Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-33168
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
(Exact name of Registrant as specified in its charter)
Central North Airport Group
(Translation of Registrant’s name into English)
United Mexican States
(Jurisdiction of incorporation or organization)
Plaza Metrópoli Patriotismo, Piso 5
Av. Patriotismo 201
Col. San Pedro de los Pinos, Benito Juárez
Ciudad de México, México
(Address of principal executive offices)
Ruffo Pérez Pliego del Castillo
+ 52 81 8625 4300
rperezpliego@oma.aero
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading Symbol(s)
Name of each exchange on which registered
American Depositary Shares (ADSs) each representing 8 Series B shares
OMAB
The NASDAQ Stock Market LLC
Series B shares
The NASDAQ Stock Market LLC*
*
Not for trading, but only in connection with the registration of ADSs, pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
N/A
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Number of Shares
336,403,425 (excluding 3,942,131 shares repurchased held in treasury )
Series BB shares
49,766,000
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
⌧ Yes ◻ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934.
◻ Yes ⌧ No
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ⌧
Accelerated filer ◻
Non-accelerated filer ◻
Emerging growth company ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ◻
IFRS ⌧
Other ◻
Indicate by check mark which financial statement item the registrant has elected to follow:
◻ Item 17 ⌧ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
☐ Yes ⌧ No
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (§ 15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒ Yes ◻ No
TABLE OF CONTENTS
Page
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3.
KEY INFORMATION
Risk Factors
Forward-Looking Statements
30
ITEM 4.
INFORMATION ON THE COMPANY
31
History And Development Of The Company
Business Overview
36
Regulatory Framework
68
Organizational Structure
86
Property, Plant And Equipment
88
ITEM 4A.
UNRESOLVED STAFF COMMENTS
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
132
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS
141
Major Shareholders
Related-Party Transactions
144
ITEM 8.
FINANCIAL INFORMATION
146
Legal Proceedings
Dividends And Capital Stock Reimbursements
150
ITEM 9.
THE OFFER AND LISTING
151
Share Price History
Trading On The Mexican Stock Exchange
ITEM 10.
ADDITIONAL INFORMATION BYLAWS
152
Material Contracts
167
Exchange Controls
Taxation
168
Documents On Display
172
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
ITEM 12A.
DEBT SECURITIES
ITEM 12B.
WARRANTS AND RIGHTS
ITEM 12C.
OTHER SECURITIES
173
ITEM 12D.
AMERICAN DEPOSITARY SHARES
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
175
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
ITEM 15.
CONTROLS AND PROCEDURES
ITEM 16.
[RESERVED]
178
ITEM 16A.
AUDIT COMMITTEE’S FINANCIAL EXPERT
ITEM 16B.
CODE OF ETHICS
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT AND NON-AUDIT FEES
179
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
181
ITEM 16G.
CORPORATE GOVERNANCE
182
ITEM 16H.
MINE SAFETY DISCLOSURES
186
ITEM 17.
FINANCIAL STATEMENTS
187
ITEM 18.
ITEM 19.
EXHIBITS
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
RISK FACTORS
Risks Related to Our Operations
The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.
The outbreak, and measures taken to contain or mitigate the coronavirus (“COVID-19”), have had dramatic adverse consequences for the global economy, including demand, operations, supply chains and financial markets. COVID-19 has led to travel restrictions imposed by governments, flight cancellations, and a marked decline in passenger demand for air travel, domestically and worldwide.
As a result of the COVID-19 pandemic, since 2020, the Mexican Government established different measures to contain or mitigate the coronavirus, including the issuance of decrees suspending all non-essential activities in the country from March 31, 2020 through May 30, 2020. However, since the beginning of the pandemic, airports were and have been considered essential and our airports have remained operational since. As a consequence of these measures, total passenger traffic in our airports declined 22.2% and 52.3% in 2021 and 2020, as compared to 2019.
In response to the material deterioration in air traffic, we took a number of actions in 2020 and 2021 to mitigate our business, operations and financial condition, including, among others, (a) the temporary reduction of certain operating areas in terminal buildings, which resulted in electricity savings and optimization of our cleaning and security crew, (b) deferral of cost in minor maintenances based on prevailing levels of operations, (c) headcount reduction of approximately 100 positions implemented in the third quarter of 2020, and (d) deferral and discount agreements with commercial and aeronautical clients, most of which were phased out on June 30, 2021. Additionally, we established health and safety protocols aimed at enhancing the well-being of passengers and essential operating personnel across the airports we operate. Protective gear is required for staff working on the premises, and sanitization practices in accordance with the guidelines of local health authorities remain in place.
On November 24, 2021, a new COVID-19 variant named Omicron was reported to the World Health Organization (WHO). This new variant was first detected in specimens collected in Botswana and South Africa, and was identified as having spread faster than other variants. As a result, we expect that the COVID-19 pandemic will continue to adversely impact the countries and regions where we operate in 2022. Our total passenger traffic decreased 10.0% in the first quarter of 2022 as compared to the first quarter of 2019.
The full extent of the ongoing impact of COVID-19 on the Company’s longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus such as the Delta and Omicron variants, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted. Even where formal advisories and restrictions have been lifted or reduced, the increased spread or resurgence of COVID-19 could result in the reintroduction of or increase in such formal advisories and restrictions.
The COVID-19 pandemic has had a material impact on the Company, and the continuation of reduced air travel demand could have a material adverse effect on the Company’s business, operating results, financial condition and liquidity.
Large scale international events, including acts of terrorism, wars and the military action launched by Russian forces in Ukraine, could have a negative impact on international air travel and our revenues.
Events such as the conflicts in the Middle East and terrorist attacks worldwide have negatively affected in the past the frequency and pattern of air travel worldwide.
On February 24, 2022, Russian forces launched significant military action against Ukraine, and sustained conflict and disruption in the region has continued as of the date of this report. The impact to Ukraine as well as actions taken by other countries could have a material adverse effect on our operations. Any general increase of hostilities in Ukraine, even if not made on or targeted directly at the air travel industry, or the fear of or the precautions taken in anticipation of any potential military attacks such as elevated national threat warnings, travel restrictions, selective cancellation or redirection of flights and new security regulations, among others, (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry as a result of new security requirements and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition.
In addition, in response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other restrictive actions against Russia. The U.S. and global markets are experiencing volatility and disruption following the escalation of such geopolitical tensions and the military conflict between Russia and Ukraine. Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the travel industry and therefore our business, financial condition, cash flows and results of operations. See also “Variations in international fuel prices could directly or indirectly adversely affect our business and results of operations.”
Our revenues are highly dependent on levels of air traffic, which depend on factors beyond our control.
Passenger and cargo traffic volumes and air traffic movements depend on many factors beyond our control, including the COVID-19 pandemic, seasonality, severe or extreme weather, economic conditions in Mexico, the United States or globally, the political situation in Mexico and elsewhere in the world, the attractiveness of the destinations of our airports relative to that of other competing destinations, fluctuations in fuel prices (which could cause airlines to increase tariffs and have a negative impact on traffic as a result of increased fuel costs), changes in regulatory policies applicable to the aviation industry and an increase or decrease in Mexican airlines’ fleets, among others. For more information on the effect COVID-19 has had on our passenger traffic, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Our revenues are closely linked to both passenger and cargo traffic volumes and to 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. Any decreases in passenger and cargo traffic volumes and the number of air traffic movements to or from our airports as a result of these factors could adversely affect our business, results of operations, prospects and financial condition.
Our business could be adversely affected by global political developments, particularly with regard to U.S. policies toward Mexico.
Changes in economic, political and regulatory conditions in the United States or in U.S. laws and policies governing foreign trade and foreign relations could create uncertainty in the international markets and could have a negative impact on the Mexican economy and public finances. This correlation is due, in part, to the high level of economic activity between the two countries generally, including the trade facilitated by the North American Free Trade Agreement (“NAFTA”), as well as physical proximity.
2
On October 1, 2018, Mexico announced that it had reached an agreement with Canada and the United States to modernize their free trade relationship and replace NAFTA. The new agreement, which is known as the United States Mexico Canada Agreement (USMCA), was formally signed on November 30, 2018 and entered into force on July 1, 2020. We cannot predict the impact of the USMCA on particular industries or government policies and the changes to international trade that may result.
Following the U.S. elections in November 2020 and the change in the U.S. administration for the four-year period from 2021 to 2024, there is uncertainty regarding future U.S. policies with respect to matters of importance to Mexico and its economy, particularly trade and migration. Policies adopted could create tension between the Mexican and U.S. governments or reduce economic activity between Mexico and the United States, thus affecting the travel of passengers between those countries. For more information on travel restrictions related to COVID-19, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Furthermore, in September 2017, the U.S. administration announced its plan to phase out the Deferred Action for Childhood Arrivals program (“DACA”), which allows certain individuals who entered the U.S. as undocumented minors to defer immediate deportation and to be eligible for a work permit. Because the majority of individuals who benefit from this program are from Mexico, terminating the program may affect relations between Mexico and the U.S., as well as transit between the two countries. On July 16, 2021, the U.S. District Court for the Southern District of Texas issued a ruling partially suspending DACA. The ruling permits the continued processing of DACA renewals but does not allow for any new applications to be granted. There is still uncertainty about whether and when DACA will be ratified, and we cannot assess the impact it may have on particular industries or government policies that may result. If new federal immigration legislation is enacted in the U.S., such laws may contain provisions that could make it more difficult for Mexican citizens to travel between Mexico and the United States. Such restrictions could have a material adverse effect on our passenger traffic results. Also, the U.S. passed the Tax Cuts and Jobs Act on December 22, 2017, which, among others, reduces the U.S. corporate income tax rate from 35% to 21%, and implemented new import taxes on certain goods, approved on January 22, 2018. We cannot predict the impact that these measures may have on trade between the U.S. and Mexico or whether foreign direct investment from the U.S. to Mexico will decrease.
The foregoing factors and further policy changes could have an impact on Mexico’s gross domestic product (“GDP”) growth, the exchange rate between the U.S. dollar and the Mexican peso, levels of foreign direct investment and portfolio investment in Mexico, interest rates, inflation, and the Mexican economy generally; which in turn, may impact the level of passenger traffic in our airports and adversely affect our financial condition or results of operations.
Our business could be adversely affected by a downturn in the global economy, particularly with regard to the U.S. economy.
The outbreak of COVID-19 has adversely affected the economies and financial markets of many countries, including the United States and Mexico. The extent to which COVID-19 impacts these economies will depend on future developments, which are highly uncertain and cannot be predicted, including the duration and scope of the outbreak and the actions taken to contain or treat the outbreak, within the United States, Mexico and around the world. The United States and Mexico technically entered into a recession in 2020 following the COVID-19 outbreak. Although recent vaccine approvals and rollout have raised hopes of a turnaround in the COVID-19 pandemic later this year, renewed waves and new variants pose concerns for the outlook. Growth may be stymied if virus surges (including from new variants such as Delta and Omicron) prove difficult to contain, infections and deaths mount rapidly before vaccines are widely available. The COVID-19 pandemic, coupled with the measures implemented by governmental authorities to contain and mitigate the effects of COVID-19, including shutdowns of non-essential infrastructure businesses, stricter border controls, stringent quarantines and social distancing, triggered significant economic downturn in Mexico and the United States. The extent and effect of a potentially new recession is difficult to predict, including whether such recession and any recovery thereof will be similar to past periods of recession and recovery.
3
Moreover, international events, such as decreases in oil prices and the slower growth in the Chinese economy, have led to volatility in the international markets and adversely affected the Mexican economy. As a result, Mexico has been forced to cut public expenses, since oil output is one of the main sources of revenue in Mexico. In recent years, however, the U.S. economy has improved, with the GDP increasing at an annualized rate in real terms of 2.3% in 2019, decreased 3.5% in 2020 and increased 5.7% in 2021, and our international passenger traffic increasing 7.9%, decreased 56.9% and increased 94.3%, respectively. In the event of an economic downturn, developing countries, which have largely rebounded from the economic and financial crisis in 2009, would be impacted through trade and financial channels.
Our business is particularly dependent on the condition of the U.S. economy and is particularly influenced by trends in the United States relating to leisure travel, consumer spending and international tourism. For more information on U.S. travel restrictions related to COVID-19, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.” According to the Mexican National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía), in 2021, exports from Mexico to the United States represented approximately 80.7% of Mexican exports, and 47.5% of foreign direct investment in Mexico originated in the United States. According to the U.S. Bureau of Economic Analysis, in 2021, secondary income received from the United States, which includes government and private transfers, was approximately U.S.$18.1 billion.
Since the demand for aeronautical services in Mexico is substantially dependent on the performance of the Mexican economy, which is in turn highly dependent on the performance of the U.S. economy, a further downturn in the U.S. economy or a disruption in commercial activities among the U.S. and Mexico could cause a material adverse effect on our results of operations, prospects and financial condition. More generally, further downturns in the global economy and/or in the Mexican economy would also adversely affect our business, results of operations, prospects and financial condition. See also “—Risks Related to Mexico—The Company is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico could adversely affect its business and results of operations.”
Variations in international fuel prices could directly or indirectly adversely affect our business and results of operations.
International fuel prices, which represent a significant cost for airlines, have experienced significant volatility in recent years.
For example, European Brent crude oil spot prices dropped from U.S.$67.77 per barrel on December 31, 2019 to U.S.$9.12 per barrel on April 21, 2020, and increased from U.S.$51.22 per barrel on December 31, 2020, to U.S.$ 77.24 per barrel on December 31, 2021. The price of fuel may 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. From December 31, 2021, to April 22, 2022 the European Brent crude oil spot prices surged 30.3% largely as a result of concerns over potential supply disruptions in connection with the current conflict between Russia and Ukraine, the outcome of which and the impact that it may have on fuel prices is uncertain.
4
In the past, increased costs were among the factors leading to cancellations of routes, decreases in frequencies of flights and, in some cases, even contributed to filings for bankruptcy by some airlines. Our business could be negatively impacted by hydrocarbon price volatility as the result of, or as a result of the threat of, Russian activities in Ukraine and as the result of, or as a result of the threat of, Russia expanding its production of oil and gas to finance its activities in Ukraine and destabilize world energy markets. Oil prices are particularly sensitive to actual and perceived threats to global political stability and to changes in production from member states in the Organization of the Petroleum Exporting Countries. An actual increase, or the threat of an increase, in Russian military activities in Ukraine could lead to increased volatility in global oil and gas prices. Further, recent increases in oil prices may lead to an unpredictable drop in pricing in the medium to long-term, and any substantial variation in fuel prices could have an adverse effect on our results of operations and financial condition. Additionally, trade and monetary sanctions in response to future developments relating to the movement of Russian military units into Ukraine could significantly affect worldwide oil prices and demand and cause turmoil in the global financial system, which could in turn materially affect our business and financial condition. See also “Large scale international events, including acts of terrorism, wars and the military action launched by Russian forces in Ukraine, could have a negative impact on international air travel and our revenues.”
Our business is highly dependent on the operations of Mexico City International Airport.
In 2019, 2020 and 2021, approximately 43.0%, 40.0% and 40.3%, respectively, of our domestic passengers flew to or from our airports via Mexico City International Airport (Aeropuerto Internacional de la Ciudad de México, S.A. de C.V.) As a result, our domestic traffic is highly dependent upon the operations of Mexico City International Airport.
On July 3, 2017, the Mexican Federal Antitrust Commission (Comisión Federal de Competencia Económica, or the “Antitrust Commission”) issued Corrective Measures for the Mexico City International Airport to address the inefficiencies observed at the airport during congested hours, limiting operations between the hours of 7:00 and 22:00. In response, on September 29, 2017, the Ministry of Infrastructure, Communications and Transportation (Secretaría de Infraestructura, Comunicaciones y Transportes and formerly known as Ministry of Communications and Transportation) announced in the Federal Official Gazette the General Guidelines for the allocation of slots at congested airports (see “Risk Factors—Risks Related to the Regulation of Our Business—The Company cannot predict how the regulations governing the business will be applied.”). The indirect effect of the new regulation in 2017 was a decrease in the number of flights and an increase in the number of flight cancellations to and from Mexico City International Airport and other regional destinations.
To alleviate congestion at the Mexico City International Airport, a new Mexico City international airport was being built and was expected to start operations in 2022. The current Mexican federal administration that took office on December 1, 2018 cancelled the construction of the new Mexico City international airport. There is still uncertainty about what effect, if any, the cancellation of the new Mexico City international airport will have on our operations and passenger traffic results.
In addition, the current Mexican federal administration announced that it would seek to alleviate congestion at the existing airport by (i) converting a military airport approximately 40 kilometers (24.9 miles) outside of Mexico City (the “Felipe Ángeles Airport”) to a civil airport that started operations on March 21, 2022, (ii) expanding the Toluca International Airport, which is approximately 60 kilometers (37.3 miles) outside of Mexico City and (iii) expanding the boarding gate capacity at Terminal 2 of the existing Mexico City International Airport, which expansion plan was announced on September 24, 2019. There is still uncertainty about what impact the new Felipe Ángeles airport will have to alleviate congestion at the existing Mexico City International Airport. We cannot assure you that the airport’s operations will remain at existing levels or increase in the future.
Security enhancements have resulted in increased costs and may require additional investments in the future.
In 2021, 12.8% of the passengers served by our airports were international passengers, of which, 85.2% arrived or departed on flights originating in or departing to the United States. The air travel business is susceptible to increased costs resulting from enhanced security and higher insurance. Following the events of September 11, 2001, we reinforced security at our airports, and our general liability insurance premiums increased substantially. For more information on the insurance policies we carry, see “Item 4. Information on the Company – Property, Plant and Equipment.”
5
Because a substantial majority of our international flights involve travel to and from the United States, we may be required to comply with security directives of the U.S. Federal Aviation Administration (“FAA”) in addition to the directives of Mexican aviation authorities. World events, such as the terrorist attacks worldwide attributed to the Islamic State of Iraq and Syria or any other organization, could lead to additional security measures taken by the FAA or the International Civil Aviation Organization (“ICAO”), an agency of the United Nations Organization, and could require us to incur in additional costs to comply with these measures. Similarly, our airport operations and passenger volume could be negatively impacted by terrorist attacks on aircrafts, such as those which occurred with international airlines’ aircraft operating over Egypt and the Ukraine in 2015.
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 and supplies, 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. As a result of the COVID-19 pandemic, airlines and airports have had to implement additional security and compliance measures to comply with local health and safety regulations, which could increase costs. We have, among other things, installed disinfectant gel dispensers and air purifiers, mandated facemasks, installed preventive barriers, instituted spacing and flow of movement measures, and provided training to our employees. These enhanced measures have not resulted in a significant increase in our operating costs to date, but we may be required to adopt additional safety measures in the future. Security measures taken to comply with future security directives or in response to a terrorist attack or threat could reduce passenger capacity at our airports due to increased passenger screening and slower security checkpoints and increase our operating costs, which would have an adverse effect on our overall performance.
Furthermore, under the Mexican Airport Law, we are currently responsible for inspecting passengers and their carry-on luggage before they board any aircraft. Under Mexican law, we may be liable to third parties for personal injury or property damage resulting from the performance of such inspection. In addition, we may be required to adopt additional security measures in the future or undertake capital expenditures if security measures for carry-on luggage are enhanced, which could increase our liability or adversely affect our operating results.
The operation of baggage screening equipment could increase our expenses and may expose us to greater liability.
The ICAO’s security guidelines requires checked baggage on all international commercial flights and domestic commercial flights to undergo a comprehensive screening process for the detection of explosives. In some countries, such as the United States, the federal government (in the case of the United States, through the Transportation Security Administration (“TSA”)) is responsible for screening checked baggage. On May 1, 2014 and July 1, 2016, the Mexican Bureau of Civil Aviation (currently the Federal Civil Aviation Agency (Agencia Federal de Aviación Civil or “AFAC”)) published mandatory circulars CO SA-17.2/10 R3 and CO SA-17.9/16, respectively, which require that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines. We have purchased and installed screening equipment in all of our airports to facilitate compliance with the baggage screening guidelines, and our subsidiary, Servicios Complementarios del Centro Norte, S.A. de C.V., has operated the checked baggage screening system since March 1, 2012.
We incur ongoing expenses to maintain and operate this equipment and expect to incur ongoing expenses to maintain any equipment purchased. In the future, we could be required to undertake significant additional capital expenditures for items such as a new screening technology or additional equipment if screening guidelines are expanded further and require that additional steps be taken to comply with the requirements. For instance, replacement of the majority of our baggage screening equipment with new Computer Tomography X-ray (CTX) baggage screening equipment began in 2021 and will continue through 2025, although regulatory changes could force our airports to undertake this replacement sooner. In addition, the circular CO SA-17.9/16 established that airports must have alternative baggage screening methods in case the inspection technology currently used is no longer available. We believe that we comply with the baggage screening guidelines, but AFAC may require additional investments. These additional expenses could restrict our liquidity and adversely affect our financial position.
6
Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of equipment could increase our exposure to liability as a result of our involvement in the screening process.
Competition from other tourist destinations could adversely affect our business.
The principal factor affecting our results of operations and business is the number of passengers using our airports. The number of passengers using our airports (particularly the Acapulco, Mazatlán and Zihuatanejo airports) may vary as a result of factors beyond our control, including the level of tourism in Mexico. In addition, our passenger traffic volume may be adversely affected by the attractiveness, affordability and accessibility of competing tourist destinations in Mexico, such as Cancún, Puerto Vallarta and Los Cabos, or elsewhere, such as Florida, Puerto Rico, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America.
Tourism levels may decrease, and therefore the number of passengers using our airports in the future may not exceed or match current levels, which could have a direct and indirect impact on our aeronautical and non-aeronautical revenues.
Our business is highly dependent upon revenues from seven of our thirteen airports and OMA Logística, S.A. de C.V. (“OMA Logística”) and could be adversely impacted by any condition affecting those businesses.
In 2021, approximately 80.5% of the sum of our aeronautical and non-aeronautical revenues were generated from seven of our thirteen airports and OMA Logística, S.A. de C.V. (“OMA Logística”). The Monterrey airport generated the most significant portion of our revenues. The following table lists the percentage of the sum of aeronautical and non-aeronautical revenues generated at our airports, including the percentage of total revenues generated by our other subsidiaries:
For Year Ended
Airport / Subsidiary
December 31, 2021
Monterrey
42.2
%
Culiacán
9.1
Chihuahua
6.7
Ciudad Juárez
6.3
OMA Logistica S.A. de C.V. ("OMA Logística")
6.1
Mazatlán
5.2
San Luis Potosí
3.3
Acapulco
Six other airports, Servicios Complementarios del Centro Norte and Terminal 2 NH Collection Hotel
17.8
Total
100.0
As a result of the substantial contribution to our revenues from these seven airports and OMA Logística, any event or condition affecting these principal airports could have a material adverse effect on our business, results of operations, prospects and financial condition.
Lastly, we cannot predict any future effect COVID-19 will have on our revenues. For more information on risks related to COVID-19 see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
7
We are dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity risks.
We rely on a variety of information technology to manage our operations. The proper functioning of these systems is critical to the efficient operation and management of our business. If critical information systems fail or are otherwise unavailable, our ability to provide services at our airports, collect accounts receivable, pay expenses and maintain our security and customer data, could be adversely affected. In addition, these systems may require modifications or upgrades as a result of technological changes or growth in our business. These changes may be costly and disruptive to our operations, and could impose substantial demands on management time. Our systems may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break ins, unauthorized access and cyber-attacks.
In the third quarter of 2021, we detected that several of our servers had been compromised with ransomware. Relying on our backup processes and consolidated infrastructure, we were able to restore the majority of our compromised servers within 48 hours of the incident. The main systems at the airports were not affected and remained in operation with minimal disruption.
To prevent future cybersecurity incidents, we are constantly updating our infrastructure with the latest security technologies, and we conduct vulnerability analyses and penetration testing periodically. Our information systems contain backup systems, including physical and software safeguards located outside of our offices, and a cold site for critical systems. In addition, we protect our systems with antivirus software, end-point protection software and last generation firewalls, including firewalls to filter traffic from the Internet. There can be no assurances that these preventive actions to mitigate cybersecurity risks and incidents will be successful in avoiding future cyber-attacks. Any such incident could hinder our ability to protect the privacy of our clients and business by causing the unauthorized distribution of confidential data and valuable financial information, which may cause damage to our reputation and may require us to incur additional expenses. Although actions are taken continuously to improve and monitor our information technology systems, these systems remain vulnerable to failures or unauthorized access, which could adversely affect our operations, financial condition and liquidity.
We face risks associated with our diversification activities, which could lead to our inability to recover our investment as planned.
We face risks associated with the nature of the diversification projects that we have developed and in which we participate as shareholders, which could impact our results of operations, prospects and financial condition. Our Terminal 2 NH Collection Hotel and our Hilton Garden Inn Hotel depend on passenger traffic travel to and from the Mexico City International Airport and the Monterrey airport, respectively, and any event that reduces passenger volume in these airports could adversely affect the results of operations of these hotels. The passenger traffic volume in such airports depends on factors beyond our control, such as the attractiveness of the commercial, industrial and tourist centers that the airports serve. Accordingly, there can be no assurance that the passenger traffic volume in such airports will increase or maintain the current level.
As a result of the various measures implemented to control the spread of COVID-19, such as the suspension of non-essential activities and the reduced demand for air travel and hotel services, the operation of our two hotels has experienced significant declines in occupancy rates and in revenues. In 2020, the occupancy rates in our Terminal 2 NH Collection Hotel and our Hilton Garden Inn Hotel in the Monterrey airport were 42.4 and 41.6 percentage points lower, respectively, than in 2019. On April 6, 2020, we temporarily suspended services our Hilton Garden Inn Hotel through July 6, 2020 due to low occupancy demand as a result of the COVID-19 outbreak. In 2021, the average occupancy rates in our Terminal 2 NH Collection Hotel and our Hilton Garden Inn Hotel in the Monterrey airport were 20.3 and 31.6 percentage points lower, respectively, than in 2019.
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Both of the hotels that we operate, our OMA-VYNMSA industrial park and our OMA Carga bonded warehouses could face additional competition from third parties developing similar projects in areas adjacent to the Monterrey airport. Despite our efforts to retain clients, we cannot predict whether our clients will continue occupying our commercial spaces or cancel their contracts. Furthermore, the continued growth at our OMA-VYNMSA industrial park and our OMA Carga bonded warehouses business could also decline should there be a slowdown in the Mexican economy. All such factors could adversely affect the profitability of our non-aeronautical businesses and our ability to recover our investments in such projects.
Our operations depend on certain key airline customers, and the loss or suspension of operations of one or more of them could result in a loss of a significant amount of our revenues.
Of the total aeronautical revenues generated at our airports in 2021, VivaAerobus represented 36.0%, Volaris represented 24.5% and Aeroméxico and its affiliates represented 18.7%. None of our contracts with our airline customers obliges them to continue providing service from our airports and, if any of our key customers reduces their use of our airports, competing airlines may not add flights to their schedules to replace any flights no longer handled by our principal airline customers. On June 30, 2020, Aeromexico and its affiliates, which accounted for 20.3% of our total passenger traffic in 2020 and 19.5% of our passenger traffic in 2021, filed voluntary Chapter 11 petitions in the United States to implement a financial restructuring while continuing to operate. On January 28, 2022, the United States Bankruptcy Court for the Southern District of New York confirmed Aeromexico’s plan of reorganization, and the restructuring was successfully completed on March 17, 2022. In addition, as of December 9, 2020, Interjet, which accounted for 5.7% of our total passenger traffic in 2020, stopped operating at our airports due to the financial impact of the outbreak of COVID-19 on their operations. Our business and results of operations could be adversely affected if we do not continue to generate comparable portions of our revenues from our key customers.
Due to increased competition, volatility in fuel prices and the general decrease in demand because of global volatility in the financial and exchange markets, economic crises and the current COVID-19 related health crisis, many airlines are operating in adverse conditions. Should fuel prices increase or in the event of other adverse health or economic developments, one or more of our principal carriers could become insolvent, cancel routes, suspend operations or file for bankruptcy. All such events could have a material adverse effect on our results from operations. Furthermore, any accident, incident or any other event that affects the perception of safety standards of any of the major airlines may affect their image and generate a public perception that it is less safe or reliable than other airlines. These events would affect consumer demand and the number of passengers serviced by the airline, thus affecting our business, results of operations, prospects and financial condition.
The global airline industry has experienced and continues to experience significant financial difficulties and recent warnings regarding industry profitability. On February 21, 2021, the IATA announced that it did not expect the airline industry to be cash positive until 2022. In October 2021, the International Air Transport Association, or IATA, issued its 2022 financial forecast for the global commercial airline industry, estimating net post-tax loss of about U.S.$-12.0 billion, given that airlines will continue to have difficulty reducing their costs to offset lower revenues. The forecast also indicated that net profit margins were expected to slightly increase to -2.7% in 2022 compared to -11.0% in 2021. The IATA may further reduce its forecasts, and the short-term and long-term effects of the COVID-19 outbreak on the global airline industry is still uncertain. The economic shock from the COVID-19 outbreak, which has been felt more acutely by airlines, has and may continue to trigger insolvencies within the global airline industry.
Some of our airline and other clients and tenants have asked for assistance, either through discounts on payments owed to us or by an extension on those payments. During 2020 and early 2021, we provided payment extensions to our main airline customers, which allowed us to mitigate noncompliance risks. During 2020 and the first half of 2021, we also offered incentives to our commercial tenants through discounts or payment extensions. No such arrangement materially affected our financial condition or liquidity. As a result of the COVID-19 pandemic, our reserve for doubtful accounts receivable, increased by 231% to Ps.20.8 million as of December 31, 2020, and slightly decreased to Ps.20.3 million as of December 31, 2021. We cannot assure you whether the COVID-19 pandemic will continue to cause an increase in our reserve for doubtful accounts receivable in 2022. For more information on the impact of COVID-19 on our business, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
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In addition, Mexican law prohibits an international airline from transporting passengers from one Mexican location to another (unless the flight originated outside Mexico), which limits the number of airlines providing domestic service in Mexico. On December 18, 2015, the United States and Mexico entered into an Air Transport Agreement with the purpose of promoting and facilitating an international aviation system, based on competition among airlines, to facilitate the expansion of international air transport opportunities and ensure the highest degree of safety and security in air transport. The agreement, which replaced the agreement that had been in effect since 1960, became effective as of August 21, 2016, after approval by the Mexican Senate and the competent authorities in the United States. The agreement provides for an increase in services on existing routes between both nations, as well as the addition of new routes and an increase in the frequency of flights on existing routes. The agreement also grants Mexican airlines the ability to further penetrate international markets, as it permits airlines from both countries that operate flights between the United States and Mexico to pick up passengers and continue with the flights to a third country. This agreement may be modified in the future to provide for international airlines to operate domestic flights in our airports, but until then we expect to continue to generate a significant portion of our revenues from domestic travel from a limited number of airlines.
Collective labor conflicts in Mexico could have an adverse impact on our results of operations.
A number of events, such as (i) the endorsement by the Mexican Senate of the International Labor Organization’s Convention C098, the “Right to Organize and Collective Bargaining Convention”, (ii) the approval by Congress to modify the Mexican Federal Labor Law, and (iii) the adverse labor effect resulting from the COVID-19 crisis, have led and continue to cause labor conflicts in Mexico.
In addition, such conflicts have been exacerbated by (i) new labor unions created to negotiate and/or dispute existing collective bargaining agreements on behalf of the labor unions that currently hold such contracts, (ii) a 20.0% increase of the general minimum wage nationwide as of January 1, 2020, a subsequent 15.0% increase of the general minimum wage as of January 1, 2021, and a 22.0% increase as of January 1, 2022 and (iii) a 5.0% increase of the minimum wage in the municipalities near the northern border of Mexico on January 1, 2020, an additional 15.0% increase as of January 1, 2021, and a 22.0% increase as of January 1, 2022. These developments in recent years have led workers and labor unions to demand more significant benefits and higher salary increases than in prior years.
Moreover, the effects of the Mexican government's response to COVID-19 during 2020 and the first half of 2021 included travel restrictions, stay-at-home ordinances, restrictions on non-essential activities and other restrictions on the overall operation of businesses across Mexico, which have been eased as of the second half of 2021. We cannot predict if these measures will be rigorously implemented again in the case of a new outbreak, nor whether they may strain relationships by and between businesses, on the one hand, and labor unions and/or their employees, on the other. As of the date of this report, the Company has not experienced any material adverse effect as a result of the different labor related developments or those that have resulted from the evolution of the COVID-19 pandemic and cannot predict whether these will affect its labor force and relations going forward. For more information on the impact of COVID-19, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.” For more information on employee relations, see “If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations” and “Changes to Mexican laws, regulations and decrees applicable to the Company could have a material adverse impact on the results of operations”.
The Company cannot predict how these developments may affect the Company’s results of operations or its financial condition. Any increased demands by the Company’s unionized workers may lead to higher labor costs, which could have a negative impact on its results of operations.
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If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.
If any conflicts with our employees were to arise, including with our unionized employees (which accounted for 54.5% of our total employees as of December 31, 2021), 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. As of the date of this report, the effects of the COVID-19 outbreak have not affected our relations with our labor force, but we cannot assure you that any further effects resulting from COVID-19 will not cause any disruptions in the future.
Our unionized employees are represented by a national union of airport workers that operates throughout Mexico. To the extent unionized airport workers seek material modifications to the conditions agreed with us and with other Mexican airport operators, our operations could be adversely affected by union activities, including organized strikes or other work stoppages.
Our operations could be adversely affected due to changes in the collection of passenger charges.
Passenger charges are collected by the airlines and then paid to us on the basis of contracts entered into with each airline operating at our airports. We cannot guarantee that all airlines will continue collecting the passenger charges for us. Should one or more airlines stop collecting passenger charges for us, we would have to collect these charges directly ourselves, which would result in additional costs for us.
Recently, some airlines have reported losses. In cases where we extend days of credit to airlines, substantially all of our revenues from passenger charges and other aeronautical services are secured by a performance bond or other types of guarantees; however, guarantees may not fully cover the amount owed by an airline at a certain date. In the event of the insolvency of any of these airlines, we would not be certain of the collection of any amounts invoiced to that airline in respect of passenger charges. In cases where the airlines cannot provide adequate or sufficient performance bonds or other types of guarantees, the airlines operate under advance payment conditions.
In addition, the COVID-19 outbreak has and will likely continue to adversely affect the global airline industry. For more information on how COVID-19 has affected airlines, see “Our operations depend on certain key airline customers, and the loss or suspension of operations of one or more of them could result in a loss of a significant amount of our revenues.” Given the economic uncertainty for many airlines, it is possible that airlines will stop paying us the applicable passenger charges. Should one or more airlines stop paying us for passengers (other than diplomats, infants, transfer and transit passengers) departing from our terminals, our business and results of operation could be adversely affected. For more information on the impact of COVID-19 on our business, see “The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
The main domestic airlines operating at our airports may refuse to pay certain increases in our specific rates for regulated aeronautical services.
In the past, we have entered into a series of agreements with the Mexican National Air Transportation Chamber of Commerce (Cámara Nacional de Aerotransportes), pursuant to which we have established specific rates for regulated services applicable to our principal airline customers. Historically, amounts paid under these agreements have not been material, and we do not expect any such agreements with the Mexican National Air Transportation Chamber of Commerce to have a material effect on our results of operations. Although passenger traffic volume (and therefore overall revenues) may increase, any agreed incentives and/or discounts offered to airlines as a means to prevent or settle any potential dispute could reduce our aeronautical revenues per terminal passenger in the future. In addition, should any of our principal airline customers refuse to continue to make payment to us, or should they refuse to pay increases in our charges for aeronautical services in future years, our results of operations could be adversely impacted by decreased cash flows from operations.
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Our operation depends on our management team for its knowledge and experience and the loss of capable executives could affect our operations.
The current and future performance of our operations depends significantly on the continuous contribution of managers and other key employees. In order to achieve the objectives of each manager or key position, the ability, experience, aptitude and knowledge of each candidate is taken into account for recruitment and personnel allocation purposes. We cannot guarantee that in the future our executive team will be maintained, or that if new executives are incorporated, they will have the same level of knowledge and experience. The potential lack of a capable management team could adversely affect the operations, financial situation and results of operations.
The operations of our airports may be affected by the actions of third parties, which are beyond our control.
As is the case with most airports, the operation of our airports is largely dependent on the services of third parties, such as air traffic control authorities, airlines, airline providers and ground transportation providers. We also depend upon the Mexican government or government entities for provision of services, such as electricity, supply of fuel to aircraft, air traffic control and immigration and customs services for our international passengers. The disruption or stoppage of taxi or bus services at one or more of our airports could also adversely affect our operations. We are not responsible for and cannot control the services provided by these parties. Any disruption in, or adverse consequence resulting from, their services, including a work stoppage or other similar event, may have a material adverse effect on the operation of our airports and on our results of operations.
In addition, if any service providers were to halt operations at any of our airports, we could be required to seek a new provider of these services or to provide these services ourselves, either of which may result in increased costs and have an adverse impact on our results of operations.
We may be liable for property taxes as a result of claims asserted against us by certain municipalities.
Various municipalities have assessed tax credits against us for the payment of property taxes with respect to the real estate on which we operate our airports in those cities. We have appealed all the administrative law proceedings, as well as the tax credits, assessed against us and, while some have been dismissed by the relevant administrative authority, some are still pending. We believe there are no legal grounds which enable the municipalities to collect such taxes and although we intend to defend our position vigorously, if procedures are brought by authorities, there can be no assurance that we will be successful in such defense. See “Item 8. Financial Information—Legal Proceedings—Property Tax Claims” for a full discussion of these property tax proceedings. Some Mexican airport operators contesting the assessment of similar property tax claims have been required to post material surety bonds in connection with their challenge of those assessments. If we are required to post similar surety bonds in the future, the terms of the surety bonds may restrict our ability to pay dividends or otherwise limit our flexibility. In addition, if we are required to pay for additional state or municipal rights, we could face costs, limiting our liquidity, flexibility and ability to pay dividends.
Furthermore, if the Mexican Congress changes the current laws or if we do not prevail in these proceedings, these tax liabilities could have an adverse effect on our financial condition and results of operations. In addition, any change in law which enables municipalities to request construction or operation permits may affect our ability to comply with investments required under our Master Development Programs, which in turn may result in additional payments for governmental tariffs and affect our results of operations.
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Inability to generate sufficient future taxable profits or adverse changes to tax laws, regulatory requirements or accounting standards could have a negative impact on the recoverability of certain deferred tax assets.
We recognize deferred tax assets relating to tax losses carried forward and deductible temporary differences only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the temporary differences can be utilized. Net deferred tax assets amounted to approximately Ps.428,215 thousand at December 31, 2021. The deferred tax assets are quantified on the basis of currently enacted tax rates and accounting standards and are subject to change as a result of future changes to tax laws or the rules for computing taxable profits and allowable losses. Failure to generate sufficient future taxable profits or changes in tax laws or accounting standards may reduce our estimated recoverable amount of net deferred tax assets. Such a reduction could have an adverse effect on our financial condition and results of operations. For further information on deferred tax assets, refer to Note 4 to our audited consolidated financial statements. See “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies—Deferred Income Taxes.”
Natural disasters could adversely affect our business.
From time to time, the northern and central regions of Mexico experience torrential rains, hurricanes (particularly during the months of July through September) and, depending on the region, earthquakes and volcanic activity. In addition, the Mazatlán, Culiacán and Acapulco airports are susceptible to occasional flooding due to torrential rainfall.
Natural disasters may impede or cause the suspension of operations, damage infrastructure necessary to our operations or adversely affect the destinations served by our airports. For instance, on November 3, 2016, the Tampico airport flooded due to heavy rains, causing the collapse of part of the bordering fence. Although, the affected neighbors filed claims for damages against the Tampico airport, the insurance carrier rejected the neighbors’ claims alleging that the damage was caused by a natural disaster. In addition, the Terminal 2 NH Collection Hotel located in Terminal 2 of the Mexico City International Airport was temporarily closed after the earthquake on September 19, 2017. Although the Terminal 2 NH Collection Hotel did not suffer any structural damage, utilities of the hotel were interrupted and hotel operations were suspended until September 25, 2017.
Any of these events could reduce our passenger and cargo traffic volume in the airports and our guest volume in the Terminal 2 NH Collection Hotel. For example, our international passenger traffic decreased 1.2% during September 2017, partially due to the cancellation of flights caused by hurricanes Harvey and Max. The occurrence of natural disasters in the destinations that we serve could adversely affect our business, results of operations, prospects and financial condition.
We have insurance for the physical facilities at our airports against damage caused by natural disasters, accidents or other similar events, but we do not have insurance covering losses due to resulting business interruption. Moreover, should losses occur, losses caused by damages to the physical facilities may exceed the pre-established limits on any of our insurance policies.
Our operations are at greater risk of disruption due to the dependence of several of our airports on a single commercial runway.
As is the case with many other domestic and international airports around the world, several of our airports, including the Monterrey, Culiacán, Ciudad Juárez and Mazatlán airports, have only one runway for most commercial flights. The operation of our runways may be disrupted due to required maintenance or repairs. In addition, our runways may require unscheduled repair or maintenance due to natural disasters, aircraft accidents and other factors that are beyond our control. The closure of any runway for a significant period of time could have a material adverse effect on our business, results of operations, prospects and financial condition.
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We are exposed to risk related to construction projects.
The building requirements under our Master Development Programs could encounter delays or cause us to exceed our budgeted costs for such projects, which could limit our ability to expand capacity at our airports, increase our operating or capital expenditures and could adversely affect our business, results of operations, prospects and financial condition. Such delays or budgetary overruns also could limit our ability to comply with our Master Development Programs, which are established as a necessary requirement to our concessions.
From March 31, 2020 to June 1, 2020, we stopped most construction works, including those needed to comply with our Master Development Program, as a result of the restrictions imposed by the Mexican government on non-essential activity, including construction, in Mexico due to the COVID-19 outbreak. These restrictions generated delays in our scheduled works to comply with our Master Development Program commitments for 2020. Even though the delays were notified to and agreed upon with the regulator, should we experience any other delay that prevents us from complying with our Master Development Program commitments, there could be penalties which could adversely affect our business, results of operations, prospect and financial condition.
We are exposed to the risk of non-performance by our subcontractors.
We currently subcontract certain services (including security and surveillance services) necessary to conduct our operations. In the event that our subcontractors fail to perform their obligations under our agreements, we could incur extra costs in providing replacements and could be exposed to liability for operations that we may have to provide directly, which could adversely affect our business, results of operations, prospects and financial condition.
In accordance with applicable labor laws, subcontractors are required to register their employees with the Mexican Social Security Institute (Instituto Mexicano del Seguro Social), the National Workers’ Housing Fund Institute (Instituto del Fondo Nacional de la Vivienda para los Trabajadores) and anyone employing the services of subcontractors that has failed to comply with these laws is jointly liable for the payment of social security obligations as well as any applicable penalties. Therefore, if subcontractors providing services at our airports do not have their employees registered at the Mexican Social Security Institute and the National Workers’ Housing Fund Institute, we could be held jointly liable for the payment of social security obligations that such contractors may have, as well as any applicable penalties.
For more information on the recent legal reform affecting subcontracting and its effects on the Company, see also “—Risks Related to the Regulation of Our Business— Changes to Mexican laws, regulations and decrees applicable to the Company could have a material adverse impact on the results of operations”.
Our ability to expand certain of our airports and to comply with applicable safety guidelines could be limited by difficulties we encounter in acquiring additional land on which to operate our airports.
Certain guidelines established by the ICAO require the maintenance of a perimeter surrounding the land used for airport operations. At several of our airports, we do not control portions of the land within the required perimeters. If portions of such land adjacent to certain of our airports are developed by third parties in a manner that encroaches on the required perimeters, our ability to comply with applicable guidelines of the ICAO or to expand our airport operations could be adversely affected. Also, the growth of certain cities in the proximity of our airports could limit our ability to expand our airports.
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To allow the future expansion of the Monterrey airport, including the construction of a second commercial runway and the relocation of the control tower, between 2007 and 2011 we entered into a series of agreements for the purchase and exchange of plots of land adjacent or nearby the Monterrey airport. We currently own approximately 575 hectares (2.2 square miles) of land adjacent or nearby the Monterrey airport with an aggregate book value of Ps.1,705,774 thousand (U.S.$83.3 million). Improvements made to airport facilities at our expense may be recognized by AFAC as part of our investment in the airport concession. To recover the cost of our investments in land reserve, on December 4, 2012, we received authorization from the former Mexican Bureau of Civil Aviation (currently AFAC) to reallocate Ps.386,538 thousand (amount expressed in nominal 2009 pesos) in investments included in the 2011–2015 Master Development Program for the Monterrey airport to recover the cost of land acquisition. Additionally, the 2011 Master Development Program review recognized Ps.77,307 thousand (amount expressed in nominal 2009 pesos) in land acquisition costs. The recovery of the remaining investment of Ps.696,767 thousand (amount expressed in nominal 2009 pesos) in land acquisition costs has been included in the indicative period of our current approved Master Development Program for 2026-2035. The remaining amount of the investments may not be recognized by the Ministry of Infrastructure, Communications and Transportation in the future.
Our future profitability and growth will depend upon our ability to expand our airports in the future. Potential limitations on our possibility of expansion, such as those described above, could restrict any such expansion and thus have a material adverse effect on the future profitability and growth of our business.
We are exposed to risks inherent to the operation of airports.
We are obligated to protect the public at our airports and to reduce the risk of accidents at our airports. As with any company dealing with members of the public, we must implement certain measures for the protection of the public, such as fire safety in public spaces, design and maintenance of car parking facilities and access routes to meet road safety rules. We are also obligated to take certain measures related to aviation activities, such as maintenance, management and supervision of aviation facilities, rescue and fire-fighting services for aircraft, measurement of runway friction coefficients, flood control at the Acapulco airport and measures to control the threat from birds and other wildlife on airport sites. These obligations may require us to incur additional costs and could increase our exposure to liability to third parties for personal injury or property damage resulting from our operations.
Our insurance policies may not provide sufficient coverage against all liabilities.
While we seek to insure all reasonable risks, our insurance policies may not cover all of our liabilities in the event of an accident, terrorist attack or any other incident. The markets for airport insurance and construction insurance are limited, and a change in coverage policy by the insurance companies involved could reduce our ability to obtain and maintain adequate or cost-effective coverage. A certain number of our assets cannot, by their nature, be covered by property insurance (notably aircraft movement areas, and certain civil engineering works and infrastructure). In addition, we do not currently carry business-interruption insurance.
We are exposed to risks related to handling cargo.
The air cargo system is a complex, multi-faceted network that handles a vast amount of freight, packages and mail carried aboard passenger and all-cargo aircraft. The air cargo system is vulnerable to several security threats, including: potential plots to place explosives aboard aircraft; illegal shipments of hazardous materials; criminal activities, such as smuggling and theft; and potential hijackings and sabotage by persons with access to aircraft. Several procedural and technology initiatives to enhance air cargo security and detect terrorist and criminal threats have been put in place, such as an x-ray machine certified by the TSA in the bonded OMA Carga area at the Monterrey airport, or are under consideration.
We may be subject to risks related to the integrity of our facilities or the reduction of our cargo traffic volume. The occurrence of such events could adversely affect our business, results of operations, prospects and financial condition.
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We may not be able to detect money laundering operations and other illegal or improper activities, which could expose us to additional liabilities and adversely affect our operations and financial results.
We are required to comply with applicable anti-money laundering and anti-terrorism and other regulations in Mexico. Such laws require us to adopt and implement certain policies and procedures designed to detect and prevent transactions with third parties involved in money laundering or terrorist activities. Although we have adopted such policies and procedures, these procedures require services related to third parties that are not under our control, including third-party providers of complementary services or retailers, restaurants and other commercial tenants leasing spaces at the airport. To the extent that we may fail to fully comply with applicable laws and regulations or fail to detect illegal activities carried out by third parties, the competent authorities may impose certain fines on us and our reputation may also be adversely affected.
We could be exposed to additional risks if we pursue business opportunities in other countries.
From time to time, we may consider strategic participation in airport assets located in other countries. In the past, we have evaluated business opportunities in Mexico and other countries, and we may evaluate international expansion opportunities through capital investment in other concessions in the future. Expansion into a market outside of Mexico could require significant capital expenditures. If we pursue an international expansion opportunity, we could face internal or external risks, including, without limitation: (i) a lack of market experience in the relevant country, (ii) foreign exchange and economic volatility, (iii) the dedication of significant management resources to execute the international operation and (iv) exposure to risks inherent to doing business in the relevant country. Our inability to successfully manage the risks and uncertainties related to such business opportunities could have a material adverse effect on our business, results of operations, prospects and financial condition, including our capital structure.
Risks Related to the Regulation of Our Business
The Company provides a public service regulated by the Mexican government, and the flexibility in managing aeronautical activities is limited by the regulatory environment in which the Company operates.
The Company’s aeronautical fees charged to airlines and passengers are regulated, like most airports in other countries. In 2019, 2020 and 2021, approximately 67.5%, 54.8% and 60.5%, respectively, of the Company’s total revenues, and approximately 76.0%, 71.5% and 76.1%, respectively, of the sum of its aeronautical and non-aeronautical revenues were earned from aeronautical services, which are subject to price regulation under the Company’s maximum rates. These regulations may limit the Company’s flexibility in operating its aeronautical activities, which could have a material adverse effect on its business, results of operations, prospects and financial condition. In addition, several of the regulations applicable to the Company’s operations that affect its profitability are authorized (as in the case of the Master Development Programs) or established (as in the case of maximum rates) by the Ministry of Infrastructure, Communications and Transportation for five-year terms. The Company generally does not have the ability to unilaterally change its obligations (such as the investment obligations under its Master Development Programs or the obligation under its concessions to provide a public service) or increase our maximum rates applicable under those regulations should the passenger traffic or other assumptions on which the regulations were based change during the applicable term. In addition, this price regulation system may be amended in the future in a manner that would cause additional sources of the Company’s revenues to be regulated.
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The Company’s results of operations may be adversely affected by required efficiency adjustments to its maximum rates.
The Company’s maximum rates in Mexico 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 period ending December 31, 2020 and December 31, 2025, the maximum rates applicable to the Company’s airports reflect an annual efficiency improvement of 0.70%. Future annual efficiency adjustments will be determined by the Ministry of Infrastructure, Communications and Transportation in connection with the setting of each Mexican airport’s maximum rates every five years. For a description of these efficiency adjustments, see “Item 4. Information on the Company—Regulatory Framework—Revenue Regulation—Methodology for Determining Future Maximum Rates.” We cannot provide assurance that we will achieve efficiency improvements sufficient to maintain or increase our operating income as a result of the progressive decrease in each of our airport’s maximum rate.
The Company cannot predict how the regulations governing the business will be applied.
Many of the laws, regulations and instruments that regulate the Company’s business were adopted or became effective in 1999, and there is only a limited history and examples that would allow the Company to predict the impact of these legal requirements on its future operations. Mexican law establishes ranges of sanctions that might be imposed should the Company fail to comply with the terms of one of its concessions, the Mexican Airport Law and its regulations or other applicable laws. The Company cannot predict the sanctions that are likely to be assessed for a given violation within these ranges. It may encounter difficulties in complying with these laws, regulations and instruments.
Although the Master Development Programs and maximum rates through 2025 have been set, the Company cannot predict what the Master Development Program for 2026 and following years will establish. When determining the maximum rates for the next five year period (from 2026 to 2030), the Ministry of Infrastructure, Communications and Transportation may be solicited by different entities (for example, the Antitrust Commission) and the carriers operating at our airports) to modify the maximum rates, thus reducing the Company’s profitability. The laws and regulations governing the business, including the rate-setting process and the Mexican Airport Law, may change in the future or be applied or interpreted in a way that could have a material adverse effect on the Company’s business, results of operations, prospects and financial condition.
Additionally, on October 16, 2019, the Ministry of Infrastructure, Communications and Transportation established AFAC, an independent regulatory agency, that replaced the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil). AFAC is responsible for establishing, coordinating, overseeing and controlling international and national air transportation, as well as the airports, complementary services and generally all activities related to civil aviation. AFAC was formally established on February 26, 2021, and while the internal regulations and operation manuals further enacted did not change materially with respect to the previous ones, the Company cannot predict the actions that the AFAC will take in the future, or the effect of any such actions on its business.
On February 20, 2014, a bill of the Federal Antitrust Law (Ley Federal de Competencia Económica) was submitted to Mexico’s Congress in furtherance and as a result of certain amendments to Mexico’s Constitution passed in 2013. The bill was enacted and published on May 23, 2014. The law grants broader powers to the Antitrust Commission, including the authority to regulate essential facilities, order the divestment of assets and eliminate barriers to competition in order to promote access to the market. Such law also sets forth important changes in connection with mergers and anti-competitive behavior, increases liabilities and the amount of fines that may be imposed for violations of the law and limits the availability of legal defenses against the application of the law. The Antitrust Commission may therefore determine that the services that the Company provides at its airports are essential and require it to implement significant changes to its business operations and thus generate a significant impact on its results of operations.
For example, pursuant to the Federal Antitrust Law (Ley Federal de Competencia Económica), the Antitrust Commission determined that the slots allocated to air carriers at the Mexico City International Airport constitute an essential service. The Antitrust Commission found that the allocation of slots led to flight delays and cancellations and, among others, hindered entry to new competitors. On July 3, 2017, the Antitrust Commission issued a series of corrective measures (the “Corrective Measures”) for the Mexico City International Airport to address the inefficiencies and anticompetitive effects observed at such airport.
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In response to the Antitrust Commission’s findings, the Ministry of Infrastructure, Communications and Transportation (Secretaría de Infraestructura, Comunicaciones y Transportes) published an amendment to the regulations of the Mexican Airport Law in the Federal Official Gazette on September 29, 2017, as well as general guidelines for the allocation of slots at congested airports (the “General Guidelines”). The Antitrust Commission found that the reforms issued by the Ministry of Infrastructure, Communications and Transportation did not provide a solution to the issues the Antitrust Commission had addressed and that the General Guidelines directly contradicted the Corrective Measures. As a result, the Antitrust Commission filed an appeal (controversia constitucional) before the Mexican Supreme Court, arguing that the Antitrust Commission, not the Ministry of Infrastructure, Communications and Transportation, has the authority to regulate the allocation of slots as a public essential service. On November 26, 2019 the Mexican Supreme Court ruled against the Antitrust Commission.
Even though none of its airports have been declared congested as of the date of this report, the Company cannot predict whether or when this will happen. Similarly, it cannot predict whether the Antitrust Commission will declare any of its airports, or any complementary or commercial service provided at the airports, as essential services, and consequently, establish rules, recommendations, guidelines or conditions that could limit or restrict the Company’s aeronautical and/or non-aeronautical revenues.
The regulations pursuant to which the maximum rates applicable to the aeronautical revenues are established do not guarantee that the consolidated results of operations, or the results of operations of any airport, will be profitable, or that the Company will realize the expected return on investment.
The regulations applicable to the Company’s 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 the Company may earn at that airport from services subject to price regulation. For a discussion of the framework for establishing its maximum rates and the application of the rates, see “Item 4. Information on the Company—Regulatory Framework—Revenue Regulation.” On November 30, 2020, the Ministry of Infrastructure, Communications and Transportation approved, based on the terms of the Company’s concessions, the maximum rates for its airports from January 1, 2021 through December 31, 2025. Under the terms of the Company’s concessions, there is no guarantee that the results of operations of any airport will be profitable. The Company may not realize its expected return on investment from investments under the Master Development Programs.
The Company’s concessions provide that an airport’s maximum rates will be adjusted periodically for inflation (determined by reference to the Mexican Producer Price Index (Índice Nacional de Precios Productor), excluding fuel). Although the Company is entitled to request additional adjustments to an airport’s maximum rates under certain circumstances including, among others, required capital investments not foreseen in the Master Development Programs, decreases in capital investments attributable to Mexican economy-related passenger traffic decreases or modifications of the concession tax payable by the Company, its concessions provide that such a request will be approved only if the Ministry of Infrastructure, Communications and Transportation determines that certain limited events specified in the concessions have occurred. Therefore, such a request may not be granted in the future. If a request to increase an airport’s maximum rates is not granted, and the Company is impacted by the circumstances that led to the request, its results of operations and financial condition could be adversely affected, and the value of Series B shares and ADSs could decline.
The Company business is dependent upon international regulations that affect Mexican airlines.
The FAA evaluates the legal framework for civil aviation and issues related to the monitoring, staff training and inspection processes related to regulations issued by the ICAO.
On May 25, 2021, the FAA announced that, following an assessment of the Mexican Federal Agency for Civil Aviation (AFAC), it had determined that Mexico was not in compliance with international safety standards set by ICAO, and as a result, downgraded Mexico’s aviation safety from Category 1 rating to an ICAO Category 2 rating.
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The FAA had already downgraded Mexico’s aviation safety rating from a Category 1 rating to a Category 2 rating on July 30, 2010, as a result of the FAA’s visit to the Mexican Bureau of Civil Aviation (currently AFAC) between January and July 2010. The downgrade was attributable to an insufficient number of flight inspectors and administrative and organizational elements in the Mexican Bureau of Civil Aviation (currently AFAC).
The consequences of the above-mentioned downgrades were the suspension of the right to operate code-shared flights and the restriction of Mexican airlines’ ability to increase the frequency of, or add new routes to, the United States.
In 2019, 2020 and 2021, 2.9%, 2.8% and 5.0%, respectively, of our total passenger traffic, corresponded to passengers who traveled through our airports on flights to or from the United States operated by Mexican Airlines. The Company cannot be certain of how long this rating will be maintained and 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 our airports.
If the Company exceeds the maximum rate at any airport at the end of any year, it could be subject to sanctions.
Historically, the Company has set the tariffs it charges for aeronautical services at each airport in order to come as close as possible to its authorized maximum rate for that airport in any given year. For example, in 2021, the revenues subject to maximum rate regulation represented approximately 92.1% of the amounts the Company was entitled to earn under the maximum rates for all of its airports. The Company may not be able to establish tariffs in the future that allows it to collect substantially all of the revenues it is entitled to earn from services subject to price regulation.
The specific tariffs the Company charges for aeronautical services are determined based on various factors, including projections of passenger traffic volumes, the Mexican Producer Price Index (excluding fuel), the Mexican Consumer Price Index and the value of the peso relative to the U.S. dollar. These variables are outside of the Company’s control. The Company’s projections could differ from the applicable actual data, and, if these differences occur at the end of any year, they could cause the Company to exceed the maximum rate at any one or more of its airports during that year.
If the Company exceeds the maximum rate at any airport at the end of any year, the Ministry of Infrastructure, Communications and Transportation may assess a fine and may reduce the maximum rate at that airport in the subsequent year. The imposition of sanctions for violations of certain terms of a concession, including for exceeding an airport’s maximum rate, can result in termination of the concession if the relevant term has been violated and sanctions have been imposed at least three times. In the event that any one of the Company’s concessions is terminated, its other concessions may also be terminated. For a discussion of events that may lead to a termination of a concession, see “Item 4. Information on the Company—Regulatory Framework—Penalties and Termination and Revocation of Concessions and Concession Assets.”
Depreciation of the peso may cause the Company to exceed the maximum rates.
The Company aims to charge prices that are as close as possible to its maximum chargeable rates, and it is entitled to adjust the specific tariffs only once every six months for inflation (or earlier upon a cumulative increase of 5% in the Mexican Producer Price Index (excluding fuel)). However, the Company generally collects passenger charges from airlines 30 to 60 days following the date of each flight. The tariffs for the services that it provides to international flights or international passengers are generally denominated in U.S. dollars but are paid in Mexican pesos based on the average exchange rate for the month prior to each flight. Accordingly, depreciation of the peso, particularly late in the year, could cause the Company to exceed the maximum rates at one or more of its airports, which could lead to the imposition of fines and the subsequent termination of one or more of its concessions.
The peso has historically experienced significant volatility. From December 31, 2019 to December 31, 2020, the peso depreciated by approximately 5.5%, from Ps.18.86 per U.S.$1.00 on December 31, 2019 to Ps.19.89 per U.S.$1.00 on December 31, 2020. From December 31, 2020 to December 31, 2021, the peso depreciated by approximately 3.1% from Ps.19.89 per U.S.$1.00 to Ps.20.51 per U.S.$1.00. On April 22, 2022, the exchange rate was Ps.21.31 per U.S.$1.00.
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The Mexican government may terminate or reacquire the concessions under various circumstances, some of which are beyond the control of the Company.
The Company’s concessions are its principal assets, and it would be unable to continue operations without them. A concession may be revoked by the Mexican government for certain prescribed reasons, including the failure to comply with the Master Development Programs, a temporary or permanent halt in the Company’s operations, actions affecting the operations of other concession holders in Mexico, the failure to pay damages resulting from its operations, the failure to keep the rates from exceeding its maximum rates or the failure to comply with any other material term of its 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. The concessions may also be terminated upon the Company’s bankruptcy or insolvency. Violations of the Mexican Airport Law, its regulations or other federal regulations could result in similar sanctions. In the event that any one of the Company’s concessions is terminated, its other concessions may also be terminated. For a discussion of events that may lead to a termination of a concession, see “Item 4. Information on the Company—Regulatory Framework—Penalties and Termination and Revocation of Concessions and Concession Assets.”
