented in thousands of pesos. |
g. | Use of estimates and critical judgments in preparing the financial statements– The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the application of accounting policies relating to the reported amounts of assets, liabilities, income and expenses of the relevant period. Actual results could differ from these estimates. |
Information on the uncertainty in the use of assumptions and estimates that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:
Estimation of doubtful accounts (Note 7)
Definition of useful lives and depreciation and amortization periods (Notes 3.c y 3.d)
Probability of recovery of tax loss (Note 14.f)
Recovery of tax on assets paid in prior years (Note 14.i)
Assumptions used to determine liabilities for retirement benefits (Note 17)
Contingency liabilities (Note 26)
In addition to the estimates, the Company makes critical judgments in applying its accounting policies, which have a material effect on the amounts recognized in the financial statements. Management believes that the decisions made are the most reasonable based on information available, on the judgments made and the way it manages the operation of the Company. Critical judgments relate to:
Identification of differences between IFRS and MFRS – As part of the process of adopting of IFRS as explained in Note 2c, management of the Company has undertaken a comprehensive analysis of the applicable IFRS that apply to its operations and believes it has reasonably identified all significant differences that may have a material effect on the consolidated financial statements, as well as the effects of the mandatory exceptions and applicability of the voluntary exemptions adopted as of January 1, 2011, the IFRS transition date.
• | Accounting for the Concession – Management believes it has carried out a comprehensive implementation of the standards applicable to the accounting treatment of its concession and has determined that, among others, International Financial Reporting Interpretation (IFRIC) 12Service Concession Arrangementsis applicable to the Company. The Company treats its investments related to improvements and upgrades to be performed in connection with the MDP under the intangible asset model established by IFRIC 12 and does not recognize a provision for maintenance, as all investments required by the MDP, regardless of their nature, directly increase the Maximum Tariff per traffic unit (MT). Accordingly, all amounts invested under the MDP have a direct correlation to the amount of fees the Company will be able to charge each passenger or cargo service provider, and thus, a direct correlation to the amount of revenues the Company will be able to generate. As result, management defines all expenditures associated with investments required by the MDP as revenue generating activities given that they ultimately provide future benefits, whereby subsequent improvements and upgrades made to the concession are recognized as intangible assets based on the principles of IFRIC 12. Additionally, compliance with the committed investments per the MDP is mandatory, as well as the fulfillment of the MT and therefore, in case of default in any of these obligations (MDP or MT), the Company could be subject to sanctions and even its concession could be revoked. To determine the amortization period of the intangible associated with the improvements and upgrades made to comply with the MDP, the Company focuses on the period over which they will generate future economic benefits or the concession term, whichever is less. |
h. | Income from |
Comprehensive |
Classification of |
3. | Summary of significant accounting policies |
The accompanying consolidated financial statements have been prepared in accordancecomply with MFRS, which require thatIFRS as issued by the IASB. Its preparation requires management to make certain estimates and use certain assumptions that affect certain items of the amounts reported in theconsolidated financial statements and their related disclosures; however,disclosures required therein, and in the preparation of the initial statement of financial position in accordance with IFRS as of January 1, 2011. However, actual results maycould differ from suchthose estimates. The Company’s management, upon applying professional judgment, considers that estimates made and assumptions used were adequate under the circumstances.circumstances (Note 2.g). The significant accounting policies of the Company are as follows:
a. |
Financial assets –Financial assets are recognized when the Company becomes a contractual party to the terms of the related instruments.
Financial assets are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets at fair value through profit or loss (FVTPL) are recognized immediately in profit or loss.
The Company’s financial assets are classified into the following specified categories: i) FVTPL and ii) accounts receivable. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way of purchases or sales, are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
Financial assets at FVTPL – Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.
A financial asset is classified as held for trading if:
It has been acquired principally for the purpose of selling it in the near term; or
In its initial recognition, it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
It is a derivative that is not designated and is effective as a hedging instrument.
Financial assets at FVTPL are stated at fair value, with any gain or loss arising on remeasurement is recognized in profit or loss. The net gain or loss recognized in profit or loss includes any dividend or interest earned from the financial asset and is included in the finance income in the consolidated statements of comprehensive income. Fair value is determined in the manner described in Note 6.
Accounts receivable – Trade accounts receivable and other receivables, with fixed or determinable payments that are not quoted in an active market are classified as receivables. Interest income is recognized by applying the effective interest rate, except for the short term receivables, in the event that the recognition of interest is not material.
The effective interest rate is the rate that discounts the estimated future cash receipts (including all professional fees and basis points paid or received that are part of the effective interest rate, transaction costs and other premiums or discounts) for the expected life of the instrument, or when is appropriate a shorter period, to the net carrying amount at initial recognition.
Financial liabilities and equity instruments –Financial liabilities are recognized when the Company becomes a contractual party to the terms of the related instruments.
Financial liabilities and are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on its initial recognition. Transaction costs directly attributable to the acquisition of financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements.
Equity instruments – An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the resources received, net of direct costs from the emission.
Repurchase of the Company’s common stock is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss at the purchase, sale, issue or cancellation of the Company’s own equity instruments.
Financial liabilities – Financial liabilities are classified as financial liabilities at FVTPL or as other financial liabilities. At the date of the financial statements, the Company does not have liabilities at FVTPL.
Other financial liabilities (including borrowings and trade accounts payable) are subsequently measured at amortized cost, using the effective interest rate method.
The effective interest rate method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments exactly (or as appropriate in a short term) with the net book value on its initial recognition.
The Company derecognizes financial liabilities when, and only when, the Company´s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the amount paid and payable is recognized in profit or loss.
Even when the Company has the right, in certain cases, for a compensation of financial assets and liabilities, as of the date of this consolidated financial statements, the Company does not have the intention of compensate a liability with an asset, nor expect in a short term may require it. Therefore, deposits received in guarantee are presented separately from accounts receivable.
b. | Cash and cash equivalents |
c. |
Machinery, equipment and improvements on leased buildings |
Recognition and valuation – Machinery, equipment and improvements to leased buildings are recognized at acquisition cost less accumulated depreciation and any accumulated impairment losses. The acquisition cost includes expenses directly attributable to the acquisition of the asset.
When significant parts of an asset of machinery, equipment and improvements to leased buildings have different useful lives, they are accounted for separately as a component of the asset.
Gains and losses from sales or retirements of machinery, equipment and improvements to leased buildings are determined comparing the proceeds from the sale or retirement against net amount of machinery, equipment and improvements to leased buildings and are recognized net in other expenses in the consolidated statement of comprehensive income.
Subsequent costs – The cost to replace a part or item of machinery, equipment and improvements to leased buildings are recognized in the value of the asset when it is probable that future economic benefits associated with that part will flow to the Company and its cost can be measured reliably. The net value of the replaced item is derecognized at its net book value. Minor maintenance costs are recognized in earnings as incurred.
Depreciation – Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other substitute value of that cost, since this is the value that reflects more certainty the expected pattern of consumption of future economic benefits implicit in the active. The Company does not determine residual values for machinery, equipment, improvements and leased buildings as they are not considered to be material.
Depreciation of machinery and equipment is recognized in the consolidated statement of comprehensive income and is calculated under the straight-line method based on the useful lives of the related assets. Also, improvements to leased buildings are amortized by the straight-line method based on the remaining useful life of the improvements or the lease term, whichever is less. The estimated useful life and the depreciation method are reviewed at the end of each year, and the effect of any changes in the estimate recorded is recognized on a prospective basis.
The estimated useful lives for the current period and comparative period are as follows
Useful life (years) | Average annual depreciation rate | |||
Machinery and equipment | 10 | 10% | ||
Office furniture and equipment | 10 | 10% | ||
Computer equipment | 3.3 | 30% | ||
Transportation equipment | 4 | 25% | ||
Communication equipment | 10 - 3.3 | 10% - 30% | ||
Improvements on leased buildings | 10 | 10% |
d. | Intangible Assets |
Improvements to concession assets – Improvements to concession assets are accounted for the improvements that are made pursuant to the Master Development Plan (MDP) and improvements carried out by the daily operation of the Company’s airports. All infrastructure investments made by the airports will be delivered to the Mexican government at the end of the term of the Concession. Under the Company’s concession agreements, through the Master Development Programs agreed with the Mexican government every five years, the Company is committed to carry out various improvements, upgrades and additions to each of its airports on an annual basis. In exchange for investing in those additions and upgrades, the Mexican government grants the Company the right to obtain benefits for services provided using those assets. The Company, as the operator of the concession assets, recognizes an intangible asset as it receives a right granted by the Mexican government to charge users of the public service associated with the use of its airports.
Airport concessions – The Company recognized an intangible asset of the Concession granted by the SCT to manage and operate each of the airports for 50 years since its acquisition.
Rights to use airport facilities – Rights to use airport facilities are recorded at acquisition cost of the assets recorded by ASA and transferred to the Company according to the Concession granted, in order to manage, operate and exploit them during the Concession term.
Other acquired rights – These rights correspond to payments made by the Company after the date the Concessions were granted, in order to early-terminate certain long-term leases contracts that existed at that time between ASA and third-party leaseholders, these rights are recorded at its acquisition cost.
Amortization – After to its initial recognition, intangible assets are valued at acquisition cost plus capitalized borrowing costs that are recognized, less accumulated depreciation and accumulated impairment losses. Depreciation is recognized in the consolidated statement of comprehensive income under the straight line method applied to the shorter of the estimated period of future economic benefits the intangible assets will generate, or the concession period, from the date they are available for use.
Amortization periods for the current and comparative period are as follows:
Period (years) | Average annual amortization rate | |||
Improvements to concession assets | 12.5 - 20 | 5% - 8% | ||
Airport concessions | 49 | 2% | ||
Rights to use airport facilities | 10 - 49 | 10% - 2% | ||
Other acquired rights | 44 - 48 | 2% |
The amortization method and useful lives are reviewed at each year end date and adjusted prospectively if necessary.
e. | Capitalized borrowing costs – Borrowing costs directly attributable to qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use are capitalized as part of the cost of the related |
f. | Impairment |
Financial assets – A financial asset that is not recognized at FVTPL is evaluated by the Company at the close of each reporting period to determine whether there is evidence of potential impairment. A financial asset is impaired if there is objective evidence that a loss has occurred after the initial recognition of the asset and that loss has a negative effect on the estimated future cash flows of the asset, that can be estimated reliably. The reversal of an impairment loss cannot exceed the amount of the impairment previously recognized
For all other financial assets, objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
breach in the payment of the interests or the loan; or
it is probable that the borrower will enter in bankruptcy or into a financial reorganization; or
the disappearance of an active market for that financial asset because of financial difficulties.
An impairment loss on financial assets carried at amortized cost is calculated as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Losses are recognized in earnings and are reflected in the allowance for doubtful accounts included in cost of services. When a subsequent event causes the amount of impairment loss to reverse, such amount is recognized in current earnings on a prospective basis and cannot exceed the amount of the impairment previously recognized.
Individually significant financial assets are tested one by one for impairment. The remaining financial assets are assessed in groups of similar credit risk characteristics.
For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.
All impairment losses are recognized in the consolidated statement of comprehensive income.
A reversal of an impairment loss occurs only if it can be associated objectively to an event that occurred after the date the loss was recognized.
Non-financial assets – Non-financial assets of the Company are assessed at each period end date to determine whether there is any indication of impairment. If there is such an indication of impairment, management estimates the recoverable amount.
The recoverable amount of an asset or cash-generating unit is the higher of asset value in use and net selling price. To determine the asset’s value in use, the estimated future cash flows are discounted to present value using an appropriate discount rate before tax that reflects current market conditions in relation to the time value of money and the risks specific to the asset. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating unit).
The Company’s individual airports cannot be considered as separate cash-generating units, as the bidding process for the concession made by the Mexican Federal Government included the package of twelve airports, and therefore the Company is required to operate and maintain all 12 airports independently of the results they generate individually. Considering the above, the Company performs an impairment assessment at a consolidated basis.
When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimated recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had an impairment loss not been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit and loss.
g. |
When derivative financial instrumentscontract are entered into to hedge risks, and such derivatives meet all hedging requirements, their designation is documentedsubsequently valued at fair value at the beginningend of the hedging transaction, which includes the Company’s risk management objectives and strategy for undertaking the hedge, identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the entity will assess the hedging instrument’s effectiveness.
each reporting period. The accounting for changes in the fair value of a derivative financial instrument designated has a hedge depends on the type of hedge and is accounted for as follows: (1) for fair value hedges, the gain or loss is recognized in current earnings offsetting the gainprofit or loss immediately unless the derivative is designated as a hedging instrument and is considered to be effective. The timing of the recognition of the hedging instrument in earnings will depend on the hedged item; (2) for cash flow hedges, the effective portionnature of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings; the ineffective portion of the gain or loss is reported in earnings immediately. When the Company determines the effectiveness of a cash flow hedge based on the intrinsic value of the instrument, it recognizes the changes in the time value of the instrument directly through earnings.hedge.
The Company discontinuesmay designate certain instruments as hedges for accounting purposes if at inception of the hedge, the Company documents the relationship between the hedging instrument and the hedged item, as well as the risk management and management strategy objectives for undertaking various hedging transactions. Additionally, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting the exposure to changes in fair value or changes in cash flows of the hedged item.
Hedge accounting ifis discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or exercised, ifor when it fails to meet the criteria for hedge accounting. Any cumulative gain or loss on the hedging instrument that has been recognized in equity remains in equity until the forecasted transaction is ultimately recognized in profit or loss. When management no longer meetsexpects the hedge accounting criteria—for example it is no longer effective or for cash flow hedges the forecastforecasted transaction is no longer expected to occur, the gain or if the entity revokes the hedge designation.
Embedded derivative financial instruments areloss accumulated in equity is recognized for rental agreements that establish rental paymentsimmediately in a currency different from the functional currency of the both parties to the rental agreement. The embedded derivative is segregated, whose underlying is the fluctuation between the foreign currency and functional currency, and is measured at fair value through results of the period.profit or loss.
Other intangible assets |
Provisions– Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. |
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, an account receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Provisions are classified as current or noncurrent based on the period of time estimated to meet the obligations covered.
k. | Direct employee benefits |
The Company adopted in advance IAS 19 (as revised in 2011)Employee Benefits, which did not have a significant impact on the Company’s consolidated financial statements.
Statutory employee profit sharing |
n. |
Aeronautical services – The majority of the Company’s revenues are derived from rendering aeronautical services, related to the use of airport facilities by airlines and passengers. These revenues are regulated by the SCT through a “maximum rate” per “workload unit.” A workload unit is currently equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.
Revenues from non-aeronautical services consist mainly of the leasing of commercial space at the airport terminals (other than space deemed essential to airline operations), car parking, access fees charged to third parties providing food catering and other services at the airports, and other miscellaneous revenues.
Commercial space within the terminals is leased through operating lease agreements, based on either a monthly fixed rent or a charge based on the higher of a minimum monthly rent or a percentage of the lessee’s monthly revenues. Rental income from the Company’s leases is recognized on a straight-line basis over the term of the relevant lease.
• | Revenues |
customers and therefore it recognizes the |
Foreign currency transactions |
Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable exchange rate in effect at the consolidated statement of financial position date. Exchange fluctuations are recognized as interest income as earned in the finance income – cost, as exchange gain or loss.
Income taxes |
Current tax expense is the tax payable determined for the year, using tax rates enacted or substantially enacted at the reporting date, plus any adjustment to tax payable in respect of previous years. Taxable income differs from income before income taxes reported in the consolidated statements of comprehensive income because there are items of income or expense that are taxable or deductible in other years and items that will never be taxable or deductible.
To recognize deferred income taxes, based on its financial projections, the Company determines whether its individual airports expect to incur ISR or IETU in the future, and recognizes the deferred taxes accordingly. Deferred taxes are calculated by applying the rate for temporary differences resulting from comparing the accounting and tax assets and liabilities, and when applicable, the benefits from tax loss carryforwards and certain tax credits, such as the Tax on Assets (IMPAC) paid in previous years and expected to be recovered in future periods in accordance with the rules established in the tax laws, to the extent that it is probable the existence of future taxable profit that can be applied against such tax benefits. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the tax benefit can be recognized.
The rates applied to determine the deferred tax are those that correspond to the year in which it is expected the reversal of the temporary difference.
The Company did not recognized deferred taxes for the following items:
Initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor tax results.
Differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future and where the Company has the power to control the reversal date.
Earnings per share |
r. | Finance income and cost – Finance income comprises interest income from investments in debt securities, changes in the market value of financial assets at FVTPL and gains on hedging instruments that are recognized in the consolidated statement of comprehensive income, among other concepts. Interest income is recognized when it is probable that the economic benefits will flow to the Company and the amount can be reliably measured. Interest income is recorded on a regular basis, with reference to the capital invested and the effective interest rate. |
Finance costs comprise interest costs of loans net of interest cost capitalized on qualifying assets, changes in the market value of financial assets at FVTPL, losses on hedging instruments that are recognized in the consolidated statement of comprehensive income, interest paid to the tax authorities, among other items. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in the consolidated statement of comprehensive income, using the effective interest method.
4. | Financial risk management |
The Company is exposed, among other, to the following risks from the use of financial instruments:
Credit risk
Liquidity risk
Market risk
This note presents information about the Company’s exposure to each of the above risks, the objectives, polices and processes of measuring and risk management of the Company. In different sections of these financial statements the Company has included additional in-depth disclosures.
At December 31, 2012 and 2011, and January 1, 2011, financial instruments held by the Company are comprised of the following:
December 31, 2012 | December 31, 2011 | January, 1 2011 | ||||||||||
Financial assets | ||||||||||||
Cash and cash equivalents | Ps. | 1,663,683 | Ps. | 2,135,010 | Ps. | 2,348,807 | ||||||
Financial investments held for trading purposes | 433,573 | 278,349 | 233,915 | |||||||||
Receivables | 247,543 | 296,752 | 297,885 | |||||||||
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Derivative financial instruments | 1,045 | 4,468 | 7,138 | |||||||||
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Financial liabilities at amortized cost | ||||||||||||
Current and long term bank loans | Ps. | 2,012,723 | Ps. | 2,023,618 | Ps. | 1,309,300 | ||||||
Accounts payable | 376,225 | 472,645 | 403,724 | |||||||||
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Financial risk management objectives –The board of directors is responsible for developing and monitoring the Company’s risk management policies.
The Company’s risk management policies are established to identify and analyze potential risks, to set appropriate limits and controls, to monitor such risk on an ongoing basis. Policies and risk management systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop an environment of disciplined and constructive control in which all employees understand their roles and obligations.
The Audit Committee of the Company supervises how management monitors compliance with policies, procedures and reviews risks that is appropriate to the risk management framework in relation to the risks faced by the Company. The Audit Committee is supported in its oversight role by the Company’s Internal Audit Function. Internal Audit performs routine and special reviews of controls and risk management procedures, and reports its results directly to the Audit Committee.
Credit risk– Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company and arises primarily for trade accounts receivable and the Company’s investments, including investment funds and derivative financial instruments.
Receivables – The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographic characteristics of its customers, including the default risk of the industry and country in which its customers operate, as these factors could also affect credit risk, particularly considering the recent economic downturn. The main source of income for the Company is the Passenger Charge Fees (Tarifa de Uso Aeroportuario, TUA) and leasing revenues from commercial areas in its airports. The TUA is charged to each departing passenger (except diplomat, infant or transit passenger), and is collected by the airlines and subsequently refunded to the airports. At December, 31 2012 and 2011 the revenues for TUA represented 57.1% and 51.8% of the total revenues, respectively. The revenues from commercial areas are collected from other clients, which are not are airline customers. Approximately 31.5% and 28.5% of the Company’s revenues in 2012 and 2011 are derived from the TUA collected by three major client airlines, which collect the TUA and remit it to the airports. However, geographically there is nominal geographical risk concentration because its airports are in different cities in Mexico, and therefore if one airport has an operating problem its other airports will not be affected. Approximately 36.0% and 37.0% of aeronautical and non-aeronautical revenues earned during the periods ended December 31, 2012 and 2011 were generated by the Guadalajara airport. In addition, approximately 90.9% and 90.8% of aeronautical and non aeronautical revenues earned during the periods ended December 31, 2012 and 2011, respectively, were generated by six of the Company’s airports (Guadalajara, Tijuana, San Jose del Cabo, Puerto Vallarta, Bajio and Hermosillo).
The Company has a credit policy under which each new customer is analyzed individually for creditworthiness before offering the standard terms and conditions of payment and delivery of the services provided by the Company. The review of the Company includes external ratings, when they are available, and in some cases bank references. Every customer has established credit limits, which must be approved by the Company’s management and are reviewed periodically.
The Company has entered into agreements with all its airline customers to collect the TUA, by who receive the payment for the use of the airport services on behalf of the airports. According to these agreements, each customer airline could have a grace period of up to a maximum of 60 days to reimburse to the airport the TUA paid by passengers. If an airline customer needed a credit term of up to 60 days, it must provide a guarantee to the airport covering this period, bond or cash equivalent of 30 days more than the estimated consumption for the credit period requested by that airline. In the case of insolvency of any airline or a notice by the authorities on suspension of operations, the Company may recover the pending amounts regarding TUA up to the value of the guarantee. In order to mitigate credit risk with its customers, mainly TUA, airlines have granted cash guaranties, which are reported as Deposits received, in the consolidated statements of financial position, in addition to the cash guaranties of other commercial customers. At December 31, 2012 and 2011 and January 1, 2011, the Company has customer deposits of Ps. 430,615, Ps. 316,389 and Ps. 226,412, respectively. These deposits are considered long-term based on the duration of the contracts signed with these airlines and the estimation that will maintain long-term operations at the Company’s airports.
When reviewing credit risk, management groups the Company’s clients according to their credit characteristics that include whether the customer is an individual or a corporation, if they are airline customers, commercial customers, age and the existence of previous financial difficulties.
The Company systematically and periodically reviews the aging and collection of trade accounts receivable, and recognizes an allowance for doubtful accounts when it has evidence that it is probable these accounts will not be recovered (Note 7).
Investment securities – The Company limits its exposure to credit risk by investing in government-backed securities. Management constantly monitors credit ratings does not expect any counterparty defaults.
Liquid funds and derivative financial instruments – The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by recognized rating agencies.
Liquidity Risk–The risk of liquidity represents the possibility that the Company will have difficulty to fulfill its obligations related with its financial liabilities that will be paid in cash or another financial asset. The Company focuses its liquidity management to ensure, as much as possible, that it will have sufficient liquidity to comply with its obligations at their maturity date, both in normal and in extraordinary conditions, without incurring in unacceptable losses or risking the reputation of the Company.
The Company utilizes its budget, prepared at a cost center level, to allocate resources to render its services, which helps to monitor cash flow requirements and to optimize the performance of its investments. Generally, the Company ensures availability of sufficient cash flows to cover operating expenses for a period of 60 days, including payment of its financial debt; this excludes the possible impact of extreme circumstances that are not reasonably predictable, such as natural disasters. The Company has external financing as described in Note 16 for compliance of its obligations under the MDP, whereas for other obligations it uses cash flows from operating activities and resources received at the maturity of its financial investments. As of December 31, 2012 and 2011, the Company has available credit lines of Ps. 293,692 and Ps. 560,726, respectively.
Following is a table with a summary of the Company’s contractual maturities for its financial liabilities, including the interest to be paid, as of December 31, 2012 and 2011:
Weighted average of effective interest rate | Less than 1 month | December 31, 2012 From 1 to 3 | From 3 months to 1 year | From 1 year to 5 years | More than 5 years | Total | ||||||||||||||||||||||
Fixed rate bank loans | Ps. | 21,929 | Ps. | 21,429 | Ps. | 130,071 | Ps. | 212,500 | Ps. | — | Ps. | 385,929 | ||||||||||||||||
Fixed rate interest | 8.52 | % | 5,137 | 3,195 | 19,378 | 16,120 | — | 43,830 | ||||||||||||||||||||
Variable rate bank loans | 128,399 | 49,210 | 204,887 | 1,017,800 | 226,498 | 1,626,794 | ||||||||||||||||||||||
Variable rate interest | 6.83 | % | 9,617 | 18,400 | 71,894 | 200,354 | 12,572 | 312,837 | ||||||||||||||||||||
Trade accounts payable | N/A | 141,491 | 139,168 | 29,345 | — | — | 310,003 | |||||||||||||||||||||
Ps. | 306,573 | Ps. | 231,402 | Ps. | 455,575 | Ps. | 1,446,774 | Ps. | 239,070 | Ps. | 2,679,394 | |||||||||||||||||
Weighted average of effective interest rate | Less than 1 month | December 31, 2011 From 1 to 3 | From 3 months to 1 year | From 1 year to 5 years | More than 5 years | Total | ||||||||||||||||||||||
Fixed rate bank loans | Ps. | 21,929 | Ps. | 21,429 | Ps. | 130,071 | Ps. | 385,929 | Ps. | — | Ps. | 559,358 | ||||||||||||||||
Fixed rate interest | 8.52 | % | 7,047 | 5,077 | 30,623 | 43,830 | — | 86,577 | ||||||||||||||||||||
Variable rate bank loans | 13,579 | 45,923 | 178,508 | 952,041 | 274,209 | 1,464,260 | ||||||||||||||||||||||
Variable rate interest | 7.13 | % | 5,941 | 20,092 | 71,508 | 219,050 | 17,266 | 333,857 | ||||||||||||||||||||
Trade accounts payable | N/A | 202,775 | 153,140 | 52,079 | — | — | 407,994 | |||||||||||||||||||||
Ps. | 251,271 | Ps. | 245,661 | Ps. | 462,789 | Ps. | 1,600,850 | Ps. | 291,475 | Ps. | 2,852,046 |
The interest payable from loans with variable interest rates was determined based on projected interest rates, plus the basis point adjustment corresponding to each bank loan.
Market risk –Is the risk that changes in market prices, such as exchange rates, interest rates and prices of equity instruments, may affect the amount of the Company’s financial instruments. The Company’s market risk management objectives include controlling the risk exposures between acceptable parameters, while optimizing profits.
The Company in certain enters into derivatives instrument contracts to manage market risks. These transactions are in-line within the policies established by management. The Company also applies hedge accounting to minimize the volatility in profit or loss associated with certain financial instruments.
Foreign exchange risk – The Company is exposed to currency risk for its revenues denominated in a currency other than the functional currency of the Company, which is the peso. The foreign currencies in which transactions are primarily denominated is the U.S. dollar (USD) (Note 28).
The tariffs to be charged to international passengers and international flights are published in the Official Journal (Diario Oficial de la Federación) in USD, however, in accordance with Mexican law these tariffs are billed and collected in Mexican pesos. A significant depreciation of the peso during the last two months in each year could lead to an increase in aeronautical revenues that could lead to exceed the maximum tariff per traffic unit allowed, which may be a breach of compliance with the Concession’s maximum rates of each airport. If a significant depreciation of the peso occurs, the Company may be required to provide discounts to avoid exceeding the maximum tariffs. On the other hand, a significant appreciation of the peso could lead to our rates substantially decreasing. The Company has no way to recover the lost revenue if it charges less than the maximum rate as a result of a significant appreciation of the peso.
While the Company can ensure that it does not exceed the maximum rates as mentioned above, the depreciation of the Mexican peso can have a positive effect on commercial revenues and aeronautical revenues, while that appreciation of Mexican peso generally has a negative effect. The rates applied to international passengers, international flights and some of our commercial contracts are denominated in USD and are billed and collected in Mexican pesos translated at the average exchange rate of the previous month. Therefore, the depreciation of the peso against the dollar results in the Company obtaining more USD than before the depreciation, while the appreciation of the peso against the USD results in the Company obtaining less Mexican pesos. As the Mexican peso appreciates against the USD, the Company obtains fewer pesos which could result in a decreased in profit, especially if the appreciation continues or exceeds historical levels. In addition, although most of our operating costs are denominated in pesos, we cannot predict whether our cost of services will increase as a consequence of the depreciation of the peso, or as a result of other factors.
Following is a sensitivity analysis of our financial assets and liabilities denominated in USD, if the peso depreciates or appreciates by 10%, which is the amount management considers reasonably possible of occurring at year end:
USD amounts 31, 2012 | Peso amounts at exchange rate of Ps.13.0101 | Peso amounts if exchange rate would depreciate 10% | Peso amounts if exchange rate would appreciate 10% | |||||||||||||
Thousands of U.S. dollars: | ||||||||||||||||
Financial assets: | ||||||||||||||||
Cash and cash equivalents | 240 | Ps. | 3,120 | Ps. | 3,435 | Ps. | 2,810 | |||||||||
Financial investments held for trading purposes | 33,326 | 433,573 | 482,857 | 395,065 | ||||||||||||
Trade accounts receivable | 3,536 | 46,004 | 50,604 | 41,403 | ||||||||||||
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37,102 | 482,697 | 536,896 | 439,278 | |||||||||||||
Financial liabilities: | ||||||||||||||||
Accounts payable | 224 | 2,914 | 3,206 | 2,623 | ||||||||||||
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Net asset position | 36,878 | Ps. | 479,783 | Ps. | 533,690 | Ps. | 436,655 | |||||||||
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USD amounts 31, 2011 Thousands of U.S. dollars: Financial assets: Cash and cash equivalents Financial investments held for trading purposes Trade accounts receivable Financial liabilities: Accounts payable Net asset position
at December Peso amounts
at exchange
rate of
Ps.13.9787 Peso amounts
if exchange
rate would
depreciate
10% Peso amounts
if exchange
rate would
appreciate
10% 368 Ps. 5,144 Ps. 5,659 Ps. 4,630 19,912 278,349 306,178 250,509 2,977 41,615 45,776 37,453 23,257 325,108 357,613 292,592 824 11,518 12,670 10,367 22,433 Ps. 313,590 Ps. 344,943 Ps. 282,225
Interest rate risk – The Company monitors its interest rate risk and when bank loans are entered into with variable interest rates it determines whether it should enter into derivative financial instruments, in order to reduce its exposure to the risk of volatility in interest rates (Note 13). The negotiation with derivative financial instruments is only entered into with institutions of high repute and credit rating. The Company does not enter into operations for speculative purposes.
The following sensitivity analysis has been determined based on the exposure to interest rates for both derivatives and non-derivative financial instruments at the end of the reporting period. For loans with variable interest rates, an analysis is prepared assuming the amount of liability outstanding at the end of the reporting period under review has been the current liability for the year. The sensitivity analysis used assumes an increase or decrease of 100 basis points, which is the change management considers reasonably possible of occurring at year end.