Under applicable Mexican law and the terms of the Company’s concessions, its concessions may also be made subject to additional conditions, including under the renewed Master Development Programs, which the Company may be unable to meet. Failure to meet these conditions may also result in fines, other sanctions and the termination of the concessions.
The Mexican government may also terminate one or more of the concessions at any time through reversion, if, in accordance with applicable Mexican law, it determines that it is in the public interest to do so. The Mexican government may also assume the operation of any airport in the event of war, public disturbance or a threat to national security. In addition, in the case of a force majeure event, the Mexican government may require the Company to implement certain changes in its operations. In the event of a reversion of the public domain assets that are the subject of the concessions, the Mexican government under Mexican law is required to compensate the Company for the value of the concessions or added costs based on the results of an audit performed by appraisers or, in the case of a mandated change in the Company’s operations, the cost of that change. Similarly, in the event of an assumption of the Company’s operations, other than in the event of war, the government is required to compensate it and any other affected parties for any resulting damages. The Company may not receive compensation equivalent to the value of its investment in or any additional damages related to its concessions and related assets in the event of such action.
In the event that any one of the Company’s concessions is terminated, whether through revocation or otherwise, its other concessions may also be terminated. Thus, the loss of any concession would have a material adverse effect on the business and results of operations.
The Mexican government could grant new concessions that compete with the airports operated by the Company.
The Mexican government could grant additional concessions to operate existing government-managed airports or authorize the construction of new airports, which could compete directly with the airports operated by the Company.
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On February 5, 2014, the Mexican government announced in the Federal Official Gazette that the Ministry of Infrastructure, Communications and Transportation granted to Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V., a concession for 20 years to construct, operate and exploit a civil-aviation airport in the municipality of Bocoyna, Chihuahua, located 250 kilometers (144 miles) from the city of Chihuahua, within an area of 95.5 hectares (0.4 square miles). The government of the state of Chihuahua owns 98% of the capital stock of Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V. The airport has an ICAO Category 3C rating and could present competition to the Company’s airport located in the municipality of Chihuahua, which has a higher ICAO Category 4D rating and is located 18 kilometers (11.2 miles) from the city of Chihuahua. The Ministry of Infrastructure, Communications and Transportation has the capacity to upgrade the category of the airport depending on improvements to infrastructure made by the concessionaire or could downgrade the category if the concessionaire does not maintain adequate conditions in the airport. On February 21, 2020, the State of Chihuahua announced that the airport was expected to start operations in late 2020, with limited operations through late 2021. On February 1, 2022, the State of Chihuahua mentioned that the airport is expected to start operations in 2023, due to constructions delays because of COVID-19. The airport is expected to be fully operational beginning in 2023 and will serve both commercial and general aviation flights. It will have an annual capacity to serve up to 80,000 passengers per year during the first five years of operations, and later increase its capacity to serve up to 250,000 passengers per year. As of the date of this report, the Company cannot predict whether the Chihuahua airport will materially affect its results of operations or financial performance.
In the future, the Company may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession. Historically, Aeropuerto del Norte has been used solely for general aviation operations. The state of Nuevo León has requested in the past that the Ministry of Infrastructure, Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations. To date, the Ministry of Infrastructure, Communications and Transportation has not amended Aeropuerto del Norte’s concession. However, the Ministry of Infrastructure, Communications and Transportation may authorize such an amendment and commercial aviation flights may operate from Aeropuerto del Norte in the future. Any competition from other such airports could have a material adverse effect on the Company’s business, results of operations, prospects and financial condition. Under certain circumstances, the grant of a concession for a new or existing airport must be made pursuant to a public bidding process. In the event that a competing concession is offered in a public bidding process, the Company may not participate in such a process, or it may not be successful if it were to participate. See “Item 4. Information on the Company—Regulatory Framework—Grants of New Concessions.”
The Ministry of Infrastructure, Communications and Transportation could require the Company to monitor certain aircraft movements at its airports that the Company does not currently control, which could result in increased costs.
The Mexican Air Traffic Control Authority (Servicios a la Navegación en el Espacio Aéreo Mexicano) or “SENEAM”, could require the Company to monitor certain aircraft movements at its airports that the Company does not currently control, which could result in increased costs. SENEAM may require the Company to manage and control aircraft movements in and out of its arrival and departure gates and remote boarding locations at its airports. Should SENEAM require the Company to control, or if the Company, for efficiency purposes, requests to control, these aircraft movements directly at any or all of its other airports in the future, the Company’s results of operations could be negatively impacted by increased operating insurance and liability costs resulting from taking on these obligations.
Changes to Mexican laws, regulations and decrees applicable to the Company could have a material adverse impact on the results of operations.
In recent years, the Mexican government has implemented changes to the tax laws applicable to Mexican companies, including the Company. The terms of the Company’s concessions do not exempt it from any changes to the Mexican tax laws. Should the Mexican government implement changes to the tax laws that result in the Company having significantly higher income tax, the Company will be required to pay higher amounts due pursuant to any such changes, which could have a material adverse impact on its results of operations. For example, the issuance of the Business Flat Tax (Impuesto Empresarial a Tasa Única), which was published on October 1, 2007 and repealed in 2013, adversely impacted the Company’s results of operations in each of the years from 2007 through 2013. In addition, changes to the Mexican constitution or to any other Mexican laws could also have a material adverse impact on the Company’s business, results of operations, prospects and financial condition.
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On December 27, 2016, the Ministry of Finance and Public Credit announced an increase, effective January 1, 2017, in the maximum gasoline and diesel prices to be applied in certain regions of Mexico, which caused an increase of gasoline prices of up to 20% in those areas. Furthermore, in November 2017, the Mexican Government removed price controls on gasoline and diesel, and such removal remains in place as of today. The removal of price controls and the resulting price increases led to widespread protests across Mexico. The Company cannot predict the effect of changes in gasoline and diesel prices, and any related political and social unrest, on the Mexican economy or whether the Mexican Government may alter its strategy for price liberalization in the future.
On May 1, 2019, the Mexican Government published significant reforms in the Federal Official Gazette to the Mexican Federal Labor Law. These changes include the creation of courts specializing in labor law and protections to the collective rights of workers and union rights. As a result of these reforms, employees cannot be forced to join a union and more than one union can exist in every workplace. Currently, all unionized Company employees are represented by a national union of airport workers that operates throughout Mexico. To the extent unionized airport workers seek to create or join new unions, and/or materially modify the conditions agreed with the Company and with other Mexican airport operators, the Company’s operations could be adversely affected by union activities, including organized strikes or other work stoppages. The Company cannot predict how these developments may affect the Company’s results of operations or its financial condition. Any increased demands by the Company’s unionized workers may lead to higher labor costs, which could have a negative impact on its results of operations. For more information, see “Collective labor conflicts in Mexico could have an adverse impact on our results of operations” and “If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.”
As part of the current Federal Administration’s effort to protect worker’s rights, on October 23, 2019, NOM-035-STPS-2018 became effective. This NOM seeks to identify and prevent psychosocial risk factors in the workplace and promote a favorable work environment. Some of the obligations set forth in this NOM include the creation of internal policies to prevent psychosocial risks, such as workloads, excessive work hours and shift rotations, negative interference in family life, negative leaderships in the workplace and violence in the workplace. While the Company has complied with the NOM provisions, the Company cannot predict whether its employees will eventually claim that the Company violated any of the provisions under the NOM. Any claims against the Company filed by its employees may lead to higher labor costs, which could have a negative impact on our results of operations. For more information, see “If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.”
In December 2019, the Mexican government published several amendments to the Income Tax Law, Value Added Tax Law, Excise Tax Law and the Federal Tax Code, most of which became effective on January 1, 2020. This set of tax reforms is one of the most important in the past few years and its main purpose is to tackle tax evasion by strengthening tax authorities’ control mechanisms. These amendments imposed stringent restrictions on the deductibility of certain expenses, such as a new earnings-stripping rule applicable to net interest, and the non-deductibility of payments to related parties that are deemed subject to preferential tax regimes or by means of structured arrangements, introduced regulations regarding hybrid mismatches and added amendments to the tax treatment applicable to tax transparent foreign entities or arrangements, all of which could affect our operating results. None of these amendments significantly impacted our operating results in 2021.
The 2020 tax reform also introduced a new mandatory disclosure regime aimed at tax advisors, for purposes of reporting and monitoring specific tax schemes listed under article 199 of the Federal Tax Code.
On January 11, 2021, the Mexican Government published reforms to Article 311 of Mexican Federal Labor Law in the Federal Official Gazette, regulating remote working conditions. As a result of these reforms, employees that work more than 40% of their work hours from home or from any other place that is not the applicable company’s domicile without supervision or guidance from the employer have new rights and obligations. These new rules also sets forth new obligations for employers. For example, employers must now provide the necessary tools and services for employees to fulfill their jobs. This reform became effective as of January 12, 2021 and provides for the publication of a Mexican Official Norm (Norma Oficial Mexicana, or “NOM”) which will determine the conditions to be complied with by employers to protect the security and health of employees working under this modality. These developments may adversely affect the Company’s results of operations or financial condition.
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On April 23, 2021, the Mexican government published a decree pursuant to which several amendments were made to the Federal Labor Law, Income Tax Law, VAT Law, among others, in order to prohibit outsourcing of personnel, limit subcontracting and amending profit-sharing rules. The amendments became effective April 24, 2021, except for certain legal provisions that became effective August 1, 2021. Among the most important amendments made were: (i) prohibition of outsourcing of personnel, however the provision of specialized services or the execution of specialized works (through external providers or companies within the same business group) is still allowed, only to the extent the services provided are not part of the corporate purpose or the primary economic activity of the company receiving the services; (iii) joint and several liability of companies hiring specialized services with a contractor who fails to comply with its labor obligations; (iv) companies that provide specialized services will require to be registered with the Ministry of Labor and Social Welfare (STPS); (v) increase in fines for violation of the rules; and (vi) payments related to subcontracting of personnel will not receive income tax deduction or VAT accreditation. In order to comply with the new regulations, the Company transferred certain employees to its airport subsidiaries, terminated certain subcontracting services contracts and ensured that its remaining subcontracted service providers complied with the new regulation. None of these regulatory amendments nor the actions the Company took in response thereto had any material impact in the Company’s results of operations or its financial condition, and we do not expect any material impacts in the future.
On March 10, 2021, a decree amending certain terms of the Electric Industry Law (“EIL”) became effective. The amendments aim to strengthen the state-owned utility Comisión Federal de Electricidad (“CFE”). The amendment includes, among others, (a) modifications to the order of priority of dispatch to the national electric grid; (b) modifications to the granting of permits referred in the EIL, which will now be subject to the planning criteria issued by the Ministry of Energy; and (c) powers granted to the Energy Regulatory Commission (“CRE”, for its acronym in Spanish) to revoke vesting self-supply contracts. The EIL amendments have been subject of numerous amparo lawsuits before federal courts in Mexico, in which judges have granted general injunctions, suspending the effects of the EIL amendments, for the benefit of anyone affected by the amendments, until a ruling on the merits of the amparo lawsuits is issued by the competent courts. Furthermore, the EIL’s constitutionality was judicially challenged by the Mexican Federal Antitrust Commission (Comisión Federal de Competencia Económica) and local governments, and through an unconstitutionality proceeding (acción de insconstitucionalidad) filed by two-thirds of the Mexican Senate. However, the Mexican Supreme Court dismissed the action of unconstitutionality and the constitutional challenges for lack of sufficient votes to proceed with these actions. As of the date of this report, the Mexican Supreme Court has not issued any binding precedent on the matter, so the federal courts reviewing the amparos filed against the EIL could rule differently than the Mexican Supreme Court.
On September 30, 2021, the Mexican federal executive branch presented a bill before the House of Representatives (Camara de Diputados) to amend Articles 25, 27 and 28 of the Mexican Constitution, which bill proposed changes to the legal framework that governs CFE and the Mexican power industry generally. The bill was vetoed by the House of Representatives as of April 17, 2022 and will not go into effect.
In addition, in 2017 we entered into a self supply agreement (“SSA”) under the self-supply (“autoabasto”) legal figure, with a wind electricity generator, which expires in 2028. In 2021, approximately 82.3% of the total electricity consumption of the Company was supplied under this agreement. As of the date of this report, we cannot predict how these amendments to the EIL and the proposed bill to amend the Constitution will affect the SSA if they ever become effective.
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Risks Related to Mexico
The Company’s business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico could adversely affect its business and results of operations.
In 2019, 2020 and 2021, domestic terminal passengers have represented approximately 88.1%, 89.3% and 87.2%, respectively, of the passenger traffic volume in the Company’s airports. In addition, all of its assets are located, and all of its operations are conducted, in Mexico. Accordingly, the Company’s financial conditions and results of operations are substantially dependent on economic conditions prevailing from time to time in Mexico. As a result, its business, financial condition and results of operations could be adversely affected by any deterioration of the general condition of the Mexican economy, by a devaluation of the peso, by inflation and high interest rates in Mexico or by other negative political, social and economic developments in Mexico.
In the past, Mexico has experienced economic crises, caused by internal and external factors, characterized by exchange-rate instability (including large devaluations), high inflation, high domestic interest rates, economic contraction, a reduction of international capital flows, a reduction of liquidity in the banking sector and high unemployment rates.
The Mexican economy underwent an economic crisis that began in 2008 and continued in 2009 as a result of the impact of the global financial crisis, which affected many emerging economies. The Mexican economy’s link with the U.S. economy remains very important, and therefore, any downside to the economic outlook of the U.S. may hinder any recovery in Mexico. This correlation may have an impact on Mexico’s GDP growth and other macro-economic conditions. The Mexican economy achieved real GDP growth rates of 5.0%, -8.5% and -0.1 in 2021, 2020 and 2019, respectively, and is estimated to increase by 2.8% in 2022 and to grow by 2.7% in 2023, according to the World Economic Outlook published by the International Monetary Fund in January 2022.
During 2021, average reference interest rates in Mexico decreased by 70 basis points compared to 2020. The annualized interest rates on 28-day short-term Mexican treasury bills, or Cetes (Certificados de la Tesorería de la Federación), averaged approximately 6.7%, 7.6%, 7.8%, 5.3% and 4.6% for 2017, 2018, 2019, 2020 and 2021, respectively. To the extent that the Company incurs peso-denominated debt in the future, it could be at high interest rates.
If inflation or interest rates increase significantly or if the Mexican economy is otherwise further adversely impacted, the Company’s business, financial condition, prospects and results of operations could be materially and adversely affected because, among other things, demand for transportation services may decrease. Similar events may occur, and the recurrence of such events may adversely affect the Company’s business, results of operations, prospects and financial condition.
Political conditions in Mexico, could materially and adversely affect the Mexican economy and political climate and, in turn, the operations of the Company.
Last presidential and federal congressional elections in Mexico were held on July 1, 2018. President López Obrador’s term will expire on September 30, 2024. Historically, the Mexican president has strongly influenced new policies and governmental actions that impact the Mexican economy. We cannot assure you that the current administration or any other future administration will maintain business-friendly and open-market economic policies and policies that stimulate economic growth and social stability. Any administration could implement substantial changes in law, policy and regulations in Mexico, which could adversely affect our business, financial condition, results of operations and prospects. In addition, any actions taken by the administration may lead to riots, protests and looting that could adversely affect our operations. Our financial condition and results of operation may be adversely affected by changes in Mexico’s political climate, to the extent that such changes affect the nation’s economic policies, growth, stability, outlook or regulatory environment.
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In addition, following the congressional elections on July 1, 2018, Morena obtained an absolute majority in the Mexican Chamber of Deputies and, together with its allied political parties (Partido del Trabajo and Partido Encuentro Social), obtained a majority in the Mexican Senate. The current members of the Mexican Congress took office on September 1, 2018. We cannot assure you that Morena and its political party allies or any future members will not introduce new legislative initiatives or modify existing legislation that could, in turn, result in economic or political conditions that could materially and adversely affect our business. On June 6, 2021, a number of electoral processes took place including mid-term elections for the Mexican Chamber of Deputies as well as governor elections in fifteen states, including six of the states in which we operate our airports. While the opposition coalition made important gains in the Chamber of Deputies, Morena won 11 of the states’ governor races. Changes in laws, public policies or regulations may affect the political and economic environment in Mexico and, consequently, contribute to economic uncertainty and heightened volatility of the Mexican capital markets and in securities issued by Mexican companies.
Furthermore, our business may be adversely affected by fluctuations in the value of the U.S. dollar as compared to the Mexican peso, inflation, interest rates, changes in laws and other political or social developments in Mexico over which we have no control. Any of the above may have an adverse effect on Mexico’s economic situation and, in turn, on our business, results of operations, financial condition and ability to repay our indebtedness.
Adverse domestic events could negatively impact the Company’s business and results of operations.
The operations of our airports may be disrupted due to the actions of third parties, such as protestors or demonstrators, which are beyond our control. Any disruption in our operations, or adverse consequence resulting from protests or riots, including flight delays, 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.
Demonstrations and riots taking place in cities where our airports are located and where they are either a potential target or in the path of such demonstrations could generate flight cancellations and the suspension of our operations and could materially and adversely affect our business, results of operations, prospects and financial condition.
Depreciation of the peso relative to the U.S. dollar could adversely affect the results of operations and financial condition of the Company.
From December 31, 2019 to December 31, 2020, the peso depreciated from Ps.18.86 per U.S.$1.00 on December 31, 2019 to Ps.19.89 per U.S.$1.00 on December 31, 2020. From December 31, 2020 to December 31, 2021, the peso appreciated from Ps.19.89 per U.S.$1.00 on December 31, 2020 to Ps.20.51 per U.S.$1.00 on December 31, 2021 a depreciation of 3.1%. During the first months of 2022, the peso appreciated, reaching Ps.21.31 per U.S.$1.00 on April 22, 2022.
A depreciation of the peso affects the Company’s business in the following ways: (i) international passengers and international flights pay tariffs reported in U.S. dollars; while these tariffs are generally collected in Mexican pesos up to 60 days following the date of each flight, any depreciation of the Mexican peso has a positive impact on the Company’s results from operations, which are reported in Mexican pesos; (ii) the Company has cash balances denominated in U.S. dollars; a depreciation in the Mexican peso would result in higher cash balances when converted to Mexican pesos, thus causing foreign exchange gains; and (iii) the Company has financial liabilities denominated in U.S. dollars; a depreciation in the Mexican peso results in higher debt balances when converted to Mexican pesos, thus causing foreign exchange losses. As of December 31, 2021, the Company had U.S.$4.8 million of liabilities denominated in U.S. dollars, representing 0.8% of its consolidated debt. As of March 31, 2022, U.S.$21.6 million of the Company’s cash balance was denominated in U.S. dollars.
Moreover, the depreciation of the peso also affects some of the Company’s airline customers transacting in U.S. dollars, including the purchases or leases of equipment, maintenance and fuel. Severe devaluation or depreciation of the peso may also result in the disruption of the international foreign exchange markets and may limit the Company’s ability to transfer or to convert pesos into U.S. dollars and other currencies.
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High incidences of crime in Mexico, including extortion and drug trafficking, could adversely affect the Company’s business.
Higher incidences of crime throughout Mexico, including extortion and drug trafficking, could have an adverse effect on our business, results of operations, prospects and financial condition, as it may decrease the international and domestic passenger traffic directed to or within Mexico. The travel warning issued by the U.S. Department of State (Bureau of Consular Affairs) on March 16, 2022 (the “Travel Advisory”) urges U.S. citizens not to travel to the states of Colima, Guerrero, Michoacán, Sinaloa (except the city of Mazatlán), and Tamaulipas. This Travel Advisory also urges U.S. citizens to defer non-essential travel to cities, states and other regions, such as Chihuahua, Coahuila, Durango, areas of the state of Jalisco that border the states of Michoacán, Mexico State, Morelos, Nayarit, the eastern edge of Sonora which borders the state of Chihuahua, and Zacatecas. Drug-related violence and other incidents of organized crime may not be contained, which could have a material adverse effect on our business, results of operations, prospects and financial condition.
In January 2019, the Mexican government implemented measures to reduce the theft of fuel transported in pipelines operated by Mexican state-owned entity Petróleos Mexicanos (PEMEX) throughout Mexico. As a result of these measures, certain states in Mexico, such as Mexico State, Hidalgo, Querétaro, Guanajuato, Jalisco, Tamaulipas and Nuevo León, were affected by a shortage of gasoline for automobile use. Even though there were no shortages of aircraft fuel as a result of the actions implemented by the Mexican government, we cannot assure that future actions taken by the Mexican government against theft of fuel will not affect the availability of aircraft fuel in states where our airports are located, which, in turn, could have an adverse effect on our operations.
The value and prices of securities issued by Mexican companies, including us, may be adversely affected by developments in other countries.
The market value of securities of Mexican companies, including us, may be, to varying degrees, affected by economic and market conditions in other countries. Although economic conditions in these countries may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers. In past years, prices of both Mexican debt and equity securities have been adversely affected by the sharp drop in Asian securities markets and the economic crises in Argentina, Brazil, Greece, Italy, Portugal, Russia, Spain, Venezuela and the United Arab Emirates.
In addition, economic conditions in Mexico have become increasingly correlated to economic conditions in the United States. Therefore, an economic downturn in the United States will significantly adversely impact the Mexican economy. Furthermore, the Company cannot assure you that any policies adopted by the Biden U.S. administration will not have an impact in the market value of its securities, or that the market value of its securities will not be adversely affected by events elsewhere. See also, ““—Risks Related to Our Operations— Large scale international events, including acts of terrorism, wars and the military action launched by Russian forces in Ukraine, could have a negative impact on international air travel and our revenues.”
Delays in the process of obtaining necessary governmental approvals could affect the ability to expand the airports of the Company.
The expansion, development and growth of the Company’s airports from time to time may require governmental approvals, administrative proceedings or some other governmental action. Any delay or inability to obtain such approvals or favorable outcomes of such proceedings could have a negative impact on the expansion, development and growth of the Company’s airports.
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Mexico’s environmental legislation could limit the growth of some of our airports.
The level of environmental regulation in Mexico is increasing and the enforcement of environmental laws has become more common. For instance, Mexico launched a carbon dioxide (“CO2”) market in 2018. The market requires that industries that generate above a certain amount of CO2 emissions pay for rights to excess emissions. Starting in 2019, the legislation also requires that companies report their global emissions as verified by the Mexican Emissions Registry (Registro Nacional de Emisiones). In addition, new water quality standards are being discussed, which would require greater water quality for all of our wastewater disposal. 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.
According to the Mexican Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) norm NOM-SEMARNAT-059-2010, mangroves are protected species, and it is a criminal offense to remove such species. Within the grounds of our Acapulco and Zihuatanejo airports, we have extended areas with mangroves, which may limit our potential to expand such airports.
The Mexican National Water Commission (Comisión Nacional del Agua) has the authority to restrict water use in some of our airports due to water shortage in northern Mexico and has enhanced its mechanisms to verify compliance with the fiscal, administrative and technical requirements regarding the extraction and discharge of water. Concessionaires who fail to comply with any of these requirements may be subject to administrative procedures that may result in the cancellation of water extraction rights and /or the imposition of significant fines.
Furthermore, all thirteen of our airports have received the Environmental Quality Certification awarded by the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente). However, compliance with current or future environmental regulations may require us to incur additional costs in order to bring our airports into compliance, and if we fail to comply with current or future environmental regulations, we may be subject to fines and other sanctions.
On August 11, 2014, the Mexican National Agency of Industrial Safety and Protection of the Environment of the Hydrocarbons Sector (Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos, or “ASEA”) was created. While initially taking a secondary role to the role of the Mexican Ministry of the Environment and Natural Resources, ASEA has started to enforce its legal powers. Our airport growth projects related to fuel supply must now be approved by ASEA, which may result in more burdensome proceedings for the approval of special projects related to hydrocarbons. As of the date of this report, there can be no assurance whether ASEA’s rules and regulations will materially affect our business or results of operations.
Minority shareholders may be less able to enforce their rights against the Company, its directors or 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, there are no precedent cases in which Mexican courts found that the directors violated their fiduciary duties. As a result, it may be difficult for minority shareholders to bring an action against directors for breach of these duties and achieve the same results as in most jurisdictions in the United States. Procedures for class-action lawsuits were incorporated into Mexican law and became effective in March 2012. However, these rules and procedures are different and more limited than those in place in the United States. Therefore, it may be more difficult for minority shareholders to enforce their rights against the Company, its directors or its controlling shareholders.
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Enforcing civil liabilities against us or our directors, officers and controlling persons may be difficult.
We are organized under the laws of Mexico, and almost all of our directors, officers and controlling persons reside in Mexico. In addition, a substantial portion of our assets and the assets of our directors, officers and controlling persons are located in Mexico. As a result, it may be difficult for investors to effect service of process on such persons within the United States or elsewhere outside of Mexico or to enforce judgments against us or our directors, officers and controlling persons, including in any action based on civil liabilities under U.S. federal securities laws. There is doubt as to the enforceability in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts or other courts outside of Mexico, of liabilities based solely on U.S. federal securities laws.
Mexican law and the bylaws of the Company restrict the ability of non-Mexican shareholders to invoke the protection of their governments with respect to their rights as shareholders.
As required by Mexican law, the Company’s bylaws provide that non-Mexican shareholders shall be considered as Mexicans in respect of their ownership interests in the Company and shall be deemed to have agreed not to invoke the protection of their governments in certain circumstances. Under this provision, a non-Mexican shareholder is deemed to have agreed not to invoke the protection of his own government by asking such government to interpose a diplomatic claim against the Mexican government with respect to the shareholder’s rights as a shareholder, but is not deemed to have waived any other rights it may have, including any rights under the U.S. securities laws, with respect to its investment in the Company. If you invoke such governmental protection in violation of this agreement, your shares could be forfeited to the Mexican government.
The Company is subject to different corporate disclosure standards than U.S. companies.
A principal objective of the securities laws of the United States is to promote full and fair disclosure of all material corporate information. However, there may be less publicly available information about foreign issuers of securities listed in the United States than is regularly published by or about U.S. issuers of listed securities.
Risks Related to Our Shareholders
SETA has the right to appoint certain key members of our management, and SETA’s interests may differ from those of other shareholders.
As of the date of this report, Fintech Holdings, Inc., Bagual S.à r.l. (“Bagual”), Grenadier S.à r.l. (“Grenadier”), Pequod S.à r.l. (“Pequod”), Harpoon S.à r.l. (“Harpoon”), Expanse S.à r.l. (“Expanse”) and Aerodrome Infrastructure S.à.r.l. (“Aerodrome”), together (“Fintech”), through Aerodrome and their direct subsidiary SETA, are the beneficial owners of 30.1% of our total capital stock. SETA directly owns Series B shares representing 1.9% of our total capital stock and owns Series BB shares that represent 12.8% of our capital stock. On July 9, 2021 Aerodrome acquired 60,155,201 Series B shares representing 15.4% of our capital stock through a tender offer. See “Item 5. Operating and Financial Review and Prospects—Recent Developments—Purchase of shares by Fintech Holdings Inc. and its affiliates”.
As long as SETA retains at least 7.65% of our capital stock in the form of Series BB, all of its special rights, including its right to nominate, appoint and remove certain directors and officers as holder of Series BB shares, will remain in place. The rights and obligations of SETA in our management are explained in “Item 7. Major Shareholders and Related Party Transactions—Major Shareholders.”
The termination of the Technical Assistance Agreement would also trigger the conversion of SETA’s remaining Series BB shares into Series B shares, resulting in the termination of all of SETA’s special rights. As long as the Technical Assistance Agreement remains in effect and SETA continues to hold at least 7.65% of our capital stock in the form of Series BB shares, it also has the right to appoint and nominate the same number of directors and officers that it is currently entitled to appoint under our bylaws. For further information on the Technical Assistance Agreement and its terms, see “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Arrangements Relating to SETA.”
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SETA’s veto rights as holder of at least 7.65% of our capital stock in the form of Series BB shares and its right to nominate, appoint and remove certain directors and officers as holder of Series BB shares, which will continue for as long as it maintains the aforementioned percentage and the Technical Assistance Agreement remains in effect, could constitute an obstacle for us to bring in a new strategic shareholder and/or operator. With the right to nominate, appoint and remove certain members of our senior management, SETA influences the actions of our management. Should SETA’s shares fall below this threshold, our management could change significantly. In the event of termination of the Technical Assistance Agreement, SETA would cease to have the special rights of the Series BB shares, which may adversely affect and disrupt our operations.
On September 14, 2020, Empresas ICA, S.A.B. de C.V. and Controladora de Operaciones de Infraestructura, S.A. de C.V. (“CONOISA”) filed Amendment No. 9 amending the Schedule 13D filed with the SEC, informing that prior to June 12, 2020, SETA was a wholly-owned subsidiary of ICA Tenedora,. S.A. de C.V. (“ICATEN”). On June 10, 2020, each of Bagual, Grenadier, Pequod, Harpoon and Expanse entered into a Stock Purchase Agreement with ICATEN and in the case of Bagual, a Stock Purchase Agreement with each of ICATEN and ICA Infraestructura, S.A. de. C.V. (a subsidiary of ICATEN), to purchase collectively 100% of the capital stock of SETA. The transactions closed on June 12, 2020 and the aggregate purchase price for the SETA shares was Ps. 5.47 per share for 862,703,377 shares.
On May 24, 2021, Aerodrome, SETA, Bagual, Grenadier, Pequod, Harpoon, Expanse, Fintech, and David Martínez purchased 923,703 ADSs, representing 7,389,624 Series B Shares, and 52,765,577 Series B Shares of the Company through a cash tender offer in the U.S and an offer by Aerodrome in Mexico directed to holders of Series B Shares. The transaction closed on July 9, 2021 and the aggregate purchase price for the Company’s shares was Ps.137 per Series B Share and Ps.1,096 per ADS, for a total of approximately Ps.8,241 million.
The interests of SETA, Fintech, or any shareholder holding Series BB shares may differ from those of our other shareholders and can be contrary to the preferences and expectations of our other shareholders. SETA and the officers nominated or appointed by it may not exercise their rights in ways that favor the interests of our other shareholders. Furthermore, as a result of our board’s decision-making process, officers appointed by SETA may influence decisions taken by the rest of our officers.
Risks Related to Our ADSs
You may not be entitled to participate in future preemptive rights offerings.
Under Mexican law, if we issue new shares for cash as part of a capital increase, we generally must grant our shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in the Company. Rights to purchase shares in these circumstances are known as preemptive rights. We may not legally be permitted to allow holders of ADSs in the United States to exercise any preemptive rights in any future capital increase, unless we file a registration statement with the SEC with respect to that future issuance of shares or the offering qualifies for an exemption from the registration requirements of the Securities Act of 1933, as amended.
At the time of any future capital increase, we will evaluate the costs and potential liabilities associated with filing a registration statement with the SEC and any other factors that we consider important to determine whether we will file such a registration statement.
We may not file a registration statement with the SEC in the future to allow holders of ADSs or shares in the United States to participate in a preemptive rights offering. In addition, under current Mexican law, sales by the depository of preemptive rights and distribution of the proceeds from such sales to you, the ADS holders, is not possible. As a result, your equity interest in the Company may be diluted proportionately.
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Holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary.
Under Mexican law, a shareholder is required to deposit its shares with the Secretary of the Company, S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V. (“Indeval”), a Mexican or foreign credit institution or a brokerage house in order to attend a shareholders’ meeting. A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to attend shareholders’ meetings. A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with the procedures provided for in the deposit agreement, but a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.
FORWARD-LOOKING STATEMENTS
This Form 20-F contains forward-looking statements. We may from time to time make forward-looking statements in our annual and periodic reports to the SEC on Forms 20-F and 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others. Examples of such forward-looking statements include but are not limited to:
Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from the projections, plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors, some of which are discussed above under “Risk Factors,” include material changes in the performance or terms of our concessions, developments in legal proceedings, economic and political conditions and government policies in Mexico or elsewhere, inflation rates, exchange rates, regulatory developments, customer demand and competition. We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties, including the duration and severity of the COVID-19 outbreak and its impacts on our business; may cause actual results to differ materially from those in forward-looking statements.
Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments.
Item 4. Information on the Company
HISTORY AND DEVELOPMENT OF THE COMPANY
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., which we refer to by the acronym “GACN”, is a corporation (sociedad anónima bursátil de capital variable) organized under the laws of Mexico. We were incorporated in 1998 as part of the Mexican government’s program for the opening of Mexico’s airports to private investment. The duration of our corporate existence is indefinite. We are a holding company and conduct substantially all of our operations through our subsidiaries. The terms “GACN”, “the Company”, “we”, “us” and “our” in this annual report refer to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., together with its subsidiaries, and to properties and assets that we own or operate, unless otherwise specified. Our registered office is located at Plaza Metrópoli Patriotismo, Piso 5, Av. Patriotismo 201, Col. San Pedro de los Pinos, Benito Juárez, Ciudad de México, México 03800, telephone +52.81.8625.4300. Our U.S. agent is Puglisi & Associates. Our U.S. agent’s address is 850 Library Avenue, Suite 204, Newark, Delaware 19711.
The SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports and information statements and other information regarding us. The reports and information statements and other information about us can also be downloaded from the SEC’s website or our website at http://www.oma.aero.
Investment by SETA and Its Affiliates
In 2000, as part of the first stage of our privatization, the Mexican government sold Series BB shares to SETA in a public bidding process. Pursuant to this transaction, SETA paid the Mexican government a total of Ps.864,055,578 (amount in nominal pesos, excluding interest) (U.S.$76.0 million based on the exchange rate in effect on the date of SETA’s bid) in exchange for:
Currently, Series BB shares represent 12.9 % of our capital stock and the remainder consist of Series B shares.
SETA’s current shareholders are:
Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers industry expertise and technology to us in exchange for a fee, which in 2021 amounted to approximately Ps.133,558 thousand. This agreement is more fully described in “Item 7. Major Shareholders and Related-Party Transactions.”
Initial Public Offering
On November 29, 2006, a Mexican trust established by Nacional Financiera, S.N.C., or NAFIN (a Mexican national credit institution and development bank owned and controlled by the Mexican Government), acting pursuant to the instructions of the former Ministry of Communications and Transportation (as of October 10, 2021, the “Ministry of Infrastructure, Communications and Transportation”), sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of ADSs and Series B shares, concurrently in the United States and Mexico. The net proceeds from the sale of the shares totaled approximately U.S.$432.2 million and were paid to the Mexican government.
Master Development Programs and Capital Expenditures
Master Development Program
Every five years, we are required to submit to the Ministry of Infrastructure, Communications and Transportation for approval a Master Development Program for each of our concessions describing, among other matters, our traffic forecasts for the following 15 years, and detailed expansion, modernization and major and minor maintenance plans for the following five years. Each Master Development Program is required to be updated and resubmitted for approval to the Ministry of Infrastructure, Communications and Transportation every five years. Upon such approval, the Master Development Program is binding for the following five years and deemed to constitute part of the relevant concession. Any major construction, renovation or expansion of an airport generally may only be made pursuant to a concession holder’s Master Development Program and upon approval by the Ministry of Infrastructure, Communications and Transportation. In November 2020, the Ministry of Infrastructure, Communications and Transportation approved the Master Development Programs for each of our subsidiary concession holders for the 2021 to 2025 period. These five-year Master Development Programs, which were approved by the Ministry of Infrastructure, Communications and Transportation, are in effect from January 1, 2021 until December 31, 2025, and we are required to comply with them on a year-by-year basis. We do not expect the COVID-19 pandemic to affect our committed investments under the current Master Development Programs.
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The following table sets forth our committed investments, including major maintenance expenditures, under our Master Development Programs by airport for 2021 through 2025. Figures are updated based on the Producer Price Index for the construction industry:
Committed Investments Under Master Development Programs byAirport for 2021 through 2025 (1)
For the Year Ended December 31,
2021
2022
2023
2024
2025
2021 - 2025
(in thousands of pesos)
194,906
62,525
52,111
23,049
47,116
379,708
269,745
233,994
361,160
225,755
71,513
1,162,166
321,973
348,248
385,012
84,056
102,069
1,241,358
216,921
192,384
243,013
133,863
83,834
870,015
Durango
84,931
129,513
94,640
51,148
28,588
388,819
91,288
81,524
151,541
17,611
46,128
388,091
1,092,149
1,540,828
1,428,589
2,158,157
1,947,414
8,167,136
Reynosa
120,696
50,939
51,668
41,327
33,396
298,026
178,187
95,956
103,792
58,968
34,362
471,265
Tampico
120,304
80,482
62,785
12,615
59,390
335,578
Torreón
94,664
127,691
44,851
32,263
38,352
337,822
Zacatecas
82,216
27,784
21,633
19,423
25,815
176,870
Zihuatanejo
90,488
89,883
21,373
36,373
59,899
298,016
2,958,467
3,061,752
3,022,167
2,894,608
2,577,877
14,514,871
The following table sets forth our committed investments, including major maintenance expenditures, under our Master Development Programs by category for 2021 through 2025:
Committed Investments Under Master Development Programs by
Category for 2021 through 2025 (1)
Terminal capacity expansions and quality projects
703,497
1,213,086
1,493,599
1,665,437
1,658,836
6,734,455
Projects to meet ICAO directives
272,259
161,262
16,206
11,831
10,958
472,516
Operational Infrastructure Expansion
219,308
203,880
182,248
241,630
361,522
1,208,588
Runways and aprons
428,384
509,621
401,690
327,907
156,020
1,823,622
Machinery and equipment
504,938
607,753
229,242
184,025
251,063
1,777,021
Security, Safety and Information Technology Equipment
447,906
180,199
627,655
416,467
94,022
1,766,249
Other
382,175
185,952
71,527
47,311
45,456
732,421
3,022,169
2,894,606
2,577,875
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Expenditures Under the Master Development Programs and Other Strategic Capital Expenditures
Expenditures incurred to comply with our obligations under the Master Development Programs include expenditures associated with improvements to our concession assets, major maintenance costs and other items recorded as operating costs as incurred. Major maintenance expenditures are not subject to capitalization and reduce our major maintenance provision. See “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies—Major Maintenance Provision.” Thus, not all expenditures incurred to comply with our obligations under the Master Development Programs will constitute capital expenditures.
In addition to investments in our Master Development Programs, we have also invested in commercial, real estate and other business opportunities, including our investment in hotels in Terminal 2 of the Mexico City International Airport and in the Monterrey airport, as well as our industrial park in the Monterrey airport.
The following table sets forth our actual capital expenditures, including capital expenditures made pursuant to our Master Development Programs and other strategic capital expenditures by airport for 2017 through 2021:
Actual Capital Expenditures by Airport for 2017 through 2021
2017
2018
2019
2020
372,253
279,099
12,221
34,592
44,088
33,404
9,096
29,839
78,794
165,227
44,389
34,035
65,480
40,919
91,355
122,448
141,908
173,576
37,908
63,584
19,991
13,788
48,932
47,209
35,601
30,222
31,306
37,812
23,805
45,625
505,445
282,514
244,038
748,245
1,002,022
127,353
153,562
63,443
30,191
62,780
108,757
231,726
71,716
53,596
67,399
46,742
26,169
111,210
50,152
129,471
20,017
19,990
9,105
29,400
28,802
19,174
9,656
17,555
29,443
18,318
28,138
13,587
105,374
74,516
129,957
103,626
67,927
58,625
122,714
26,313
1,581,959
1,314,363
1,048,926
1,401,483
1,910,541
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The following table sets forth our actual capital expenditures by category across all of our airports for 2017 through 2021:
Actual Capital Expenditures by Category for 2017 through 2021
For the Year Ended
December 31,
Capacity and quality project
882,289
961,580
598,829
946,848
1,019,023
113,561
71,813
52,345
57,788
90,437
Facilities for disabled passengers
628
7,289
—
591
4,455
Environmental projects
12,429
6,655
3,350
4,279
220,480
Projects requested by competent authorities
8,216
4,126
692
16,806
2,665
1,735
220,647
95,033
202,126
2,863
15,413
8,672
64,314
Operative standards equipment
78,735
25,804
10,027
33,475
37,146
Security — investments
27,309
6,074
17,305
29,398
13,125
Information systems — investments
58,545
43,738
16,972
14,432
13,230
Baggage-screening system — investments
81,942
12,538
820
22,363
69,337
313,707
174,746
112,527
171,798
174,204
In 2019, 2020 and 2021, our major maintenance expenditures totaled Ps.305,133 thousand, Ps.103,704 thousand and Ps.203,042 thousand, respectively. For a detailed reconciliation of expenditures actually made during 2019, 2020 and 2021 and their classification in our consolidated financial statements for such periods, see “Item 5 Operating and Financial Review and Prospects—Liquidity and Capital Resources—Principal Uses of Capital.”
Our actual capital expenditures from 2019 through 2021 were allocated to the following types of investments at the majority of our airports:
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BUSINESS OVERVIEW
Our Operations
Through our subsidiaries, we hold concessions to operate, maintain and develop 13 airports in Mexico, which are concentrated in the country’s central and northern regions. Each of our concessions has a term of 50 years beginning on November 1, 1998. The term of each of our concessions may be extended by the Ministry of Infrastructure, Communications and Transportation under certain circumstances for up to 50 additional years. The terms of our concessions also include the right to occupy, use and improve the land appurtenant to our airports, which we do not own and which will revert to the Mexican government upon the termination of our concession. As operator of the 13 airports under our concessions, we charge fees to airlines, passengers and other users for the use of the airports’ facilities. We also derive rental and other income from commercial and diversification activities conducted at our airports, such as the leasing of space to restaurants and retailers, the operation of parking facilities, the operation of the OMA Carga business, the Terminal 2 NH Collection Hotel and the Hilton Garden Inn Hotel at the Monterrey airport, among others.
We operate 13 airports, which serve a major metropolitan area (Monterrey), three tourist destinations (Acapulco, Mazatlán and Zihuatanejo), seven regional centers (Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas) and two border cities (Ciudad Juárez and Reynosa). Our airports are located in nine of the 32 Mexican states, covering a territory of approximately 926,421 square kilometers (575,667 square miles), with a population of approximately 29.0 million according to the Mexican National Institute of Statistics and Geography. All of our airports are designated as international airports under Mexican law, meaning that they are all equipped to receive international flights and to maintain customs and immigration services managed by the Mexican government, as well as refueling services.
According to figures published by the AFAC, our total aviation passenger traffic accounted for approximately 14.1% of all arriving and departing total aviation passengers in Mexico in 2021.
In 2021, we recorded revenues of Ps.8,720,010 thousand (U.S.$426,048 thousand) and a consolidated net income of Ps. 2,863,630 thousand (U.S.$ 139,913 thousand), the sum of our aeronautical and non-aeronautical revenues was Ps.6,931,107 thousand (U.S.$ 338,645 thousand) and our airports handled approximately 18.0 million terminal passengers, an increase of 62.9% with respect to the 11.1 million terminal passengers handled in 2020.
Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, Monterrey-San Antonio, San Luis Potosí-Houston, Chihuahua-Dallas, San Luis Potosí-Dallas, Durango-Dallas, Monterrey-Las Vegas, Mazatlán-Los Angeles, Mazatlán-Phoenix, Monterrey-Atlanta, Zacatecas-Chicago and Monterrey-McAllen. Our airports also serve several other major international destinations, including Harlingen, Chicago, Miami and Los Angeles in the United States, Panama City and Madrid. In addition, our airports serve major resort destinations, such as Acapulco, Mazatlán and Zihuatanejo, which are popular destinations in Mexico frequented by tourists from Mexico, the United States and Canada. Our airports also serve major domestic routes, including Monterrey-Mexico City, which was the country’s second busiest domestic route in 2021, with approximately 2.3 million total passengers (including passengers flying directly to the nearby airport of Toluca, which are counted together with those flying to Mexico City), according to the AFAC. Other major domestic routes served by our airports include Monterrey-Cancún, Culiacán-Tijuana and Chihuahua-Mexico City, with approximately 1,490,903, 866,737 and 671,745 total passengers, respectively, in 2021, according to the AFAC.
Our international traffic in 2021 increased by 94.3% compared to 2020, principally as a result of an increase in the operations of VivaAerobus’ Monterrey-Houston route, American Airlines’ Monterrey-Dallas route, VivaAerobus’ Monterrey-San Antonio route, United Airlines’ San Luis Potosí-Houston route, Aeromar’s Monterrey-McAllen route and VivaAerobus’ Monterrey-Harlingen route.
Monterrey and its metropolitan area is the third largest city in Mexico based on population, with a population of approximately 5.0 million. Monterrey ranks among Mexico’s most established urban and commercial centers and is the capital of the state of Nuevo León, Mexico’s seventh largest state based on population. It is home to many of Mexico’s largest companies in a wide variety of industries, as well as several major universities. Business travelers account for a substantial portion of passengers at the Monterrey airport. The Monterrey airport is our leading airport based on passenger traffic volume, air traffic movements and contribution to revenues and ranked as the fifth busiest airport in Mexico based on passenger traffic volume in 2021, according to data published by the AFAC. In 2021, our Monterrey airport accounted for approximately 45.9% of our terminal passenger traffic, 43.9% of our total revenues and 42.2% of the sum of our aeronautical and non-aeronautical revenues.
Three of our airports, Acapulco, Mazatlán and Zihuatanejo, serve popular Mexican tourist destinations. Acapulco is Mexico’s 26th largest tourist destination, Mazatlán is the 13th and Zihuatanejo is the 20th, based on the number of international visitors in 2021 according to the AFAC. Acapulco is a principal port of call for cruise ships. In 2021, the Acapulco, Mazatlán and Zihuatanejo airports collectively accounted for 12.3% of our aggregate terminal passengers, 11.1% of our total revenues and 10.9% of the sum of our aeronautical and non-aeronautical revenues.
Seven of our airports serve small and mid-sized cities that are important regional centers of economic activity, with diverse economic activities such as mining (the Durango and Zacatecas airports), maquiladora manufacturing (the Chihuahua and Torreón airports), petroleum and chemical production (the Tampico airport), agriculture and livestock (the Culiacán airport) and transportation and logistics (the San Luis Potosí airport). In 2021, these seven regional airports collectively accounted for 31.2% of our aggregate terminal passengers, 27.9% of our total revenues and 28.9% of the sum of our aeronautical and non-aeronautical revenues.
The remaining two airports in the group, the Ciudad Juárez and Reynosa airports, serve cities situated along the border of Mexico and the United States. Both Ciudad Juárez and Reynosa are popular entry points to the United States. In 2021, the Ciudad Juárez and Reynosa airports collectively accounted for 10.7% of our aggregate terminal passengers, 9.3% of our total revenues and 8.2% of the sum of our aeronautical and non-aeronautical revenues.
Additionally, we operate four bonded warehouses under the OMA Carga brand that provide cargo logistics services, which include storage, handling, custody maneuvers, loading and unloading, and x-ray screening of exports, among other services. Two bonded warehouses operate at the Monterrey airport, one operates at the Ciudad Juárez airport and the other at the Chihuahua airport.
37
We also have a 90% investment with a Mexican subsidiary of the international hotel operator NH Hoteles SA under Consorcio Grupo Hotelero T2, S.A. de C.V. to develop and operate a 287-room hotel and more than 5,000 square meters (53,820 square feet) of commercial space inside Terminal 2 of Mexico City International Airport under a lease agreement (the “Lease”) with Mexico City International Airport that expires in 2029. The Terminal 2 NH Collection Hotel opened in August 2009. Under certain circumstances, the Mexico City International Airport can terminate the Lease at any time with partial or no compensation to us.
In November 2012, as part of our diversification activities, we signed a strategic alliance agreement with VYNMSA Desarrollo Inmobiliario, S.A. de C.V. (“VYNMSA”), to build and operate an industrial park at the Monterrey airport. As part of this strategic alliance, 32.4 hectares (80.06 acres) within the Monterrey airport’s perimeter are being developed in phases for use as an industrial park. The industrial park was inaugurated on March 20, 2015, and as of December 2021 we have built a total of 10 warehouses with a total leasable area of 63,813 square meters (686,877 square-feet), of which all warehouses have already been leased and are currently in operation with lease terms ranging from 40 to 144 months. In February 2022, we began the construction of an additional warehouse with an area of 10,849 square meters (112,334 square-feet), which is expected to be finalized in September 2022.
We also have an investment with Grupo Hotelero Santa Fe, S.A.B. de C.V. (“Grupo Hotelero Santa Fe”), a Mexican hospitality investment and operating company, to develop and operate a 134-room hotel at the Monterrey airport under the Hilton Garden Inn brand. The hotel started operations on August 27, 2015.
We consider OMA Carga, our hotel operations and the operation of our industrial park a key part of our diversification strategy to increase our non-aeronautical revenues.
The following table provides summary data for each of our 13 airports for the years ended December 31, 2019, 2020 and 2021:
Aeronautical
Sum of
and Non-
and
Revenues
Revenues per
Terminal
Non-Aeronautical
per Terminal
Passengers
Revenues (1)
Passenger(2)
Revenues(1)
Passenger (2)
(Number
(in millions
(in pesos)
Airport
in millions)
of pesos)
(pesos)
Metropolitan destination:
11.2
48.2
3,367.7
48.5
301.3
5.0
45.1
1,757.6
46.7
351.9
8.3
45.9
2,922.9
46.8
407.2
Total metropolitan destination
(3)
46.79
Tourist destinations:
0.9
3.8
268.2
3.9
306.4
0.4
3.6
144.4
364.6
0.7
3.7
229.9
343.0
1.2
374.2
5.4
322.2
248.6
6.6
335.8
1.1
363.4
5.8
338.3
0.6
2.7
217.1
3.1
347.3
0.3
2.9
117.0
368.6
2.4
159.1
2.5
366.5
Total tourist destinations
11.5
859.5
12.4
322.9
1.4
13.2
510.0
13.6
350.8
2.2
12.2
752.4
12.0
345.3
Regional destinations:
1.7
7.3
478.4
6.9
281.4
0.8
7.4
261.8
7.0
320.0
7.6
467.6
7.5
381.0
10.6
684.3
9.9
278.3
411.3
10.9
299.5
2.0
631.1
10.1
320.3
0.5
2.3
163.6
310.4
90.6
334.0
169.9
2.8
210.0
3.0
326.4
136.6
441.5
231.1
437.1
3.2
225.2
304.7
91.7
338.7
153.2
385.8
225.1
317.7
112.3
350.1
199.7
371.8
2.1
155.4
327.1
0.2
81.8
352.1
147.4
392.2
Total regional destinations
7.2
31.3
2,142.0
30.9
295.4
32.5
1,186.1
31.5
329.9
5.6
31.2
2,000.0
32.0
355.9
Border destinations:
1.6
436.3
273.1
7.1
237.4
300.5
1.5
439.4
292.9
131.8
1.9
274.2
69.5
1.8
303.5
132.1
310.1
Total border destinations
9.0
568.1
8.2
273.4
1.0
9.2
306.9
301.2
10.7
571.5
296.7
Sum of aeronautical and non-aeronautical revenues(1)
23.2
100
6,937.3
299.4
11.1
3,760.6
339.9
18.0
6,246.8
38
See Note 25 to our consolidated financial statements for further information by segment. The Company’s reportable segments under IFRS include its airports, the Terminal 2 NH Collection Hotel, the Hilton Garden Inn Hotel and the OMA-VYNMSA Industrial Park, individually, and information about our holding company and other companies has been combined in the “other” line item, as they represent other business activities and are segments that are not required to be reported separately. For purposes of analysis, segments are comprised of our two hotels, one industrial park, and thirteen individual airports, which have been grouped into four different regions according to their location: metropolitan, tourist, regional and border airports.
Our Sources of Revenues
Aeronautical Services
Aeronautical services represent the most significant source of our revenues. All of our revenues from aeronautical services are regulated under the maximum-rate price regulation system applicable to our airports. In 2019, 2020 and 2021, aeronautical services revenues represented approximately 67.5%, 54.8% and 60.5%, respectively, of our total revenues and 76.0%, 71.5% and 76.1%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
Our revenues from aeronautical services are derived principally from: passenger charges, landing charges, aircraft parking charges, charges for the use of passenger walkways and charges for the provision of airport security services. Aeronautical services revenues are principally dependent on the following factors: passenger traffic volume, the number of air traffic movements, the weight of the aircraft, the duration of an aircraft’s stay at the airport, the time of day the aircraft operates at the airport and the specific prices charged for the service.
Passenger Charges
We collect a passenger charge for each departing passenger on an aircraft (other than diplomats, infants and transfer and transit passengers) called the Tarifa de Uso de Aeropuerto. We do not collect passenger charges from arriving passengers. Passenger charges are 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.
The current agreements between our airports and our principal airline customers provide that payments for passenger charges will be between 30 and 60 days after the invoice delivery date. In 2021, the weighted average term of payment was 54 days.
International passenger charges are currently U.S. dollar-denominated but are collected in pesos based on the average exchange rate during the month prior to the flight, and the value of our revenues from those charges is therefore affected by fluctuations in the value of the U.S. dollar as compared to the peso. In 2019, 2020 and 2021, passenger charges corresponding to international passengers represented 16.87%, 13.20% and 15.95%, respectively, of our consolidated revenues (excluding construction services revenues). Domestic passenger charges are peso-denominated. In 2019, 2020 and 2021, passenger charges represented approximately 86.6%, 81.6% and 87.1%, respectively, of our aeronautical services revenues, 58.5%, 44.7% and 52.7%, respectively, of our total revenues and 65.9%, 58.4% and 66.3%, respectively, of the sum of aeronautical and non-aeronautical revenues. Passenger charges vary at each airport and based on the destination of each flight.
Aircraft Landing Charges
We collect landing charges from all carriers including cargo carriers for their use of our runways and taxiways, illumination systems on the runways and taxiways and other visual landing assistance services. Our landing charges are different for each of our airports and are based on each landing aircraft’s weight (determined as an average of the aircraft’s weight without fuel and maximum takeoff weight), the time of the landing, the origin of the flight and the nationality of the airline or client. In 2019, 2020 and 2021, these charges represented approximately 4.0%, 5.0% and 3.9%, respectively, of our aeronautical services revenues, 2.7%, 2.7% and 2.4%, respectively, of our total revenues and 3.0%, 3.6% and 3.0%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
39
Aircraft Parking, Boarding and Unloading Charges and Aircraft Long-Term Parking Charges
We collect various charges from all carriers including cargo carriers for the use of our facilities by their aircraft and passengers after landing. We collect aircraft parking charges based on the time an aircraft is at an airport’s gate or parking position. Each of these charges varies based on the time of day or night that the relevant service is provided (with higher fees generally charged during peak usage periods and at night), the aircraft’s maximum takeoff weight, the origin and destination of the flight and whether the service is domestic or international. We collect aircraft parking charges the entire time an aircraft is on our aprons.
We collect charges from carriers for the long-term use of facilities at our airports for aircraft long-term parking that does not involve the loading or unloading of passengers or cargo. These charges are based on the time of day or night the aircraft is parked at our facilities, the length of time the aircraft is parked at our facilities and whether the service is domestic or international. Together with our aircraft parking, boarding and unloading charges described above, in 2019, 2020 and 2021, these charges represented approximately 3.2%, 4.2% and 3.2%, respectively, of our aeronautical services revenues, 2.2%, 2.3% and 1.9%, respectively, of our total revenues and 2.5%, 3.0% and 2.4%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
Passenger Walkway Charges
Airlines are also assessed charges for the connection of their aircraft to our terminals through a passenger walkway and for the transportation of passengers between terminals and aircraft via buses and other vehicles. These charges are generally based on the amount of time each service is used, the number of these services used, the time of day the services are used, the origin and destination of the flight and the nationality of the airline or client. In 2019, 2020 and 2021, these charges represented approximately 0.8%, 0.7% and 0.4%, respectively, of our aeronautical services revenues, 0.6%, 0.4% and 0.3%, respectively, of our total revenues and 0.6%, 0.5% and 0.3%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
Airport Security Charges
We also assess an airport security charge, which is collected from each airline, based on the number of its departing terminal passengers (excluding infants, diplomats and transit passengers), for use of our x-ray equipment, metal detectors and other security equipment and personnel. These charges are based on the time of day the services are used, the number of departing passengers and the destination of the flight. Independent subcontractors provide airport security services at our airports. In 2019, 2020 and 2021, these charges represented approximately 1.1%, 1.0% and 1.0%, respectively, of our aeronautical services revenues, 0.7%, 0.6% and 0.6%, respectively, of our total revenues and 0.8%, 0.7% and 0.8%, respectively, of the sum of our aeronautical and non-aeronautical revenues.
The ICAO, the AFAC and the Office of Public Security issue guidelines for airport security in Mexico. In response to the September 11, 2001 terrorist attacks in the United States, we have taken additional steps to increase security at our airports. The ICAO issued directives in October 2001 establishing new rules and procedures to be adopted at our airports. Under these directives, these rules and procedures were to be implemented immediately and for an indefinite period of time.
Several of our airline customers have also contributed to the enhanced security at our airports as they have adopted new procedures and guidelines established by the ICAO applicable to airlines. Some measures adopted by the airlines included adding more points for verification of passenger identification, inspecting luggage prior to check-in and reinforcing controls over access to airplanes by various service providers (such as baggage handlers and food service providers).
40
The ICAO established security guidelines requiring checked baggage on all international commercial flights as of January 2006, and all domestic commercial flights as of July 2006, to undergo a comprehensive screening process for the detection of explosives. Our subsidiary, Servicios Complementarios del Centro Norte, S.A. de C.V., has operated the checked-baggage screening system since March 1, 2012. In some countries, such as the United States, the federal government (in the case of the United States, through TSA) is responsible for screening checked baggage. Under Mexican law, however, airlines are responsible for screening checked baggage. On May 1, 2014 and July 1, 2016, the AFAC published mandatory circulars CO SA-17.2/10 R3 and CO SA-17.9/16, respectively, which require that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines. Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of equipment could increase our exposure to liability as a result of our involvement in the screening process. In addition, although we are not currently obligated to screen checked baggage, we could become obligated to do so, and thus become subject to potential liability, if Mexican law changes in the future. Revenues derived from checked baggage screening are classified as non-aeronautical revenues see “Item 4. Information on the Company—Our Sources of Revenue.”
In response to the COVID-19 pandemic, we have continued to implement the following measures, which increased airport costs and expenses during 2021:
Complementary Service Providers
At each of our airports, we earn revenues from charging access and other fees from third-party providers, ramp-handling and baggage-handling services, catering services, aircraft security, providers of aircraft maintenance and repair and fuel. These access 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 their total revenues. We currently maintain contracts with 52 companies that provide the majority of these complementary services at our 13 airports.
Under the Mexican Airport Law, we are required to provide complementary services at each of our airports if there is no third party providing such services. If any service providers were to halt operations at any of our airports, we could be required to seek a new provider of these services or to provide these services ourselves.
41
On November 1, 1998, the Company entered into an agreement with the Mexican Airport and Auxiliary Services Agency (Aeropuertos y Servicios Auxiliares or “ASA”), pursuant to which the Company granted the agency access to the facilities at the Company’s airports for a nominal fee in order for ASA to buy, sell and supply fuel in such facilities. On July 21, 2018, the Mexican Bureau of Civil Aviation (currently AFAC) published a notice in the Federal Official Gazette clarifying the scope of Transitory Article Nine of the Regulations of the Mexican Airport Law, stating that as of the publication of the Hydrocarbons Law on August 11, 2014, the fuel market was to be considered open so that any interested party can distribute and sell Jet-A fuel. This clarification opens the possibility for third parties complying with the applicable legal requirements to provide fuel distribution and supply services within the airports operated by the Company. As of the date of this report, there are no third parties, other than ASA, providing fuel distribution and supply services within such airports.
Leasing of Space to Airlines
We derive aeronautical revenues from leasing space in our airports to airlines that is necessary for their operations, such as ticket counters and offices. Our lease agreements with airline customers for the use of space in our airports are typically for terms of three years with provisions for periodic inflation adjustments to our rental fees.
Cargo Handling
Cargo-related revenues include revenues from the leasing of space in the airside of our airports to cargo handling agents and shippers, landing fees for each arriving aircraft carrying cargo and a portion of the revenues derived from other complementary services provided in connection with cargo services. Cargo-related revenues are largely aeronautical and therefore subject to maximum rates applicable to aeronautical revenue sources.
Revenues from cargo handling in our airports historically have represented a negligible portion of our total revenues.
Permanent Ground Transportation
We receive revenues from ground transportation vehicles and taxi companies who pay an access fee to operate on our airport premises. Our revenues from providers of ground transport 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. Our revenues from non-aeronautical services are principally derived from (i) commercial activities, such as the leasing of space in our airports to retailers, restaurants and other commercial tenants, maintaining and operating parking facilities and advertising; (ii) diversification activities, such as OMA Carga, hotel services, operation and lease of the industrial park and real estate services and (iii) complementary activities, which principally include the baggage-screening system and the leasing of space to airlines.
None of our revenues from non-aeronautical services are regulated under our maximum-rate price regulation system, though other authorities may regulate them. For example, our parking facilities may be subject to certain municipal regulations.
42
As one of the main parts of our business strategy, we have prioritized increasing our non-aeronautical revenues, seeking new and improved commercial prices at our airports, as well as the development of the diversification and complementary activities. As a result of our efforts during the last ten years, our non-aeronautical revenues have increased as a percentage of our revenues. In 2010, non-aeronautical revenues represented 14.0% of the sum of aeronautical and non-aeronautical revenues, while in 2019, 2020 and 2021 non-aeronautical revenues accounted for approximately 21.3%, 21.8% and 19.0% of our total revenues, respectively. Non-aeronautical revenues represented 24.0%, 28.5% and 23.9% in 2019, 2020 and 2021, respectively, of the sum of our aeronautical and non-aeronautical revenues.
Revenues from Commercial Activities
As another main part of our business strategy to enhance our non aeronautical revenues, we have prioritized increasing our revenues per passenger from commercial activities in our airports through the development of new areas, introduction of new services, brands and promotion of the commercial services described below. In 2021, our revenues from commercial activities increased by 36.3% in 2021 as compared to 2020. In order to position our commercial revenues for future growth, the following initiatives have been implemented or expanded:
43
Commercial activities in each of our airports currently consist of the following:
44
Revenues from Diversification Activities
To enhance our non-aeronautical revenues, we also focus our business strategy on generating new services and products to diversify our revenue sources, such as our OMA Carga business, hotel services and real estate services. We develop land not intended for aeronautical purposes at our airports for industrial, logistical or commercial uses that are directly or indirectly related to airport activities in order to strengthen the airports’ role as focal points of economic development in the cities where they are located.
Our revenues from diversification activities increased by 42.1% as compared to 2020. The following are our main diversification initiatives during 2021:
45
Revenues from Complementary Activities
Our complementary activities generated 18.4% of our non-aeronautical revenues in 2021. These include:
Our Airports
In 2019, 2020 and 2021, our airports served a total of approximately 23.2 million, 11.1 million and 18.0 million terminal passengers, respectively. 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.
46
The following table sets forth the percentage of terminal passenger traffic generated at our airports per type of destination during 2019, 2020 and 2021:
Percentage of Total Passenger Traffic
Type of Destination
Metropolitan (Monterrey)
Tourist (Acapulco, Mazatlán and Zihuatanejo)
Border (Ciudad Juárez and Reynosa)
Regional (Culiacán, Chihuahua, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas)
47
The following tables set forth the passenger traffic volume presented in amounts of (i) total passengers, (ii) terminal departing and arriving passengers and (iii) transit passengers, for each of our airports for the periods indicated:
Passenger Traffic
Terminal(1)
Transit(2)
Total passengers:
685,124
5,198
690,322
739,120
15,340
754,460
875,315
14,298
889,613
395,948
1,704
397,652
670,239
6,180
676,419
1,173,135
7,846
1,180,981
1,364,028
9,725
1,373,753
1,597,471
8,168
1,605,639
790,009
3,053
793,062
1,499,841
813
1,500,654
1,909,651
14,480
1,924,131
2,270,834
10,477
2,281,311
2,458,863
8,915
2,467,778
1,373,102
2,571
1,375,673
1,970,211
9,197
1,979,408
1,409,579
16,762
1,426,341
1,556,770
11,788
1,568,558
1,699,816
5,004
1,704,820
818,151
650
818,801
1,363,937
768
1,364,705
395,905
3,442
399,347
418,914
2,711
421,625
527,004
5,521
532,525
271,231
1,317
272,548
446,030
789
446,819
994,283
22,085
1,016,368
1,038,555
14,220
1,052,775
1,161,155
21,573
1,182,728
740,306
8,310
748,616
1,106,071
13,108
1,119,179
9,771,630
28,232
9,799,862
10,733,186
36,620
10,769,806
11,176,555
24,797
11,201,352
4,994,170
4,341
4,998,511
8,269,834
8,066
8,277,900
485,727
288
486,015
466,934
158
467,092
480,524
169
480,693
229,058
221
229,279
425,918
524
426,442
553,353
1,639
554,992
626,512
2,282
628,794
643,224
2,509
645,733
309,311
823
310,134
528,625
2,317
530,942
717,342
4,199
721,541
736,627
2,638
739,265
739,143
2,750
741,893
270,835
728
271,563
397,191
2,380
399,571
618,930
4,191
623,121
681,551
5,164
686,715
708,563
6,153
714,716
320,820
1,591
322,411
537,161
3,079
540,240
349,453
1,470
350,923
366,871
2,639
369,510
475,241
3,849
479,090
232,352
1,003
233,355
375,930
451
376,381
597,902
2,068
599,970
566,497
1,331
567,828
625,186
501
625,687
317,395
637
318,032
434,176
434,205
19,662,014
111,900
19,773,914
21,566,399
115,093
21,681,492
23,168,060
104,207
23,272,267
11,062,688
26,949
11,089,637
18,025,164
47,701
18,072,865
48
Domestic
International
Terminal departing passengers:
305,337
41,326
346,663
327,220
43,948
371,168
392,382
46,383
438,765
178,343
22,046
200,389
304,494
30,640
335,134
573,739
2,244
575,983
668,369
3,927
672,296
772,724
5,856
778,580
384,557
1,677
386,234
718,819
11,814
730,633
940,889
22,723
963,612
1,118,311
25,413
1,143,724
1,210,867
30,656
1,241,523
681,298
11,417
692,715
962,481
41,991
1,004,472
638,836
65,574
704,410
701,064
72,745
773,809
762,680
80,957
843,637
370,880
40,497
411,377
607,491
86,328
693,819
161,252
36,228
197,480
171,650
37,542
209,192
208,049
56,567
264,616
105,226
30,968
136,194
172,323
55,337
227,660
341,616
157,267
498,883
363,086
157,710
520,796
413,165
166,222
579,387
279,964
94,180
374,144
460,163
91,969
552,132
4,193,276
674,556
4,867,832
4,612,687
728,440
5,341,127
4,777,176
774,363
5,551,539
2,195,445
288,703
2,484,148
3,384,393
741,850
4,126,243
234,880
3,210
238,090
225,614
3,354
228,968
230,461
3,392
233,853
108,582
1,809
110,391
203,881
8,205
212,086
185,349
91,558
276,907
207,879
104,717
312,596
211,770
108,127
319,897
105,942
48,709
154,651
173,765
92,965
266,730
332,405
28,354
360,759
333,706
37,904
371,610
331,815
38,671
370,486
123,884
14,274
138,158
174,714
27,454
202,168
277,275
37,673
314,948
299,449
43,274
342,723
306,625
47,316
353,941
144,792
16,840
161,632
229,382
39,778
269,160
104,028
71,578
175,606
107,399
76,809
184,208
158,191
81,492
239,683
79,767
39,216
118,983
122,420
71,167
193,587
177,623
121,440
299,063
167,886
116,800
284,686
197,126
116,593
313,719
95,487
67,842
163,329
167,531
49,600
217,131
8,466,505
1,353,731
9,820,236
9,304,320
1,452,583
10,756,903
9,973,031
1,556,595
11,529,626
4,854,167
678,178
5,532,345
7,681,857
1,349,098
9,030,955
49
Terminal arriving passengers:
326,492
11,969
338,461
354,367
13,585
367,952
422,254
14,296
436,550
182,686
12,873
195,559
319,269
15,836
335,105
596,586
566
597,152
691,262
470
691,732
818,244
647
818,891
403,398
377
403,775
768,487
721
769,208
939,409
6,630
946,039
1,123,022
4,088
1,127,110
1,211,407
5,933
1,217,340
678,105
680,387
957,713
8,026
965,739
659,426
45,743
705,169
734,964
47,997
782,961
802,503
53,676
856,179
381,813
24,961
406,774
626,199
43,919
670,118
177,219
21,206
198,425
191,524
18,198
209,722
224,717
37,671
262,388
110,487
24,550
135,037
178,320
40,050
218,370
353,920
141,480
495,400
375,957
141,802
517,759
434,104
147,664
581,768
285,878
80,284
366,162
474,146
79,793
553,939
4,308,480
595,318
4,903,798
4,788,705
603,354
5,392,059
4,979,390
645,626
5,625,016
2,292,727
217,295
2,510,022
3,590,916
552,675
4,143,591
247,231
406
247,637
237,689
277
237,966
246,429
242
246,671
118,395
272
118,667
213,334
498
213,832
210,794
65,652
276,446
243,290
70,626
313,916
242,306
81,021
323,327
115,160
39,500
154,660
187,314
74,581
261,895
341,321
15,262
356,583
349,805
15,212
365,017
353,006
15,651
368,657
126,954
5,723
132,677
181,277
13,746
195,023
286,981
17,001
303,982
322,643
16,185
338,828
331,013
23,609
354,622
149,194
9,994
159,188
246,130
21,871
268,001
117,174
56,673
173,847
121,675
60,988
182,663
169,639
65,919
235,558
80,903
32,466
113,369
125,326
57,017
182,343
188,412
110,427
298,839
177,154
104,657
281,811
208,721
102,746
311,467
97,830
56,236
154,066
173,028
44,017
217,045
8,753,445
1,088,333
9,841,778
9,712,057
1,097,439
10,809,496
10,443,733
1,194,701
11,638,434
5,023,530
506,813
5,530,343
8,041,459
952,750
8,994,209
50
The following table sets forth the air traffic movement capacity of each of our airports as of December 31, 2021:
Capacity(1) by Airport(2)
Peak Air Traffic
Movements per
Runway
% Capacity
Hour
Capacity(3)
Used
12.5
30.0
37.5
17.5
36.4
50.0
22.2
18.2
25.0
15.0
The following table sets forth the terminal capacity of each of our airports as of December 31, 2021:
Peak Passenger
Traffic Movements
per Hour
474
1,103
43.0
869
621
139.9
977
938
104.2
805
1,297
62.1
403
606
66.5
955
1,537
Monterrey Terminal A
1,391
2,091
Monterrey Terminal B
569
1,469
38.7
Monterrey Terminal C
1,534
1,246
123.1
574
895
64.1
463
1,380
33.6
384
776
49.5
418
549
76.1
387
579
66.8
945
58.1
51
The following table sets forth the air traffic movements for each of our airports for the periods indicated:
Air Traffic Movements by Airport(1)
22,838
24,151
23,606
16,115
18,360
16,215
18,512
19,260
12,277
18,243
38,018
41,133
40,750
29,520
35,912
29,361
30,760
20,990
27,366
14,559
15,324
16,039
11,556
13,985
17,424
17,579
17,342
13,407
18,325
110,938
114,564
112,188
58,265
77,860
8,639
7,278
6,757
4,825
7,181
21,605
21,394
19,813
12,628
16,420
18,702
18,930
17,219
10,266
14,720
14,842
16,863
16,912
10,350
14,077
6,868
6,903
7,390
4,377
6,282
12,343
11,959
12,582
9,580
10,626
332,352
345,350
340,080
214,156
279,357
The following table sets forth the average number of passengers per air traffic movement for each of our airports for the periods indicated:
Average Passengers per Air Traffic Movements by Airport(1)
30.6
37.1
24.6
36.5
72.3
73.7
82.9
64.3
82.2
50.2
55.2
60.3
46.5
54.9
48.0
50.6
56.2
39.0
49.8
27.2
27.3
32.9
23.5
31.9
57.1
59.1
67.0
60.4
88.1
93.7
99.6
85.7
106.2
64.2
71.1
47.5
59.3
25.6
29.3
24.5
32.2
38.4
38.9
42.9
26.4
27.0
41.7
40.4
41.9
31.0
38.2
50.9
53.1
59.8
48.4
47.4
49.7
33.1
40.9
Average of all airports
59.2
62.4
68.1
51.7
64.5
52
Air Traffic Movements by Aviation Category(1)
a
Commercial aviation
125,975
172,410
Charter aviation
648
266
General aviation and other
87,533
106,681
Metropolitan Destination
Monterrey International Airport
The Monterrey airport is our most important airport based on passenger traffic (including both domestic and international passengers), air traffic movements and contribution to aeronautical revenues. According to the AFAC, the Monterrey airport was the fifth busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, it accounted for approximately 48.2%, 45.1% and 45.9%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 11.2 million, 5.0 million, and 8.3 million terminal passengers, respectively, were served by the Monterrey airport. Of the terminal passengers in 2019, 87.3% were domestic, and 12.7% were international passengers. In 2020, 89.9% were domestic, and 10.1% were international passengers. In 2021, 84.3% were domestic, and 15.7% were international passengers. This airport serves primarily business travelers and is also a hub for the transportation of goods.
A total of 11 commercial airlines operated at this airport during 2021. In 2021, airlines operating at this airport served 46 direct destinations, including 33 domestic destinations and 13 international destinations. In 2021, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Cancún, Guadalajara, Tijuana, Puerto Vallarta, Mérida, Veracruz, San José del Cabo, Villahermosa, Querétaro, Hermosillo, Mazatlán, Ciudad Juárez, Puebla, Chihuahua, El Bajío, Houston, Dallas, San Antonio, Las Vegas, Atlanta, McAllen, Harlingen, Chicago, Miami, Panama City, Los Angeles and Madrid. In 2021, the principal airlines operating at the airport were VivaAerobus, Volaris, Aeroméxico, Magnicharters, American Airlines, United Airlines, Aeroméxico Connect, Aeromar, TAR and Delta Airlines.
The Monterrey airport is located approximately 21 kilometers (13 miles) from the city of Monterrey, which has a population (including its suburbs) of approximately 5.0 million inhabitants. Monterrey is Mexico’s third largest city based on population and is one of Mexico’s most productive industrial centers. It is home to many of Mexico’s largest companies in a wide variety of industries, as well as several major universities. Monterrey is the capital of the state of Nuevo León, the third largest contributor to Mexico’s GDP.
The Monterrey airport operates 24 hours a day. The airport has two operating runways, one with a length of 3,000 meters (9,842 feet) and the other with a length of 1,800 meters (5,905 feet). The airport’s runway capacity is 38 air traffic movements per hour. The airport also has an instrument landing system on runway 29. The airport occupies a total area of 806.2 hectares (3.11 square miles) and has three commercial passenger terminal buildings (Terminal A, B and C for domestic and international flights) with a total area of approximately 62,297 square meters (670,559 square feet). The airport has three platforms for commercial aviation operations, one platform for general aviation operations, one platform for air freight operations with eight positions and eleven taxiways.
The Terminal A building has a total area of approximately 29,269 square meters (315,049 square feet), of which 4,571 square meters (49,202 square feet) is commercial space, a 19-position apron for commercial aviation, eight-position apron for air freight, a five-position apron for general aviation, nine air bridges, an ample boarding lounge for passengers making connections with other flights and other boarding lounges. Terminal A has 15 boarding gates for international or domestic flights and a public parking facility that accommodates 2,102 vehicles.
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The Terminal B building started operations on September 1, 2010, and is used by Aeroméxico, Aeroméxico Connect, Delta, TAR and Aeromar. Terminal B has a total area of approximately 20,568 square meters (221,392 square feet), of which 3,309 square meters (35,618 square feet) is commercial space. It has two levels plus a mezzanine and includes six air bridges, an 18-position commercial aviation apron and 14 boarding gates. Terminal B also has a public parking facility that accommodates 650 vehicles. In 2018, we completed a 1,200 square-meter (12,917 square-foot) expansion of the passenger waiting area for regional flights leaving out of Terminal B at the Monterrey airport. The expansion increased the regional waiting area by 280%. The project had a total investment of Ps.125 million, and it started operations on September 8, 2018.
The Terminal C building has a total area of approximately 12,460 square meters (134,118 square feet), of which 1,841 square meters (19,816 square feet) is commercial space. This terminal, which commenced operation at year-end 2006, is used by VivaAerobus. Terminal C has eight boarding gates and serves 15 aircraft positions for commercial aviation. In January 2012, we concluded the construction of a new modern access to the Terminal C building, more commercial spaces and an additional baggage-claim area, with a total area of approximately 3,420 square meters (36,812 square feet). Terminal C has a public parking facility that accommodates 987 vehicles.
The Monterrey airport offers air cargo services for imports and exports and serves as a logistical hub for domestic and international air shipping providers. Its current infrastructure servicing air cargo operations includes bonded warehouses. An area of 14,661 square meters (157,810 square feet) has been occupied by Federal Express and OMA Carga since 2004, United Parcel Service since 2005 and DHL since 2011. In 2017, OMA Logística started operating a 15,926 square-meter (171,426 square-feet) bonded warehouse under the OMA Carga brand to facilitate for ground cargo operations between customs. Inside the Monterrey airport, the customs authority has import and export merchandise checkpoint platforms and our warehouses offer services for the handling, storage and custody of merchandise, dry cargo, controlled temperature, DGR (Dangerous Goods Regulation), X-ray (authorized equipment by TSA), 24/7 surveillance cameras, scales of up to 30 tons, as well as miscellaneous services required for authorized import and export operations. The Monterrey airport also offers commercial, office and parking spaces that facilitate and contribute to the activities of all users and make it an attractive logistical hub for the entire foreign trade community, in conjunction with the infrastructure and facilities for Mexican customs.
To allow the future expansion of the Monterrey airport, including its second commercial runway, between 2007 and 2011, we entered into a series of agreements for the purchase and exchange of plots of land adjacent to or near the Monterrey airport. We currently own approximately 575 hectares (2.2 square miles) of land reserve adjacent or near the Monterrey airport with an aggregate book value of Ps. 1,705,774 thousand, of which approximately 393 hectares (1.5 square miles) with a book value of Ps.1,571,509 thousand are owned by the Monterrey airport and approximately 182 hectares (0.7 square miles) with a book value of Ps.134,264 thousand are owned by our other subsidiaries. The acquired land is classified in our financial statements as land owned by the Company at its acquisition value, presented as a fixed asset. To recover the cost of our investments in land reserve, on December 4, 2012, we received authorization from the Mexican Bureau of Civil Aviation (currently AFAC) to reallocate Ps.386,538 thousand (amount expressed in nominal 2009 pesos) in investments included in the 2011–2015 Master Development Program for the Monterrey airport. Additionally, during the 2011 Master Development Program review, We recognized Ps.77,307 thousand (amount expressed in nominal 2009 pesos) of cost of land acquisitions. The recovery of Ps.695,767 thousand (amount expressed in nominal 2009 pesos) of cost of land acquisitions is included in the indicative period of our currently approved Master Development Program for 2026-2035. The actual amounts of recovery are adjusted annually based on the Mexican Producer Index.
On July 22, 2016, we sold 200,000 square meters (2,152,782 square feet) of vacant land outside the Monterrey airport, which was not required for future aeronautical use, for Ps.30 million. The Acapulco airport owned 58.82% of the vacant land and the Zihuatanejo airport owned 41.18%.
54
In November 2019, we started a major expansion project at the Monterrey airport. We expect to invest approximately Ps.5.1 billion between 2019 and 2025. The project will be built in two phases. Phase 1 consists of the expansion of the public and check-in areas of Terminal A and the construction of a new boarding gate wing. As a result, total terminal space will increase by approximately 14,646 square meters (157,648 square feet), approximately a 24% increase of the existing terminal space. Certain components of Phase 1 are expected to become operational by the end of the second quarter of 2022. Phase 2 consists of the construction of a second new boarding gate wing and an overall expansion of the terminal, increasing terminal space by an additional 14,753 square meters (158,800 square feet), an increase of 19% versus phase 1. Phase 2 is expected to be completed by the end of 2025. After both phases of the expansion, the Monterrey airport will have an annual capacity of 16.3 million passengers (up from 12.0 million passengers currently), positioning itself as one of the busiest connection centers in northern Mexico.
In the future, we may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession. Historically, Aeropuerto del Norte has been used solely for general aviation operations. The state of Nuevo León has requested in the past that the Ministry of Infrastructure, Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations. To date, the Ministry of Infrastructure, Communications and Transportation has not amended Aeropuerto del Norte’s concession. The Ministry of Infrastructure, Communications and Transportation may authorize such an amendment and that commercial aviation flights will operate from Aeropuerto del Norte in the future. In addition, we understand that Aeropuerto del Norte is not capable of accommodating commercial passenger traffic with its current infrastructure.
Tourist Destinations
Acapulco International Airport
The Acapulco airport is our sixth most important airport based on passenger traffic and contribution to aeronautical revenues. According to the AFAC, the Acapulco airport was the 25th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, it accounted for approximately 3.8%, 3.6% and 3.7%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 875,315, 395,948 and 670,239 terminal passengers, respectively, were served by the Acapulco airport. Of the terminal passengers in 2019, 93.1% were domestic, and 6.9% were international. In 2020, 91.2% were domestic, and 8.8% were international. In 2021, 93.1% were domestic and 6.9% were international. Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are highly seasonal and affected by Mexican and international economic conditions.
A total of 8 airlines (seven commercial airlines and one charter airline) operated at this airport during 2021. In 2021, airlines operating at this airport served eight direct destinations, including five domestic destinations and three international destinations. In 2021, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Tijuana, Monterrey, Guadalajara and Cancún. In 2021, the principal airlines operating at the airport were Volaris, Aeroméxico Connect, VivaAerobus, Aeromar, United Airlines, Aeroméxico, American Airlines and Air Transat.
The Acapulco airport is located approximately 15 kilometers (9 miles) from the city of Acapulco in the state of Guerrero, which has a population (including its suburbs) of 852,622. Guerrero is Mexico’s 13th largest state based on population, and the city of Acapulco is one of Mexico’s most recognized tourist destinations, of particular importance as a port of embarkation and disembarkation for cruise ships. We believe that these cruise ship passengers represent a significant portion of the airport’s terminal passengers.
The Acapulco airport operates 24 hours a day. The airport has two operating runways and six taxiways. The principal runway has a length of 3,300 meters (10,827 feet), and the auxiliary runway has a length of 1,700 meters (5,577 feet). The apron servicing commercial aviation accommodates 17 airplanes, and the general aviation apron accommodates 24 aircrafts.
55
The runway capacity at the Acapulco airport is 40 air traffic movements per hour. The airport also has two instrument landing systems for landing in low visibility on runways 10 and 28, which provide precise guidance to assist aircraft during landing. The airport occupies a total area of 422.2 hectares (1.63 square miles) with a total terminal space of 15,436 square meters (166,151 square feet), of which 2,020 square meters (21,743 square feet) is commercial space. Besides having the instrument landing system, runways 10 and 28 have approach lights and flashes on both headers. The Acapulco airport has a public parking facility that accommodates 110 vehicles.
Due to its technical and geographic characteristics, the Acapulco airport is the primary alternate airport of Mexico City. The length of the airport’s runway as well as its elevation and average temperature makes it possible to operate airplanes at their maximum passenger, freight and fuel capacities.
In May 2018, we inaugurated a new terminal building at Acapulco airport that has an 18,800 square-meter (202,362 square-foot) surface, with three levels and a mezzanine. The new terminal has the capacity to serve 1.3 million passengers per year. The project had a total investment of Ps.615 million.
Mazatlán International Airport
The Mazatlán airport is our fifth most important airport based on passenger traffic. According to the AFAC, the Mazatlán airport was the 16th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, it accounted for approximately 5.0%, 6.7% and 6.1%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 1,161,155, 740,306 and 1,106,071 terminal passengers, respectively, were served by the Mazatlán airport. Of the terminal passengers in 2019, 73.0% were domestic, and 27.0% were international. In 2020, 76.4% were domestic, and 23.6% were international. In 2021, 84.5% were domestic and 15.5% were international. The airport’s passengers are predominantly domestic tourists who come from Mexico City, Monterrey and Tijuana, among other cities, and international tourists who come primarily from the United States and Canada. Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are highly seasonal and affected by Mexican and international economic conditions.
A total of 15 airlines operate at the airport (13 commercial airlines and two charter airlines). In 2021, airlines operating at this airport served 22 direct destinations, including ten domestic destinations and twelve international destinations. Of these destinations, Mexico City, Tijuana, Monterrey, Chihuahua, La Paz, Cabo San Lucas, San José del Cabo, Ciudad Juárez, Querétaro, and Guadalajara were the main domestic routes. The main international destinations served by this airport were Los Angeles, Phoenix, Dallas, Minneapolis and Houston in the United States and Calgary, Vancouver, Edmonton and Toronto in Canada. In 2021, the principal airlines operating at this airport were Volaris, VivaAerobus, Aeroméxico Connect, American Airlines, Alaska Airlines, Aero Calafía, Magnicharters, TAR, Aeroméxico and WestJet.
The Mazatlán airport is located approximately 18 kilometers (11 miles) from the city of Mazatlán, which has a population of 501,441 people. Mazatlán is the principal tourist destination of the Sinaloa region, with about 9,754 hotel rooms, according to the Mexican Ministry of Tourism (Secretaría de Turismo). Mazatlán offers attractive beaches and is also a major producer of shrimp, sardines and tuna.
The Mazatlán airport operates 24 hours a day. Its runway capacity is 22 air traffic movements per hour. The airport occupies approximately 439.8 hectares (1.70 square miles) of land. The airport’s facilities include a terminal building with a total area of 18,444 square meters (198,530 square feet), of which 2,268 square meters (24,413 square feet) is commercial space. The airport has a commercial aviation apron with 10 positions and a general aviation apron with 24 positions. In addition, the airport has four air bridges and a public parking facility that accommodates 157 vehicles. The airport’s runway is 2,702 meters (8,865 feet) long, with four taxiways that connect the commercial and general aviation platforms and includes an instrument landing system on runway 26.
56
In 2014, the terminal building was expanded by 2,300 square meters (24,757 square feet) and 2,500 square meters (26,909 square feet) of space were refurbished, including the main facade of the airport, waiting area, check-in and inspection points, restrooms and offices. Commercial spaces were also expanded. In October 2021, we started a project to redesign and redirect passenger flows at the terminal building of the Mazatlán airport. This project will increase the airport capacity by approximately 1,134 square meters (12,206 square feet), increase the terminal space by 6% and distribute commercial and operational spaces more efficiently by taking advantage of the reconfiguration of passenger flows. We expect to invest approximately Ps.120 million in this project which is expected to be fully completed by the end of 2022.
Zihuatanejo International Airport
The Zihuatanejo airport is our tenth most important airport based on passenger traffic. According to the AFAC, the Zihuatanejo airport was the 32nd busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, it accounted for approximately 2.7%, 2.9% and 2.4% respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 625,186, 317,395 and 434,176 terminal passengers, respectively, were served by the Zihuatanejo airport. Of the terminal passengers in 2019, 64.9% were domestic, and 35.1% were international. In 2020, 60.9% were domestic, and 39.1% were international. In 2021, 78.4% were domestic and 21.6% were international. Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are seasonal and are affected by Mexican and international economic conditions.
A total of 15 airlines operate at the airport (12 commercial airlines and three charter airlines). In 2021, airlines operating at this airport served 14 direct destinations, including two domestic destinations and 12 international destinations. In 2021, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Tijuana, Los Angeles, Houston, Phoenix, Calgary, Minneapolis, Dallas, Chicago and Vancouver. In 2021, the principal airlines operating at this airport were Aeroméxico Connect, Volaris, Aeromar, VivaAerobus, Alaska Airlines, United Airlines, American Airlines, WestJet, Sun Country, Aeroméxico, Air Canada, Magnicharters and Sunwing.
The Zihuatanejo airport is located approximately 12 kilometers (7 miles) from the city of Zihuatanejo. Situated in the state of Guerrero, with a population of 126,001 people, the city of Zihuatanejo is one of Mexico’s most attractive tourist destinations, with approximately 6,226 hotel rooms, according to the Ministry of Tourism, a marina, world-class golf courses and a growing residential real estate market.
The Zihuatanejo airport operates 14 hours a day. The airport has one runway, which is 2,506 meters (8,222 feet) long with a runway capacity of 20 air traffic movements per hour. The airport’s facilities include a terminal building encompassing an area of 11,336 square meters (122,020 square feet), including 1,450 square meters (15,608 square feet) of commercial space. It has a six-position commercial aviation apron, a 23-position general aviation apron and two taxiways. The Zihuatanejo airport has a public parking facility that accommodates 171 vehicles.
The quality of services offered at the Zihuatanejo airport has improved as a result of the rehabilitation of its runway, the remodeling and expansion of the departure gate area and the reconfiguration of the passenger and carry-on luggage screening area, which were completed on July 14, 2016.
In order to maintain the current infrastructure of the Zihuatanejo airport, on June 2019, we began construction of a structural reinforcement of its terminal building. Total investment is approximately Ps.134 million and construction is expected to be completed by the end of 2022.
57
Regional Destinations
Chihuahua International Airport
The Chihuahua airport is our fourth most important airport based on passenger traffic and air traffic movements and our third most important airport based on aeronautical revenues. According to the AFAC, the Chihuahua airport was the 13th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, it accounted for approximately 7.3%, 7.4% and 7.6%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 1,699,816, 818,151, and 1,363,937 terminal passengers, respectively, were served by the Chihuahua airport. Of the terminal passengers in 2019, 92.1% were domestic, and 7.9% were international. In 2020, 92.0% were domestic, and 8.0% were international. In 2021, 90.5% were domestic and 9.5% were international. 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 eight commercial airlines operate at the airport. In 2021, airlines operating at this airport served 13 direct destinations, including fourteen domestic destinations and two international destinations. In 2021, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Guadalajara, Monterrey, Cancún, Tijuana, Mazatlán, Culiacán, Hermosillo, Los Mochis, Querétaro, Dallas, Denver. In 2021, the principal airlines operating at this airport were Volaris, VivaAerobus, Aeroméxico, Aeroméxico Connect, American Airlines and TAR.
The Chihuahua airport is located approximately 18 kilometers (11 miles) from the city of Chihuahua, the capital of the state of Chihuahua. The city’s population is 937,674 people. Chihuahua’s close proximity to the United States and its highly developed maquiladora industry account for the majority the airport’s incoming and outgoing traffic.
The Chihuahua airport operates 14 hours a day. The airport has three runways, with lengths of 2,600 meters (8,530 feet), 2,420 meters (7,940 feet) and 1,100 meters (3,609 feet), respectively. The runway system has a capacity of 40 air traffic movements per hour. The airport also has an instrument landing system on runway 36R. The airport occupies a total area of approximately 909.2 hectares (3.51 square miles). The airport’s facilities include a terminal building with a total area of approximately 12,968 square meters (139,586 square feet), including 1,629 square meters (17,534 square feet) of commercial space, a seven-position apron for commercial aviation, two aprons with a total of 21 positions for general aviation, four taxiways, a one-position apron for airfreight and one air bridge. The airport terminal has seven gates. The Chihuahua airport has a public parking facility that accommodates 627 vehicles.
To accommodate growing demand for airfreight services and an expanding local economy, in August 2005 we completed the construction of a cargo area, which includes a warehouse, a customs platform and office, storage areas and logistics offices. We currently operate all international cargo operations at this airport directly.
In December 2016, we started an expansion and remodeling of the terminal building at the Chihuahua airport, which was completed on September 17, 2019. The project had a total investment of Ps.318 million and included 5,743 square meters (61,817 square feet) of new areas and the remodeling of 9,510 square meters (102,365 square feet).
Culiacán International Airport
The Culiacán airport is our second most important airport based on passenger traffic, air traffic movements and contribution to aeronautical revenues. According to the AFAC, the Culiacán airport was the 10th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, it accounted for approximately 10.6%, 12.4% and 10.9%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 2,458,863, 1,373,102 and 1,970,211 terminal passengers, respectively, were served by the Culiacán airport. Of the terminal passengers in 2019, 98.5% were domestic, and 1.5% were international. In 2020, 99.0% were domestic, and 1.0 % were international. In 2021, 97.5% were domestic and 2.5% were international. Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are highly affected by Mexican economic conditions.
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The airport’s terminal passenger traffic consists predominantly of commercial aviation. In 2019, 2020 and 2021, commercial aviation accounted for approximately 99.8%, 99.7% and 99.7%, respectively, and general aviation accounted for approximately 0.2%, 0.3% and 0.3%, respectively, of the airport’s terminal passenger traffic.
A total of seven commercial airlines operate at the airport. In 2021, airlines operating at this airport served twelve domestic destinations: Tijuana, Mexico City, Guadalajara, San José del Cabo, Mexicali, Monterrey, La Paz, Hermosillo, Chihuahua and Cancún and one international destination to Phoenix. In 2021, the principal airlines operating at this airport were Volaris, VivaAerobus, Aeroméxico Connect, Aeroméxico, TAR, Aerocalafia and American Airlines.
The Culiacán airport is located approximately 14 kilometers (9 miles) from the city of Culiacán. The population of the whole municipality is 1,155,462. Culiacán is the capital of the state of Sinaloa, an important producer of beef and agricultural products.
The Culiacán airport operates 16 hours a day. The runway has a length of 2,227 meters (7,306 feet) and capacity of 24 air traffic movements per hour. The airport occupies a total area of 280.9 hectares (1.08 square miles). The airport’s facilities include a terminal building expanded in 2012 with a total area of approximately 11,250 square meters (121,094 square feet), including 2,051 square meters (22,077 square feet) of commercial space, a nine-position apron for commercial aviation, a 57-position apron for general aviation, six taxiways and two air bridges. The Culiacán airport has a public parking facility that accommodates 343 vehicles.
The Culiacán airport also includes military installations. The presence of these installations amid their operational activity may at some point affect the airport’s runway capacity at peak hours, thus affecting its civil aviation operations.
Durango International Airport
In 2019, 2020 and 2021, the Durango airport accounted for approximately 2.3%, 2.5% and 2.5%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 527,004, 271,231 and 446,030 terminal passengers, respectively, were served by the Durango airport. Of the terminal passengers in 2019, 82.1% were domestic, and 17.9% were international. In 2020, 79.5% were domestic, and 20.5% were international. In 2021, 78.6% were domestic and 21.4% were international. 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 commercial airlines operate at the airport. In 2021, airlines operating at this airport served six direct destinations, including four domestic destinations and three international destinations: Mexico City, Tijuana, Guadalajara, Ciudad Juárez, Dallas and Chicago. In 2021, the airlines operating at this airport were Volaris, Aeroméxico Connect, American Airlines, TAR and VivaAerobus
The Durango airport is located approximately 16 kilometers (10 miles) from the City of Durango, which has a population of 688,697. The state of Durango is rich in natural resources and is Mexico’s leading producer of gold, silver, lead and zinc.
The Durango airport operates 14 hours a day. The airport’s runway is 2,900 meters (9,514 feet) long. The runway has five taxiways and a capacity of 40 air traffic movements per hour.
The airport’s total area is 541.4 hectares (2.09 square miles). Its facilities include a 4,846 square-meter (52,162 square-foot) terminal building with 512 square meters (5,511 square feet) of commercial space. It has a five position commercial aviation apron, a 33-position general aviation apron and a 136-space public parking area. The airport has three boarding gates for international or domestic flights. In 2020, we completed a 756 square meter (8,137 square-foot) expansion of the passenger waiting area of the terminal building at the Durango Airport. The expansion increased the waiting area’s capacity by 25.7%. The project had a total investment of Ps.47.2 million.
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San Luis Potosí International Airport
According to the AFAC, the San Luis Potosí airport was the 29th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, the San Luis Potosí airport accounted for approximately 2.8%, 2.8% and 2.9%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 643,224, 309,311 and 528,625 terminal passengers, respectively, were served by the San Luis Potosí airport. Of the terminal passengers in 2019, 70.6% were domestic, and 29.4% were international. In 2020, 71.5% were domestic, and 28.5% were international. In 2021, 68.3% were domestic and 31.7% were international. 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 eight commercial airlines operate at the airport: Aeroméxico Connect, Volaris, United Airlines, American Airlines, VivaAerobus, Aeromar, TAR and Magnicharters. In 2021, airlines operating at this airport served seven destinations, including five domestic destinations and two international destinations. In 2021, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Cancún, Tijuana, Puerto Vallarta, Monterrey, Houston and Dallas.
The San Luis Potosí airport operates 24 hours per day and is located approximately 15 kilometers (9 miles) from the city of San Luis Potosí, which is the capital of the state of San Luis Potosí and has a population of 911,908. The airport has two runways with a total capacity of 20 air traffic movements per hour. The principal runway is 3,006 meters (9,862 feet) long, and the secondary runway is 1,000 meters (3,281 feet) long. The airport has a total area of 508.3 hectares (1.96 square miles). The airport’s facilities include a terminal building with approximately 11,042 square meters (118,855 square feet), including 1,224 square meters (13,175 square feet) of commercial space, a six-position platform for commercial aviation, two aprons with a total of 24 positions for general aviation, four taxiways, a boarding lounge with five gates and a public parking facility that accommodates 222 vehicles. The airport’s navigational aids include precision approach path indicators, VHF omnidirectional radio and an instrument landing system on runway 14.
In November 2016, we started an expansion and remodeling of the terminal building at the San Luis Potosí airport, which was completed on August 16, 2019. The project had a total investment of Ps.400 million and included an expansion of 8,600 square meters (92,570 square feet), for a total of 13,482 square meters (145,119 square feet). Passenger capacity grew threefold to serve up to 1.2 million passengers per year.
Tampico International Airport
According to the AFAC, the Tampico airport was the 35th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, it accounted for approximately 3.2%, 2.4% and 2.2%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021 a total of 739,143, 270,835 and 397,191 terminal passengers, respectively, were served by the Tampico airport. Of the terminal passengers in 2019, 92.7% were domestic, and 7.3% were international. In 2020, 92.6% were domestic, and 7.4% were international. In 2021, 89.6% were domestic, and 10.4% were international. 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 four commercial airlines operate at the airport. In 2021, airlines operating at this airport served five direct destinations, including four domestic destinations and one international destination: Mexico City, Monterrey, Cancún, Ciudad del Carmen and Houston. In 2021, the airlines operating at the airport were Aeroméxico Connect, VivaAerobus, United Airlines and TAR.
The Tampico airport serves the industrial zone of Tampico, Ciudad Madero and Altamira, which have a combined population of 773,285. This industrial zone is home to companies in the petroleum and chemical industries.
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The Tampico airport operates Monday, Wednesday and Friday from 6:30 a.m. to 9:30 p.m. (local time) and from 6:30 a.m. to 9:00 p.m. on Sunday, Tuesday, Thursday and Saturday. The airport has three runways in operation. The principal runway is 2,550 meters (8,366 feet) long, the second runway is 1,221 meters (4,006 feet) in length, and the third runway (used exclusively for Alpha (A) category aircraft and visual flights) is 1,200 meters (3,937 feet) long. The airport has a capacity of 22 air traffic movements per hour and includes an instrument landing system on runway 13, which provides precise guidance to assist aircraft during landing.
The airport’s total area is 372.5 hectares (1.44 square miles). Its facilities include a 7,763 square-meter (83,560 square-foot) terminal building, of which 861 square meters (9,268 square feet) are commercial spaces. It has six position apron for commercial aviation, a 17 position apron for general aviation, two taxiways and four boarding gates. The Tampico airport has a public parking facility that accommodates 254 vehicles.
In December 2017, we started an expansion and remodeling of the terminal building at the Tampico airport. The project will have a total investment of approximately Ps.175 million. After the project concludes, total area will be 7,763 square meters (85,907 square feet), an increase of approximately 14%. After this expansion, the Tampico airport will have an annual capacity of 1.1 million passengers, an increase of approximately 38%.
Torreón International Airport
According to the AFAC, the Torreón airport was the 27th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, the Torreón airport accounted for approximately 3.2%, 2.9% and 3.0%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 708,563, 320,820 and 537,161 terminal passengers, respectively, were served by the Torreón airport. Of the terminal passengers in 2019, 90.0% were domestic, and 10.0% were international. In 2020, 91.6% were domestic, and 8.4% were international. In 2021, 88.5% were domestic and 11.5% were international. 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 seven commercial airlines operate at the airport. In 2021, airlines operating at this airport served eight direct destinations, including seven domestic destinations and one international destination. In 2021, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Cancún, Guadalajara, Tijuana, Querétaro, Ciudad Juárez, Monterrey and Dallas. In 2021, the airlines operating at the airport were Aeroméxico Connect, VivaAerobus, Volaris, American Airlines, TAR, Aeroméxico and Aeromar.
The Torreón airport is located in the city of Torreón, which is part of the La Laguna region, Mexico’s top dairy-producing region and an important industrial and commercial region. Approximately 720,848 people live in the city of Torreón, and approximately 1.4 million people live in La Laguna region.
The Torreón airport operates 14 hours a day. The airport has two runways. The principal runway measures 2,755 meters (9,038 feet) in length, and the secondary runway measures 1,467 meters (4,813 feet) in length. The airport has a runway capacity of 20 air traffic movements per hour. The airport has an instrument landing system, which provides precise guidance to assist aircraft during landing on runway 31.
The airport’s total area is 354.6 hectares (1.37 square miles). Its facilities include a terminal building of 5,492 square meters (59,115 square feet), of which 656 square meters (7,061 square feet) are commercial space, a seven-position apron for commercial aviation, a seven-position apron for general aviation, one taxiway, five boarding gates, several VIP lounges and one air bridge. The Torreón airport has a public parking facility that accommodates 142 vehicles.
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Zacatecas International Airport
According to the AFAC, the Zacatecas airport was the 36th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, the Zacatecas airport accounted for approximately 2.1%, 2.1% and 2.1%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 475,241, 232,352 and 375,930 terminal passengers, respectively, were served by the Zacatecas airport. Of the terminal passengers in 2019, 69.0% were domestic, and 31.0% were international. In 2020, 69.1% were domestic, and 30.9% were international. In 2021. 65.9% were domestic, and 34.1% were international. 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 four commercial airlines operate at the airport. In 2021, airlines operating at this airport served six direct destinations, including two domestic destinations and four international destinations: Tijuana, Mexico City, Chicago, Los Angeles, Dallas and San José, California.
In 2021, the airlines operating at this airport were Volaris, Aeroméxico Connect, American Airlines and VivaAerobus.
Located in the center of Mexico, the state of Zacatecas (of which the city of Zacatecas is the capital) is Mexico’s leading silver producer and second leading producer of lead, copper, zinc and gold. The state of Zacatecas has a population of approximately 1.6 million.
The airport currently operates 24 hours a day. The airport has one runway, which measures 3,000 meters (9,843 feet) in length. The runway capacity is 20 air traffic movements per hour.
The airport’s total area is 207.6 hectares (0.80 square miles). The terminal building is 5,794 square meters (62,366 square feet), of which 542 square meters (5,834 square feet) is commercial area. It has a four-position apron for commercial aviation, a 13-position apron for general aviation, three boarding gates and a parking lot with 202 parking spaces.
In 2012, we built a solar park at Zacatecas airport with an installed capacity of 200 Kw in a land area of approximately 4,000 square meters (43,056 square feet), which in 2021 generated approximately 225,125 Kw/h for the airport, equivalent to approximately 35.0% of the airport’s total electricity requirements.
Border Destinations
Ciudad Juárez International Airport
According to the AFAC, the Ciudad Juárez airport was the 12th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, the Ciudad Juárez airport accounted for approximately 6.9%, 7.1% and 8.3%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 1,597,471, 790,009 and 1,499,841 terminal passengers, respectively, were served by the Ciudad Juárez airport. Of the terminal passengers in 2019, 2020 and 2021, 99.6%, 99.7% and 99.2%, respectively, were domestic.
A total of five commercial airlines operate at the airport. In 2021, airlines operating at this airport served 11 direct destinations, all of which were domestic. In 2021, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Guadalajara, Cancún, Monterrey, El Bajío, Tijuana, Puerto Vallarta, Torreón, Mazatlán Hermosillo and Durango. In 2021, the airlines operating at the airport were VivaAerobus, Volaris, Aeroméxico, Aeroméxico Connect, and TAR. As of the date of this annual report, the airport does not have any active non-Mexican airlines.
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The airport is located in the city of Ciudad Juárez, which is near the U.S. border and has a population of 1,512,450. The city is a major center of the maquiladora industry. Because Ciudad Juárez is a popular entry point to the United States many of the airport’s passengers consist of Mexican migrant workers traveling to Ciudad Juárez in order to seek work in the United States. Although the airport’s passengers are predominantly domestic, its passenger traffic and results of operations are affected by economic conditions in both Mexico and the United States.
The Ciudad Juárez airport operates 14 hours a day. The airport has two runways. The principal runway measures 2,700 meters (8,858 feet) in length, and the secondary runway measures 1,710 meters (5,610 feet) in length. The airport has a capacity of 20 air traffic movements per hour.
The airport’s total area is 367.95 hectares (1.42 square miles). Its facilities include a terminal building of 6,210 square meters (66,844 square feet), consisting of 779 square meters (8,395 square feet) of commercial space, four boarding gates and one air bridge. The airport has a six-position commercial aviation apron, a 15-position general aviation apron, a one-position freight services apron and three taxiways. The Ciudad Juárez International Airport has a public parking facility that accommodates 501 vehicles.
In January 2021, we started an expansion and remodeling of the terminal building at the Ciudad Juárez airport. The project will have a total investment of approximately Ps.520 million. After the project concludes total area will be 12,470 square meters (34,226 square feet), an increase of approximately 101%.
Reynosa International Airport
According to the AFAC, the Reynosa airport was the 34th busiest airport in Mexico in 2021 based on commercial and general aviation passenger traffic. In 2019, 2020 and 2021, the Reynosa airport accounted for approximately 2.1%, 2.1% and 2.4%, respectively, of our terminal passenger traffic.
In 2019, 2020 and 2021, a total of 480,524, 229,058 and 425,918 terminal passengers, respectively, were served by the Reynosa airport. Of the terminal passengers in 2019, 2020 and 2021, 99.2%, 99.1% and 98.0% respectively, were domestic. 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 two airlines operate at the airport. In 2021, airlines operating at this airport served four direct destinations, all of which are domestic destinations: Mexico City, Cancún, Guadalajara and Veracruz. In 2021, the airlines operating at this airport were VivaAerobus and Aeroméxico Connect.
The airport is located in Reynosa, a city with a population of 704,767 inhabitants bordering the United States near the Gulf of Mexico. We believe that Reynosa’s robust industrial economic activity and proximity to the United States create the potential for growth in air cargo services. Because Reynosa is a popular entry point to the United States, many of the airport’s passengers consist of Mexican migrant workers traveling to Reynosa in order to seek work in the United States. Although the airport’s passengers are predominantly domestic, its passenger traffic and results of operations are affected by economic conditions in both Mexico and the United States.
The Reynosa airport operates 12 hours a day. The airport has one runway, which is 1,893 meters (6,211 feet) in length and has a runway capacity of 18 air traffic movements per hour.
The airport’s total area is approximately 407.4 hectares (1.57 square miles).
In February 2021, we inaugurated the new terminal building at the Reynosa airport. The project had a total investment of Ps.325 million and included an expansion of 4,550 square meters (48,976 square feet). Passenger capacity grew threefold to serve up to 970,000 passengers per year. The new terminal building is 7,158 square meters (77,048 square feet), which includes 981 square meters (10,559 square feet) of commercial area. It has a four-position apron for commercial aviation, an 11-position apron for general aviation, two taxiways, three boarding gates and a public parking area with 270 spaces.
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Principal Aeronautical Services Customers
Airline Customers
As of December 31, 2021, over 12 international commercial airlines and eight Mexican commercial airlines operated flights at our 13 airports. VivaAerobus, Volaris and Grupo Aeroméxico operated the most flights at our airports. In 2021, revenues from VivaAerobus were Ps.1,900,282 thousand (U.S.$92.8 million), revenues from Volaris were Ps.1,295,360 thousand (U.S.$63.3 million) and revenues from Grupo Aeroméxico and its affiliates totaled Ps.987,835 thousand (U.S.$48.3 million), representing 36.0%, 24.5% and % and 18.7%, respectively, of our aeronautical revenues from airline customers for 2021. These revenues were earned from passenger charges, landing charges, aircraft parking charges and the leasing of space to these airlines. On December 9, 2020, Interjet stopped operations in all our airports and as of the date of this report, the airline has not resumed any operations in the airports we operate.
The following table sets forth the number of air traffic customers per airline for the years ended December 31, 2019, 2020 and 2021:
Terminal Passengers
Principal Air Traffic Customers Per Airline
Domestic:
VivaAerobus
6,666,650
3,996,278
7,484,920
Volaris
5,300,929
2,900,985
4,907,684
Grupo Aeroméxico (Aeroméxico and Aeroméxico Connect)
5,079,229
2,248,687
3,519,352
Grupo Aeromonterrey (Magnicharter)
518,536
163,649
306,984
TAR Aerolíneas
437,626
136,962
246,164
Aeromar
196,944
107,388
225,821
Interjet
3,045,049
620,940
112,117
40,683
69,008
Total domestic
21,357,080
10,215,572
16,759,933
International:
American Airlines
544,886
306,241
584,846
United
507,277
162,630
324,021
Alaska Airlines
145,414
63,317
92,378
Delta
192,509
42,201
50,231
Copa Airlines
30,395
6,311
16,977
221,488
139,474
38,873
Total international
1,641,969
720,174
1,107,326
General aviation
169,011
126,942
157,905
Historically, traditional carriers such as Aeroméxico had represented a substantial majority of the Mexican commercial airline market. In recent years, however, international carriers, discount carriers, low-cost carriers and other new market entrants have represented a growing proportion of the Mexican commercial airline market. In 2021, passengers traveling on discount and low-cost carriers, such as VivaAerobus and Volaris, accounted for approximately 69.4% of our commercial aviation passenger traffic. Since air transportation historically has been affordable only to the higher income segments of Mexico’s population, resulting in a comparatively low level of air travel, we believe that the entry of low-cost and discount carriers into the Mexican commercial airline market has helped to increase the use of air transportation in Mexico.
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Aeroméxico is a publicly traded company and Delta Airlines currently owns approximately 20.0% of Aeroméxico. In June 2020, Aeromexico and its affiliates filed voluntary Chapter 11 petitions in the United States to implement a financial restructuring, while continuing to operate. On January 28, 2022, the United States Bankruptcy Court for the Southern District of New York confirmed Aeromexico’s plan of reorganization, and the restructuring was successfully completed on March 17, 2022. As of April 22, 2022, both Aerolitoral, S.A. de C.V. and Aerovias de Mexico, S.A. de C.V. (two subsidiaires of Aeromexico) generally comply with their payment oblgiations and continue to operate in our airports.
The following table sets forth our principal air traffic customers for the years ended December 31, 2019, 2020 and 2021:
Percentage of Aeronautical Revenues
Principal Air Traffic Customers
22.4
28.0
36.0
20.5
23.4
21.8
20.0
18.7
Grupo Aeromonterrey (Magnicharters)
TAR
1.3
DHL Express México
Calafia Airlines
5.7
4.0
4.8
87.2
87.6
89.0
4.3
5.3
0.1
Charters
12.8
11.0
Complementary Services Customers
As of December 31, 2021, our principal complementary services clients are three principal providers of ramp-handling and baggage-handling services, AGN Aviation Services, S.A. de C.V., Menzies Aviation Mexico, S.A. de C.V. and Servicios Aeroportuarios Monterrey, S.A. de C.V., and our primary catering client is Aero Cocina, S.A. de C.V., all of which provided an aggregate of Ps.24,253 thousand of revenues in the form of access fees in 2021.
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Principal Non-Aeronautical Services Customers
As of December 31, 2021, we were party to approximately 1,158 contracts with providers of commercial services in the commercial space in our airports, including retail store operators, duty free store operators, food and beverage providers, financial services providers, car rental companies, telecommunications providers, VIP lounges, advertising, travel agencies, time-share sales and promotions services and tourist information and promotion services. As a result, our revenues from non-aeronautical services commercial customers are spread across a large number of customers and are, therefore, not dependent on a limited number of principal customers. In 2021, our largest commercial customers were Alquiladora de Vehículos Automotores, S.A. de C.V. (car rental), ISA Corporativo S. A. de C. V. (advertising), Aerocomidas, S.A. de C.V. (food and beverage) a subsidiary of Grupo Areas, Café Sirena, S. de R.L. de C.V (food and beverage), Operadora Aeroboutiques, S.A. de C.V. (retail stores) a subsidiary of Grupo Areas, DMC Transportación Ejecutiva, S. de R.L. de C. V. (VIP lounges), Fly By Wings, S. de R.L. de C.V (food and beverage), and Dufry México, S.A. de C.V. (duty free).
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, weather, air traffic control delays and general economic conditions, as well as the other factors discussed above. In addition, the impact of COVID-19 on the Company’s longer-term operational performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty. As a result, our operating results for a quarterly period are not necessarily indicative of operating results for an entire year, and historical operating results are not necessarily indicative of future operating results.
Competition
Excluding our airports servicing tourist destinations, our airports currently are the only major airports in the geographic areas that they serve and generally do not face significant competition.
However, since the Acapulco, Mazatlán and Zihuatanejo airports are substantially dependent on tourists, 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 Los Cabos, Cancún and Puerto Vallarta, and abroad, such as in Florida, Puerto Rico, Cuba, Jamaica, the Dominican Republic, other Caribbean islands and Central America.
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 to a significant degree, the U.S. economy and the attractiveness of other commercial and industrial centers in Mexico, which may affect the attractiveness of Monterrey and other growing population centers in our airport group, such as Ciudad Juárez and San Luis Potosí. In addition, with respect to Acapulco, Mazatlán and Zihuatanejo, these factors include promotional activities and pricing policies of hotel and resort operators, weather conditions, natural disasters (such as hurricanes and earthquakes) and the development of new resorts that may be considered more attractive. The locations we serve may not continue to attract the same level of passenger traffic in the future.
The Mexican Airport and Auxiliary Services Agency currently operates 12 small airports in Mexico’s northern region, which collectively served 1,887,109 passengers in 2021, representing an increase of 52.6% from 2020 traffic, mainly as a result of an increase in passenger traffic to and from Querétaro, Ciudad Obregón, Tepic and Uruapan.
In addition, the Mexican government could grant new concessions to operate existing government-managed airports or authorize the construction of new airports, which could compete directly with our airports. Any competition from other such airports could have a material adverse effect on our business and results of operations.
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For more information, see “Risk Factors - Risks Related to the Regulation of Our Business – “The Mexican government could grant new concessions that compete with the airports operated by the Company”.
Sustainability and Our Corporate Culture
Sustainability is one of the core values of our corporate culture. Our integrated management system focuses on occupational health and safety, environmental care, corporate social responsibility and corporate governance. This allows us to respond in a balanced way to the relevant aspects of our stakeholders through different actions and projects in our 13 airports.
Awards and Recognition
In 2018, OMA was included in the Dow Jones Sustainability Index (“DJSI”) Emerging Markets for the third consecutive year. In addition, OMA was included in 2019 in the Dow Jones Sustainability Index-MILA, for the second consecutive year.
On March 6, 2018, the Mazatlán airport was named the Best Regional Airport of 2017 in Latin America and the Caribbean by Airports Council International (“ACI”). Previous recognition was awarded in 2014.
In 2018, the Culiacán, Mazatlán, Reynosa, Tampico, Torreón, Zacatecas and Zihuatanejo airports received the Distinctive “S” (Distintivo “S”) granted by the Ministry of Tourism to companies with good practices in the development of tourism projects and its commitment to global sustainability criteria. In 2019, the Acapulco, Ciudad Juárez, Chihuahua, Durango and San Luis Potosí airports also received such Distinctive “S” (Distintivo “S”).
In, 2020, we were included in the Sustainability Index of the Mexican Stock Exchange now called S&P/BMV Total México ESG Index, for the ninth year in a row.
In 2020, all of our airports received the Health Security Distinction, awarded by the Mexican Institute of Social Security (IMSS) related to implementation of a healthy return to the workplace due to COVID-19 outbreak.
In 2020, the Monterrey airport was certified by ACI with the Airport Health Accreditation. This recognition certifies compliance with global health standards including those of ACI and ICAO recommendations, for passengers, authorities and users at the Monterrey airport.
In 2021, the Acapulco, Culiacán, Mazatlán, and Reynosa airports maintained a Family Responsibility Company Certificate (Certificado de Empresa Familiarmente Responsable) granted by the Mexican Ministry of Labor and Social Welfare.
In 2021, all of our airports received the Safe Travels seal granted by the World Travel and Tourism Council (WTTC) because of the actions and protocols implemented to provide its users of facilities with high standards of sanitation in order to mitigate the risk of infection of COVID-19 in each of its terminal buildings.
In 2021, we received an award for being the First Airport Group to Issue a Green Bond in the Mexican Market granted by the Green Finance Advisory Council (Consejo Consultivo de Finanzas Verdes) at the 2020-2021 Green, Social and Sustainability Bonds Awards.
In 2022, we were included for the first time in the 2022 Bloomberg Gender-Equality Index (“GEI”).
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Ten of our 13 airports have maintained certifications as Safe Companies by the Mexican Ministry of Labor and Social Welfare (Secretaría del Trabajo y Previsión Social) for their achievements in the administration of health and safety in the workplace. The San Luis Potosí airport was the first airport in Mexico to receive such certification in 2011, and in 2015 it was granted the highest recognition by the Ministry of Labor and Social Welfare with a Level III Safe Company Certificate (Certificado de Empresa Segura Nivel III). The Ministry of Labor and Social Welfare granted Level I Safe Company Certificates (Certificado de Empresa Segura Nivel I) to the Reynosa airport, Level II Safe Company Certificates (Certificado de Empresa Segura Nivel II) to the Zacatecas airport, Level III to the Acapulco, Ciudad Juárez, Monterrey and Zihuatanejo airports, and the Revalidation of Level III Safe Company Certificates (Certificado de Empresa Segura Revalidación Nivel III) to the Culiacán, Mazatlán, San Luis Potosí and Torreón airports.
All of our airports, have received the Environmental Quality Certificate (Certificado de Calidad Ambiental) awarded by the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente) for compliance with applicable Mexican environmental laws, regulations and applicable Official Mexican Standards and must be renewed on a biannual basis.
REGULATORY FRAMEWORK
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 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, the holder of a concession granted by the Ministry of Infrastructure, 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 either (a) entities considered part of “the federal public administration” as defined under Mexican law or (b) private companies whose principal shareholders may be a state or municipal government; (ii) concessions granted to operators of private airports (who have operated privately for five or more years) wishing to begin operating their facilities as public service airports; and (iii) complementary concessions granted to existing concession holders. 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 Infrastructure, Communications and Transportation granted 13 concessions to operate, maintain and develop the 13 principal airports in Mexico’s Central North region 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 Series BB shares (currently representing 12.9% 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 September 12, 2000, in order, among other things, to incorporate each airport’s maximum rates and certain other terms as part of the concession.
Reforms to the Mexican Airport Law and Civil Aviation Law
On January 26, 2015, amendments to the Mexican Airport Law and Civil Aviation Law were published and enacted. Among other matters, the amendments include provisions that intend to create a competitive market for the suppliers of complementary services. To this end, the amendments establish that a concession holder may not limit the number of providers of complementary services in its airport, except in instances in which space availability, operational efficiency and/or safety warrant such a limitation. If a concession holder denies entry to any complementary service provider for a reason other than the above, that service provider may file a complaint before the Ministry of Infrastructure, Communications and Transportation.
On June 8, 2016, Article 10 BIS was added to the Mexican Airport Law to provide guidance regarding the granting of concession titles and extensions. Article 10 BIS requires the Ministry of Infrastructure, Communications and Transportation to file with the Ministry of Finance and Public Credit, in accordance with the Mexican Airport Law and corresponding regulations, the following: (i) a favorable opinion on the economic profitability of the respective project; (ii) if federal public funds are used to finance part of the project, evidence of the registration of the project with the investment program and project registry maintained by the Ministry of Finance and Public Credit; and (iii) the determination of the fee and duties payable by the concessionaire to the Mexican government, in terms of the applicable law.
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We believe we are currently complying in all material respects with the requirements of the Mexican Airport Law and its regulations. Noncompliance with these regulations could result in fines or other sanctions being assessed by the Ministry of Infrastructure, Communications and Transportation, and are among the violations that could result in termination of a concession if they occur three or more times.
On November 8, 2017, an amendment to the Mexican Airport Law took effect, which modified various regulations, primarily impacting airlines. As a result of the amendment, airlines must, among others: (i) be transparent when providing information regarding taxes and restrictions on a passenger’s airplane ticket and the breakdown of each cargo fee; (ii) provide passengers at least a 24-hour advance notice of any change in itinerary; (iii) compensate passengers in the event of a cancellation, overbooking and/or the damage, loss or destruction of luggage; and (iv) allow passengers with disabilities to transport necessary implements (such as wheelchairs, walkers, prostheses, crutches, walking sticks or any other implement), at no extra charge, provided that it is for personal use and the item is directly related to the traveler’s disability.