If interest rates had been 100 basis points higher or lower than the interest rate at year-end with the other variables remaining constant, the effect on net income and stockholders’ equity for the years ended December 31, 2012 and 2011 would be as follows:
2012 | 2011 | |||||||
Effect in case of interest rate increase in 100 basis points | ||||||||
Variable rate bank loans | Ps. | (14,313 | ) | Ps. | (14,002 | ) | ||
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Effect in case of interest rate decrease in 100 basis points | ||||||||
Variable rate bank loans | Ps. | 14,313 | Ps. | 14,002 | ||||
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Based on the forward interest rate curves for the contractual term of the Company’s loans where management has entered into derivative interest rate caps to hedge the volatility in interest rate risk, the Company does not expect that such forward rates will be above 7.0%, which is the strike price of the interest rate cap for some of the Company’s bank loans. However, if the interest rates increase above 7.0%, the hedging instrument would become effective and the intrinsic value of the instrument would be recognized in other comprehensive income.
The Company has entered into derivative financial instrument interest rate caps (CAPs), whereby it agreed to exchange the difference between the amounts of the variable interest rate calculated over the principal amounts of the hedged items associated with its variable rate debt instruments. These contracts allow the Company to hedge the cash flow exposures on debt contracted at variable interest rates. The fair value of the CAPs at the end of the reporting period is measured at their fair market value, which amounted to Ps. 1,045 and Ps. 4,468, respectively at December 31, 2012 and 2011 (Note 13).
Capital Management –The policy of the Board of Directors of the Company is to maintain a strong capital position to provide confidence to its investors, creditors, and the market and to sustain future development of the business. The Board of Directors monitors the return on equity, which the Company defines as result from net profit divided by total stockholders’ equity.
The Board of Directors seeks to maintain the optimal balance for the ratio between total liabilities and stockholders’ equity, which may result from increased levels of bank loans up to the financial structure that it deems optimal, therefore, management seeks authorization from the Board of Directors for any additional debt issuances or for the prepayment of debt. While the liability grows in relation to equity and net profit continues to increase, the Company will generate higher returns on capital.
Following is the ratio of total liabilities to stockholders’ equity of the Company at the end of the reporting period:
2012 | 2011 | |||||||
Total liabilities | Ps. | 3,080,424 | Ps. | 3,038,492 | ||||
Stockholders’ equity | 21,453,213 | 21,681,183 | ||||||
Ratio of total liabilities to stockholders’ equity | 7.0 | 7.1 |
The Company may elect to repurchase its own shares in the stock market, under the following terms and conditions:
The acquisition has to be approved previously at a Stockholders Meeting and be at market price (except in the case of public offerings or auctions authorized by the stock market).
If the acquisition is made, the Company reduces stockholders’ equity and reflects the acquisition within the repurchased shares account. If the Company decides to cancel the shares it reduces common stock accordingly.
Announcing the amount of common stock issued and paid when determining the authorized stock, for repurchase. The Ordinary Stockholders Meeting shall expressly agree, for each year, the maximum amount of funds that may be used for the repurchase of the Company’s shares, with the only limitation that the sum of the resources that can used for this purpose, in no event shall exceed the total balance of retained earnings of the Company.
Repurchased shares are not subject to vote at the Company’s Stockholders Meeting, do not provide rights or economic benefits and are also not considered when determining a quorum to vote.
During the year, there was no change in the Company’s capital management policy. The Company is not subject to externally equity requirements, except for those corresponding to the minimum common stock required by Mexican Companies Law (Ley General de Sociedades Mercantiles).
Fair value of the financial instruments– Except for bank loans, management believes the carrying amounts of financial assets and financial liabilities, recognized at amortized cost in the financial statements, approximate their fair value due to their short-term maturities.
As of December 31, 2012 and 2011 and as of January 1, 2011, the fair value of bank loans recognized at amortized cost was Ps. 1,918,827, Ps. 2,004,899 and Ps. 1,288,758, respectively, while their book value is Ps.2,012,723, Ps. 2,023,618 and Ps. 1,309,300, respectively. The fair value of bank loans are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.
The fair value of financial assets and liabilities is determined as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices) (Level 2); and
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3)
Financial instruments recognized at fair value, are categorized according to the fair value hierarchy into levels 1 to 3 based on the degree to which their fair value is objectively observable, are:
Financial instruments classified as FVTPL – Are classified within Level 1 of the fair value hierarchy.
Derivative financial instruments – Are classified within Level 2 of the fair value hierarchy.
5. | Cash and cash equivalents |
As of December 31, 2012, 2011 and January 1, 2011, the balances are composedcomprised of the following:
2009 | 2008 | December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||||||
Cash | Ps. | 327,930 | Ps. | 48,037 | Ps. | 115,118 | Ps. | 471,672 | Ps. | 231,813 | ||||||||
Investments of cash surpluses | 1,493,220 | 1,457,967 | ||||||||||||||||
Cash equivalents designated for expenditure, held in trust | 24,947 | 145,000 | 228,577 | |||||||||||||||
Overnight investments of cash surpluses | 1,523,618 | 1,518,338 | 1,888,417 | |||||||||||||||
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| ||||||||||||||||
Ps. | 1,821,150 | Ps. | 1,506,004 | Ps. | 1,663,683 | Ps. | 2,135,010 | Ps. | 2,348,807 | |||||||||
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On December 23, 2009 the Company established a trust for investment and administration with Banamex, who acts as a trustee, while the airports of the Company are trustors and beneficiaries in the second instance, and Rapiscan is the beneficiary in first instance. The trust is controlled by a Technical Committee consisting solely of executives of the Company, although Rapiscan will be able to intervene in the event that the resources held in trust will be used for projects other than that stipulated in the trust agreement. On February 25, 2010, the Company signed a modification agreement which converts the trust to an irrevocable trust whose funds are solely to be used for payment to Rapiscan in return for its construction services provided with respect to a documented baggage inspection project. If either party does not fulfill their obligations with respect to the trust agreement, the assets held in trust will be frozen until either a judicial resolution or an arbitration proceeding determines the rights of each party. The assets are only to be invested in government securities denominated in national currency or bonds guaranteed by the Mexican Government, as instructed by the Company, and should be immediately available. The duration of the trust is for the period in which the contracts with the airports are in force and over which Rapiscan will fulfill the terms of the contract. As of December, 31, 2012, and 2011 and January 1, 2011 the balances are for Ps. 24,077, Ps. 57,710 and Ps. 228,577 respectively, including funds and earned interest.
On December 15, 2011, the Company established two trusts for investment and administration with Banamex, who acts as a trustee, while the airports of the Company are trustors and beneficiaries. The trusts are controlled by a Technical Committee consisting solely of executives of the Company, these trusts are revocables and only they will be destined to pay the execution of the constructions “Enlargement Terminal Building Phase III” in the Tijuana airport and “New Terminal T4” in the Los Cabos airport. The assets are only to be invested in government securities denominated in national currency or bonds guaranteed by the Mexican Government, as instructed by the Company, and should be immediately available. The duration of the trusts are for the period in which the contracts with the airports are in force. As of December, 31, 2012, the balance is for Ps. 870 and this is only for the Tijuana airport. As of December, 31, 2011, the balances in the Tijuana and San José airports are Ps.31,489 and Ps. 55,801, respectively, including funds and earned interest.
Financial investments held for trading purposes |
Financial investments held for trading purposesAt December 31, 2011 and 2012, and January 1, 2011 the financial instrument are composed of the following at December 31:as follows:
2009 | 2008 | |||||||
Cost of acquisition | Fair Value | Cost of acquisition | Fair Value | |||||
PEMEX UMS Bonds | Ps.281,276 | Ps.279,621 | Ps.277,222 | Ps.275,237 |
December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||||||||||||||
Acquisition Cost | Fair Value | Acquisition Cost | Fair Value | Acquisition Cost | Fair Value | |||||||||||||||||||
Pemex UMS 2013 Bonds | Ps. | — | Ps. | — | Ps. | 88,323 | Ps. | 83,817 | Ps. | 78,077 | Ps. | 77,680 | ||||||||||||
Pemex 2015 Bonds | — | — | 179,005 | 183,620 | 153,202 | 156,235 | ||||||||||||||||||
Pemex 2018 Bonds | 18,582 | 18,221 | 1,028 | 1,019 | — | — | ||||||||||||||||||
Pemex 2018 Bonds | 155,360 | 154,369 | — | — | — | — | ||||||||||||||||||
Pemex 2019 Bonds | 251,799 | 260,983 | 9,971 | 9,893 | — | — | ||||||||||||||||||
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Total | Ps. | 425,741 | Ps. | 433,573 | Ps. | 278,327 | Ps. | 278,349 | Ps. | 231,279 | Ps. | 233,915 | ||||||||||||
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Maturity date Maturity date Maturity date Pemex UMS 2013 Bonds Pemex 2015 Bonds Pemex 2018 Bonds Pemex 2018 Bonds Pemex 2019 Bonds December 31, 2012 December 31, 2011 January 1, 2011 Average
interest rate Average
interest rate — — 5.833 % January 16, 2013 January 16, 2013 — — 3.876 % March 15, 2015 March 15, 2015 3.731 % March 1, 2018 3.860 % March 1, 2018 3.718 % September 30, 2018 — — 3.928 % May 3, 2019 4.040 % May 3, 2019
Investments held for trading purposes are composed of investment fundsgovernment bonds with immediate liquidity. According to the treasury policy of the Company, such investments will be tradedsold within one year of acquisition, andacquisition. Investments are presented at fair value based on the market value of such securitiesbonds at each balance sheetstatement of financial position date. Changes in fair value are recognized within comprehensive financingin the finance (cost) income inof the consolidated statements of comprehensive income.
Trade accounts receivable |
TradeAs of December 31, 2012 and 2011, and January 1, 2011, trade accounts receivable are composed of the following at December 31:following:
2009 | 2008 | December 31, | December 31, | January, 1 | ||||||||||||||||
Accounts receivable | Ps. | 589,469 | Ps. | 684,676 | ||||||||||||||||
2012 | 2011 | 2011 | ||||||||||||||||||
Trade accounts receivable | Ps. | 470,801 | Ps. | 522,855 | Ps. | 513,846 | ||||||||||||||
Allowance for doubtful accounts | (135,613 | ) | (112,618 | ) | (226,005 | ) | (228,352 | ) | (217,700 | ) | ||||||||||
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| ||||||||||||||||||
Ps. | 453,856 | Ps. | 572,058 | Ps. | 244,796 | Ps. | 294,503 | Ps. | 296,146 | |||||||||||
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|
Accounts receivable include balances invoiced to be reimbursed to the Company by domestic and international airlines for passenger charges fees (TUA) of Ps. 441,174250,293, Ps. 300,578 and Ps. 532,703316,280 as of December 31, 20092012 and 2008,2011 and January 1, 2011, respectively. Passenger charges are payable for each passenger (other than diplomats, infants, transfer and transit passengers) departing from the airport terminals operated by the Company and are collected by the airlines and subsequently remitted to the Company.
The Guadalajara Airport represented approximately 34%, 33% and 33% of consolidated revenues generated during the years ended December 31, 2009, 2008, and 2007. Also, approximately 89%, 90% and 88% of consolidated revenues during the years ended December 31, 2009, 2008, and 2007, respectively, were generated by the Company’s six largest airports (Guadalajara, Tijuana, Los Cabos, Puerto Vallarta, Guanajuato and Hermosillo).
During 2009, the Company increasedmovements in the allowance for doubtful accounts by Ps. 22,995, mainly due to Consorcio Aviaxsa, S.A. de C.V. and Cenca Comercializadora, S.A. de C.V., as well as other commercial clients.are recorded under cost of services in the consolidated statement of comprehensive income.
2012 | 2011 | |||||||
Beginning balance | Ps. | (228,352 | ) | Ps. | (217,700 | ) | ||
Bad debt expense | (16,869 | ) | (10,652 | ) | ||||
Write-offs | 19,216 | — | ||||||
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Ending balance | Ps. | (226,005 | ) | Ps. | (228,352 | ) | ||
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As mentioned in Note 1.b, on December 23, 2009Following are past due balances of accounts receivable, for which there has not been a provision of allowance for doubtful accounts, according to the Company’s policy and their maturity date:
December 31, | December 31, | January 1, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
Accounts receivables past due from 1 to 30 days | Ps. | 18,643 | Ps. | 22,407 | Ps. | 22,643 | ||||||
Accounts receivables past due 31 to 60 days | 5,012 | 3,755 | 6,839 | |||||||||
Accounts receivables past due 61 to 90 days | 1,327 | 1,413 | 1,421 | |||||||||
Accounts receivables past due more than 90 days | 206 | 16,613 | 17,056 | |||||||||
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Ps. | 25,188 | Ps. | 44,188 | Ps. | 47,959 | |||||||
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Following the percentage shown represents the balance of the main clients of the Company established a trust for investment and administration entitled “Revocable Investment and Administration Trust”, with Banamex. The objectiverelation to the total of this trust isthe trade accounts receivable, segregating the accounts receivable of passenger charges (TUA) that corresponds to fulfill the financial obligations arisingamounts that the airline recovers from a contract executed between the airportspassengers in behalf of the Company and Rapiscan, forsubsequently they deliver, as well as another accounts receivable that corresponds to the project called “Turn-Key Design, Supply, Installationservices provided directly to the airline:
December 31, 2012 December 31, 2011 January 1, 2011 Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V. Aerovías de México, S.A. de C.V. ABC Aerolíneas, S.A. de C.V. Aerolitoral, S.A. de C.V. % of TUA
to be
reimbursed % of own
receivables % of TUA
to be
reimbursed % of own
receivables % of TUA
to be
reimbursed % of own
receivables 10.0 % 2.4 % 8.9 % 3.5 % 8.5 % 1.6 % 6.1 % 0.9 % 10.1 % 1.0 % 9.3 % 0.7 % 7.3 % 1.0 % 4.3 % 0.7 % 4.6 % 0.4 % 7.2 % 0.7 % 5.3 % 0.5 % 5.6 % 0.6 %
The Company has cash, bonds and Starting up for a System to Inspect 100%goods that guarantee certain amounts from TUA as well as accounts receivables from clients as of Documented Baggage”, as the project is part of the Master Development Program 2005-2009.
Banamex acts as trustee, while the airports of the Company are trustors and beneficiaries in the second instance, and Rapiscan is the beneficiary in first instance. The trust is revocable and is controlled by a Technical Committee consisting solely of executives of the Company. At December 31, 2009, investment balances held2012 and 2011. These guaranties would be able to apply to any unpaid balance in the trust totaled Ps. 352,436, comprisedcase of the initial cash contributiona breach from clients and interest earned. The assets are only to be invested in government securities denominated in national currency or bonds guaranteed by the Mexican Government, as instructed by the Company, and should be immediately available from January 4, 2010. The maximum term for investments is limited to 30 days. The duration of the trust is for the period in which the contracts with airports are in force and over which Rapiscan will fulfill the terms of the contract.
8. | Machinery, equipment and improvements on leased buildings |
Machinery,As of December 31, 2012 and 2011 and January 1, 2011, the machinery, equipment and improvements on leased buildings are composed of the following at December 31:as follows:
2009 | 2008 | Average Annual Depreciation Rate | Balance as of 2012 | Additions | Divestitures | Balance as of 2012 | ||||||||||||||||||||
Investment: | ||||||||||||||||||||||||||
Machinery and equipment | Ps. | 426,161 | Ps. | 391,086 | 10% | Ps. | 934,379 | Ps. | 189,071 | Ps. | (21,735 | ) | Ps. | 1,101,715 | ||||||||||||
Office furniture and equipment | 118,609 | 112,052 | 10% | 124,793 | 20,800 | (7,239 | ) | 138,354 | ||||||||||||||||||
Computer equipment | 136,237 | 92,213 | 30% | 231,458 | 55,889 | (6,677 | ) | 280,670 | ||||||||||||||||||
Transportation equipment | 30,698 | 29,824 | 25% | 30,840 | 1,726 | (1,037 | ) | 31,529 | ||||||||||||||||||
Communication equipment | 13,150 | 11,760 | 10% and 30% | 15,000 | 1,227 | (630 | ) | 15,597 | ||||||||||||||||||
Improvements on leased buildings | 7,892 | 7,305 | 5% | 8,824 | 4,928 | (3,545 | ) | 10,207 | ||||||||||||||||||
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Total investment | Ps. | 1,345,294 | Ps. | 273,641 | Ps. | (40,863 | ) | Ps. | 1,578,072 | |||||||||||||||||
732,747 | 644,240 |
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Less- accumulated depreciation | (368,646 | ) | (309,082 | ) | ||||||||||||||||||||||
Accumulated depreciation: | ||||||||||||||||||||||||||
Machinery and equipment | Ps. | (284,271 | ) | Ps. | (86,874 | ) | Ps. | 16,305 | Ps. | (354,840 | ) | |||||||||||||||
Office furniture and equipment | (65,510 | ) | (12,121 | ) | 7,052 | (70,579 | ) | |||||||||||||||||||
Computer equipment | (125,329 | ) | (46,746 | ) | 6,567 | (165,508 | ) | |||||||||||||||||||
Transportation equipment | (24,975 | ) | (2,524 | ) | 1,037 | (26,462 | ) | |||||||||||||||||||
Communication equipment | (6,401 | ) | (1,537 | ) | 473 | (7,465 | ) | |||||||||||||||||||
Improvements on leased buildings | (2,469 | ) | (1,374 | ) | 2,090 | (1,753 | ) | |||||||||||||||||||
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Total accumulated depreciation | Ps. | (508,955 | ) | Ps. | (151,176 | ) | Ps. | 33,524 | Ps. | (626,607 | ) | |||||||||||||||
Ps. | 364,101 | Ps. | 335,158 |
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Balance as of January 1, 2011 | Additions | Divestitures | Balance as of December 31, 2011 | |||||||||||||
Investment: | ||||||||||||||||
Machinery and equipment | Ps. | 542,225 | Ps. | 421,135 | Ps. | (28,981 | ) | Ps. | 934,379 | |||||||
Office furniture and equipment | 120,581 | 16,365 | (12,153 | ) | 124,793 | |||||||||||
Computer equipment | 176,110 | 64,069 | (8,721 | ) | 231,458 | |||||||||||
Transportation equipment | 32,785 | 1,529 | (3,474 | ) | 30,840 | |||||||||||
Communication equipment | 13,582 | 2,228 | (810 | ) | 15,000 | |||||||||||
Improvements on leased buildings | 5,415 | 3,409 | — | 8,824 | ||||||||||||
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Total investment | Ps. | 890,698 | Ps. | 508,735 | Ps. | (54,139 | ) | Ps. | 1,345,294 | |||||||
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Accumulated depreciation: Machinery and equipment Office furniture and equipment Computer equipment Transportation equipment Communication equipment Improvements on leased buildings Total accumulated depreciation Balance as of
January 1,
2011 Additions Divestitures Balance as of
December 31,
2011 Ps. (249,936 ) Ps. (57,184 ) Ps. 22,849 Ps. (284,271 ) (63,014 ) (12,871 ) 10,375 (65,510 ) (97,336 ) (35,810 ) 7,817 (125,329 ) (25,909 ) (2,540 ) 3,474 (24,975 ) (5,188 ) (1,589 ) 376 (6,401 ) (2,149 ) (320 ) — (2,469 ) Ps. (443,532 ) Ps. (110,314 ) Ps. 44,891 Ps. (508,955 )
Balance as of December 31, 2012 | Balance as of December 31, 2011 | Balance as of January 1, 2011 | ||||||||||
Net amounts: | ||||||||||||
Machinery and equipment | Ps. | 746,875 | Ps. | 650,108 | Ps. | 292,289 | ||||||
Office furniture and equipment | 67,775 | 59,283 | 57,567 | |||||||||
Computer equipment | 115,162 | 106,129 | 78,774 | |||||||||
Transportation equipment | 5,067 | 5,865 | 6,876 | |||||||||
Communication equipment | 8,132 | 8,599 | 8,394 | |||||||||
Improvements on leased buildings | 8,454 | 6,355 | 3,266 | |||||||||
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Total amounts | Ps. | 951,465 | Ps. | 836,339 | Ps. | 447,166 | ||||||
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The Company has several buildings under operating leasing for office use. In Note 25.a and 30, the Company disclosed the costs and obligations under these leases.
9. | Improvements to concession assets |
As of December 31, 2012 and 2011 and January 1, 2011, the improvements to concession assets are composed as follows:
Balance as of 2012 | Additions | Divestitures | Transfers | Balance as of 2012 | ||||||||||||||||
Investment: | ||||||||||||||||||||
Improvements to concession assets | Ps. | 4,740,837 | Ps. | 130,312 | Ps. | (21,249 | ) | Ps. | 1,155,770 | Ps. | 6,005,670 | |||||||||
Construction in-progress | 774,803 | 549,283 | — | (1,155,770 | ) | 168,316 | ||||||||||||||
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Total investment | Ps. | 5,515,640 | Ps. | 679,595 | Ps. | (21,249) | Ps. | — | Ps. | 6,173,986 | ||||||||||
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Accumulated amortization | Ps. | (1,077,988 | ) | Ps. | (307,096 | ) | Ps. | 21,249 | Ps. | — | Ps. | (1,363,836 | ) | |||||||
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Balance as of 2011 | Additions | Divestitures | Transfers | Balance as of 2011 | ||||||||||||||||
Investment: | ||||||||||||||||||||
Improvements to concession assets | Ps. | 3,808,470 | Ps. | 32,574 | Ps. | (39,908 | ) | Ps. | 939,701 | Ps. | 4,740,837 | |||||||||
Construction in-progress | 873,426 | 841,078 | — | (939,701 | ) | 774,803 | ||||||||||||||
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Total investment | Ps. | 4,681,896 | Ps. | 873,652 | Ps. | (39,908 | ) | Ps. | — | Ps. | 5,515,640 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Accumulated amortization | Ps. | (835,435 | ) | Ps. | (257,277 | ) | Ps. | 14,724 | Ps. | — | Ps. | (1,077,988 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2012 Balance as of January 1, 2011 Net amounts: Improvements to concession assets Construction in-progress Total amounts Balance as of
December 31, 2011 Ps. 4,641,834 Ps. 3,662,849 Ps. 2,973,035 168,316 774,803 873,426 Ps. 4,810,150 Ps. 4,437,652 Ps. 3,846,461
Improvements to concession assets are composedcomprised by intangible assets from additions and improvements to such assets in accordance with IFRIC 12, as well as other investments that have been carried out to the infrastructure of the following at December 31:airports, even though they are not regulated under the MDP’s commitments.
2009 | 2008 | Average Annual Amortization Rate | ||||||||
Improvements to concession assets | Ps. | 3,853,684 | Ps. | 3,245,426 | 5% and 8% | |||||
Less- accumulated amortization | (732,465 | ) | (533,883 | ) | ||||||
3,121,219 | 2,711,543 | |||||||||
Construction in-progress | 382,402 | 647,830 | ||||||||
Other | 9,770 | 9,475 | ||||||||
392,172 | 657,305 | |||||||||
Ps. | 3,513,391 | Ps. | 3,368,848 | |||||||
As of December 31, 20092012 and 2008,2011, and January 1, 2011, the balance of machinery, equipment, improvements on leased assetsbuildings and improvements to concession assets includes investments pending to be paid was Ps.163,644, Ps. 101,296276,443 and Ps. 223,530, respectively of unpaid investments.227,373, respectively. Construction in-progress relates mainly to the constructionexpansion of new Terminalthe satellite building at the Los CabosPuerto Vallarta airport, and the construction of a fire extinguishing systemterminal buildings at the Bajio, Guadalajara airport.and Morelia airports. As of December 31, 2009, significant construction in-progress pending execution2012 and payment, amounts to approximately2011, the cumulative net amount capitalized was Ps. 15,750.
As of December 31, 2009 and 2008, comprehensive financing result (“CFR”) was capitalized under improvements to concession assets for Ps. 30,959161,907 and Ps. 24,887,97,031, respectively, derived from capital expenditures at the Guanajuato, Hermosillo, Puerto Vallartawith a capitalization rate of 6.9% and Los Cabos airports of approximately Ps. 363,721 and Ps. 308,557. These expenditures were realized from January to December 2009 and 2008 and the average annual interest rate was 8.5% for both years. As of December 31, 2009 and 2008, the accumulated amount of capitalized CPR was Ps. 58,020 and Ps. 27,061,2.8%, respectively.
Reconciliation of the comprehensive financial result is as follows:
2009 | 2008 | |||||
Net CFR income | Ps. | 27,250 | Ps. | 189,991 | ||
Add back: CFR cost capitalized | 30,959 | 24,887 | ||||
CFR income in the statements of income | Ps. | 58,209 | Ps. | 214,878 | ||
10. | Airport concessions |
As described in Note 1.a, the Mexican Government granted concessions to manage, operate and develop 12 airports, and benefit from the use of the airport facilities over a 50-year term beginning November 1, 1998. The value of airport concessions and rights to use airport facilities was determined as explained in Note 1.a, and paid by GAP through the issuance of shares to the Mexican Government.
The table below shows the values of airport concessions and rights to use airport facilities as of December 31, 2009:2012 and 2011, and January 1, 2011:
Remaining amortization term (years) | Original amortization term (years) | ||||||
Acquisition cost | Ps. | 24,210,213 | |||||
Assigned to: | |||||||
Rights to use airport facilities (Note 11): | |||||||
Runways, aprons, platforms | Ps. | 788,443 | 25 | 35 | |||
Buildings | 876,867 | 15 | 25 | ||||
Other facilities | 138,596 | — | 10 | ||||
Land | 1,412,873 | 39 | 49 | ||||
3,216,779 | |||||||
Airport concessions | 20,993,434 | 39 | 49 | ||||
Ps. | 24,210,213 | ||||||
Acquisition cost assigned to: | Ps. | 15,938,359 | ||
Rights to use airport facilities (Note 11): | ||||
Runways, aprons, platforms | Ps. | 519,057 | ||
Buildings | 577,270 | |||
Other facilities | 91,241 | |||
Land | 930,140 | |||
2,117,708 | ||||
Airport concessions | 13,820,651 | |||
Ps. | 15,938,359 | |||
The original amortization term for the concessions is 49 years. As mentioned in Note 1.a, the concession value was assigned in August 1999, thereforedate in which the amortization term began, and will begin from that date on and untilrun through November 2048.
The value of the concessions at December 31, 2012 and 2011, and January 1, 2011 is as follows:
2009 | 2008 | December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||||||||
Airport concessions | Ps. | 20,993,434 | Ps. | 20,993,434 | Ps. | 13,820,651 | Ps. | 13,820,651 | Ps. | 13,820,651 | ||||||||||
Less- accumulated amortization | (4,236,461 | ) | (3,804,951 | ) | ||||||||||||||||
Less - accumulated amortization | (3,641,229 | ) | (3,357,152 | ) | (3,073,074 | ) | ||||||||||||||
|
|
| ||||||||||||||||||
Ps. | 16,756,973 | Ps. | 17,188,483 | Ps. | 10,179,422 | Ps. | 10,463,499 | Ps. | 10,747,577 | |||||||||||
|
|
|
Amortization recognized for the years ended December 31, 2012 and 2011, amounts to Ps. 284,078 in both years.
Each airport concession agreement contains the following terms and basic conditions:
The concessionaire has the right to manage, operate, maintain and use the airport facilities and carry out any construction, improvements, or maintenance of facilities in accordance with its Master Development Program (“MDP”),MDP, and to provide airport, complementary and commercial services. Each concessionaire is required to make minimum investments at each airport under the terms of its MDP. The Company’s investment plans under the MDP must be updated every five years starting from 2000 and approved by the SCT. During December 2009, the SCT authorized the Company’s MDP update for the five-year period from 2010 to 2014.
The concessionaire will use the airport facilities only for the purposes specified in the concession, will provide services in conformity with the law and applicable regulations, and will be subject to inspections by the SCT.
The concessionaire must pay a tax for the use of the assets under concession (currently 5% of the concessionaire’s annual gross revenues derived from the use of public property), in conformity with the Mexican Federal Duties Law.
The concessionaire assumed ASA’s rights and obligations derived from airport-related agreements with third parties.
ASA has the exclusive right to supply fuel for consumption at the airport.
The concessionaire must grant free access to specific airport areas to certain Mexican Government agencies (such as customs and immigration) so that they may carry out their activities within the airport.
According to Article 27 of the General Law on Airports, the concession may be revoked if the concessionaire breaches any of its obligations established therein or falls under any of the causes for revocation referred to in Article 26 of law and in the concession agreement. The breach of certain concession terms may be cause for revocation if the SCT has applied sanctions in three different instances with respect to the same concession term.
The SCT may modify concession terms and conditions that regulate the Company’s operations.
The concession may be renewed in one or more instances, for terms not to exceed an additional 50 years.
11. | Rights to use airport facilities |
The value of the rights to use airport facilities at December 31, 2012 and 2011, and January 1, 2011 was as follows:
2009 | 2008 | December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||||||||
Rights to use airport facilities | Ps. | 3,216,779 | Ps. | 3,216,779 | Ps. | 2,117,708 | Ps. | 2,117,708 | Ps. | 2,117,708 | ||||||||||
Less-accumulated amortization | (1,028,544 | ) | (933,181 | ) | ||||||||||||||||
Less - accumulated amortization | (847,218 | ) | (790,519 | ) | (733,821 | ) | ||||||||||||||
|
|
| ||||||||||||||||||
Ps. | 2,188,235 | Ps. | 2,283,598 | Ps. | 1,270,490 | Ps. | 1,327,189 | Ps. | 1,383,887 | |||||||||||
|
|
|
Amortization recognized in the years ended December 31, 2012 and 2011amounted to Ps. 56,699 and Ps. 56,698, respectively.