Federal Antitrust Commission
On May 23, 2014, a new Federal Antitrust Law (Ley Federal de Competencia Económica) was enacted. The law grants broader powers to the Mexican Antitrust Commission, including the abilities to regulate essential facilities, order the divestment of assets and eliminate barriers to competition in order to promote access to the market. The law also sets forth important changes in connection with mergers and anti-competitive behavior, increases liabilities that may be incurred for violations of the law, increases the amount of fines that may be imposed for violations of the law and limits the availability of legal defenses against the application of the law. If the Mexican Antitrust Commission determines that a specific service or product is an essential facility, it has the ability to regulate access conditions, prices, tariffs or technical conditions for or in connection with the relevant service or product. As of April 22, 2022, the Mexican Antitrust Commission had not made any determination as to whether the services we render are considered an essential facility.
Role of the Ministry of Infrastructure, Communications and Transportation
The Ministry of Infrastructure, Communications and Transportation is the principal regulator of airports in Mexico and is authorized by the Mexican Airport Law to perform the following functions:
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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 Infrastructure, Communications and Transportation is required to provide air traffic control, radio assistance and aeronautical communications at Mexico’s airports. The Ministry of Infrastructure, Communications and Transportation provides these services through Services for Navigation in Mexican Air Space, the Mexican air traffic control authority, which is a division of the Ministry of Infrastructure, Communications and Transportation. Since 1978, the Mexican air traffic control authority has provided air traffic control for Mexico’s airports.
On October 16, 2019, the Ministry of Infrastructure, Communications and Transportation established AFAC, an independent regulatory agency, that replaced the Mexican Bureau of Civil Aviation (Dirección General de Aeronáutica Civil). AFAC is responsible for establishing, coordinating, overseeing and controlling international and national air transportation, as well as the airports, complementary services and generally all activities related to civil aviation. AFAC has been formally established and its internal regulations and operation manuals were published and enacted on February 26, 2021, with no material changes with respect to the ones they replaced. We cannot predict the actions that AFAC will take in the future in compliance with its internal regulations and operation manual, or the effect of any such actions on its business.
Concession Tax
Under Article 232-A of the Mexican Federal Duties Law, holders of airport concessions must pay a tax for the use of state-owned assets. As such, 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 at any time by the Mexican government. Our concessions provide that we may request an amendment of our maximum rates if there is a change in this concession tax, although such a request may not be honored in the future.
Scope of Concessions
We hold (through subsidiary holding companies) concessions granted to us by the Mexican government to use, operate, maintain and develop 13 airports in the Central North region of Mexico in accordance with the Mexican Airport Law. As authorized under the Mexican Airport Law, each of the concessions is held by one of our subsidiaries for an initial 50-year term beginning on November 1, 1998. This initial term of each of our concessions may be renewed in one or more terms for up to an additional 50 years, subject to our acceptance of any new conditions imposed by the Ministry of Infrastructure, Communications and Transportation and to our compliance with the terms of our concession.
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In order to renew a concession, the Ministry of Infrastructure, Communications and Transportation must obtain a favorable opinion from the Tax Ministry, which will analyze the profitability of each of the airports together with the costs and benefits of renewing the concession. Such analysis compares the cash revenues that may be generated from the use, benefit and exploitation of the public domain assets and services subject to the relevant concessions against the associated costs. The Tax Ministry must issue a resolution on the profitability of each airport within 30 days following receipt of all relevant information from the Ministry of Infrastructure, Communications and Transportation. If the Tax Ministry does not issue a resolution within the 30-day period, it will be deemed that the Tax Ministry issued favorable opinion. In addition, together with the profitability analysis, the Ministry of Infrastructure, Communications and Transportation shall submit a proposal for the concession fee applicable to the renewed period to the Tax Ministry.
The concessions held by our subsidiary concession holders allow 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 its regulations 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, the use of 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 shall 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 the inspection of passengers and carry-on luggage prior to approaching the departure gates and specify that the transporting airline is responsible for the inspection of checked-in luggage and cargo. If public order or national security is endangered, the competent federal authorities are authorized to act to protect the safety of aircraft, passengers, cargo, mail, installations and equipment.
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 Infrastructure, Communications and Transportation. No agreement documenting liens approved by the Ministry of Infrastructure, 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 Infrastructure, Communications and Transportation. The Ministry of Infrastructure, 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 Infrastructure, Communications and Transportation may require.
General Obligations of Concession Holders
The concessions impose certain obligations on the concession holders, including, among 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 Programs and the concessions.
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Each concession holder and any third party providing services at an airport is required to carry specified insurance in amounts and covering specified risks, such as damage to persons and property at the airport, in each case as specified by the Ministry of Infrastructure, Communications and Transportation. As of April 22, 2022, the Ministry of Infrastructure, 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, together with our subsidiary concession holders, are jointly and severally liable to the Ministry of Infrastructure, 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, 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 one concession, the Ministry of Infrastructure, Communications and Transportation is entitled to revoke all of the concessions held by our subsidiaries.
Substantially all of the contracts entered into prior to the grant of our concessions 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 its regulations classify the services that may be rendered at an airport into the following three categories:
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Third parties rendering airport, complementary or commercial services are required to do so pursuant to a written agreement with the relevant concession holder. We have entered into agreements with third parties for security and surveillance services, ramp-handling and baggage-handling services and checked-baggage services, among others. All agreements relating to airport or complementary services are required to be approved by the Ministry of Infrastructure, 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 of complementary services are required to be corporations incorporated under Mexican law. In addition, we lease spaces to third-party tenants that provide commercial services such as food and beverage, retail and advertising.
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/or safety considerations. If a concession holder denies entry to any complementary services provider for reasons other than the above, such service provider may file a complaint with the Ministry of Infrastructure, Communications and Transportation, which shall determine within 60 days of the filing of the complaint whether entry of the service provider into the airport shall be authorized. 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 a competitive bidding process.
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.
In the event of force majeure, the Ministry of Infrastructure, Communications and Transportation may impose additional regulations governing the provision of services at airports, but only to the extent necessary to address the force majeure event. The Mexican Airport Law allows the airport administrator appointed by a concession holder to suspend the provision of airport services in the event of force majeure.
Master Development Programs
Concession holders are also required to submit to the Ministry of Infrastructure, Communications and Transportation a Master Development Program describing, among other things, the concession holder’s construction and maintenance plans.
Each Master Development Program is for a period of 15 years and is required to be updated every five years and resubmitted for approval to the Ministry of Infrastructure, Communications and Transportation. Upon such approval, the Master 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 pursuant to a concession holder’s Master Development Program or upon approval by the Ministry of Infrastructure, Communications and Transportation. Information required to be presented in the Master Development Program includes:
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The concessions require the concession holder to prepare and submit the concession holder’s Master Development Program in a 24-month period and consider the necessary requirements of the airport users in the preparation of the Master Development Program as well as the opinions of air carriers and operations and timetable’s committee. The concession holder must submit a draft of the Master Development Program to an operations committee (Comité de Operación y 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 Infrastructure, Communications and Transportation. Further, the concession holder must submit, six months prior to the expiration of the five-year term, the new Master Development Program to the Ministry of Infrastructure, Communications and Transportation. The Ministry of Infrastructure, Communications and Transportation may request additional information or clarification as well as seek further comments from airport users. The Mexican Ministry of Defense (Secretaría de la Defensa Nacional) may also opine on the Master Development Programs.
A concession holder may only undertake a major construction project, renovation or expansion relating to an airport pursuant to its Master Development Program or with the approval of the Ministry of Infrastructure, Communications and Transportation. We are required to spend the full amounts set forth in each investment program under our Master Development Programs, and the Ministry of Infrastructure, Communications and Transportation may apply sanctions if we do not comply.
Changes to a Master Development Program and investment program require the approval of the Ministry of Infrastructure, Communications and Transportation, except for emergency repairs and minor works that do not adversely affect an airport’s operations.
Pursuant to the terms of our concessions, we are required to comply with the investment obligations under the Master Development Programs on a year-by-year basis, and the Ministry of Infrastructure, Communications and Transportation is entitled to review our compliance thereunder (and apply sanctions accordingly) on a year-by-year basis. Although historically the Ministry of Infrastructure, Communications and Transportation has indicated its intent to review our compliance with these obligations on an aggregate five-year basis, we understand that the Ministry of Infrastructure, Communications and Transportation may also conduct more limited reviews of our compliance with our obligations on a year-by-year basis going forward.
During 2020, we negotiated the Master Development Program for the 2021 to 2025 period with the Ministry of Infrastructure, Communications and Transportation for each of our subsidiary concession holders. This five-year program is in effect from January 1, 2021 until December 31, 2025.
Revenue Regulation
The Mexican Airport Law provides for the Ministry of Infrastructure, Communications and Transportation to establish price regulations for services for which the Antitrust Commission determines that a competitive market does not exist. In 1999, the 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 Infrastructure, 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 September 12, 2000, the Rate Regulation (Regulación Tarifaria), which provides a framework for the setting by the Ministry of Infrastructure, Communications and Transportation of five-year maximum rates, was incorporated within the terms of each of our concessions. See “Item 3. Key Information—Risk Factors—Risks Related to the Regulation of Our Business— The Company cannot predict how the regulations governing the business will be applied.”
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Regulated Revenues
Since January 1, 2000, all of our revenues from aeronautical services have been subject to the Rate Regulation. This price regulation system 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, including those transported in passenger airplanes. The combined maximum tariffs are expressed in workload units for each airport and were determined based on: (i) projected workload units; (ii) capital investments; and (iii) the operating expenses authorized for the five-year period in the Master Development Programs.
We are able to set the specific prices for regulated services, other than complementary services and the leasing of space to airlines, for each of our airports every six months (or earlier upon a cumulative increase of 5% in the Mexican Producer Price Index (excluding fuel)), as long as the combined revenues from regulated services at an airport does not exceed the maximum rate per workload unit at that airport on an annual basis. Since our aggregate revenues resulting from regulated services are not otherwise restricted, increases in passenger and cargo traffic increase the workload units permit greater revenues overall within each five-year period for which maximum rates are established.
The Rate Regulation establishes a “dual-till” system of price regulation under which a majority of our revenues, such as passenger fees, landing fees, aircraft parking fees and access fees from third parties providing complementary services at our airports, are regulated, while the revenues that we earn from commercial activities in terminals at our airports, such as the leasing of space to retailers, restaurants, car rental companies and banks, are not regulated. In 2019, 2020 and 2021, approximately 67.5%, 54.8% and 60.5%, respectively, of our total revenues were earned from aeronautical services subject to price regulation under our maximum rates (76.0 %, 71.5% and 76.1%, respectively, of the sum of aeronautical and non-aeronautical revenues).
Our revenues from non-aeronautical services, including revenues that we earn from most commercial activities in our terminals, are not subject to this maximum-rate price regulation system and are therefore not subject to a ceiling. For a description of how we classify our revenues into aeronautical and non-aeronautical services, see “Item 5. Operating and Financial Review and Prospects—Overview—Classification of Revenues.”
Maximum Rates
Each airport’s maximum rate is to be determined for each year by the Ministry of Infrastructure, 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 Infrastructure, Communications and Transportation. The schedule of maximum rates for each airport is to be established every five years.
Maximum Rates for 2021 through 2025
On December 28, 2020, the Ministry of Infrastructure, Communications and Transportation set the airport maximum rates for the five-year period from January 1, 2021 through December 31, 2025. These maximum rates are subject to adjustment only under the limited circumstances described below under “Special Adjustments to Maximum Rates.” The following table sets forth the maximum rates for each of our airports under our 2021 to 2025 Master Development Programs that went into effect as of January 1, 2021:
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Current Maximum Rates(1)
364.14
361.59
359.06
356.55
354.06
298.48
296.39
294.32
292.25
290.20
318.19
315.96
313.75
311.55
309.37
313.74
311.54
309.36
307.19
305.04
363.54
360.99
358.46
355.95
353.46
354.18
351.70
349.24
346.79
344.36
297.90
295.81
293.74
291.69
289.65
315.34
313.12
310.93
308.75
306.59
284.36
282.37
280.39
278.43
276.49
348.59
346.15
343.72
341.31
338.93
353.31
350.84
348.38
345.95
343.53
378.81
376.16
373.53
370.91
368.31
383.83
381.14
378.47
375.82
373.19
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:
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Our concessions specify a discounted cash flow formula to be used by the Ministry of Infrastructure, Communications and Transportation to determine the maximum rates that, given the projected pre-tax earnings, the efficiency adjustment, 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. In connection with the preparation of the current Master Development Programs, we prepared a proposal to submit to the Ministry of Infrastructure, 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. Historically, the maximum rates ultimately established by the Ministry of Infrastructure, Communications and Transportation reflect a negotiation between the Ministry and us regarding these variables. Once the maximum rates are established, they may be adjusted annually to take account of projected improvements in efficiency and the Mexican Producer Price Index (excluding fuel).
The concessions provide that each airport’s reference values, discount rate and the other variables used in calculating the maximum rates do not represent an undertaking by the Ministry of Infrastructure, 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 have been 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 this shortfall.
To the extent that such aggregate revenues per workload unit exceed the relevant maximum rate, the Ministry of Infrastructure, 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 Unit of Measurement and Update (“UMA”). The UMA as of January 1, 2022 was Ps.96.22. As a result, the maximum penalty at such date could have been Ps.4,811 thousand (U.S.$235,059) per airport.
As established by the Ministry of Infrastructure, 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 commercial cargo.
Special Adjustments to Maximum Rates
Once determined, each airport’s maximum rates are subject to special adjustment only under the following circumstances:
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Ownership Commitments and Restrictions
The concessions require us to retain a 51% direct ownership interest in each of our 13 concession holders throughout the term of these concessions. Any acquisition by us or 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 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 Infrastructure, 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 Infrastructure, 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 Infrastructure, Communications and Transportation to such control acquisition. For purposes of this requirement, control is deemed to be acquired in the following circumstances:
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Under the regulations to 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 Infrastructure, Communications and Transportation is required to be notified 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 Infrastructure, 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 spinoff 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:
Following a concession’s termination, the concession holder remains liable for the performance of its obligations during the term of the concession.
On May 20, 2004, a new Mexican National Assets Law was adopted and published in the Federal Official Gazette that, among other things, establishes regulations relating to concessions on real property held in the public domain, including the airports that we operate. The Mexican National Assets Law establishes additional grounds for revocation of concessions for failure to pay certain applicable taxes.
Revocation of Concessions
A concession may be revoked by the Ministry of Infrastructure, Communications and Transportation under certain conditions, including:
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The Ministry of Infrastructure, 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 Infrastructure, Communications and Transportation revokes one of our concessions, it is entitled to revoke all of our other concessions.
According to the Mexican National Assets Law, Mexico’s national patrimony consists of private and government-owned assets of Mexico. The surface area of our airports and improvements on such space are considered government-owned assets. A concession concerning government-owned assets may be “rescued,” or reverted 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 “rescue,” or reversion, the assets that were subject to the concession are automatically returned to the Mexican government.
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In the event of war, public disturbances or threats to national security, the Mexican government may assume the operations (through a process known as 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 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 shall be determined by experts jointly appointed by both parties, and the amount of losses shall be determined based on the average net income of the concession holder during the previous year. In the event of a requisa due to international war, the Mexican government would not be obligated to indemnify us.
The Mexican Airport Law provides that sanctions of up to 400,000 times the UMA may be assessed for failures to comply with it or the terms of a concession. The UMA as of January 1, 2022 was Ps.96.22. As a result, the maximum penalty at such date could have been Ps.38,488 thousand (U.S.$1.9 million) per airport or per violation.
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 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 Infrastructure, 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, upon expiration or termination of our concessions, the assets used by our subsidiary concession holders to provide services at our airports may 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 Mexican Antitrust 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:
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Additionally, under the Mexican Airport Law for the granting of a concession title or the resolution to extend the term thereof, the Ministry of Infrastructure, Communications and Transportation shall file before the Ministry of Finance and Public Credit the following:
Environmental Matters
Regulation
Our operations are subject to Mexican federal and state 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 Equilibrium and Environmental Protection (Ley General del Equilibrio Ecológico y la Protección al Ambiente) or the “General Environmental Law,” and its regulations, which are administered by the Ministry of the Environment and Natural Resources and enforced by the Ministry’s enforcement branch, the Federal Attorney for Environmental Protection; (ii) the General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos), the “Law on Waste”, the General Law for Sustainable Forest Development (Ley General de Desarrollo Forestal Sustentable) and the General Law for Wildlife (Ley General de Vida Silvestre), each of which are also administered by the Federal Attorney for Environmental Protection; (iii) the National Waters Law (Ley de Aguas Nacionales) and its regulations, which are administered and enforced by the National Waters Commission, also a branch of the Ministry of the Environment and Natural Resources; (iv) the General Law of Climate Change; and (v) the Federal Law of Environmental Responsibility (Ley Federal de Responsabilidad Ambiental).
Under the General Environmental Law, regulations have been enacted concerning air pollution, environmental impact, environmental audits, natural protected areas, ecological ordering, emissions records and transfer of pollutants. 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 published in October 2003, owners and/or possessors of real 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 wastewaters into national water bodies must comply with, among other rules, 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.
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In addition to the foregoing, Official Mexican Standards (Normas Oficiales Mexicanas), which are technical standards issued by competent regulatory authorities pursuant to the General Metrology and Normalization Law (Ley General de Metrología y Normalización) and to other laws that include the environmental laws described above, establish standards relating to air emissions, soil contamination, wastewater discharges, the generation, handling and disposal of hazardous waste and noise control, among other issues.
The Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales) and the Federal Office for the Protection of the Environment (Procuraduría Federal de Protección al Ambiente) are the responsible regulators. 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 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 (with which we have complied). 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 adopted specific actions within a determined time frame.
On June 6, 2012, the General Law on Climate Change was adopted and published in the Official Gazette of the Federation, which, among other objectives, (i) regulates greenhouse gases and emissions, taking into consideration the goals set forth by the UN Framework Convention on Climate Change and the provisions derived therein; (ii) promotes the education, research, development and technology transfer, innovation and promotion with respect to adapting to and mitigating climate change; and (iii) promotes the transition to a competitive, sustainable and low-carbon economy. In accordance with the General Law of Climate Change, individuals and entities that are responsible for sources of emission that are subject to environmental reporting are obligated to compile necessary information, data and documents with respect to direct and indirect emissions for the inclusion in the Mexican National Registry of Emissions (Registro Nacional de Emisiones). This regulation was published on October 28, 2014. We have been obligated to comply with this requirement since February 15, 2016.
Furthermore, on June 7, 2013, the Federal Law of Environmental Responsibility was published in the Federal Official Gazette and requires that any person or entity who, whether by act or omission, directly or indirectly, causes harm to the environment, is obligated to repair such harm. If repair of such harm is not possible, such person is required to pay compensation for the harm caused and take any action necessary to avoid any additional harm or damage. Likewise, this law establishes a judicial procedure for environmental responsibility through which any physical or moral person with a legitimate interest can sue for repair and compensation for harm done to the environment.
On August 11, 2014, the Mexican National Agency of Industrial Safety and Protection of the Environment of the Hydrocarbons Sector (Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos, or “ASEA”) was created. While initially taking a secondary role to the role of the Mexican Ministry of the Environment and Natural Resources, ASEA has recently started to enforce its legal powers. Our airport growth projects related to fuel supply must now be approved by ASEA, which may result in more burdensome proceedings for the approval of special projects related to hydrocarbons. As of the date of this report, there can be no assurance whether ASEA’s rules and regulations will materially affect our business or results of operations.
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In 2018, Mexico launched a carbon dioxide (“CO2”) market. The market requires that industries that generate above a certain amount of CO2 emissions pay for rights to excess emissions. Starting in 2019, the legislation also requires that companies report their global emissions as verified by the Mexican Emissions Registry (Registro Nacional de Emisiones). In addition, new water quality standards are being discussed, which would require greater water quality for all of our wastewater disposal.
Modifications of existing environmental laws and regulations or the adoption of more stringent environmental laws and regulations may result in the need for investments that are not currently provided for in our capital expenditures program and may otherwise result in a material adverse effect on our business, results or operations or financial condition. Although we do not currently expect that compliance with environmental laws will have material effect on our financial condition or results of operations, there can be no assurance, however, 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. For more information see “Item 3. Key Information—Risk Factors—Risks Related to Mexico—Mexico’s environmental legislation could limit the growth of some of our airports.”
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. We believe that we are entitled to indemnification for any liabilities related to actions that our predecessor was required to perform or refrain from performing under applicable environmental laws and under their agreements with environmental authorities, though this may change in the future.
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 trilateral agreement on Environmental Cooperation that will be entered into by Canada, the United States and Mexico in the context of the USMCA (which was formally signed on November 30, 2018 and entered into force on July 1, 2020), as well as by other international treaties on environmental matters. In 2018, Mexico, the United States and Canada announced a Trilateral Agreement of Environmental Cooperation under the USMCA which, has replaced the North American Agreement on Environmental Cooperation in force since January 1, 1994. 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, environmental regulations or the enforcement thereof may change in a manner that could have a material adverse effect on our business, results of operations, prospects and financial condition.
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ORGANIZATIONAL STRUCTURE
The following table sets forth our consolidated subsidiaries as of April 22, 2022, including our direct and indirect ownership interest in each:
Name of Company
Jurisdiction ofEstablishment
PercentageOwned
Description
Aeropuerto de Acapulco, S.A. de C.V.
Mexico
Holds concession for AcapulcoInternational Airport
Aeropuerto de Ciudad Juárez, S.A. de C.V.
Holds concession for Ciudad JuárezInternational Airport. Is authorized to operate a bonded warehouse in such airport
Aeropuerto de Culiacán, S.A. de C.V.
Holds concession for CuliacánInternational Airport
Aeropuerto de Chihuahua, S.A. de C.V.
Holds concession for ChihuahuaInternational Airport. Is authorized to operate a bonded warehouse in such airport
Aeropuerto de Durango, S.A. de C.V.
Holds concession for DurangoInternational Airport
Aeropuerto de Mazatlán, S.A. de C.V.
Holds concession for MazatlánInternational Airport
Aeropuerto de Monterrey, S.A. de C.V.
Holds concession for MonterreyInternational Airport. Is authorized to operate a bonded warehouse in such airport
Aeropuerto de Reynosa, S.A. de C.V.
Holds concession for ReynosaInternational Airport
Aeropuerto de San Luis Potosí, S.A. de C.V.
Holds concession for San Luis PotosíInternational Airport
Aeropuerto de Tampico, S.A. de C.V.
Holds concession for TampicoInternational Airport
Aeropuerto de Torreón, S.A. de C.V.
Holds concession for TorreónInternational Airport
Aeropuerto de Zacatecas, S.A. de C.V.
Holds concession for ZacatecasInternational Airport
Aeropuerto de Zihuatanejo, S.A. de C.V.
Holds concession for Zihuatanejo International Airport
Servicios Aeroportuarios del Centro Norte, S.A. de C.V.
Provider of administrative and other services.
Operadora de Aeropuertos del Centro Norte, S.A. de C.V.
Provider of operational services.
Holding Consorcio Grupo Hotelero T2, S.A. de C.V.
Holds 90% of the shares of the Consortium to develop and operate an NH-branded hotel and commercial areas inside the Terminal 2 of Mexico City International Airport. A Mexican subsidiary of NH Hoteles SA, a Spanish company, owns the other 10%.
Consorcio Grupo Hotelero T2, S.A. de C.V.
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Holds a 20-year lease agreement with Mexico City International Airport to develop and operate a 287-room, 5-star hotel and more than 5,000 square meters (53,820 square feet) in commercial space inside Terminal 2.
Servicios Corporativos Terminal T2, S.A. de C.V.
Servicios Complementarios del Centro Norte, S.A. de C.V.
Provider of complementary services.
OMA Logística, S.A. de C.V.
Develops and operates commercial areas in our concessionaries.
Is authorized to operate a bonded warehouse in the Monterrey airport.
Holds 85% of the shares of the investment project to develop and operate a Hilton Garden Inn and commercial areas at the Monterrey airport. Grupo Hotelero Santa Fe owns the remaining 15%.
Holds 51% of the shares of OMA-VYNMSA Aero Industrial Park, S.A. de C.V., an investment project to develop, operate and build an industrial park at the Monterrey airport. VYNMSA owns the remaining 49%.
Servicios Aero Especializados del Centro Norte, S.A. de C.V.
OMA-VYNMSA Aero Industrial Park, S.A. de C.V.
Entity created to build and operate an industrial park at the Monterrey airport.
Consorcio Hotelero Aeropuerto Monterrey, S.A.P.I. de C.V.
Holds a 20-year lease agreement with the Monterrey airport to develop and operate a 134-room hotel at the Monterrey airport under the brand Hilton Garden Inn.
Servicios Hoteleros Aeropuerto Monterrey, S.A. de C.V.
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PROPERTY, PLANT AND EQUIPMENT
Pursuant to the Mexican National Assets Law, 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 Infrastructure, 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, including any improvements thereon, except for those caused by normal wear and tear.
We use the property constituting our airports pursuant to our concessions. For more information regarding our property, plant and equipment, see “Item 4. Business Overview—Our Airports.”
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 U.S.$50.0 million insurance policy covering damages to our property resulting from certain terrorist acts and a U.S.$500 million policy covering personal and property damages to third parties. We also carry a U.S.$200.0 million insurance policy covering damage to our assets and infrastructure.
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 qualified in its entirety by reference to, our consolidated financial statements and the notes to those consolidated financial statements. 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 included in this annual report are prepared in accordance with IFRS, as issued by the IASB.
Overview
We hold concessions to operate, maintain and develop 13 airports in Mexico, many of which are located in the northern and central regions of the country, pursuant to concessions granted by the Mexican government. The substantial 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, approximately 60.5% of our total revenues in 2021 were earned from aeronautical services and approximately 76.1% of the sum of our aeronautical and non-aeronautical revenues in 2021 were earned from aeronautical services. Changes in our revenues from aeronautical services are principally driven by the passenger and cargo volume 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 Infrastructure, Communications and Transportation and the specific prices that we negotiate with airlines for the provision of aeronautical services. The maximum rate system of price regulation that applies to our aeronautical revenues is linked to the traffic volume (measured in workload units) at each airport; thus, increases in passenger and cargo volume generally permit greater revenues from aeronautical services. In evaluating our aeronautical revenues, we focus principally on workload units, which measure volume, and aeronautical revenues per workload unit, which measures the contribution to aeronautical revenues from each workload unit.
We also derive revenues from non-aeronautical activities, which principally relate to the commercial activities carried out at our airports, such as the operation of parking facilities, advertising and the leasing of space to restaurants and retailers. We also derive non-aeronautical revenues from diversification activities, such as hotel services, air cargo logistics services and real estate services; and complementary activities, which principally include the leasing of space to airlines and operating our baggage-screening system. Our revenues from non-aeronautical activities are not subject to the system of price regulation established by the Ministry of Infrastructure, Communications and Transportation (though they may be subject to regulation by other authorities). Our commercial revenues are principally affected by the passenger volume at our airports, the mix of commercial activities carried out at our airports and our ability to increase the rates we charge to those service providers. We evaluate our non-aeronautical revenues by analyzing changes in diversification, commercial and complementary revenues.
During 2021, our business initiatives were focused on reactivating overall operations in our airports and diversification activities, mitigating the effect of the COVID-19 pandemic, which generated adverse effects in our operations during 2020 and the first half of 2021, as well as preserving liquidity.
Recent Developments
Purchase of shares by Fintech Holdings Inc. and its affiliates
As of December 22, 2020, Fintech Holdings Inc, and Fintech owned Series B shares and underlying ADRs and Series BB Shares (which convert into Series B Shares upon their disposition to a third party) which represented approximately 14.8% of our total outstanding capital stock.
Fintech informed that it had considered making a tender offer, in Mexico or globally, for an additional interest in our Series B Shares. On December 22, 2020 Fintech filed Amendment No.10 amending the Schedule 13D filed with the SEC describing possible transactions under consideration related to its investment.
On May 24, 2021, Aerodrome, SETA, Bagual, Grenadier, Pequod, Harpoon, Expanse, Fintech, and David Martínez (the “Offerors”) filed a Schedule tender offer with the SEC, which included an offer to purchase, and commenced a tender offer pursuant to Rule 14d-1 of the Securities Exchange Act of 1934 to purchase up to 97,527,888 Series B Shares held by U.S. Persons and Series B Shares represented by outstanding ADS (the “U.S. Offer”), considering any Series B Shares purchased in the Mexican Offer (as defined below). The price for the U.S. Offer was Ps.137 per Series B Share and Ps.1,096 per ADS. The U.S. Offer was made in conjunction with an offer by Aerodrome in Mexico directed to holders of Series B Shares, but not holders of ADSs (the “Mexican Offer” and, together with the U.S. Offer, the “Offers”).
On June 16, 2021, the Offerors amended the U.S. Offer, to, among other things, reduce the aggregate amount of Series B Shares, including Series B Shares represented by ADSs, that the Offerors offered to purchase in the Offers from 97,527,888 outstanding Series B Shares to 60,155,201 Series B Shares.
Upon the expiration of the offer on June 30, 2021, a total of 1,579,317 ADSs, representing 12,634,536 Series B Shares, and 90,217,248 Series B Shares, were validly tendered and not withdrawn. Offer announcing the final results of the Offers. Because the Offers were oversubscribed, the Offerors accepted Securities on a prorated basis using a proration factor of approximately 58.49%. As a result, the aggregate purchase price for the Company’s shares was Ps.137 per Series B Share and Ps.1,096 per ADS, for a total of approximately Ps.8,241 million. Payment for shares validly tendered and accepted for purchase in the offers occurred on July 9, 2021 (the “Settlement Date”). The Offerors purchased 923,703 ADSs, representing 7,389,624 Series B Shares, and 52,765,577 Series B Shares of the Company. Taking into account the Series B Shares currently owned by SETA, after the transaction, the Offerors owned, directly or indirectly, 30.4% of OMA’s outstanding capital stock.
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On July 9, 2021, the Offerors filed Amendment No. 13 amending the Schedule 13D filed with the SEC describing the Offers. The Offerors stated that they may in the future acquire Series B Shares or other securities of the Issuer from the Issuer, in the open market, in privately-negotiated purchases or otherwise and may also, depending on then-current circumstances, dispose of all or a portion of the Series B Shares or the Series BB shares owned by the Offerors in one or more transactions and may consider and explore one or more corporate transactions involving the Company. As of April 22, 2022, no further plans were announced.
Fintech Loan Facility
On July 9, 2021, Aerodrome entered into a loan agreement with Fintech to for purposes of refinancing indebtedness incurred in connection with the Offers, pursuant to which Fintech provided an unsecured term loan in an aggregate amount of the equivalent in U.S. dollars of Ps.7,005,074,000, or 85% of the total amount of funds required to settle the Offers (the “Loan Facility”).
The Loan Facility was ultimately repaid by a Ps. 6,200,000,000 margin facility entered into on December 6, 2021, between Aerodrome, as borrower, and a bank syndicate comprised of Banco Inbursa, Santander México, and ICBC Standard Bank, as lenders (the “Margin Facility”). The Margin Facility is secured by our Series B and Series BB Shares owned by SETA, and our Series B Shares owned by Aerodrome. On December 9, 2021, we entered into an ancillary agreement with the borrower, lenders and agent party to the Margin Facility, for purposes of providing liquidity to SETA’s Series BB Shares in case of foreclosure of the collateral upon an event of default under the Margin Facility. In such letter we agreed, among other things, (i) to issue 49,766,000 Series B Shares in the form of treasury shares, for the sole purpose of giving effect to the conversion of any Series BB Shares granted as collateral into Series B Shares, and to maintain such shares at our treasury; (ii) to update our Series B registration with the national securities registry in Mexico to allow for the issuance of the Series B Shares maintained in treasury upon conversion of the Series BB Shares; (iii) to deposit with Indeval a share certificate representing the Series B Shares issuable upon conversion; (iv) to transfer to a trustee each and all amounts regarding any dividend or distribution paid in cash on the Series B Shares pledged into a cash collateral account held by a guaranty trust; and (v) not to exercise or give effect to any transfer restriction or preemptive or similar rights on the pledged Series B Shares and the Series BB Shares other than the existing transfer restrictions in accordance with Rule 144 and the Mexican Airport Law.
June 2021 Ordinary Shareholders’ Meeting
An Ordinary Meeting for the Shareholders of the Company was held on June 11, 2021. The Meeting approved to carry out the issuance of 49,766,000 unsubscribed and unpaid Series B Shares to be kept in the treasury of the Company, exclusively to cover the conversion of the Series BB Shares owned by SETA into Series B shares, in case of default under certain financing documents, in the understanding that such issuance will not cause dilution to the shareholders of the Company. Said issuance was carried out in relation to the Tender Offer, to be financed through the Loan Facility that will use as collateral, among other things, the Series BB Shares owned by SETA.
December 2021 Ordinary and Extraordinary Shareholders’ Meeting
On December 2, 2021, the Extraordinary and Ordinary Shareholders’ Meeting approved the payment of a special cash dividend of up to Ps.4,370 million, or Ps.11.20 per share, which was paid on January 19, 2022. Additionally, shareholders approved the elimination of the reference in Article Eighteenth, numeral twenty five, section b), subsection (ii) of the by-laws of the Company, which required that the Company must not exceed a 50% debt-to-capital ratio.
OMA obtains short-term loans
In December 2021, we obtained short-term loans for an aggregate amount of Ps.2,700 million with Banco Nacional de México, S.A., HSBC México, S.A. and Banco Santander México, S.A., which were prepaid on March 31, 2022. Proceeds were used to capitalize the group’s subsidiaries, for working capital and to strengthen the Company’s liquidity. The maturity date of such loans is in June 2022 and have an annual weighted average interest rate of TIIE plus 99.6 basis points.
OMA included in the 2022 Bloomberg Gender-Equality Index
On January 26, 2022, we were recognized as one of the only ten Mexican companies to be included in the 2022 Bloomberg Gender-Equality Index, which distinguishes companies that excel at promoting equality, female talent development and diversity.
Issuance OMA22L and OMA22-2L (2022 Sustainability-Linked Variable Rate Notes and Fixed Rate Notes)
On March 31, 2022, OMA issued Ps.1,700,000 thousand in five-year sustainability-linked notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the “2022 Sustainability-Linked Variable Rate Notes Indenture”). Interest payments are made every 28 days at a variable annual interest rate of 28-days TIIE plus 14 basis points. The principal amount will be repaid at maturity on March 25, 2027. The same day, OMA issued Ps.2,300,000 thousand in seven-year sustainability-linked notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the 2022 Sustainability-Linked Fixed-Rate Notes indenture). Interest payments are made on a semiannual basis at a fixed annual interest rate of 9.35%. The principal amount will be repaid at maturity on March 22, 2029. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.
For a detailed description of covenants, events of default and the green bond framework, see “Item 5 Operating and Financial Review and Prospects—Liquidity and Capital Resources—Indebtedness.”
2022 Annual Shareholders’ Meeting
The Annual General Ordinary Shareholders’ Meeting of the Company held on April 22, 2022 approved, among other matters, the declaration and payment of a cash dividend to shareholders of Ps.2,300 million, which will be paid in two installments: the first one of Ps.1,800 million to be made no later than May 31, 2022, and the second one of Ps.500 million, to be made no later than July 31, 2022.
Operating Results
Certain U.S. dollar amounts have been translated from Mexican pesos for convenience purposes at an exchange rate of Ps.20.4672 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2021.
Passenger and Cargo Volumes
In 2021, approximately 87.2% of the terminal passengers using our airports were domestic. Domestic traffic increased by 59.2% and international traffic increased by 94.2% as compared to 2020. In addition, of the international passengers traveling through our airports, a majority has historically traveled on flights originating in or departing to the United States. 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, including the adverse effects of the COVID-19 pandemic.
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In 2019, 2020 and 2021, our 13 airports handled approximately 97,620, 93,242 and 123,100 metric tons of cargo, respectively. The increase in 2021 was due to a 37.9% increase in cargo transportation at the Monterrey airport and a 21.4% increase in cargo transportation at the San Luis Potosí airport. Increases in our cargo volume are beneficial to us for purposes of the maximum-rate calculations, as cargo increases the number of our workload units.
The following table sets forth certain operating and financial data relating to our revenues and passenger and cargo volumes for the periods indicated:
Domestic terminal passengers(1)
20,416.76
9,877.70
15,723.32
International terminal passengers(1)
2,751.30
1,184.99
2,301.85
Total terminal passengers(1)
23,168.06
11,062.69
18,025.16
Cargo units(1)
976.20
932.42
1,231.00
Total workload units(1)
24,144.26
11,995.11
19,256.16
Change in total terminal passengers(2)
(52.3)
62.9
Change in workload units(2)
(50.3)
60.5
Aeronautical revenues(3)
5,752,662
2,942,558
5,277,728
Change in aeronautical revenues(2)
11.9
(48.8)
79.4
Aeronautical revenues per workload unit
238.3
245.3
274.1
Change in aeronautical revenues per workload unit(1)(2)
4.6
11.7
Non-aeronautical revenues(3)
1,819,605
1,171,039
1,653,379
Change in non-aeronautical revenues(2)
(35.6)
41.2
Non-aeronautical revenues per terminal passenger(4)
78.5
105.9
Change in non-aeronautical revenues per terminal passenger(2)
4.2
34.8
(13.3)
Non-aeronautical revenues per terminal passenger, excluding hotel services(4)(5)
63.1
93.0
Change in non-aeronautical revenues per terminal passenger, excluding hotel services(2)(5)
6.4
(14.6)
In 2021, we served 18.0 million terminal passengers, of which 15.7 million were domestic and 2.3 million were international. The increase in passengers in 2021 was principally due to the reactivation of routes at our airports.
Classification of Revenues
We classify our revenues into three categories: revenues from aeronautical services, revenues from non-aeronautical services and revenues from construction services. Historically, a substantial majority of our total revenues have been derived from aeronautical services. For example, in 2021, 60.5% of our total revenues were derived from aeronautical services, and the remainder of our revenues was derived from non-aeronautical services and construction services. Aeronautical services represented 76.1% of the sum of our aeronautical and non-aeronautical revenues.
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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, the leasing of space in our airports to airlines (other than first class/VIP lounges and other similar activities not directly related to essential airport operations) 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: (i) commercial activities, such as car parking (which may be subject to certain municipal regulations, but not to our maximum rates), rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as advertising, retail operators, food and beverage providers, car rental companies, time-share sales and promotions service providers, duty-free operators and fees collected from other miscellaneous sources, such as telecommunications providers, financial services providers and other passenger services providers; (ii) diversification activities, which include revenues earned by OMA Carga operations (air cargo and ground cargo logistics services), the operation of the Terminal 2 NH Collection Hotel of Mexico City International Airport, the Hilton Garden Inn hotel at the Monterrey airport and real estate services; and (iii) complementary activities, which principally include our checked baggage-screening services, the leasing of space to airlines and complementary service providers for first class/VIP lounges and other activities not directly related to essential airport operations, as well as fees for access to federal zones.
We recognize revenues from construction services derived from the improvements made to airports that are included in our Master Development Programs. Construction service revenues related to the airport concession are determined based on negotiations between us and the Ministry of Infrastructure, Communication and Transportation (recognized according to the percentage-of-completion method), as we construct or improve the airports based on the Master Development Programs. In 2021, revenues from improvements to concessioned assets accounted for 20.5% of our total revenues.
For a detailed description of the components of our aeronautical and non-aeronautical revenue categories, see “Item 4. Information on the Company—Business Overview—Our Sources of Revenues.”
Fluctuations in the Peso
From December 31, 2018 to December 31, 2019, the peso appreciated by approximately 3.9%, from Ps.19.64 per U.S.$1.00 on December 31, 2018, to Ps.18.86 per U.S.$1.00 on December 31, 2019. From December 31, 2019 to December 31, 2020, the peso depreciated by approximately 5.5%, from Ps.18.86 per U.S.$1.00 on December 31, 2019, to Ps.19.89 per U.S.$1.00 on December 31, 2020. From December 31, 2020 to December 31, 2021, the peso depreciated by approximately 3.1%, from Ps.19.89 per U.S.$1.00 on December 31, 2020, to Ps.20.51 per U.S.$1.00 on December 31, 2021. In the first months of 2021, the peso appreciated, reaching Ps.20.31 per U.S.$1.00 on April 22, 2022.
International passengers and international flights pay tariffs denominated in U.S. dollars. However, these tariffs are generally collected in Mexican pesos 30 to 60 days following the date of each flight, and our maximum rates are set in Mexican pesos. Therefore, a significant depreciation of the Mexican peso as compared to the dollar during this 30 to 60-day period could result in us exceeding our maximum rates, which would be a violation of our concession. We attempt to set our U.S. dollar-denominated tariffs so as to avoid exceeding our maximum rates, and so far, 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.
In addition, we have financial liabilities denominated in U.S. dollars, and a significant depreciation in the Mexican peso could result in higher debt balances when converted to Mexican pesos, thus resulting in foreign exchange losses. We may also, from time to time, maintain cash balances denominated in U.S. dollars, in which cases a depreciation of the Mexican peso against the U.S. dollar could result in a foreign exchange gain. As of December 31, 2021, Ps.443 million of our cash balance was denominated in U.S. dollars.
As of December 31, 2021, international passenger charges amounted to Ps.1,169,292 thousand, and as of December 31, 2021, we had U.S.$4.8 million of liabilities denominated in U.S. dollars.
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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 (a workload unit is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from aeronautical services. See “Item 4. Regulatory Framework—Revenue Regulation” for a description of our maximum rates and the rate setting procedures for future periods. The maximum rates for our airports have been determined for each year through December 31, 2025.
The following table sets forth our revenues from aeronautical services for the periods indicated:
Amount
(in thousands of pesos, except percentages)
Aeronautical revenues:
Domestic passenger charges
3,776,401
65.6
1,857,551
3,422,714
64.9
International passenger charges
1,207,989
21.0
542,933
18.5
1,169,292
Landing charges
229,919
147,387
206,114
Platform for embarking and disembarking
150,055
2.6
90,257
134,436
Aircraft parking charges on extended stay or overnight
35,910
31,905
36,539
Domestic and international passenger and carry-on baggage check
62,970
29,688
52,998
Aerocars and jetways
48,074
19,920
22,395
Other airport services, leases and regulated access(1)
241,342
222,917
233,240
4.4
Total aeronautical revenues
Under the regulatory system applicable to our aeronautical revenues, we can set the specific price for each category of aeronautical services, other than complementary services and the leasing of space to airlines, every six months (or earlier upon a cumulative increase of 5% in the Mexican Producer Price Index (excluding fuel)), as long as the total aeronautical revenues per workload unit each year at each of our airports does not exceed the maximum rate at that airport for that year. See “Item 4. Information on the Company—Regulatory Framework—Price Regulation” for a description of our maximum rates and the rate-setting procedures for future periods. We currently set the specific price for these categories of aeronautical services after negotiating with our principal airline customers. Historically, our specific prices have been structured such that the substantial majority of our aeronautical revenues are derived from passenger charges, and we expect this to continue to be the case in future agreements with our principal airline customers. In 2021, passenger charges represented 87.1% of our aeronautical services revenues. In 2021, aeronautical services represented 52.7% of our total revenues and 66.3% of the sum of our aeronautical and non-aeronautical revenues.
Aeronautical revenue per workload unit is an indicator that is calculated by dividing total 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: (i) adjustment in the maximum rates for the efficiency factor and the Mexican Producer Price Index (excluding fuel); (ii) increases and decreases in the relative number of workload units at each airport; and (iii) changes in total workload units per airport.
We, from time to time, seek to offer incentives, including discounts on charges for aeronautical services, to encourage carriers to establish new routes and take other measures expected to increase passenger traffic at our airports. The Mexican Airport Law prevents discriminatory pricing, so incentives we offer must be available to any carrier meeting the conditions specified for those incentives. The main objective is to promote passenger growth in all of our airports. We may continue to offer further incentives in the future.
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Such initiatives undertaken in the future may not be carried out, and may not increase our passenger traffic volume or our revenues.
In 2021, our aeronautical revenues represented approximately 92.1% of the amount we were entitled to earn under the maximum rates applicable to all of our airports. To the extent that we offer incentives to carriers to establish routes serving our airports in the future, or other changes to our sources of aeronautical revenues, this percentage could decrease. We may not be able to collect substantially all of the revenues we are entitled to earn from services subject to price regulation in the future.
Non-Aeronautical Revenues
Non-aeronautical services historically have generated a significantly smaller portion of our total revenues as compared to aeronautical services. Non-aeronautical revenues per terminal passenger are calculated by dividing total non-aeronautical revenues by the number of terminal passengers during the same period. The contribution to our total revenues from non-aeronautical services was 19.0% in 2021. Our non-aeronautical revenues per terminal passenger decreased from Ps.105.9 in 2020 to Ps. 91.7 in 2021, due primarily to a lower increase in revenues generated from the commercial, diversification and complementary activities, compared to our passenger traffic recovery. Our non-aeronautical revenues in 2021 represented 23.9% of the sum of our aeronautical and non-aeronautical revenues, and our revenues from commercial activities per terminal passenger decreased from Ps.51.7 in 2020 to Ps. 43.2 in 2021, due primarily to a higher recovery in passenger traffic than in commercial revenues.
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, or diversification revenues). Accordingly, non-aeronautical revenues do not always behave in the same manner as passenger traffic or workload units.
A substantial amount of our contracts with third-party tenants are royalty-based arrangements. Under a royalty-based contract, the amount tenants must pay is based on tenants’ revenues, subject to minimum guaranteed fixed amounts for the space leased. When the royalty-based amount is lower than the minimum guaranteed amount, the tenant must still pay the latter. Conversely, when the royalty-based amount is higher than the minimum guaranteed amount, the tenant will pay the former. Therefore, a decrease in passenger traffic volumes would result in a reduction in non-aeronautical revenues only if, (i) prior to such decrease in passenger traffic, the sales of royalty-based tenants were higher than the minimum guaranteed amount and (ii) the decrease in traffic volumes is such that it would cause the royalty-based amount to be lower than the minimum guaranteed amount for a given tenant. 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.
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The following table sets forth our revenues from non-aeronautical activities for the periods indicated:
Non-aeronautical revenues:
Commercial activities:
Car parking charges
279,463
15.4
126,818
10.8
217,728
Advertising
76,200
59,695
5.1
70,338
Retail operations(1)
124,554
6.8
64,486
5.5
86,128
Food and beverage
144,374
7.9
87,499
120,148
Car rental operators
149,454
111,037
9.5
142,651
8.6
Time share developers
16,663
12,683
13,557
Financial services
10,367
0.57
7,853
8,355
Communication and services
16,006
17,800
18,137
Services to passenger
4,127
3,281
3,561
VIP lounges
51,176
36,538
49,381
Other commercial revenues(3)
43,542
44,300
49,593
Total commercial activities
915,926
50.3
571,990
48.8
779,577
47.2
Diversification activities:
Hotel services
357,032
19.6
141,890
12.1
221,728
13.4
OMA Carga
194,936
183,382
15.7
257,210
15.6
Real estate services
18,181
16,499
19,721
Industrial services
39,451
51,272
63,737
Other diversification revenues(3)
4,966
7,547
6,889
Total diversification activities
614,566
33.8
400,590
34.2
569,285
34.4
Complementary Activities:
Leasing of space(2)
83,477
85,729
122,639
Access rights
19,709
15,819
21,316
Documented baggage inspection
175,006
9.6
86,491
150,238
Other complementary revenues(4)
10,921
10,420
10,324
Total complementary activities
289,113
15.9
198,459
16.9
304,517
18.4
Total revenues from non-aeronautical services
The majority of our non-aeronautical revenues are derived from commercial activities, which represented 47.2% of our non-aeronautical revenues in 2021. Commercial activities include car parking charges (which may be subject to government regulation, but not to our maximum rates), rental and royalty payments from third parties operating retail stores and providing commercial services at our airports, such as advertising, food and beverage providers, car rentals, time-share sales and promotions services, duty-free stores and fees collected from other miscellaneous sources, such as telecommunications providers, financial services providers and other passenger services providers.
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On an individual basis, during 2021, our most important source of non-aeronautical revenues was OMA Carga which provides air and ground cargo logistics services, and represented 15.6% of our non-aeronautical revenues in 2021 and is part of our diversification activities. Other than OMA Carga, diversification activities include hotel services (both Terminal 2 NH Collection Hotel at the Mexico City International Airport and the Hilton Garden Inn Hotel at the Monterrey airport) and industrial services operation of the OMA-VYNMSA Aero Industrial Park.
Complementary activities represented 18.4% of our non-aeronautical revenues in 2021. These activities primarily include baggage-screening services, the leasing of space to airlines and complementary service providers for first class/VIP lounges and other activities not directly related to essential airport operations; as well as fees for access to federal zones.
Operating Costs
Our operating costs have been, and we believe that they will continue to be, funded entirely from our results of operations. The following table sets forth our operating costs and certain other related information for the periods indicated:
% Change
Operating Costs:
Cost of services:
Wages and salaries
242,473
4.5
228,993
(5.6)
229,358
Maintenance
177,191
16.1
124,563
(29.7)
142,069
14.1
Security and insurance
161,351
(5.4)
134,774
(16.5)
128,299
(4.8)
Utilities (electricity, cleaning and water)
177,250
(15.7)
122,961
(30.6)
144,727
17.7
Building lease
15,683
(64.6)
2,543
(83.8)
2,015
(20.8)
Allowance for doubtful accounts
(241)
(96.0)
17,738
(7,460)
646
(96)
Cost of hotel service
85,706
30.1
30,650
(64.2)
44,282
44.5
Equipment lease, fees and other
94,794
(11.8)
103,736
9.4
90,711
(12.6)
Total cost of services
954,207
(2.4)
765,958
(19.7)
782,107
Major maintenance provision
292,324
17.6
392,531
34.3
512,653
Cost of construction
954,834
(16.4)
1,253,869
1,788,903
42.7
Administrative expenses
542,664
(3.6)
518,059
(4.5)
586,542
Right to use airport facilities
363,561
13.9
199,202
(45.2)
319,906
60.6
Technical assistance fees
150,108
(13.0)
81,164
(45.9)
133,558
64.6
Depreciation and amortization(1)
415,252
18.1
435,344
487,230
Other income, net
(1,155)
463.4
(129)
(88.8)
(1,278)
890.7
Total operating costs
3,671,795
(2.7)
3,645,998
(0.7)
4,609,621
Cost of Services
Our cost of services consists primarily of employee, maintenance, safety, security and insurance costs, utilities (a portion of which we recover from our tenants) and other miscellaneous expenses.
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We are required to perform major maintenance activities to our airports as established by our concession provided by the Mexican government. The estimated major maintenance costs are based on our Master Development Programs, which are reviewed and updated every five years. The contractual obligations to maintain and restore the infrastructure of our airports is recognized as a provision in our consolidated statements of financial position based on an estimate of the expenditure that would be required to settle the present obligation at the end of the reporting period. When the effect of the time value of money is material, the amount of the provision equals the present value of the expenditures expected to be required to settle the obligation. Where discounting is used, the carrying amount of the provision increases each period to reflect the passage of time and this increase is recognized as a borrowing cost. After initial recognition, provisions are reviewed at the end of each reporting period and adjusted to reflect current best estimates. Adjustments to provisions arise from three sources: (i) revisions to estimated cash flows (both in amount and timing); (ii) changes to present value due to the passage of time; and (iii) revisions of discount rates to reflect prevailing current market conditions. In periods following the initial recognition and measurement of the major maintenance provision at its present value, the provision is revised to reflect estimated cash flows being closer to the measurement date. The unwinding of the discount relating to the passage of time is recognized as a financing cost and the revision of estimates of the amount and timing of cash flows is a reassessment of the provision and charged or credited as an operating item within our consolidated statements of income and other comprehensive income.
Every quarter, the major maintenance provision is revised to update the amount that has been provided for in order to keep the provision as accurate as possible. The provision could increase or decrease, as a result of certain events, such as, on the one hand, a contingency in an airport that requires immediate major maintenance or other maintenance that has been delayed or, on the other hand, an asset that does not need maintenance, in which case resources can be better used for other activities.
Construction Costs
We invest in additions and upgrades to our concession assets in accordance with our Master Development Programs. As our construction costs are equal to our revenues from construction services, they do not have a cash impact on our results of operations.
Administrative Expenses
Our administrative expenses consist primarily of personnel expenses, fees and expenses paid to consultants and other providers of professional services and other administrative overhead expenses.
Beginning November 1, 1998, we became subject to Article 232-A of the Mexican Federal Duties Law, which requires that the holders of concessions pay a tax for the use of state-owned assets. This tax is currently equal to 5% of the gross annual revenues of each concession holder obtained from the use of public domain assets pursuant to the terms of its concession. The concession tax may be revised at any time by the Mexican government, and this tax may increase in the future. If the Mexican government increases the concession tax, we are entitled to request an increase in its maximum rates from the Ministry of Infrastructure, Communications and Transportation; however, the Ministry of Infrastructure, Communications and Transportation may not honor such requests in the future.
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Technical Assistance Fee
Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers technical assistance and technological and industry knowledge and experience to us in exchange for a fee. For more information about this agreement, see “Item 7. Major Shareholders and Related-Party Transactions—Related Party Transactions.” The technical assistance fee for each of 2001 and 2002 was fixed at U.S.$5.0 million (adjusted annually for U.S. inflation). For the remainder of the original contract term, the fee was equal to the greater of U.S.$3.0 million adjusted annually for inflation (measured by the U.S. consumer price index) or 5% of our EBITDA. Pursuant to the second amendment to the Technical Assistance Agreement signed on May 13, 2015, as of June 14, 2015, the fee was reduced to the greater of U.S.$3,478,000 (updated annually according to the U.S. consumer price index) and 4% of our EBITDA for the first three years of the extension and 3% of our EBITDA for the last two years of the extension. Pursuant to the third amendment of the Technical Assistance Agreement, dated as of December 14, 2020, the term of such agreement was extended until December 31, 2021, with automatic renewals for one year periods starting on January 1, 2022, unless a termination notice is provided by any of the parties involved. Additionally, the automatic renewals shall be in force as long as SETA holds an individual interest of at least 7.65% of the shares of the Company. The economic terms of the agreement were not modified.
Depreciation and Amortization
Our depreciation and amortization expenses primarily reflect the amortization of our investment in our 13 concessions. In 2021, our depreciation and amortization expenses increased by 11.9%, as compared to 2020, primarily due to an increase in the investment to improve our concessions’ assets during 2021.
The value of our concessions was determined in June 2000, when SETA won the bid to acquire Series BB shares currently representing 12.9% of our capital stock, based on the value assigned by the independent company INGENIAL. In addition, we depreciate the value of certain fixed assets that we acquire or build at our airports pursuant to the investment requirements under our Master Development Programs. For further information regarding depreciation and amortization expenses, refer to Notes 9 and 10 to our audited consolidated financial statements.
Solidarity Fees
We and our subsidiaries have entered into intercompany agreements under which we provide services in exchange for payments from our subsidiaries. The payments under these agreements affect the revenues, operating costs and income at our individual subsidiaries but not our consolidated results. Under the intercompany agreements, our parent company Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., or GACN, provides certain administrative services to guarantee that our airport subsidiaries operate in compliance with the required standards under their respective concession titles. Pursuant to Article 10.3 of the concession titles of each of our subsidiaries, we and each airport concessionaire are joint and severally liable with respect to the obligations of each other airport concessionaire before the Ministry of Infrastructure, Communications and Transportation. In exchange for these services, our airport operating subsidiaries make payments to GACN. As a result of the foregoing, each of our airports has entered into an Operating Services Agreement with our parent company or GACN, pursuant to which each of our airport operating subsidiaries pays a solidarity fee to GACN in exchange for which GACN provides services to guarantee the ongoing viability of that subsidiary’s concession and make sure that they have the resources to comply with their respective Master Development Programs and other regulatory obligations. As described under “Item 4. Information on the Company—Regulatory Framework—General Obligations of Concession Holders,” in the event of a breach of one concession, the Ministry of Infrastructure, Communications and Transportation is entitled to revoke all of the concessions held by our airport operating subsidiaries. Therefore, our airport operating subsidiaries that generate higher revenues pay higher solidarity fees to our parent company to ensure the continued viability of the concessions held by our airport operating subsidiaries that generate lower revenues. Amounts paid pursuant to the Operating Services Agreement are determined in accordance with Mexican transfer pricing regulations established under the Mexican Income Tax Law and are in line with a transfer pricing study that we commission annually from an independent third party. Other services provided pursuant to our Operating Services Agreements include, among others, negotiating regulated tariffs and interfacing with regulators, leasing the commercial spaces and real estate, trademark license royalties, and marketing services. The costs of these services and guarantees, including the solidarity fees, are actual costs that are charged to individual airports.
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During 2021, we made certain amendments to our Operating Services Agreements to ensure compliance with the labor reform implemented in 2021 by the Mexican Government that would allow us to contract specialized services within companies of the same economic group.
Expenditures pursuant to master development programs and other capital expenditures
In 2021, expenditures pursuant to master development programs and other capital expenditures were Ps.2,117,178 thousand. We funded our expenditures through cash flows from operations, and we believe that we will continue to fund them through cash flow from operations, as well as new debt, in the future. See “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
Employee Statutory Profit Sharing
We are subject to the mandatory statutory employee profit sharing regime (participación de los trabajadores en las utilidades de las empresas, or “PTU”) established by the Mexican Federal Labor Law. Under this regime, 10% of a company’s unconsolidated annual profits, as calculated for tax purposes, and subject to certain limits, must be distributed among employees other than the chief executive officer. Pursuant to the labor reform implemented in 2021 by the Mexican Government, the statutory profit sharing payment for an employee is capped to three months of base salary, subject to certain limits
The recognition of a deferred tax asset from previous years represented Ps.245,569 thousand for the year ended December 31, 2021, while the current tax amounted to Ps.1,217,748 thousand. In 2021, we had an effective tax rate of 25.3%, which reflects the permanent differences related primarily to inflationary effects for tax purposes.
The statutory Mexican corporate income tax rate in 2021, 2020 and 2019 was 30.0%.
A withholding tax at a rate of 10% on the gross amount of dividends distributed to non-Mexican holders with respect to our Series B shares and our ADSs was enacted as part of the 2013 tax reforms. For a further discussion of the withholding tax, see “Item 10. Additional Information—Taxation—Taxation of Dividends.”
Operating Results by Segment
The following table sets forth our results of operations for the periods indicated for each of our airports, our hotel services and our industrial services.
Monterrey:
Revenues:
Aeronautical services
2,641,052
1,278,255
2,371,178
Non-aeronautical services
726,684
479,322
551,744
Construction services
323,035
802,470
908,960
Total revenues
3,690,771
2,560,047
3,831,882
Operating costs:
Costs and administrative expenses
392,344
254,416
391,081
63,673
78,811
81,610
Construction costs
Depreciation and amortization
111,020
122,507
142,152
Solidarity fee
2,327,084
855,891
1,803,003
3,217,156
2,114,095
3,326,806
Income from operations
473,615
445,952
505,076
Operating margin(1)
17.4
101
Acapulco:
227,954
117,218
196,631
40,242
27,159
33,250
63,102
29,410
331,298
173,787
273,969
61,603
49,893
72,553
9,374
13,536
15,960
43,286
44,780
45,693
100,121
14,580
54,191
277,486
152,199
232,485
53,812
21,588
41,484
16.2
15.1
Mazatlán:
321,313
211,184
317,004
52,857
37,431
46,368
34,572
24,704
408,742
273,319
408,997
61,828
47,936
79,076
16,796
13,282
21,456
17,514
18,699
19,254
225,406
105,593
186,537
356,116
210,214
351,948
52,626
63,105
57,049
12.9
23.1
Zihuatanejo:
191,512
98,645
137,018
25,596
22,127
22,876
45,984
239,984
162,989
289,102
38,918
29,319
48,706
32,792
40,780
28,325
18,660
19,091
20,058
83,124
14,855
35,392
196,370
150,029
262,438
43,614
12,960
26,664
8.0
102
Chihuahua:
411,392
215,728
419,027
67,022
46,049
48,531
124,701
30,679
63,456
603,115
292,456
531,014
68,233
51,254
75,507
34,802
52,396
101,967
17,974
25,274
26,384
290,026
82,815
184,429
535,736
242,418
451,743
67,379
50,038
79,271
17.1
14.9
Culiacán:
617,978
359,562
573,506
66,287
51,732
57,560
68,961
68,142
91,262
753,226
479,436
722,328
80,460
57,683
89,764
8,884
64,627
24,023
18,658
20,887
22,442
479,985
175,756
385,657
656,948
387,095
613,148
96,278
92,341
109,180
19.3
Durango:
150,130
79,515
155,408
13,433
11,083
14,536
36,677
50,202
35,600
200,240
140,800
205,544
27,964
21,566
40,521
14,506
26,418
28,509
7,537
8,259
10,082
90,542
24,135
59,662
177,226
130,580
174,374
23,014
10,220
31,170
15.2
103
San Luis Potosí:
174,340
108,045
192,712
35,631
28,508
38,345
110,743
58,189
320,714
194,742
298,456
35,460
26,288
50,903
26,093
12,962
47,441
12,857
21,569
24,150
107,623
41,086
73,275
292,776
160,094
263,168
27,938
34,648
35,288
8.7
11.8
Tampico:
197,161
74,330
133,178
28,056
17,414
20,054
61,823
67,530
130,162
287,040
159,274
283,394
43,969
38,759
53,404
11,593
29,466
27,779
9,218
9,920
12,083
128,629
3,441
38,191
255,232
149,116
261,619
31,808
10,158
21,775
7.7
Torreón:
201,446
94,892
175,268
23,683
17,425
24,450
18,343
12,233
243,472
124,550
228,520
34,781
24,812
40,934
17,457
19,327
58,531
9,883
10,605
10,811
131,350
33,913
56,525
211,814
100,890
195,603
31,658
23,660
32,917
13.0
19.0
14.4
Zacatecas:
141,500
71,292
132,427
13,945
10,512
14,996
6,843
7,480
162,288
89,284
165,741
27,746
22,432
42,259
12,129
1,243
14,371
7,813
8,024
8,419
76,622
29,349
61,236
131,153
68,528
144,603
31,135
20,756
21,138
19.2
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Ciudad Juárez:
380,271
199,685
403,208
55,999
37,736
36,148
17,650
27,949
165,532
453,920
265,370
604,888
60,977
43,601
58,913
31,050
18,155
45,800
11,799
12,717
15,201
271,070
102,706
245,331
392,546
205,128
530,777
61,374
60,242
74,111
13.5
22.7
12.3
Reynosa:
113,515
58,010
119,950
18,240
11,500
12,133
112,031
55,366
74,664
243,786
124,876
206,747
28,119
21,123
39,154
13,177
21,528
16,883
8,189
9,553
20,472
55,895
8,135
31,355
217,411
115,705
182,528
26,375
9,171
24,219
105
Hotels
Terminal 2 NH Collection Hotel:
255,393
110,299
171,005
Equity method (1)
220
226
2,175
255,613
110,525
173,180
138,742
78,833
95,418
39,546
40,301
42,054
178,288
119,134
137,472
(Loss) income from operations
77,325
(8,609)
35,708
Operating margin
30.3
(7.8)
20.6
Hilton Garden Inn Hotel:
103,474
32,614
52,483
(188)
336
417
103,286
32,950
52,900
59,559
28,438
37,477
11,382
11,430
9,634
70,941
39,868
47,111
32,345
(6,918)
5,789
(21.0)
Industrial Park
OMA-Vynmsa Aero Industrial Park:
41,981
56,454
68,294
6,811
8,751
8,886
19,548
23,621
28,186
26,359
32,372
37,072
15,622
24,082
31,222
37.2
45.7
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Summary Historical Consolidated Results of Operations
The following table sets forth a summary of our consolidated results of operations for the years indicated:
Year Ended December 31,
8,527,101
5,367,466
(37.1)
8,720,010
62.5
Operating costs and expenses:
Cost of services
Concession taxes
Other income
(88.9)
Total operating costs and expenses
4,855,306
1,721,468
(64.5)
4,110,389
138.8
Interest expense, net
(204,772)
(308,610)
50.7
(387,197)
25.5
Exchange loss, net
(50,878)
79,522
(256.3)
112,617
41.6
Income before income taxes
4,599,656
1,492,380
(67.6)
3,835,809
157.0
Income taxes
1,372,222
394,501
(71.3)
972,179
146.4
Consolidated net income
3,227,434
1,097,879
(66.0)
2,863,630
160.8
Other operating data:
56.9
32.1
47.1
Net margin(2)
37.8
32.8
Results of Operations for the Year Ended December 31, 2021, Compared to the Year Ended December 31, 2020.
Consolidated Revenues
Total revenues for 2021 were Ps.8,720,010 thousand, 62.5% higher than the Ps.5,367,466 thousand recorded in 2020, primarily as a result of an increase in both aeronautical and non-aeronautical revenues. The sum of aeronautical and non-aeronautical revenues in 2021 increased by 68.5% as compared to 2020.
Aeronautical revenues increased by 79.4% to Ps.5,277,728 thousand in 2021, as compared to Ps.2,942,558 thousand in 2020 due primarily to an increase in passenger charges from Ps.2,400,483 thousand in 2020 to Ps.4,592,006 thousand in 2021, attributable to a 62.9% increase in passenger traffic and an increase in aeronautical tariffs. Aeronautical revenues per workload unit in 2021 were Ps.274.1 compared to Ps.245.3 in 2020, an increase of 11.7%.
Non-aeronautical revenues increased by 41.2% from Ps.1,171,039 thousand in 2020 to Ps. 1,653,379 thousand in 2021, due primarily to the recovery in revenue generation of our commercial activities and the expansion of the diversification activities. Non-aeronautical revenues per terminal passenger decreased by 13.3%, from Ps.105.9 in 2020 to Ps. 91.7 in 2021, due primarily to a higher growth in terminal passengers, compared to the recovery of non-aeronautical revenues.
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Revenues from construction services in 2021 were Ps. 1,788,903 thousand, an increase of 42.7% from Ps.1,253,869 thousand recognized in 2020, primarily as a result of the progress in the improvements of concession assets, principally in the Monterrey, Ciudad Juárez, Tampico and Zihuatanejo airports.
Our revenues are highly dependent on the volume of passenger traffic. The effects of the COVID-19 pandemic resulted in a significant reduction in passenger traffic during 2020 and a recovery during 2021, as a result of the actions taken by the Mexican, U.S. and other governments and from the broader reduction in demand for air travel caused by the COVID-19 pandemic. Even though we have taken action to recover passenger confidence, along with measures taken to preserve liquidity, the ongoing adverse effects of COVID-19 on our operations remain uncertain and the continuation of reduced air travel demand could have a material adverse effect on the Company’s business, operating results, financial condition and liquidity. For more information, see “Risk Factors—Risks Related to Our Operations— The outbreak of COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations and results.”
Revenues by Segment
On an airport-by-airport basis, the principal contributors to total revenues in 2021 were the Monterrey airport (Ps.3,831,882 thousand), the Culiacán airport (Ps.722,328 thousand), the Ciudad Juárez airport (Ps.604,888 thousand), the Chihuahua airport (Ps.531,014 thousand) and the Mazatlán airport (Ps.408,997 thousand). Based on contribution to aeronautical and non-aeronautical revenues in 2021, the main contributors were the Monterrey airport (Ps.2,922,922 thousand), the Culiacán airport (Ps.631,066 thousand), the Chihuahua airport (Ps.467,558 thousand), the Ciudad Juárez airport (Ps.439,356 thousand) and the Mazatlán airport (Ps.363,372 thousand). Historically, Monterrey, Culiacán and Chihuahua have been our three principal contributors to aeronautical and non-aeronautical revenues, and we expect this trend to continue in the future.
At the Monterrey airport, aeronautical revenues increased by 85.5% from Ps.1,278,255 thousand in 2020 to Ps.2,371,178 thousand in 2021, due primarily to a 74.0% increase in domestic passenger charges, as a result of a 55.4% increase in domestic passenger traffic and a 9.5% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 15.1% from Ps. 479,322 thousand in 2020 to Ps.551,744 thousand in 2021, due primarily to a 44.2% increase in OMA Carga, a 42.3% increase in food and beverage and a 33.6% increase in revenue from car rentals. The sum of aeronautical and non-aeronautical revenues increased by 66.3% from Ps. 1,757,577 thousand in 2020 to Ps.2,922,922 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 17.5% from Ps.320.5 in 2020 to Ps.376.4 in 2021, principally due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic
At the Acapulco airport, aeronautical revenues increased by 67.7% from Ps.117,218 thousand in 2020 to Ps.196,631 thousand in 2021, due primarily to an 84.7% increase in domestic passenger charges, as a result of a 72.8% increase in domestic passenger traffic and a 7.5% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 22.4% from Ps.27,159 thousand in 2020 to Ps.33,250 thousand in 2021, due primarily to a 45.4% increase in food and beverage, and a 30.2% increase in revenues from retail operations. The sum of aeronautical and non-aeronautical revenues increased by 59.2% from Ps.144,377 thousand in 2020 to Ps.229,881 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit decreased by 6.1% from Ps.363.7 in 2020 to Ps.341.7 in 2021, principally due to a lower increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
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At the Mazatlán airport, aeronautical revenues increased by 50.1% from Ps.211,184 thousand in 2020 to Ps.317,004 thousand in 2021, due primarily to a 94.0% increase in domestic passenger charges, as a result of a 65.1% increase in domestic passenger traffic and a 9.3% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 23.9% from Ps.37,431 thousand in 2020 to Ps.46,368 thousand in 2021, due primarily to a 45.6% increase in revenues from car rentals, a 51.7% increase in revenues from time-share developers, and a 43.9% increase in revenues from food and beverage. The sum of aeronautical and non-aeronautical revenues increased by 46.2% from Ps.248,615 thousand in 2020 to Ps.363,372 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 2.4% from Ps.323.7 in 2020 to Ps.331.5 in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At the Zihuatanejo airport, aeronautical revenues increased by 38.9% from Ps.98,645 thousand in 2020 to Ps.137,018 thousand in 2021, due primarily to a 194.6% increase in domestic passenger charges, as a result of a 76.2% increase in domestic passenger traffic and a 6.1% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 20.5% from Ps.18,360 thousand in 2020 to Ps.22,127 thousand in 2021, due primarily to a 918% increase in leasing of space, and a 33.5% increase in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues increased by 36.0% from Ps.117,005 thousand in 2020 to Ps.159,145 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit decreased by 0.7% from Ps.367.4 in 2020 to Ps.365.0 in 2021, principally due to a lower increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At the Chihuahua airport, aeronautical revenues increased by 94.2% from Ps.215,728 thousand in 2020 to Ps.419,027 thousand in 2021, due primarily to a 107.6% increase in domestic passenger charges, as a result of a 63.9% increase in domestic passenger traffic and a 9.5% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 5.4% from Ps.46,049 thousand in 2020 to Ps.48,531 thousand in 2021, due primarily to a 37.8% increase in revenues from leasing of space, and a 28.6% increase in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues increased by 78.6% from Ps.261,777 thousand in 2020 to Ps.467,558 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 10.0% from Ps.292.1 in 2020 to Ps.321.5 in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At the Culiacán airport, aeronautical revenues increased by 59.5% from Ps.359,562 thousand in 2020 to Ps.573,506 thousand in 2021, due primarily to a 57.1% increase in domestic passenger charges, as a result of a 41.3% increase in domestic passenger traffic and a 9.5% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increase by 11.3% from Ps.51,732 thousand in 2020 to Ps.57,560 thousand in 2021, due primarily to a 31.9% increase in revenues from food and beverage, a 33.9% increase in revenue from retail, and a 29.1% increase in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues increased by 53.4% from Ps.411,294 thousand in 2020 to Ps.631,066 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.1% from Ps.288.5 in 2020 to Ps.309.0 in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At the Durango airport, aeronautical revenues increased by 95.4% from Ps.79,515 thousand in 2020 to Ps.155,408 thousand in 2021, due primarily to a 134.2% increase in domestic passenger charges, as a result of a 62.6% increase in domestic passenger traffic and a 9.3% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increase by 31.2% from Ps.11,083 thousand in 2020 to Ps.14,536 thousand in 2021, due primarily to a 373.1% increase in revenues from leasing of spaces, and a 25.0% increase in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues increased by 87.6% from Ps.90,598 thousand in 2020 to Ps.169,944 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 14.3% from Ps.332.1 in 2020 to Ps.379.5 thousand in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
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At the San Luis Potosí airport, aeronautical revenues increased by 78.4% from Ps.108,045 thousand in 2020 to Ps.192,712 thousand in 2021, due primarily to a 104.5% increase in domestic passenger charges, as a result of a 63.3% increase in domestic passenger traffic and a 4.3% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 34.5% from Ps.28,508 thousand in 2020 to Ps.38,345 thousand in 2021, due primarily to an 82.4% increase in revenues from leasing of spaces, a 13.3% increase in revenues from car rentals and a 25.0% increase in revenues from food and beverage. The sum of aeronautical and non-aeronautical revenues increased by 69.2% from Ps.136,553 thousand in 2020 to Ps.231,057 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 12.6% from Ps.258.0 in 2020 to Ps.290.3 in 2021, due to a higher increase in non-aeronautical revenues than aeronautical revenues, compared to the increase in passenger traffic.
At the Tampico airport, aeronautical revenues increased by 79.2% from Ps.74,330 thousand in 2020 to Ps.113,178 thousand in 2021, due primarily to a 109.1% increase in domestic passenger charges, as a result of a 41.9% increase in domestic passenger traffic and a 7.4% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 15.2% from Ps.17,414 thousand in 2020 to Ps.20,054 thousand in 2021, due primarily to a 110.7% increase in revenues from leasing of spaces, and a 15.8% increase in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues increased by 67.0% from Ps.91,744 thousand in 2020 to Ps.153,232 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 14.0% from Ps.335.7 in 2020 to Ps.382.8 in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At the Torreón airport, aeronautical revenues increased by 84.7% from Ps.94,892 thousand in 2020 to Ps.175,268 thousand in 2021, due primarily to a 91.7% increase in domestic passenger charges, as a result of a 61.7% increase in domestic passenger traffic and a 9.3% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 40.3% from Ps.17,425 thousand in 2020 to Ps.24,450 thousand in 2021, due primarily to a 121.9% increase in revenues from leasing of spaces, a 19.3% increase in revenue from car rentals and a 46.1% increase in revenues from retail operations. The sum of aeronautical and non-aeronautical revenues increased by 77.8% from Ps.112,317 thousand in 2020 to Ps.199,718 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 6.2% from Ps.341.8 in 2020 to Ps.362.9 thousand in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At the Zacatecas airport, aeronautical revenues increased by 85.8% from Ps.71,292 thousand in 2020 to Ps.132,427 thousand in 2021, due primarily to a 99.6% increase in domestic passenger charges, as a result of a 54.2% increase in domestic passenger traffic and a 7.8% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 42.7% from Ps.10,512 thousand in 2020 to Ps.14,996 thousand in 2021, due primarily to an 806.5% increase in revenues from leasing of spaces, and a 23.7% increase in revenue from car rentals. The sum of aeronautical and non-aeronautical revenues increased by 80.2% from Ps.81,804 thousand in 2020 to Ps.147,423 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit at the Zacatecas airport increased by 11.6% from Ps.350.5 in 2020 to Ps.391.2 in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At the Ciudad Juárez airport, aeronautical revenues increased by 101.9% from Ps.199,685 thousand in 2020 to Ps.403,208 thousand in 2021, due primarily to a 107.8% increase in domestic passenger charges, as a result of a 88.8% increase in domestic passenger traffic and a 9.5% increase in the tariff for domestic passenger charges. Non-aeronautical revenues decreased by 4.2% from Ps.37,736 thousand in 2020 to Ps.36,148 thousand in 2021, due primarily to a 48.3% decrease in revenues from car parking. The sum of aeronautical and non-aeronautical revenues increased by 85.1% from Ps.237,421 thousand in 2020 to Ps.439,356 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit decreased by 1.5% from Ps.284.3 in 2020 to Ps.280.0 in 2021, due to a lower increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
110
At the Reynosa airport, aeronautical revenues increased by 106.8% from Ps.58,010 thousand in 2020 to Ps.119,950 thousand in 2021, due primarily to a 106.2% increase in domestic passenger charges, as a result of a 83.8% increase in domestic passenger traffic and a 9.3% increase in the tariff for domestic passenger charges. Non-aeronautical revenues increased by 5.5% from Ps.11,500 thousand in 2020 to Ps.12,133 thousand in 2021, due primarily to a 27.8% increase in revenues from car rentals, a 172.5% increase in revenue from food and beverage. The sum of aeronautical and non-aeronautical revenues increased by 90.0% from Ps.69,510 thousand in 2020 to Ps.132,083 thousand in 2021. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 1.8% from Ps.298.2 in 2020 to Ps.303.6 in 2021, due to a higher increase in non-aeronautical revenues and aeronautical revenues, compared to the increase in passenger traffic.
At our Terminal 2 NH Collection Hotel, total revenues increased by 55.0% from Ps.110,299 thousand in 2020 to Ps.171,005 thousand in 2021, due primarily to an increase in the annual average occupancy rate from 40.2% in 2020 to 63.8% in 2021 and an 11.3% increase in the average rates per room in 2021. The revenues of the Terminal 2 NH Collection Hotel are mainly dependent on passenger traffic traveling to and from the Mexico City International Airport.
At our Hilton Garden Inn Hotel at the Monterrey airport, total revenues increased by 60.9% from Ps.32,614 thousand in 2020 to Ps.52,483 thousand in 2021, due primarily to an increase in the annual average occupancy rate from 36.1% in 2020 to 46.1% in 2021. The revenues of the Hilton Garden Inn Hotel are dependent on passenger traffic traveling to and from the Monterrey international airport.
At our OMA-VYNMSA Aero Industrial Park, total revenues increased by 21.0% from Ps.56,454 thousand in 2020 to Ps68,294 thousand in 2021, due primarily to an increase in the number of leased commercial warehouses.
Our cost of services increased by 2.1% from Ps.765,958 thousand in 2020 to Ps.782,107 thousand in 2021, mainly as a result of a 17.7% increase in utilities, and a 14.1% increase in minor maintenance. Additionally, our cost of hotel services increased 44.5% as a result of an increase in operations in both hotels during 2021. As a percentage of the sum of aeronautical and non-aeronautical revenues, cost of services decreased from 18.6% in 2020 to 11.3% in 2021.
Our major maintenance provision increased from Ps.392,531 thousand in 2020 to Ps.512,653 thousand in 2021, due primarily to the recognition of the major maintenance works included in the new Master Development Program for 2021-2025.
Our administrative expenses increased by 13.2% from Ps.518,059 thousand in 2020 to Ps.586,542 thousand in 2021, due primarily to a 9.1% increase in payroll expenses, and a 41.5% increase in expenses paid to consultants and other providers of professional services.
Our technical assistance fee, which is paid in U.S. dollars, increased by 64.6% from Ps.81,164 thousand in 2020 to Ps.133,558 thousand in 2021, as a result of an increase in EBITDA, which is the base for its calculation.
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Our concession tax increased by 60.6% from Ps.199,202 thousand in 2020 to Ps.319,906 thousand in 2021, as a result of the increase in aeronautical and non-aeronautical revenues.
Our depreciation and amortization increased 11.9% from Ps.435,344 thousand in 2020 to Ps.487,230 thousand in 2021, due primarily to an increase in investments to improve our concessioned assets during 2021.
Income from Operations
On a consolidated basis, our operating income increased by 138.8% from Ps.1,721,468 thousand in 2020 to Ps.4,110,389 thousand in 2021, due primarily to a 62.5% increase in total revenue. Our operating margin increased from 32.1% in 2020 to 47.1% in 2021, and considering only the sum of our aeronautical and non-aeronautical revenues, our operating margin increased from 41.8% in 2020 to 59.3% in 2021.
Operating Income by Segment
The figures presented in this section take into account the intercompany transactions described above under “Item 5. Operating and Financial Review and Prospects—Operating Results—Solidarity Fees.” In addition, the operating cost amounts exclude construction costs, which have been eliminated together with construction revenues.
On an airport-by-airport basis, the principal contributors to our operating income in 2021 were the Monterrey airport (Ps.505,076 thousand), the Culiacán airport (Ps.109,180 thousand), the Chihuahua airport (Ps.79,271 thousand), the Ciudad Juárez airport (Ps.74,111 thousand), the Mazatlán airport (Ps.57,049 thousand), and the Acapulco airport (Ps.41,484 thousand).
Operating income for the Monterrey airport increased by 13.3% from Ps.445,952 thousand in 2020 to Ps.505,076 thousand in 2021, due primarily to an increase of 66.3% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 57.4% in operating costs, mainly due to the increase in solidarity fees from Ps.855,891 thousand in 2020 to Ps.1,803,003 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Acapulco airport increased by 92.2% from Ps.21,588 thousand in 2020 to Ps.41,484 thousand in 2021, due primarily to an increase of 59.2% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 52.8% in operating costs, mainly due to the increase in solidarity fees from Ps.14,580 thousand in 2020 to Ps.54,191 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues
Operating income for the Mazatlán airport decreased by 9.6% from Ps.63,105 thousand in 2020 to Ps.57,049 thousand in 2021, due primarily to an increase of 46.2% in aeronautical and non-aeronautical revenues, which was offset by an increase of 67.4% in operating costs, mainly due to the increase in solidarity fees from Ps.105,593 thousand in 2020 to Ps.186,537 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Zihuatanejo airport increased by 105.7% from Ps.12,960 thousand in 2020 to Ps.26,664 thousand in 2021, due primarily to an increase of 36.0% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 74.9% in operating costs, mainly due to the increase in solidarity fees from Ps.14,855 thousand in 2020 to Ps.35,392 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
112
Operating income for the Chihuahua airport increased by 58.4% from Ps.50,038 thousand in 2020 to Ps.79,271 thousand in 2021, due primarily to an increase of 78.6% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 86.3% in operating costs, mainly due to the increase in solidarity fees from Ps.82,815 thousand in 2020 to Ps.184,429 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Culiacán airport increased by 18.2% from Ps.92,341 thousand in 2020 to Ps.109,180 thousand in 2021, due primarily to an increase of 53.4% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 58.4% in operating costs mainly due to the increase in solidarity fees from Ps.175,756 thousand in 2020 to Ps.385,657 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Durango airport increased by 205.0% from Ps.10,220 thousand in 2020 to Ps.31,170 thousand in 2021, due primarily to an increase of 87.6% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 33.5% in operating costs mainly due to the increase in solidarity fees from Ps.24,135 thousand in 2020 to Ps.59,662 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the San Luis Potosí airport increased by 1.8% from Ps.34,648 thousand in 2020 to Ps.35,288 thousand in 2021, due primarily to an increase of 69.2% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 64.4% in operating costs mainly due to the increase in solidarity fees from Ps.41,086 thousand in 2020 to Ps.73,275 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Tampico airport increased by 114.4% from Ps.10,158 thousand in 2020 to Ps.21,775 thousand in 2021, due primarily to an increase of 67.0% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 75.4% in operating costs mainly due to the increase in solidarity fees from Ps.3,441 thousand in 2020 to Ps.38,191 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Torreón airport increased by 39.1% from Ps.23,660 thousand in 2020 to Ps.32,917 thousand in 2021, due primarily to an increase of 77.8% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 93.9% in operating costs mainly due to the increase in solidarity fees from Ps.33,913 thousand in 2020 to Ps.56,525 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Zacatecas airport increased by 1.8% from Ps.20,756 thousand in 2020 to Ps.21,138 thousand in 2021, due primarily to an increase of 80.2% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 111.0% in operating costs mainly due to the increase in solidarity fees from Ps.29,349 thousand in 2020 to Ps.61,236 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
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Operating income for the Ciudad Juárez airport increased by 23.0% from Ps.60,242 thousand in 2020 to Ps.74,111 thousand in 2021, due primarily to an increase of 85.1% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 158.8% in operating costs mainly due to the increase in solidarity fees from Ps.102,706 thousand in 2020 to Ps.245,331 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Operating income for the Reynosa airport increased by 164.1% from Ps.9,171 thousand in 2020 to Ps.24,219 thousand in 2021, due primarily to an increase of 90.0% in aeronautical and non-aeronautical revenues, which was partially offset by an increase of 57.8% in operating costs mainly due to the increase in solidarity fees from Ps.8,135 thousand in 2020 to Ps.31,355 thousand in 2021, principally as a result of the growth in aeronautical and non-aeronautical revenues.
Terminal 2 NH Collection Hotel had an operating loss of Ps.8,609 thousand in 2020, compared to an operating income of Ps.35,708 thousand in 2021 due primarily to an increase in revenues.
Hilton Garden Inn Hotel had an operating loss of Ps.6,918 thousand in 2020, compared to an operating income of Ps.5,789 thousand in 2021 due primarily to an increase in revenues.
Operating income for our OMA-VYNMSA Industrial Park increased from Ps.24,082 thousand in 2020 to Ps.31,222 thousand in 2021 which reflected an increase in revenues.
Exchange Gain (Loss)
We had a net exchange gain in 2021 of Ps.112,617 thousand, as compared to a gain of Ps. 79,522 thousand in 2020 due primarily to a higher depreciation of the Mexican peso in relation to the U.S. dollar on our U.S. dollar cash balances in 2020 compared to the depreciation of the Mexican peso in 2021. The exchange rate used to convert our dollar-denominated liabilities from pesos to U.S. dollars was Ps.20.4672 to U.S.$1.00 as of December 31, 2021 and Ps.19.9087 to U.S.$1.00 as of December 31, 2020. Our cash balance denominated in U.S. dollar was U.S.79,552 thousand on December 31, 2020 and U.S.21,666 thousand on December 31, 2021.
Net Interest Expense
Our net interest expense increased by 25.5% from Ps.308,610 thousand in 2020 to Ps.387,197 thousand in 2021, as a result of a higher interest expense due to additional debt issued during 2021.
Income Taxes
We recorded an income tax expense of Ps. 972,179 thousand in 2021, as compared to Ps.394,501 thousand in 2020, due primarily to an increase in revenues that resulted in a higher taxable income.
Our current income tax was Ps.1,217.748 thousand in 2021, as compared to Ps. 480,232 thousand in 2020, as a result of increased revenues.
Our effective tax rate was 26.4% in 2020 and 25.3% in 2021. The effective tax rates in 2020 and 2021 differed from the statutory rate of 30%, as a result of the permanent differences related primarily to inflationary effects for tax purposes.
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Net Income and Comprehensive Income
Our net income increased by 160.8% from Ps.1,097,879 thousand in 2020 to Ps.2,863,630 thousand in 2021. Comprehensive income attributable to the controlling interest increased by 163.6% from Ps.1,085,231 thousand in 2020 to Ps.2,860,262 thousand in 2021. Earnings per share were Ps.7.3521 and earnings per ADS were Ps.58.8165 in 2021.
Results of Operations for the Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019.
Total revenues for 2020 were Ps.5,367,466 thousand, 37.1% lower than the Ps.8,527,101 thousand recorded in 2019, primarily as a result of a decrease in both aeronautical and non aeronautical revenues. The sum of aeronautical and non-aeronautical revenues in 2020 decreased by 45.7% as compared to 2019.
Aeronautical revenues decreased by 48.8% to Ps.2,942,558 thousand in 2020, as compared to Ps.5,752,662 thousand in 2019 due primarily to a decrease in passenger charges from Ps.4,984,390 thousand in 2019 to Ps.2,400,484 thousand in 2020, attributable to a 52.3% decrease in passenger traffic. Aeronautical revenues per workload unit in 2020 were Ps.245.3 compared to Ps.238.3 in 2019, an increase of 3.0%.
Non-aeronautical revenues decreased by 35.6% from Ps.1,819,605 thousand in 2019 to Ps.1,171,039 thousand in 2020, due primarily to the reduction in operations at our airports, attributable to a 52.3% decrease in passenger traffic. Non-aeronautical revenues per terminal passenger increased by 34.8%, from Ps.78.5 in 2019 to Ps.105.9 in 2020, due primarily to a lower reduction in non-aeronautical revenue compared to passenger traffic, as a result of the nature of contracts from commercial, diversification and complementary activities, which provide for a minimum guaranteed fixed rent.
Revenues from construction services in 2020 were Ps.1,253,869 thousand, an increase of 31.3% from Ps.954,834 thousand recognized in 2019, primarily as a result of the progress in the improvements of concession assets, principally in the Monterrey, Culiacán, Tampico and San Luis Potosí airports.
Our revenues are highly dependent on the volume of passenger traffic. The effects of the COVID-19 pandemic resulted in a significant reduction in passenger traffic during 2020, as a result of the actions taken by the Mexican, U.S. and other governments and from the broader reduction in demand for air travel caused by the COVID-19 pandemic. Even though we have taken action to recover passenger confidence, along with measures taken to preserve liquidity, the ongoing adverse effects of COVID-19 on our operations remain uncertain and the continuation of reduced air travel demand could have a material adverse effect on the Company’s business, operating results, financial condition and liquidity.
On an airport-by-airport basis, the principal contributors to total revenues in 2020 were the Monterrey airport (Ps.2,560,047 thousand), the Culiacán airport (Ps.479,436 thousand), the Chihuahua airport (Ps.292,456 thousand), the Mazatlán airport (Ps.273,319 thousand), the Ciudad Juárez airport (Ps.265,370 thousand), the San Luis Potosí airport (Ps.194,742 thousand), and the Acapulco airport (Ps.173,787 thousand). Based on contribution to aeronautical and non-aeronautical revenues in 2020, the main contributors were the Monterrey airport (Ps.1,757,577 thousand), the Culiacán airport (Ps.411,294 thousand), the Chihuahua airport (Ps.261,777 thousand), the Mazatlán airport (Ps.248,615 thousand), the Ciudad Juárez airport (Ps.237,421 thousand), the Acapulco airport (Ps.144,377 thousand), and the San Luis Potosí airport (Ps.136,553 thousand). Historically, Monterrey, Culiacán and Chihuahua have been our three principal contributors to aeronautical and non-aeronautical revenues, and we expect this trend to continue in the future.
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At the Monterrey airport, aeronautical revenues decreased by 51.6% from Ps.2,641,052 thousand in 2019 to Ps.1,278,255 thousand in 2020, due primarily to a 54.9% decrease in passenger charges, as a result of a 55.3% decrease in passenger traffic. Non-aeronautical revenues decreased by 34.0% from Ps.726,684 thousand in 2019 to Ps.479,322 thousand in 2020, due primarily to a 70.2% decrease in car parking charges, a 42.7% decrease in food and beverage and a 54.1% decrease in retail operations. The sum of aeronautical and non-aeronautical revenues decreased by 47.8% from Ps.3,367,736 thousand in 2019 to Ps.1,757,577 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 11.3% from Ps.287.9 in 2019 to Ps.320.5 in 2020, principally due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Acapulco airport, aeronautical revenues decreased by 48.6% from Ps.227,954 thousand in 2019 to Ps.117,218 thousand in 2020, due primarily to a 52.1% decrease in passenger charges, as a result of a 54.8% decrease in passenger traffic. Non-aeronautical revenues decreased by 32.5% from Ps.40,242 thousand in 2019 to Ps.27,159 thousand in 2020, due primarily to a 45.6% decrease in retail operations, a 28.8% decrease in revenues from car rentals and a 35.9% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 46.2% from Ps.268,196 thousand in 2019 to Ps.144,377 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 19.1% from Ps.305.3 in 2019 to Ps.363.7 in 2020, principally due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Mazatlán airport, aeronautical revenues decreased by 34.3% from Ps.321,313 thousand in 2019 to Ps.211,184 thousand in 2020, due primarily to a 36.6% decrease in passenger charges, as a result of a 36.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 29.2% from Ps.52,857 thousand in 2019 to Ps.37,431 thousand in 2020, due primarily to a 32.8% decrease in retail operations, a 39.5% decrease in revenues from time-share developers and a 46.3% decrease in revenues from car parking. The sum of aeronautical and non-aeronautical revenues decreased by 33.6% from Ps.374,170 thousand in 2019 to Ps.248,615 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 2.3% from Ps.316.4 in 2019 to Ps.323.7 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Zihuatanejo airport, aeronautical revenues decreased by 48.5% from Ps.191,512 thousand in 2019 to Ps.98,645 thousand in 2020, due primarily to a 52.2% decrease in passenger charges, as a result of a 49.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 28.3% from Ps.25,596 thousand in 2019 to Ps.18,360 thousand in 2020, due primarily to a 34.7% decrease in retail operations, a 20.6% decrease in revenues from car rentals and a 51.9% decrease in revenues from car parking. The sum of aeronautical and non-aeronautical revenues decreased by 46.1% from Ps.217,108 thousand in 2019 to Ps.117,005 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 6.2% from Ps.346.0 in 2019 to Ps.367.4 in 2020.
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At the Chihuahua airport, aeronautical revenues decreased by 47.6% from Ps.411,392 thousand in 2019 to Ps.215,728 thousand in 2020, due primarily to a 52.0% decrease in passenger charges, as a result of a 51.9% decrease in passenger traffic. Non-aeronautical revenues decreased by 31.3% from Ps.67,022 thousand in 2019 to Ps.46,049 thousand in 2020, due primarily to a 55.8% decrease in revenues from car parking, a 38.3% decrease in revenues from car rentals, and a 44.4% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 45.3% from Ps.478,414 thousand in 2019 to Ps.261,777 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.8% from Ps.271.0 in 2019 to Ps.292.1 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Culiacán airport, aeronautical revenues decreased by 41.8% from Ps.617,978 thousand in 2019 to Ps.359,562 thousand in 2020, due primarily to a 43.9% decrease in passenger charges, as a result of a 44.2% decrease in passenger traffic. Non-aeronautical revenues decreased by 22.0% from Ps.66,287 thousand in 2019 to Ps.51,732 thousand in 2020, due primarily to a 54.8% decrease in revenues from car parking, a 14.8% decrease in food and beverage, and a 44.3% decrease in revenues from VIP lounges. The sum of aeronautical and non-aeronautical revenues decreased by 39.9% from Ps.684,265 thousand in 2019 to Ps.411,294 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 5.8% from Ps.272.8 in 2019 to Ps.288.5 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Durango airport, aeronautical revenues decreased by 47.0% from Ps.150,130 thousand in 2019 to Ps.79,515 thousand in 2020, due primarily to a 51.6% decrease in passenger charges, as a result of a 48.5% decrease in passenger traffic. Non-aeronautical revenues decreased by 17.5% from Ps.13,433 thousand in 2019 to Ps.11,083 thousand in 2020, due primarily to a 47.6% decrease in revenues from car parking, a 58.4% decrease in retail operations and a 21.9% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 44.6% from Ps.163,563 thousand in 2019 to Ps.90,598 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.7% from Ps.308.4 in 2019 to Ps.332.1 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the San Luis Potosí airport, aeronautical revenues decreased by 38.0% from Ps.174,340 thousand in 2019 to Ps.108,045 thousand in 2020, due primarily to a 43.8% decrease in passenger charges, as a result of a 51.9% decrease in passenger traffic. Non-aeronautical revenues decreased by 20.0% from Ps.35,631 thousand in 2019 to Ps.28,508 thousand in 2020, due primarily to a 57.3% decrease in revenues from car parking, a 50.3% decrease in revenues from VIP lounges and a 9.5% decrease in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 35.0% from Ps Ps.209,971 thousand in 2019 to Ps.136,553 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 8.7% from Ps.237.3 in 2019 to Ps.258.0 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Tampico airport, aeronautical revenues decreased by 62.3% from Ps.197,161 thousand in 2019 to Ps.74,330 thousand in 2020, due primarily to a 69.5% decrease in passenger charges, as a result of a 63.4% decrease in passenger traffic. Non-aeronautical revenues decreased by 37.9% from Ps.28,056 thousand in 2019 to Ps.17,414 thousand in 2020, due primarily to a 59.0% decrease in revenues from car parking, a 33.2% decrease in revenues from car rentals and a 70.8% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 59.3% from Ps.225,217 thousand in 2019 to Ps.91,744 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 10.8% from Ps.303.0 in 2019 to Ps.335.7 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Torreón airport, aeronautical revenues decreased by 52.9% from Ps.201,446 thousand in 2019 to Ps.94,892 thousand in 2020, due primarily to a 56.7% decrease in passenger charges, as a result of a 54.7% decrease in passenger traffic. Non-aeronautical revenues decreased by 26.4% from Ps.23,683 thousand in 2019 to Ps.17,425 thousand in 2020, due primarily to a 58.7% decrease in revenues from car parking, a 50.8% decrease in retail operations and a 14.9% decrease in revenues from car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 50.1% from Ps.225,129 thousand in 2019 to Ps.112,317 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 9.3% from Ps.312.8 in 2019 to Ps.341.8 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
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At the Zacatecas airport, aeronautical revenues decreased by 49.6% from Ps.141,500 thousand in 2019 to Ps.71,292 thousand in 2020, due primarily to a 52.1% decrease in passenger charges, as a result of a 51.1% decrease in passenger traffic. Non-aeronautical revenues decreased by 24.6% from Ps.13,945 thousand in 2019 to Ps.10,512 thousand in 2020, due primarily to a 54.0% decrease in revenues from car parking, a 37.1% decrease in retail operations and a 24.4% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 47.4% from Ps.155,445 thousand in 2019 to Ps.81,804 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit at the Zacatecas airport increased by 7.7% from Ps.325.4 in 2019 to Ps.350.5 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Ciudad Juárez airport, aeronautical revenues decreased by 47.5% from Ps.380,271 thousand in 2019 to Ps.199,685 thousand in 2020, due primarily to a 49.6% decrease in passenger charges, as a result of a 50.5% decrease in passenger traffic. Non-aeronautical revenues decreased by 32.6% from Ps.55,999 thousand in 2019 to Ps.37,736 thousand in 2020, due primarily to a 44.3% decrease in revenues from car parking, a 46.5% decrease in food and beverage and a 33.4% decrease in car rentals. The sum of aeronautical and non-aeronautical revenues decreased by 45.6% from Ps.436,270 thousand in 2019 to Ps.237,421 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 7.1% from Ps.265.5 in 2019 to Ps.284.3 in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At the Reynosa airport, aeronautical revenues decreased by 48.9% from Ps.113,515 thousand in 2019 to Ps.58,010 thousand in 2020, due primarily to a 50.8% decrease in passenger charges, as a result of a 52.3% decrease in passenger traffic. Non-aeronautical revenues decreased by 37.0% from Ps.18,240 thousand in 2019 to Ps.11,500 thousand in 2020, due primarily to a 45.6% decrease in revenues from car parking, a 24.8% decrease in car rentals and a 67.6% decrease in food and beverage. The sum of aeronautical and non-aeronautical revenues decreased by 47.2% from Ps.131,755 thousand in 2019 to Ps.69,510 thousand in 2020. The sum of aeronautical and non-aeronautical revenues per workload unit increased by 10.0% from Ps.271.0 in 2019 to Ps.298.2 thousand in 2020, due to a lower decrease in non-aeronautical revenues than aeronautical revenues, compared to the decrease in passenger traffic.
At our Terminal 2 NH Collection Hotel, total revenues decreased by 56.8% from Ps.255,393 thousand in 2019 to Ps.110,299 thousand in 2020, due primarily to a decrease in the annual average occupancy rate from 84.1% in 2019 to 40.2% in 2020. The revenues of the Terminal 2 NH Collection Hotel are dependent on passenger traffic traveling to and from the Mexico City International Airport.
At our Hilton Garden Inn Hotel at the Monterrey airport, total revenues decreased by 68.5% from Ps.103,474 thousand in 2019 to Ps.32,614 thousand in 2020, due primarily to a decrease in the annual average occupancy rate from 77.7% in 2019 to 36.1% in 2020. The revenues of the Hilton Garden Inn Hotel are dependent on passenger traffic traveling to and from the Monterrey international airport.
The full extent of the ongoing impact of COVID-19 on the Company’s longer-term operational and financial performance will depend on future developments, including those outside our control related to the efficacy and speed of vaccination programs in curbing the spread of the virus, the introduction and spread of new variants of the virus, which may be resistant to currently approved vaccines, passenger testing requirements, mask mandates or other restrictions on travel, all of which are highly uncertain and cannot be predicted with certainty. Even where formal advisories and restrictions have been lifted or reduced, the increased spread or resurgence of COVID-19 could result in the reintroduction of or increase in such formal advisories and restrictions. We expect that the COVID-19 pandemic will continue to severely impact the countries and regions where we operate in 2021. On April 6, 2020, we temporarily suspended services of our Hilton Garden Inn Hotel through July 6, 2020 due to low occupancy.
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At our OMA-VYNMSA Aero Industrial Park, total revenues increased by 34.5% from Ps.41,981 thousand in 2019 to Ps.56,454 thousand in 2020, due primarily to an increase in the number of leased commercial warehouses. An additional warehouse was developed, which construction ended in January 2021. with an area of 4,849 square meters (52,192 square-feet).
Our cost of services decreased by 19.7% from Ps.954,207 thousand in 2019 to Ps.765,958 thousand in 2020, mainly as a result of our cost cutting initiatives that resulted in a decrease of 30.6% in utilities, mainly as a result of a decrease in electricity consumption of 19,556 thousand KwH, equivalent to a reduction of 32.5%, as compared to 2019, and a 29.6% decrease in maintenance, fees, and others. Additionally, our cost of hotel services declined 64.2% as a result of lower occupancy levels in our hotels during 2020. As a percentage of the sum of aeronautical and non-aeronautical revenues, cost of services increased from 12.6% in 2019 to 18.6% in 2020.
Our major maintenance provision increased from Ps.292,324 thousand in 2019 to Ps.392,531 thousand in 2020, due primarily to the recognition of the major maintenance works included in the new Master Development Program for 2021-2025 approved in November 2020.
Our administrative expenses decreased by 4.5% from Ps.542,664 thousand in 2019 to Ps.518,059 thousand in 2020, due primarily to a 12.5% decrease in expenses paid to consultants and other providers of professional services and a 70.8% decrease in travel expenses.
Our technical assistance fee, which is paid in U.S. dollars, decreased by 45.9% from Ps.150,108 thousand in 2019 to Ps.81,164 thousand in 2020, as a result of a decrease in EBITDA, which is the base for its calculation.
Our concession tax decreased by 45.2% from Ps.363,561 thousand in 2019 to Ps.199,202 thousand in 2020, as a result of a decrease in aeronautical and non-aeronautical revenues.
Our depreciation and amortization increased 4.8% from Ps.415,252 thousand in 2019 to Ps.435,344 thousand in 2020, due primarily to an increase in the investment to improve our concessions’ assets during 2020.
On a consolidated basis, our operating income decreased by 64.5% from Ps.4,855,306 thousand in 2019 to Ps.1,721,468 thousand in 2020, due primarily to a 37.1% decrease in total revenue. Our operating margin decreased from 56.9% in 2019 to 32.1% in 2020, and considering only the sum of our aeronautical and non-aeronautical revenues, our operating margin decreased from 64.2% in 2019 to 41.8% in 2020.
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On an airport-by-airport basis, the principal contributors to our operating income in 2020 were the Monterrey airport (Ps.445,952 thousand), the Culiacán airport (Ps.92,341 thousand), the Mazatlán airport (Ps.63,103 thousand), the Ciudad Juárez airport (Ps.60,241 thousand), the Chihuahua airport (Ps.50,038 thousand), and the San Luis Potosí airport (Ps.36,648 thousand).
Operating income for the Monterrey airport decreased by 5.8% from Ps.473,615 thousand in 2019 to Ps.445,952 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.2,327,084 thousand in 2019 to Ps.855,891 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Acapulco airport decreased by 59.9% from Ps.53,812 thousand in 2019 to Ps.21,588 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.100,121 thousand in 2019 to Ps.14,580 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Mazatlán airport increased by 19.9% from Ps.52,626 thousand in 2019 to Ps.63,105 thousand in 2020, due primarily to a decrease in operating costs. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.225,406 thousand in 2019 to Ps.105,593 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Zihuatanejo airport decreased by 70.3% from Ps.43,614 thousand in 2019 to Ps.12,960 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.83,124 thousand in 2019 to Ps.14,855 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Chihuahua airport decreased by 25.7% from Ps.67,379 thousand in 2019 to Ps.50,038 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.290,026 thousand in 2019 to Ps.82,815 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Culiacán airport decreased by 4.1% from Ps.96,278 thousand in 2019 to Ps.92,341 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.479,985 thousand in 2019 to Ps.175,756 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
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Operating income for the Durango airport decreased by 55.6% from Ps.23,014 thousand in 2019 to Ps.10,220 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.90,542 thousand in 2019 to Ps.24,135 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the San Luis Potosí airport increased by 24.0% from Ps.27,938 thousand in 2019 to Ps.34,648 thousand in 2020, due primarily to a decrease in operating costs. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.107,623 thousand in 2019 to Ps.41,086 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Tampico airport decreased by 68.1% from Ps.31,808 thousand in 2019 to Ps.10,158 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.128,629 thousand in 2019 to Ps.3,441 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Torreón airport decreased by 25.3% from Ps.31,658 thousand in 2019 to Ps.23,660 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.131,350 thousand in 2019 to Ps.33,913 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Zacatecas airport decreased by 33.3% from Ps.31,135 thousand in 2019 to Ps.20,756 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.76,622 thousand in 2019 to Ps.29,349 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Ciudad Juárez airport decreased by 1.8% from Ps.61,374 thousand in 2019 to Ps.60,242 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.271,070 thousand in 2019 to Ps.102,706 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for the Reynosa airport decreased by 65.2% from Ps.26,375 thousand in 2019 to Ps.9,171 thousand in 2020, due primarily to a decrease in aeronautical and non-aeronautical revenues. The decrease in operating costs mainly reflected a decrease in solidarity fees from Ps.55,895 thousand in 2019 to Ps.8,135 thousand in 2020, which declined mainly due to an update in the fees’ calculation method and the decrease in aeronautical and non-aeronautical revenues.
Operating income for our Terminal 2 NH Collection Hotel decreased from Ps.77,325 thousand in 2019 to an operating loss of Ps.8,609 thousand in 2020 due primarily to a decrease in revenues.
Operating income for our Hilton Garden Inn Hotel decreased from Ps.32,345 thousand in 2019 to an operating loss of Ps.6,918 thousand in 2020 due primarily to a decrease in revenues.
Operating income for our OMA-VYNMSA Industrial Park increased from Ps.15,622 thousand in 2019 to Ps.24,082 thousand in 2020 which reflected an increase in revenues.
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We had a net exchange gain in 2020 of Ps.79,522 thousand, as compared to a loss of Ps.50,878 thousand in 2019 due primarily to the depreciation of the Mexican peso in relation to the U.S. dollar on our U.S. dollar cash balances in 2020. The exchange rate used to convert our dollar-denominated liabilities from pesos to U.S. dollars was Ps.19.9087 to U.S.$1.00 as of December 31, 2020 and Ps.18.8727 to U.S.$1.00 as of December 31, 2019. Our cash balance denominated in U.S. dollar was Ps.78,940 thousand on December 31, 2019 and Ps.79,552 thousand on December 31, 2020.
Our net interest expense increased by 50.7% from Ps.204,772 thousand in 2019 to Ps.308,610 thousand in 2020, as a result of higher interest expense due to the unwinding of our major maintenance provision as well as a reduction in interest income due to lower interest rates. During 2020, the annualized interest rates on 28-day short-term Mexican treasury bills, or Certificados de la Tesorería de la Federación, consistently decreased from 7.3% on January 1, 2020 to 4.2% on December 31, 2020, with a yearly average of 5.3%.
We recorded an income tax expense of Ps.394,501 thousand in 2020, as compared to Ps.1,372,222 thousand in 2019, due primarily to a decrease in revenues and the lower taxable income.
Our current income tax decreased from Ps.1,329,867 thousand in 2019 to Ps.480,232 thousand in 2020 as a result of decreased revenues.
Our effective tax rate was 29.8% in 2019 and 26.4% in 2020. The effective tax rates in 2019 and 2020 differed from the statutory rate of 30%, as a result of the permanent differences related primarily to inflationary effects for tax purposes.
Our net income decreased by 66.0% from Ps.3,227,434 thousand in 2019 to Ps.1,097,879 thousand in 2020. Comprehensive income attributable to the controlling interest decreased by 66.2% from Ps.3,210,814 thousand in 2019 to Ps.1,085,231 thousand in 2020. Earnings per share were Ps.2.8038 and earnings per ADS were Ps.22.4304 in 2020.
Liquidity and Capital Resources
Sources of Liquidity
Historically, we covered all of our liquidity needs, including our obligations under the Master Development Programs, with cash flows generated by the operations of our subsidiaries and incurred no significant debt. We modified our strategy to finance our operations and incorporated debt as a means to fund capital investments. In the future, we hope to continue covering our liquidity needs with cash flows generated by the operations of our subsidiaries, with a reduction and control of costs and operational improvements to maximize profitability, and with the incurrence of additional debt to finance expenditures pursuant to our Master Development Program obligations, other capital expenditures and working capital, and make our capital structure more efficient.
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In November 2020, we received approval from the Ministry of Infrastructure, Communications and Transportation, through the AFAC, of the Master Development Program for each of our thirteen airports, corresponding to the 2021-2025 period. Total investments approved amount to Ps.14,514,871 thousand in pesos as of December 31, 2021. As a result, in our opinion, our cash flows from operations are sufficient for our present operating obligations; however, we may, from time to time, have to incur in additional debt to finance our investment expenditures pursuant to our Master Development Program obligations, as well as other strategic investment expenditures. As of the date of this report, we have been able to timely service our debt and other obligations, without having to take advantage of any available payment deferrals, forbearance periods, or other concessions. For a discussion on our Master Development Program obligations, see “Item 4. Information on the Company—Master Development Programs and Capital Expenditures—Revenue Regulation.”
Pursuant to our Master Development Programs, in 2022 through 2025, we anticipate investing Ps.12,519,332 thousand as follows:
Expected Investments Under Master Development Programs by Category for 2022 to 2025
2022 - 2025
897,560
5,715,431
343,084
382,079
195,589
980,988
540,680
1,426,296
1,040,534
1,704,865
495,269
1,633,413
511,966
676,260
4,024,680
12,519,332
Our committed investments pursuant to our Master Development Programs for 2022 amount to Ps.4,024,680 thousand. Our committed investment for 2022 includes investments for additional capacity and equipment, among others. See “Item 4. Information on the Company—Master Development Programs and Capital Expenditures.”
Cash Flows
Our treasury monitors cash flows on a daily, monthly and annual basis to plan and determine the management, sources and uses of resources, as well as to meet our capital and debt service obligations at all times, and to improve our working capital and capital structure.
As of December 31, 2019, 2020 and 2021, we had Ps.3,429,873 thousand, Ps.2,958,804 thousand and Ps.5,987,164, respectively, of cash and cash equivalents, of which 43.4%, 53.0% and 7.4% respectively, was denominated in U.S. dollars. We invested these resources in financial instruments in accordance with our investment policy.
In 2021, we generated Ps.4,446,844 thousand in cash flows from operating activities of which Ps.5,137,098 thousand was directly from operating activities and was offset mainly by Ps.491,542 thousand of income tax paid, Ps.252,673 thousand of net trade accounts receivable and Ps.203,042 thousand of major maintenance expenses. Our cash flow used in investing activities was Ps.1,794,891 thousand, mainly with respect to investments in our concessions, and our cash flow received from financing activities was Ps.292,269 thousand, mainly from Ps.3,500,000 thousand from issued debt and Ps.2,700,000 thousand from short-term borrowings, both of which were offset by the use of Ps.3,000,000 thousand for the amortization of debt, the use of Ps.1,979,790 thousand for dividend payment and the use of Ps.474,852 thousand for share repurchases. We believe our working capital is sufficient for our present requirements, and we anticipate generating sufficient cash to satisfy our long-term liquidity needs.
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In 2020, we generated Ps.1,303,478 thousand in cash flows from operating activities of which Ps.2,569,574 thousand was directly from operating activities and was offset mainly by Ps.747,867 thousand of income tax paid, Ps.103,704 thousand of major maintenance expenses and Ps.94,229 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.1,324,430 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.528,888 thousand, mainly for payment of Ps.320,866 thousand in dividends and Ps.150,000 thousand in interest.
In 2019, we generated Ps.3,716,524 thousand in cash flows from operating activities of which Ps.5,554,608 thousand was directly from operating activities and was offset mainly by Ps.1,324,834 thousand of income tax paid, Ps.305,133 thousand of major maintenance expenses and Ps.60,949 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.952,227 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.2,246,461 thousand, mainly for payment of Ps.1,598,681 thousand in dividends and Ps.327,309 thousand in interest.
Indebtedness
Short-Term Indebtedness
In December 2021, we obtained short-term loans with Banco Nacional de México, S.A., for Ps.1,000,000 thousand at a variable rate of 28-day TIIE plus 100 basis points, HSBC México, S.A., for Ps.900,000 thousand at a variable rate of 91-day TIIE plus 50 basis points and Banco Santander México, S.A., for Ps.1,000,000 thousand at a variable rate of 28-day TIIE plus an average of 155 basis points, all of which were prepaid on March 31,2022. Proceeds were used to capitalize the group’s subsidiaries, for working capital and to strengthen the company’s liquidity. These loans mature in June 2022.
As of April 22, 2022, we had unused non-committed, lines of credit available for short-term issuances totaling Ps.2,650,000 thousand.
Long-Term Indebtedness
On March 26, 2013, we issued Ps.1,500,000 thousand in 10-year peso-denominated notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered in 2011 (the “2011 Indenture”). Interest payments are made on a semiannual basis at a fixed annual interest rate of 6.47%. The principal amount will be repaid at maturity on March 14, 2023. The Acapulco, Ciudad Juárez, Culiacán, Chihuahua, Mazatlán, Monterrey, Tampico, Torreón and Zihuatanejo airports act as guarantors under these notes. The net proceeds from the placement were used to prepay existing debt and were used to fund committed investments under the Master Development Programs for our 13 airports, as well as for strategic investments. The notes received ratings of mxAA+ by Standard and Poor’s and AA+ (mex) by Fitch Ratings at the moment of the issuance. Currently our long-term debt has a AAA+ (mex) by Fitch Ratings and Baa1/Aaa.mx by Moody’s. The principal covenants and the events of default under the indenture pursuant to which these notes were issued (the “2013 Indenture”) are described below.
Covenants
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Events of Default
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As of the date of this annual report, we were in compliance with these covenants, and no event of default had been triggered. None of our credit or other debt agreements contain financial covenants.
We, through seven of our airports, maintained lines of credit with Private Export Funding Corporation (backed by Ex-Im Bank) for U.S.$20.4 million, pursuant to agreements dated October 15, 2010 and October 14, 2011, valid through December 21, 2021. As of December 31, 2021, the balance of credit was zero. These lines of credit were guaranteed by checked-baggage inspection equipment acquired by the airports. The interest rate was three-month LIBOR plus 125 basis points.
On June 16, 2014, OMA issued Ps.3,000,000 thousand in seven-year notes (certificados bursátiles) at a fixed rate of 6.85% that were registered with the Mexican National Registry of Securities. The purpose of the issuance was to fix interest payments and to extend the maturity profile of debt by prepaying the Ps.1,300,000 thousand in floating-rate notes issued under the 2011 Indenture, and to finance the Master Development Programs and strategic investments. The floating-rate Ps.notes issued under the 2011 Indenture were paid on July 11, 2014. The principal covenants and the events of default under the indenture pursuant to which these notes were issued (the “2014 Indenture”) are substantially similar to those under the 2013 Indenture. On April 19, 2021, the notes issued under the 2014 indenture were paid in full.
On April 16, 2021, OMA issued Ps.1,000,000 thousand in five-year green notes (certificados bursátiles verdes) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the “2021 Green Variable Rate Notes Indenture”). Interest payments are made every 28 days at a variable annual interest rate of TIIE 28 + 0.75%. The principal amount will be repaid at maturity on April 10, 2026. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance is to finance green investments pursuant to our Master Development Programs for 2021-2025. The current ratings of the notes are Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings.
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On April 16, 2021, OMA issued Ps.2,500,000 thousand in seven-year notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an Indenture into which we entered on that date (the 2021 Fixed Rate Notes Indenture). Interest payments are made on a semiannual basis at a fixed annual interest rate of 7.83%. The principal amount will be repaid at maturity on April 7, 2028. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to extend the maturity profile of debt by prepaying the Ps.3,000,000 thousand in fixed-rate notes issued under the 2014 Indenture. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.
The principal covenants and the events of default under the 2021 Green Variable Rate Notes Indenture and the 2021 Fixed Rate Notes Indenture are described below:
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On March 31, 2022, OMA issued Ps.1,700,000 thousand in five-year sustainability-linked notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an indenture into which we entered on that date (the “2022 Sustainability-Linked Variable-Rate Notes Indenture”). Interest payments are made every 28 days at a variable annual interest rate of 28-day TIIE plus 14 basis points. The principal amount will be repaid at maturity on March 25, 2027. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to partially prepay the Ps.2,700,000 thousand outstanding on our short-term loans. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.
On March 31, 2022, OMA issued Ps.2,300,000 thousand in seven-year sustainability-linked notes (certificados bursátiles) that were registered with the Mexican National Registry of Securities and trade on the Mexican market pursuant to an Indenture into which we entered on that date (the 2022 Sustainability-Linked Fixed-Rate Notes Indenture). Interest payments are made on a semiannual basis at a fixed annual interest rate of 9.35%. The principal amount will be repaid at maturity on March 22, 2029. The Monterrey, Culiacán and Chihuahua airports act as guarantors under these notes. The purpose of the issuance was to partially prepay the Ps.2,700,000 thousand outstanding on our short-term loans., fund our committed investments pursuant to our Master Development Program and for other corporate purposes. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance. The principal covenants and the events of default under the indenture pursuant to which these notes (and the 2022 Sustainable-Linked Variable Rate Notes Indenture) were issued are substantially similar to those under the 2021 Indenture.
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As of the date of this annual report, we are in compliance with these covenants, and no event of default has occurred or is continuing.
We did not access revolving lines of credit or raise capital in the public or private markets to address any liquidity needs as a result of the COVID-19 pandemic.
Total Indebtedness
The following table sets forth our total indebtedness at the closing of each of the periods indicated:
As of December 31,
Ps.
4,543,609
4,510,388
7,696,622
Derivative Financial Instruments
As of December 31, 2021, we were not party to and did not hold any financial derivative instrument.
Other Restrictions
As of December 31, 2021, restrictions imposed by debt instruments did not have any impact on our ability to fulfill our capital and cash obligations
Principal Treasury Policies and Procedures
The operation of the treasury department is based on various policies, with which we were in compliance as of December 31, 2021. The most significant policies currently in effect are as follows:
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Capital Management Policy
We have developed a Capital Management Policy aimed at reaching and maintaining a solid capital base, which allows us to achieve our growth objectives, comply with our investment commitments and provide confidence to our stakeholders. Based on such policy, we seek to:
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Our Board of Directors, with prior recommendation of the Audit Committee will review and approve any transaction that (i) modifies our capital structure or the capital structure of any of our subsidiaries and (ii) that is outside the normal course of operations. Additionally, our Board of Directors, with prior recommendation of the Audit Committee, will review and approve any of the following transactions (whether carried out simultaneously or successively), which are intended to be executed by us or any of our subsidiaries within a fiscal year and their amount results, based on consolidated financial information of the previous quarter, in any of the following:
Principal Uses of Capital
Resources
Our capital resources are mainly used to comply with the Master Development Programs (which include capital expenditures, major maintenance and other expenditures) and to invest in other capital expenditures necessary to accommodate the growth of our business.
The following table details our actual expenditures made during 2019, 2020 and 2021 and their classification in our consolidated financial statements for such periods:
Capital expenditures pursuant to master development programs
Other capital expenditures
94,090
147,614
121,638
Total capital expenditures
1,048,924
Expenditures made for major maintenance(1)
305,133
103,704
203,042
Other expenditures pursuant to master development programs
4,526
1,050
3,595
Expenditures pursuant to master development programs and other capital expenditures(2)
1,358,584
1,506,237
2,117,178
In 2021, we spent Ps.1,910,541 thousand on capital expenditures, principally in connection with works to improve our terminal and operating infrastructure. In 2020, we spent Ps.1,401,483 thousand on capital expenditures, principally in connection with works to improve our terminals and operating infrastructure. In 2019, we spent Ps.1,048,924 thousand on capital expenditures, principally in connection with works to improve our terminals. We believe our working capital is sufficient for our present requirements, and we anticipate generating sufficient cash to satisfy our short and long-term liquidity needs.
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We currently intend to fund our commitments pursuant to the Master development programs, other capital expenditures and working capital required by our business operations through cash flows generated from our operations and through the issuance of additional debt as deemed necessary by our management to comply with our obligations under the Master Development Programs. For a discussion on our Master Development Program obligations, see “Item 4. Information on the Company—Master Development Programs and Capital Expenditures—Revenue Regulation.”
Share Repurchase Program
On April 21, 2019, our shareholders authorized the use of an amount of up to Ps.1,500 million for repurchases of Series B shares until the next annual shareholders’ meeting approved the 2019 results. On July 7, 2020, our shareholders authorized an increase of the share purchase reserve to Ps.1,500 million and the use up to such amount to repurchase Series B shares until the next annual shareholders’ meeting approved the 2020 results. On April 21, 2021, our shareholders authorized the use of an amount of up to Ps.1,500 million for the repurchase of Series B shares until the next annual shareholders’ meeting approved the 2021 results. On April 22, 2022, our shareholders authorized an increase of the share purchase reserve to Ps.1,500 million and the use of up to such amount for the repurchase of Series B shares until the next annual shareholders’ meeting approves the 2022 results.