12. | Other acquired rights |
At December 31, 2012 and 2011 and January 1, 2011 the value of other acquired rights wascorrespond to payments made by the Company after the date the concessions were granted, in order to early-terminate certain long-term leases contracts that existed at that time between ASA and third-party leaseholders. The rights acquired are comprised as follows:
2009 | 2008 | Remaining amortization term (years) | Original amortization term (years) | December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||||||||||
Right to operate the charter and general aviation terminal and FBO at Los Cabos airport terminal | Ps. | 483,469 | Ps. | 483,469 | 39 | 48 | Ps. | 344,443 | Ps. | 344,443 | Ps. | 344,443 | ||||||||||||
Right to operate commercial space at Tijuana airport | 19,443 | 19,443 | 39 | 46 | 15,935 | 15,935 | 15,935 | |||||||||||||||||
Right to operate various space at Puerto Vallarta airport | 358,095 | 358,095 | 39 | 44 | 309,616 | 309,616 | 309,616 | |||||||||||||||||
Right to operate commercial space at Guadalajara airport | 108,235 | 108,235 | 39 | 44 | 93,560 | 93,560 | 93,560 | |||||||||||||||||
Right to operate various parking lots | 7,118 | 7,118 | 39 | 46 | 5,673 | 5,673 | 5,673 | |||||||||||||||||
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|
| ||||||||||||||||||||||
976,360 | 976,360 | 769,227 | 769,227 | 769,227 | ||||||||||||||||||||
Less-accumulated amortization | (156,072 | ) | (135,021 | ) | ||||||||||||||||||||
Less – accumulated amortization | (170,746 | ) | (154,046 | ) | (137,346 | ) | ||||||||||||||||||
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|
| ||||||||||||||||||||||
Ps. | 820,288 | Ps. | 841,339 | Ps. | 598,481 | Ps. | 615,181 | Ps. | 631,881 | |||||||||||||||
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|
|
On June 1, 2000,Amortization recognized in the Company paidyears ended December 31, 2012 and 2011amounted to Servicios Aéreos del Centro, S.A. de C.V. U.S.$ 34.9 million (Ps. 332,108 nominal pesos) to recoverPs. 16,700 in both years. These assets have a useful life until the right to operate the charter terminal (terminal 3) and the general aviation terminal at the Los Cabos airport.
On December 12, 2002, GAP paid to Ruber, S.A. de C.V. and Recaro, S.A. de C.V. U.S.$ 1.5 million (Ps. 15,682 nominal pesos) to recover the right to operate commercial space at the Tijuana airport and commercial advertising inside the terminal.
On June 1, 2004, GAP paid U.S.$ 26.6 million to Grupo Aeroplazas, S.A. de C.V. (“AEROPLAZAS”) for the early terminationend of the operating lease agreement in connection with certain commercial areas within the Puerto Vallarta airport, originally signed between AEROPLAZASconcession, due to its use and ASA, which lease agreement was transferred, in its entirety, from ASA to the Puerto Vallarta airport.exploitation will continue until then.
On the same date, GAP paid U.S.$ 7.8 million to Aerolocales, S.A. de C.V. (“AEROLOCALES”) for the early termination of an operating lease agreement (which agreement was transferred from ASA, in its entirety, to the Guadalajara airport), in connection with certain commercial areas within the Guadalajara airport.
13. |
As mentionedThe Company has borrowings at variable interest rates, which in Note 1.b, oncase of an increase in interest rates, would reduce the Company’s cash flows. Through the contracting of the CAPs with Banamex, the Company established a ceiling to hedge the increase in interest rates such that if the relevant rate surpasses the level established (strike) in the contract, the CAP generates positive cash flows to the Company, which offsets the negative effects of the increase in the interest rates from the underlying bank loans. The Company’s derivative financial instruments, are negotiated in the market Over The Counter (OTC) market, through national and international banks.
On December 9, 2009, the Company entered into unsecured credit agreements with crossed guarantees by its individual airports, with Banamex and HSBC receiving funds for Ps. 325,723 from each institution, for a total of Ps. 651,446. The loans bear interest at the variable Mexican Interbank Equilibrium Interest Rate (“TIIE”)(TIIE) plus 350 basis points, requiring quarterly payments of principal and interest for a period of seven years. Funds from the loan are intended to fulfill investment commitments.
With respect to the loans, each contracting airport entered into a derivative financial instrument with Banamex, which the Company has designated as cash flow hedges.Banamex. This instrument establishes a ceiling of 7% on the variable 91-day TIIE interest rates stipulated in the loan agreements (representing the strike price of the hedging instrument), which when added to the 350 basis points established in the loan agreements and the related hedge contract, results in a maximum interest rate of 10.50%. The effective date of the hedge begins in the fourth year of the related debt agreement and extends to the end of the term of the debt. This hedge applies to both creditsloans issued by Banamex and by HSBC.
These financial instruments were not entered into for speculative purposes, but neither was formally designated and therefore did not qualify as hedging instruments for accounting purposes and as a result changes in their fair value are recognized in profit or loss within finance income (cost). The Company paid a premium of Ps. 14,667 in December 2009. The Company determined the effectiveness of the cash flow hedge based on its intrinsic value, which at December 31, 2009, was zero, for which reasonmain characteristics and the fair value of these derivatives at December 31, 2012 and 2011 and January 1, 2011, are as follows:
Counterparty | Notional amount | Interest rate | Start date of the hedging instrument | Maturity date | December, 31 2012 | Fair value December 31, | January 1, 2011 | |||||||||||||||
Banamex | Ps. | 82,145 | TIIE 91 Strike 7% | December 2012 | December 2016 | Ps. | 206 | Ps. | 923 | Ps. | 1,511 | |||||||||||
Banamex | 290,109 | TIIE 91 Strike 7% | January 2013 | January 2017 | 839 | 3,545 | 5,627 | |||||||||||||||
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|
|
|
|
|
| |||||||||||||||
Ps. | 372,254 | Ps. | 1,045 | Ps. | 4,468 | Ps. | 7,138 | |||||||||||||||
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|
|
|
|
|
|
|
During the hedge representsyears ended December 31, 2012 and 2011, the timeCompany recognized Ps. 3,424 and Ps. 2,670, respectively, within finance (cost) income as an expense of the period, due to the value of the instrument and is recognized directly through consolidated results for Ps. 1,020;premium paid; no amounts have been recognized through other comprehensive income.income at the date of these financial statements.
At
On December 31, 2009, details9, 2012 the Company’s derivative hedging the loan with a notional amount of Ps. 82,145, because current TIIE rates are below the 7% strike. As disclosed in Note 4, the projections of the hedging instrumentforward interest curves are as follows:not expected to exceed the 7% strike.
Year | Notional amount | Start date of the hedging instrument | Maturity date | Interest rate | Maximum interest rate | Fair Value | |||||||||
2009 | Ps. | 82,145 | December 2012 | December 2016 | TIIE+350 bp | 10.50 | % | Ps. | 2,988 | ||||||
2010 | 290,109 | January 2013 | January 2017 | TIIE+350 bp | 10.50 | % | 10,659 | ||||||||
Total | Ps. | 372,254 | Ps. | 13,647 | |||||||||||
14. |
The liability for employee benefits at December 31 was as follows:
2009 | 2008 | |||||
Termination benefits: | ||||||
Seniority premiums | Ps. | 2,087 | Ps. | 1,695 | ||
Severance payments at the end of the work relationship | 6,435 | 5,580 | ||||
Retirement benefits: | ||||||
Seniority premiums | 2,809 | 2,431 | ||||
Severance payments at the end of the work relationship | 23,827 | 15,415 | ||||
Ps. | 35,158 | Ps. | 25,121 | |||
The Company provides seniority premium benefits to its employees, which consist of a lump sum payment of 12 days’ wages for each year worked, calculated using the most recent salary, not to exceed twice the legal minimum wage established by law. Additionally, the Company pays severance at the end of the work relationship, in some circumstances. The related liability and annual cost of such benefits are calculated by an independent actuary on the basis of formulas defined in the plans using the projected unit credit method.
2009 | 2008 | |||||||
Vested benefit obligation | Ps. | 1,151 | Ps. | 930 | ||||
Nonvested benefit obligation | 33,998 | 31,002 | ||||||
Defined benefit obligation | 35,149 | 31,932 | ||||||
Unamortized items: | ||||||||
Past service costs and changes to the plan | (15,179 | ) | (18,062 | ) | ||||
Unrecognized actuarial gains and losses | 3,857 | 1,545 | ||||||
(11,322 | ) | (16,517 | ) | |||||
Net projected liability | Ps. | 23,827 | Ps. | 15,415 | ||||
Nominal rates used in actuarial calculations were as follows:
2009 | 2008 | |||
Discount of the projected benefit obligation at present value | 8% | 8% | ||
Increase in salaries | 5% | 5% |
Amortization period for past services is five years.
The net cost of the period is composed of the following:
2009 | 2008 | 2007 | |||||||
Service cost of the year | Ps. | 2,963 | Ps. | 2,907 | Ps. | 3,431 | |||
Financial cost of the year | 2,568 | 2,384 | 1,228 | ||||||
Past service costs and changes to the plan | 2,881 | 2,883 | 1,738 | ||||||
Ps. | 8,412 | Ps. | 8,174 | Ps. | 6,397 | ||||
Changes to the present values of the defined benefit obligation are as follows:
2009 | 2008 | |||||||
Present value of defined benefit obligation as of January 1 | Ps. | 31,932 | Ps. | 29,548 | ||||
Service cost | 2,963 | 2,907 | ||||||
Interest cost | 2,568 | 2,384 | ||||||
Actuarial gain on the obligation | (2,314 | ) | (2,907 | ) | ||||
Present value of defined benefit obligation as of December 31 | Ps. | 35,149 | Ps. | 31,932 | ||||
On September 7, 2007, the Company borrowed the first available tranche of Ps. 600,000 under its loan from Banamex as follows: the Los Cabos airport borrowed Ps. 330,000, the Puerto Vallarta airport borrowed Ps. 193,000, the Hermosillo airport borrowed Ps. 44,000 and the Guanajuato airport borrowed Ps. 33,000.
On January 30, 2008, the Company borrowed the second available tranche of Ps. 344,000 as follows: the Los Cabos airport borrowed Ps. 273,000, the Guanajuato airport borrowed Ps. 28,000, the Puerto Vallarta airport borrowed Ps. 26,000 and the Hermosillo airport borrowed Ps. 17,000.
On January 30, 2009, the Company borrowed the third available tranche of Ps. 270,000 as follows: the Los Cabos airport borrowed Ps. 202,000, the Hermosillo airport borrowed Ps. 41,000, the Guanajuato airport borrowed Ps. 19,000 and the Puerto Vallarta airport borrowed Ps. 8,000.
Year | Amount | ||
2010 | Ps. | 193,965 | |
2011 | 193,965 | ||
2012 | 193,965 | ||
2013 | 193,965 | ||
2014 | 172,536 | ||
Thereafter | 101,572 | ||
Ps. | 1,049,968 | ||
Airport | Current | Long-Term | Total | ||||||
Guanajuato | Ps. | 15,283 | Ps. | 72,056 | Ps. | 87,339 | |||
Guadalajara | 13,856 | 83,138 | 96,994 | ||||||
Hermosillo | 17,397 | 81,594 | 98,991 | ||||||
Puerto Vallarta | 32,429 | 125,179 | 157,608 | ||||||
Los Cabos | 115,000 | 494,036 | 609,036 | ||||||
Total | Ps. | 193,965 | Ps. | 856,003 | Ps. | 1,049,968 | |||
Number of Shares | Nominal Value | Restatement Effect | Total | ||||||||
Fixed Capital | |||||||||||
Series B | 476,850,000 | Ps. | 13,616,849 | Ps. | 7,075,955 | Ps. | 20,692,804 | ||||
Series BB | 84,150,000 | 2,402,974 | 1,248,698 | 3,651,672 | |||||||
Total | 561,000,000 | Ps. | 16,019,823 | Ps. | 8,324,653 | Ps. | 24,344,476 | ||||
2009 | 2008 | 2007 | |||||||
Contributed capital account | Ps. | 26,847,527 | Ps. | 25,934,170 | Ps. | 24,344,476 | |||
Net tax income account | 1,006,911 | 1,212,459 | 982,009 | ||||||
Total | Ps. | 27,854,438 | Ps. | 27,146,629 | Ps. | 25,326,485 | |||
2009 | 2008 | |||||
Thousands of U.S. dollars: | ||||||
Monetary assets: | ||||||
Cash and cash equivalents | 886 | 4,207 | ||||
Financial investments held for trading purposes | 21,413 | 20,330 | ||||
Trade accounts receivable | 3,080 | 4,667 | ||||
25,379 | 29,204 | |||||
Monetary liabilities: | ||||||
Suppliers | 1,021 | 1,019 | ||||
AMP, related party | 532 | — | ||||
1,553 | 1,019 | |||||
Net monetary asset position | 23,826 | 28,185 | ||||
Equivalent in Mexican pesos | Ps. | 311,137 | Ps. | 381,581 | ||
2009 | 2008 | 2007 | ||||
(In thousands of U.S. dollars) | ||||||
Revenues from aeronautical and non-aeronautical services | 22,389 | 27,849 | 24,627 | |||
Revenues for recovery expenses | 500 | 100 | 87 | |||
Technical assistance fee | 4,996 | 4,992 | 4,796 | |||
Import purchases, technical assistance and other expenses | 3,234 | 2,468 | 3,119 | |||
December 31, | March 8, 2010 | |||||||
2009 | 2008 | 2007 | ||||||
Mexican pesos per one U.S. dollar (see Note 3.s) | Ps.13.0587 | Ps.13.5383 | Ps.10.8662 | Ps.12.7182 | ||||
Transactions with related parties, carried out in the ordinary course of business, were realized at prices comparable to those for transactions with independent parties and were as follows:
2009 | 2008 | 2007 | |||||||
AMP, related party | |||||||||
Expenses: | |||||||||
Technical assistance fees | Ps. | 111,721 | Ps. | 118,226 | Ps. | 125,857 | |||
Services received | Ps. | 6,007 | Ps. | 362 | Ps. | 287 | |||
AENA Desarrollo Internacional, S.A., related party | |||||||||
Expenses: | |||||||||
Services received | Ps. | 2,008 | Ps. | 9,928 | Ps. | 325 | |||
In 1999, GAP and AMP entered into a technical assistance and transfer-of-technology agreement whereby AMP and its stockholders agreed to render administrative and advisory services and transfer industry technology and know-how to GAP in exchange for consideration. The agreement’s original 15-year term may be automatically renewed for successive five-year terms, with the approval of the stockholders’ meeting, unless one party gives a termination notice to the other at least 60 days prior to the effective termination date. If GAP decides to cancel or renew the agreement, GAP needs the approval of at least 51% of the holders of Series “B” shares other than AMP or any party related to AMP.
According to the agreement, as of January 1, 2000, the Company committed to pay AMP annual consideration of U.S.$ 7,000,000 for the years 2000 and 2001 and, beginning in 2002, the greater of U.S.$ 4,000,000 (these amounts are subject to restatement based on the U.S. National Consumer Price Index (“CPI”)) or 5% of GAP’s consolidated operating income, defined as earnings before interest income or expense, calculated prior to deducting the technical assistance fee, income taxes, depreciation and amortization.
AMP is also entitled to the refund of expenses incurred in the rendering of the services provided for in the agreement.
The total amounts paid to executive officers were as follows:
2009 | 2008 | 2007 | |||||||
Benefits paid | Ps. | 19,883 | Ps. | 17,924 | Ps. | 15,950 | |||
Indemnification payments | — | — | 329 | ||||||
Total | Ps. | 19,883 | Ps. | 17,924 | Ps. | 16,279 | |||
2009 | 2008 | 2007 | ||||||||||
PTU | Ps. | (599 | ) | Ps. | (67 | ) | Ps. | (1,569 | ) | |||
(Loss) gain on sale of fixed assets | (6,859 | ) | (4,480 | ) | 2,055 | |||||||
Gain from a judicial resolution | — | 8,000 | — | |||||||||
Donations | — | — | (5,000 | ) | ||||||||
Repairs due to natural disasters | (3,829 | ) | — | — | ||||||||
Other | (423 | ) | 4,090 | 2,162 | ||||||||
Ps. | (11,710 | ) | Ps. | 7,543 | Ps. | (2,352 | ) | |||||
2009 | 2008 | 2007 | ||||||||||
PTU: | ||||||||||||
Current | Ps. | (1,759 | ) | Ps. | (3,664 | ) | Ps. | (1,569 | ) | |||
Deferred | 1,160 | 3,597 | — | |||||||||
Ps. | (599 | ) | Ps. | (67 | ) | Ps. | (1,569 | ) | ||||
Income taxes |
Mexican companies areThe Company is subject to a dual tax system comprised of ISR and IETU.
ISR—RateThe ISR rate was 28% for 2009, 2008, 2007 and will be 30% for years 2010 to2011 and 2012. In 2012, 29%the ISR rate for 2013 and 2014 was amended, from 29% to 30% and from 28% to 29%, respectively. The ISR rate will be 28% for 20142015 and thereafter.
IETU—Revenues, as well as deductions and certain tax credits, are determined based on cash flows generatedof each fiscal year. Beginning in each year. The2010, the IETU rate was 16.5% in 2008 and 17% in 2009, and will beis 17.5% as of 2010 and thereafter.. The Asset Tax (IMPAC) Law was repealed upon enactment of the IETU Law; however, under certain circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid for the first time instead of IMPAC, may be refunded,recovered, according to the terms of the law.
The income tax expense in the year is paid based on the higher of ISR and IETU.
AccordingDeferred tax recognized in profit or loss (deferred ISR on deferred IETU) is based on the income tax the Company and its subsidiaries expect to itspay in the following years based on their financial projections, which include the MDP and maximum rates for the period 2010-2014 approved in accordance with Interpretation of Financial Reporting Standards (“INIF”) 8,Effects ofDecember 2009 by the Business Flat Tax,SCT.
To determinate deferred tax at December 31, 2012 and 2011, the Company determinedapplied temporary differences and the tax rates that it will pay ISR. Therefore, the Company recognizes deferred ISR, except for Corsa and Servicios a la Infraestructura Aeroportuaria del Pacífico, S.A. de C.V. (“SIAP”), which essentially will pay IETU.be in effect according to their estimated reversal date.
a. | Recoverable income taxes paid on dividends –Dividends paid to stockholders which are not derived from the net tax income account (CUFIN) generates ISR, which can be credited against the taxes of the Company during the year of the dividend payment and the two subsequent years. |
b. | Recoverable taxes –In |
In 2008, the Aguascalientes, La Paz, Mexicali and Morelia airports paid dividends which generated income tax on dividends and a recoverable income tax asset of Ps. 8,470. The Company’s management estimates that this amount will not be recoverable within the time limit, and thus reserved the asset.
In 2009, the Aguascalientes and Morelia airports paid dividends which generated income tax on dividends of Ps. 933. The Company’s management estimates that this amount will not be recoverable within the time limit, and thus reserved the asset.
During 2009 the Company requested from the Secretaría de Hacienda y Crédito Público (the “Mexican Treasury Department”), for the Guadalajara, Puerto Vallarta, Los Cabos and Tijuana airports, confirmation of the criteria with respect to the application of Article 11 of the Income Tax Law (the “ISR Law”) to ISR paid on dividends paid. The Company obtained positive confirmation, except with respect to the Guadalajara airport as mentioned above, that the mechanism in Article 10 of the ISR Law, which is being applied by the Company, establishes that ISR paid on dividends is creditable against current ISR of the year in which the dividends are paid and the subsequent two years, prior to the crediting of monthly provisional ISR payments from the same year, thereby establishing technical merits for the recovery of the amount at the Guadalajara airport.
In 2003, the Company filed a request with the tax authorities regarding the confirmation of the criteria with respect to the basis that the Company could use to calculate asset tax.IMPAC. The Company requested that such calculation, based on the interpretations of tax law as published by the Mexican Treasury Department, should only take into account the amount effectively paid by AMP for the shares of the Company that was reflected in the assets in each concession acquired through the bidding process.
After several legal procedures, on August 29, 2006, the Mexican Treasury Department confirmed the criteria for the Aguascalientes, Hermosillo, La Paz, Los Mochis, Morelia and Manzanillo airports, reducing the asset tax basis for these airports. Thus, for these airports, the base used to calculate tax on assets considers only the amount effectively paid by AMP for its 15% of the shares of the Company. This generated a recoverable tax as of December 31, 2006 for Ps. 190,537, (nominal pesos), plus Ps. 18,026 (nominal pesos) related to inflation,of interest, for a total recoverable asset of Ps. 208,563 (nominal pesos) recognized within the current recoverable income tax asset.
DuringIn 2007, the Company received a refund of Ps. 146,407, (nominal pesos). Thethe remaining amountamounts of Ps. 62,156 which corresponds to amounts from years 2002, 2003, 2005 and 2006 (2005 and 2006 corresponding only to the Hermosillo airport) has been deniedwere rejected by the tax authorities. Accordingly, the Company filed a judicial annulment in order to obtain a favorable resolution. As a resultauthority. The majority of these annulment proceedings, the Company received favorable resolutions for the Los Mochis, Aguascalientes and La Paz airports. Unfavorable resolutions were received for the Morelia and Manzanillo airports. With respect to the Manzanillo airport, the legal proceeding is still open to determine if any refund of interest applies. Proceedings are still pending resolution for the Hermosillo airport. Given the resolutions received as mentioned above, amounts were either further reserved or were received, suchrecovered through different legal procedures that as of December 31, 2009,concluded in 2010 with the remaining amount is Ps.42,789. In the opinion of the Company and its legal counsel, an unfavorable outcome is considered remote.refunded amounts.
As of December 31, 20092012, the judicial annulmentonly remaining portion pending to be recovered corresponds to the Hermosillo airport for Ps. 25,863 (interest included). The tax authorities determined that the recoverable amount should be the result of the ISR calculation for the remaining six airports was still pending resolution. Inyear and not be treated as an overpayment of taxes for the year. The risk with the resolution criteria is that the right to receive the refund of the amounts claimed will expire, as well as the favorable interest being sought by the Company. Therefore, the Company filed a legal petition to recover the full amount. Based on the opinion of the Company and its legal counsel, management believes a favorable outcome is probable.
For the Guadalajara, Los Cabos, Tijuana, Guanajuato, Puerto Vallarta and Mexicali airports, on May 20 and 24, 2011, the Company considers itreceived a resolution related to a sentence issued on June 5, 2009. In these documents, the tax authority establishes that the airports have to calculate the IMPAC base considering 100% of the assets utilized as part of their operations, which management believes are based on improper arguments associated with ownership percentages and utilizing tax consolidation rules, which are not applicable for the airports. The Company’s management based on the advice of certain of its legal advisors does not believe there are sufficient elements to recover the amounts paid and has sufficient technical merits to obtain a favorable resolution.
The balances of recoverable taxes are comprised as follows:
December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||
Recoverable taxes: | ||||||||||||
IMPAC | Ps. | 61,469 | Ps. | 87,830 | Ps. | 58,066 | ||||||
ISR | 16,395 | 22,266 | 27,345 | |||||||||
Value added tax | 12,253 | 29,791 | 16,525 | |||||||||
Tax to cash deposits | 8,579 | 8,791 | 8,579 | |||||||||
IETU | 1,292 | 1,163 | 6,027 | |||||||||
Retained taxes | 13,152 | 13,254 | 15,243 | |||||||||
Other | 1,229 | 11,866 | 10,441 | |||||||||
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| |||||||
Ps. | 114,369 | Ps. | 174,961 | Ps. | 42,226 | |||||||
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c. | Income Tax –Income tax expense for the years ended at December 31, 2012 and 2011 consists of the following: |
2009 | 2008 | 2007 | 2012 | 2011 | ||||||||||||||||
ISR: | ||||||||||||||||||||
Current | Ps. | 359,553 | Ps. | 431,295 | Ps. | 464,342 | Ps. | 546,592 | Ps. | 473,661 | ||||||||||
Deferred | (211,778 | ) | (324,915 | ) | (229,601 | ) | (221,662 | ) | (222,061 | ) | ||||||||||
Deferred ISR due to tax rate increases | (8,967 | ) | — | — | ||||||||||||||||
Cancellation of recoverable income tax | 933 | 8,470 | 42,836 | |||||||||||||||||
IETU: | ||||||||||||||||||||
Current | 9,943 | 8,136 | — | 5,168 | 6,862 | |||||||||||||||
Deferred | (8,510 | ) | 6,253 | — | (2,649 | ) | 3,296 | |||||||||||||
Deferred IETU due to tax rate increases | (257 | ) | 386 | — | ||||||||||||||||
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| |||||||||||||||||||
Ps. | 140,917 | Ps. | 129,625 | Ps. | 277,577 | Ps. | 327,449 | Ps. | 261,758 | |||||||||||
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d. | Effective tax rate –The reconciliation of the statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the years ended December 31, 2012 and 2011 is shown below: |
2009 | 2008 | 2007 | |||||||
Statutory rate | 28 | % | 28 | % | 28 | % | |||
Effect of tax rate increase | (1 | )% | — | — | |||||
Effects of inflation | (20 | )% | (29 | )% | — | ||||
Effects of cancellation of recoverable income tax | — | 1 | % | 3 | % | ||||
Effect of recovery of tax on assets originated from enactment of IETU | — | — | (17 | )% | |||||
Change in valuation allowance | 4 | % | 8 | % | 3 | % | |||
Effective rate | 11 | % | 8 | % | 17 | % | |||
% | 2012 | % | 2011 | |||||||||||||
Net income | Ps. | 1,772,030 | Ps. | 1,611,580 | ||||||||||||
Income tax expense | 327,449 | 261,758 | ||||||||||||||
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Income before income taxes | 2,099,479 | 1,873,338 | ||||||||||||||
Statutory tax rate | 30 | % | 629,844 | 30 | % | 562,001 | ||||||||||
Effects of tax inflation on nonmonetary assets | (15 | %) | (314,922 | ) | (16 | %) | (299,733 | ) | ||||||||
Other | 1 | % | 12,527 | (0 | %) | (510 | ) | |||||||||
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Effective rate | 16 | % | Ps. | 327,449 | 14 | % | Ps. | 261,758 | ||||||||
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e. | Recognized deferred income tax assets and liabilities – At December 31, 2012 and 2011 the main items comprising the deferred income tax |
2009 | 2008 | |||||||
Deferred ISR asset (liability): | ||||||||
Allowance for doubtful accounts | Ps. | 37,297 | Ps. | 27,806 | ||||
Airport concessions and rights to use airport facilities | 917,969 | 481,828 | ||||||
Machinery, equipment and improvements on leased buildings | 29,790 | 19,011 | ||||||
Improvements to concession assets | 75,512 | 42,930 | ||||||
Capitalized comprehensive financing result | (11,688 | ) | (5,736 | ) | ||||
Embedded derivatives | (4,929 | ) | (11,719 | ) | ||||
Hedging derivative financial instrument | 295 | — | ||||||
Employee benefits | 5,639 | 10,809 | ||||||
Other provisions | — | 355 | ||||||
Deferred ISR | 1,049,885 | 565,284 | ||||||
Effect of tax loss carryforwards | 232,132 | 431,394 | ||||||
Valuation allowance for tax loss carryforwards | (211,760 | ) | (163,796 | ) | ||||
Net long-term deferred ISR asset | 1,070,257 | 832,882 | ||||||
Deferred IETU asset (liability): | ||||||||
Employee benefits | 7,883 | 2,740 | ||||||
Accounts receivable and payable—net | (2,234 | ) | — | |||||
Machinery and equipment | (3,522 | ) | (9,380 | ) | ||||
Net long-term deferred IETU liability | 2,127 | (6,640 | ) | |||||
Net long-term deferred income tax asset | Ps. | 1,072,384 | Ps. | 826,242 | ||||
Assets | Liability | Net | ||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||||||
Deferred ISR asset (liability): | ||||||||||||||||||||||||
Allowance for doubtful accounts | Ps. | 60,773 | Ps. | 61,747 | Ps. | — | Ps. | — | Ps. | 60,773 | Ps. | 61,747 | ||||||||||||
Machinery and equipment | 11,652 | 10,743 | — | — | 11,652 | 10,743 | ||||||||||||||||||
Improvements to concession assets | 222,038 | 203,362 | — | (14,523 | ) | 222,038 | 188,839 | |||||||||||||||||
Airport concessions and rights to use airport facilities | 3,373,508 | 3,230,159 | — | — | 3,373,508 | 3,230,159 | ||||||||||||||||||
Other acquired rights | 88,777 | 83,596 | — | — | 88,777 | 83,596 | ||||||||||||||||||
Derivative financial instruments | 4,317 | 3,120 | — | — | 4,317 | 3,120 | ||||||||||||||||||
Other assets | 1,077 | 1,482 | — | — | 1,077 | 1,482 | ||||||||||||||||||
Tax loss carryforwards | 56,152 | 53,273 | — | — | 56,152 | 53,273 | ||||||||||||||||||
Recoverable tax on assets | 335,272 | 344,969 | — | — | 335,272 | 344,969 | ||||||||||||||||||
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| |||||||||||||
Deferred ISR asset (liability) | 4,153,566 | 3,992,451 | — | (14,523 | ) | 4,153,566 | 3,977,928 | |||||||||||||||||
Deferred IETU asset (liability): | ||||||||||||||||||||||||
Accounts receivable | — | — | (28,335 | ) | (23,325 | ) | (28,335 | ) | (23,325 | ) | ||||||||||||||
Accounts payable | 17,131 | 11,248 | — | — | 17,131 | 11,248 | ||||||||||||||||||
Provisions | 2,014 | 2,232 | — | — | 2,014 | 2,232 | ||||||||||||||||||
Liabilities for retirement benefits | 10,551 | 8,380 | — | — | 10,551 | 8,380 | ||||||||||||||||||
Machinery, equipment and improvements on leased buildings | — | — | (2,123 | ) | (1,945 | ) | (2,123 | ) | (1,945 | ) | ||||||||||||||
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| |||||||||||||
Deferred IETU asset (liability) | 29,696 | 21,860 | (30,458 | ) | (25,270 | ) | (762 | ) | (3,410 | ) | ||||||||||||||
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Asset (liability) deferred income tax | Ps. | 4,183,262 | Ps. | 4,014,311 | Ps. | (30,458) | Ps. | (39,793) | Ps. | 4,152,804 |
| Ps. | 3,974,518 | |||||||||||
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For the computation of the deferred income tax asset as of December 31, 2009 and 2008, the Company applied to temporary differences the applicable rates according to their estimated date of reversal. The result derived from the application of different rates is presented in the captions of deferred ISR due to tax rate increase and deferred IETU due to tax rate increases in the table of tax provisions above.
f. | Deferred income tax asset not recognized – Deferred income tax assets not recognized in the statement of financial position is comprised of the following items: |
December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||
Tax loss carryforwards | Ps. | 123,496 | Ps. | 107,363 | Ps. | 158,511 | ||||||
Recoverable tax on assets | 241,455 | 257,578 | 238,561 | |||||||||
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| |||||||
Ps. | 364,951 | Ps. | 364,941 | Ps. | 397,072 | |||||||
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The Company does not recognize deferred tax assets on tax loss carryforwards for which it is not probable to generate future taxable profits to utilize such tax losses.
As disclosed in this Note, the recoverable tax on assets will expire in 2017. The recoverable income tax from recoverable tax on assets detailed above has not been recognized because the Company’s financial projections indicate it is not likely to be recovered.
The Company does not recognize deferred tax assets relating to temporary differences between the accounting and tax value of investments in subsidiaries, as it has the power to control the reversal date of those temporary differences, and does not expect them to reverse in the foreseeable future.
g. | Deferred income tax from tax loss carryforwards –The Company generated tax loss carryforwards in the airports of Aguascalientes, Los Mochis, Manzanillo and Morelia, and at Grupo Aeroportuario del Pacífico, S.A.B. de C.V.; The Company estimates that recoverable tax loss carryforwards will be in the airports of Aguascalientes and Morelia and the Grupo Aeroportuario del Pacífico, S.A.B. de C.V., according to the amounts shown in the following table. In respect with the tax legislation relative to concessions, such losses will expire in 2048, except for the tax losses of Grupo Aeroportuario del Pacífico, S.A.B. de C.V., which expire in 2020. Tax losses than can be recovered based on management’s financial projections are recognized as part of the deferred tax asset. |
December 31, 2012 December 31, 2011 January 1, 2011 Tax loss carryforwards Unrecognized tax loss carryforwards Recognized tax loss carryforwards Ps. 641,599 Ps. 573,702 Ps. 703,605 (441,056 ) (383,440 ) (566,111 ) Ps. 200,543 Ps. 190,262 Ps. 137,494
h. | Balances and movements in deferred taxes during the period. |
Balance as of 2011 | Effects in profit and loss | Allocation to recoverable taxes | Balance as of December 31, 2011 | Effects in profit and loss | Allocation to recoverable taxes | Balance as of 2012 | ||||||||||||||||||||||
Temporal differences for the deferred ISR: | ||||||||||||||||||||||||||||
Allowance for doubtful accounts | Ps. | 58,991 | Ps. | 2,756 | Ps. | — | Ps. | 61,747 | Ps. | (974) | Ps. | — | Ps. | 60,773 | ||||||||||||||
Machinery, equipment and improvements on leased buildings | 8,628 | 2,115 | — | 10,743 | 909 | — | 11,652 | |||||||||||||||||||||
Improvements to concession assets | 155,201 | 33,638 | — | 188,839 | 33,199 | — | 222,038 | |||||||||||||||||||||
Airport concessions and rights to use airport facilities | 3,071,054 | 159,105 | — | 3,230,159 | 143,348 | — | 3,373,507 | |||||||||||||||||||||
Other acquired rights | 75,604 | 7,992 | — | 83,596 | 5,181 | — | 88,777 | |||||||||||||||||||||
Derivative financial instruments | 2,370 | 750 | — | 3,120 | 1,198 | — | 4,318 | |||||||||||||||||||||
Other assets | 1,908 | (426 | ) | — | 1,482 | (406 | ) | — | 1,076 | |||||||||||||||||||
Tax loss carryforwards | 38,499 | 14,774 | — | 53,273 | 2,879 | — | 56,152 | |||||||||||||||||||||
Recoverable tax on assets | 396,318 | 1,357 | (52,706 | ) | 344,969 | 36,328 | (46,025 | ) | 335,272 | |||||||||||||||||||
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| |||||||||||||||
Total | 3,808,573 | 222,061 | (52,706 | ) | 3,977,928 | 221,662 | (46,025 | ) | 4,153,565 | |||||||||||||||||||
Temporal differences for the deferred IETU: | ||||||||||||||||||||||||||||
Accounts receivable | (19,907 | ) | (3,418 | ) | — | (23,325 | ) | (5,011 | ) | — | (28,236 | ) | ||||||||||||||||
Accounts payable | 12,449 | (1,201 | ) | — | 11,248 | 5,883 | — | 17,131 | ||||||||||||||||||||
Provisions | 2,885 | (653 | ) | — | 2,232 | (217 | ) | — | 2,015 | |||||||||||||||||||
Liabilities for retirement benefits | 6,360 | 2,020 | — | 8,380 | 2,171 | — | 10,551 | |||||||||||||||||||||
Machinery and equipment | (1,901 | ) | (44 | ) | — | (1,945 | ) | (177 | ) | — | (2,122 | ) | ||||||||||||||||
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Total | (114 | ) | (3,296 | ) | — | (3,410 | ) | 2,649 | — | (761 | ) | |||||||||||||||||
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Total for ISR and IETU: | Ps. | 3,808,459 | Ps. | 218,765 | Ps. | (52,706 | ) | Ps. | 3,974,518 | Ps. | 224,311 | Ps. | (46,025 | ) | Ps. | 152,804 | ||||||||||||
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i. | As a result of the enactment of IETU law beginning in 2008, specifically with respect to the third transitory article, the Company has ten years |
In 2009, basedThere are several interpretations as to how an entity can recover the tax on assets paid, but to the date there is no explicit definition from the tax authorities or a precedent from any court that provides clarity as to the proper manner in which to recover such amounts. The Company’s financial projections for the following eight years, mainlymanagement believes it is not probable that they will recover certain amounts and has therefore not recognized an asset of Ps. 241,455 as a result of the deterioration in projected results for the Tijuana airport, the Company increased the valuation allowance by Ps. 15,875.December 31, 2012. The actualremaining amount of recoverable tax on assets paid in previous years amounts to Ps. 646,316. However, according to tax on asset (through 2007) and IETU laws, the recovery against income tax of the amount of tax on assets paid in the last ten years is limited to 10% per year. Therefore, the Company recognized a valuation allowancecomprised of Ps. 250,076, which results in net recoverable tax on assets237,788 (nominal value) and Ps. 97,484 of interest for the following:period from 2002 to 2012.
Recoverable tax on assets for year 2009 | Recoverable tax on assets from 2010 to 2017 | Total | |||||||
Guanajuato | Ps. | 520 | Ps. | 3,202 | Ps. | 3,722 | |||
Guadalajara | 15,315 | 107,441 | 122,756 | ||||||
Puerto Vallarta | 2,254 | 11,583 | 13,837 | ||||||
Tijuana | 10,702 | 245,223 | 255,925 | ||||||
Total | Ps. | 28,791 | Ps. | 367,449 | Ps. | 396,240 | |||
At December 31, 2011 and 2012, and January 1, 2011, the recoverable tax on assets is comprised as follows:
2009 | 2008 | |||||||
Recoverable tax on assets paid | Ps. | 646,316 | Ps. | 668,200 | ||||
Valuation allowance for recoverable tax on assets paid | (250,076 | ) | (226,120 | ) | ||||
Recoverable tax on assets | Ps. | 396,240 | Ps. | 442,080 | ||||
December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||
Recoverable tax on assets paid | Ps. | 576,727 | Ps. | 602,547 | Ps. | 634,879 | ||||||
Unrecognized recoverable tax on assets paid | (241,455 | ) | (257,578 | ) | (238,561 | ) | ||||||
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| |||||||
Recognized recoverable tax on assets | Ps. | 335,272 | Ps. | 344,969 | Ps. | 396,318 | ||||||
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At December 31, 2012 the recoverable tax on assets paid is comprised as follows:
Tax on assets 2012 results | Tax on assets expected to be recoverable from 2013 to 2017 | Total | ||||||||||
Bajio | Ps. | 535 | Ps. | 1,670 | Ps. | 2,205 | ||||||
Guadalajara | 17,109 | 68,202 | 85,311 | |||||||||
La Paz | — | 188 | 188 | |||||||||
Puerto Vallarta | 2,519 | 5,272 | 7,791 | |||||||||
Tijuana | 38,498 | 201,279 | 239,777 | |||||||||
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Total | Ps. | 58,661 | Ps. | 276,611 | Ps. | 335,272 | ||||||
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15. | Accounts Payable |
The Company receives credit from its suppliers at 30 and 45 days without charging interest, whereby the provider payment policy is to pay the maximum term granted. As of the date of these consolidated financial statements there is no supplier that represents more than 10% of its investments in productive assets and/or the total operating costs.
December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||
Suppliers | Ps. | 310,003 | Ps. | 407,994 | Ps. | 341,245 | ||||||
Advance payments from clients | 36,010 | 21,938 | 26,852 | |||||||||
Interest payable | 20,528 | 18,753 | 14,516 | |||||||||
Others accounts payable | 9,684 | 23,960 | 21,111 | |||||||||
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Total | Ps. | 376,225 | Ps. | 472,645 | Ps. | 403,724 | ||||||
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Advanced payments from clients represent payments for future services that have not yet been provided and if they are not performed by the Company has the obligation to reimburse it to its customers.
16. | Bank loans |
Since 2007 the Company has obtained bank loans to finance its capital investments committed in the MDP of Bajio , Guadalajara, Hermosillo, Puerto Vallarta and San Jose del Cabo airports, which are described below with the unpaid balance at each date.
December 31 | December 31 | January 1, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
On August 31, 2007 the Company entered into an unsecured credit agreement, with crossed guarantees by its individual airports with Banamex for a total amount of Ps. 1,214,000, bearing fixed interest at a rate of 8.52%. The agreement matures in seven years from the date of the borrowing and payments and amortization of principal are required to be made in 28 equal and consecutive quarterly principal and interest payments. Such funds were disbursed: i) the September 7, 2007 for Ps. 600,000, ii) the January 30, 2008 by Ps. 344,000 and iii) the January 30, 2009 for Ps. 270,000. | Ps. | 385,929 | Ps. | 559,358 | Ps. | 732,786 |
On December 9, 2009, the Company entered into contracts for unsecured credit agreements, with crossed guarantees among the individual airports with Banamex and HSBC for Ps. 325,723 from each institution, totaling Ps. 651,446. The loans bear interest at a variable TIIE rate plus 350 basis points and require quarterly principal and interest payments for a period of seven years. Such funds were disbursed in different dates as follows: i) on December 9, 2009, Ps. 143,754, and ii) on February 3, 2010, Ps. 507,692. (1) On May 26, 2011, the Company entered into a contract for an unsecured credit agreement, with crossed guarantees among the individual airports, with HSBC for Ps. 1,023,980, for the Los Cabos, Puerto Vallarta, Guadalajara, Hermosillo and Guanajuato airports. The loans bear interest at a variable 28-day TIIE plus 165 basis points and require quarterly principal and interest payments for a period of seven years. Funds of 2011 were disbursed on different dates as follows i) on May 26, 2011 for Ps. 184,152, ii) on July 11, 2011 for Ps. 247,142, iii) on December 23, 2011 for Ps. 228,213 iv) on April 10, 2012 by Ps. 95,869, v) on May 25, 2012 by Ps. 40,600, vi) on July 10, 2012 for Ps. 49,769 and vii) the October 11, 2012 for Ps. 67,393. The remainder of Ps. 110,842 has not been disbursed yet. On June 6, 2011, the Company entered into a contract for an unsecured credit agreement, with crossed guarantees among the individual airports, with Banamex for Ps. 551,372, for the Los Cabos, Puerto Vallarta, Guadalajara, Hermosillo and Guanajuato airports. The loans bear interest at a variable 91-day TIIE plus 135 basis points for the 2011 disbursements, and at the variable 91-day TIIE rate plus 143 basis points for the 2012 disbursements. Both dispositions will require quarterly principal and interest payments for a period of seven 7 years. Funds of 2011 were disbursed on different dates as follows: i) on June 7, 2011for Ps.99,158, ii) on July 11, 2011 for Ps. 133,077, iii) on December 23, 2011 for Ps. 122,884. On November 7, 2012, the Company notified to Banamex that the remaining balance of the amount ordered by the unsecured loan would be pay. The unpaid balance was paid on December 7 and 23, 2012, for Ps. 77,910 and Ps. 105,329, respectively. An additional payment to be held on January 11, 2013 for Ps.104,560, for a total payment of Ps. 287,799, plus the amortization payment corresponding at that date of Ps. 4,753. With these payments credit loans will be completely liquidated. On August 2, 2012, the Company entered into a contract for an unsecured credit agreement with BBVA Bancomer for Ps. 242,747, with crossed guarantees among the individual airports to a variable interest rate of TIIE 91 days, plus 1.20 percentage points at quarterly principal and interest, for a period of seven years were made: i) on August 3, 2012 for Ps. 168,530, and ii) on October 11, 2012 for Ps. 74,217. On November 23, 2012, the Company signed an unsecured credit agreement, with crossed guarantees between the accredited airports, with BBVA Bancomer for Ps. 287,799. The loan bears interest at a variable rate based on the 91-day TIIE plus 120 basis points at quarterly principal and interest for a period of seven years. Disbursements of 2012 were held on the following dates: i) on December 5, 2012 for Ps. 46,672, and ii) the December 21, 2012 for Ps. 58,277, and iii) the last one that will be disburse on January 9, 2013 for Ps. 182,850. Total unpaid balance of bank loans Less - Current portion Long-term portion December 31 December 31 January 1, 2012 2011 2011 390,387 483,451 576,514 785,417 637,526 — 109,313 343,283 — 236,728 — — 104,949 — — 2,012,723 2,023,618 1,309,300 (555,925 ) (411,439 ) (266,492 ) Ps. 1,456,798 Ps. 1,612,179 Ps. 1,042,808
(1) | In connection with loans of December 9, 2009, the Company entered into interest rate hedge with Banamex, as explained in Note 13. |
The unpaid consolidated balances at December 31, 2012 and 2011 and January 1, 2011, from the loans previously described, mature as follows:
Year | December 31, 2012 | December 31 2011 | January 1, 2011 | |||||||||
2011 | Ps. | — | Ps. | — | Ps. | 266,492 | ||||||
2012 | — | 411,439 | 266,492 | |||||||||
2013 | 555,925 | 411,439 | 266,492 | |||||||||
2014 | 425,183 | 390,010 | 245,064 | |||||||||
2015 | 324,040 | 288,867 | 245,064 | |||||||||
2016 | 282,826 | 247,653 | 19,696 | |||||||||
2017 | 198,251 | 163,079 | — | |||||||||
Thereafter | 226,499 | 111,131 | — | |||||||||
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| |||||||
Ps. | 2,012,723 | Ps. | 2,023,618 | Ps. | 1,309,300 | |||||||
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At December 31, 2012 and 2011, and January 1, 2011, bank loans are payable by the following airport subsidiaries:
At December 31, 2012
Airport | Current | Long-Term | Total | |||||||||
Bajio | Ps. | 41,380 | Ps. | 117,912 | Ps. | 159,292 | ||||||
Guadalajara | 130,547 | 439,233 | 569,780 | |||||||||
Hermosillo | 36,705 | 87,315 | 124,020 | |||||||||
Puerto Vallarta | 120,495 | 333,239 | 453,734 | |||||||||
San Jose del Cabo | 226,798 | 479,099 | 705,897 | |||||||||
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| |||||||
Total | Ps. | 555,925 | Ps. | 1,456,798 | Ps. | 2,012,723 | ||||||
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At December 31, 2011
Airport | Current | Long-Term | Total | |||||||||
Bajio | Ps. | 29,258 | Ps. | 112,094 | Ps. | 141,352 | ||||||
Guadalajara | 82,897 | 401,202 | 484,099 | |||||||||
Hermosillo | 30,062 | 110,207 | 140,269 | |||||||||
Puerto Vallarta | 92,133 | 366,090 | 458,223 | |||||||||
San Jose del Cabo | 177,089 | 622,586 | 799,675 | |||||||||
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| |||||||
Total | Ps. | 411,439 | Ps. | 1,612,179 | Ps. | 2,023,618 | ||||||
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At January 1, 2011
Airport | Current | Long-Term | Total | |||||||||
Bajio | Ps. | 22,290 | Ps. | 93,559 | Ps. | 115,849 | ||||||
Guadalajara | 49,013 | 253,853 | 302,866 | |||||||||
Hermosillo | 23,693 | 97,251 | 120,944 | |||||||||
Puerto Vallarta | 56,496 | 219,109 | 275,605 | |||||||||
San Jose del Cabo | 115,000 | 379,036 | 494,036 | |||||||||
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| |||||||
Total | Ps. | 266,492 | Ps. | 1,042,808 | Ps. | 1,309,300 | ||||||
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The loan agreements limit the Company’s use of proceeds for the financing of capital expenditures, working capital and prepayments of loans, in addition to prohibiting the merger of the airport creditors with any other company, as well as the prohibition of sales or transfers of assets in an amount greater than Ps. 1,000, without previous authorization from the creditors and requires the Company to maintain certain financial ratios. If the individual airports are unable to fulfill their commitments and maintain the minimum financial ratios under the credit agreements, dividends cannot be declared. As of December 31, 2012, the airports were in compliance with all covenants stipulated by their credit agreements.
17. | Liabilities for postemployment benefits |
a. | Defined contribution plans– Under Mexican legislation, the Company makes payments equivalent to 2% of its workers’ daily comprehensive salary to a defined contribution plan that is part of the retirement savings system. The expense was Ps. 4,346 and Ps. 4,275 in 2012 and 2011, respectively. |
b. | Defined benefit plans– According to the Federal Labor Law in Article 162, the Company is required to pay a seniority premium as postemployment benefits if an employee leaves and if have at least 15 years of service, which consist of a payment of 12 days per worked year based on the last salary, not to exceed twice the legal minimum wage established by law. Additionally, the Company pays as part of its labor policy severance at the employee retirement age. The present value of the retirement benefit obligation and the current service cost and past service costs were calculated using the projected unit credit method. The table below shows the movements in the present value of defined benefit obligations: |
2012 | 2011 | |||||||
Defined benefit obligation as of January 1, | Ps. | 47,897 | Ps. | 36,356 | ||||
Current service cost | 12,593 | 11,826 | ||||||
Benefits paid | (200 | ) | (285 | ) | ||||
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| |||||
Defined benefit obligation as of December 31, | Ps. | 60,290 | Ps. | 47,897 | ||||
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Below are the amounts for the years ended December 31, 2012 and 2011 that were recognized in the consolidated statements of comprehensive income:
2012 | 2011 | |||||||
Current service cost | Ps. | 7,185 | Ps. | 7,858 | ||||
Interest on obligation | 4,818 | 4,073 | ||||||
Actuarial losses (gains) | 590 | (105 | ) | |||||
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| |||||
Total recognized in employee cost (Note 20) | Ps. | 12,593 | Ps. | 11,826 | ||||
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The main actuarial assumptions at the reporting date (expressed as weighted average nominal rates) are shown below:
2012 | 2011 | |||||||
Discount of the projected benefit obligation at present value | 7.0 | % | 7.5 | % | ||||
Salary increase | 5.0 | % | 5.0 | % |
The discount rate is determined based on the structure of the interest rate curve of government bonds for 30 years. The net interest cost on the retirement benefit obligation is recorded in profit and loss within the cost of services, in conjunction with the other components of liabilities for retirement benefits.
If the discount rate had a variation of 100 basis points upward or downward, the effect on the liability for retirement benefit are estimated to be approximately Ps. 2,450, as increase or as decrease.
Assumptions related to expected mortality are based on statistics and experience of the Mexican population. The average life expectancy of an individual retiring at age 65 is 17 years for men and 19 years for women (Demographic Mortality Experience for Active people, EMSSA 1997).
18. | Stockholders’ equity |
a. | At December 31, 2012, common stock consists of the following: |
Number of | Nominal | |||||||
Shares | Value | |||||||
Fixed Capital | ||||||||
Series B | 476,850,000 | Ps. | 13,130,223 | |||||
Series BB | 84,150,000 | 2,317,099 | ||||||
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| |||||
Total | 561,000,000 | Ps. | 15,447,322 | |||||
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At December 31, 2011, and January 1, 2011, common stock consists of the following:
Number of | Nominal | |||||||
Shares | Value | |||||||
Fixed Capital | ||||||||
Series B | 476,850,000 | Ps. | 13,616,849 | |||||
Series BB | 84,150,000 | 2,402,974 | ||||||
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| |||||
Total | 561,000,000 | Ps. | 16,019,823 | |||||
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At December 31, 2012, all shares are fully subscribed and paid. The Company’s shares are represented by common ordinary shares and without nominal value. Series “BB” shares, which may represent up to 15% of common stock, may only be transferred upon prior conversion into Series “B” shares, based on certain time restrictions.
Each share of Series “B” and “BB” gives the holder the right to one vote at any Ordinary Stockholders’ Meeting. According to the Company’s bylaws, shareholders of Series “B” shares either individually or jointly with their related parties, cannot hold more than 10% of the total outstanding common stock of the Company, and therefore would be prohibited from exceeding such limits by participating through trusts, agreements, social pacts or bylaws, pyramid schemes or any other mechanism that provides a larger share than legally allowed. Additionally, the Company’s bylaws provide that if a person individually or jointly with its related parties, acquires a percentage of shares exceeding the limits of participation previously mentioned, the person or group of persons will be required to sell the excess over what is allowed through a public offering, during which time, the shares owned over the 10% threshold by such individuals will not have voting rights and cannot be represented in any Stockholder Meeting. Furthermore, the shareholders of Series “BB” shares, either individually or jointly with their related parties, may also be owners of shares of Series “B” shares, regardless of the shares they hold in the aggregate of Series “B” and Series “BB”. However, as shareholders of the Series “BB” shares, their votes will be limited to no more than 10% of the voting common stock, and any additional participation is required to vote in the same way of the majority of the votes in any Stockholder Meeting.
Shareholders of Series “BB” shares are entitled to elect four members to the board of directors and their alternates, whereas shareholders of Series “B” shares with rights to vote, even limited or restricted, that individually or together owning 10% or more of the Company’s capital stock is entitled to elect one member to the board of directors at a Stockholders’ Meeting, an in such instances, such shareholder or group of shareholders may not exercise the right to vote for the board members corresponding to the majority. If any shareholder or group of shareholders representing at least 10% of the common shares of which the common stock is comprised, exercises the right to appoint a board member, such shareholder will not have the right to vote in the designation of the board members that correspond to appointment by the majority of Series “B” shareholders. The total number of members of the Board of Directors of the Company is 11, therefore holders of Series “B” shares have the right to appoint only seven members.
The members of the Board of Directors appointed by the Shareholders of the Series “BB” will have the ability to make the following valid designations: (i) upon consultation with the Company’s Nomination and Compensation Committee, appointment and dismissal of the Chief Executive Officer and the top-level executive officers; (ii) appointment of three of the six members of the Operating Committee and three alternates, and the number of members and their alternates to the Audit Committee, including the acquisition, nominations and compensation corresponding to 20% (twenty percent) of the total members, with the understanding that there will be at least one member and alternate, for each of them, iii) in the creation and determination of the Operating Committee whom are not part of the Company, members of the Board of Directors or the Company’s officers.
In the case of the Audit Committee must also comply with the legal restrictions of independence.
b. | At an Ordinary Stockholders’ Meeting held on April 27, 2011, the stockholders approved a dividend payment of Ps. 1.4424 per share to be made on or before May 31, 2011, and a second payment of Ps. 0.4807 per share to be made on or before November 30, 2011. Both dividends were paid in cash on May 31, 2011 for a total of Ps. 780,000, and on November 29, 2011 for a total of Ps. 255,117. On the same day, the stockholders approved the cancellation of the remainder of the stock repurchase program, approved at the Ordinary General Stockholders’ Meeting held from July 22 to July 25, 2010 for Ps. 86,198. Additionally, the stockholders approved a stock repurchase program to repurchase up to a maximum amount of Ps. 473,500 to be executed as the Company’s management determines it is convenient or necessary, in accordance with the Securities Market Law. |
During 2011, the Company repurchased a total of 16,364,500 shares for Ps. 777,493, which represented 2.9% of outstanding shares at such time. From the total shares repurchased during 2011, 6,302,700 shares costing Ps. 303,993 corresponded to the amount approved at the General Stockholders’ Meetings on July 25, 2010, which authorized the repurchase for up to Ps. 1,000,000; additionally, the Company repurchased 10,061,800 shares costing Ps. 473,500, corresponding to the amount approved at the General Stockholders’ Meeting on April 27, 2011 in order to repurchase shares for up to Ps. 473,500. The calculation of weighted average shares outstanding, in the consolidated statements of comprehensive income, includes the effect of the repurchased shares during 2011.
c. | In an Ordinary Stockholders’ Meeting held on April 16, 2012, the stockholders approved a dividend payment of Ps. 1,130,000, to divide in each share outstanding at the date of paid, excluding repurchased shares to each of the payment dates in accordance with the Article 56 of the Securities Market Law. The first paid was in cash on may 31, 2012 for Ps. 847,500, and the second payment was made on November 1, 2012 for Ps. 282,500. In the same Stockholders’ Meeting, the stockholders approved a stock repurchase program to repurchase up to a maximum amount of Ps. 280,000 to be executed for the next twelve month. |
d. | In an Extraordinary General Stockholders’ Meeting held on September 25, 2012, the stockholders approved a capital distribution to be paid in cash for Ps. 870,000, which is comprised of Ps. 572,501 for common stock with a historical value and Ps. 297,499 for the value of inflation recognized through December 31, 2007 in according with Mexican Financial Reporting Standards. This is because for legal and tax purposes in Mexico, Grupo Aeroportuario del Pacífico, S.A.B. de C.V., as an individual entity, will continue preparing and presenting separate financial information under MFRS. Therefore, for any transaction related to Stockholders’ Equity, the Company must take into consideration the accounting balances prepared under MFRS and determine the tax effects under applicable laws in Mexico, which require financial information prepared using MFRS. |
As a part of the adoption of IFRS, the effects of inflation recognized in the Stockholders’ Equity under MFRS until December 31, 2007, were reclassified to retained earnings, as the cumulative inflation recognized under IFRS occurred during periods that were not considered to be hyperinflationary in IFRS. As a result, the effects of inflation for the common stock reduction of Ps. 297,499 recorded under MFRS is presented as a reduction to retained earnings for IFRS purposes, which is the account where these effects were reclassified at the date of transition to IFRS (January 1, 2011).
e. | The General Corporate Law requires that at least 5% of the consolidated comprehensive income of the year, be transferred to the legal reserve until the reserve equals 20% of capital stock at par value (nominal pesos). The legal reserve may be capitalized but may not be distributed, except in the form of stock dividends, until the entity is dissolved. The legal reserve must be replenished if it is reduced for any reason. At December 31, 2012 and 2011, and January 1, 2011, the legal reserve, in nominal pesos, was Ps. 553,477, Ps. 479,255 and Ps. 404,247, respectively, corresponding to 3.6%, 3.0% and 2.5% of the common stock, respectively. |
f. | At December 31, 2012, the Company has a maximum amount of funds approved to repurchase shares of the Company for Ps. 1,667,302. From the approved amount 30,279,400 shares have been repurchased for a total of Ps. 1,387,302, the repurchases has been made from September 2010 to October 2011. |
Stockholders’ equity distribution, except for the restatement amounts of the common stock contributed and the Net tax income account (CUFIN), will be subject to an ISR tax, calculated at the tax rate applicable to the distribution year. This corporate level dividend income tax on the distribution of earnings may be applied as a credit against ISR corresponding to the fiscal year in which the dividend was paid and the subsequent two fiscal years following the date in which the dividend was paid.
g. |
December 31, 2012 | December 31, 2011 | January 1, 2011 | ||||||||||
Contributed capital account (CUCA) | Ps. | 28,707,601 | Ps. | 27,720,753 | Ps. | 27,406,628 | ||||||
Net tax income account (CUFIN) | 1,340,727 | 1,205,583 | 1,106,564 | |||||||||
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| |||||||
Total | Ps. | 30,048,328 | Ps. | 28,926,336 | Ps. | 28,513,192 | ||||||
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19. | Revenues |
According to the General Law on Airports and its regulations, certain of the Company’s revenues are classified as airport, complementary and commercial services. Airport services generally include the use of airport runways, taxiways and parking areas for arriving and departing planes, use of passenger walkways, security services, hangars, and, in general, use of the space inside the terminal and other infrastructure by aircraft, passengers and cargo services. These services include rental of space that is vital for the operation of airlines and complementary service suppliers. Complementary services are ramps and handling services, catering, fuel supply, maintenance and repairs, and traffic and dispatch services. Commercial services include services that are not essential for the operation of an airport; therefore, these revenues are not regulated by TM, such as car parking services, lease of space to retailers, restaurants and banks, among others.
A price regulation system establishes a maximum rate for airport services and complementary services for each airport for each year in a five-year period. The maximum rate is the maximum amount of revenues per “workload unit” that may be earned at an airport each year from regulated sources. Under this regulation, a workload unit is equivalent to one passenger (excluding transit passengers) or 100 kilograms (220 pounds) of cargo. As of December 2009, SCT authorized the Company’s maximum rates applicable for the period 2010-2014.
During the periods ended December 31, 2012 and 2011, the Company charged up to 100% and 99.9%, respectively, of the maximum rate.
The table below presents a summary for the years ended December 31, 2012 and 2001, of the Company’s revenues (these do not include revenues related to improvements to concession assets under IFIRIC 12). Using the Airports Law classification, the information is sent to the SCT to comply with the Company’s reporting obligations with respect to regulated and unregulated revenues, which are classified as either aeronautical or non-aeronautical revenues. For this presentation, access fee are classified as airport services.
Regulated revenues Airport operating services to airlines: Landing Charges for not canceling extended stay reservations Parking on embarking/disembarking platform Parking on extended stay or overnight platform Passenger walkways and shuttle buses Airport security charges Airport real estate services to airlines: Leasing of hangars to airlines Leasing of shops, warehouses and stockrooms to airlines (operating) Leasing of space and other terminal facilities to airlines within the terminal (operating) Leasing of land and other surfaces to airlines outside the terminal (operating) Leasing of check-in desks and other terminal space Leasing of desks and other terminal space for ticket sale Airport passenger services: Domestic passenger charges International passenger charges Airport real estate services and rights of access to other operators Complementary services: Catering services Other third-party ramp services rendered to airlines Traffic and/or dispatch Fuel supply or removal Third-party airplane maintenance and repair Total regulated revenues included in the maximum rate Regulated revenues not included in the maximum rate: Car parking charges Recovery of cost over aeronautical services Recovery of cost over non-aeronautical services Total regulated revenues not included in the maximum rate Total regulated revenues Unregulated revenues Commercial concessions(1): Retail operations Food and beverages Duty free VIP lounges Financial services Communications and networks Car rentals Commercial leasing Advertising Time sharing developers Leasing of space to airlines and other complementary service providers (non-operating) Lounge VIP 2012 2011 Ps. 170,659 Ps. 157,683 132 3,826 123,406 115,086 30,672 29,229 22,592 24,284 44,615 40,852 10,783 15,582 2,393 2,583 35,912 32,196 2,645 2,722 11,298 11,355 5,856 5,976 1,541,208 1,406,028 1,281,598 1,150,372 28,352 30,608 6,093 6,335 22,783 20,551 19,771 18,791 1,556 1,379 3,658 2,489 3,365,982 3,077,927 193,705 169,777 58,252 27,823 13,973 12,783 265,930 210,383 3,631,912 3,288,310 69,282 68,835 65,053 58,038 92,466 53,747 9,251 7,617 14,986 13,048 5,668 7,607 90,107 80,755 5,984 5,477 76,206 51,039 98,460 82,422 100,551 92,146 10,497 —
Revenues from sharing of commercial activities(1): Retail operations Food and beverages Duty free Financial services Car rentals Advertising Access fee for ground transportation Non-airport access fees Services rendered to ASA Various commercial-related revenues Others Total unregulated revenues Total aeronautical and non-aeronautical services 2012 2011 11,006 9,942 20,958 16,310 20,477 17,472 359 57 2,170 896 — 2,992 14,159 13,358 19,943 18,103 65 139 12,104 11,678 2,770 2,519 742,522 614,197 Ps. 4,374,434 Ps. 3,902,507
(1) | Unregulated revenues are earned based on |
Revenues from improvements to concession assets are recognized with respect to the additions and improvements made for the Company in its airports, which are committed under the MDP, and is a requirement of fulfillment. Revenues for the years ended as of December 31, 2012 and 2011 accounted for Ps. 570,233 and Ps. 1,036,227, respectively.