Our share repurchase program started in October 2007. The operation of our share repurchase program generates cash inflow and cash outflow depending on the nature of the transaction (buying or selling). For the year ended December 31, 2019 the share repurchase program generated a cash outflow of Ps.244,201, for the year ended December 31, 2020 the share repurchase program resulted in a cash outflow of Ps.150,000 thousand, and for the year ended December 31, 2021, the share repurchase program resulted in a cash outflow of Ps.474,852 thousand. On December 31, 2019, 2020, and 2021 the number of repurchased shares in treasury amounted to 2,145,651, 0 and 3,942,131 respectively. At the Extraordinary Shareholders’ Meeting held on July 7, 2020, the shareholders approved the cancellation of 3,659,417 repurchased shares held in treasury.
Critical Accounting Policies
See Note 4 to our consolidated financial statements for a description of our significant accounting policies.
Item 6. Directors, Senior Management and Employees
Directors
Our Board of Directors is responsible for the management of our business. Pursuant to our bylaws, our Board of Directors must consist of an odd number of directors determined at an ordinary general meeting of shareholders and is required to have at least 11 members. Our Board of Directors currently consists of 11 directors, each of whom is elected or re-elected at the annual shareholders’ meeting. Under the Mexican Securities Law (Ley del Mercado de Valores) and our bylaws, at least 25% of our directors must be independent.
Our bylaws provide that (i) each person (or group of persons acting together) holding 10% of our capital stock in the form of Series B shares is entitled to designate one director, (ii) the holders of Series BB shares are entitled to elect three directors and their alternates pursuant to our bylaws, the Participation Agreement and the Technical Assistance Agreement, and (iii) the remaining members of the Board of Directors are to be elected by the holders of our capital stock (both the Series BB shares and the Series B shares, including those Series B holders that were entitled to elect a director by virtue of their owning 10% of our capital stock).
At the shareholders’ meeting held on April 29, 2019, our shareholders approved the designation of Bernardo Casas Godoy as member of the Board of Directors, replacing Pablo García Aguilar. All other members of the Board of Directors were re-elected. At the same shareholders’ meeting our shareholders approved that all members of the Board of Directors, Committee Presidents and the Secretary of the Board of Directors were to stay in place until the next shareholders’ meeting conveyed to approve the results for the year ended on December 31, 2019.
At the shareholders’ meeting held on July 7, 2020, our shareholders approved the Annual Report for 2019 prepared by the Chief Executive Officer and the Audited Consolidated and Non-Consolidated Financial Statements for the year ended 2019; the Reports of the Presidents of the Audit Committee and the Corporate Practices, Finance, Planning and Sustainability Committee; the appointment of Alejandro Ortega Aguayo and Federico Patiño Márquez as independent members of the Board of Directors, replacing Alberto Felipe Mulás Alonso and Felipe Duarte Olvera; the appointment of Ricardo Maldonado Yáñez as president of the Corporate Practices, Finance; Planning and Sustainability Committee; the re-election of all other members of the Board of Directors; the application of results of the Company, as well as an increase in the share repurchase reserve to Ps.1,500 million and the use of up to such amount to repurchase Series B shares until the next annual shareholders’ meeting approved the 2020 results. On that same date, the shareholders held an extraordinary meeting approving the cancelation of 3,659,417 Series B shares repurchased held in treasury. As a result, outstanding shares amount to 390,111,556.
At the shareholders’ meeting held on April 21, 2021, our shareholders approved the Annual Report for 2020 prepared by the Chief Executive Officer and the Audited Consolidated and Non-Consolidated Financial Statements for the year ended 2020; the Reports of the Presidents of the Audit Committee and the Corporate Practices, Finance, Planning and Sustainability Committee; the reelection of the members of the Board of Directors and its Committees; the application of results of the Company, as well as Ps.1,500 million for the share repurchase reserve and the use of up to such amount to repurchase Series B shares until the next annual shareholders’ meeting approved the 2021 results.
At the shareholders’ meeting held on April 22, 2022, our shareholders approved the Annual Report for 2021 prepared by the Chief Executive Officer and the Audited Consolidated and Non-Consolidated Financial Statements for the year ended 2021; the Reports of the Presidents of the Audit Committee and the Corporate Practices, Finance, Planning and Sustainability Committee; the reelection of the members of the Board of Directors and its Committees; the application of results of the Company, as well as Ps.1,500 million for the share repurchase reserve and the use of up to such amount to repurchase Series B shares until the next annual shareholders’ meeting approves the 2022 results.
The following table lists the members of the Board of Directors effective on April 22, 2022, confirmed at the shareholders’ meeting held on April 22, 2022 along with their titles, dates of appointment and ages:
Name
Title
Director Since
Age
Diego Quintana Kawage*
Chairman and Director
April 14, 2011
Guadalupe Phillips Margain*
Director
February 24, 2017
Rodrigo Antonio Quintana Kawage*
Christian Whamond
April 23, 2018
Bernardo Casas Godoy
April 29, 2019
Próspero Antonio Ortega Castro
Ricardo Maldonado Yáñez
Independent Director
April 14, 2016
Martin Werner Wainfeld
Luis Solórzano Aizpuru
Alejandro Ortega Aguayo
July 7, 2020
Federico Patiño Márquez
* Appointed by SETA
Diego Quintana Kawage. Mr. Diego Quintana Kawage has been a member of our Board of Directors since April 2011 and has been its Chairman since April 16, 2013. He was a member of the Board of Directors of Empresas ICA from 2008 to 2016. He joined Empresas ICA in 1995 in the Project Finance Area where he worked until the year 2000. He served as General Director of ViveICA, S.A. de C.V., Empresas ICA’s homebuilding company, from 2004 to 2009 and as Finance Director of ViveICA, S.A. de C.V., from 2000 to 2003. He holds an economics degree from the Universidad Anáhuac and has a Master’s of Science in management from Stanford University.
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Guadalupe Phillips Margain. Ms. Guadalupe Phillips Margain has been the Chief Executive Officer of ICA Tenedora, S.A. de C.V. and is a member of its board of directors. Previously, she worked as Chief Executive Officer and Chief Restructuring Officer of Empresas ICA, S.A.B. de C.V., as well as Vice President of Finance and Risk Management for Grupo Televisa among other positions. She is a member of the boards of directors of Innova, Grupo AXO. She is also an alternate member of the board of directors of Grupo Financiero Banorte and proprietary member of the board of directors of Grupo Televisa and Volaris. Ms. Phillips holds a law degree from the Instituto Tecnológico Autónomo de México and an M.A. and Ph.D. from the Fletcher School at Tufts University.
Rodrigo Antonio Quintana Kawage. Until 2020, Mr. Rodrigo Antonio Quintana Kawage was an executive at Grupo ICA for eleven years serving in various leadership positions, including as its General Counsel and as its Chief Financial Officer. He is currently in private practice and serving on ICA’s Board of Directors. He previously worked as a legal intern at Banco de México, Mexico’s central bank, and as an associate in the finance practice of Mayer Brown, a global law firm, in its Chicago and New York offices. Mr. Quintana holds law degrees from the Instituto Tecnológico Autónomo de México in Mexico City and from the University of Chicago Law School. He is the brother of Mr. Diego Quintana, the Chairman of OMA’s Board.
Christian Whamond. Mr. Christian Whamond has been Portfolio Manager and Director of Corporate Credit at Fintech Advisory Inc. since joining the firm in 2012. He is responsible for directing and managing investments in corporate fixed income and equities. Prior to joining Fintech, Mr. Whamond worked at BTG Pactual where he had responsibility for managing and trading a portfolio of Latin American fixed income corporate credits. He joined BTG Pactual from James Caird Asset Management, a principal investment firm spun-off from Moore Capital where, as Emerging Markets Portfolio Strategist, he co-managed a portfolio of Emerging Markets sovereign and corporate credits. Mr. Whamond worked from 2007 to 2008 for Lehman Brothers’ Global Principal Strategies group (later renamed R3) where he helped manage the Emerging Markets credit portfolio. Prior to this, Mr. Whamond worked at JPMorgan, where he started his career in the Investment Bank in 1996 as a financial analyst and investment banker covering clients from the Buenos Aires office. He was later a Vice President in JPMorgan’s Latin American Mergers and Acquisitions group in New York and afterwards joined the Latin American Sales and Trading group, where he was responsible for trading and positioning complex Latin American corporate credits. Mr. Whamond holds an Industrial Engineering degree from the Instituto Tecnológico de Buenos Aires in Argentina.
Bernardo Casas Godoy. Mr. Bernardo Casas Godoy joined Grupo ICA in 1990 as a lawyer in the legal-fiscal department. He also participated as Legal Director in several business units of ICA, including the areas of contracts, financial matters, corporate, housing and urban construction. Currently, Mr. Casas is General Counsel and responsible for the Corporate Fiscal and Capital Control Direction. Mr. Casas holds a law degree from Universidad Panamericana and has obtained certifications in Tax Law, Civil Law and Amparo from the same institution. He also attended an executive program at the Instituto Panamericano de Alta Dirección de Empresas (IPADE) in Mexico City.
Próspero Antonio Ortega Castro. Mr. Prospero Antonio Ortega Castro has been the Director of Administration and Finance of Grupo ICA since 2015. Previously, he held positions in a number of Grupo ICA’s business units. Prior to joining Grupo ICA in 1995, Mr. Ortega worked as an auditor at Price Waterhouse. Mr. Ortega holds a degree in Finance and Accounting from the Universidad de las Americas in Puebla and a Master’s degree in Administration from the Instituto Tecnológico de Estudios Superiores de Monterrey. He also attended an executive program at the Instituto Panamericano de Alta Direccion de Empresas (IPADE) in Mexico City.
Ricardo Maldonado Yáñez. Mr. Ricardo Maldonado Yáñez is a partner at the law firm Mijares, Angoitia, Cortés y Fuentes,S.C. He has over 25 years of experience providing advice to Mexican and foreign companies on domestic and cross-border merger and acquisition transactions, joint ventures and strategic alliances. He also represents issuers and financial institutions in public and private debt and equity offerings, and advises clients in the negotiation, structuring and drafting of all types of financings and in infrastructure projects. Mr. Maldonado also focuses part of his practice to Corporate Governance matters advising family-owned and publicly listed companies. Mr. Maldonado serves as member of the board of Controladora Vuela Compañía de Aviación (Volaris) and ICA Tenedora. Mr. Maldonado holds a law degree from the Universidad Nacional Autónoma de México (UNAM) and an LLM from the University of Chicago Law School. Mr. Maldonado is a member of the National Association of Corporate Directors (NACD) and of the International Corporate Governance Network (ICGN).
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Martin Werner Wainfeld. Dr. Martin Werner Wainfeld is the founding partner of DD3 Capital Partners, an investment and advisory firm based in Mexico City. Dr. Werner was co-head of the Investment Bank for Latin America and Director General of Goldman Sachs in Mexico from 2000 to 2016. Previously, he was Undersecretary of Finance in Mexico for the period 1997-1999. He was in charge of the restructuring of Mexico’s external public debt after the 1994-1995 financial crisis. Dr. Werner has 16 years’ experience in investment banking and participated in more than ninety merger and acquisition and financing transactions. He is a member of the Board of Directors of Betterware and until March 29, 2021 he was member of the Board of Directors of Grupo Comercial Chedraui. He is a member of the Advisory Board of the Yale University Business School. Dr. Werner holds an economics degree from the Instituto Tecnológico Autónomo de México (ITAM) and a Ph.D. in economics from Yale University.
Luis Solórzano Aizpuru. Mr. Solorzano is Chief Executive Officer and Founding Partner of Acamar Partners. Mr. Solorzano has over 20 years of investment experience across various sectors. Mr. Solorzano has served on the boards of various public and private companies, including CarLotz, Inc., Acamar Partners Acquisition Corp II, Grupo Aeroportuario del Centro Norte, Acamar Partners Acquisition Corp I, Dufry, Latin American Airport Holdings, Aerodom, InverCap Holdings, and Viakem. Mr. Solorzano began his career with BankBoston Capital, where he spent 4 years making private equity investments and corporate loans across Latin America. In 2001, Mr. Solorzano joined Advent International becoming a partner and Managing Director in 2008. He served as Chairman of the Latin America’s Investment Committee from 2013 to 2017. During his tenure at Advent, Mr. Solorzano participated in various investments and management activities encompassing various of Advent’s private equity funds. He was a key executive involved in the raising of three funds for a cumulative U.S.$5 billion, and he played a leading role in 15 investment transactions in various sectors, including retail and consumer, financial services, industrials, information technology and infrastructure. Mr. Solorzano also played a significant role in supporting portfolio companies in the design and implementation of various strategic, operating and financial value creation initiatives. Mr. Solorzano served as Chief Executive Officer and director of Acamar Partners Acquisition Corp I from its inception in November 2018 until the successful completion of its business combination with CarLotz, Inc., a leading consignment-to-retail used vehicle marketplace. Mr. Solorzano graduated with a degree in Economics (cum laude) from the Instituto Tecnológico Autónomo de Mexico (ITAM) and an MBA from Harvard Business School.
Alejandro Ortega Aguayo. Mr. Alejandro Ortega obtained his bachelor’s degree in law from the Instituto Tecnológico Autónomo de México. He later obtained his master’s degree in business administration at Harvard Business School. In 1991 he joined the law firm Barrera, Siqueiros y Torres Landa, S.C. (currently Hogan Lovells). In 1997, he joined the Investment Banking firm of Donaldson Lufkin & Jenrette in New York City. In 2002 he returned to Mexico City as Vice President of UBS Investment Bank. He acted as head of Investment Banking in Mexico for UBS until 2011, when he joined Morgan Stanley as head of Investment Banking for Mexico, where he gained significant experience in industries such as infrastructure, energy & electricity, financial institutions, real estate, healthcare, and media and telecommunications. As of September 2021, he worked as a strategic client advisor for Credit Suisse Wealth Management Mexico, and he also serves as independent board member for several companies in Mexico.
.
Federico Patiño Márquez. Mr. Patiño has more than 30 years of experience in the financial sector. From 2015 to 2018 he was Chief Executive Officer of Grupo Aeroportuario de la Ciudad de Mexico S.A de C.V. (GACM) and previously served as Chief Financial Officer of GACM since 2014. During this period, he was responsible for the financing of the New Airport project and the “Terminal 2” of Mexico City’s International Airport. From 1980 to 2008, he worked at Nacional Financiera, S. N. C., Institución de Banca de Desarrollo (NAFIN), where he held several positions including, among others, General Director of Credit, General Director of Treasury, General Director of Development and General Director of Investment Banking. He was responsible for the creation of Corporación Mexicana de Inversiones de Capital (CMIC), a private equity fund created in 2006, by the Mexican development bank. CMIC invests in private equity funds that fund Mexican companies. Federico also was the founder of Fondo Nacional de Infraestructura (FONADIN) at Banco Nacional de Obras y Servicios Públicos, S.N.C. (BANOBRAS).
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Executive Officers
Pursuant to our bylaws, the holders of Series BB shares are entitled to nominate and propose the removal of our chief executive officer and to appoint and remove our chief financial officer, our chief operating officer and our commercial director. The Series BB Directors are also entitled to appoint half of our executive officers, which appointment must be made in accordance with the Technical Assistance Agreement and the guidelines approved by our Board of Directors.
The following table lists our executive officers, their current position and their date of appointment as an executive officer. On April 3, 2018, we appointed Ruffo Pérez Pliego as Chief Financial Officer. On April 26, 2018, we appointed Enrique Navarro Manjarrez as Director for Airport Operations. On June 1, 2018, we appointed Adriana Díaz Galindo as General Counsel, and on June 12, 2018, we appointed Enrique Chacón Tinajero as Director for Infrastructure and Maintenance. On November 12, 2018, we appointed Ricardo Dueñas as Chief Executive Officer.
Current Position
ExecutiveOfficer Since(1)
Ricardo Dueñas Espriu
Chief Executive Officer
November 12, 2018
Chief Financial Officer
April 3, 2018
Adriana Díaz Galindo
General Counsel
June 1, 2018
Enrique Navarro Manjarrez
Airports Operations Director
April 26, 2018
E. Héctor H. Cortés
Commercial Director
October 7, 2015
Enrique Chacón Tinajero
Infrastructure and Maintenance Director
June 12, 2018
Ricardo Dueñas Espriu has served as our Chief Executive Officer since November 2018. Prior to joining us, Mr. Dueñas served in various capacities in the airport and infrastructure sectors, including as Chief Financial Officer of Grupo Aeroportuario de la Ciudad de México and as an advisor in infrastructure projects at the Ministry of Communications and Transportation. As Chief Financial Officer of Grupo Aeroportuario de la Ciudad de México, he was responsible for securing more than eight billion U.S. dollars in financing. Previously, he worked for JP Morgan’s Investment Banking Division in London focusing on emerging markets. Prior to that, he worked as an analyst for economic research at the Central Bank of Mexico. He has also worked as a hedge fund analyst based in New York, as an advisor to the Mexican Delegation to the OECD in Paris and as a part-time lecturer at Instituto Tecnológico Autónomo de México (ITAM). In 2004, he received the IMEF National Prize of Economics. He has also been a board member in several companies in the transportation sector. Mr. Dueñas Espriu holds an economics degree, cum laude, from ITAM, a Master’s in Business Administration from Harvard Business School and a Master’s in Public Administration from Harvard Kennedy School.
Ruffo Pérez Pliego del Castillo has served as our Chief Financial Officer since April 3, 2018. Mr. Pérez Pliego has more than 20 years of experience in the areas of corporate finance, debt and equity placements, and mergers and acquisitions. Prior to joining us, Mr. Pérez Pliego served as Chief Financial Officer and Chief Executive Officer of Latin American Airports Holdings Ltd., which, during his tenure, owned Aerodom, a concessionaire of six airports in the Dominican Republic, and Inmobiliaria Fumisa, which leased substantially all the commercial spaces in the international wing of Terminal 1 of the Mexico City International Airport. Previously, Mr. Pérez Pliego worked for nine years in the investment banking division of Credit Suisse. Mr. Pérez Pliego holds a B.A. from Instituto Tecnológico Autónomo de México (ITAM) and a Master’s in Business Administration from Harvard Business School.
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Adriana Díaz Galindo has served as our General Counsel since June 2018. Prior to joining us, Ms. Díaz Galindo was Legal Director of Finance and Administration at Grupo Televisa and Legal Director for Interprotección, Agente de Seguros y de Fianzas, S.A. de C.V., among other positions. Ms. Díaz Galindo has a law degree from the Universidad Iberoamericana and has obtained certifications in Corporate Law, Tax Law and Foreign Trade from the Instituto Tecnológico Autónomo de México (ITAM) in Mexico City.
Enrique Navarro Manjarrez has served the Company since May 2004. Prior to his appointment as Director of Airport Operations, Mr. Navarro Manjarrez served as Director of the Monterrey airport since 2013. Previously, he was the Administrator of the airports in Ciudad Juárez and Mazatlán. Prior to joining OMA, Mr. Navarro Manjarrez was promotions manager for Casa de Bolsa Probursa, Director of Investments and Projects for Grupo Chihuahua, Regional Administrator for Tax Audit in the Secretariat of Finance and Public Credit, and Director of Economic Studies for the government of the state of Nuevo León. He holds a Bachelor’s degree in economics from the Universidad Anáhuac, a Master’s in Economic Development and Corporate Finance from Boston University, and has completed studies for a doctorate in business administration at the Swiss Management Center University. In addition, he has taken courses in airport management and development offered by Aéroports de Paris and has a diploma in senior management from the IPADE business school. He has taught courses at the Universidad Anáhuac, the Instituto Tecnológico y de Estudios Superiores de Monterrey and the Universidad de Monterrey.
Eliseo Héctor Hugo Cortés has served as Chief Commercial Officer since March 2017. He served as Real Estate and New Businesses Director from October 2015 to March 2017. He joined us in 2001 after being part of the team that participated in the bidding process for the privatization of our airports, from the buyers’ side. Within our company he has held various positions. From 2007 through 2015 he acted as Manager of the Culiacán airport, from 2004 to 2006 he was Manager of the Tampico airport and from 2001 to 2003 he was Diversification Manager. Prior to joining us, he participated in the development of special projects for Grupo ICA between 1999 and 2000. He has experience in the maritime port sector through his involvement in the start-up and operation of ICAVE, a specialized container terminal under concession, between 1995 and 1997, and between 1989 and 1994 he participated on a part-time basis at Puertos Mexicanos, a unit of the Ministry of Infrastructure, Communications and Transportation. He holds a Bachelor of Science in Civil Engineering from the Universidad Nacional Autónoma de México (UNAM) and a Master’s Degree in Project Management from the University of British Columbia. He holds a diploma in advanced business and management by the Instituto Panamericano de Alta Dirección de Empresa (IPADE) Business School, and in management by the Universidad de las Américas. He holds a post graduate degree in Airports Engineering and Operations from the Instituto Politécnico Nacional and attended different Airports Management and Development courses offered by Aéroports de Paris. He has completed a variety of specialized courses in airports operations, security, safety, maintenance and development. He is a member of the American Association of Airport Executives.
Enrique Chacón Tinajero has served as our Infrastructure and Maintenance Director since June 2018. Prior to joining the Company, Mr. Chacón Tinajero was director of urban construction projects at Grupo ICA from 2011 to 2018. With more than 20 years of experience in the design, construction, and management of infrastructure, Mr. Chacón Tinajero began his professional career in 1998 at ICA, holding positions in the International and Urban Construction divisions. He is a civil engineering graduate of the Universidad Autónoma de Chihuahua and has taken courses for a Masters in Construction Management at the Universidad Iberoamericana. In addition, he is certified by the American Concrete Institute as a Supervising Inspector for concrete works and has taken numerous specialized courses in the construction field.
The business address of our directors and executive officers is our principal executive headquarters.
Compensation of Directors and Executive Officers
For 2021, the aggregate compensation earned by our 21 officers (including executive officers and airport administrators) was Ps.70,048 thousand.
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None of our directors or executive officers are entitled to benefits upon termination under their service contracts with us, except for what they are entitled to receive upon termination pursuant to Mexican Federal Labor Law. Additionally, we have not made personal loans to our directors or executive officers and do not have a stock option plan or any equivalent plan.
During 2021, we terminated the defined contribution plan for employees in our subsidiary Servicios Aero Especializados del Centro Norte, S.A. de C.V. and for each of our airport administrators. Our total contributions to these plans amounted to Ps.725 thousand, Ps.894 thousand, and Ps.967 thousand, in 2021, 2020 and 2019, respectively.
Board of Directors’ Supporting Committees
The Mexican Securities Law and our bylaws provide that the Board of Directors may receive assistance from one or more Special Committees created directly by the Board of Directors or by the chief executive officer in order to carry out the functions that the Mexican Securities Law and our bylaws assign to the Board of Directors with respect to audit and corporate practices.
Considering the importance and breadth of the matters overseen by our Special Committee, at the recommendation of our Board of Directors, at our general shareholders’ meeting held on April 16, 2013, the establishment of two committees was approved: an Audit Committee and a Corporate Practices, Finance, Planning and Sustainability Committee. The committees provide relevant support to the Board of Directors so that the Board of Directors may make necessary decisions.
Our bylaws provide that the Committee or Committees responsible for the Audit and Corporate Practices functions will consist exclusively of Independent Directors and that a minimum of three members shall be appointed by the Board of Directors based on a recommendation from the Chairman of the Board of Directors. Holders of the Series BB shares have the right to propose the appointment of at least one member.
The Chairman of the Board of Directors will propose at each shareholders’ meeting one of the Independent Directors as a Chairman of the Audit Committee and the Corporate Practices, Finance, Planning and Sustainability Committee, and such candidate should fulfill the requirements of independence, experience, abilities and professional prestige in accordance with Articles 25, 26 and 43 of the Mexican Securities Law.
If we are controlled by a shareholder or group of shareholders representing 50% or more of our capital stock, the committee that conducts the Corporate Practices functions will be formed by a majority of Independent Directors.
Audit Committee
The Audit Committee, which is responsible for the Audit Functions and consists exclusively of Independent Directors, has the following responsibilities: (i) selecting the external auditor of the Company, recommending to the Board of Directors the appointment of such external auditor and providing an opinion about any removal of such external auditor, (ii) supervising our external auditors and analyzing their reports, (iii) analyzing and supervising the preparation of our financial statements, (iv) informing the board of our internal controls and their adequacy, (v) requesting reports from our executive officers whenever the committee deems appropriate, providing assistance to our Board of Directors in the preparation of the reports containing the main accounting and information guidelines used for the preparation of the financial information and assistance to our Board of Directors in the preparation of the report on the operations and activities in which the Board of Directors had intervened pursuant to the Mexican Securities Law, (vi) informing the Board of Directors of any irregularities that it may encounter, (vii) receiving and analyzing recommendations and observations made by the shareholders, members of the Board of Directors, executive officers, our external auditors or any third party and taking the necessary actions, (viii) calling shareholders’ meetings, (ix) overseeing the execution of the shareholders’ and directors’ resolutions by the chief executive officer in accordance with the instructions provided thereto by the shareholders or the directors and (x) providing an annual report to the Board of Directors.
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The Chairman of the Audit Committee shall present an annual report to our Board of Directors with respect to the findings of the Audit Committee, which shall include (i) the status of the internal controls and internal audits and any deviations therefrom and deficiencies thereof, taking into consideration the reports of external auditors and independent experts, (ii) the results of any preventive and corrective measures taken based on results of investigations in respect of non-compliance of operating and accounting policies, (iii) the evaluation of external auditors, (iv) the main results from the review of our financial statements and those of our subsidiaries, (v) the description and effects of changes to accounting policies, (vi) the measures adopted as result of observations of shareholders, directors, executive officers and third parties relating to accounting, internal controls and internal or external audits and (vii) compliance of shareholders’ and directors’ resolutions.
The current members of the Audit Committee are Martin Werner Wainfeld, Federico Patiño Márquez and Alejandro Ortega Aguayo.
Corporate Practices, Finance, Planning and Sustainability Committee
The Corporate Practices, Finance, Planning and Sustainability Committee, which is responsible for the Corporate Practices, Finance, Planning and Sustainability Functions, has the following responsibilities: (i) providing opinions to our Board of Directors; (ii) requesting and obtaining opinions from independent experts; (iii) calling shareholders’ meetings; (iv) assisting the board in the preparation of annual reports and other reporting obligations; (v) analyzing the general principles for the determination of the strategic plan of the Company and the observance of such plan; (vi) evaluating and opining on the investment and financing policies of the Company that the chief executive officer proposes; (vii) opining on the premises of the annual budget and the following of its application, such as its control system; (viii) analyzing and evaluating the risks factors of the Company, such as the mechanisms for its control; (ix) evaluating whether the investment and financing policies are consistent with the strategic plan of the Company; and (x) evaluating whether the financing projects are consistent with the strategic plan of the Company.
The Chairman of the Corporate Practices, Finance, Planning and Sustainability Committee shall prepare an annual report to our Board of Directors with respect to the findings of this Committee, which shall include (i) observations with respect to relevant directors and officers, (ii) the transactions entered into with related parties, (iii) the remunerations paid to directors and officers and (iv) any permissions granted for a director or officer to take advantage of a business opportunity.
The current members of the Corporate Practices, Finance, Planning and Sustainability Committee are Ricardo Maldonado Yáñez, Luis Solorzano Aizpuru and Alejandro Ortega Aguayo.
Employees
As of December 31, 2021, we had approximately 1,182 employees. The total number of employees increased by 17% in 2021, due primarily to the organizational restructuring we undertook as a result of changes in labor regulation in Mexico. As of December 31, 2021, approximately 46.7% of our employees were unionized.
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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 period indicated:
Categories of activity:
Airport operations
541
459
627
Airport maintenance
148
143
Administration
260
262
275
Hotel services(1)
184
Geographic location:
197
252
Corporate offices
145
155
Total(2)
1,160
1,182
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All of our unionized employees, who are employed by our airport subsidiaries, are members of local chapters of the Mexican National Union of Airport and Auxiliary Services 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 (Grupo Aeroportuario del Sureste, S.A.B. de C.V.), the Mexico City Group (Grupo Aeroportuario de la Ciudad de México, S.A. de C.V.) and the Pacific Group (Grupo Aeroportuario del Pacífico, S.A.B. de C.V.)) operating in Mexico. Since July 2008, the labor relations with our employees are governed by a collective bargaining agreement 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 October 2022, we will negotiate the terms and conditions of the collective bargaining agreement. We believe that our relations with our employees are good, and the wages we pay our employees are similar to those paid to employees of similar airport operating companies in Mexico. As of December 31, 2021, our airport subsidiaries had a total of 475 unionized employees. In addition, our hotel subsidiaries have a total of 77 unionized employees, affiliated to the National Union of Workers and Employees of the Hotel Industry (Sindicato Nacional de Trabajadores y Empleados de la Industria Hotelera) and to the National Union of Workers of the Food, Soft Drinks, Tourist, Hotel, Gastronomic and related Industries (Unión Nacional de Trabajadores de la Industria Alimenticia, Refresquera, Turistica, Hotelera, Gastronómica Similares y Conexos).
We maintain a savings plan available to all of our employees pursuant to which the 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 in their accounts on an annual basis. In 2019, 2020 and 2021, we made a total of Ps.60,132 thousand; Ps.61,015 thousand and Ps.54,512 thousand, respectively, in payments to employees’ accounts pursuant to the savings plan.
Funds in the savings plan may be used to make advances to employees and are otherwise invested in securities listed on the Mexican Stock Exchange or in treasury bills issued by the Ministry of Finance and Public Credit.
Item 7. Major Shareholders and Related-Party Transactions
MAJOR SHAREHOLDERS
On January 5, 2016, Aeroinvest merged into CONOISA, a subsidiary of ICATEN, with CONOISA as the surviving entity. As a result of this internal merger, CONOISA assumed all of the rights and obligations of Aeroinvest, including with respect to Aeroinvest’s beneficial ownership of Series B shares. In 2020, CONOISA sold to SETA all its B shares, that represent 1.9% of our outstanding capital stock.
On June 10, 2020, Fintech entered into a Stock Purchase Agreement with ICATEN and Bagual entered into a Stock Purchase Agreement with each of ICATEN and ICA Infraestructura, S.A. de. C.V. (a subsidiary of ICATEN), to purchase collectively 100% of the capital stock of SETA. The transactions closed on June 12, 2020 and the aggregate purchase price for the SETA shares was Ps.5.47 per share for 862,703,377 shares.
On July 9, 2021, Aerodrome entered into the Loan Facility with Fintech for purposes of refinancing indebtedness incurred in connection with the Offers, for an aggregate principal amount of the equivalent in U.S. dollars of Ps.7,005,074,000. The Loan Facility was ultimately repaid by the Margin Facility dated as of December 6, 2021. The Margin Facility is secured by our Series B and Series BB Shares owned by SETA, and our Series B Shares owned by Aerodrome. On December 9, 2021, we entered into an ancillary agreement with the borrower, lenders and agent party to the Margin Facility, for purposes of providing liquidity to SETA’s Series BB Shares in case of foreclosure of the collateral upon an event of default under the Margin Facility. In such letter we agreed, among other things, (i) to issue 49,766,000 Series B Shares in the form of treasury shares, for purposes of giving effect to the conversion of any Series BB Shares granted as collateral into Series B Shares, and to maintain such shares at our treasury; (ii) to update our Series B registration with the national securities registry in Mexico to allow for the issuance of the Series B Shares maintained in treasury upon conversion of the Series BB Shares; (iii) to deposit with Indeval a share certificate representing the Series B Shares issuable upon conversion; (iv) to transfer to a trustee each and all amounts regarding any dividend or distribution paid in cash on the Series B Shares pledged into a cash collateral account held by a guaranty trust; and (v) not to exercise or give effect to any transfer restriction or preemptive or similar rights on the pledged Series B Shares and the Series BB Shares other than the existing transfer restrictions in accordance with Rule 144 and the Mexican Airport Law.
As of the date of this report, Fintech Holdings, Inc. through Fintech, is the beneficial owner of 30.4% of our total capital stock through its direct subsidiaries SETA and Aerodrome. Bagual owns 19.6% of the capital stock of SETA and Aerodrome; Grenadier owns 21.5% of the capital stock of SETA and Aerodrome; Pequod owns 21.5% of the capital stock of SETA and Aerodrome; Harpoon owns 20.4% of the capital stock of SETA and Aerodrome, and Expanse owns 17.1% of the capital stock of SETA and Aerodrome. SETA directly owns Series B shares representing 1.9% of our total capital stock and owns Series BB shares that represent 12.9% of our capital stock. As long as SETA retains at least 7.65% of our capital stock in the form of Series BB shares, all of its special rights, including its right to nominate, appoint and remove certain directors and officers as holder of Series BB shares, will remain in place.
In November 2006, a Mexican trust established by NAFIN, acting pursuant to the instructions of the Ministry Infrastructure, of Communications and Transportation, sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of American Depositary Shares, or ADSs, and Series B shares, concurrently in the United States and Mexico. The net proceeds from the sale of the shares were paid to the Mexican government. After the offering, the Mexican government ceased to be a shareholder.
On May 31, 2017, our shareholders approved the cancellation of 6,229,027 Series B shares that were acquired through our share repurchase program. On July 7, 2020, our shareholders approved the cancellation of 3,659,417 Series B shares that were acquired through our share repurchase program. As of April 22, 2022, our fixed minimum social capital consisted of 390,111,556 ordinary shares, of which 49,766,000 were Series BB shares and 340,345,556 were Series B shares.
The following table sets forth information with respect to beneficial ownership of our capital stock as of April 22, 2022, identifying each owner of more than 5% of any series of our shares:
er
Percentage of
Outstanding Capital
Identity of Shareholder
B Shares
BB Shares
SETA(1)
7,516,377
57,282,377
14.8
Aerodrome(1)
60,155,201
Public
268,731,847
69.6
Officers and Directors
Total Shares Outstanding
336,403,425
386,169,425
87.1
Shares Repurchased held in Treasury
3,942,131
Total Authorized Shares
340,345,556
390,111,556
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Arrangements Relating to SETA
Pursuant to our bylaws, SETA (as holder of our Series BB shares) has the right to present to our Board of Directors the name or names of the candidates for appointment as our chief executive officer, to appoint and remove half of our executive officers, which currently include our chief financial officer, our chief operating officer and our commercial director, and to elect three members of our Board of Directors. SETA (as holder of our Series BB shares) also has the right pursuant to our bylaws to veto certain actions requiring approval of our shareholders (including the payment of dividends, the amendment of our bylaws and the amendment of its right to appoint certain members of our senior management). Additionally, most matters voted on by our Board of Directors require the affirmative vote of the directors appointed by our Series BB shareholders. If the Technical Assistance Agreement is terminated, the Series BB shares would be converted into Series B shares, resulting in the termination of all of SETA’s special rights. As long as SETA retains at least 7.65% of our capital stock in the form of Series BB, all of its special rights will remain in place. If SETA were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares must be converted into Series B shares, which would cause SETA to lose all of its special rights. On October 15, 2015, we, at the request of SETA, converted 9,034,000 of our Series BB shares held by SETA to Series B shares. After this conversion, SETA’s shareholding of Series BB shares remains at 12.9% and its special rights were not affected. In addition, shareholders of SETA have allocated among themselves certain veto rights, which increases the risk of impasse at the shareholders’ meeting of SETA and ultimately at our shareholders’ meetings.
Our bylaws and the Technical Assistance Agreement also contain certain provisions designed to avoid conflicts of interest between SETA and us, such as approval of certain related-party transactions by our Corporate Practices, Finance, Planning and Sustainability Committee.
In accordance with our bylaws, at least one member of each of our Audit Committee and Corporate Practices, Finance, Planning and Sustainability Committee shall be appointed by SETA.
RELATED-PARTY TRANSACTIONS
Arrangements with SETA and Its Affiliates
The rules for the sale to SETA of the Series BB shares previously owned by the Mexican government required us to enter into a Participation Agreement with SETA and Ministry of Infrastructure, Communications and Transportation, which established the framework for certain related agreements: the Option Agreement, the Technical Assistance Agreement and the Bancomext Trust. Our Board of Directors approved these agreements, in accordance with our Related Party Guidelines.
Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers industry expertise and technology to us in exchange for a fee which in 2021 amounted to Ps.133,458 thousand (U.S.$6.5 million). The agreement provides us an exclusive license in Mexico to use all technical assistance and expertise transferred to us by SETA or its shareholders during the term of the agreement. The agreement had an initial term of 15 years beginning June 14, 2000, and expiring on the date of the expiration of the Participation Agreement, or June 14, 2015. On May 13, 2015, the Technical Assistance Agreement was extended for a term that ended on December 31, 2020. On December 14, 2020, pursuant to the third amendment, the Technical Assistance Agreement was modified; the term was extended until December 31, 2021, with automatic renewals for one year periods starting on January 1, 2022, unless a termination notice is provided by any of the parties involved. Additionally, the automatic renewals shall be in force as long as SETA holds an individual interest of at least 7.65% of the shares of the Company. The economic terms of the agreement were not modified. A decision by us not to renew the Technical Assistance Agreement is subject to the approval of the holders of a majority of our Series B Shares that are not owned by SETA or any of its affiliates.
Additionally, a party may terminate the Technical Assistance Agreement prior to its expiration date upon non-compliance with its terms by the other party. SETA 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 Programs that we are required to submit to the Ministry of Infrastructure, Communications and Transportation and the improvement of our airport operations.
The Technical Assistance Fee for 2000 and 2001 was fixed at U.S.$5.0 million. Subsequent to January 1, 2003, the Technical Assistance Fee was equal to the greater of U.S.$3.0 million adjusted annually for inflation since June 14, 2006 (measured by the U.S. consumer price index), or 5% of our EBITDA (as defined in the Technical Assistance Agreement). As of June 14, 2015, the technical assistance fee was reduced by 20% for the first three years of the extension and amendment to the Technical Assistance Agreement, to the greater of U.S.$3,478,000 (updated annually according to the U.S. consumer price index) and 4% of our EBITDA, and by an additional 25% for the final two years of the extension, to 3% of our EBITDA. We believe that this structure creates an incentive for SETA to increase our annual consolidated earnings. SETA 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 SETA, its shareholders and their affiliates to render additional services to us only if our Corporate Practices, Finance, Planning and Sustainability Committee determines that these related persons have submitted an arm’s-length bid in a public bidding process. For a description of this committee, see “Item 6. Directors, Senior Management and Employees—Committees.”
In 2020 and 2021, we recognized expenses of U.S.$3.8 million and U.S.$6.5 million, respectively, pursuant to the Technical Assistance Agreement.
Arrangements with Other Affiliates
We periodically engage ICATEN and its affiliates to provide construction and related services to us. In 2021, we contracted Ps.806,387 thousand for services to be provided by ICATEN and its affiliates, periodically. In accordance with our Related Party Guidelines, any of these contracts shall be approved by our Board of Directors upon the recommendation of our Corporate Practices, Finance, Planning and Sustainability Committee and in accordance with Mexican Securities Law. The Committee considers whether these contracts are arm’s‑length agreements based on the evaluation of unit prices of these contracts by independent third‑party professional, such as Grupo GEO Consultoría y Construcción S.A. de C.V. represented by Jorge Mata Ortega and Corporativo de Ingeniería Terrestre, S.A. de C.V. (COITSA), represented by Jorge González Mijares. These third-party professionals are independent experts contracted by us to evaluate unit prices in the offers made by ICATEN or its affiliates in order to determine if such offers are consistent with market prices.
The following table sets forth the amounts paid to affiliates of ICATEN during 2021, for a total of Ps.959,489 thousand, in exchange for the provision of services related to the construction and expansion of terminal buildings and platforms at our airports, as well as major maintenance works. This amount represents approximately 45.3% of our expenditures under the Master Development Programs including major maintenance expenditures and other capital expenditures for an amount of Ps.2,117,178 thousand.
Service
Monterrey airport
621,055
Torreón airport
97,933
Ciudad Juárez airport
113,986
Tampico airport
69,575
Zihuatanejo airport
52,723
San Luis Potosí airport
4,218
959,489
Transactions with Related Parties
As of December 31, 2021, we had Ps.269,249 thousand in accounts payable to related parties, and we engaged in the following transactions with related parties during 2021:
Item 8. Financial Information
See “Item 18. Financial Statements” beginning on page F-1.
LEGAL PROCEEDINGS
The Company is involved, from time to time, in certain legal proceedings that are incidental to the normal conduct of its business.
Disputed Land Ownership at the Ciudad Juárez Airport
Parties purporting to be former owners of land comprising a portion of the Ciudad Juárez airport initiated legal proceedings against the airport in 1995 to reclaim 240 hectares of land, alleging that it had been improperly transferred to the Mexican government. The claimants also sought monetary damages of U.S.$120.0 million. On May 18, 2005, a Mexican court ordered the airport to return the disputed land to the plaintiffs. However, that decision and three subsequent constitutional claims permitted the ruling to be reconsidered, and the Ministry of Infrastructure, Communications and Transportation as grantor of the concession, was included as a party to the litigation.
On July 8, 2016, the local court in Ciudad Juárez ruled that the claims against the Ciudad Juárez airport were inadmissible. The claimants filed an appeal before the Appellate Court in Chihuahua against the court’s determination and on July 31, 2017, the First Civil Court overturned the lower court’s decision and ruled in favor of the plaintiffs. The First Civil Court required the Mexican government to pay restitution to the plaintiffs for the loss of their property. The Mexican government filed an injunction proceeding (amparo) to appeal the decision. On May 25, 2018, the First Civil Court overturned its decision and absolved the Mexican government and Ciudad Juárez airport. The plaintiffs appealed this decision to the Mexican Supreme Court, which on May 25, 2019, determined not to hear the matter at hand and ordered the return of the file to the First Civil Court for all applicable legal effects.
In compliance with the Mexican Supreme Court’s decision, the First Civil Court restarted its proceedings and on December 12, 2019 ruled against of the plaintiffs by denying the requested injunction proceeding (amparo). As a result, the plaintiffs filed an appeal before the Mexican Supreme Court.
On November 24, 2021, the Mexican Supreme Court ruled that the First Collegiate Court in Chihuahua must once again analyze the claimant’s case. As of April 22, 2022, the First Collegiate Court in Chihuahua has not issued its ruling.
In the event that any subsequent legal resolution results in a decision substantially similar to the May 18, 2005 court order or that is otherwise adverse to us, and the Mexican government fails to repossess the land, our concession to operate the Ciudad Juárez airport would terminate. In 2021, the Ciudad Juárez airport represented 6.9% of our consolidated total revenues. We believe that under the terms of our concessions the termination of the Ciudad Juárez concession as a result of the foregoing legal proceeding would not affect the validity of our remaining airport concessions and that the Mexican government would be obliged to indemnify us against any monetary or other damages resulting from the termination of our Ciudad Juárez concession. We have not recorded any provision relating to this claim, as it is not probable that an outflow of resources embodying economic benefits will be required to settle this obligation.
Disputed Land Ownership at the Monterrey Airport
On May 14, 2015, Banco Mercantil del Norte, S.A. (“Banorte”), acting as trustee of a certain trust, filed a civil lawsuit against the Monterrey airport in connection with the ownership of 240 hectares of land previously acquired (the “Land”) by the Monterrey airport, which book value in our financial statements as of December 31, 2021 amounted to Ps. 266,850 thousand.
By means of the lawsuit, Banorte filed an action to recover possession and requested a declaratory judgment saying that Banorte has a better right than the Monterrey airport to possess the Land and that the Land should be restituted to Banorte, and that the Monterry airpot should pay costs and expenses. Monterrey airport appeared on trial and requested that the company DIAV, S.A. de C.V., (“DIAV”) appear as a defendant in its capacity as seller of the Land. On August 8, 2018, the court found that the plaintiff’s claims were inadmissible due to lack of evidence (the “First Instance Judgment”), and the plaintiff appealed the decision.
The Second Chamber of the Superior Court of Justice of the State of Nuevo Leon heard the appeals against the First Instance Judgment and on July 25, 2019 issued a second instance judgment (“First Second Instance Judgment”) against the Monterrey airport, finding that Banorte had a better right to possess the Land, and ordering the Monterrey airport to return the Land to Banorte.
Both Monterrey airport and DIAV filed injunctions (amparo) against the First Second Instance Judgment in August 2019, which were referred to the Second Collegiate Court in Civil Matters of the Fourth Circuit (the “Collegiate Court”). On August 6, 2021, the Collegiate Court granted the amparo relief to the Monterrey airport leaving without effect the First Second Instance Judgment and ordering a new one that considered, among other matters, that the evidence provided by Banorte was insufficient to prove its claims. In compliance with the amparo ruling, on August 25, 2021, the Eighth Civil Chamber vacated the First Second Instance Judgment. On September 13, 2021, the Eighth Civil Chamber issued a new second instance judgment (the “Second Instance Judgment”) by virtue of which it confirmed the First Instance Judgment, releasing the Monterrey airport of all claims.
Dissatisfied with the Second Instance Judgments, all the parties to the litigation filed amparo reliefs (including the Monterrey airport with respect to, among other issues, the refusal of the Eighth Civil Court to grant the payment of legal fees and expenses claimed by the Monterrey airport), which were referred to the same Collegiate Court and are currently pending to be resolved.
We believe that in the event of a resolution adverse to the airport’s interests, DIAV as the seller of the Land should be liable for any economic losses resulting thereof; nonetheless, we cannot predict whether we may prevail in a legal action against DIAV. Although Monterrey airport cannot definitively foresee the outcome of this litigation, to date it has not recorded any provision in relation to the contingency, since it considers its position in the litigation to be solid.
Disputed Land Ownership at the Durango Airport
On March 5, 2020, the Company was notified of the lawsuit filed against the Durango airport, the Ministry of Infrastructure, Communications and Transportation, the Government of the State of Durango and the Ministry of Agrarian, Territorial and Urban Development. The plaintiff sued for the nullity of the expropriation decree dated September 8, 1975, which affected an area of 40 hectares of the Durango airport and claims the payment of compensation for the affected area, as well as the payment of damages for the undue use of the property.
The trial hearing was held with the appearance of the parties and the evidentiary stage of the trial is pending. As of the date of this report, the contingency is still in effect because the trial is still pending the judgment on the merits of the case. In the event that the resolution of the lawsuit is not favorable to us , it is expected that the economic impact of the lawsuit will be borne by the Federal Government, as established in the concession title. As such, Durango airport has not recorded any provision in connection with this lawsuit.
Disputed Land Ownership at the Reynosa Airport
On October 16, 2020, the Company was notified of the lawsuit filed against the AFAC, in which the Reynosa airport was called as an interested third party. The nullity of the administrative resolution dated February 7, 2020 issued by the AFAC in the Appeal for Review filed by the plaintiff is demanded in order for the AFAC to study the plaintiff's petition and recognize that the legal requirements for the reversion of the expropriation of 2.6 hectares included in the expropriation decrees of 1970 and 1971 have been met.
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Reynosa airport appeared in the lawsuit and the final ruling is pending as of the date of this report. The lawsuit does not include a financial claim; however, the contingency is maintained until the final judgment in the annulment lawsuit is issued and the challenged resolution is confirmed or, if applicable, a judgment is issued, the effects of which must be complied with by the AFAC. Reynosa airport has not recorded any provision in connection with this lawsuit.
Property Tax Claims
Administrative law proceedings have been asserted against us in the past by various municipalities for the payment of property taxes with respect to the real estate in which we operate our airports in the relevant cities.
In November 2018, the municipality of Culiacán filed property tax claims against us for Ps.2,425 thousand, plus Ps.3,339 thousand in other fees. In response to these claims, on December 2018, we filed an administrative annulment proceeding before the Sinaloa Administrative Court (Tribunal de lo Contencioso Administrativo del Estado de Sinaloa) which has not been resolved as of the date of this report. The Ministry of Infrastructure, Communications and Transportation was asked to join the proceeding as an interested party.
In May 2019, the Municipality of Acapulco filed property tax claims against us for Ps.27,012 thousand for property tax considering Acapulco airport as a solidary debtor to the Mexican Airport and Auxiliary Services Agency. An administrative annulment proceeding was filed against these claims, which as of April 22, 2022 is yet to be resolved.
In September 2019, the Municipality of Chihuahua filed property tax claims against us for Ps.113,529 thousand. Administrative annulment proceedings were filed against these claims. In January 2021, all the tax claims were resolved in favor of the Chihuahua airport. The Municipality of Chihuahua filed an amparo relief against these resolutions, which were found without merit and resolved in favor of the airport in a final and non-appealable resolution.
In December 2019, the Municipality of Tampico filed property tax claims against us for Ps.18,840 thousand. An administrative annulment proceeding was filed against these claims. In December 2020, the claims were resolved in favor of the Tampico airport. The Municipality of Tampico filed an Amparo relief against this ruling, and the Collegiate Court that heard the Amparo trial ruled in favor of the airport in a final and non-appealable resolution.
In March 2020, the Municipality of Ciudad Juárez filed property tax claims against us for Ps.16,097 thousand. An administrative annulment proceeding was filed against these claims, which was resolved in favor of the Airport. The Municipality of Ciudad Juárez filed an amparo relief against this ruling, and the Collegiate Court that heard the amparo ruled in favor of the Airport in a final and non-appealable resolution.
Other municipalities in which we operate may assert similar claims, which if such is the case, we intend to pursue aggressively.
Amparo Trial related to Municipal Licenses
In September 2019, the municipal authority of Chihuahua carried out verification visits at the commercial premises located at the Chihuahua airport to request municipal operating licenses, likewise requiring the Chihuahua Airport to present its construction license. A request for amparo was filed against such requirements by the Chihuahua airport, challenging the visit order and the unconstitutionality of the municipal regulations applied. The court issued a ruling in favor of the Chihuahua airport, indicating that the commercial spaces of the Chihuahua airport are under federal not municipal jurisdiction. The municipal authority has challenged the ruling, which has not been resolved as of the date of this report.
Tax Credit at the Acapulco Airport
On February 5, 2020, the Ministry of Finance of the State of Guerrero notified a tax credit against the Acapulco airport in the amount of Ps.24,813 thousand for omitted income tax and value-added tax payments for the period from January 1, 2015 to December 31, 2015.
The credit was challenged by Acapulco airport before the Ministry of Finance of the State of Guerrero and on July 23, 2020 a resolution was issued declaring the nullity of the proceeding pursuant to which the authority determined the tax credit and the authority was ordered to reinstate such proceeding. Acapulco airport filed an annulment proceeding against such resolution since it would allow the authority to correct the deficiencies of the procedure, without resolving on the terms of the tax audit procedure which resulted in the imposition of the tax credit against Acapulco airport.
On February 2021, a settlement agreement was reached for Ps.1,874 thousand with the Ministry of Finance of the State of Guerrero, and the Acapulco airport withdrew its annulment proceeding. On May 14, 2021, the Ministry of Finance of the State of Guerrero found that the Acapulco airport did not owe any amount and the matter was closed.
Consumer Protection Agency Fines
On November 11, 2021, agents of the Mexican Federal Consumer Protection Agency (Procuraduría Federal del Consumidor or PROFECO) made a visit to the Acapulco airport in order to review the compliance with certain Mexican Official Norms by the scales used to weigh luggage and the parking lot’s clocks. On November 22, 2021, PROFECO notified Acapulco airport that it initiated administrative proceedings claiming violations to the Federal Consumer Protection Law.
The Acapulco airport presented evidence before PROFECO proving the alleged violations to the law did not take place. However, on January 10, 2022 PROFECO notified the Acapulco airport of its ruling, fining the airport Ps.14,554 thousand and freezing the scales and parking lot’s clocks. This ruling was challenged by Acapulco airport on January 31, 2022 and as the date of this report the appeal for review has not been resolved.
Corporate Tax Claim for Monterrey Airport.
In accordance with the Third Transitory Article of the Law for Single Rate Corporate Tax (Ley del Impuesto Empresarial a Tasa Única), the Monterrey airport requested on December 20, 2019 and December 16, 2020, the refund of the Asset Tax paid with respect to previous fiscal years.
For fiscal years 2018 and 2019, the Monterrey airport requested a refund of Ps.10,220 thousand and Ps.10,624 thousand ,respectively, which were denied by the tax authority.
On September 16, 2020, the Monterrey airport challenged the tax authority’s denial for the 2018 fiscal year refund, which was ruled in favor of the Monterrey airport by the Federal Court for Administrative Justice (Tribunal Federal de Justicia Administrativa).
On April 27, 2021, the Monterrey airport challenged the tax authority’s denial for the 2019 fiscal year refund, which was ruled in favor of the Monterrey airport by the Federal Court for Administrative Justice.
On June 30, 2021 and December 1, 2021, the tax authority filed recourses against the rulings of the Federal Court for Administrative Justice related to the refunds corresponding to fiscal years 2018 and 2019, respectively, which are pending resolution.
The Monterrey airport maintains assets in the amount of Ps.28,619 thousand related to payments of Asset Taxes paid for fiscal years 2018, 2019 and 2020. Given that the Monterrey airport does not expect an unfavorable resolution against it, it has not registered any provision related to the refund of Asset Taxes for such years.
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We do not believe that liabilities related to any claims or proceedings against us are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition or results of operations. Should a court determine that these taxes must be paid in response to any future proceedings, we believe that only the owners of the land would be responsible for paying these taxes directly, and the obligation to pay these taxes is not otherwise contemplated by the terms of our concessions. The Mexican government has not acknowledged an obligation to pay such taxes; however, changes to the Mexican Constitution and other applicable laws could render us liable to municipalities for property taxes in the future. We cannot predict the amount of any such future tax liabilities or the criteria that would be used to determine them. If such changes were to occur, and any amounts owed were substantial, these resulting tax liabilities could have a materially adverse effect on our consolidated financial condition or results of operations.
DIVIDENDS AND CAPITAL STOCK REIMBURSEMENTS
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 its capital stock (without adjustment for inflation). Our legal reserve fund was Ps.60,729 thousand as of December 31, 2021 (excluding reserve amounts corresponding to 2021 net income), which represented 20.3% of our capital stock as of such date.
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. Since 2011, the level of earnings available for the payment of dividends has been determined under IFRS. Our subsidiaries are required to allocate 5% of earnings to their respective legal reserve funds prior to paying dividends to us. We are also required to allocate earnings to our legal reserve fund prior to distributing any dividend payments to our shareholders.
Dividends that are paid from a company’s distributable earnings that have not been subject to corporate income tax are subject to a corporate-level dividend tax (charged against cumulative net income and payable by us). Companies are entitled to apply any corporate-level dividend tax on the distribution of earnings as a credit against their 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 in which the dividend was paid. Dividends paid from a company’s distributable earnings that have been subject to corporate income tax are not subject to this corporate-level dividend income tax. Furthermore, dividends paid to resident and non-resident holders with respect to our Series B shares and ADSs since 2014 are subject to a 10% Mexican withholding tax, which is withheld by the brokerage firms doing the distribution.
On April 14, 2011, our shareholders approved a dividend policy, applicable to our results of operations starting in 2011.
Our dividend policy seeks to ensure the tax efficient payment of dividends. Because any dividend we expect to pay will likely be subject to the corporate-level dividend tax referred to above, our dividend policy has been designed to ensure that any corporate-level dividend tax we pay may be applied by us as a credit against its projected future corporate income tax liability in the year paid and in the subsequent two years.
Our dividend policy has a fixed and a variable component paid annually in equal quarterly installments. The fixed component is Ps.325,000 thousand per year. The variable component will be based on the funds available for distribution in excess of the fixed component.
Our current dividend policy presupposes that the declaration and amount of dividends paid are subject to (and determined by) the following factors:
Our current dividend policy was prepared based on current Mexican tax law and our current projections of our future earnings and IFRS. Changes in Mexican tax law and our actual results of operations could cause our Board of Directors to propose to our shareholders to change the current dividend policy.
We declare our 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.
The declaration, amount and payment of dividends, if any, are subject to the approval of either (i) holders of a majority of our capital stock present at a shareholders’ meeting and, so long as the Series BB shares represent at least 7.65% of our outstanding capital stock, the approval of SETA (as the holder of the Series BB shares) or (ii) holders of 95% of our capital stock.
We paid aggregate dividends of Ps.1,598,681 thousand in 2019 and Ps.1,979,790 thousand in 2021. We did not pay dividends in 2020.
Certain distributions that we make to our shareholders other than capital reimbursements (in the manner described above), including 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.
Item 9. The Offer and Listing
SHARE PRICE HISTORY
The ADSs are listed on the NASDAQ under the symbol “OMAB.” Our common shares are listed on the Mexican Stock Exchange under the symbol “OMA.”
TRADING ON THE MEXICAN STOCK EXCHANGE AND BOLSA INSTITUCIONAL DE VALORES
The Mexican Stock Exchange or the Bolsa Mexicana de Valores, S.A.B. de C.V. and the Bolsa Institucional de Valores are both located in Mexico City and are the two stock exchanges operating in Mexico. The Bolsa Institucional de Valores launched operations in July 2018. Trading takes place principally through automated systems that are open between the hours of 8:30 a.m. and 3:00 p.m. Mexico City time, each business day. Beginning in March 2008, during daylight savings time, trading hours change to match the NYSE trading hours, opening at 7:30 a.m. and closing at 2:00 p.m. local time. Both stock exchanges operate a system of automatic suspension of trading in shares of a particular issuer as a means of controlling excessive price volatility, but under current regulations, this system does not apply to securities such as the units represented by ADSs or CPOs that are directly or indirectly quoted on a stock exchange outside of Mexico.
Settlement is effected two business days after a share transaction. Deferred settlement, even if by mutual agreement, is not permitted without the approval of the Mexican Stock Exchange or the Bolsa Institucional de Valores. Most securities traded on the Mexican Stock Exchange or the Bolsa Institucional de Valores are on deposit with Indeval, a privately owned central securities depositary that acts as a clearing house, depositary, custodian and registrar for transactions on the Mexican Stock Exchange and the Bolsa Institucional de Valores, eliminating the need for the physical transfer of shares.
Reporting Obligations
As a company with securities listed on the Mexican Stock Exchange and NASDAQ, we are subject to several reporting and disclosure obligations regarding corporate information and material events set forth by the Mexican and U.S. securities laws, which include filing quarterly and annual financial reports, as well as corporate information and disclosing material events to the regulatory authorities in Mexico and the United States.
For the last three years, we have duly and timely filed all the information that we are obligated to file in order to comply with the Mexican and U.S. securities laws.
Material Changes to the Rights Conferred by Our Securities Registered with the Mexican National Registry of Securities and Traded in the Mexican Market
As of December 31, 2021, there have been no material changes to the rights conferred by our securities registered with the Mexican National Registry of Securities and traded in the Mexican market.
Item 10. Additional Information Bylaws
This section summarizes certain provisions of Mexican law and our bylaws (estatutos sociales), a copy of which is attached to this Form 20-F as Exhibit 1.1.
At our Extraordinary Shareholders’ Meeting held on October 2, 2006, our shareholders adopted resolutions amending and restating of our bylaws to organize the company as a sociedad anónima bursátil and to conform our bylaws to the provisions of the Mexican Securities Law. Some of the relevant changes included the enhancement of certain provisions applicable to the corporate governance of public companies, clarification of certain provisions relating to directors’ and officers’ liability and the elimination of restrictions on ownership of our shares.
At our shareholders’ meetings held on July 7, 2020, May 31, 2017, April 23, 2015 and April 10, 2014, our bylaws were amended to update the amounts of fixed minimum common stock to reflect the decrease on the fixed portion of our capital stock after the cancellation of shares repurchased held in treasury and capital reimbursements.
Purposes
The purposes of the Company include the following:
Election of Directors
The Board of Directors is responsible for the oversight of our business. Pursuant to our bylaws, the Board of Directors must consist of an odd number of directors determined at an ordinary general meeting of shareholders and is required to have at least 11 members. Our Board of Directors currently consists of 11 directors, each of whom is elected at the annual shareholders’ meeting. Under the Mexican Securities Law and our bylaws, at least 25% of our directors must be independent. Under Mexican law, the determination as to the independence of our directors made by our shareholders’ meeting may be contested by the CNBV. 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 Board of Directors to all of our stockholders at a stockholders’ meeting for their approval.
At each shareholders’ meeting for the election of directors (i) each person (or group of persons acting together) holding 10% of our capital stock in the form of Series B shares is entitled to designate one director, (ii) the holders of Series BB shares are entitled to elect three directors and their alternates pursuant to our bylaws, the Participation Agreement and the Technical Assistance Agreement and (iii) the remaining members of the Board of Directors are to be elected by the holders of our capital stock (both the Series BB shares and the Series B shares, including those Series B holders that were entitled to elect a director by virtue of their owning 10% of our capital stock). The candidates to be considered for election as directors by the shareholders will be proposed to the shareholders’ meeting by the Board. Any slate of candidates proposed by the Board shall include independent directors to the extent required by the Mexican Securities Law and other applicable law.
Five of our directors are independent.
Authority of the Board of Directors
The Board of Directors has broad authority to manage the company. Pursuant to the Mexican Securities Law, the Board of Directors is required to approve, among other matters:
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Under our bylaws, resolutions at meetings of the Board of Directors with respect to any of the items listed above will be valid only if approved by the members of the Board of Directors elected by the holders of the Series BB shares.