20. | Cost of services |
Cost of services for the years ended December 31, was composed of the following:
2012 | 2011 | |||||||
Employee costs (Note 22) | Ps. | 402,607 | Ps. | 369,386 | ||||
Maintenance | 200,022 | 179,455 | ||||||
Safety, security and insurance | 159,379 | 131,168 | ||||||
Utilities | 139,479 | 122,095 | ||||||
Other | 158,515 | 184,834 | ||||||
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| |||||
Ps. | 1,060,002 | Ps. | 986,938 | |||||
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21. | Depreciation and amortization |
Depreciation and amortization for the years ended December 31, were composed of the following:
2012 | 2011 | |||||||
Depreciation | Ps. | 151,176 | Ps. | 110,314 | ||||
Amortization | 676,054 | 632,655 | ||||||
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| |||||
Ps. | 827,230 | Ps. | 742,969 | |||||
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|
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22. | Employee Cost |
Employee Cost for the years ended December 31, was composed of the following:
2012 | 2011 | |||||||
Wages and salaries | Ps. | 252,482 | Ps. | 237,959 | ||||
Other remunerations | 42,597 | 42,752 | ||||||
Social benefits | 39,629 | 37,427 | ||||||
Severance payments | 21,366 | 6,901 | ||||||
Labor union fees | 16,290 | 13,656 | ||||||
Taxes on employee benefits | 5,647 | 5,157 | ||||||
PTU | 4,203 | 3,813 | ||||||
Liabilities for postemployment benefits | 12,593 | 11,826 | ||||||
Others | 7,800 | 9,895 | ||||||
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| |||||
Ps. | 402,607 | Ps. | 369,386 | |||||
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23. | Cost of improvements to concession assets |
As disclosed in Note 3.n, in conformity with IFRIC12, the Company must recognize the revenues and costs of additions and improvements to concession assets which they are obligated to perform at the airports as established by the MDP. The cost for such additions and improvements to concession assets is based on actual costs incurred by the Company in the execution of the additions or improvements, considering the investment requirements in the MDP. Through bidding processes, the Company contracts third parties to carry out such construction. The amount of revenues for these services are equal to the amount of costs incurred, as the Company does not obtain any profit margin for these construction services. The amounts paid are set at market value.
Cost of improvements to concession assets are composed of the following at December 31:
2012 | 2011 | |||||||
Cost of improvements to concession assets | Ps. | 570,233 | Ps. | 1,036,227 | ||||
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24. | Finance (cost) income |
The finance (cost) income is composed of the following at December 31:
2012 | 2011 | |||||||
Interest income from cash equivalents | Ps. | 105,073 | Ps. | 74,324 | ||||
Interest on recovered taxes | 1,836 | 7,389 | ||||||
Gain in fair value on financial investments held for trading purposes | 10,479 | 6,632 | ||||||
Gain in fair value on derivative financial instruments | — | 3,530 | ||||||
Other | 4,690 | 16,570 | ||||||
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| |||||
Total interest income | 122,078 | 108,445 | ||||||
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| |||||
Interest cost from bank loans | (102,136 | ) | (57,220 | ) | ||||
Loss on financial investments held for trading purposes | (10,475 | ) | (10,778 | ) | ||||
Loss on derivative financial instrument | (3,424 | ) | (6,200 | ) | ||||
Commissions for bank loans | (1,067 | ) | (13,492 | ) | ||||
Other financing costs | (4,217 | ) | (6,063 | ) | ||||
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| |||||
Total interest expenses | (121,319 | ) | (93,753 | ) | ||||
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|
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| |||||
Foreign exchange gains | 49,528 | 83,984 | ||||||
Foreign exchange loss | (64,310 | ) | (61,358 | ) | ||||
|
|
|
| |||||
Foreign exchange gains (loss) - net | (14,782 | ) | 22,626 | |||||
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| |||||
Finance (cost) income - net | Ps. | (14,023 | ) | Ps. | 37,318 | |||
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25. | Commitments |
a. | The Company has leased office space under one five-year operating lease agreement, which was renewed in February |
Lease expense was Ps. 5,068, Ps. 4,7175,424 and Ps. 4,7464,954, for the years ended December 31, 2009, 2008,2012 and 2007,2011, respectively.
b. | On December 28, 2009, the SCT authorized the Company’s MDP update for the five-year period from 2010-2014. The table below shows the investments to be made during this period, as approved by the SCT: |
Year | Amount | Amount Committed | Amount Invested | ||||||||
2010 | Ps. | 553,904 | Ps. | 553,904 | Ps. | 764,430 | |||||
2011 | 989,456 | 989,456 | 1,214,730 | ||||||||
2012 | 562,217 | 562,217 | 706,350 | ||||||||
2013 | 411,349 | 411,349 | — | ||||||||
2014 | 253,731 | 253,731 | — | ||||||||
|
| ||||||||||
Ps. | 2,770,657 | Ps. | 2,770,657 | Ps. | 2,685,510 | ||||||
|
|
Amounts set forth above are expressed in thousands of Mexican pesos of purchasing power as of December 31, 2007, and have to be expressedre-expressed using factors derived from the National Construction Price IndexNCPI at the time of their execution. The amounts invested are expressed in thousands of pesos of each year, and include the improvements to concession assets and the machinery and equipment committed under the MDP.
Contingencies |
a. | Several municipalities have filed real estate tax claims against some subsidiary airports related to the land where the airports operate. Based on the opinion of its external legal counsel, the Company believes that there are no legal grounds for such claims. Therefore, the Company has initiated legal proceedings to invalidate the claims, and, where applicable, related foreclosures or other actions. Although no assurance can be given, the Company does not expect the resolutions to have any adverse effects on its consolidated financial position or |
In the case of2004 the Mexicali airport, claims have been filedhad a claim for Ps. 89,000 (nominal pesos), which iswas guaranteed with an encumbrance on 25% of the daily revenues from the operation of the parking lot at the airport generated from November 2004 until September 24, 2008. The cumulative amount of such encumbrances isamounts to Ps. 6,300 (nominal pesos).
During 2008, the Company received a favorable resolution in the ultimate instance. Accordingly,instance; therefore the Company has claimedrequested in return the encumbrance amounts. On April 1, 2011, the Mexicali airport received in return the amount of Ps. 6,002 (including interest), however, there is a refund for this amount which is stillremaining pending payment.to be returned of Ps. 1,294 (nominal pesos). The Company’s legal advisors are in the process of recovery.
On June 8, 2005, the Tijuana airport received a second municipal real estate tax claim of Ps. 146,442 (nominal value). On February 9, 2006, a bailment contract was issued on behalf of the airport for Ps. 141,770 (nominal pesos) in order to release the encumbrance.an encumbrance of certain of its assets. In March 2008, the Tribunal declared the annulment of the tax claim, but upheld, however, the right for the municipal authorities to claim real estate taxes over commercial areas. Theareas, thus, the Company filed a legal proceeding against the resolution, but only for the decision of the court to maintain the right of the municipal authorities to claim real estate taxes over commercial areas.it was denied. As the Tribunal declared the original tax claim null and void, the bailment was cancelled during 2008.
On October 20, 2010 the municipal authorities of Tijuana issued another payment request for real estate taxes covering the period from the 2000 to 2010, however, in the opinion of the Company’s legal advisors this tax claim is not in accordance with the law, as there is precedent that in previous occasions the tribunals declared null the first request corresponding to 2005 and 2006. On October 20, 2010, the municipal authorities demanded that the airport pay the required amount of Ps. 269,229 in the following three days, assigning several of its assets to guarantee such amount in case the airport would not pay. The assigned and encumbered assets do not affect the airport’s operation.
As the Company and its legal counsel believe that these tax claims are not in accordance with the law, GAP proceeded to filed an annulment judgment against the municipal authorities, which is pending resolution. Because, previous judgments in this and other airports have been resolved favorably for the Company, GAP and its legal counsel believe an unfavorable outcome is remote.
b. | In 1970, the Mexican Government expropriated a portion of land occupied by the Tijuana Airport, |
In the case of Guadalajara airport, the Ejido El Zapote and Santa Cruz del Valle presented an appeal with jurisdictional authorities against the SCT and the Reforma Agraria, regarding the expropriation decrees issued to build the airport. In November 2010, the Court granted the protection of the federal justice to the Ejidos El Zapote and Santa Cruz del Valle in Guadalajara airport, ordained to replace the administrative procedure of expropriation due to a lack of notification to these Ejidos and declared unsubsistence the Concession granted to the Guadalajara airport in 1998, in reference to manage, operate and develop the airport facilities. On July 10, 2012, the Court revoked this resolution and ordered the reinstatement of the actions in order to obtain more documentary evidence, for which the judgment is pending resolution. The Company believes it is probable that the court will rule in its favor.
If the legal proceedings are resolved in such a way the adversely impact the Company, management has other legal resources to challenge such resolution. Additionally, under the Concession agreement, the Company has guarantees providing it with access to the airport’s land, and the Mexican government would be liable for any operating disruption caused by the Ejidos and would have to restore the concessionaire the rights to use public property, and compensate any economic damage to the airport. Thus, in the opinion of the Company and its legal counsel, the possibility of an unfavorable outcome is remote.
c. | Federal, state and environmental protection laws regulate the Company’s operations. According to these laws, the passing of regulations relating to air and water pollution, environmental impact studies, noise control and disposal of dangerous and non-dangerous material has been considered. The Federal Environmental Protection Agency has the power to impose administrative, civil and criminal penalties against companies violating environmental laws. It is also entitled to close any facilities that do not meet legal requirements. As of the date of these consolidated financial statements, the Company does not have any environmental sanctions against it. |
d. |
The users of airports, principally airlines, have been subject to increased costs following the events of September 11, 2001 in addition to the events on December 26, 2009 in Detroit, Michigan. Airlines have been required to adopt additional security measures and may be required to comply with more rigorous security guidelines in the future. Because a substantial majority of the Company’s international flights involve travel to the U.S., the Company may be required to comply with security directives of the U.S. Federal Aviation Authority, in addition to the directives of Mexican aviation authorities. The Mexican Government, being part of the International Civil Aviation Organization |
Currently, the Mexican Treasury Department (MTD) carried out tax audits at certain of the Company’s airports. As a result of such audits, the Mexican Treasury Department claimed that the Aguascalientes, La Paz, Los Mochis, Mexicali and Morelia airports incorrectly applied the fiscal amortization rates with respect to the value of their respective concessions. The Company has filed administrative proceedings rejecting the claims made by the tax authority and defending its original position. With respect to the Aguascalientes |
f. | On April, 25, 2011, the Company received a notice from the Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission or CNBV) in which it initiated a proceeding for alleged violations of Mexican disclosure statutes primarily in connection with disputes among AMP’s Stockholders during 2010. This notice is the first stage of the procedure to impose a fine on the Company. On June 3, 2011, the Company exercised its right to appeal the determination of the CNBV and to file evidence to contest this determination. At of the issuance date of these consolidated financial statements, there is no response from the authority. In the opinion of the Company’s management and its legal counsel, the possibility of an unfavorable outcome is considered to be remote. |
Information by |
The Company determines and evaluates its airports individual performances before allocating personnel-related costs and other costs incurred by SIAP, the subsidiary relating to the Company’s senior management. It is for this reason that the Company presents its segment information for airports, which are considered as strategic business units, not by type of service. All airports provide similar services to their customers. For each one of the strategic business the Chief Executive Officer and the Chief Financial Officer, review the internal management reports monthly.
The following table shows a summary of the Company’s financial information by segment as it relates to the Guadalajara, Tijuana, Puerto Vallarta, Los Cabos, Hermosillo and Guanajuato airports. The financial information relating to the remaining six airports was combined and includedare comprised under “Other Airports”airports”. The financialcorresponding information regardingrelated with SIAP Corsa, Parking(company that provides technical assistance and professional services highly qualified), CORSA (company that provides operative services specialized in aeronautical industry) and PCP (company that manages the parking lot operation), as well as the Company’s own operations, including its equity method under “Total intersegment revenues”operation (including investments in subsidiaries), was combined and included under “Other Companies”. The elimination of the investment of the Company in its subsidiaries is included under “Eliminations”. along with any intersegment revenues and other significant intercompany operations. The performance of each segment is measured in base to the income before income taxes, as is reported in the internal financial statements.
December 31, 2012 | Guadalajara | Tijuana | Puerto Vallarta | San Jose del Cabo | Hermosillo | Bajio | Other Airports | Other Companies | Eliminations | Total | ||||||||||||||||||||||||||||||
Total external revenues | Ps. | 1,693,317 | Ps. | 649,593 | Ps. | 699,454 | Ps. | 985,808 | Ps. | 212,086 | Ps. | 236,966 | Ps. | 467,444 | Ps. | — | Ps | — | Ps. | 4,944,667 | ||||||||||||||||||||
Total intersegment revenues | — | — | — | — | — | — | — | 1,922,314 | (1,922,314 | ) | — | |||||||||||||||||||||||||||||
Income from operations | 915,019 | 241,563 | 298,352 | 487,327 | 68,319 | 73,969 | 12,101 | 1,645,731 | (1,628,879 | ) | 2,113,502 | |||||||||||||||||||||||||||||
Interest income | 46,210 | 14,078 | 10,486 | 19,445 | 5,002 | 2,942 | 11,475 | 20,778 | (8,338 | ) | 122,078 | |||||||||||||||||||||||||||||
Interest expense | (37,735 | ) | (4,681 | ) | (27,877 | ) | (28,914 | ) | (10,582 | ) | (9,426 | ) | (6,825 | ) | (3,616 | ) | 8,338 | (121,319 | ) | |||||||||||||||||||||
Depreciation and amortization for the year | (240,538 | ) | (130,316 | ) | (118,503 | ) | (115,384 | ) | (43,365 | ) | (38,834 | ) | (127,124 | ) | (13,166 | ) | — | (827,230 | ) | |||||||||||||||||||||
Income before income taxes | 916,408 | 249,026 | 280,518 | 469,268 | 62,753 | 67,478 | 16,755 | 1,666,151 | (1,628,878 | ) | 2,099,479 | |||||||||||||||||||||||||||||
Income tax expense | (185,786 | ) | 14,670 | (46,087 | ) | (109,928 | ) | (3,654 | ) | (7,289 | ) | 21,640 | (11,015 | ) | — | (327,449 | ) | |||||||||||||||||||||||
Total assets | 7,750,131 | 4,504,800 | 3,442,872 | 3,347,978 | 1,257,242 | 1,130,931 | 3,098,119 | 26,197,628 | (26,196,064 | ) | 24,533,637 | |||||||||||||||||||||||||||||
Total liabilities | 851,150 | 184,279 | 613,245 | 937,604 | 178,225 | 225,222 | 187,230 | 195,808 | (292,339 | ) | 3,080,424 | |||||||||||||||||||||||||||||
Net cash flows provided by operating activities | 1,100,076 | 307,055 | 409,182 | 478,485 | 117,880 | 115,995 | 154,435 | (21,834 | ) | — | 2,661,273 | |||||||||||||||||||||||||||||
Net cash flows used in investing activities | (198,026 | ) | (80,975 | ) | (148,564 | ) | (389,677 | ) | (31,179 | ) | (39,711 | ) | (86,639 | ) | 1,735,986 | (1,745,000 | ) | (983,785 | ) | |||||||||||||||||||||
Net cash flows used in financing activities | (826,782 | ) | (186,000 | ) | (295,954 | ) | (399,027 | ) | (122,526 | ) | (48,537 | ) | (14,993 | ) | (1,999,997 | ) | 1,745,000 | (2,148,816 | ) | |||||||||||||||||||||
Investment in productive assets | 5,376,838 | 3,111,862 | 2,629,621 | 2,747,448 | 904,336 | 816,969 | 2,265,345 | 66,409 | (69 | ) | 17,918,759 | |||||||||||||||||||||||||||||
December 31, 2011 | Guadalajara | Tijuana | Puerto Vallarta | San Jose del Cabo | Hermosillo | Bajio | Other Airports | Other Companies | Eliminations | Total | ||||||||||||||||||||||||||||||
Total external revenues | Ps. | 1,618,135 | Ps. | 686,558 | Ps. | 773,401 | Ps. | 1,042,676 | Ps. | 209,746 | Ps. | 210,738 | Ps. | 397,480 | Ps. | — | Ps | — | Ps. | 4,938,734 | ||||||||||||||||||||
Total intersegment revenues | — | — | — | — | — | — | — | 1,791,421 | (1,791,421 | ) | — | |||||||||||||||||||||||||||||
Income from operations | 847,070 | 212,065 | 275,995 | 405,197 | 63,229 | 58,212 | (3,412 | ) | 1,482,064 | (1,504,401 | ) | 1,836,020 | ||||||||||||||||||||||||||||
Interest income | 58,353 | 9,394 | 10,001 | 5,731 | 5,149 | 3,597 | 9,519 | 20,361 | (13,661 | ) | 108,445 | |||||||||||||||||||||||||||||
Interest expense | (28,092 | ) | (3,538 | ) | (19,699 | ) | (21,237 | ) | (8,176 | ) | (9,063 | ) | (12,621 | ) | (4,989 | ) | 13,661 | (93,753 | ) | |||||||||||||||||||||
Depreciation and amortization for the year | (210,170 | ) | (117,078 | ) | (111,430 | ) | (93,048 | ) | (38,453 | ) | (37,153 | ) | (123,059 | ) | (12,580 | ) | — | (742,969 | ) | |||||||||||||||||||||
Income before income taxes | 890,333 | 216,527 | 267,329 | 403,565 | 60,224 | 52,825 | (6,465 | ) | 1,493,401 | (1,504,401 | ) | 1,873,338 | ||||||||||||||||||||||||||||
Income tax expense | (152,564 | ) | (7,579 | ) | (36,696 | ) | (91,688 | ) | (272 | ) | (3,349 | ) | 30,960 | (570 | ) | — | (261,758 | ) | ||||||||||||||||||||||
Total assets | 7,793,642 | 4,383,102 | 3,474,168 | 3,346,937 | 1,310,016 | 1,088,299 | 3,071,927 | 26,575,547 | (26,323,964 | ) | 24,719,675 | |||||||||||||||||||||||||||||
Total liabilities | 747,784 | 140,277 | 617,872 | 1,044,502 | 194,097 | 184,779 | 185,485 | 227,812 | (304,115 | ) | 3,038,492 | |||||||||||||||||||||||||||||
Net cash flows provided by operating activities | 905,785 | 318,869 | 321,621 | 388,521 | 99,887 | 88,904 | 161,074 | (27,942 | ) | — | 2,256,718 | |||||||||||||||||||||||||||||
Net cash flows used in investing activities | (222,180 | ) | (224,915 | ) | (244,637 | ) | (356,395 | ) | (48,045 | ) | (58,371 | ) | (88,656 | ) | 1,729,747 | (1,740,018 | ) | (1,253,470 | ) | |||||||||||||||||||||
Net cash flows used in financing activities | (673,037 | ) | (275,000 | ) | (124,760 | ) | 17,962 | (33,672 | ) | (53,927 | ) | (2,000 | ) | (1,812,628 | ) | 1,740,018 | (1,217,045 | ) | ||||||||||||||||||||||
Investment in productive assets | 5,448,454 | 3,164,531 | 2,628,638 | 2,522,912 | 923,943 | 805,379 | 2,303,924 | 57,905 | (69 | ) | 17,855,617 |
Productive assets are comprised of Machinery, equipment, Improvements to leased buildings, Improvements to concession assets, Airport concessions, Rights of use of airport facilities, Other acquired rights and Other assets.
December 31, | Guadalajara | Tijuana | Puerto Vallarta | Los Cabos | Hermosillo | Guanajuato | Other Airports | Other Companies | Eliminations | Total | |||||||||||||||||||||||||||
Total external revenues | Ps. | 1,115,670 | Ps. | 422,710 | Ps. | 527,723 | Ps. | 566,593 | Ps. | 151,857 | Ps. | 148,654 | Ps. | 333,033 | Ps. | — | Ps. | — | Ps. | 3,266,240 | |||||||||||||||||
Total intersegment revenues | — | — | — | — | — | — | — | 1,448,981 | (1,448,981 | ) | — | ||||||||||||||||||||||||||
Income from operations | 536,249 | 101,092 | 257,722 | 333,171 | 33,280 | 40,284 | (31,557 | ) | 1,211,147 | (1,187,526 | ) | 1,293,862 | |||||||||||||||||||||||||
Interest income (expense) | 42,813 | 32,481 | (213 | ) | 7,230 | 521 | 3,337 | 20,188 | 3,422 | — | 109,779 | ||||||||||||||||||||||||||
Income tax | 58,347 | (14,883 | ) | 30,572 | 64,557 | (6,413 | ) | (1,684 | ) | 691 | 9,730 | — | 140,917 | ||||||||||||||||||||||||
Total assets | 9,256,323 | 5,467,182 | 3,723,717 | 3,345,732 | 1,487,365 | 1,289,479 | 3,556,370 | 26,903,577 | (26,647,830 | ) | 28,381,915 | ||||||||||||||||||||||||||
Total liabilities | 263,194 | 81,077 | 218,763 | 696,105 | 128,148 | 112,910 | 300,384 | �� | 132,332 | (331,552 | ) | 1,601,361 | |||||||||||||||||||||||||
Capital expenditures in productive assets | 112,905 | 70,814 | 35,718 | 72,782 | 57,904 | 44,940 | 143,018 | 4,033 | — | 542,114 | |||||||||||||||||||||||||||
Investment in productive assets | 7,660,694 | 4,440,295 | 3,292,758 | 2,674,215 | 1,263,848 | 1,085,670 | 3,208,036 | 59,101 | (69 | ) | 23,684,548 | ||||||||||||||||||||||||||
Depreciation and amortization for the year | 258,058 | 139,434 | 114,682 | 88,328 | 42,483 | 39,700 | 129,029 | 17,121 | — | 828,835 | |||||||||||||||||||||||||||
December 31, | Guadalajara | Tijuana | Puerto Vallarta | Los Cabos | Hermosillo | Guanajuato | Other Airports | Other Companies | Eliminations | Total | |||||||||||||||||||||||||||
Total external revenues | Ps. | 1,163,847 | Ps. | 465,185 | Ps. | 585,226 | Ps. | 585,935 | Ps. | 156,487 | Ps. | 177,688 | Ps. | 356,416 | Ps. | — | Ps. | — | Ps. | 3,490,785 | |||||||||||||||||
Total intersegment revenues | — | — | — | — | — | — | — | 1,822,620 | (1,822,620 | ) | — | ||||||||||||||||||||||||||
Income from operations | 575,297 | 142,702 | 299,812 | 354,056 | 36,921 | 61,299 | (34,747 | ) | 1,570,204 | (1,557,498 | ) | 1,448,046 | |||||||||||||||||||||||||
Interest income (expense) | 37,189 | 30,544 | 3,323 | 18,185 | 4,152 | 8,566 | 11,884 | (8,290 | ) | — | 105,553 | ||||||||||||||||||||||||||
Income tax | 18,050 | 29,031 | 25,492 | 70,588 | (15,362 | ) | (2,282 | ) | (14,735 | ) | 18,843 | — | 129,625 | ||||||||||||||||||||||||
Total assets | 9,238,844 | 5,443,557 | 3,796,211 | 3,459,527 | 1,452,054 | 1,373,326 | 3,567,502 | 26,818,388 | (27,007,715 | ) | 28,141,694 | ||||||||||||||||||||||||||
Total liabilities | 151,217 | 61,526 | 250,760 | 649,708 | 80,039 | 91,963 | 175,114 | 167,810 | (224,089 | ) | 1,404,048 | ||||||||||||||||||||||||||
Capital expenditures in productive assets | 160,491 | 38,512 | 26,723 | 181,211 | 22,271 | 20,942 | 66,330 | 5,494 | — | 521,974 | |||||||||||||||||||||||||||
Investment in productive assets | 7,837,861 | 4,522,001 | 3,374,334 | 2,715,120 | 1,248,481 | 1,099,570 | 3,204,686 | 71,541 | (69 | ) | 24,073,525 | ||||||||||||||||||||||||||
Depreciation and amortization for the year | 243,528 | 137,012 | 110,079 | 87,252 | 41,114 | 37,003 | 122,022 | 20,241 | — | 798,251 | |||||||||||||||||||||||||||
December 31, | Guadalajara | Tijuana | Puerto Vallarta | Los Cabos | Hermosillo | Guanajuato | Other Airports | Other Companies | Eliminations | Total | |||||||||||||||||||||||||||
Total external revenues | Ps. | 1,163,027 | Ps. | 477,779 | Ps. | 528,527 | Ps. | 556,151 | Ps. | 156,333 | Ps. | 192,119 | Ps. | 403,388 | Ps. | — | Ps. | — | Ps. | 3,477,324 | |||||||||||||||||
Total intersegment revenues | — | — | — | — | — | — | — | 1,641,300 | (1,641,300 | ) | — | ||||||||||||||||||||||||||
Income from operations | 624,150 | 172,894 | 282,790 | 336,934 | 45,378 | 84,413 | 38,334 | 1,411,707 | (1,411,195 | ) | 1,585,405 | ||||||||||||||||||||||||||
Interest income (expense) | 41,891 | 74,500 | 10,555 | 20,071 | 3,488 | 7,866 | (4,054 | ) | (1,511 | ) | — | 152,806 | |||||||||||||||||||||||||
Income tax | 194,180 | (201,166 | ) | 85,904 | 97,920 | 12,712 | 25,364 | 60,036 | 2,627 | — | 277,577 | ||||||||||||||||||||||||||
Total assets | 8,826,742 | 5,552,341 | 3,809,317 | 3,188,003 | 1,424,398 | 1,318,432 | 3,488,233 | 26,553,467 | (26,634,656 | ) | 27,526,277 | ||||||||||||||||||||||||||
Total liabilities | 135,693 | 51,628 | 287,839 | 473,698 | 63,489 | 57,312 | 143,654 | 179,431 | (228,032 | ) | 1,164,712 | ||||||||||||||||||||||||||
Capital expenditures in productive assets | 238,682 | 25,401 | 178,223 | 318,842 | 17,330 | 11,637 | 68,728 | 72,774 | — | 931,617 | |||||||||||||||||||||||||||
Investment in productive assets | 7,866,395 | 4,592,237 | 3,444,813 | 2,542,834 | 1,255,484 | 1,092,634 | 3,224,221 | 87,315 | (69 | ) | 24,105,864 | ||||||||||||||||||||||||||
Depreciation and amortization for the year | 240,698 | 136,463 | 101,647 | 67,767 | 40,408 | 37,980 | 123,843 | 5,291 | — | 754,097 | |||||||||||||||||||||||||||
Productive assets are comprised of: Machinery, equipment and improvements to leased buildings, Improvements to Concession assets, Airport concessions, Rights of use of airport facilities, Other acquired rights and Other assets. |
Geographic information—All business units of the Company are operating in Mexico. The financial information presented above shows the different regions where these business units operate.
Principal Customers—The Company has no dependence on a particularly client, as 57.1% and 51.8% of the total revenues for 2012 and 2011, respectively, corresponds to the passenger charges that are paid for by passengers upon use of the Company’s airport facilities, that is collected by the airlines to be subsequently reimbursed to the airports, and are covered by the airlines through guarantees issued in favor of the airports. Without the revenues from passenger charges that airlines collect on behalf of the Company, no one client represents more than 10.0% of the consolidated revenues.
Principal suppliers—The Company has no dependence of particularly supplier, due to, no one supplier represents more than 10.0% of its capital investments in productive assets and/or of the total operating costs.
28. | Foreign currency transactions |
a. | Transactions denominated in foreign currency for the years ended at December 31, 2012 and 2011 were as follows: |
2012 | 2011 | |||||||
(In thousands of U.S. dollars) | ||||||||
Revenues from aeronautical and non-aeronautical services | 26,870 | 22,572 | ||||||
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Revenues for recovery expenses | 175 | 626 | ||||||
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Technical assistance fee | 5,364 | 5,209 | ||||||
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Technical assistance expenses and other expenses | 4,040 | 5,621 | ||||||
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b. | The exchange rates in effect at the dates of the consolidated balance sheets and the date of the related report of the independent auditors were as follows: |
December 31, | January 1, | February 22, | ||||||||||||||
2012 | 2011 | 2011 | 2013 | |||||||||||||
Mexican pesos per one U.S. dollar (Note 3.o) | Ps. | 13.0101 | Ps. | 13.9787 | Ps. | 12.3571 | Ps. | 12.6694 | ||||||||
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c. | At December 31, the foreign currency exchange gains and losses was as follows: |
2012 | 2011 | |||||||
Foreign exchange gains | Ps. | 49,528 | Ps. | 83,984 | ||||
Foreign exchange loss | (64,310 | ) | (61,358 | ) | ||||
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Foreign exchange (loss) gains – net | Ps. | (14,782 | ) | Ps. | 22,626 | |||
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According to the General Law on Airportsdefinitions of control established in IFRS, the Company does not have a company controlling its operations, however, and its regulations, Company revenues are classified as airport, complementary and commercial services. Airport services generally include the use of airport runways, taxiways and parking areas for arriving and departing planes, use of passenger walkways, security services, hangars, and, in general, use of the space inside the terminal and other infrastructure by aircraft, passengers and cargo services. These services include rental of space that is vital foraccording to these definitions, AMP represents an entity with significant influence over the operation of airlinesthe Company, as it has representation on the Board of Directors, participates in the policy-making processes, maintains material transactions, appoints officers and complementary service suppliers. Complementaryprovides essential technical information, but without exercising control over the Company, no other Stockholder fulfills this definition.