Powers of Series BB Directors
The Series BB directors are entitled to: (i) nominate the candidates for chief executive officer to our Board of Directors, (ii) move for the removal of our chief executive officer, (iii) appoint and remove half of our executive officers in accordance with the guidelines established in the Technical Assistance Agreement and the guidelines approved by our Board of Directors and (iv) appoint at least one member to each of our committees.
In addition, any matter requiring approval of the Board of Directors under our bylaws, as indicated above, will require the approval of a majority of the directors appointed by the Series BB shareholders for so long as the Series BB shares represent at least 7.65% of our capital stock.
Our Capital Stock
Pursuant to our bylaws, our capital stock has a variable portion. As of the date of this report, the Company has a fixed minimum capital stock, without withdrawal rights, of Ps.300,822 thousand, represented by ordinary nominal Class I shares, without par value, which are fully subscribed and paid, of which 340,345,556 are Series B shares and 49,766,000 are Series BB shares. For the last three years, no part of our capital stock has been paid in-kind.
Our capital stock has been modified during the last three years as a consequence of the following events:
We are not beneficiaries of any derivative instruments payable in-kind, which have Series B or Series BB shares, or any other security representing those shares, as underlying assets.
The following table sets forth our authorized capital stock and our issued and outstanding capital stock as of April 22, 2022:
Authorized
Outstanding
Capital Stock:
All ordinary shares confer equal rights and obligations to holders within each series. The Series BB shares have special voting and other rights described below.
Our bylaws provide for the issuance of the following shares, which have the characteristics described below:
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 (Comisión Nacional de Inversiones Extranjeras) is obtained.
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 three members of our 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’ meetings. An annual ordinary shareholders’ 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, declaration of dividends and the determination of compensation for members of the Board. Under the Mexican Securities Law, our ordinary shareholders’ meeting, in addition to those matters described above, must approve any transaction representing 20% or more of our consolidated assets, executed in a single or a series of transactions, during any fiscal year.
Extraordinary shareholders’ meetings are those called to consider any of the following matters:
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.
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Shareholders’ meetings are required to be held in our corporate domicile, which is Mexico City. Calls for shareholders’ meetings must be made by the Chairman, the Secretary, two members of the Board of Directors, the Audit Committee and the Corporate Practices, Finance, Planning and Sustainability Committee. Any shareholder or group of shareholders representing at least 10% of our capital stock has the right to request that the president of the Board of Directors, the Audit Committee or the Corporate Practices, Finance, Planning and Sustainability Committee calls a shareholders’ meeting to discuss the matters indicated in the relevant request. If the president of the Board of Directors, the Audit Committee or the Corporate Practices, Finance, Planning and Sustainability Committee fails to call a meeting within 15 calendar days following receipt of the request, the shareholder or group of shareholders representing at least 10% of our capital stock may request that the call be made by a competent court.
Calls for shareholders’ meetings must be published in the Federal Official Gazette or in one newspaper of general circulation in Mexico City 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. Calls must be signed by whoever makes them, provided that calls made by the Board of Directors, the Audit Committee or the Corporate Practices, Finance, Planning and Sustainability Committee must be signed by the Chairman, the Secretary or a special delegate appointed by the Board of Directors, the Audit Committee or the Corporate Practices, Finance, Planning and Sustainability Committee for that purpose. Shareholders’ meetings will be validly held and convened without the need of a prior call or publication whenever all the shares representing our capital are duly represented.
To be admitted to any shareholders’ meeting, shareholders must: (i) be registered in our share registry; and (ii) at least 24 hours prior to the commencement of the meeting submit (a) an admission ticket issued by us for that purpose and (b) a certificate of deposit of the relevant stock certificates issued by the Secretary or by a securities deposit institution, a Mexican or foreign bank or securities dealer in accordance with the Mexican Securities Law. The share registry will be closed three days prior to the date of the meeting. Shareholders may be represented at any shareholders’ meeting by one or more attorneys-in-fact who may not be our directors. Representation at shareholders’ meetings may be substantiated pursuant to general or special powers of attorney or by a proxy executed before two witnesses. Ownership of shares may be evidenced by a certificate issued by a securities depositary (or Indeval) coupled with a certificate issued by any institution with an account at Indeval.
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.
Quorum
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 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 present at the meeting.
Extraordinary shareholders’ meetings are regarded as legally convened pursuant to a first call when at least 75% of the shares representing our capital are present or duly represented and no minimum number of shares is required for a quorum at a second call for an extraordinary shareholders’ meeting.
Resolutions at extraordinary meetings of shareholders are valid if taken by the favorable vote of shares representing more than 50% of our capital.
Notwithstanding the foregoing, resolutions at extraordinary meetings of shareholders called to discuss any of the items listed below are valid only if approved by a vote of shares representing at least 75% of our capital:
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Our bylaws also establish that a delisting of our shares requires the vote of holders of 95% 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 items listed below will only be valid if approved by a vote of at least 95% of our capital stock or a majority of the Series BB shares:
Right of Withdrawal
Any shareholder having voted against a resolution validly adopted at a meeting of our shareholders with respect to (i) a change in our corporate purpose or nationality, (ii) a change of corporate form, (iii) a merger involving us in which we are not the surviving entity or the dilution of its capital stock by more than 10% or (iv) a spin-off, may request redemption of its shares, provided that the relevant request is filed with us within 15 days following the holding of the relevant shareholders’ meeting. The redemption of the shareholders’ shares will be effected at the lower of (a) 95% of the average trading price determined based on the average of the prices of our shares on the 30 days on which the shares may have been quoted prior to the date of the meeting or (b) the book value of the shares in accordance with the most recent audited financial statements approved by our shareholders’ meeting.
Dividends and Distributions
At our annual ordinary general shareholders’ meeting, the Board of Directors will submit to the shareholders for their approval our financial statements for the preceding fiscal year as presented by our Chief Executive Officer. 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—Dividends.”
Registration and Transfer
Our shares are registered with the Mexican National Securities Registry, as required under the Mexican Securities Law and regulations issued by the CNBV. Our shares are evidenced by share certificates in registered form, and registered dividend coupons may be attached thereto. Our shareholders may either hold their shares directly, in the form of physical certificates, or indirectly, in book-entry form through institutions that have accounts with Indeval. Indeval is the holder of record in respect of all such shares held in book-entry form. Indeval will issue certificates on behalf of our shareholders upon request. Accounts may be maintained at Indeval by the following participants: brokers, banks, other financial entities or other entities approved by the CNBV. We maintain a stock registry and only those persons listed in such stock registry, and those holding certificates issued by Indeval or any related Indeval participants indicating ownership, will be recognized as our shareholders. The transfer of shares must be registered in our stock registry. In the case of an international offering, the Depositary will appear in such stock registry as the registered holder of the common shares represented by the ADSs.
Series BB shares may only be transferred after conversion into Series B shares and are subject to the following rules:
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For purposes of our bylaws, “control” of a person, with respect to any person, is defined as:
Shareholder Ownership Restrictions and Anti-Takeover Protection
Under the Mexican Airport Law:
Air carriers and their subsidiaries and affiliates are not permitted, directly or indirectly, to “control” us or any of our subsidiary concession holders.
Under the Mexican Airport Law, any acquisition of control requires the prior consent of the Ministry of Infrastructure, Communications and Transportation.
For purposes of these provisions, “related person” and “control” are defined above under “Registration and Transfer.”
The Mexican Securities Law contains provisions relating to public tender offers and certain other share acquisitions. Any intended acquisition of our shares that results in the acquirer obtaining control of our voting shares (our Series B shares and Series BB shares considered together) requires the acquirer, with the prior approval of the CNBV, to make a mandatory public tender offer for the greater of (i) the percentage of the capital stock intended to be acquired or (ii) 10% of our capital stock. Any intended acquisition of our shares that is aimed at obtaining control requires the potential acquirer to make a mandatory tender offer for 100% of our outstanding capital stock (in addition to the approval of the Ministry of Infrastructure, Communications and Transportation). The tender offer must be made at the same price to all shareholders and classes of shares. Our Board of Directors must issue its opinion of any tender offer resulting in a change of control, which opinion must take into account minority shareholder rights and which may be accompanied by an independent fairness opinion. Directors and principal officers are required to disclose whether they will participate in the tender.
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Under the Mexican Securities Law, all tender offers must be open for at least 20 business days, and purchases thereunder are required to be made pro rata to all tendering shareholders. The Mexican Securities Law only permits the payment of certain amounts to controlling shareholders over and above the offering price if these amounts are fully disclosed, approved by the Board of Directors and paid solely in connection with non-compete or similar obligations.
Certain Minority Protections
Pursuant to the Mexican Securities Law and the Mexican General Law of Business Corporations, there are several protections afforded to minority shareholders. These protections include provisions that permit:
Changes in Capital Stock
Increases and reductions of our capital must be approved at an extraordinary shareholders’ meeting, subject to the provisions of our bylaws and the Mexican General Law of Business Corporations.
Subject to the individual ownership limitations set forth in our bylaws, in the event of an increase of our capital stock, other than (i) for purposes of conducting a public offering of the shares issued as a result of such increase, (ii) in connection with mergers, (iii) with respect to the resale of repurchased shares or (iv) in connection with the conversion of convertible securities, 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. Such preemptive right shall be exercised by any method provided in Section 132 of the Mexican General Law of Business Corporations, by subscription and payment of the relevant stock within 15 business days after the date of publication of the corresponding notice to our shareholders through the electronic system established by the Mexican Ministry of Economy (Secretaría de Economía), provided that if at the corresponding meeting all of our shares are duly represented, the 15-calendar day period shall commence on the date of the meeting.
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Our capital stock may be reduced by resolution of a shareholders’ meeting taken pursuant to the rules applicable to capital increases. Our capital stock may also be reduced upon withdrawal of a shareholder as provided in Section 206 of the Mexican General Law of Business Corporations (see “—Voting Rights and Shareholders’ Meetings—Right of Withdrawal”) or by repurchase of our own stock in accordance with the Mexican Securities Law (see “—Share Repurchases”).
Share Repurchases
We may choose to acquire our own shares through the Mexican Stock Exchange and NASDAQ on the following terms and conditions:
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 an employee stock option plan and in conformity with the Mexican Securities Law.
Repurchase Obligation
Pursuant to the Mexican Securities Law, in the event that we decide to cancel the registration of our shares in the Mexican National Securities Registry and the listing of our shares on the Mexican Stock Exchange, or if the CNBV orders such cancellation, we will be required to conduct a tender offer for the purchase of stock held by minority shareholders and to create a trust for a period of six months, with amounts sufficient to purchase all shares not participating in the tender offer. Under the law, controlling shareholders will be secondarily liable for these obligations. The price at which the stock must be purchased shall be the higher of (i) the average of the trading price on the Mexican Stock Exchange during the last 30 days on which the shares were quoted prior to the date on which the tender offer is made or (ii) the book value of such shares as determined pursuant to our latest quarterly financial information filed with the CNBV and the Mexican Stock Exchange. If the tender for cancellation is requested by the CNBV, it must be initiated within 180 days from the date of the request. If requested by us, under the Mexican Securities Law, the cancellation must be approved by 95% of our shareholders.
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.
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Other Provisions
Liabilities of the Members of the Board of Directors
The Mexican Securities Law imposes a duty of care and a duty of loyalty on directors. The duty of care requires our directors to act in good faith and in the best interests of the Company. For such purpose, our directors are required to obtain the necessary information from the chief executive officer, the executive officers, the external auditors or any other person in order to act in our best interests. Our directors are liable for damages and losses caused to us and our subsidiaries as a result of violations of this duty of care.
The duty of loyalty requires our directors to preserve confidential information received in connection with the performance of their duties and to abstain from discussing or voting on matters in which they have a conflict of interest. In addition, the duty of loyalty is violated if a shareholder or group of shareholders is knowingly favored or if, without the express approval of the Board of Directors, a director takes advantage of a corporate opportunity. The duty of loyalty is also violated by (i) failing to disclose to the Audit Committee or the external auditors any irregularities that the director encounters in the performance of his or her duties or (ii) disclosing information that is false or misleading or omitting to record any transaction in our records that could affect our financial statements. Directors are liable for damages and losses caused to us and our subsidiaries for violations of this duty of loyalty. This liability also extends to damages and losses caused as a result of benefits obtained by the director or directors or third parties, as a result of actions of such directors.
Our directors may be subject to criminal penalties of up to 12 years’ imprisonment for certain illegal acts involving willful misconduct that result in losses to us. Such acts include the alteration of financial statements and records.
Liability actions for damages and losses resulting from the violation of the duty of care or the duty of loyalty may be exercised solely for our benefit and may be brought by the company or by shareholders representing 5% or more of the capital stock of the company, and criminal actions may only be brought by the Mexican Ministry of Finance and Public Credit, after consulting with the CNBV.
As a safe harbor for directors, the Mexican Securities Law provides that the liabilities specified above will not be applicable if (i) the director acted in good faith and complies with applicable law and the bylaws; (ii) facts based upon information are provided by officers or third-party experts, the capacity and credibility of which may not be the subject of reasonable doubt; (iii) the director selects the more adequate alternative in good faith or in a case where the negative effects of such decision may not have been foreseeable; and (iv) actions were taken in compliance with resolutions adopted at the shareholders’ meeting.
In addition to the duty of care and duty of loyalty required by the Mexican Securities Law, our bylaws provide that, from the date on which at least 51% of our capital stock is listed on a stock exchange, a member of the Board of Directors will be liable to us and our shareholders in the following circumstances:
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The members of the Board of Directors are liable to our shareholders only for the loss of net worth suffered as a consequence of disloyal acts carried out in excess of their authority or in violation of our bylaws. The Company, in any case, is required to indemnify and hold the relevant officers, members of the Board of Directors and the Secretary harmless from any liability that they may incur with respect to third parties in the performance of their duties, which shall include (a) the indemnity amount to be paid for the damages caused by their acts to third parties and, (b) the expenses they may incur (including, without limitation, legal and advisory fees) in connection with item (a) of this paragraph, provided that such expenses are reasonable and duly documented, except in cases of fraud, willful misconduct, or illegal acts under the Mexican Securities Law and other laws.
Information to Shareholders
The Mexican Securities Law establishes that companies, acting through their boards of directors, must annually present a report at a shareholders’ meeting that includes the following:
In addition to the foregoing, our bylaws provide that the Board of Directors should also prepare the information referred to above 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 is indefinite.
Shareholders’ Conflict of Interest
Under Mexican law, any shareholder that has a conflict of interest with respect to any transaction must abstain from voting and from being present and participating in discussions 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.
Certain Differences between Mexican and U.S. Corporate Law
The Mexican General Law of Business Corporations and the Mexican Securities Law, which apply to us, differ in certain material respects from laws generally applicable to U.S. corporations and their shareholders.
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Independent Directors
The Mexican Securities Law requires that 25% of the directors of Mexican public companies be independent. Pursuant to the rules and regulations of the NASDAQ National Market, foreign companies subject to reporting requirements under the U.S. federal securities laws and listed on the NASDAQ National Market must maintain a committee responsible for Audit Functions comprised entirely of independent directors as defined in the U.S. federal securities laws.
Mergers, Consolidations and Similar Arrangements
A Mexican company may merge with another company only if a majority of the shares representing its outstanding capital stock approves the merger at a duly convened general extraordinary shareholders’ meeting, unless the company’s bylaws impose a higher threshold. Dissenting shareholders are not entitled to appraisal rights. Creditors have 90 days to oppose a merger judicially, provided they have a legal interest to oppose the merger.
Under Delaware law, with certain exceptions, a merger, consolidation, or sale of all or substantially all the assets of a corporation must be approved by the Board of Directors and a majority of the outstanding shares entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which the shareholder may receive payment in the amount of the fair market value of the shares held by the shareholder (as determined by a court) in lieu of the consideration the shareholder would otherwise receive in the transaction. Delaware law also provides that a parent corporation, by resolution of its Board of Directors and without any shareholder vote, may merge with any subsidiary of which it owns at least 90% of each class of capital share. Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.
Anti-Takeover Provisions
Subject to the approval of the CNBV, the Mexican Securities Law permits public companies to include anti-takeover provisions in their bylaws that restrict the ability of third parties to acquire control of the company without obtaining approval of the company’s board of directors.
Under Delaware law, corporations can implement shareholder rights plans and other measures, including staggered terms for directors and super-majority voting requirements, to prevent takeover attempts. Delaware law also prohibits a publicly held Delaware corporation from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the shareholder became an interested shareholder unless:
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Shareholders’ Suits
As mentioned above, holders of 5% of our outstanding shares may initiate action against some or all of our directors for violations of their duty of care or duty of loyalty, for our benefit, in an amount equal to the damages or losses caused to us. Actions initiated on these grounds have a five-year statute of limitations and will not be applicable if the relevant directors acted under any of the exclusions set forth under the Mexican Securities Law. Procedures for class-action lawsuits were incorporated into Mexican law and became effective in March 2012. However, these rules and procedures are different and more limited than those in place in the United States.
Class actions and derivative actions are generally available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In these kinds of actions, the court generally has discretion to permit the winning party to recover attorneys’ fees incurred in connection with the action.
Shareholder Proposals
Under Mexican law and our bylaws, holders of at least 10% of our outstanding capital stock are entitled to appoint one member of our Board of Directors and his or her alternate.
Delaware law does not include a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in which business may be brought before a meeting.
Calling of Special Shareholders’ Meetings
Under Mexican law and our bylaws, a shareholders’ meeting may be called by the Board of Directors, any two directors, the chairman, the secretary, the Audit Committee or the Corporate Practices, Finance, Planning and Sustainability Committee. Any shareholder or group of shareholders with voting rights representing at least 10% of our capital stock may request that the chairman of the Board of Directors, the Audit Committee or the Corporate Practices, Finance, Planning and Sustainability Committee call a shareholders’ meeting to discuss the matters indicated in the written request. If the chairman of the Board of Directors, the Audit Committee or the Corporate Practices, Finance, Planning and Sustainability Committee fails to call a meeting within 15 calendar days following date of the written request, the shareholder or group of shareholders may request that a competent court call the meeting. A single shareholder may call a shareholders’ meeting if no meeting has been held for two consecutive years or if matters to be dealt with at an ordinary shareholders’ meeting have not been considered.
Delaware law permits the board of directors or any person who is authorized under a corporation’s certificate of incorporation or bylaws to call a special meeting of shareholders.
Cumulative Voting
Under Mexican law, cumulative voting for the election of directors is not permitted.
Under Delaware law, cumulative voting for the election of directors is permitted only if expressly authorized in the certificate of incorporation.
Approval of Corporate Matters by Written Consent
Mexican law permits shareholders to take action by unanimous written consent of the holders of all shares entitled to vote. These resolutions have the same legal effect as those adopted in a general or special shareholders’ meeting. The board of directors may also approve matters by unanimous written consent.
Delaware law permits shareholders to take action by written consent of holders of outstanding shares having more than the minimum number of votes necessary to take the action at a shareholders’ meeting at which all voting shares were present and voted.
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Amendment of Certificate of Incorporation
Under Mexican law, it is not possible to amend a company’s certificate of incorporation (acta constitutiva). However, the provisions that govern a Mexican company are contained in its bylaws, which may be amended as described below. Under Delaware law, a company’s certificate of incorporation generally may be amended by a vote of the majority of shareholders entitled to vote thereon (unless otherwise provided in the Certificate of Incorporation), subsequent to a resolution of the board of directors proposing such amendment.
Amendment of Bylaws
Under Mexican law, amending a company’s bylaws requires shareholder approval at an extraordinary shareholders’ meeting. Mexican law requires that at least 75% of the shares representing a company’s outstanding capital stock be present at the meeting in the first call (unless the bylaws require a higher threshold) and that the resolutions be approved by a majority of the shares representing a company’s outstanding capital stock. In addition, pursuant to our bylaws, the amendment of our bylaws requires the approval of either (i) holders of at least 95% of our outstanding capital stock or (ii) holders of at least a majority of our outstanding capital stock, including, for so long as the Series BB shares represent at least 7.65% of our capital stock, a majority of holders of Series BB shares.
Under Delaware law, holders of a majority of the voting power of a corporation and, if so provided in the certificate of incorporation, the directors of the corporation, have the power to adopt, amend and repeal the bylaws of a corporation.
Staggered Board of Directors
Mexican law does not permit companies to have a staggered board of directors, while Delaware law does permit corporations to have a staggered board of directors.
MATERIAL CONTRACTS
Our subsidiaries are parties to the airport concessions granted by the Ministry of Infrastructure, Communications and Transportation under which we are required to construct, operate, maintain and develop the airports in exchange for certain benefits. See “—Sources of Regulation” and “—Scope of Concessions and General Obligations of Concession Holders” under “Regulatory Framework” in Item 4.
We are a party to a participation agreement with SETA and the Ministry of Infrastructure, Communications and Transportation that establishes the framework for several other agreements to which we are a party. See “Item 7. Major Shareholders and Related-Party Transactions—Related-Party Transactions—Arrangements Relating to SETA.”
We have entered into a Technical Assistance Agreement with SETA providing for management and consulting services. The Technical Assistance Agreement was amended on December 14, 2020 with effect as of December 14, 2020. See “Item 7. Major Shareholders and Related-Party Transactions—Related-Party Transactions—Arrangements Relating to SETA.”
EXCHANGE CONTROLS
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 government may not maintain its current foreign exchange policies. See “Item 3. Key Information—Exchange Rates.”
TAXATION
The following summary contains a description of the material anticipated 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 will be 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 our Series B shares or ADSs. In particular, the summary deals only with U.S. holders that will 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 shares by vote or value, 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 persons 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, or entities that are treated as partnerships for U.S. federal income tax purposes (or partners therein). 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, or the Medicare tax on net investment income.
The summary is based upon the federal income tax laws of the United States and Mexico as in effect on the date of this 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. In addition, a “Treaty Country” is a jurisdiction that has a treaty that provides for the avoidance of double taxation in force with Mexico. 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 and that will 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 is incorporated under Mexican law or 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. An individual’s significant center of interest will be considered Mexico in the following circumstances, among other factors: (i) when more than 50% of such person’s total yearly income originates in Mexico and (ii) when Mexico is the individual’s principal place of business. Additionally, Mexican officers and employees working for the Mexican government but living outside of Mexico will be considered to be Mexican residents even if their significant center of interest is not in Mexico. However, any determination of residence should take into account the particular situation or each person or legal entity.
In general, for U.S. federal income tax purposes, holders of ADSs will be treated as the beneficial owners of the Series B shares represented by those ADSs.
Taxation of Dividends
Mexican Tax Considerations
Dividends paid to non-Mexican holders with respect to our Series B shares and, as a consequence, with respect to ADSs, are subject to Mexican withholding tax at the rate of 10% on the gross amount of the dividend distributed. This withholding tax may not apply to dividend distributions related to certain retained earnings for years prior to 2013. Such 10% withholding tax will be remitted to the Mexican tax authorities as a definitive payment on behalf of the non-Mexican holders.
Non-Mexican holders that are residents of a Treaty Country may be entitled to a benefit under the provisions of the applicable treaty, such as a reduced tax rate; therefore, each non-Mexican holder should consult its tax advisor regarding the application requirements of any tax treaty under its particular circumstances. For Mexican tax purposes, in order to be entitled to the benefits of any tax treaty, non-Mexican holders must demonstrate that they are tax residents of the corresponding country by means of a tax residency certificate and comply with the procedural provisions set forth in the treaty and in the Mexican Income Tax Law.
U.S. Federal Income Tax Considerations
Subject to the discussion below regarding the passive foreign investment company rules, 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 will be includible in the gross income of a U.S. holder as ordinary income on the date on which the distributions are received by the U.S. holder in the case of Series B shares, or by the depositary in the case of ADSs, and will not be eligible for the dividends received deduction allowed to certain corporations under the U.S. Internal Revenue Code of 1986, as amended. To the extent that a distribution exceeds our current and accumulated earnings and profits, it will be 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. We do not expect to maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles. U.S. Holders therefore should expect that distributions generally will be treated as dividends for U.S. federal income tax purposes. Distributions, which will be made in pesos, will be 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 U.S. holder in the case of Series B shares, or the depositary in the case of ADSs, 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.
Dividends generally will be treated as “passive category” income from foreign sources for U.S. foreign tax credit limitation purposes. A U.S. holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit for any Mexican withholding tax imposed with respect to the Series B shares or ADSs. However, as a result of recent changes to the U.S. foreign tax credit rules, for taxable years beginning after December 28, 2021, Mexican tax generally will need to satisfy certain additional requirements in order to be considered a creditable tax for a U.S. holder, except in the case of a U.S. holder that is eligible for, and properly claims, the benefits of the U.S.-Mexico Tax Treaty. We have not determined whether these requirements have been met, and, accordingly, no assurance can be given that any Mexican withholding tax will be creditable. Alternatively, a U.S. holder may elect to deduct Mexican withholding taxes in computing such U.S. holder’s taxable income (provided that the U.S. holder elects to deduct, rather than credit, all foreign income taxes paid or accrued for the relevant taxable year). The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions, involves the application of rules that depend on a U.S. holder’s particular circumstances. The rules governing the foreign tax credit are complex and U.S. holders are urged to consult their own tax advisors whether, and to what extent, a foreign tax credit will be available in light of their particular circumstances .
Subject to certain exceptions for short-term and hedged positions, the U.S.-dollar amount of dividends received by an individual U.S. holder with respect to the ADSs will be subject to taxation at preferential rates if the dividends are “qualified dividends.” Dividends paid on the Series B shares or 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 has been approved for the purposes of the qualified dividend rules, and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the years in which the dividend is paid, a passive foreign investment company (a “PFIC”). The income tax treaty between the United States and Mexico has been approved for the purposes of the qualified dividend rules. Based on our audited 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 2020 and 2021 taxable years. In addition, based on our audited 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 2022 taxable year.
Taxation of Dispositions of Shares or ADSs
ADSs-Mexican Tax Considerations
Non-Mexican holders are liable for income tax in Mexico with respect to income derived from sources of wealth located within the national territory. The Mexican Income Tax Law locates the source of wealth for capital gains within the national territory when the shares that are sold were issued by a Mexican resident entity. Deposits and withdrawals of our Series B shares in exchange for ADSs will not give rise to Mexican tax or transfer duties.
The Mexican income taxation of the proceeds of a sale of our Series B shares or ADSs by a non-Mexican holder differs based on the jurisdiction of the holder, the method of effecting the sale, and a number of other factors. The various outcomes are summarized as follows:
Non-Mexican Holder Not Resident in Treaty Country
Gain on the sale of our Series B shares or ADSs by a non-Mexican holder who is not resident of a Treaty Country will be subject to Mexican withholding tax at the rate of 10% on the gain realized on such sale if the transaction is carried out through the Mexican Stock Exchange or other recognized markets. According to the Mexican Income Tax Law, Mexican stock intermediaries participating in these transactions are obligated to apply the aforementioned withholding. There are no clear rules in those cases in which a non-Mexican intermediary is involved, thus the non-Mexican holder could be obliged to remit the corresponding income tax to the Mexican tax authorities directly.
Non-Mexican Holder Resident in Treaty Country
Gain on the sale of our Series B shares or ADSs by a non-Mexican holder who is resident of a Treaty Country will not be subject to any Mexican tax if the transaction is carried out through the Mexican Stock Exchange, or any other recognized market, provided that certain requirements set forth by the Mexican Income Tax Law are complied with. A letter stating that the non-Mexican holder is resident in a Treaty Country shall be provided to the financial intermediary obligated to apply the withholding.
Under the Tax Treaty, a holder that is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains realized on a sale or other disposition of the Series B shares, so long as the holder did not own, directly or indirectly, 25% or more of our capital stock (including through ADSs) within the 12-month period preceding such sale or other disposition.
Sales Not Subject to the Reduced 10% Withholding Rate
For a non-Mexican holder that does not carry out the sale through an authorized stock exchange, the proceeds obtained from the sale or disposition of our Series B shares or ADSs will be subject to a 25% tax on the full sale price. Under certain circumstances, and provided certain requirements set forth by the Mexican Income Tax Law are complied with, non-Mexican holders, alternatively, may pay a 35% tax on the gain obtained from the transaction. This 25%/35% regime would also apply in the following cases: (i) sales of our Series B shares or ADSs that were acquired by the transferor outside of the Mexican Stock Exchange, or other recognized markets set forth in the Mexican Federal Tax Code; (ii) sales made by 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; (iii) pre-negotiated trades executed through the facilities of the Mexican Stock Exchange; and (iv) trades of shares obtained as a result of our merger or spin-off, in certain cases.
In cases in which the 25%/35% regime is applicable, if the non-Mexican holder is a resident of a Treaty Country, a reduced withholding rate may be applicable if certain requirements are met according to the corresponding Treaty. Each holder is urged to consult its tax advisor regarding the application requirements of any tax treaty under its particular circumstances.
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Assuming we are not treated as a PFIC (as discussed above under Taxation of Dividends—U.S. Federal Income Tax Considerations), upon the sale or other disposition of the Series B shares or ADSs, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or other disposition and such U.S. holder’s tax basis in the Series B shares or ADSs. Gain or loss recognized by a U.S. holder on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the Series B shares or ADSs have 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. In addition, as a result of recent changes to the foreign tax credit rules, for taxable years beginning after Decebmer 28, 2021, any Mexican tax imposed on the sale or other disposition of the Series B shares or ADSs is unlikely to be treated as creditable, unless the U.S. Holder is eligible for and elects the benefits of the Tax Treaty. 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.
Specified Foreign Financial Assets
Certain U.S. Holders that own “specified foreign financial assets” with an aggregate value in excess of U.S.$50,000 on the last day of the taxable year or U.S.$75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the Series B shares or ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders that fail to report the required information could be subject to substantial penalties. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the Class B shares or ADSs, including the application of the rules to their particular circumstances.
U.S. Backup Withholding Tax and Information Reporting Requirements
In general, information reporting requirements will apply to payments by a paying agent within the United States to a non-exempt U.S. holder of dividends in respect of the Series B shares or ADSs or the proceeds received on the sale or other disposition of the Series B shares or ADSs, and a backup withholding tax may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number to the paying agent. Backup withholding is not an additional tax. Amounts withheld as backup withholding tax will be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the U.S. Internal Revenue Service.
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A holder that is a foreign corporation or a non-resident alien individual may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.
DOCUMENTS ON DISPLAY
The materials included in this annual report on Form 20-F, and exhibits hereto, may be viewed at the SEC’s public reference room in Washington, D.C. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. The SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports and information statements and other information regarding us. The reports and information statements and other information about us can also be downloaded from the SEC’s website.
A translation of this annual report on Form 20-F will be filed with the Mexican Stock Exchange and will be available for consultation through the Mexican Stock Exchange.
The person responsible of handling requests from investors and analysts on our behalf is our Chief Financial Officer, Ruffo Pérez Pliego del Castillo, who can be reached at Plaza Metrópoli Patriotismo, Piso 5, Av. Patriotismo 201, Col. San Pedro de los Pinos, Benito Juárez , Ciudad de México, México.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Rate Risk
Our principal exchange rate risk involves changes in the value of the Mexican peso relative to the U.S. 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 largely collected in Mexican pesos based on the average exchange rate for the prior month. In 2019, 2020 and 2021, 14.2%, 10.1% and 13.4%, respectively, of our consolidated revenues were derived from passenger charges for international passengers. A depreciation of the Mexican peso as compared to the U.S. dollar, particularly late in the year, could cause us to exceed the maximum rates at one or more of our airports, in which case, we may provide discounts to passenger charges or to the airlines. In addition, if the peso appreciates as compared to the U.S. dollar, we may underestimate the specific prices we can charge for regulated services and be unable to adjust our prices upwards to maximize our regulated revenues.
In addition, we did not have U.S. dollar-denominated debt as of December 31, 2021. Future decreases in the value of the peso relative to the U.S. dollar will increase the cost in pesos of servicing such indebtedness. Our cash balance denominated in U.S. dollars was Ps.78,940 thousand on December 31, 2019, Ps.79,552 thousand on December 31, 2020 and Ps.21,666 thousand on December 31, 2021. See Note 21 to our audited consolidated financial statements for additional disclosures about market risk.
Item 12. Description of Securities Other Than Equity Securities
Item 12A. Debt Securities
Item 12B. Warrants and Rights
Item 12C. Other Securities
Item 12D. American Depositary Shares
JPMorgan Chase Bank, N.A., serves as the depositary for our ADSs, and the address of its principal office is 4 New York Plaza, Floor 12, New York, New York, 10004. ADS holders are required to pay various fees to the depositary. On August 9, 2016, the Deposit Agreement among us and the depositary was amended to, among other things, implement certain changes in the form of American Depositary Receipt.
The following table sets forth the fees and charges that a holder of our ADSs may have to pay, directly or indirectly. For more complete information regarding ADRs, you should read the entire deposit agreement and the form of ADR.
Fee or Charge Amount
Payee
Issuance and delivery of ADRs against deposits of shares, including deposits in respect of share distributions, rights and other distributions
U.S.
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
JPMorgan Chase Bank, N.A.
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates
U.S.$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
Any cash distribution to ADS registered holders
U.S.$0.05 (or less) per ADS
Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS 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
Depositary services
U.S.$0.05 (or less) per ADS per calendar year
Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
U.S.$1.50 per ADR plus applicable registration or transfer fees
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)
Expenses of the depositary
Converting foreign currency to U.S. dollars
Other fees, as necessary
Taxes and other governmental charges JPMorgan Chase Bank, N.A., or the custodian has to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes
Any charges incurred by JPMorgan Chase Bank, N.A., or its agents for servicing the deposited securities
The depositary of our ADSs, JPMorgan Chase Bank, N.A., collects its fees directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects these fees by deducting them from the amounts distributed or by selling a portion of distributable property to pay the fees. For example, the depositary may deduct from cash distributions, directly bill investors or charge the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting services until its fees for these services are paid.
174
The following table sets forth the amounts that we received in 2021, directly or indirectly, from JPMorgan Chase Bank N.A., as depositary of our ADSs:
For expenses related to the establishment of the facility including, but not limited to, investor relations expenses, the initial NASDAQ application and listing fees or any other program-related expenses.
U.S.$
For expenses related to the administration and maintenance of the facility including, but not limited to, investor relations expenses, the annual NASDAQ listing fees or any other program-related expenses.
155,638
JPMorgan Chase Bank, N.A., as depositary of our ADSs, has agreed to reimburse us for expenses it incurs that are related to establishment and maintenance expenses of the ADS program. The depositary has agreed to reimburse us for its continuing annual stock exchange listing fees. It has also agreed to reimburse us annually for certain investor relationship programs. 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.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
(a) Disclosure Controls and Procedures
We have evaluated, with the participation of our chief executive officer and chief financial officer, the design and operation of our disclosure controls and procedures as of December 31, 2021.
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 as of December 31, 2021, 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 Exchange Act 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 IFRS. Our internal control over financial reporting includes those policies and procedures that:
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, 2021.
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—Integrated Framework (2013), which has been early-adopted.
Based on our assessment and those criteria, our management has concluded that we maintained effective internal control over financial reporting as of December 31, 2021. Additionally, Galaz, Yamazaki, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu Limited, the independent registered public accounting firm that has audited our consolidated financial statements, has issued an attestation report on the effectiveness of our internal control over financial reporting.
176
(c) Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm to the Shareholders and the Board of Directors of Grupo Aeroportuario del Centro Norte, S. A. B. de C. V.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated April 29, 2022, expressed an unqualified opinion on those financial statements and included an emphasis of matter paragraph related to the effects of the outbreak of coronavirus disease (“COVID-19”) stated in note 3d, and, an explanatory paragraph related to the translation of Mexican peso amounts into U.S. dollar amounts in conformity with the basis stated in note 3f.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process 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. A company's 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 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) 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.
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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 the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu Limited
/s/ Jorge Omar Esquivel Romero
C.P.C. Jorge Omar Esquivel Romero
México City, Mexico
April 29, 2022
(d) Changes in Internal Control over Financial Reporting
There has been no change in internal controls over financial reporting during 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
(e) COVID-19 Pandemic
As a result of the COVID-19 pandemic and related advisories and restrictions put in place by the Mexican government in March and April 2020, and the recommendations to stay at home depending on the alert level of the epidemiological “traffic light” system implemented by the Mexican government after May 2020, the Company implemented remote working arrangements for certain employees, which have not impacted our automated systems. These measures have not impacted our internal control over financial reporting in 2021 as the processes established in the Company’s policies and procedures remain in force.
Item 16. [Reserved]
Item 16A. Audit Committee’s Financial Expert
Our Board of Directors has determined that Mr. Martin Werner Wainfeld, a member of our Audit Committee, qualifies as an “audit committee financial expert” and as independent within the meaning of this Item 16A. The shareholders’ meeting of April 30, 2019, appointed Mr. Martin Werner Wainfeld as the independent director required by the Mexican Securities Law and applicable NASDAQ listing standards and as an “audit committee financial expert” within the meaning of this Item 16A. See “Item 6. Directors, Senior Management and 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 Board of Directors, chief executive officer, chief financial officer, chief accounting officer and persons performing similar functions as well as to our other officers and employees. Our code of ethics is filed as an exhibit to this Form 20-F and is available on our website at www.oma.aero. 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.
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, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu Limited (Deloitte), during the fiscal years ended December 31, 2020 and 2021:
Audit fees
12,502
12,802
Tax fees
All other fees
Total fees
12,977
Audit fees in the above table are the aggregate fees billed by Deloitte in connection with audits of both our consolidated financial statements and those financial statements of our subsidiaries and other statutory audit reports, in addition to their internal control attestation report.
All other fees in the above table are fees billed by Deloitte for services in connection with services rendered other than audit and tax 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
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,” 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 U.S.-dollar value) of shares that may yet be purchased under our plans and programs.
SHARES REPURCHASED BY US PURSUANT TO THE SHARE REPURCHASE PROGRAM
(c) Total number of
(d) Maximum
shares purchased as
number of shares
(b) Average price
part of publicly
that may yet be
(a) Number of shares
paid or received per
announced plans or
purchased under the
purchased (issued)
share in pesos
programs (issued)
plans or programs
January 1–31
February 1–28
March 1–31
April 1–30
May 1–31
June 1–30
July 1–31
August 1–31
3,736,531
September 1–30
205,600
October 1–31
November 1–30
December 1–31
SHARES PURCHASED BY SETA
(b) Average price paid
or received per share
purchased
in pesos
programs
180
SHARES PURCHASED BY AERODROME
July 1–31 (1)
SHARES PURCHASED BY FINTECH
Item 16F. Change in Registrant’s Certifying Accountant
Item 16G. Corporate Governance
Pursuant to Rule 5615(a)(3) of the NASDAQ Stock Market, Inc. (NASDAQ) Marketplace Rules, 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 NASDAQ 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 Mexican Securities Law and the regulations issued by the CNBV.
On December 30, 2005, a new Mexican Securities Law was published in the Federal Official Gazette, which became effective on June 28, 2006.
The table below discloses the significant differences between our corporate governance practices and the NASDAQ standards.
NASDAQ Standards
Our Corporate Governance Practice
Director Independence. Majority of board of directors must be independent and directors deemed independent must be identified in a listed company’s proxy statement (or annual report on Form 10-K or 20-F if the issuer does not file a proxy statement). “Controlled companies,” which would include us if we were a U.S. issuer, are exempt from this requirement. A controlled company is one in which more than 50% of the voting power is held by an individual, group or another company, rather than the public. Rules 5605(b)(1), 5615(c)(1) & (c)(2).
Director Independence. Pursuant to the Mexican Securities Law, we are required to have a board of directors composed of a maximum of 21 members, 25% of whom must be independent. One alternate director may be appointed for each principal director; provided that the alternates for the independent director must also be independent. Certain persons are per se non-independent, including insiders, control persons, major suppliers, and any relatives of such persons. In accordance with the Mexican Securities Law, our shareholders’ meeting is required to make a determination as to the independence of our directors, though such determination may be challenged by the CNBV. There is no exemption from the independence requirement for controlled companies.
Our bylaws provide that our Board of Directors shall be composed of at least 11 members. Currently, our board has 11 members, of which five are independent under the Mexican Securities Law and the Sarbanes-Oxley Act of 2002.
Executive Sessions. Independent directors must meet regularly in executive sessions at which only independent directors are present. Rule 5605(b)(2).
Executive Sessions. Our independent directors and those who are not members of the Company’s executive team are not required to meet in executive sessions and generally do not do so. Under our bylaws and applicable Mexican law, executive sessions are not required.
Audit Committee. Audit committee satisfying the independence and other requirements of Rule 10A-3 under the Exchange Act and the more stringent requirements under the NASDAQ standards is required. Rule 5605(c)(1).
Audit Committee. We are in compliance with the independence requirements of Rule 10A-3. Marketplace Rule 4350(a)(1) permits us to follow our home country governance practices in lieu of certain NASDAQ requirements, and as such the members of our Audit Committee are not required to satisfy the NASDAQ independence and other Audit Committee standards that are not prescribed by Rule 10A-3.
The principal characteristics of our Audit Committee are as follows:
●
Our Audit Committee is composed of three members, all of whom are members of our Board of Directors.
All of the members of our Audit Committee and the committee’s chairman are independent.
The Chairman of the Audit Committee is appointed and/or removed exclusively by the general shareholders’ meeting.
Our Audit Committee operates pursuant to provisions in the Mexican Securities Law and our bylaws.
Our Audit Committee submits an annual report regarding its activities to our Board of Directors.
The duties of our Audit Committee include, among others, the following:
issuing recommendations to the Board of Directors for the appointment of an external auditor of the Company, as well as for the contracting of services other than auditing, and providing an opinion about any removal of such external auditor;
supervising the activities of our external auditors and following up to their communications and opinions;
analyzing and supervising the preparation of our financial statements;
informing the board of our internal controls and their adequacy;
requesting reports from our executive officers whenever the committee deems appropriate, providing assistance to our Board of Directors in the preparation of the reports containing the main accounting and information guidelines used for the preparation of the financial information, and assistance to our Board of Directors in the preparation of the report on the operations and activities in which the Board of Directors had intervened pursuant to the Mexican Securities Law;
183
informing the board of any irregularities that it may encounter;
receiving and analyzing recommendations and observations made by the shareholders, members of the Board, executive officers, our external auditors or any third party and taking the necessary actions;
calling shareholders’ meetings;
overseeing the execution of the shareholders’ and directors’ resolutions by the chief executive officer in accordance with the instructions provided thereto by the shareholders or the directors; and
providing an annual report to the Board.
Compensation Committee. CEO compensation must be determined, or recommended to the board for determination, either by compensation committee comprised solely of independent directors or a majority of the independent directors and the CEO may not be present during voting or deliberations. Compensation of all other executive officers must be determined in the same manner, except that the CEO, and any other executive officers, may be present. “Controlled companies” are exempt from this requirement. Rules 5605(e)(1)(B) & 5615(c)(2).
Corporate Practices, Finance, Planning and Sustainability Committee. Pursuant to the Mexican Securities Law, we are required to have a committee responsible for Corporate Practices Functions, although we are not required to have a separate compensation committee. The Mexican Securities Law requires that committees consist of at least three independent directors appointed by the board of directors. All committee members must be independent (except to the extent a controlling shareholder or shareholders own 50% or more of our outstanding capital stock, in which case the majority must be independent).
Pursuant to our bylaws and the Mexican Securities Law, the duties of our Corporate Practices, Finance, Planning and Sustainability Committee include, among others, the following:
(i)
providing opinions to our Board of Directors;
(ii)
requesting and obtaining opinions from independent experts;
(iii)
calling shareholders’ meeting; and
(iv)
assisting the board in the preparation of annual reports and other reporting obligations.
The duties of our Corporate Practices, Finance, Planning and Sustainability Committee are, among others, the following:
evaluating the performance of relevant officers,
reviewing related-party transactions, and
determining the total compensation package of the chief executive officer.
Equity Compensation Plans. Equity compensation plans require shareholder approval, subject to limited exemptions. Rule 5635(c).
Equity Compensation Plans. Shareholder approval is not expressly required under our bylaws for the adoption and amendment of an equity-compensation plan. Such plans must provide similar treatment to executives in comparable positions. No equity-compensation plans have been approved by our shareholders.
Shareholder Approval for Issuance of Securities. Issuances of securities (i) that will result in a change of control of the issuer, (ii) in connection with certain acquisitions of the stock or assets of another company, or (iii) in connection with certain transactions other than public offerings require shareholder approval. Rules 5635(a)(2), (b) & (d)(1-2).
Shareholder Approval for Issuance of Securities. Mexican law and our bylaws require us to obtain shareholder approval for the issuance of equity securities.
185
Code of Business Conduct and Ethics. Corporate governance guidelines and a code of business conduct and ethics is required, with disclosure of any waiver and the reasons for such waiver for directors or executive officers. The code must include an enforcement mechanism. Rule 5610.
Code of Business Conduct and Ethics. We have adopted a code of ethics applicable to all of our directors and executive officers, which is available to you free of charge upon request and at www.oma.aero. We are required by Item 16B of Form 20-F to disclose any waivers granted to our chief executive officer, chief financial officer and persons performing similar functions, as well as to our other officers/employees.
Conflicts of Interest. Appropriate review of all related-party transactions for potential conflict of interest situations and approval by an Audit Committee or another independent body of the board of directors of such transactions is required. Rule 5630(a-b).
Conflicts of Interest. In accordance with Mexican law and our bylaws, the Audit Committee must provide an opinion regarding any transaction with a related party that is outside of the ordinary course of business, and such transactions must be approved by the Board of Directors. Pursuant to the Mexican Securities Law, our Board of Directors and our Audit Committee are required to establish certain guidelines regarding related-party transactions that do not require board approval.
Solicitation of Proxies. 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 NASDAQ. Rule 5620(b).
Solicitation of Proxies. Under the Mexican Securities Law, we are obliged to make available proxy materials for meetings of 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 by proxy. Under the deposit agreement relating to our ADSs, holders of our ADSs receive notices of shareholders’ meetings and, where applicable, requests for instructions to the ADS depositary for the voting of shares represented by ADSs.
Peer Review. A listed company must be audited by an independent public accounting firm that is registered as a public accounting firm with the Public Company Accounting Oversight Board. Rule 5250(c)(3).
Independent Public Accountants Review. Under Mexican law, we must be audited by an independent public accountant that has complied with the requirements established in the “General Provisions applicable to entities and issuers supervised by the CNBV that require external audit services for basic financial statements.” Galaz, Yamazaki, Ruiz Urquiza, S.C., Member of Deloitte Touche Thomatsu Limited is our independent auditor.
Item 16H. Mine Safety Disclosures
PART III
Item 17. Financial Statements
Item 18. Financial Statements
Reference is made to pages F-1 through F-[72] of this annual report.
Item 19. Exhibits
Documents filed as exhibits to this annual report:
Exhibit No.
1.1*
An English translation of the Amended and Restated Bylaws (Estatutos Sociales) of GACN.
Deposit Agreement among GACN, JPMorgan Chase Bank, N.A., 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 Form F-6 (File No. 333-185511) filed on December 14, 2012) (effective as of December 27, 2012).
Amendment No. 1 to the Deposit Agreement among GACN, JPMorgan Chase Bank, N.A., 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 Form F-6 (File No. 333-185511), post-effective amendment, filed on August 9, 2016).
Offering Supplement for GACN’s Ps.1,500,000 thousand offering in 10-year peso-denominated notes (certificados bursátiles), issued March 25, 2013 (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2013 filed on April 25, 2014).
Offering Supplement for GACN’s Ps.3,000,000 thousand offering in seven-year peso-denominated notes (certificados bursátiles), issued June 16, 2014 (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2014 filed on April 23, 2015).
2.5*
Indenture dated as of April 16, 2021 among Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. as Issuer, Aeropuerto de Culiacán, S.A. de C.V., Aeropuerto de Chihuahua S.A. de C.V. and Aeropuerto de Monterrey, S.A. de C.V., as guarantors, and Monex Casa de Bolsa, S.A. de C.V., Monex Grupo Financiero, as Common Representative, for Ps.2,500,000 thousand 7-year peso denominated notes (certificados bursátiles) issued on April 16, 2021 (incorporated by reference to our Form F-20-F filed on April 30, 2021).
2.6*
Indenture dated as of March 31, 2022 among Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. as Issuer, Aeropuerto de Culiacán, S.A. de C.V., Aeropuerto de Chihuahua S.A. de C.V. and Aeropuerto de Monterrey, S.A. de C.V., as guarantors, and Monex Casa de Bolsa, S.A. de C.V., Monex Grupo Financiero, as common representative, for Ps.2,300,000 thousand 7-year peso denominated notes (certificados bursátiles) issued on March 31, 2022.
2.d*
Description of the registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
Trust Agreement among GACN, Operadora Mexicana de Aeropuertos, S.A. de C.V. (now Servicios de Tecnología Aeroportuaria, S.A. de C.V.), or SETA, and Banco Nacional de Comercio Exterior, S.N.C., División Fiduciaria, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
Amendment to the Trust Agreement among GACN, SETA, and Bancomext, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
Voting Agreement among Aeroinvest, ADPM, SETA, Banco Nacional de Comercio Exterior, S.N.C., División Fiduciaria and Banca Múltiple, J.P. Morgan Grupo Financiero, División Fiduciaria, English translation (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2006 filed on July 2, 2007).
3.4
Trust Agreement among SETA, ADPM and Banco Invex, S.A., Institución de Banca Múltiple, Invex Grupo Financiero, Fiduciario, with the appearance of GACN (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2015 filed on April 27, 2015).
4.1
Participation Agreement among GACN, the Mexican Federal Government through the Ministry of Communications and Transportation, NAFIN, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., Aeropuerto de Acapulco, S.A. de C.V., Aeropuerto de Chihuahua, S.A. de C.V., Aeropuerto de Ciudad Juárez, S.A. de C.V., Aeropuerto de Culiacán, S.A. de C.V., Aeropuerto de Durango, S.A. de C.V., Aeropuerto de Mazatlán, S.A. de C.V., Aeropuerto de Monterrey, S.A. de C.V., Aeropuerto de Reynosa, S.A. de C.V., Aeropuerto de Tampico, S.A. de C.V., Aeropuerto de Torreón, S.A. de C.V., Aeropuerto de San Luis Potosí, S.A. de C.V., Aeropuerto de Zacatecas, S.A. de C.V. and Aeropuerto de Zihuatanejo, S.A. de C.V. (collectively, the “Concession Companies”), SETA, Constructoras ICA, S.A. de C.V., Aéroports de Paris and Vinci, S.A., with the appearance of Bancomext, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
Amendment to Participation Agreement among GACN, the Mexican Federal Government through the Ministry of Communications and Transportation, NAFIN, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., the Concession Companies, SETA, Constructoras ICA, S.A. de C.V. and Aéroports de Paris, with the appearance of Bancomext, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
Agreement entered into among NAFIN, Aeroinvest, SETA and the Mexican Federal Government through the Ministry of Communications and Transportation with respect to certain provisions of the Participation Agreement, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
Technical Assistance and Transfer of Technology Agreement among the Registrant, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., the Concession Companies, SETA and Constructoras ICA, S.A. de C.V., Aéroports de Paris and Vinci, S.A., English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
Second Amendment to Technical Assistance and Transfer of Technology Agreement among the Registrant, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., the Concession Companies, SETA and Constructoras ICA, S.A. de C.V., Aéroports de Paris and Vinci, S.A., English translation (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2015 filed on April 27, 2015).
188
4.6*
Third Amendment to Technical Assistance and Transfer of Technology Agreement among the Registrant, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., the Concession Companies, and SETA, English translation (incorporated by reference to our Form F-20-F filed on April 30, 2021).
4.7
Lease Agreement among Aeropuerto Internacional de la Ciudad de México S.A. de C.V. and Consorcio Grupo Hotelero T2 S.A. de C.V. dated as of March 22, 2007 (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2008 filed on June 11, 2009).
8.1
List of subsidiaries of GACN (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2018 filed on April 30, 2019).
Code of Ethics of the Company (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2006, filed on July 2, 2007).
12.1*
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 29, 2022.
12.2*
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated April 29, 2022.
13.1*
Certification of Chief Financial Officer and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 29, 2022.
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH
XBRL Schema Document.
101.CAL
XBRL Calculation Linkbase Document.
101.DEF
XBRL Definition Linkbase Document.
101.LAB
XBRL Label Linkbase Document.
101.PRE
XBRL Presentation Linkbase Document.
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).
* Filed herewith
189
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 CENTRO NORTE, S.A.B. DE C.V.
By:
/s/ Ruffo Pérez Pliego del Castillo
Name: Ruffo Pérez Pliego del Castillo
Title: Chief Financial Officer
Dated: April 29, 2022
*****
190
Grupo Aeroportuario del Centro
Norte, S. A. B. de C. V. and Subsidiaries
(Subsidiary of Servicios de Tecnología Aeroportuaria, S.A. de C.V.)
Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019, and Report of Independent Registered Public Accounting Firm Dated April 29, 2022
F-1
Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries
Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements for the Years Ended December 31, 2021, 2020 and 2019
Table of contents
Report of Independent Registered Public Accounting Firm (Galaz, Yamazaki, Ruíz, Urquiza, S.C., Mexico, PCAOB ID 01130)
F-4
Consolidated Statements of Financial Position
F-7
Consolidated Statements of Income and Other Comprehensive Income
F-9
Consolidated Statements of Changes in Shareholders’ Equity
F-10
Consolidated Statements of Cash Flows
F-11
Notes to Consolidated Financial Statements
F-12
F-2
Index for Notes to Consolidated Financial Statements
Note
Nature of business operations
Significant event
Basis of presentation and consolidation
F-13
Significant accounting policies
F-16
Critical accounting judgments and key sources of estimation uncertainty
F-31
Cash and cash equivalents
F-33
Accounts receivable
Other accounts receivable and prepaid expenses
F-35
Property, leasehold improvements and equipment
Investment in airport concessions
F-36
Composition of GACN
F-38
Trade accounts payable
F-39
Payable taxes and other accrued expenses
F-40
Short-term debt
Long-term debt
F-41
F-42
Labor obligations
F-43
Right of use assets, net and lease liability
F-46
F-48
Commitment and contingencies
F-50
Financial risk management
F-55
Shareholders’ equity
F-61
Accumulated other comprehensive income
F-63
Related party balances and transactions
Operating segment data
F-66
F-69
F-71
Subsequent event
Authorization for the issuance of the consolidated financial statements
F-3
(Thousands of Mexican pesos)
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and subsidiaries (the “Company”) as of December 31, 2021, 2020 and 2019, the related consolidated statements of income and other comprehensive income, changes in shareholders’ equity and cash flows, for the years then ended and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Our audits also comprehended the translation of Mexican peso amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 3f. to the consolidated financial statements. Such U.S. dollar amounts are presented solely for the convenience of readers outside of Mexico.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 29, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Emphasis of Matter
We draw attention to Note 3d of the consolidated financial statements, which describes the effects of the outbreak of coronavirus disease (“COVID-19”) on the operations of the Company.
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Investment in airport concessions and major maintenance provision — Refer to Notes 4i, 4l, 10 and 16 to the consolidated financial statements.
Critical Audit Matter Description
The Company is obligated to incur expenditures for improvements to concessioned assets and major maintenance in accordance with the Master Development Program (MDP). During the year ended December 31, 2021, the Company spent $1,788,903 and $203,042, in improvements to airport concessions and major maintenance work, respectively. These expenditures must comply with the MDP to be recovered through increases in rates that the Company may charge for aeronautical services.
We identified the recognition of expenditures as improvements to the airport concession and major maintenance cost as a critical audit matter because of the judgements made by management, including whether the expenditures comply with the MDP. This required a high degree of auditor judgment in evaluating whether the audit evidence obtained supports management’s assertion related to the recognition of these expenditures and their compliance with the MDP.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recognition of the expenditures related to the improvements to airport concessions and major maintenance cost included the following, among others:
F-5
We have served as the Company’s auditor since 2000.
F-6
Thousands of
U.S. dollars
(Convenience
Translation
Note 3 d)
Notes
Assets:
292,525
5,987,164
2,958,804
3,429,873
Accounts receivable, net
53,044
1,085,670
833,643
757,756
Recoverable taxes
13,465
275,600
542,365
295,768
Advance Payment for constructions to related parties
10,920
223,498
214,209
181,989
Advance Payments to contractors
7,923
162,165
115,233
102,776
42,333
66,575
42,742
Total current assets
379,946
7,776,430
4,730,829
4,810,904
Non-current assets:
Property, leasehold improvements and equipment, net
133,105
2,724,296
2,700,469
2,647,101
Investment in airport concessions, net
570,703
11,680,684
10,229,656
9,267,111
Rights of use of leased assets, net
9,632
197,131
178,247
210,788
Other assets, net
2,257
46,196
34,621
44,053
Deferred income taxes
22,690
464,404
317,758
297,004
Total non-current assets
738,387
15,112,711
13,460,751
12,466,057
Total assets
1,118,332
22,889,141
18,191,580
17,276,961
Liabilities and shareholders’ equity:
Current liabilities:
131,918
2,700,000
Current portion of long-term debt
3,013,502
36,851
Current portion of major maintenance provision
33,849
692,788
443,570
151,554
Current portion of financial leases
1,433
29,332
26,553
72,320
10,417
213,207
204,048
196,791
48,754
997,854
370,188
590,262
Accounts payable to related parties
13,155
269,249
167,704
187,515
Total current liabilities
239,526
4,902,430
4,225,565
1,235,293
Non-current liabilities:
244,128
4,996,622
1,496,886
4,506,758
51,250
1,048,945
874,415
802,342
Guarantee deposits
16,716
342,120
350,738
387,656
6,312
129,199
115,691
106,160
Financial leases
9,547
195,404
168,210
148,540
1,768
36,189
133,828
202,717
Total non-current liabilities
329,721
6,748,479
3,139,768
6,154,173
Total liabilities
569,247
11,650,909
7,365,333
7,389,466
Contributed capital:
Common stock
14,549
297,782
300,822
301,739
Additional paid-in capital
1,455
29,786
16,004
327,568
330,608
331,525
Earned capital:
Reserve for repurchase of shares
50,236
1,028,188
1,500,000
1,257,454
Retained earnings
474,034
9,702,141
8,824,666
8,121,937
Accumulated other comprehensive loss
(95)
(1,936)
(4,933)
4,194
524,175
10,728,393
10,319,733
9,383,585
Controlling interest
540,179
11,055,961
10,650,341
9,715,110
Non-controlling interest
8,906
182,271
175,906
172,385
Total shareholders’ equity
549,084
11,238,232
10,826,247
9,887,495
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
F-8
(Thousands of Mexican pesos, except per share data)
Thousands of U.S.
dollars
For the years ended December 31,
257,863
80,782
87,403
426,048
Cost of services, excluding depreciation and amortization
38,213
25,048
28,658
15,630
6,525
(62)
225,220
Operating income
200,828
Interest expense
25,244
516,676
420,499
376,008
Interest income
(6,326)
(129,479)
(111,889)
(171,236)
(5,502)
(112,617)
(79,522)
50,878
13,416
274,580
229,088
255,650
187,412
Income tax expense
47,499
Consolidated net income for the year
139,913
Other comprehensive income (loss):
Items that will not be subsequently reclassified to profit or loss:
Actuarial gain (loss) on labor obligations
17 and 23
209
4,281
(13,039)
(12,834)
Income tax relating to actuarial loss (gain) on labor obligations
(63)
(1,284)
3,912
3,850
Total other comprehensive income (loss)
2,997
(9,127)
(8,984)
Total comprehensive income for the year
140,060
2,866,627
1,088,752
3,218,450
Consolidated net income attributable to:
139,602
2,857,265
1,094,358
3,219,798
311
6,365
3,521
7,636
Comprehensive income attributable to:
139,749
2,860,262
1,085,231
3,210,814
Basic and diluted earnings per share of controlling interest
0.35921
7.35206
2.8038
8.1984
Weighted average shares outstanding
388,634,783
390,313,970
392,736,827
(Thousands of Mexican pesos, except share data (Note 22))
Contributed capital
Accumulated
Reserve for
other
Total non-
Number of
Additional
contributed
repurchase of
Retained
comprehensive
Total earned
Total controlling
controlling
shareholders’
shares
paid-in capital
capital
earnings
income
interest
equity
Balance as of January 1, 2019
393,446,466
303,394
333,180
1,466,016
6,534,804
13,178
8,013,998
8,347,178
164,749
8,511,927
Repurchase of shares, net
(2,145,651)
(1,655)
(242,546)
(244,201)
Dividends paid
(1,598,681)
Increase in reserve for repurchase of shares
33,984
(33,984)
Consolidated comprehensive income
Balance as of December 31, 2019
391,300,815
(1,189,259)
(917)
(149,083)
(150,000)
391,629
(391,629)
Balance as of December 31, 2020
(3,942,131)
(3,040)
(471,812)
(474,852)
(1,979,790)
Balance as of December 31, 2021
Year ended December 31,
Cash flows from operating activities:
Adjustments for:
Increase (decrease) in allowance for doubtful accounts
18,342
Gain on sales of property and equipment
(74)
(1,520)
(5,380)
(1,162)
Present value of major maintenance provision
5,577
114,137
75,262
23,157
19,667
402,538
345,237
352,851
Exchange differences
(4,149)
(84,916)
(72,253)
44,007
250,992
5,137,098
2,569,574
5,554,608
(Increase) decrease trade accounts receivable, net
(12,345)
(252,673)
(94,229)
(60,949)
(Increase) decrease recoverable tax
13,034
266,765
(246,597)
(183,103)
(Increase) decrease of repayment for contractors, other accounts receivable and prepaid expenses
693
14,175
(16,576)
(25,156)
Increase (decrease) trade accounts payable
(1,583)
(32,374)
7,384
(26,880)
(Decrease) increase payable taxes and other accrued expenses
(4,813)
(98,515)
48,472
41,367
Income taxes paid
(24,016)
(491,542)
(747,867)
(1,324,834)
Increase (decrease) related parties, net
4,777
97,780
(72,554)
(42,276)
(9,920)
(203,042)
(103,704)
(305,133)
Increase guarantee deposits and labor obligations
448
9,172
(40,425)
88,880
Net cash flows from operating activities
217,267
4,446,844
1,303,478
3,716,524
Cash flows from investment activities:
Acquisition of property improvements
(4,951)
(101,333)
(157,992)
(57,103)
Other non-current assets
(65)
(753)
Proceeds from sale of property and equipment
1,520
5,380
1,162
Acquisition of improvements in concessioned assets
(89,145)
(1,824,557)
(1,283,642)
(1,086,426)
Other investments held to maturity
19,657
Interest received
6,326
129,479
111,889
171,236
Net cash flows used by investing activities
(87,696)
(1,794,891)
(1,324,430)
(952,227)
Cash flow from financing activities:
Borrowing of short term debt
Payment of long-term debt
(682)
(13,967)
(42,592)
(40,790)
Issuance of debt securities
3,500,000
Amortization of debt securities
(146,576)
(3,000,000)
Debt issuance costs
(628)
(12,859)
Repurchase of shares
(23,201)
Loans obtained from related parties
41,895
14,700
Loans repaid to related parties
(359)
(7,350)
Interest paid
(17,800)
(364,324)
(320,866)
(327,309)
(96,730)
Financial leases payments
(2,667)
(54,589)
(57,325)
(50,180)
Net cash used by financing activities
14,280
292,269
(528,888)
(2,246,461)
Net increase (decrease) in cash and cash equivalents
143,851
2,944,222
(549,840)
517,836
Effects of exchange rate changes on the foreign currency cash balance
4,111
84,138
78,771
(46,865)
Cash and cash equivalents at the beginning of the year cash balance
144,563
2,958,902
Cash and cash equivalents at the end of the year
Non cash investing activities which are not reflected in the consolidated statements of cash flows:
Acquisition of property, leasehold improvements and equipment, including finance leases
250
593
Acquisition of other assets
265
2,879
58,925
29,342
29,068
The accompanying notes are an integral part of these consolidated financial statements
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(In thousands of Mexican pesos, except otherwise indicated)
1. Nature of business operations
Operations
Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. (“GACN” or the “Company”), is a subsidiary of Servicios de Tecnología Aeroportuaria, S. A. de C.V. (“SETA”). GACN is a holding company, whose subsidiaries are engaged in the administration, operation, and use of 13 airports under a concession granted by the Mexican Government through the Ministry of Infrastructure, Communications and Transportation. The airports are located in the following cities: Monterrey, Acapulco, Mazatlán, Zihuatanejo, Ciudad Juárez, Reynosa, Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón, and Zacatecas. The Company also generates revenue from hotel services provided by Consorcio Grupo Hotelero T2, S.A. de C.V. (the Terminal 2 NH Hotel) and Consorcio Hotelero Aeropuerto Monterrey, S.A.P.I. de C.V. (the Hilton Garden Inn Hotel), located at Terminal 2 of the Mexico City International Airport and at Monterrey International Airport, respectively.