Transactions with related parties, carried out in the ordinary course of business, were entered into at prices comparable to those for transactions with independent parties and were as follows:
2012 | 2011 | |||||||
AMP, entity with significant influence | ||||||||
Expenses: | ||||||||
Technical assistance fees | Ps. | 155,072 | Ps. | 136,191 | ||||
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Services received | Ps. | 1,315 | Ps. | 245 | ||||
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In 1999, GAP and AMP entered into a technical assistance and transfer-of-technology agreement whereby AMP and its stockholders agreed to render administrative and advisory services are ramps and handling services, catering, fuel supply, maintenancetransfer industry technology and repairs,know-how to GAP in exchange for consideration. The agreement’s original 15-year term may be automatically renewed for successive five-year terms, with the approval of the stockholders, unless one party gives a termination notice to the other at least 60 days prior to the effective termination date. Only the Stockholders’ Meeting has the authority to decide the non-renewal or deny the renewal of the agreement. If GAP decides to cancel or renew the agreement, GAP needs the approval of at least 51% of the holders of Series B shares other than AMP or any party related to AMP, accordingly to the participation agreement signed on August 25, 1999 among the SCT, GAP, its strategic partner and traffic and dispatch services.the Stockholders of the strategic partner.
Commercial services include services that are not essentialAccording to the agreement, as of January 1, 2000, the Company committed to pay AMP annual consideration of U.S. 7,000,000 for the operationyears 2000 and 2001 and, beginning in 2002, the greater of an airport, suchU.S. 4,000,000 (these amounts are subject to adjustment based on the U.S. National Consumer Price Index (CPI)) or 5% of GAP’s consolidated operating income, defined as car parking areas, leaseearnings before interest income or expense, calculated prior to deducting the technical assistance fee, income taxes, depreciation and amortization.
AMP is also entitled to the refund of spaceexpenses incurred in the rendering of services provided for in the agreement.
The total amounts paid to retailers, restaurants and banks.
A price regulation system establishes a maximum rate for airport services and complementary services for each airport for each year in a five-year period. The maximum rate is the maximum amount of revenues per “workload unit” that may be earned at an airport each year from regulated sources. Under this regulation, a workload unit is equivalent to one passenger (excluding transit passengers) or 100 kilograms (220 pounds) of cargo. As of December 2009, SCT authorized the Company’s maximum rates applicableexecutive officers for the period 2010-2014.
During the periodsyears ended at December 31, 2009,2012 and 2011 were as follows:
2012 | 2011 | |||||||
Benefits paid | Ps. | 22,907 | Ps. | 20,228 | ||||
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30. | Operating lease agreements |
Leasing as the lessee –The rents of operating leases are payable as follows:
2012 | 2011 | |||||||
Less than one year | Ps. | 7,474 | Ps. | 6,028 | ||||
Between one and 5 years | 25,496 | 1,001 | ||||||
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Ps. | 32,970 | Ps. | 7,029 | |||||
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The Company has leased office space under one five-year operating lease agreement, which was renewed in February 2008 and 2007,will conclude in January 2013. The renewal of this contract was executed in February 2013 for an additional five years with monthly rental payments of U.S.$ 33,617. Base rent is subject to increases according to the Company charged up to 99.8%, 99.2%NCPI and 99.7%, respectively,the CPI, starting in the second year of the maximum rate.lease, which begins in February 2013.
Below is a detailLeasing as the lessor –The Company receives payments from leasing of spaces inside the commercial area of the Company’s revenues forairports, which have been classified as operating leases. The future minimum lease payments associated with such leases is as follows:
2012 | 2011 | |||||||
Less than one year | Ps. | 488,298 | Ps. | 422,240 | ||||
Between one and 5 years | 1,084,908 | 555,951 | ||||||
More than 5 years | 263,423 | 161,781 | ||||||
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Ps. | 1,836,629 | Ps. | 1,139,972 | |||||
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During the years ended December 31, 2009, 20082012 and 2007 according to2011, the General Law on Airports and its regulations. For presentation purposes, revenuesCompany recognized income from access fees charged to third party providers of complementary services are classified as airport services.
2009 | 2008 | 2007 | |||||||
Regulated revenues | |||||||||
Airport operating services to airlines: | |||||||||
Landing | Ps. | 138,293 | Ps. | 146,728 | Ps. | 136,272 | |||
Charges for not canceling extended stay reservations | 209 | 808 | 408 | ||||||
Parking on embarking/disembarking platform | 97,971 | 100,263 | 94,193 | ||||||
Parking on extended stay or overnight platform | 24,898 | 26,707 | 20,981 | ||||||
Passenger walkways and shuttle buses | 19,676 | 18,222 | 23,318 | ||||||
Airport security charges | 35,247 | 37,921 | 39,379 | ||||||
Airport real estate services to airlines: | |||||||||
Leasing of hangars to airlines | 9,814 | 15,362 | 14,794 | ||||||
Leasing of shops, warehouses and stockrooms to airlines (operating) | 3,565 | 4,204 | 4,085 | ||||||
Leasing of space and other terminal facilities to airlines within the terminal (operating) | 28,924 | 32,659 | 34,716 | ||||||
Leasing of land and other surfaces to airlines outside the terminal (operating) | 3,927 | 6,709 | 7,517 | ||||||
Leasing of check-in desks and other terminal space | 13,184 | 18,653 | 21,223 | ||||||
Leasing of desks and other terminal space for ticket sale | 7,286 | 7,736 | 7,590 | ||||||
Airport passenger services: | |||||||||
Domestic passenger charges | 1,123,159 | 1,312,724 | 1,370,623 | ||||||
International passenger charges | 966,540 | 965,591 | 968,456 | ||||||
Airport real estate services and rights of access to other operators | 24,011 | 21,429 | 17,757 | ||||||
Complementary services: | |||||||||
Catering services | 5,260 | 6,473 | 9,241 | ||||||
Other third-party ramp services rendered to airlines | 10,600 | 14,548 | 18,724 | ||||||
Traffic and/or dispatch | 19,305 | 19,340 | 18,882 | ||||||
Fuel supply or removal | 2,765 | 2,443 | 2,352 | ||||||
Third-party airplane maintenance and repair | 2,628 | 3,678 | 2,358 | ||||||
Total regulated revenues included in the maximum rate | 2,537,262 | 2,762,198 | 2,812,869 | ||||||
Regulated revenues not included in the maximum rate: | |||||||||
Car parking charges | 142,816 | 161,513 | 134,880 | ||||||
Recovery of cost over aeronautical services | 10,394 | 11,577 | 11,938 | ||||||
Recovery of cost over non-aeronautical services | 11,165 | 14,124 | 11,300 | ||||||
Total regulated revenues not included in the maximum rate | 164,375 | 187,214 | 158,118 | ||||||
Total regulated revenues | 2,701,637 | 2,949,412 | 2,970,987 | ||||||
2009 | 2008 | 2007 | |||||||
Unregulated revenues | |||||||||
Commercial concessions(1): | |||||||||
Retail operations | 60,646 | 64,450 | 58,301 | ||||||
Food and beverages | 61,961 | 55,230 | 45,899 | ||||||
Duty free | 43,406 | 44,694 | 36,700 | ||||||
VIP lounges | 7,834 | 6,209 | 6,409 | ||||||
Financial services | 10,805 | 8,514 | 6,348 | ||||||
Communications and networks | 9,675 | 10,037 | 10,293 | ||||||
Car rentals | 69,130 | 58,497 | 52,033 | ||||||
Advertising | 5,268 | 12 | — | ||||||
Commercial leasing | 32,794 | 40,119 | 34,483 | ||||||
Time sharing | 87,952 | 73,282 | 71,594 | ||||||
Leasing of space to airlines and other complementary service providers (non-operating) | 82,555 | 67,348 | 63,153 | ||||||
Revenues from sharing of commercial activities(1): | |||||||||
Retail operations | 9,406 | 8,793 | 10,695 | ||||||
Food and beverages | 11,001 | 18,121 | 20,912 | ||||||
Duty free | 18,727 | 16,123 | 18,495 | ||||||
Financial services | 1,279 | 469 | 333 | ||||||
Communications and networks | — | 5 | — | ||||||
Car rentals | 2,510 | 6,302 | 8,182 | ||||||
Advertising | 4,518 | 6,280 | 2,686 | ||||||
Time sharing | 349 | 327 | 296 | ||||||
Access fee for ground transportation | 11,801 | 12,148 | 12,221 | ||||||
Non-airport access fees | 24,884 | 36,844 | 38,049 | ||||||
Services rendered to ASA | 184 | 159 | 67 | ||||||
Various commercial-related revenues | 6,817 | 7,256 | 7,772 | ||||||
Others | 1,101 | 154 | 1,416 | ||||||
Total unregulated revenues | 564,603 | 541,373 | 506,337 | ||||||
Total revenues | Ps. | 3,266,240 | Ps. | 3,490,785 | Ps. | 3,477,324 | |||
(1) Unregulated revenues are earned based on the terms of the Company’s operating lease agreements. Lease agreements are based on either a monthly rent (which generally increases each year based on the NCPI) or the greater of a monthly minimum guaranteed rent or a percentage of the lessee’s monthly revenues. Monthly rent and minimum guaranteed rent earned on the Company’s operating lease agreements are included under the caption “Commercial concessions” above. Revenues earned in excess of the minimum guaranteed rent are included in the “Revenues from sharing of commercial activities” caption above.
Future minimum rentals as of December 31, 2009, are as follows: |
Year | Amount | ||
2010 | Ps. | 454,920 | |
2011 | 326,462 | ||
2012 | 191,958 | ||
2013 | 119,471 | ||
2014 | 85,131 | ||
Thereafter | 144,920 | ||
Total | Ps. | 1,322,862 | |
Amounts include contracts denominated in both Mexican pesos and U.S. dollars. The U.S. dollar denominated future minimum rentals were translated to Mexican pesos using the exchange rate applicable on December 31, 2009, which was a rateleasing activities of Ps. 13.0576 Mexican pesos per U.S.$1.00.641,971 and Ps. 522,051, in the consolidated statements of comprehensive income, respectively.
Future minimum rentals do not include the contingent rentals that may be paid under certain commercial leases on the basis of a percentage of the lessee’s monthly revenues in excess of the monthly minimum guaranteed rent. Contingent rentals for the years ended December 31, 2009, 20082012 and 20072011 are disclosed under the caption “Revenues from sharing of commercial activities”.
CostAs disclosed in Note 2.a, these are the first consolidated financial statements prepared in accordance with IFRS.
The accounting policies disclosed in Note 3 have been applied in the elaboration of servicesthe consolidated financial statements to the and by the year finished December 31, 2012, as well as in the comparative information presented in these consolidated financial statements for the yearsyear ended December 31, was composed2011 and in the preparation of the following:opening balance under IFRS of the consolidated financial statements as of January 1, 2011 (transition date of the Company).
In the preparation of the opening balance under IFRS of the consolidated financial statements, the Company has adjusted the figures reported previously in the financial statements prepared in accordance with MFRS. Subsequently the explanation is included of how the transition of the MFRS to the IFRS impacted the Company’s stockholders’ equity, comprehensive income and cash flows.
Reconciliation of consolidated statements of financial position:
Transition effects to IFRS | Transition effects to IFRS | |||||||||||||||||||||||||
Notes | MFRS | January 1, 2011 | IFRS | MFRS | December 31, 2011 | IFRS | ||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||
Cash and cash equivalents | a | Ps. | 2,348,807 | Ps. | — | Ps. | 2,348,807 | Ps. | 2,115,508 | Ps. | 19,502 | Ps. | 2,135,010 | |||||||||||||
Financial investments held for trading purposes | 233,915 | — | 233,915 | 278,349 | — | 278,349 | ||||||||||||||||||||
Trade accounts receivable – net | 296,146 | — | 296,146 | 294,503 | — | 294,503 | ||||||||||||||||||||
Recoverable taxes | 142,226 | — | 142,226 | 174,961 | — | 174,961 | ||||||||||||||||||||
Embedded derivatives | b | 266 | (266 | ) | — | 469 | (469 | ) | — | |||||||||||||||||
Other current assets | 1,739 | — | 1,739 | 2,249 | — | 2,249 | ||||||||||||||||||||
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|
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|
|
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|
| |||||||||||||||
Total current assets | 3,023,099 | (266 | ) | 3,022,833 | 2,866,039 | 19,033 | 2,885,072 | |||||||||||||||||||
Long-term cash and cash equivalents | — | — | — | 19,502 | (19,502 | ) | — | |||||||||||||||||||
Advance payments to suppliers | 113,099 | — | 113,099 | 114,712 | — | 114,712 | ||||||||||||||||||||
Machinery, equipment and improvements on leased buildings – net | 447,166 | — | 447,166 | 836,339 | — | 836,339 | ||||||||||||||||||||
Improvements to concession assets – net | c | 4,034,940 | (188,479 | ) | 3,846,461 | 4,633,604 | (195,952 | ) | 4,437,652 | |||||||||||||||||
Airport concessions – net | c | 16,325,463 | (5,577,886 | ) | 10,747,577 | 15,893,953 | (5,430,454 | ) | 10,463,499 | |||||||||||||||||
Rights to use airport facilities – net | c | 2,102,111 | (718,224 | ) | 1,383,887 | 2,015,986 | (688,797 | ) | 1,327,189 | |||||||||||||||||
Other acquired rights – net | c | 799,180 | (167,299 | ) | 631,881 | 778,100 | (162,919 | ) | 615,181 | |||||||||||||||||
Recoverable income taxes | 23,022 | — | 23,022 | — | — | — | ||||||||||||||||||||
Recoverable tax on assets | d | 396,318 | (396,318 | ) | — | 344,969 | (344,969 | ) | — | |||||||||||||||||
Embedded derivatives | b | 11,292 | (11,292 | ) | — | 5,621 | (5,621 | ) | — | |||||||||||||||||
Derivative financial instruments | 7,138 | — | 7,138 | 4,468 | — | 4,468 | ||||||||||||||||||||
Deferred income taxes – net | d | 1,536,986 | 2,271,473 | 3,808,459 | 1,807,873 | 2,166,645 | 3,974,518 | |||||||||||||||||||
Deferred statutory employee profit sharing | e | 7,475 | (7,475 | ) | — | 8,529 | (8,529 | ) | — | |||||||||||||||||
Other assets | c | 61,993 | (1,786 | ) | 60,207 | 62,150 | (1,105 | ) | 61,045 | |||||||||||||||||
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|
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|
| |||||||||||||||
Total | Ps. | 28,889,282 | Ps. | (4,797,552 | ) | Ps. | 24,091,730 | Ps. | 29,391,845 | Ps. | (4,672,170 | ) | Ps. | 24,719,675 | ||||||||||||
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(Continued)
January 1, 2011 Liabilities and Stockholders’ Equity Current liabilities Current portion of long-term bank loans Concession taxes payable Aeropuertos Mexicanos del Pacífico, S.A.P.I. de C.V. Accounts payable Taxes payable, other than income taxes and concession taxes Income taxes payable Total current liabilities Deposits received Liabilities for postemployment benefits Long-term bank loans Total liabilities Stockholders’ equity: Common stock Legal reserve Fund for repurchase of shares Repurchased shares Retained earnings Total stockholders’ equity Total Transition
effects to IFRS Transition
effects to IFRS Notes MFRS IFRS MFRS December 31,
2011 IFRS Ps. 266,492 Ps. — Ps. 266,492 Ps. 411,439 Ps. — Ps. 411,439 26,791 — 26,791 33,493 — 33,493 64,784 — 64,784 71,450 — 71,450 403,724 — 403,724 472,645 — 472,645 18,429 — 18,429 18,816 — 18,816 123,721 — 123,721 54,184 �� 54,184 903,941 — 903,941 1,062,027 — 1,062,027 226,412 — 226,412 316,389 — 316,389 f 45,216 (8,860 ) 36,356 58,514 (10,617 ) 47,897 1,042,808 — 1,042,808 1,612,179 — 1,612,179 2,218,377 (8,860 ) 2,209,517 3,049,109 (10,617 ) 3,038,492 g 24,344,476 (8,324,653 ) 16,019,823 24,344,476 (8,324,653 ) 16,019,823 g 432,341 (28,094 ) 404,247 507,349 (28,094 ) 479,255 1,000,000 — 1,000,000 1,387,302 — 1,387,302 (609,809 ) — (609,809 ) (1,387,302 ) — (1,387,302 ) h 1,503,897 3,564,055 5,067,952 1,490,911 3,691,194 5,182,105 26,670,905 (4,788,692 ) 21,882,213 26,342,736 (4,661,553 ) 21,681,183 Ps. 28,889,282 Ps. (4,797,552 ) Ps. 24,091,730 Ps. 29,391,845 Ps. (4,672,170 ) Ps. 24,719,675
(Concluded)
Reconciliation of consolidated statement of comprehensive income:
MFRS | Transition effects to IFRS as for the year ended December 31, 2011 | IFRS | ||||||||||||
Revenues: | ||||||||||||||
Aeronautical services | Ps. | 3,077,927 | Ps. | — | Ps. | 3,077,927 | ||||||||
Non-aeronautical services | 824,580 | — | 824,580 | |||||||||||
Improvements to concession assets | 1,036,227 | — | 1,036,227 | |||||||||||
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| |||||||||
4,938,734 | — | 4,938,734 | ||||||||||||
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Operating costs: | ||||||||||||||
Cost of services | e, f | 984,878 | 2,060 | 986,938 | ||||||||||
Technical assistance fees | 136,191 | — | 136,191 | |||||||||||
Concession taxes | 193,802 | — | 193,802 | |||||||||||
Depreciation and amortization | c | 944,094 | (201,125 | ) | 742,969 | |||||||||
Cost of improvements to concession assets | 1,036,227 | — | 1,036,227 | |||||||||||
Other expenses – net | c | 9,346 | (2,759 | ) | 6,587 | |||||||||
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3,304,538 | (201,824 | ) | 3,102,714 | |||||||||||
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Income from operations | 1,634,196 | 201,824 | 1,836,020 | |||||||||||
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Finance income (cost): | ||||||||||||||
Interest income | c, d | 140,259 | (31,814 | ) | 108,445 | |||||||||
Interest expense | (93,753 | ) | — | (93,753 | ) | |||||||||
Exchange gain – net | 22,626 | — | 22,626 | |||||||||||
Loss from embedded derivatives | b | (5,468 | ) | 5,468 | — | |||||||||
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| |||||||||
63,664 | (26,346 | ) | 37,318 | |||||||||||
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Income before income taxes | 1,697,860 | 175,479 | 1,873,338 | |||||||||||
Income tax expense : | ||||||||||||||
Current | 480,523 | — | 480,523 | |||||||||||
Deferred | d | (267,104 | ) | 48,339 | (218,765 | ) | ||||||||
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213,419 | 48,339 | 261,758 | ||||||||||||
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| |||||||||
Consolidated net income | Ps. | 1,484,441 | Ps. | 127,140 | Ps. | 1,611,580 | ||||||||
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Reconciliation of consolidated statements of changes in stockholders’ equity:
Notes | Common Stock | Legal Reserve | Fund for repurchase of Shares | Repurchased hares | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||||||
January 1, 2011 MFRS | Ps. | 24,344,476 | Ps. | 432,341 | Ps. | 1,000,000 | Ps. | (609,809 | ) | Ps. | 1,503,897 | Ps. | 26,670,905 | |||||||||||||
Transition adjustments to IFRS | g, h | (8,324,653 | ) | (28,094 | ) | — | — | 3,564,055 | (4,788,692 | ) | ||||||||||||||||
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January 1, 2011 IFRS | Ps. | 16,019,823 | Ps. | 404,247 | Ps. | 1,000,000 | Ps. | (609,809 | ) | Ps. | 5,067,952 | Ps. | 21,882,213 | |||||||||||||
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December 31, 2011 MFRS | Ps. | 24,344,476 | Ps. | 507,349 | Ps. | 1,387,302 | Ps. | (1,387,302 | ) | Ps. | 1,490,911 | Ps. | 26,342,736 | |||||||||||||
Transition adjustments to IFRS | g, h | (8,324,653 | ) | (28,094 | ) | — | — | 3,691,194 | (4,661,553 | ) | ||||||||||||||||
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December 31, 2011 IFRS | Ps. | 16,019,823 | Ps. | 479,255 | Ps. | 1,387,302 | Ps. | (1,387,302 | ) | Ps. | 5,182,105 | Ps. | 21,681,183 | |||||||||||||
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Adjustments recognized in the consolidated statements of cash flows
For purposes of IFRS, for the period ended December 31, 2011, the Company reconciles its consolidated statements of cash flows from consolidated net income, whereas for purposes of MFRS they were reconciled from income before income taxes.
For purposes of presenting cash flows under IFRS, capitalized interest income on qualifying assets was reclassified from operating activities to investing activities for Ps. 26,679, decreasing cash flows from investing activities. There are no other material differences between the consolidated statement of cash flows presented under IFRS and the consolidated statement of cash flows presented under MFRS other than as it relates to the IFRS adjustments disclosed below.
Reconciliation notes
As previously disclosed, the Company’s transition date to IFRS was January 1, 2011 and therefore for the year ended December 31, 2011 is the comparative period and the reconciliations between MFRS and IFRS have been prepared in accordance with IFRS 1First-time Adoption of International Financial Reporting Standards. According to IFRS 1, the Company applied the mandatory exceptions and certain optional exemptions to the retrospective applications IFRS.
i. | Mandatory exceptions– The Company applied the relevant mandatory exceptions to the retroactive applications of IFRS as follows: |
2009 | 2008 | 2007 | |||||||
Employee costs | Ps. | 335,628 | Ps. | 363,417 | Ps. | 351,699 | |||
Maintenance | 179,406 | 165,604 | 142,361 | ||||||
Safety, security and insurance | 110,666 | 110,950 | 106,251 | ||||||
Utilities | 91,267 | 113,078 | 90,307 | ||||||
Other | 152,348 | 199,680 | 148,501 | ||||||
Ps. | 869,315 | Ps. | 952,729 | Ps. | 839,119 | ||||
Calculations of estimates – Estimates prepared under IFRS are consistent with the estimates recognized under MFRS as of the same date, unless the Company is required to adjust such estimates to conform with IFRS.
Moreover, the Company estimated that the following mandatory exceptions had no effect on its consolidated financial statements at the date of transition to IFRS:
Derecognition and transfer of financial assets and liabilities
Hedge accounting
Non-controlling interests
ii. |
Depreciation and amortization for
Deemed Cost – The deemed cost exemption was applied; therefore, the years endedCompany has opted to use the MFRS revaluation at December 31, were composed2007 of its machinery, equipment and improvements on leased buildings as its deemed cost at the transition date to IFRS, which represents the cost or depreciated cost in accordance with IFRSs, adjusted to reflect changes in the NCPI or CPI as applicable. The Company recognized improvements to concession assets, airport concessions, rights to use airport facilities, other acquired rights and other assets at their historical cost. These intangible assets are directly related with the concession, which is also presented as an intangible asset. Additionally, the Company has opted to recognized the fair value recognized for purposes of MFRS at the date of the following:airports privatization process as its deemed cost (its event driven fair value) and therefore eliminated the inflation effects recognized through December 31, 2007 as the cumulative inflation recognized under MFRS occurred during periods that were not considered to be hyperinflationary in IFRS.
2009 | 2008 | 2007 | |||||||
Depreciation | Ps. | 82,455 | Ps. | 87,180 | Ps. | 81,299 | |||
Amortization | 746,380 | 711,071 | 672,798 | ||||||
Ps. | 828,835 | Ps. | 798,251 | Ps. | 754,097 | ||||
Postemployment benefits – The Company applied the exemption in IFRS 1, recognizing all the accrued actuarial gains and losses against retained earnings at their transition date.
• |
|
iii. | Adjustments between MFRS and IFRS–Below is the summary of the adjustments that the Company has identified in its transition from MFRS to IFRS as of January 1, 2011, and for the year ending December 31, 2011 as well as an estimate of their most significant effects with their corresponding deferred income tax impact: |
a. | Reclassification of cash and cash equivalents – The Company presented its cash and cash equivalents associated with its trusts for investment and administration (see Note 5) for purposes of MFRS based on the period such assets were expected to be paid to the contractor (current and non-current). For purposes of IFRS, such amounts are presented as current given that they are readily available for use. |
b. | Embedded derivatives in lease agreements– Under MFRS, the Company recognized embedded derivatives associated with lease agreements of commercial spaces located at the airport terminals. Such agreements are denominated in U.S. dollars, differing from the Company’s functional currency, which is the Mexican peso. According to IFRS, as the U.S. dollar is commonly used in the region where the Company operates for this type of lease agreement, it derecognized the embedded derivatives that had been recognized under MFRS as permitted by IAS 39, Financial Instruments: Recognition and Measurement. |
The effects of these changes were as follows:
December 31, 2011 | ||||
Effect on statement of comprehensive income: | ||||
Loss on embedded derivatives in lease agreements | Ps. | 5,468 | ||
Retained earnings adjustment | Ps. | 5,468 | ||
January 1, 2011 | December 31, 2011 | |||||||
Effect in statements of financial position: | ||||||||
Current embedded derivatives in lease agreements | Ps. | (266 | ) | Ps. | (469 | ) | ||
Long-term embedded derivatives in lease agreements | (11,292 | ) | (5,621 | ) | ||||
Deferred income tax | 3,468 | 1,827 | ||||||
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Retained earnings adjustment | Ps. | (8,090 | ) | Ps. | (4,263 | ) | ||
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c. | Intangible Assets– At the transition to IFRS the Company eliminated the effects of inflation recognized in accordance with MFRS through December 31, 2007, as the cumulative inflation recognized under MFRS occurred during periods that were not considered to be hyperinflationary in IFRS. Amortization for the year ended December 31, 2011 was adjusted according to the intangible asset value determined under IFRS, which excludes the cumulative inflation previously recognized under MFRS. In addition, in determining the amount of borrowing costs eligible for capitalization during a period for purposes of IFRS, any investment income earned on such funds is deducted from the borrowing costs incurred, whereas for purposes of MFRS such amounts were recognized as income. The effects of these adjustments were as follows: |
December 31, 2011 | ||||||||||||||||||||
Improvements to concession assets | Airport concessions | Rights to use airport facilities | Other acquired rights | Other non-current assets | ||||||||||||||||
Effect on statement of comprehensive income: | ||||||||||||||||||||
Depreciation and amortization | Ps. | (19,206 | ) | Ps. | (147,432 | ) | Ps. | (29,427 | ) | Ps. | (4,380 | ) | Ps. | (680 | ) | |||||
Interest income | 26,679 | — | — | — | — | |||||||||||||||
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Retained earnings adjustment | Ps. | 7,473 | Ps. | (147,432 | ) | Ps. | (29,427 | ) | Ps. | (4,380 | ) | Ps. | (680 | ) | ||||||
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Effect on statement of financial position Elimination of inflation Elimination of interest on borrowing cost Elimination of inflation of amortization Net elimination Deferred income taxes Retained earnings adjustment Effect on statement of financial position Elimination of inflation Elimination of inflation of amortization Net effect Deferred income taxes Retained earnings adjustment December 31, 2011 Improvements to
concession assets Airport
concessions Rights to use
airport facilities Other acquired
rights Other non-current
assets Ps. (302,235 ) Ps. (7,172,783 ) Ps. (1,099,070 ) Ps. (207,133 ) Ps. (9,038 ) (23,073 ) — — — — 129,356 1,742,329 410,273 44,214 7,933 (195,952 ) (5,430,454 ) (688,797 ) (162,919 ) (1,105 ) 55,778 1,524,950 193,424 45,754 310 Ps. (140,174 ) Ps. (3,905,504 ) �� Ps. (495,373 ) Ps. (117,165 ) Ps. (795 ) January 1, 2011 Improvements to
concession assets Airport
concessions Rights to use
airport facilities Other acquired
rights Other non-current
assets Ps. (302,235 ) Ps. (7,172,783 ) Ps. (1,099,070 ) Ps. (207,133 ) Ps. (9,038 ) 113,756 1,594,897 380,846 39,834 7,252 (188,479 ) (5,577,886 ) (718,224 ) (167,299 ) (1,786 ) 53,069 1,569,180 202,052 47,126 503 Ps. (135,410 ) Ps. (4,008,706 ) Ps. (516,172 ) Ps. (120,173 ) Ps. (1,283 )
d. | Deferred taxes– As a result of changes in accounting values related from the adoption of IFRS, the Company recognized the effects of deferred income taxes based on the tax rate applicable according to their estimated date of reversal. Additionally, under MFRS the recoverable tax on assets was presented as a separate line-item. However, for IFRS purposes, the amount of the recoverable tax on assets is presented within deferred income taxes. |
The changes described in the previous paragraph increased the deferred tax assets as shown below, based on the tax rate applicable according to their estimated date of reversal.
December 31, 2011 | ||||
Effect on statement of comprehensive income: | ||||
Deferred income taxes | Ps. | 53,475 | ||
Reclassification of inflationary effects on recoverable tax on assets: | ||||
Interest income | 5,136 | |||
Deferred income taxes | (5,136 | ) |
January 1, 2011 | December, 31 2011 | |||||||
Effect on statement of financial position: | ||||||||
Recoverable tax on assets | Ps. | (396,318 | ) | Ps. | (344,969 | ) | ||
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Deferred income taxes | Ps. | 1,875,155 | Ps. | 1,821,676 | ||||
Recoverable tax on assets | 396,318 | 344,969 | ||||||
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Net deferred income tax adjustment | Ps. | 2,271,473 | Ps. | 2,166,645 | ||||
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e. | Current and deferred PTU– According to MFRS, current PTU is presented within other expenses. Under IFRS, current PTU is considered to be an employee benefit and is presented in cost of services as part of employee costs in the consolidated statement of comprehensive income. MFRS requires that deferred PTU be determined by applying a similar model to deferred income taxes and is calculated by comparing the book value of assets and liabilities to their tax value as of the date of the financial statements. As deferred PTU is not permitted by IFRS, the amount recognized under MFRS was derecognized in the transition to the IFRS. |
The effect of this change is:
December 31, 2011 | ||||
Effect on statement of comprehensive income: | ||||
Deferred PTU | Ps. | 1,054 | ||
Reclassification of PTU: | ||||
Cost of services | 3,813 | |||
Other expenses—net | (3,813 | ) |
January 1, 2011 | December, 31 2011 | |||||||
Effect on statement of financial position: | ||||||||
Deferred PTU | Ps. | (7,475 | ) | Ps. | (8,529 | ) | ||
Effect on deferred income taxes | 1,308 | 1,493 | ||||||
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Retained earnings adjustment | Ps. | (6,167 | ) | Ps. | (7,036 | ) | ||
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f. | Employee benefits– In accordance with MFRS, the Company recognized seniority premium benefits, termination benefits and retirement benefits from severance payments at the end of the work relationship, pursuant to Financial Reporting Standard D3Employee Benefits. However, under IFRS, the liability for termination benefits from severance payments at the end of the work relationship was derecognized as it does not meet the requirements of IAS 19 (revised 2011),Employee Benefits, which requires the existence of a demonstrable obligation (whether contractual or constructive) to terminate the work relationship with the employee in order for a liability to be recognized. Additionally, the Company utilized the optional exemption of IFRS 1, which consists of recognizing all unrecognized items in retained earnings as of the transition date. |
The effect of this change is:
December, 31 2011 | ||||
Effect on statement of comprehensive income: | ||||
Termination benefits from severance payments at the end of the work relationship | Ps. | (1,757 | ) | |
January 1, 2011 | December, 31 2011 | |||||||
Effect on statement of financial position: | ||||||||
Termination benefits from severance payments at the end of the work relationship | Ps. | 8,528 | Ps. | 10,617 | ||||
Actuarial losses | 332 | — | ||||||
Deferred income taxes | (1,551 | ) | (1,860 | ) | ||||
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Retained earnings adjustment | Ps. | 7,309 | Ps. | 8,757 | ||||
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g. | Effects of inflation in the financial information– In accordance with MFRS, the Company’s common stock and legal reserve include the effects of inflation through December 31, 2007. However, for IFRS, these effects were eliminated as the cumulative inflation recognized under MFRS occurred during periods that were not considered to be hyperinflationary in IFRS. IFRS requires, among other factors, that in order to recognize inflation in the financial information, cumulative inflation in a three year period needs to approach or exceed 100%, which represents a reclassification among equity accounts. Since 1998, the year in which the Company was incorporated, and through December 31, 2012, the cumulative inflation over a three-year period has not reached or exceeded 100% |
The effect of this change is as follows
January 1, 2011 | December, 31 2011 | |||||||
Effect on statement of financial position: | ||||||||
Common stock | Ps. | 8,324,653 | Ps. | 8,324,653 | ||||
Legal reserve | 28,094 | 28,094 | ||||||
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Retained earnings adjustment | Ps. | 8,352,747 | Ps. | 8,352,747 | ||||
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h. | Retained earnings– The changes described previously increased retained earnings as of the Company’s transition date as shown below: |
January 1, 2011 | December, 31 2011 | |||||||
Embedded derivatives in the lease agreements | Ps. | (8,090 | ) | Ps. | (4,263 | ) | ||
Improvements to concession assets | (135,410 | ) | (140,174 | ) | ||||
Airport concessions | (4,008,706 | ) | (3,905,504 | ) | ||||
Rights to use airport facilities | (516,172 | ) | (495,373 | ) | ||||
Other acquired rights | (120,173 | ) | (117,165 | ) | ||||
Other assets, net | (1,283 | ) | (795 | ) | ||||
Deferred PTU | (6,167 | ) | (7,036 | ) | ||||
Liabilities for retirement benefits | 7,309 | 8,757 | ||||||
Effects of inflation on common stock and legal reserves | 8,352,747 | 8,352,747 | ||||||
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Retained earnings adjustment | Ps. | 3,564,055 | Ps. | 3,691,194 | ||||
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32. | New accounting principles not yet in effect |
As partThe following IFRS new and/or revised have been issued but are not yet effective, spite of its efforts to converge Mexican standards with international standards, in 2009, the Mexican Board for Research and Development of Financial Information Standards (“CINIF”) issued the following NIFs and INIFs, which mayit can be applicable toearly adopted, the Company and become effectivehas not adopted any of these standards as follows:of the issuance date of these consolidated financial statements.
Effective as of | |||
| January, 1, 2013 | ||
Amendments to IFRS 7Disclosures — Offsetting Financial Assets and Financial Liabilities | January, 1, 2013 | ||
Amendments to IFRSAnnual improvements to IFRS 2009-2011, except for the amendments to IAS 1 | January, 1, 2013 | ||
Amendments to IAS 1Presentation of Concepts From Other Comprehensive Income | January, 1, 2013 | ||
Amendments to IAS 32 Disclosures –Offsetting Financial Assets and Financial Liabilities | January, 1, 2014 | ||
IFRS 9Financial Instruments | January, 1, 2015 | ||
Amendments to IFRS 9 and IFRS 7Mandatory effective date of IFRS 9 and Transition Disclosures | January, 1, 2015 |
ImprovementsIFRS 13Fair Value Measurement– Establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to NIFsboth financial instrument items and non-financial instrument items for 2010:which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope.
NIF B-1,Amendments to the IFRS 7Accounting ChangesDisclosures — Offsetting Financial Assets and CorrectionFinancial Liabilities – The amendment requires disclosure of Errorsinformation about recognized financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS 32. These amendments are effective for annual periods beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures must be shown retrospectively for all comparative periods.
NIF B-2,Amendments to IFRSStatement of Cash FlowsAnnual improvements to IFRS 2009-2011, except for the amendments to IAS 1
NIF B-7,Business Acquisitions –
NIF C-7,Investments in Associated Companies and Other Permanent Investments
NIF C-13,Related PartiesThe amendment makes amendments to several standards. Amendments are effective for annual periods beginning on or after January 1, 2013. The amendments include:
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SomeAmendments to IAS 1 Presentation of Concepts from Other Comprehensive Income – The amendment retains the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.
The amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.
Amendments to IAS 32 Disclosures – Offsetting Financial Assets and Financial Liabilities – The amendments clarify certain aspects because of diversity in application of the most important changes established by these standards are:requirements on offsetting, focused on the following main areas: i) the meaning of currently has a legally enforceable right of set-off, ii) the application of simultaneous realization and settlement, iii) the offsetting of collateral amounts, and iv) the unit of account for applying the offsetting requirements.
NIF C-1,IFRS 9CashFinancial Instruments – Issued in November 2009 introduces new requirements for the classification and Cash Equivalents, changesmeasurement of financial assets. IFRS 9 amended in October 2010 includes the “cash” conceptrequirements for the classification and measurement of financial liabilities and for derecognition.
Key requirements of IFRS 9 are described as follows:
IFRS 9 requires all recognized financial assets that are within the scope of IAS 39, Financial Instruments: Recognition and Measurement to be consistent withsubsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the definitioncontractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.
The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in NIF B-2,Statementthe fair value of Cash Flows, and introduces definitionsa financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for restricted cash, cash equivalents and readily available investments.
Improvementsfinancial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to NIFs for 2010—The main improvements generating accounting changes in the credit risk of that must be recognized retroactively are:
NIF B-1,Accounting Changes and Correction of Errors—Requires further disclosures when an entity applies a particular Standard forliability is presented in other comprehensive income, unless the first time.
NIF B-2,Statement of Cash Flows—Requires recognition of the effects of fluctuationschanges in exchange rates used for translating cashthe liability’s credit risk in foreign currencies, and changesother comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of cash inattributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the form of precious metal coins, and other cash items, at fair value, in a specific line item.
NIF B-7,Business Acquisitions—Permits recognition of intangible assets or provisions in a business acquisition for a contract whose terms and conditions are favorable or unfavorable with respect to market, only when the acquired business is the lessee in an operating lease. This accounting change should be recognized retroactively for acquisitions made on or after January 1, 2009.
NIF C-7,Investments in Associated Companies and Other Permanent Investments—Modifies how the effects derived from increases in equity percentages in an associated company are determined. It also establishes that the effects due to an increase or decrease in equity percentages in associated companies should be recognized under equity in income (loss) of associated companies, rather than in the non-ordinary line item within the statement of income.
NIF C-13,Related Parties—Requires that, if the direct or ultimate controlling entityentire amount of the reporting entity does not issue financial statements available for public use, the reporting entity should disclose the name of the closest, direct / indirect, controlling entity that issues financial statements available for public use.
INIF 14,Construction Contracts, Sale of Real Property and Rendering of Related Services—is a supplement to Bulletin D-7,Construction and Manufacturing Contracts for Certain Capital Assets, and requires segregation of the different components of the contractschange in order to define whether the contract refers to construction of real property, sale of real property, or rendering related services, and establishes the rules for recognizing revenue and related costs and expenses, based on the different elements identified in the contract. INIF 14 provides guidance for the appropriate use of the percentage-of-completion method for revenue recognition.
INIF 17,Service Concession Contracts—is a supplement to Bulletin D-7,Construction and Manufacturing Contracts for Certain Capital Assets, and establishes that, when the infrastructure of the service concession contracts falls within the scope of this INIF, it should not be recognized under property, plant and equipment. It also establishes that when the operator renders construction or improvement services, as well as operating services under the same contract, revenues should be recognized for each type of service, based on the fair value of the consideration receivedfinancial liability designated as at fair value through profit or loss was presented in profit or loss.
Amendments to IFRS 9 and IFRS 7Mandatory effective date of IFRS 9 and Transition Disclosures – On December 16, 2011, the timeIASB issuedMandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 and IFRS 7), which amended the service is rendered. When amounts are clearly identifiedeffective date of IFRS 9 to annual periods beginning on or after 1 January 2015, and after they are quantified,modified the applicable revenue recognition criterion should be followed, taking the nature of the service rendered into consideration. INIF 17 also establishes that, when the operator renders construction or improvement services, both revenuesrelief from restating comparative periods and the associated costs and expenses should be recognized under the percentage-of-completion method and consideration received, or receivable, should be recognized, initially, at fair value. Revenues from operating services should be recognized as the services are rendered, considering supplemental application of International Accounting Standard 18,Revenue.disclosures in IFRS 7.
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Some of the most important changes established by these standards are:
NIF B-5,Financial Segment Information—Uses a managerial approach to disclose financial information by segments, as opposed to Bulletin B-5, which also used a managerial approach but required that the financial information be classified by economic segments, geographical areas, or client groups. NIF B-5 does not require different risks among business areas in order to separate them. It allows areas in the preoperating stage to be classified as a segment, and requires separate disclosure of interest income, interest expense and liabilities, as well as disclosure of the entity’s information as a whole with respect to products, services, geographical areas and major customers. Like the previous Bulletin, this Standard is mandatory only for public companies or companies in the process of becoming public.
NIF B-9,Interim Financial Information—As opposed to Bulletin B-9, this Standard requires presentation of the statement of changes in stockholders’ equity and statement of cash flows, as part of the interim financial information. For comparison purposes, it requires that the information presented at the closing of an interim period contain the information of the equivalent interim period of the previous year, and in the case of the balance sheet, presentation of the previous years’ annual balance sheet.
At the date of issuance of these consolidated financial statements, the Company has not fully assessed the effects of adopting these new standards and amendments on its consolidated financial information.
International Financial Reporting Standards
On January 2009, the Mexican Securities and Banking National Commission (the “CNBV”) issued an amendment to the Omnibus Issuers’ circular to incorporate a mandatory ruling that establishes that all financial statements of entities issued with the CNBV must comply with International Financial Reporting Standards beginning 2012. Earlier application is allowed.
The Company’s consolidated financial statements are prepared in accordance with MFRS, which differ in certain significant respects from U.S. GAAP.
The principal differences between MFRS and U.S. GAAP and the effects on the consolidated net income and consolidated stockholders’ equity of the Company are presented below with an explanation of the adjustments.
For the years ended December 31, | ||||||||||||
Reconciliation of net income | 2009 | 2008 | 2007 | |||||||||
Net income according to MFRS | Ps. | 1,199,444 | Ps. | 1,540,842 | Ps. | 1,402,819 | ||||||
U.S. GAAP adjustments | ||||||||||||
(i) Amortization of the cost of airport concessions | 431,510 | 431,510 | 431,510 | |||||||||
(ii) Amortization of assets under concession (“Rights to use airport facilities” under MFRS) | (27,779 | ) | (27,779 | ) | (27,779 | ) | ||||||
(iii) Deferred fees for technical assistance services | (39,618 | ) | 60,938 | (25,762 | ) | |||||||
(iv) Recognition of the fair value of embedded derivative instruments | (9,191 | ) | 72,319 | 3,374 | ||||||||
(v) Start-up costs | 4,010 | 4,010 | 2,673 | |||||||||
(vi) Legal gain contingency | — | 12,358 | — | |||||||||
(vii) Recoverable income taxes | — | — | 83,411 | |||||||||
(x) Cancellation of deferred statutory employee profit sharing | (1,160 | ) | (3,597 | ) | — | |||||||
(xi) Employee labor obligations | 2,012 | 6,991 | 1,738 | |||||||||
Total U.S. GAAP adjustments before the effect of deferred income taxes | 359,784 | 556,750 | 469,165 | |||||||||
(viii) Deferred income taxes | (82,808 | ) | (136,412 | ) | (115,224 | ) | ||||||
Total U.S. GAAP adjustments | 276,976 | 420,338 | 353,941 | |||||||||
Net income according to U.S. GAAP | Ps. | 1,476,420 | Ps. | 1,961,180 | Ps. | 1,756,760 | ||||||
At December 31, | ||||||||
Reconciliation of stockholders’ equity | 2009 | 2008 | ||||||
Stockholders’ equity according to MFRS | Ps. | 26,780,554 | Ps. | 26,737,646 | ||||
U.S. GAAP adjustments | ||||||||
(i) Initial cost of airport concessions (recorded to common stock under MFRS) | (20,993,434 | ) | (20,993,434 | ) | ||||
(i) Accumulated amortization of airport concessions | 4,236,460 | 3,804,950 | ||||||
(ii) Amortization of assets under concession (“Rights to use airport facilities” under MFRS) | (287,047 | ) | (259,268 | ) | ||||
(iv) Recognition of the fair value of embedded derivative instruments | (1,899 | ) | 7,292 | |||||
(v) Start-up costs | (16,034 | ) | (20,044 | ) | ||||
(x) Cancellation of deferred statutory employee profit sharing | (6,077 | ) | (4,917 | ) | ||||
(xi) Employee labor obligations | (12,814 | ) | (19,020 | ) | ||||
Total U.S. GAAP adjustments before the effects of deferred income taxes | (17,080,845 | ) | (17,484,441 | ) | ||||
(viii) Deferred income taxes | 4,811,068 | 4,894,597 | ||||||
Total U.S. GAAP adjustments | (12,269,777 | ) | (12,589,844 | ) | ||||
Stockholders’ equity according to U.S. GAAP | Ps. | 14,510,777 | Ps. | 14,147,802 | ||||
A summary of the changes in consolidated stockholders’ equity after giving effect to the aforementioned U.S. GAAP adjustments is as follows:
Common Stock | Additional Paid- in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Treasury stock | Total Stockholders’ Equity | |||||||||||||||||
Balance at January 1, 2008 | Ps. | 3,351,045 | Ps. | 122,988 | Ps. | 9,939,239 | Ps. | — | Ps. | — | Ps. | 13,413,272 | ||||||||||
Net income | — | — | 1,961,180 | — | — | 1,961,180 | ||||||||||||||||
Deferred fees for technical assistance services | — | (60,938 | ) | — | — | — | (60,938 | ) | ||||||||||||||
Stock repurchase of 1,720,000 shares | — | — | — | — | (44,227 | ) | (44,227 | ) | ||||||||||||||
Dividends (2.0000 pesos per basic share) | — | — | (1,122,000 | ) | — | 515 | (1,121,485 | ) | ||||||||||||||
Balance at December 31, 2008 | 3,351,045 | 62,050 | 10,778,419 | — | (43,712 | ) | 14,147,802 | |||||||||||||||
Comprehensive income: | ||||||||||||||||||||||
Net income | — | — | 1,476,420 | — | — | 1,476,420 | ||||||||||||||||
Other comprehensive income—Actuarial gains on employee labor obligations (net of income tax of Ps. 721) | — | — | — | 3,473 | — | 3,473 | ||||||||||||||||
Total comprehensive income | — | — | 1,476,420 | 3,473 | — | 1,479,893 | ||||||||||||||||
Deferred fees for technical assistance services | — | 39,618 | — | — | — | 39,618 | ||||||||||||||||
Stock repurchase of 360,000 shares | — | — | — | — | (10,248 | ) | (10,248 | ) | ||||||||||||||
Repurchased stock sold (2,080,000 shares) | — | — | (248 | ) | — | 53,960 | 53,712 | |||||||||||||||
Dividends (2.1390 pesos per basic share) | — | — | (1,200,000 | ) | — | — | (1,200,000 | ) | ||||||||||||||
Balance at December 31, 2009 | Ps. | 3,351,045 | Ps. | 101,668 | Ps. | 11,054,591 | Ps. | 3,473 | Ps. | — | Ps. | 14,510,777 | ||||||||||
Condensed consolidated balance sheets and statements of income including the aforementioned U.S. GAAP adjustments, as of and for the years ended December 31, were as follows:
At December 31, | |||||||
2009 | 2008 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | Ps. | 1,821,150 | Ps. | 1,506,004 | |||
Financial investments held for trading purposes | 279,621 | 275,237 | |||||
Trade account receivables—net | 453,856 | 572,058 | |||||
Recoverable taxes, mainly recoverable tax on assets | 260,253 | 375,571 | |||||
Current deferred taxes | 45,685 | 35,418 | |||||
Other accounts receivable | 2,251 | 3,827 | |||||
Total current assets | 2,862,816 | 2,768,115 | |||||
Trading investments designated for expenditure, held in trust | 352,436 | — | |||||
Buildings, building improvements, machinery and equipment—net | 3,877,492 | 3,704,006 | |||||
Assets under concession—net (“Rights to use airport facilities” under MFRS) | 1,901,188 | 2,024,330 | |||||
Other acquired assets | 820,288 | 841,339 | |||||
Long-term recoverable income tax | 23,022 | 23,022 | |||||
Embedded derivatives | 14,531 | 47,727 | |||||
Hedging financial derivative instrument | 13,647 | — | |||||
Deferred income taxes and recoverable tax on assets | 6,234,007 | 6,126,279 | |||||
Other non-current assets | 25,524 | 36,052 | |||||
Total assets | Ps. | 16,124,951 | Ps. | 15,570,870 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Current portion of long-term bank loans | Ps. | 193,965 | Ps. | 134,857 | |||
Concession taxes payable | 17,140 | 25,785 | |||||
Aeropuertos Mexicanos del Pacífico, related party | 50,767 | 62,044 | |||||
Accounts payable | 275,478 | 374,661 | |||||
Taxes payable, other than income and concession taxes payable | 47,652 | 47,206 | |||||
Income tax and business flat tax payable | 27,455 | 29,319 | |||||
Total current liabilities | 612,457 | 673,872 | |||||
Long-term bank loan | 856,003 | 665,143 | |||||
Employee benefits | 47,971 | 44,141 | |||||
Deposits received | 97,743 | 39,912 | |||||
Total liabilities | 1,614,174 | 1,423,068 | |||||
Common stock | 3,351,045 | 3,351,045 | |||||
Additional paid-in capital | 101,668 | 62,050 | |||||
Retained earnings | 11,054,591 | 10,778,419 | |||||
Accumulated other comprehensive income | 3,473 | — | |||||
Treasury stock | — | (43,712 | ) | ||||
Total stockholders’ equity | 14,510,777 | 14,147,802 | |||||
Total liabilities and stockholders’ equity | Ps. | 16,124,951 | Ps. | 15,570,870 | |||
For the years ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net revenues | Ps. | 3,231,628 | Ps. | 3,580,027 | Ps. | 3,486,430 | ||||||
Cost of services | 869,062 | 941,401 | 838,950 | |||||||||
Technical assistance fees | 151,339 | 57,288 | 151,619 | |||||||||
Concession taxes | 162,507 | 173,533 | 172,846 | |||||||||
Depreciation and amortization | 421,094 | 390,509 | 347,693 | |||||||||
Total cost of services | 1,604,002 | 1,562,731 | 1,511,108 | |||||||||
Income from operations | 1,627,626 | 2,017,296 | 1,975,322 | |||||||||
Interest income (expense) and exchange gain (loss)—net | 83,630 | 197,953 | 91,611 | |||||||||
Other income (expense)—net | (11,111 | ) | 11,968 | (783 | ) | |||||||
Income tax expense | (223,725 | ) | (266,037 | ) | (309,390 | ) | ||||||
Net income | Ps. | 1,476,420 | Ps. | 1,961,180 | Ps. | 1,756,760 | ||||||
Weighted average number of common shares outstanding | 556,266,472 | 556,387,312 | 556,792,500 | |||||||||
Weighted average number of common shares and common share equivalents | 560,473,972 | 560,594,812 | 561,000,000 | |||||||||
Basic earnings per share (Mexican pesos) | Ps. | 2.6542 | Ps. | 3.5248 | Ps. | 3.1551 | ||||||
Diluted earnings per share (Mexican pesos) | Ps. | 2.6342 | Ps. | 3.4983 | Ps. | 3.1315 |
(i) Airport concessions
Under MFRS, the cost of the concessions to operate the airports and the related facilities was allocated to two intangible assets: “right to use airport facilities” and “airport concessions.” “Airport concessions” represents the residual value after the allocation of cost to the “rights to use airport facilities.” The cost allocated to the “rights to use airport facilities” was determined based on the MFRS inflation-adjusted cost of the related fixed assets recorded in the accounts of ASA as of October 31, 1998. The remainder was allocated to airport concessions. The total value of the concession granted was determined by reference to the sale proceeds of the equity sold to AMP in August 1999. Consideration for the concessions to operate the facilities was provided by the issuance of the common stock of the Company.
The acquisition of the airport concessions and rights to use airport facilities was a transaction between entities under common control of the Mexican Government and did not involve cash consideration. U.S. GAAP requires that when assets are transferred between entities under common control, the receiving entity is required to initially recognize the assets at the carrying amount of the transferring entity on the date of transfer. As there was no nominal value recorded for the airport concessions between the SCT and ASA, there is no value assigned to the airport concessions for purposes of U.S. GAAP.
In addition, under MFRS, the airport concessions were deemed as concessions with a definite life and therefore have been amortized based on the concession term. Under U.S. GAAP, such amortization has been reversed.
(ii) Amortization of assets under concession (treated as intangible “rights to use airport facilities” under MFRS)
For purposes of U.S. GAAP, since the concession arrangement provides the Company with the right to use the airports and related facilities for a 50-year term, and since the Company was created and controlled by the Mexican Government at the date the concessions were granted, the arrangement is accounted for based on its economic substance as a contribution by the Mexican Government of fixed assets including runways, aprons, platforms, buildings and other infrastructure, used to operate the airport facilities under the related concession agreements. Throughout the 50-year concession term, the Mexican Government retains title to the assets under concession. Upon expiration of the concession term, use of the assets reverts to the Mexican Government.
Because the transfer of fixed assets was made among entities under common control, for U.S. GAAP purposes, the related assets were recognized at their carrying value in the records of the Mexican Government, with remaining amortization terms as follows:
Remaining Amortization Term | Original Amortization Term | ||||||
(years) | (years) | ||||||
Assets under concession allocated to: | |||||||
Runways | Ps. | 788,443 | 25 | 35 | |||
Land and buildings | 2,289,740 | 15 | 25 | ||||
Other infrastructure | 138,596 | — | 10 | ||||
Ps. | 3,216,779 | ||||||
Additional improvements and upgrades made to the fixed assets are capitalized within this line item and are amortized over their estimated useful life.
In addition, as the transfer of fixed assets included land and buildings, the Company obtained an independent appraisal of all fixed assets under concession as of the date the concession was granted. Based on the appraisals, the fair value of the land was not considered significant in relation to the total fair value of all assets transferred. Accordingly, the land has been recorded as a single unit with the building and is amortized over the economic life of the building of 25 years. Amortization of the land component of the rights to use airport facilities under MFRS is over a period of 50 years. Thus, the difference in the amortization period results in increased amortization of the asset for purposes of the U.S. GAAP reconciliation.
As described in Note 10 to the financial statements prepared under MFRS, the concession arrangements require the Company to pay a concession tax, pursuant to the Mexican Federal Duties Law, currently equal to 5% of annual gross revenues, which is classified within operating expenses. The Mexican Federal Duties Law is a law of general applicability and is not specifically directed to airport concession holders. The concession tax under the Mexican Federal Duties Law is applicable to and payable by any concession-holder that uses state-owned assets, without regard to the value of state-owned assets used. Accordingly, this annual payment is considered a tax rather than consideration paid in exchange for the Mexican Government’s contribution of the concessioned assets. Because taxes do not give rise to a liability until such time as they are incurred under U.S. GAAP, no additional obligation related to the contribution by the Mexican Government is recognized. No adjustment is made in the U.S. GAAP reconciliation for the concession tax; such tax is included within operating expenses, given that it is a tax assessed for the Company’s use of the concessions and is based on revenues generated by the concession.
(iii) Deferred fees for technical assistance services
AMP holds forfeitable shares of GAP common stock in a trust. Upon AMP’s initial acquisition in 1999 of 15% of GAP’s common stock, which represented 100% of the Series “BB” shares of GAP, and pursuant to the terms of the participation agreement between GAP and AMP, AMP signed a trust agreement with Banco Nacional de Comercio Exterior, S.N.C. and assigned to the trustee all of the Series “BB” shares it acquired. In the trust agreement, GAP was named as secondary beneficiary only in the instance in which AMP does not comply with the terms of the technical assistance agreement, in which case 5% of the Series “BB” shares would be forfeited and sold, with the proceeds of the sale to be provided to GAP as liquidated damages and penalties. AMP may gradually sell the shares in increments over the 15-year term of its initial participation contract.
Based on the fact that the 5% of AMP’s initial investment held in the trust is forfeitable, subject to compliance with the technical assistance agreement, the Company considers those shares to be compensatory and has recorded the fair value of these compensatory shares by applying variable accounting, resulting in a related expense and corresponding addition to additional paid-in capital of Ps. 39,618, Ps. (60,938) and Ps. 25,762 for the years ended December 31, 2009, 2008 and 2007, respectively. Fair value is based on the market value of the Company’s publicly traded ADR’s. Compensation cost is included in the U.S. GAAP reconciliation under the caption deferred fees for technical assistance services.
(iv) Recognition of the fair value of embedded derivative instruments
As part of its ongoing operations, the Company enters into operating lease agreements to lease commercial space in its airport terminals. Certain leases are priced in U.S. dollars while the functional currency of both the Company and the tenants to whom commercial airport terminal space is leased is the Mexican peso.
The U.S. dollar foreign currency component of these contracts meets the criteria under U.S. GAAP as embedded derivatives. The Company has determined that: i) the embedded derivatives are not clearly and closely related to the economic characteristics and risks of the host contracts (lease agreements) and ii) separate, stand-alone instruments with the same terms as the embedded derivative instruments would otherwise qualify as a derivative instruments, thereby requiring separation from the lease agreements and recognition at fair value. Such instruments do not qualify for hedge accounting under U.S. GAAP and are thereby considered non-hedging derivatives. Accordingly, the embedded derivative should be recorded at fair value in the balance sheet, with changes in such fair value each period recorded to results of operations, classified according to nature of the item to which the embedded derivative instrument is related.
These contracts also represent embedded derivative instruments under MFRS. Although the Company adopted Bulletin C-10 for MFRS purposes, a difference still arises between the accepted valuation methodologies of the embedded derivatives under U.S. GAAP and MFRS. The accepted valuation methodology under U.S. GAAP requires that at the inception of the contract, such embedded derivatives be “at-the-market” and thus, have a fair value equal to zero. At each subsequent reporting date, the embedded derivatives are adjusted to their fair value based on the difference between the forward curve rates on the monthly payments at the reporting date versus such rates at the date of inception of the lease contract. Under MFRS, the embedded derivatives are valued from inception of the contract and at each reporting date based on the forward curve rates versus the spot rate on such date, applied to the future rentals receivable. This method effectively recognizes the present value of the changes in the exchange rates on the future rentals receivable.
Accordingly, the following adjustments are included in the reconciliation to U.S. GAAP:
As of December 31, 2009 and 2008, the valuation methodology followed under both MFRS and U.S. GAAP results in an embedded derivative asset, though at different values given the differences in the valuation methodology. Accordingly, such difference in the asset value is included in the reconciliation of stockholders’ equity, while the differences between related changes in the fair values of the embedded derivatives are included in the reconciliation of net income.
Lastly, the change in the fair value of the embedded derivatives under U.S. GAAP is classified as revenues, based on the nature of the item to which the embedded derivative instrument is related, while under MFRS, such amount is included in net comprehensive financing income.
A reconciliation of the adjustments for the recognition of the fair value of embedded derivatives is as follows:
For the years ended December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||
(Loss) gain recorded to net income under MFRS | Ps. | (25,421 | ) | Ps. | 16,923 | Ps. | 5,732 | |||
Difference in fair value of embedded derivatives | (9,191 | ) | 72,319 | 3,374 | ||||||
(Loss) gain recorded to net income under U.S. GAAP | Ps. | (34,612 | ) | Ps. | 89,242 | Ps. | 9,106 | |||
(v) Start-up costs
In 2002, the Company established a new subsidiary, Pacífico Cargo, which was to provide cargo and storage services to certain courier and freight companies at the Guadalajara airport. Accordingly, the subsidiary incurred various costs, including salaries, feasibility and marketing studies, insurance and various legal costs related to developing the cargo center. As of December 31, 2006, Pacífico Cargo was liquidated and the administration of the cargo operation was transferred to the Guadalajara International Airport.
The preoperating expenses related to this subsidiary have been capitalized for purposes of MFRS, in accordance with NIF C-8,Intangibles, which permits the capitalization of certain project development costs that fulfill the criteria established for recognition as assets. The capitalized costs were amortized beginning in May 2007, the date the operation was placed into use, using the straight-line method over seven years.
As these costs are one-time activities related to the opening of the subsidiary, for purposes of U.S. GAAP, they are considered to be start-up costs, which are expensed in accordance with U.S. GAAP. Accordingly, the asset and any related annual amortization are reversed within the U.S. GAAP reconciliation.
(vi) Legal gain contingency
In May 2005 the Company paid a fine to the Mexican Treasury Department for Ps. 11,445 (nominal pesos) related to its request for refund on the taxes paid on dividends. Based on the advice of its legal counsel, the Company determined that such fine had no legal basis and as such, in the financial statements under MFRS, recorded the amount paid as a recoverable asset.
Under U.S. GAAP, such fine was considered a gain contingency. However, during 2008, the Company had obtained a final ruling from the court declaring that the fine was invalid and thus void and ruled for the tax authorities to reimburse the Company. Accordingly, during 2008, the Company filed the appropriate documentation with the tax authorities, requesting the related refund, plus interest. As substantially all uncertainties surrounding the amount and timing of the refund were resolved prior to December 31, 2008, the Company determined that realization of the gain was assured beyond a reasonable doubt, for which reason, Ps. 12,358 was recognized as a gain in the 2008 U.S. GAAP reconciliation of net income.
On February 26, 2009, the Company recovered from the Mexican Treasury Department Ps. 20,485 comprised of Ps. 11,445 for the fine and Ps. 9,040 for interest incurred.
(vii) Recoverable income taxes
In 2002, the Company paid dividends, which generated Ps. 93,915 of income tax that was paid by the Company in that year. As of December 31, 2002, the Company recorded a deferred tax asset for the income taxes paid, as the amount can be used to offset future income tax payable. However, based on its future financial projections, the Company determined that the deferred tax asset generated by this credit would not be recoverable, for which reason it recognized a full valuation allowance on the deferred tax asset.
Instead, based on the advice of its legal counsel, the Company considered that the above tax payment could have been credited against tax on assets of the year, based on Article 9 of the Asset Tax Law, for which reason it sought a refund from the Mexican tax authorities. Accordingly, under MFRS, a recoverable income tax asset was recognized with a corresponding credit to income tax expense for the year ended December 31, 2002.
Under U.S. GAAP, at that time, the recoverable income tax asset was considered a gain contingency and as realization was not assured beyond a reasonable doubt, recognition as an asset under U.S. GAAP was prohibited. Accordingly, the asset was eliminated for U.S. GAAP purposes in 2002, resulting in a reconciling item in the reconciliation of stockholders’ equity.
From such time, the Company has been in legal proceedings with respect to these taxes paid on dividends (see Note 20.a to the MFRS financial statements). From 2002 to 2007, based on the outcomes of such proceedings at the various airports, in which it has won in certain cases, recovering amounts, and lost in other cases, the Company adjusted the related recoverable tax asset accordingly. In 2007, given the probability of recovering the remaining recoverable tax asset from the tax authorities, the Company removed the remaining recoverable asset tax. However, revised tax projections indicated that the Company would now be able to offset the remaining benefit against future taxes payable, for which reason in those years, it also adjusted the valuation allowance on related deferred income tax assets.
Accordingly, while no further adjustments were required in the U.S. GAAP reconciliation related to the recoverable income tax asset from such time, because the Company continues to proceed with its legal case at certain of the airports, unrecognized tax benefits exist as discussed in insert (ix) below.
(viii) Deferred income taxes
Under MFRS, the Company recognizes income taxes based on NIF D-4,Income Taxes, which requires the application of a methodology similar to U.S. GAAP. The deferred tax adjustments required to reconcile net income and stockholders’ equity under MFRS to U.S. GAAP as of and for the years ended December 31, 2009, 2008 and 2007 result from the differences in accounting for the cost of airport concessions, amortization of assets under concession, recognition of the fair value of embedded derivative instruments, effects of the removal of the transition obligation for severance payments, effects of deferred PTU and the effect of start-up costs, as explained in previous paragraphs.
For U.S. GAAP purposes, there is no accounting basis for the airport concessions. However, a tax basis exists for Mexican statutory tax purposes, which results in an increase to the long-term deferred tax asset related to concessions. Additionally, because of the difference in the amortization rates of land for purposes of U.S. GAAP and MFRS, a different accounting basis exists under each set of accounting principles, thereby decreasing the long-term deferred tax asset recorded in the financial statements under MFRS. The effect was an increase to the deferred tax asset of Ps. 4,802,403 and Ps. 4,885,370 as of December 31, 2009, and 2008, respectively, and a related charge to net income of Ps. 82,967, Ps. 113,045 and Ps. 113,045 for the years ended December 31, 2009, 2008 and 2007, respectively.
Under both MFRS and U.S. GAAP, the change in the deferred tax asset resulting from the effects of accounting for inflation is recorded as a component of income tax expense, and affects the reconciliation of the statutory and effective tax rates, together with the expected changes in the income tax rate, as explained in Note 20.
Under MFRS, net deferred tax assets and liabilities are classified as non-current. Under U.S. GAAP, classification is based on the classification of the related asset or liability for financial reporting. A reconciliation of the net deferred income tax asset from MFRS to U.S. GAAP and the composition of the net deferred income tax asset under U.S. GAAP at December 31 were as follows:
2009 | 2008 | |||||||
Reconciliation of deferred income tax asset: | ||||||||
Net deferred income tax asset under MFRS (including recoverable tax on assets) | Ps. | 1,468,624 | Ps. | 1,268,322 | ||||
Effect of cost of airport concessions | 4,721,523 | 4,812,775 | ||||||
Effect of amortization of assets under concession (“rights to use airport facilities” under MFRS) | 80,880 | 72,595 | ||||||
Effect of embedded derivatives | 570 | (2,042 | ) | |||||
Effect of employee labor obligations | 2,975 | 4,558 | ||||||
Effects of actuarial gains in other comprehensive income | (721 | ) | — | |||||
Effect of non recognition of deferred PTU | 1,070 | 1,099 | ||||||
Effect of start-up costs | 4,771 | 5,613 | ||||||
Total U.S. GAAP adjustments to net deferred income tax asset | 4,811,068 | 4,894,598 | ||||||
Net deferred income tax asset under U.S. GAAP | 6,279,692 | 6,162,920 | ||||||
Net deferred IETU asset (liability) under U.S. GAAP | 5,407 | (5,024 | ) | |||||
Net deferred ISR asset under U.S. GAAP | Ps. | 6,274,285 | Ps. | 6,167,944 | ||||
2009 | 2008 | |||||||
Composition of net deferred income tax asset: | ||||||||
ISR | ||||||||
Current assets (liabilities): | ||||||||
Trade accounts receivable | Ps. | 37,297 | Ps. | 27,806 | ||||
Embedded derivative instruments | — | (396 | ) | |||||
Employee benefits | 5,530 | 8,008 | ||||||
Total current assets—net | 42,827 | 35,418 | ||||||
Non-current assets (liabilities): | ||||||||
Airport concessions and assets under concession (“rights to use airport facilities” under MFRS) | 5,720,372 | 5,367,198 | ||||||
Hedging derivative financial instrument | 295 | — | ||||||
Embedded derivative instruments | (4,359 | ) | (13,364 | ) | ||||
Buildings, building improvements, machinery and equipment | 105,302 | 61,940 | ||||||
Tax loss carryforwards | 232,132 | 431,394 | ||||||
Recoverable tax on assets | 646,316 | 668,200 | ||||||
Other assets | 4,771 | 5,613 | ||||||
Employee benefits | 153 | 7,198 | ||||||
Interest cost capitalized | (11,688 | ) | (5,737 | ) | ||||
Valuation allowance for recoverable tax on assets paid | (250,076 | ) | (226,120 | ) | ||||
Valuation allowance for tax loss carryforwards | (211,760 | ) | (163,796 | ) | ||||
Total non-current assets—net | 6,231,458 | 6,132,526 | ||||||
Total net ISR asset under U.S. GAAP | Ps. | 6,274,285 | Ps. | 6,167,944 | ||||
IETU | ||||||||
Current assets: | ||||||||
Employee benefits | Ps. | 2,858 | Ps. | 1,223 | ||||
Non-current assets (liabilities): | ||||||||
Buildings, building improvements, machinery and equipment | (3,522 | ) | (9,380 | ) | ||||
Trade account receivables and account payables—net | (2,234 | ) | — | |||||
Employee benefits | 8,305 | 3,133 | ||||||
Total non-current assets (liabilities)—net | 2,549 | (6,247 | ) | |||||
Total net IETU asset (liability) under U.S. GAAP | Ps. | 5,407 | Ps. | (5,024 | ) | |||
A reconciliation of the Mexican statutory tax rate to the Company’s effective tax rate under U.S. GAAP is as follows: |
For the years ended December 31, | |||||||||
2009 | 2008 | 2007 | |||||||
Statutory rate | 28 | % | 28 | % | 28 | % | |||
Effect of tax rate change | (2 | )% | — | — | |||||
Effects of inflation | (16 | )% | (21 | )% | — | ||||
Effect of cancellation of recoverable income taxes | — | 1 | % | 2 | % | ||||
Effect of cancellation of valuation allowance due to IETU law | — | — | (17 | )% | |||||
Change in valuation allowance | 3 | % | 4 | % | 2 | % | |||
Effective rate | 13 | % | 12 | % | 15 | % | |||
(ix) Accounting for uncertainty in income taxes
U.S. GAAP requires entities to follow a two-step approach with respect to recognition or disclosure of the effects of uncertain tax positions on financial information, wherein (i) a tax benefit is recognized if a position is more likely than not to be sustained and (ii) the amount of the benefit is measured as the highest tax benefit that is greater than 50 percent likely to be realized. U.S. GAAP also sets out disclosure requirements to enhance transparency of an entity’s tax reserves.
In order to determine the effects of uncertain tax positions on its consolidated financial information, the Company performs an exhaustive analysis over all open tax years that remain subject to examination by the Mexican tax authorities (as of December 31, 2009, open years are 2002 through 2009) in order to identify any uncertain tax position in any open tax year that could result in an unrecognized tax benefit. The following table summarizes the Company’s unrecognized tax benefits for 2009:
Unrecognized tax benefits resulting in recognition of a liability | Other unrecognized tax benefits | Total unrecognized tax benefits | |||||||||
2003 | 2002 | ||||||||||
Balance, January 1, 2008 | Ps. | 1,863 | Ps. | 98,375 | Ps. | 100,238 | |||||
Increases in prior year positions | 171 | 99,901 | 100,072 | ||||||||
Decreases in prior year positions | — | (48,041 | ) | (48,041 | ) | ||||||
Balance, December 31, 2008 | 2,034 | 150,235 | 152,269 | ||||||||
Increases in prior year positions | 300 | 21,070 | 21,370 | ||||||||
Decreases in prior year positions | — | — | — | ||||||||
Balance, December 31, 2009 | Ps. | 2,334 | Ps. | 171,305 | Ps. | 173,639 | |||||
The unrecognized tax benefits resulting in recognition of a liability is comprised of the fees paid to ASA for services provided to the Company from 1999 to 2003, that were deducted by the Company in 2003, as discussed in Note 22.d. Given that unfavorable sentences were received in the cases of the Aguascalientes and Morelia airports, the Company was not able to substantiate technical merits for the deductibility taken in its previous return and thus recognized a liability. During 2009, the liability was increased for additional penalties and interest accrued during 2009 and 2008 of Ps. 300 and Ps. 171, respectively.
Other unrecognized tax benefits arise from the tax positions taken by the Company with respect to the following:
The total amount of unrecognized tax benefits of Ps. 173,639 would affect the Company’s effective tax rate, if recognized.
The Company’s policy is to recognize interest and penalties within operating expense. In 2009, the Company recognized approximately Ps. 2,519 and Ps. 3,140 of interest and penalties, respectively, and in 2008, the Company recognized Ps. 1,159 and Ps. 265 of interest and penalties, respectively. Those amounts of interest and penalties related to unrecognized benefits resulting in a liability have increased the related liability.
(x) Cancellation of deferred statutory employee profit sharing
Under MFRS, beginning in January 2008, the Company adopted revised NIF D-3, which requires the recognition of a deferred PTU asset or liability, based on the asset and liability method established in NIF D-4; through 2007, deferred PTU was recognized based on temporary differences between the accounting result and taxable income for PTU purposes. In accordance with NIF D-3, as of January 1, 2008, the Company recognized the cumulative initial effect adopting NIF D-3, which resulted in a deferred PTU asset of Ps. 1,320 (Ps. 951 net of tax) within retained earnings. Furthermore, as of December 31, 2009 and 2008, the deferred PTU asset increased to Ps. 6,077 and Ps. 4,917, with the increase recognized through 2009 and 2008 earnings.
U.S. GAAP prohibits the recognition of a deferred PTU asset, for which reason, such asset has not been recognized in prior years and for which an adjustment of Ps. 1,160 and Ps. 3,597 has been recognized within results as of December 31, 2009 and 2008, respectively and the asset has been removed in the reconciliation of stockholders’ equity.
(xi) Employee labor obligations
Under MFRS, beginning in January 2005, the Company adopted the revised provisions to Bulletin D-3,Labor Obligations, which require the recognition of a liability for severance payments, calculated based on actuarial computations. Upon the adoption of Bulletin D-3, the Company recognized a transition obligation, as permitted by the Bulletin, which resulted in the recognition of an intangible asset under MFRS, amortizable over the future service period of employees. The same recognition criteria for severance payments is required under U.S. GAAP, which has been effective since 1994. U.S. GAAP is similar in methodology except that it does not permit the transition obligation recognized by the Company under MFRS.
Additionally, during 2008, the Company adopted NIF D-3,Employee Benefits, of MFRS, which, among other things, requires companies to remove any additional liability previously recognized as well as accelerates amortization of certain unrecognized items. Removal of the additional liability resulted in the derecognition of the intangible asset mentioned above, decreasing the value of the liability for severance payments recognized for purposes of MFRS. Additionally, under MFRS, the Company has not included unrecognized actuarial gains within the labor obligation liability, as permitted by MFRS. U.S. GAAP requires entities to fully recognize the under- or overfunded status of the liability, with an offsetting adjustment to other comprehensive income. Accordingly, the adjustment to the U.S. GAAP reconciliation for 2009 and 2008 represents the amount necessary to record the fully underfunded status of the projected benefit obligation.
In addition, U.S. GAAP requires certain disclosures, as follows:
Employee Benefits | ||||||||
2009 | 2008 | |||||||
Change in benefit obligation: | ||||||||
Benefit obligation at beginning of year | Ps. | 40,247 | Ps. | 35,532 | ||||
Service cost | 3,918 | 19,361 | ||||||
Interest cost | 3,176 | 2,968 | ||||||
Actuarial gain | (1,027 | ) | (2,145 | ) | ||||
Benefits paid | (2,679 | ) | (15,469 | ) | ||||
Benefit obligation at end of year | Ps. | 43,635 | Ps. | 40,247 | ||||
Net periodic benefit cost under U.S. GAAP is composed of the following:
2009 | 2008 | 2007 | |||||||||
Service cost of the year | Ps. | 3,918 | Ps. | 19,361 | Ps. | 5,131 | |||||
Financial cost of the year | 3,176 | 2,968 | 1,266 | ||||||||
Actuarial loss (gain) | 2,830 | (2,145 | ) | 3,026 | |||||||
Past service cost | 10 | (232 | ) | (4,764 | ) | ||||||
Ps. | 9,934 | Ps. | 19,952 | Ps. | 4,659 | ||||||
Additional disclosure requirements
(a) Fair value of financial instruments:U.S. GAAP requires additional disclosures with respect to all assets and liabilities measured at fair value as well as with respect to the fair value of financial assets and liabilities whose fair value is not recognized in the balance sheet.
Fair value under U.S. GAAP is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Beginning 2008, the Company determines fair value using the fair value hierarchy under U.S. GAAP, which requires the Company to maximize the use of observable inputs and to minimize the use of unobservable inputs when measuring fair value. Fair value is used on a recurring basis to measure the Company’s financial investments held for trading purposes, embedded derivatives and hedging derivative financial instruments. Accordingly, fair value has been determined by the Company using available market information or other appropriate valuation methodologies that require judgment in developing and interpreting the estimates of fair value.
Financial instruments measured at fair value on a recurring basis in the consolidated balance sheets using the fair value hierarchy are described below:
2009 | |||||||||
Observable inputs other than quoted market prices (Level 2) | Internally developed models with significant unobservable market information (Level 3) | Total carrying value in the consolidated balance sheet | |||||||
Assets | |||||||||
Financial investments held for trading purposes | Ps. | 279,621 | Ps. | — | Ps. | 279,621 | |||
Embedded derivatives | — | 14,531 | 14,531 | ||||||
Hedging derivative financial instrument | 13,647 | — | 13,647 | ||||||
Total assets at fair value | Ps. | 293,268 | Ps. | 14,531 | Ps. | 307,799 | |||
2008 | |||||||||
Observable inputs other than quoted market prices (Level 2) | Internally developed models with significant unobservable market information (Level 3) | Total carrying value in the consolidated balance sheet | |||||||
Assets | |||||||||
Financial investments held for trading purposes | Ps. | 275,237 | Ps. | — | Ps. | 275,237 | |||
Embedded derivatives | — | 49,144 | 49,144 | ||||||
Total assets at fair value | Ps. | 275,237 | Ps. | 49,144 | Ps. | 324,381 | |||
The Company does not have any financial investments that are valued under Level 1. In order to value its financial investments held for trading purposes, the Company uses observable market data for similar instruments. Such investments are classified within level 2 of the fair value hierarchy.
As mentioned in Note 13, during 2009, the Company acquired a hedging derivative instrument with Banamex to establish a ceiling on the interest rate for its variable rate debt mentioned in Note 15.b. In order to value the hedge, the Company uses observable market data for similar instruments. Such instruments are classified within level 2 of the fair value hierarchy.
Embedded derivatives, which are related to certain lease agreements the Company enters into in U.S. dollars, are marked to market using recognized valuation techniques based on the difference between the forward curve rates on the monthly payments at the reporting date versus the forward curve rates on the monthly payments at the date of inception of the lease contract. This methodology incorporates data that is not readily observable in the market, as well as other internally-developed data. Accordingly, such instruments are classified within level 3 of the fair value hierarchy. A reconciliation of these fair value measurements is provided below:
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Additionally, fair value is used on a non-recurring basis to evaluate impairment of long-lived tangible and intangible assets. No impairments of such assets were recognized in 2009 or 2008.
Finally, U.S. GAAP requires disclosures of the fair value of financial assets and liabilities for which fair value is not recognized in the consolidated balance sheets. The following table provides information on the carrying value and estimated fair value of the Company’s financial instruments that are not measured at fair value on a recurring basis, as of December 31:
2009 | 2008 | |||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||
Financial assets: | ||||||||||||
Instruments with carrying value that approximates fair value | Ps. | 2,887,695 | Ps. | 2,887,695 | Ps. | 2,457,460 | Ps. | 2,457,460 | ||||
Financial liabilities: | ||||||||||||
Instruments with carrying value that approximates fair value | Ps. | 473,647 | Ps. | 473,647 | Ps. | 451,550 | Ps. | 451,550 | ||||
Fixed rate bank loan (including accrued interest) | Ps. | 916,030 | Ps. | 866,744 | Ps. | 807,265 | Ps. | 722,668 |
Instruments with carrying values that approximate fair value are comprised of the Company’s cash and cash equivalents (including amounts held in trust), accounts receivable, recoverable taxes, accounts payable, variable interest rate debt and other current liabilities. The carrying value of these assets and liabilities approximate fair value because they have relatively short-term maturities and bear interest at rates tied to market indicators, as appropriate.
Additionally, as mentioned in Note 15, the Company signed an unsecured credit agreement during 2007. Such credit agreement contains a fixed interest rate. If the Company were to transfer the liability in the current economic environment, it would incur interest at a rate 250 basis points greater in 2009 and 300 to 400 basis points greater in 2008, than that contained in the loan agreement, which would result in a fair value of such debt of approximately Ps. 866,744 and Ps. 722,668, in 2009 and 2008, respectively.
(b) Earnings per share according to U.S. GAAP:In accordance with U.S. GAAP, basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding. The computation of diluted earnings per share is adjusted to include any potential common shares. Potential common shares include the forfeitable five percent of AMP’s shares held in the trust.
During 2009 and 2008, 360,000 shares and 1,720,000 shares, respectively, were repurchased at market value and recognized using the cost method as treasury stock, affecting the calculation of weighted average number of common shares outstanding (see Note 16.e and 16.d). As of December 31, 2009, all repurchased shares have been sold.
Diluted earnings per share for the years ended December 31, 2009, 2008 and 2007 include 4,207,500 equivalent shares from the forfeitable shares, which are considered to be contingently issuable under U.S. GAAP, and thereby are included in the calculation of diluted EPS until such time as the contingency is resolved.
The computation and reconciliation of basic and diluted earnings per share for the years ended December 31, prepared in accordance with U.S. GAAP, are as follows:
2009 | 2008 | 2007 | |||||||
Numerator | |||||||||
Net income under U.S. GAAP | Ps. | 1,476,420 | Ps. | 1,961,180 | Ps. | 1,756,760 | |||
Denominator (share amounts) | |||||||||
Weighted average number of common shares outstanding | 556,266,472 | 556,387,312 | 556,792,500 | ||||||
Dilutive effects of forfeitable shares | 4,207,500 | 4,207,500 | 4,207,500 | ||||||
Total potential dilutive shares | 560,473,972 | 560,594,812 | 561,000,000 | ||||||
Basic earnings per share (Mexican pesos) | Ps. | 2.6542 | Ps. | 3.5248 | Ps. | 3.1551 | |||
Diluted earnings per share (Mexican pesos) | Ps. | 2.6342 | Ps. | 3.4983 | Ps. | 3.1315 | |||
(c) Supplemental cash flow information: Under MFRS, for 2007 the Company presented a consolidated statement of changes in financial position in accordance with Bulletin B-12,Statement of Changes in Financial Position, which identifies the generation and application of resources as the differences between beginning and ending financial statement balances in constant Mexican pesos. For 2009 and 2008, the Company presents a consolidated statement of cash flows in accordance with NIF B-2,Statement of Cash Flows,which presents only cash movements.
For U.S. GAAP purposes, the Company has provided a statement of cash flows, which presents only cash movements, excluding the effects of inflation, and requires that additional information related to non-cash investing and financing transactions and other events be provided separately.
Requirements regarding the presentation of the statement of cash flows under MFRS differ in certain respects from those set forth by U.S. GAAP. Among others, payments for interest costs that are not capitalized as part of fixed assets are operating cash flows for U.S. GAAP and financing cash flows under MFRS.
Presented below are consolidated statements of cash flows of the Company in accordance with U.S. GAAP for the years ended December 31:
2009 | 2008 | 2007 | ||||||||||
Operating activities: | ||||||||||||
Net income under U.S. GAAP | Ps. | 1,476,420 | Ps. | 1,961,180 | Ps. | 1,756,760 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 421,094 | 390,509 | 347,693 | |||||||||
Loss on sale of fixed assets | 6,859 | 4,480 | — | |||||||||
Provision for labor obligations | 8,025 | 4,225 | 2,530 | |||||||||
Deferred fees for technical assistance services | 39,618 | (60,938 | ) | 25,762 | ||||||||
Hedging derivative financial instrument | 1,020 | — | — | |||||||||
Embedded derivatives | 34,612 | (89,243 | ) | (9,106 | ) | |||||||
Inflationary effects on recoverable tax on assets | (6,285 | ) | (14,642 | ) | — | |||||||
Short-term marketable securities | (4,384 | ) | (35,870 | ) | (116,889 | ) | ||||||
Deferred income taxes | (146,704 | ) | (181,864 | ) | (197,788 | ) | ||||||
Long-term account receivable reserve | 4,123 | — | — | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Trade accounts receivable | 118,202 | (101,748 | ) | (79,672 | ) | |||||||
Recoverable income taxes—current and other current assets | 107,435 | (153,754 | ) | 55,452 | ||||||||
Recoverable tax on assets | 42,313 | 111,847 | (23,490 | ) | ||||||||
Recoverable income taxes | — | (23,022 | ) | — | ||||||||
Concession taxes payable | (8,645 | ) | 606 | 847 | ||||||||
Accounts payable and other | 23,053 | (204,401 | ) | 92,884 | ||||||||
Aeropuertos Mexicanos del Pacífico, S.A. de C.V., related party | (11,277 | ) | (8,531 | ) | 19,330 | |||||||
Income tax and asset tax payable | (1,418 | ) | (33,669 | ) | 2,512 | |||||||
Deposits received | 57,831 | 5,299 | 2,093 | |||||||||
Loss from monetary position | — | — | 59,117 | |||||||||
Net cash provided by operating activities | 2,161,892 | 1,570,465 | 1,938,034 | |||||||||
Cash flows used in investing activities: | ||||||||||||
Buildings improvements, machinery and equipment | (572,210 | ) | (549,809 | ) | (808,167 | ) | ||||||
Investments in trust designated for expenditure | (352,436 | ) | — | — | ||||||||
Other assets | (865 | ) | 2,948 | 663 | ||||||||
Net cash used in investing activities | (925,511 | ) | (546,861 | ) | (807,504 | ) | ||||||
Cash flows used in financing activities: | ||||||||||||
Proceeds from bank loans | 413,754 | 344,000 | 600,000 | |||||||||
Payments on bank loans | (163,786 | ) | (122,571 | ) | (21,429 | ) | ||||||
Stock repurchases | (10,248 | ) | (44,227 | ) | — | |||||||
Stock repurchased sold | 53,712 | — | — | |||||||||
Hedging derivative financial instrument | (14,667 | ) | — | — | ||||||||
Dividend payments | (1,200,000 | ) | (1,121,485 | ) | (1,171,616 | ) | ||||||
(921,235 | ) | (944,283 | ) | (593,045 | ) |
2009 | 2008 | 2007 | ||||||||
Effects of inflation accounting | — | — | (41,911 | ) | ||||||
Increase in cash and cash equivalents | 315,146 | 79,321 | 495,574 | |||||||
Cash and cash equivalents at beginning of year | 1,506,004 | 1,426,683 | 931,109 | |||||||
Cash and cash equivalents at end of year | Ps. | 1,821,150 | Ps. | 1,506,004 | Ps. | 1,426,683 | ||||
Supplemental cash disclosures: | ||||||||||
Cash paid for income tax and asset tax | Ps. | 372,292 | Ps. | 476,490 | Ps. | 492,867 | ||||
Interest paid, net of amounts capitalized | 50,486 | 44,102 | 16,653 | |||||||
Supplemental non-cash investing activity: | ||||||||||
Investment in building improvements, machinery and equipment on account | Ps. | 101,296 | Ps. | 223,530 | Ps. | 203,259 | ||||
(d) Valuation and qualifying accounts:
Description | Balance at beginning of year | Additions charged to costs and expenses | Deductions | Balance at end of year | ||||||||
Allowance for doubtful accounts | ||||||||||||
2009 | Ps. | 112,618 | Ps. | 22,995 | Ps. | — | Ps. | 135,613 | ||||
2008 | 50,366 | 62,253 | — | 112,618 | ||||||||
2007 | 45,384 | 6,069 | 1,087 | 50,366 |
(e) Recently adopted accounting standards (U.S. GAAP)
Effective July 1, 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (the “Codification”) under Accounting Standards Codification (“ASC”) 105-10. Under the Codification, the historical GAAP hierarchy was eliminated and the Codification became the single official source of authoritative, non-governmental GAAP, other than guidance issued by the Securities and Exchange Commission (“SEC”). All other literature became non-authoritative. ASC 105-10 became effective for financial statements issued for interim and annual periods ending after September 15, 2009. The purpose of the Codification is not to create new accounting and reporting guidance, but rather to simplify user access to all authoritative U.S. GAAP. Accordingly, the adoption of ASC 105-10 had no effect on the Company’s consolidated financial statements.
In July 2009, the Company adopted amendments to ASC 820-10 with respect to determining fair value when the volume and level of activity for related assets and liabilities have significantly decreased. Amendments to ASC 820-10 provided further guidance on how to determine the fair value of assets and liabilities when there is no active market or where the price inputs being used to determine fair value represent distressed sales. The adoption of this guidance did not have a material impact on the consolidated financial statements.
In September 2009, the Company adopted amendments to ASC 820-10 with respect to measuring liabilities at fair value, which such amendments provide guidance on measuring the fair value of liabilities for which a quoted price in an active market for the identical liability is not available. The adoption of this guidance did not have a material impact on the consolidated financial statements.
In January 2009, the Company adopted amendments to ASC 715-20 with respect to employers’ disclosures about postretirement benefit plan assets, which require more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. The adoption of this guidance did not have a material impact on the consolidated financial statements, as the Company does not maintain plan assets.
In January 2009, the Company adopted amendments to ASC 815-10 with respect to additional disclosures of derivative instruments and hedging activities. These amendments require companies to provide qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. The statement also requires companies to disclose more information about the location and amounts of derivative instruments in financial statements, how derivatives and related hedges are accounted for under ASC 815-10 and how the hedges affect the entity’s financial position, financial performance and cash flows. The disclosures required pursuant to this new standard are presented in Note 13.
In July 2009, the Company adopted ASC 855-10 related to subsequent events. ASC 855-10 establishes accounting and reporting standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Information related to subsequent events is presented in Note 29.
(f) Recently issued accounting pronouncements (U.S. GAAP)
On January 21, 2010, the FASB issued ASU 2010-06. The ASU amends ASC 820 with respect to fair value measurements and disclosures to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. This ASU amends guidance on employers’ disclosures about postretirement benefit plan assets under ASC 715, to require that disclosures be provided by classes of assets instead of by major categories of assets. The guidance in the ASU is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. However, those disclosures are required for periods ending after initial adoption. Early adoption is permitted. The Company is currently evaluating the effects of adopting the guidance in the ASU.
Subsequent events |
On January 9, 2013, the Company utilized Ps. 182,850 associated with its available line of credit with BBVA Bancomer for use by the airports of Bajio, Guadalajara, Hermosillo, San Jose del Cabo and Puerto Vallarta, which correspond to the agreement signed on November 23, 2012, described it in Note 16.
On January 11, 2013, the Company made the last payment for Ps. 104,560 regarding its loan with Banamex signed on June 6, 2011, which is described in Note 16.
On February 7, 2013, the municipality of Tijuana made a real estate tax claim for the period from 2008-2012 against the Tijuana Airport, in the amount of Ps. 15,183, demanding payment within the subsequent three days. The Company will file an annulment against this claim and will present a bond to guarantee the amount claimed.
Financial statements issuance authorization |
On March 8, 2010February 22, 2013 the issuance of thethese consolidated financial statements was authorized by Jorge Manuel Sales Martínez,Fernando Bosque Mohino, Chief Executive Officer and by Rodrigo Guzmán Perera, Chief Financial Officer. Thereafter, theseThese consolidated financial statements were approvedare subject to approval at the ordinary general stockholders’ meeting, where they may be modified based on June 2, 2010, subsequent to which Note 29 was updated.provision set forth by the Mexican General Corporate Law.
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