The address of the Company’s corporate office is Patriotismo #201, 5th Floor, San Pedro de los Pinos, Mexico City, Zip Code 03800.
2. Significant events
OMA21V and OMA21-2 GACN Notes Issuance
On April 16, 2021, GACN announces the successful completion of its issuance of Ps.3,500,000 in long-term notes in the Mexican market through two tranches issued jointly as part of a program to issue long-term (“the Issuances”). One of the tranches was placed as a Green Bond. The issuances are the following:
The proceeds were used for the early redemption of Ps.3,000,000 of 7-year debt securities that were issued on June 16, 2014, and will be used to finance eligible green projects, such as solar generation and energy efficiency projects.
Dividend payments
Pursuant to the resolutions adopted at the Annual Ordinary Stockholders’ Meeting held on April 21, 2021, the Board of Directors determined the payment of a dividend in the amount of Ps.2,000,000,000 to be paid in a single exhibition in the amount of 5.126738671 pesos per share. The payment date was December 14, 2021, upon delivery of coupon number 3.
On January 7, 2022, in accordance with the resolutions adopted by its General Ordinary and Extraordinary Shareholders’ Meeting, held on December 22, 2021, the Board of Directors with the power delegated by the Shareholders’ Meeting, determined the payment of a cash dividend of Ps.4,370,000,000 to be paid in a single installment of Ps.11.201923995 per share. The payment date was January 19, 2022, upon delivery of coupon number 4.
Tender offer
On July 7, 2021, Aerodrome Infrastructure S.à r.l. (Aerodrome), an affiliated of SETA, settled the simultaneous tender offer in Mexico and in the United States of America, for the shares of GACN fully subscribed and paid-in capital stock (the “Offer”). Consequently, Aerodrome acquired 60,155,201 series B ordinary shares, nominative and without par value, of GACN fully subscribed and paid-in capital stock, which represents 15.4% of the Company’s outstanding capital stock. As a result of the foregoing, SETA and Aerodame, indirectly own 30.1% of the Company’s outstanding capital stock.
Issuance of Treasury Stock
At the Ordinary General Shareholders’ Meeting held on June 11, 2021, the shareholders approved to carry out the issuance of 49,766,000 (forty-nine million seven hundred sixty-six thousand) unsubscribed and unpaid Series B Shares to be kept in the treasury of the Company, exclusively to cover the possible conversion of the Series BB Shares owned by SETA into Series B shares, in case of default under certain financing agreements to which SETA and Aerodrome are parties. Neither such issuance nor its potential conversion will result in any dilution to GACN’s shareholders.
3. Basis of presentation and consolidation
a)
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), including amendments and interpretations, as issued by the International Accounting Standards Board (IASB).
b)Consolidated statement of financial position
According to the requirements of the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores), GACN must present as part of its basic consolidated financial statements, a third year in the consolidated statement of financial position.
c)Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis; notwithstanding, fair value is disclosed in certain cases. In addition, the Company determines the fair value of certain financial instruments for disclosures purposes.
i.
Historical cost
Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
ii.
Fair value
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 measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope IAS 2, and valuations that have some similarities to fair value but are not fair value, such as the value in use in IAS 36.
In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
d)Impact of Covid 19
On March 11, 2020, the World Health Organization (WHO) declared a new strain of coronavirus (COVID-19) as a pandemic. COVID-19 resulted in travel restrictions imposed by governments of various countries, flight cancellations, and a marked decrease in demand for air travel by passengers, both domestically and internationally. In 2020, the Company had a 52.3% decrease in passengers compared to 2019. During 2021, the Company had a significant recovery in the level of passengers transported of 63%. Likewise, the Company's total revenues and operating income increased 62% and 139% respectively in 2021.
e)Going concern
The consolidated financial statements have been prepared by management assuming that the Company will continue to operate as a going concern.
Derived from the uncertainty and duration of this pandemic, the Company analyzed, among others, the following considerations to determine that it will continue to operate as a going concern.
F-14
Therefore, management believes that the Company will continue as a going concern for the foreseeable future.
f)Convenience translation
Solely for convenience of readers, peso amounts included in the consolidated financial statements as of December 31, 2021, and for the year then ended have been translated into U.S. dollar amounts at the exchange rate of Ps.20.4672 pesos per U.S. dollar, as published by Banco de México, Such translation should not be construed as a representation that the Mexican peso amounts have been, could have been or could, in the future, be converted into U.S. dollars at such rate or any other rate.
g)Reporting and functional currency
The Mexican peso, legal currency of the United Mexican States is the currency in which the consolidated financial statements are presented (reporting currency) and the Company’s functional currency. Transactions in currencies other than the peso are recorded in accordance with established policies described in note 4 b.
h)Consolidated statements of income and other comprehensive income
The Company chose to present the consolidated statement of income and other comprehensive income in a single statement, as well as presenting operating income in such statement in accordance with practices in the industry. Costs and expenses were classified according to their nature.
i)Statement of Cash Flows
The Company presents the cash flows from operating activities using the indirect method, in which the profit or loss is adjusted to reflect the effect of transactions that do not require cash flow, including those associated with investment or financing activities.
j)Principles of consolidation
The consolidated financial statements incorporate the financial statements of GACN and its subsidiaries. Control is achieved when GACN or its subsidiaries:
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
F-15
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of income and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.
The income and each component of other comprehensive income are attributed to the Company’s owners and to the non-controlling interests.
The non-controlling interests in equity of subsidiaries are presented separately as non-controlling interests in the consolidated statements of financial position, within the shareholders’ equity section, and the consolidated statements of income and other comprehensive income.
The financial statements of companies that are included in the consolidation are prepared as of December 31 of each year. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Note 11 sets forth the entities that are consolidated on the financial statements and the information related thereto.
4. Significant accounting policies
The consolidated financial statements are prepared in accordance with IFRS. Preparation of financial statements under IFRS requires the Company’s management to make certain estimates and use assumptions to value certain of the items in the consolidated financial statements as well as their related disclosures required therein. The areas with a high degree of judgment and complexity or areas where assumptions and estimates are significant in the consolidated financial statements are described in note 5. The estimates are based on information available at the time the estimates are made, as well as the best knowledge and judgment of management based on experience and current events. However, actual results could differ from those estimates. The Company has implemented control procedures to ensure that its accounting policies are appropriate and are properly applied. Although actual results may differ from those estimates, the Company’s management believes that the estimates and assumptions used were adequate under the circumstances.
The consolidation requirements, accounting policies and valuation methods used in preparing the consolidated financial statements as of and for the year ended December 31, 2021, were the same as those applied in the consolidated financial statements for 2020 and 2019, except for the standards and interpretations described in paragraph (a) (I) included below, which were applicable to the Company and were effective during 2021.
In the current year, the Company adopted Phase 2 amendments Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. Adopting these amendments enables the Company to reflect the effects of transitioning from the Interbank Offered Rate (IBOR) to alternative benchmark interest rate (also referred to as “risk-free rate” or RFRs) without given rise to accounting impacts that would not provide useful information to users of financial statements.
The Company’s management determined that the application of these amendments did not have a material impact on the consolidated financial statements.
In the prior year, the Company early adopted Covid19-Related Rent Concessions (amendment to IFRS 16) that provided practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19, by introducing a practical expedient to IFRS 16.
In March 2021, the IASB issued Rent Concessions related to COVID-19 after June 30, 2021 (amendment to IFRS 16). When the IASB issued amendments to IFRS 16 in May 2020, the lessor was allowed to apply the practical expedient of the rent concession for any reduction in lease payments affecting the original payments before or at June 30, 2021. Due to the nature of the COVID-19 pandemic, the amendment extended a practical expedient to apply those original payments on or before June 30, 2022.
The Company’s management determined that the application of these amendments did not have a material impact on the consolidated financial statements, since it did not receive rent concessions in the period.
F-17
At the date of authorization of these financial statements, the Company has not applied the following new and modified IFRS Standards that have been issued but are not yet effective:
IFRS 10 and IAS 28 (amendments)
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (3)
Amendments to IAS 1
Classification of Liabilities as Current or Non-current. (2)
Amendments to IFRS 3
Reference to the Conceptual Framework (1)
Amendments to IAS 16
Property, Plant and Equipment—Proceeds before Intended Use (1)
Amendments to IAS 37
Onerous Contracts – Cost of Fulfilling a Contract (1)
Annuals Amendments a IFRS cycle del 2018 – 2020
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards (2), IFRS 9 (1) Financial Instruments, IFRS 16 Leases (3).
Amendments to IAS 1 and IFRS Practice Statements 2
Disclosure of accounting policies (3).
Amendments to IAS 8
Definition of accounting estimates (2).
Amendments to IAS 12
Deferred taxes related to assets and liabilities arising from a single transaction (2).
Management does not expect that the adoption of these and modifications will have a significant impact on the consolidated financial statements of the Company.
Foreign currency transactions are recorded at the exchange rate in effect at the date of the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the exchange rate prevailing at the end of the reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange fluctuations are recorded in profit or loss, except for exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings.
Cash and cash equivalents consist mainly of bank deposits in checking accounts and short-term investments, highly liquid and easily convertible into cash, maturing within three months as of their acquisition date, which are subject to immaterial value change risks. Cash is stated at nominal value and cash equivalents are measured at fair value.
F-18
Financial assets and financial liabilities are recognized in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.
Financial assets
All purchases or sales of financial assets in the ordinary course of business are recognized and derecognized on a trade date basis. Purchases or sales in the ordinary course of business are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.
All recognized financial assets are measured subsequently in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.
As of December 31, 2021, 2020 and 2019, all of the Company’s financial assets have been recognized at amortized cost.
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and amounts paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) excluding expected credit losses, through the expected life of the debt instrument, or, where appropriate, a shorter period, to the gross carrying amount of the debt instrument on initial recognition.
The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.
Financial assets at fair value through other comprehensive income are those whose business model is based on obtaining contractual cash flows and selling financial assets, in addition to their contractual conditions giving rise, on specified dates, to cash flows that they are only payments of the principal and interest on the outstanding principal amount. As of December 31, 2021, the Company does not have financial assets at fair value through other comprehensive income.
Financial assets are classified at fair value through profit or loss when the financial asset is held for trading, or it is designated as fair value through profit or loss. As of December 31, 2021, 2020 and 2019, the Company does not have financial assets at fair value through profit.
F-19
Impairment of financial assets
The Company recognizes a loss allowance for expected credit losses on investments in debt instruments that are measured at amortized cost or at FVTOCI, trade receivables and contract assets. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.
The Company recognizes lifetime expected credit losses (ECL) for trade receivables and contract assets. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, including general economic conditions.
For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument has increased significantly since initial
recognition, the Company compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument at the date of initial recognition. In making this assessment, the Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.
The Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable:
Irrespective of the above analysis, the Company considers that default has occurred when a financial asset is more than 90 days past due unless the Company has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred.
F-20
The Company writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g., when the debtor has been placed under liquidation or bankruptcy proceedings. Any recoveries made are recognized in profit or loss.
According to IFRS 9, the Company recognize a provision of expected credit losses in the financial assets such as trade receivables and other financial assets. The expected credit losses on these financial assets are estimated from the initial recognition of the asset at each reporting date, using as a reference the past experience of the Company’s credit losses, adjusted for factors that are specific to the debtors or groups of debtors, the general economic conditions and an assessment of both, management and conditions existing as of the reporting date, including the time value of money where appropriate.
The measurement of expected credit losses is a function of the probability of default, loss due to a default (i.e., the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss due to a default is based on historical data adjusted by forward-looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, discounted at the original effective interest rate.
Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expires, or when it transfers to another entity the financial asset and substantially all the risks and rewards of ownership of the asset.
On derecognition of a financial asset measured at amortized cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.
F-21
The Company records a reserve for the repurchase of shares from amounts appropriated from retained earnings, to strengthen the supply and demand of its shares in the stock market, as permitted by Mexican Securities Law. The shareholders’ meeting authorizes the maximum disbursement for the repurchase of shares to be used for this activity in each period between said meeting and the following, in which the application of results is approved and made.
At the time of a purchase, shares are converted into treasury shares and become part of the shareholders’ equity at the purchase price; one part of the capital stock to the historical value, and the remainder to the reserve to repurchase shares.
Financial liabilities
All financial liabilities are measured subsequently at amortized cost using the effective interest method or at FVTPL.
Other financial liabilities
Other financial liabilities, including loans, bond issuances and debt with lenders and trade creditors and other payables are valued initially at fair value, represented generally by the consideration transferred, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in results.
When a financial liability measured at amortized cost is modified without a derecognition, the Company recognizes a gain or loss in the modification, which is calculated as the difference between the amortized cost at the date of the refinancing and the cash flows with the new terms of financing discounted at the effective interest rate of the original debt. In addition, when the Company refinancing the transaction and the previous liability qualifies to be derecognized, the costs incurred in the refinancing are recognized immediately in results at the date of the termination of the previous financial liability.
Expenditures for property, leasehold improvements and equipment acquired are carried at acquisition cost. Depreciation is recognized so as to write off the cost or deemed cost of assets (other than freehold land and properties under construction). Depreciation of property, leasehold improvements and equipment is calculated using the straight-line method over the useful life of the asset. Depreciation begins in the month in which the asset is placed in service. The useful lives of assets are as follows:
Useful
Life (years)
Improvement in leased assets
Furniture and office equipment
Transportation equipment
Computer equipment
The depreciation of property, leasehold improvements and equipment is recorded in results.
F-22
Disposal of assets
The gain or loss on the sale or retirement of an item of property and equipment is calculated as the difference between the proceeds from the sale and the carrying value of the asset and is recognized in income when all risks and rewards of ownership of the asset is transferred to the buyer, which generally occurs when ownership of the asset is transferred to the buyer.
Replacements or renewals of a component of property or equipment that extend the useful life of the asset, or its economic capacity are recognized as an increase to property and equipment, with the subsequent write-off or derecognition of the assets replaced or renewed.
Construction in progress for leasehold improvement
Construction in progress for leasehold improvement is carried at cost less any recognized impairment loss. Cost includes professional fees and, in the case of qualifying assets, borrowing costs capitalized in accordance with the Company’s accounting policy. Such properties are transferred to the appropriate categories of property and equipment when completed and ready for intended use. The depreciation of these assets, as well as other properties, begins when the assets are ready for use.
Subsequent costs
Subsequent costs form part of the value of the asset or are recognized as a separate asset only when it is probable that such disbursement represents an increase in productivity, capacity, efficiency or an extension of the life of the asset and the cost of the item can be determined reliably. All other expenses, including repairs and maintenance are recognized in comprehensive income as incurred.
- As lessor
Leases for which the Company is a lessor are classified as financial leases or operating leases. Whenever the terms of the lease transfer substantially all risks and rewards of ownership in the lessee, the contract is classified as a financial lease. All other leases are classified as operating leases.
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.
Amounts due from lessees under finance leases are recognized as receivables at the amount of the Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.
- As lessee
The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognizes a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
F-23
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise in:
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
- The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
- The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
- A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.
The Company did not make any such adjustments during the periods presented.
Right-of-use assets
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfer’s ownership of the underlying asset or the cost of the right-of-use asset reflects that the Company expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
The right-of-use assets are presented as a separate line in the consolidated statement of financial position.
F-24
The Company applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the “Property, Plant and Equipment’ policy.
Guarantee deposits correspond to amounts received from lessees to guarantee performance under the lease. They are recorded at cost and are either returned to tenants at the end of the lease term or recognized against services unpaid by tenants.
Additionally, certain agreements were entered into with airlines, which established escrow deposits paid by the airlines to guarantee their obligation for payment of the amounts collected from passengers for the Airport Use Fee (Tarifa de Uso de Aeropuertos or “TUA”) and other airport services.
If the payment obligations are not met, the Company may immediately exercise the guarantees and utilize the funds. The aforementioned escrow deposits are recorded at cost.
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets is substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
This item consists of the rights paid to manage, operate and, in certain cases make capital investments to 13 airports based on a concession granted by the Mexican Government through the Ministry of Infrastructure, Communications and Transportation, and to use their facilities, for a 50-year term.
Investment in concessions includes the rights to use airport facilities of airport concessions and improvements to concessioned assets and represents the amount granted by the Ministry of Infrastructure, Communications and Transportation to each airport concessions, plus improvements made to each individual concession since the time of grant.
Under all concession arrangements, (i) the grantor controls or regulates what services the Company must provide with the infrastructure, to whom it must provide them, and at what price; and (ii) the grantor controls, through ownership, any significant residual interest in the infrastructure at the end of the term of the arrangement. Accordingly, the Company classifies the assets derived from the construction, administration and operation of the service concession arrangements either as intangible assets, financial assets (accounts receivable) or a combination of both.
The Company classifies its concessioned assets as an intangible asset, including its improvements.
An intangible asset results when the operator constructs or makes improvements and is allowed to operate the infrastructure for a fixed period after construction is complete, in which the future cash flows of the operator have not been specified, because they may vary depending on the use of the asset and are therefore considered contingent. The cost of financing incurred during the construction period is capitalized.
F-25
Investments in airport concessions are amortized on a straight-line basis over the term of the concession, which is until 2048, or from the date of capitalization of additions or improvements considering the remaining term of the concession.
Revenues and costs related to construction or improvements to intangible assets subject to the Company’s airport concession with the government are recognized as revenue based on the percentage of completion method associated with the related construction costs.
The Company classified current construction projects as part of improvements to concessioned assets in progress (contract assets).
Management periodically evaluates the impairment of long-lived assets in order to determine whether there is evidence that those assets have suffered an impairment loss. If impairment indicators exist, the recoverable amount of assets is determined, with the help of independent experts, to determine the extent of the impairment loss, if any.
Intangible assets with indefinite useful life and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
When an impairment subsequently reverses, the Company reverses a portion, or all of the impairment losses recognized in prior periods. When an impairment loss is reversed, the carrying amount of the asset is increased to the revised estimated value of its recoverable amount, only to the extent that the increased carrying amount does not exceed the carrying amount that would have been calculated if no impairment loss had been initially recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.
The Company considers that each airport individually cannot be considered as a “cash generating unit” to determine the extent of the loss impairment, since the tender for the concession was made by the Mexican Government as a package of 13 airports. Therefore, licensees are obligated to operate them regardless of the results generated individually. Considering the above, the evaluation of a possible impairment loss is performed taking into account the net assets of the 13 airports taken as a whole, while the hotels and industrial park are evaluated individually.
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, when it is probable that the Company will be required to settle the obligation, and when a reliable estimate can be made of the amount of the obligation.
F-26
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 associated with 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 the effect of the time value of money is material).
The main provision recognized by the Company is for major maintenance for its concessioned assets, which is classified as current or noncurrent based on the estimated time period over which it expects to settle the obligation.
l.
Major maintenance provisions
The Company is required to perform major maintenance activities to its airports as established by the concession provided by the Mexican Government, in order to preserve the infrastructure in optimal working condition. The estimated major maintenance costs are considered in the Company’s Master Development Program, which is reviewed and updated every five years. The Company recognizes and measures the contractual obligations of major maintenance of infrastructure when accrued according to IAS 37 (Provisions, Contingent Liabilities and Contingent Assets) and IFRS Interpretation Committee 12 (Service Concession Arrangements), a portion is recorded as short-term and the remainder as long-term depending on the period in which the maintenance is expected to be performed. These contractual obligations to maintain and restore the infrastructure of airports are recognized as a provision in the consolidated statements of financial position and in the expenses of the current fiscal year, pursuant to estimates that are required to comply with the present obligation at the end of the reporting period. When the effect of the time value of money is material, the amount of the provision equals the present value of the expenditures expected to be required to settle the obligation. The carrying amount of the provision increases each period to reflect the passage of time and this increase is recognized as an expense. After initial recognition, provisions are reviewed at the end of each reporting period and adjusted to reflect current best estimates.
Adjustments to provisions arise from three sources: (i) revisions to estimated cash flows (both in amount and timing); (ii) changes to present value due to the passage of time; and (iii) revisions of discount rates to reflect prevailing current market conditions.
In periods following the initial recognition and measurement of the maintenance provision at its present value, the provision is revised to reflect estimated cash flows being closer to the measurement date. The unwinding of the discount relating to the passage of time is recognized as a financing cost and the revision of estimates of the amount and timing of cash flows is a remeasurement of the provision and charged or credited as an operating item within the consolidated statements of income and other comprehensive income.
m.
Income tax expense represents the sum of the tax currently and deferred tax. Current tax is determined based on taxable profit, which differs from profit as reported in the consolidated statement of income and other comprehensive income because of items of income or expense that are taxable or deductible in periods different from when they are recognized in accounting profit.
Deferred income taxes are recognized for the applicable temporary differences resulting from comparing the accounting and tax values of assets and liabilities plus any future benefits from tax loss carry forwards. Except as mentioned in the following paragraph, deferred tax liabilities are recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible temporary differences and the expected benefit of tax losses. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
F-27
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. The Company determined recoverability of its deferred tax assets for each subsidiary based on its projections of future taxable income, which include the Master Development Program and the maximum rates for the period 2021-2025 approved by the Ministry of Infrastructure, Communications and Transportation.
Current and deferred income taxes are recognized as income or expense in profit or net loss, except when they relate to items recognized outside of profit or loss, as in the case of items of other comprehensive income, or other shareholders’ equity items, in which case the tax is recognized in other comprehensive income as part of the equity item involved.
Assets and deferred tax liabilities are offset when a legal right to offset assets with liabilities exists and when they relate to income taxes relating to the same tax authorities and the Company intends to liquidate its assets and liabilities on a net basis.
n.
Employee benefits
Short-term employee benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Certain subsidiaries are subject to payment of statutory employee profit sharing and is recorded in the results of the year in which it is incurred and presented under cost and administrative expenses in the consolidated statements of income and other comprehensive income.
As a result of the Income Tax Law of 2014, as of December 31, 2021, and 2020, the PTU is determined based on taxable income according to section I of article 9 of the same Law.
Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related services.
Benefits from retirement and termination
Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.
F-28
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the consolidated financial statements with a charge or credit recognized in other comprehensive income in the period in which they occur.
Remeasurement recognized in other comprehensive income may be reclassified directly to retained earnings but will not be reclassified to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:
The Company presents the first two components of defined benefit costs in the consolidated statements of income and other comprehensive income in the line items cost of services and administrative expenses. Curtailment gains and losses are accounted for as past service costs.
The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual deficit or surplus in the Company’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
A liability for a termination benefit is recognized at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognizes any related restructuring costs.
o.
Revenue recognition
The revenues are recognized at the fair value of the consideration received or receivable, net of any discount. The Company applies a 5-step approach to revenue recognition:
Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e., when “control” of the goods or services underlying the particular performance obligation is transferred to the customer.
Revenues are mainly generated from the delivery of aeronautical and non-aeronautical services.
F-29
Consist mainly of revenues generated from activities related to services provided to airlines and passengers. These revenues are subject to a system of prices regulated by the Ministry of Infrastructure, Communications and Transportation, which establishes a maximum rate for such aeronautical and complementary services provided at each airport. Such revenues are recognized when the related services are rendered.
With the objective of increasing demand for aeronautical traffic at its airports, the Company implemented an incentive program to its airline customers linked to an increase in airline traffic and the opening of new routes, which is subject to certain restrictions. These incentives are recorded as a reduction of revenues over the period they are provided to clients (see note 27).
Consist mainly of the leasing of commercial spaces in airport terminals (different from spaces occupied by airlines that are essential for their operation), revenues from the operation of parking lots, advertising, fees from access to third parties that provide catering services and other services at airports. Spaces in the airport terminals are rented through operating lease agreements that contain either fixed monthly rent (increased annually based on the National Consumer Price Index (“NCPI”)) or fees based on a minimum monthly fee or a percentage of the monthly income of the lessee, whichever is higher (contingent rent). The fixed portion of lease revenues is recognized when the services are rendered or based on the terms of the related lease.
Contingent rentals received from the percentage of monthly sales from the Company’s leases are recognized in income once the contingency is met. Therefore, during the year, the percentage of lessee monthly revenues is recognized in the following month, once the Company has received information related to its tenants’ revenues. Though each year reported includes twelve months of revenues, this accounting treatment results in a one-month lag with respect to the commercial revenues for those tenants whose stated percentage of monthly income is greater than the minimum monthly fee. However, the Company monitors the effect of this one-month lag at each reporting date and does not believe such effect to be material to its reported results.
The Company’s policy for recognition of revenue from operating leases is described in detail, in subparagraph g) of this note (the Company as lessor).
Hotel services revenues
Revenues are recognized when the services are rendered.
Construction services and costs of improvements to concessioned assets
Under IFRIC 12 (Service Concession Arrangements), the Company recognizes revenues and costs for improvements to the airport concession according to the percentage of completion method derived from the improvements made to the airports and that are included in the Master Development Program. Construction service revenues related to the airport concession are determined based on the exchange between the Company and the government, as the Company constructs or improves the airports based on the Master Development Program, and the government grants the Company the right to obtain revenues from the airport services rendered in return for those construction services.
F-30
The cost for construction services is determined according to the cost the Company would incur in the construction or improvements based on the investments included in the Master Development Program, for which, through a tender offer, the Company contracts third parties to perform. The revenue amount and cost are equivalent because the Company does not obtain any profit margin for the construction and consider that the costs incurred are paid at market prices.
p.
Basic and diluted earnings per share
Basic earnings per share are computed by dividing net income of the controlling interest by the weighted average number of common shares outstanding during the year. The Company does not have potentially dilutive shares
5. Critical accounting judgments and key sources of estimation uncertainty
In applying the Company’s accounting policies, described in note 4, the Company’s management makes judgments, estimates and assumptions about the carrying amounts of assets and liabilities in the consolidated financial statements. The estimates and underlying assumptions are based on historical experience and other factors considered relevant. Actual results may differ from these estimates.
Estimates and assumptions are reviewed on an ongoing basis. Adjustments to accounting estimates are recognized in the period in which the adjustment is made and future periods if the change affects both the current period and to subsequent periods.
a.Critical accounting judgments
Critical judgments, other than those involving estimations (see paragraph b), made by management throughout the process of applying the Company’s accounting policies that have a material effect on the consolidated financial statements, are presented below.
b.Key sources of estimation uncertainty
Basic assumptions concerning the future and other key sources of uncertainty in the estimates made at the end of the reporting period, that have a significant risk of causing significant adjustments to the carrying amounts of assets and liabilities within the following financial year are as follows:
Despite of impact of the pandemic generated by COVID-19, the Company did not identify impairment with respect to the investment of the NH T2 Hotel recorded in improvements in leased assets, whose lease contract with Mexico City International Airport expires in 2029.
The Company determined the recoverable amount of the cash-generating unit corresponding to NH T2 by estimating the value in use, which uses cash flow projections based on projections over the remaining life of the lease until 2029, discounted at an after-tax discount rate of between 10.2% to 11.2%. Over the projection period, management considers an occupancy rate of 79% in 2022, gradually recovering to an average of 83% by 2024 onwards. It is also estimated that the average fare would exceed 2019 levels in 2023 and would be updated mainly with inflation thereafter. The Company's management, based on value in use calculations, has not identified any impairment as the recoverable amount exceeds the carrying value of the cash generating unit by approximately 13%. The recoverable amount includes the carrying value of the finance lease.
Management estimates that the value in use considering an average rate reduction of 13.1% or an occupancy rate 1,073 basis points lower than estimated during the projection period would equal the carrying value of the cash generating unit.
Although these estimates were made based on the best information available as of December 31, 2021, 2020 and 2019 it is possible that future events may require the Company to modify (increase or decrease) the amounts in the coming years, which in such case would be applicable on a prospective basis by recognizing the effects of changes in estimates in the corresponding consolidated financial statements.
F-32
6. Cash and cash equivalents
Cash and cash equivalents are composed as follows:
Cash
5,986,217
2,360,422
2,916,936
Cash equivalents:
Bank notes
598,382
512,027
Money market investment funds
947
910
7. Accounts receivable
a. The balance of accounts receivable is as follows:
Receivables
1,106,002
854,402
766,748
Allowance for doubtful accounts (note 7 b.)
(20,332)
(20,759)
(8,992)
Accounts receivables represent principally the passenger charges (TUA) paid by each passenger (other than diplomats, infants, and transit passengers) using the airports operated by the Company. These TUA are collected by airlines and subsequently paid to the Company. As of December 31, 2021, 2020 and 2019, amounts receivable for passenger charges amounted to Ps.952,522. Ps.658,269 and Ps.625,246, respectively.
The Company’s management considers that the carrying amount of accounts receivable approximates its fair value given their short-term nature. No interest income is generated by any short-term account receivable. As of December 31, 2021, 2020 and 2019, the balance of the allowance for doubtful accounts was Ps.20,332, Ps.20,759 and Ps.8,992, respectively.
The following tables set forth a percentage of the principal customers that compose the accounts receivable (before allowance for doubtful accounts) as well as the revenues generated from the Company’s principal customers, which may represent a potential credit risk for the Company if the counterparty had financial and operating difficulties that would prevent them from being able to settle amounts due to the Company.
Accounts receivable:
Aeroenlaces Nacionales, S. A. de C. V.
35.78
33.00
21.16
Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V.
24.01
28.10
27.40
Aerolitoral, S. A. de C. V.
8.82
8.98
20.88
Aerovías de México, S. A. de C.V.
10.44
4.74
6.70
Revenues by client:
8.14
10.49
13.26
28.45
21.07
17.79
ABC Aerolíneas, S. A. de C. V.
4.24
10.38
Concesionaria Vuela Compañía de Aviación, S. A. P. I. de C. V.
19.32
17.36
16.11
Aerovías de México, S. A. de C. V.
6.78
4.07
On June 30, 2020, Grupo Aeromexico, S.A.B. de C.V. and certain of its subsidiaries, including Aerolitoral, S.A. de C.V. and Aerovias de Mexico, S.A. de C.V. entered into reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Law. As of December 31, 2021, and the date of issuance of the financial statements, both Aerolitoral, S.A. de C.V. and Aerovias de Mexico, S.A. de C.V. are substantially current in their payments with the Company and continue to operate the Company's Airports.
During the last quarter of 2020, ABC Aerolíneas, S.A. de C.V. ceased operating at the Company's airports. The amount of accounts receivable from this customer at December 31, 2021, is not material.
b. The changes in the allowance for doubtful accounts are as follows:
Beginning balance
20,759
8,992
31,986
Decrease
Cancelation
(5,542)
Write-off
(1,073)
(1,033)
(22,753)
Ending balance
20,332
The write-off of doubtful accounts is recognized once the Company has exhausted all means for collection of the account.
The movements in the estimate for customer impairment in 2021, with the expected loss model used by the Company, are presented below:
Airports
Others
Gross book value
1,039,503
46,167
Collateral
1,242,255
25,432
1,267,687
Probability of default in range
0% - 100%
Loss due to default range
Beginning balance of impairment of account receivable
17,428
3,331
(Decrease) increase in the provision
537
16,892
3,440
F-34
8. Other accounts receivable and prepaid expenses
Other accounts receivable and prepaid expenses are comprised as follows:
Prepaid expenses
33,180
59,033
33,310
6,952
6,167
5,897
2,201
1,375
3,535
9. Property, leasehold improvements and equipment
Property, leasehold improvements and equipment are as follows:
Net carrying value:
Land (see note 10)
1,709,508
Leasehold improvements
857,274
854,829
786,085
53,600
72,867
83,611
22,786
27,940
35,105
287
1,555
5,857
2,838
2,212
Construction in progress for leasehold improvements
75,220
32,200
29,025
Construction
Machinery
Furniture
in progress of
Leasehold
and office
Transportation
Computer
leasehold
Cost
Land
improvements
equipment
999,798
202,959
158,112
61,730
67,731
5,409
3,205,247
Acquisitions
49,345
3,386
2,168
80,290
136,058
Disposals
(525)
Transfers
9,403
(34,283)
(430)
(55,656)
(80,966)
(20)
(5,792)
(595)
(1,018)
(7,425)
1,058,546
206,345
159,735
21,655
67,575
3,252,389
8,380
440
3,973
134,821
130,420
(130,420)
(206)
(3,097)
(1,226)
(4,529)
1,188,966
214,725
159,969
68,451
3,395,474
208
1,908
5,023
114,129
121,731
(2,393)
70,373
590
(71,109)
(93)
(7,237)
(1,003)
(330)
(8,570)
1,259,802
207,749
162,467
18,259
73,144
3,506,149
Construction in
Furniture and
progress of
Machinery and
office
depreciation
(216,577)
(103,765)
(115,438)
(36,404)
(62,801)
(534,985)
Depreciation
(55,884)
(18,969)
(9,729)
(4,806)
(3,051)
(92,439)
525
21,110
489
21,611
(272,461)
(122,734)
(124,630)
(20,100)
(65,363)
(605,288)
(61,676)
(19,124)
(7,720)
(1,268)
(2,532)
(92,320)
321
2,603
(334,137)
(141,858)
(132,029)
(21,368)
(65,613)
(695,005)
(68,391)
(19,347)
(7,652)
(64)
(2,027)
(97,481)
7,056
2,446
9,502
778
353
1,131
(402,528)
(154,149)
(139,681)
(18,208)
(67,287)
(781,853)
10. Investment in airport concessions
The Company has concessions to operate, maintain and develop 13 airports in Mexico, which are concentrated in central and northern regions of the country. Each concession is for 50 years from November 1, 1998. The term of each of the Company’s concessions may be extended by the Ministry of Infrastructure, Communications and Transportation under certain circumstances for a period not exceeding 50 years.
As operators of 13 airports the Company earns revenue from airlines, passengers, and other users for using the airport facilities. The Company also earns revenues for commercial activities carried out at the airports, such as leasing of space to restaurants and other shops.
Each airport concession agreement contains the following terms and basic conditions:
Since the concessionaire is part of an integrated economic group, the concessionaire and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V, they will respond jointly and severally to the Ministry of Infrastructure, Communications and Transportation, regarding the obligations contained in each of the concessions granted and as indicated in the concession title. The terms and conditions of each concession contract have been fulfilled in all important aspects during the years ended December 31, 2021, 2020 and 2019.
Investments in airport concessions include improvements to concessioned assets, rights to use airport facilities, and airport concessions. The total cost of the concession was assigned proportionally to rights to use airport facilities on the basis of the fair value of the assets determined by an independent appraiser. At any airport concession where the cost exceeded the fair value, the excess was recognized within the airport concessions line item.
As of December 31, 2021, 2020 and 2019, the carrying value of the right to use airport facilities, airport concessions and improvement to concessioned assets classified as intangible assets are as follows:
Projects completed and in operation:
Airport concessions
605,643
Rights to use airport facilities
3,356,762
Improvements to concessioned assets (see note 15)
9,694,492
8,594,136
7,331,450
Improvements to concessioned assets in progress
1,303,793
615,246
624,063
Accumulated amortization
(3,280,006)
(2,942,131)
(2,650,807)
The changes in investment in concessions are as follows:
13,171,787
11,917,919
10,963,084
Increase
1,253,868
954,835
14,960,690
Amortization of airport concessions:
(2,396,427)
(337,875)
(291,323)
(254,380)
Net investment in airport concessions
Master Development Plan – The Company is obligated to carry out maintenance, improvements to concessioned assets and acquire fixed assets according to the Master Development Program. The Master Development Program for 2021-2025 is Ps.11,979,621 in pesos with purchasing power of December 31, 2019, and Ps.14,514,871 in pesos with purchasing power of December 31, 2021, as updated with the National Producer Price Index (INPPIC) of the construction industry, in accordance with the concession contract. The amount to be incurred as of December 31, 2021, is Ps.12,519,332, which is anticipated to be carried out as follows:
Year
F-37
The Master Development Program for the previous five-year period 2016-2020, was for Ps.4,445,653, with purchasing power as of December 31, 2014, and Ps.6,303,586 with purchasing power as of December 31, 2020, as updated with the INPPIC. The amount pending to be exercised as of December 31, 2020, is Ps.264,783, was applied during 2021, with no remaining balance to be exercised.
In 2009, the Company paid Ps.1,159,613 to acquire land strategically located adjacent to the Monterrey airport to allow for the airport’s future growth, including the construction of a second runway, which the Company intends to complete in the future.
On December 4, 2012, the Monterrey airport received authorization from the AFAC to include Ps.386,538 (amount expressed in nominal pesos of 2009) in investments as part of Master Development Program for 2011-2015.
Additionally, during the 2011 Master Development Program revision, Ps.77,306 was included due to an extraordinary adjustment in its maximum tariff under the Master Development Program. The remaining investment to be recognized for a cost of Ps.695,759 (amount expressed in 2009 nominal pesos), has been included in the indicative periods 2026-2035 of the approved Master Development Program. This amount may not be recognized by the Ministry of Infrastructure, Communications and Transportation in the future. The final recovery amounts are adjusted annually based on INPPIC.
The Company’s airports exclusively own the lands acquired, which are classified in the consolidated statements of financial position under the headings of property, leasehold improvements and equipment. The lands will remain classified under these headings until the negotiations with the AFAC have concluded. If the AFAC recognizes the land as part of the concession investment, it is estimated that the property will be transferred to the Mexican Government. At the time of such recognition, the Company shall derecognize the asset and recognize an inclusion of the same amount under investment in airport concessions (improvements in concessioned assets), which will be subject to amortization for the remaining period of the concession.
The Company’s improvements to the airport facilities can be recognized by the AFAC as part of the investment in airport concession. The cost of airport improvements recognized by the AFAC that are part of the Company’s investment in concession assets is “recovered” in the form of adjustments to the maximum rates that the Company may charge for aeronautical services, which are regulated by the AFAC.
11. Composition of GACN
a.
The following tables set forth information about the composition of GACN as of December 31, 2021, 2020 and 2019:
Place of
Number of subsidiaries
incorporation and
Principal activity
operation
2021, 2020, 2019
Services
b.
The consolidated subsidiaries are as follows:
Name of subsidiary
Ownership Percentage
Airport services;
Aeropuerto de Monterrey, S. A. de C. V.
Aeropuerto de Acapulco, S. A. de C. V.
Aeropuerto de Mazatlán, S. A. de C. V.
Aeropuerto de Zihuatanejo, S. A. de C. V.
Aeropuerto de Culiacán, S. A. de C. V.
Aeropuerto de Ciudad Juárez, S. A. de C. V.
Aeropuerto de Chihuahua, S. A. de C. V.
Aeropuerto de Torreón, S. A. de C. V.
Aeropuerto de Durango, S. A. de C. V.
Aeropuerto de Tampico, S. A. de C. V.
Aeropuerto de Reynosa, S. A. de C. V.
Aeropuerto de Zacatecas, S. A. de C. V.
Aeropuerto de San Luis Potosí, S. A. de C. V.
Hotels and Services:
Operadora de Aeropuertos del Centro Norte, S. A. de C. V.
Servicios Aeroportuarios del Centro Norte, S. A. de C. V.
Servicios Aero Especializados del Centro Norte, S. A. de C. V.
OMA Logística, S. A. de C. V.(1)
Holding Consorcio Grupo Hotelero T2, S. A. de C. V.(2)
The Company has the majority of voting power at shareholders’ meetings of the subsidiaries and has control by virtue of its contractual right to appoint the board of directors of the companies, who are empowered to affect their relevant activities.
As of December 31, 2021, 2020 and 2019, the Company has not made investments in shares of any structured or investment-related entity.
12. Trade accounts payable
Trade accounts payable consist of the following
Suppliers and contractors
123,330
107,507
140,806
Customer advances
58,512
91,841
43,102
Statutory employee profit sharing
31,365
4,700
12,883
13. Payable taxes and other accrued expenses
Tax payable and other accrued expenses are comprised of the following
Accrued expenses
210,515
172,847
202,363
Taxes payable other than income tax
713,850
153,046
345,461
Accrued interest
73,489
44,295
42,438
14. Short-term debt
As of December 31, 2021, short-term debt is comprised of credit lines denominated in pesos, with unsecured guarantees as follows:
Credit line with Banco Nacional de México for Ps.1,000,000, for six months at a variable rate of TIIE 28 plus 1.0 percentage point.
1,000,000
Credit line with HSBC Mexico for Ps.900,000, for six months, at a variable rate of TIIE 91 plus 0.50 percentage points.
900,000
Credit line with Banco Santander Mexico for Ps.1,000,000, for six months at a variable rate TIIE 28 plus 1.55 percentage points on average.
800,000
Total short-term debt
As of December 31, 2021, the Company has non-committed short-term credit lines available with financial institutions for Ps.350,000.
15. Long-term debt
The long-term debt with credit institutions, debt issuances and other marketable securities is comprised as follows:
Debt securities issued in the Mexican market on June 16, 2014, for Ps. 3,000,000, accruing interest at a fixed rate of 6.85%, for a 7-year term maturing on June 7, 2021. GACN and nine of the 13 airports guarantee the certificates, which represent a guarantee of 80% of consolidated EBITDA
3,000,000
Debt securities issued in the Mexican market on March 26, 2013, for Ps. 1,500,000, accruing interest at a fixed rate of 6.47%, for a 10-year term maturing on March 14, 2023. GACN and nine of the 13 airports guarantee the certificates, which represent a guarantee of 80% of consolidated EBITDA
Unsecured lines of credit with Private Export Funding Corporation (supported by Ex-Im Bank) in 2010 and 2011 for U.S.$ 25,365 thousand maturing on December 21, 2021. As December 31, 2021, 2020 and 2019, outstanding amounts were U.S.$0, U.S.$ 678 thousand and US.$ 2,495 thousand, respectively. Baggage screening equipment was pledged to secure the loan ⁽²⁾. The loan accrues interest at a three-month London Interbank Offered (“LIBOR”) rate plus 1.25 percentage points, with quarterly payments of principal. As of December 31, 2021, 2020 and 2019, the interest rate was %, 1.49% and 3.15%, respectively.
13,503
49,575
Debt securities issued in the Mexican market on April 16, 2021, for Ps. 1,000,000, the loan accrues interest at a TIIE 28 rate (1) plus 75 basis points for a 5-year term maturing on April 10, 2026. Financing of green projects specified in the Bank's framework
Debt securities issued in the Mexican market on April 16, 2021, for Ps. 2,500,000, accruing interest at a fixed rate of 7.83%, for a 7-year term maturing on April 7, 2028.
2,500,000
Total long-term debt
5,000,000
4,513,503
4,549,575
Less:
Financing commissions
(3,378)
(3,115)
(5,966)
Current portion long-term debt
(3,013,502)
(36,851)
Changes in consolidated long-term debt for the years ended December 31, 2021, 2020 and 2019 were as follows:
Initial debt balance
4,584,594
New loans
Long term debt repayment
Payment of commissions and other expenses
Amortization of expenses
12,595
2,851
2,663
Exchange rate fluctuation
465
6,520
(2,858)
Ending balance of debt
Maturity of long-term debt as of December 31, 2021, 2020 and 2019 is described in note 21.
The long-term debt securities include certain restrictive clauses, such as limitations on disposal of assets or limitations on incurring liens, as well as early maturity clauses including the maturity of other obligations more than certain thresholds. For the years ended December 31, 2021, 2020 and 2019, these restrictions were met.
16. Major maintenance provision
The Company has the obligation to perform major maintenance activities in its airports. The provision is recognized as accrued at an amount that represents the best estimate of the present value of future disbursements required to settle the obligation, at the date of the accompanying consolidated financial statements at a discount rate of 8.66%, 7.89% and 8.00% as of December 31, 2021, 2020 and 2019, respectively.
As of December 31, 2021, 2020 and 2019, the composition and changes of the Company’s major maintenance provision was as follows:
Additions
Disbursements
Short-term
Long-term
Major maintenance of concessioned assets
1,317,985
626,790
(1)
December 31, 2020
953,896
467,793
December 31, 2019
943,548
315,481
The provision for major maintenance as of December 31, 2021, reflects the update of such provision as a result of the approval in November 2020 of the Master Development Program for the period 2021-2025.
17. Labor obligations
a. Defined contribution plans
Until July 2021, the Company had defined contribution retirement benefit plans for all qualifying employees. The assets of the plans were held separately from the Company's assets in funds under the control of fiduciaries.
The defined contribution plan was terminated during July 2021 and the accumulated funds in the trust were transferred to the personal investment fund plans of each of the qualifying employees.
In 2021, 2020, and 2019, the total contributions to these plans based on the specific rates in the plan amounted toPs.725, Ps.894, and Ps.967, respectively.
b. Defined benefit plans
This liability for employees derives from seniority premiums benefits and termination benefits. Seniority premiums consist of a single payment equal to 12 days’ salary for each year of service based on the employee’s most recent salary, but without exceedingly twice the current minimum wage established by law and termination benefits consist of an equivalent of 20 days for each year worked and 90 days based of salary determined on actuarial calculations performed by external actuaries, using the projected unit credit.
The Mexican plans normally expose the Company to actuarial risks such as: investment risk, interest rate risk, longevity risk and salary risk.
Investment risk
The present value of the defined benefit plan obligations is calculated using a discount rate that is determined by long-term government bond yields. To select the discount rate, the yield rate of the bond is considered, which is similar to the duration of the obligations of the Company’s labor liabilities. The average days on which benefit payments are due and not the days that the bonus is due to expire are taken into account, which means that the discount rate depends on the expectation of the flow of payments of the benefits plan.
Interest risk
A decrease in the interest rate of the bonds may increase the liabilities of the plan, however, this is partially offset by an increase in the plan’s debt investment performance.
Longevity risk
The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
Salary risk
The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.
There are no additional retirement benefit plans for qualifying employees.
The actuarial calculation of the defined benefit obligation was calculated as of December 31, 2021, 2020 and 2019 by actuaries certified by the National School of Actuaries (Colegio Nacional de Actuarios de México). The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.
The principal assumptions used for the purposes of the actuarial valuations are as follows:
Discount rate (see note 5 a.)
Expected rate of salary increase
Average longevity at retirement age for current employees (years)
Inflation
The amounts recognized in the consolidated statement of income and other comprehensive income in respect of these defined benefit plans are as follows:
Service cost:
Current service cost
9,535
8,276
7,465
Net interest expense
8,936
8,490
7,156
Reductions and Terminations
(9,131)
Components of defined benefit costs recognized in profit or loss
18,471
7,635
14,621
Remeasurement on the net defined benefit liability:
Actuarial gains and losses arising from changes in financial assumptions
2,094
2,653
(161)
Actuarial gains and losses arising from experience adjustments
(6,414)
10,386
12,995
Components of defined benefit costs recognized in other comprehensive income (loss)
(4,320)
13,039
12,834
14,151
20,674
27,455
The current service cost and the net interest expense are included in the employee benefits expense in the consolidated statement of income and in other comprehensive income. The remeasurement of the net defined benefit liability is included in other comprehensive income. The amount included in the consolidated statement of financial position arising from the Company’s obligation in respect of its defined benefit plans is as follows:
Present value of defined benefit obligations
F-44
Movements in the present value of the defined benefit obligation in the current year are as follows:
Present value of defined benefit obligation as of January 1,
79,905
Interest cost
Remeasurement (gains)/losses:
Actuarial gains and losses arising from changes in financial and demographic assumptions
Benefits paid
(643)
(11,143)
(1,200)
Present value of defined benefit obligation
Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognized in the consolidated statement of financial position.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
There was no change in the process followed by the Company to manage its risks from prior periods.
The average duration period of the benefit obligation as of December 31, 2021, is 12.90 years (2020: 11.78 years and 2019: 13.97 years).
F-45
Expected cash flows from termination benefits and seniority premium benefits for the next 10 years are as follows:
Seniority premium
Pensions plan
benefits
1,000
559
1,294
1,853
9,794
1,614
11,408
289
1,547
1,836
From 2026 and subsequently
153,931
44,019
197,950
164,573
49,474
214,047
18. Right of use assets, net and lease liability
As lessee
Lease contracts entered into by the Company are as follows:
In October 2008, the Company acquired the shares of Consorcio Grupo Hotelero T2, S.A. de C.V. As a result of this acquisition, the Company assumed the commitments established in the lease agreement signed with the Mexico City International Airport for a period of 20 years, to construct, prepare and operate a hotel, and manage commercial areas at Terminal 2 of the Mexico City International Airport, establishing a minimum guaranteed income (“MGI”) of Ps.32,406 annually as rent, or a royalty of the 18% of the hotel’s revenue, whichever is greater. The MGI will be adjusted on an annual basis using the NCPI.
The following is a summary of the right-of-use assets and the lease liability
Buildings
Balance as of January 1, 2020
224,074
23,983
248
9,771
769
Decreases
(1,055)
(1,475)
(2,530)
232,790
23,277
256,067
41,771
24,754
66,525
(29,653)
(6,196)
(35,849)
244,908
41,835
286,743
Balance as of January 1, 2021
(62,266)
(15,554)
(77,820)
Depreciation of the year
(32,339)
(8,936)
(41,275)
27,555
1,928
29,483
Balance as of December 31,2021
(67,050)
(22,562)
(89,612)
Amounts recognized in consolidated statement of profit or loss statement:
Depreciation expense of right of use assets
41,275
41,348
Interest expense on lease liabilities
24,402
22,431
c.
The following is a summary of the lease liability:
Maturity analysis:
Less than one year
41,107
Greater than 1 year and less than 3 years
83,359
55,134
Greater than 3 years
47,666
113,076
172,132
194,763
The Company does not face a significant liquidity risk with respect to its lease liabilities. Lease liabilities are monitored through the Company's treasury department.
d.
As of December 31, 2021, and 2020, the total cash outflow for leases amounted to Ps.54,589 and Ps.57,325 (excluding items disbursed in excess of the IMG as variable participation), respectively.
As lessor
Revenues from operating leases
Mainly related to leases entered into by the Company, which are based on monthly rental payments that generally increase each year based on the NCPI, and/or the greater of a guaranteed minimum monthly rent plus a percentage of monthly income of the tenant. As of December 31, 2021, 2020 and 2019, the committed future rents to be received are as follows:
Duration:
Less than 1 year
428,592
444,523
546,671
Greater than 1 year and less than 5 years
477,409
753,230
843,404
Greater than 5 years
120,726
118,256
161,109
1,026,727
1,316,009
1,551,184
Minimum lease payments in the table above do not include contingent rentals, such as increases by NCPI or increases by a percentage of the monthly income of the lessee. Contingent rental income recorded for the years ended December 31, 2021, 2020, and 2019 were Ps.197,439, Ps.136,181 and Ps.229,727, respectively.
As a result of the impact generated by the COVID-19 pandemic, the Company granted certain discounts to commercial tenants during the second half of the year 2020, which were subject to certain conditions. These discounts were granted based on the decrease in passenger traffic at the Issuer's airports during the period.
Accrued operating lease income is detailed in note 26.
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19. Income taxes
The Company is subject to Income Tax (“ISR”), whose tax rate was 30% for 2021, 2020 and 2019, and will continue to be 30% for later years.
a. Income tax are as follows:
Current ISR
1,217,748
480,232
1,329,867
Deferred ISR
(245,569)
(85,731)
42,355
b. As of December 31, 2021, 2020 and 2019, the principal items comprising the balance of the deferred ISR asset (liability) were:
Liabilities:
Provisions, allowances and labor obligations
159,813
244,982
157,560
Investment in airport concessions, property, leasehold improvements and equipment, net
(225,726)
(426,325)
(407,173)
Tax loss carryforwards (1)
3,242
15,883
14,937
Recoverable tax on assets (2)
28,619
(2,137)
3,013
3,340
(36,189)
(133,828)
(202,717)
468,314
230,532
205,834
Investments in airport concessions, property, leasehold improvements and equipment, net
(243,480)
(172,806)
(184,649)
Tax loss carryforwards(1)
243,191
268,930
285,045
(3,621)
(8,898)
(9,226)
Net deferred ISR asset
428,215
183,930
94,287
c. The changes in deferred tax during the year are follows:
Beginning balance of deferred tax liability, net
132,792
Deferred ISR in profit or loss
245,569
85,731
(42,355)
Income tax effects recognized in other comprehensive income
Ending balance of deferred tax asset, net
d. The reconciliation of the statutory income tax rate and the effective income tax rate as a percentage of net income before income tax is as follows:
Rate %
Income tax expense and effective rate
25.34
26.43
29.83
Add (deduct) effects of permanent differences, primarily, non-deductible expenses and inflationary effects for financial and tax purposes.
178,564
4.66
53,213
3.57
7,675
0.17
Statutory rate
1,150,743
30.00
447,714
1,379,897
e. Each airport concession has received approval from the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) to carry forward their tax losses up to the earlier of the date of which such tax loss carryforwards are utilized by the airport or the date of expiration or liquidation of the concession. The base years and amounts as of December 31, 2021, are as follows:
Tax loss
Year of Origin
carryforwards
2002
156,580
2003
167,310
2004
213,789
2005
4,631
2006
17,817
2007
44,237
2008
30,697
2011
7,457
2012
29,778
2013
10,827
2015
5,765
22,810
26,849
7,438
746,880
f. In addition to the tax loss carryforwards of the airport concessionaires aforementioned, the Company has tax losses of other subsidiaries other than its concessionaires in the amount of Ps.71,937 the duration of which is 10 years under the Income Tax Law, and the expiration date of which is between 2021 and 2028
g. In 2021, the Company utilized tax loss carryforwards in the amount of Ps.258,900.
h.
The balances of shareholders’ equity tax accounts as of December 31 are:
Contributed capital account
5,039,892
4,694,822
4,584,512
Net consolidated tax profit account
3,028,125
3,144,619
2,878,878
8,068,017
7,839,441
7,463,390
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i. Dividends paid from profits generated from January 1, 2014, to individuals residing in Mexico and residents abroad may be subject to additional income taxes of up to 10%, which shall be retained by the Company
20. Commitment and contingencies
Commitment
Guarantor — In 2014 and 2013, GACN issued long-term debt securities for the amount of Ps. 3,000,000 and Ps. 1,500,000 with terms of 7 and 10 years, respectively, under the 2011 program. The Ps.3,000,000 issue was fully repaid in April 2021. The debt-securities are guaranteed by nine of its airports, whom together with GACN, must meet a minimum guarantee of 80% of consolidated earnings before interest (expense) income, taxes and depreciation and amortization (EBITDA).
In April 2021, GACN issued long-term debt securities for Ps.1,000,000 and Ps.2,500,000 for 5 and 7 years, respectively, under a new program registered in 2021. The issues are guaranteed by the Monterrey Airport, Chihuahua Airport and Culiacán Airport, which, together with the issuer, must meet a minimum guarantee of 80% of consolidated EBITDA.
In December 2021, GACN incurred in short-term debt, through a promissory note, with HSBC Mexico, S.A. for Ps.900,000. Aeropuerto de Monterrey, Aeropuerto de Chihuahua and Aeropuerto de Culiacán are guarantors of this instrument.
Contingencies
I.Property Tax
In the past, various municipalities initiated certain administrative enforcement procedures against the Company for tax credits for property taxes on the real estate where the airports of said cities are located. The airports have filed nullity claims against said procedures, which are pending of resolution.
Acapulco Airport:
In February 2019, the Municipal Inspection Directorate notified the Acapulco Airport, S.A. de C.V. (“Acapulco Airport”) in a letter addressed to the Mexican Airport and Auxiliary Services Agency (“ASA”) requiring proof of payment of Ps.27,012 (period from the first quarter of 1996 to the first quarter of 2019) for property tax. In response to the request, the Acapulco Airport presented clarifying briefs to the authority informing that it was not properly addressed to ASA.
In May 2019, the Secretariat of Administration and Finance announced the agreement of the explanatory documents presented by the Acapulco Airport and noted that, having acquired the airport concession, the Acapulco Airport considered itself jointly and severally liable with respect to the tax credit required from ASA, so it was appropriate to require payment of the debt. A nullity claim was filed against this resolution and the Secretary of Infrastructure, Communications and Transportation (SCT) was also called to trial as an interested third party.
b)
In May 2019, the Municipal Inspection Directorate presented a notification at the Acapulco Airport's legal domicile, that directly attributed the tax credit indicated in subsection A) above to the Acapulco Airport and required payment of Ps. 27,012 (period from the 1st two-month period of 1996 to the 1st two-month period of 2019) for property tax. A claim for annulment was filed against this resolution and the SCT was also called to trial as an interested third party.
As of the date of these consolidated financial statements, the contingencies remain due to the fact that the lawsuits are still in effect, since the judgment on the merits to resolve these cases is still pending. However, in the event that the resolution of the trial is not favorable to the Acapulco Airport, it is considered that the economic repercussion of the trial would be borne by the Federal Government, by virtue of the foregoing and given that the Acapulco Airport estimates an unfavorable resolution to be unlikely, it has not recorded any provision in relation to these lawsuits.
Culiacán Airport:
In November 2018, the Revenue Department of the Municipal Treasury of Culiacán in the State of Sinaloa notified a resolution that determined Aeropuerto de Culiacán, S.A. de C.V. (“Culiacán Airport”) a tax credit in the amount of Ps. 5,764 for urban property tax for the periods from the 4th quarter of 2013 to the 3rd quarter of 2018.
A claim for annulment was filed against this resolution and the SCT was also called to trial as an interested third party.
As of the date of these consolidated financial statements, the contingencies remain due to the fact that the lawsuit is still in force, since the judgment on the merits to resolve these cases is still pending.
However, in case the resolution of the trial is not favorable for the Culiacán Airport, it is estimated that the economic repercussion of the trial would be borne by the Federal Government, due to the above and given that the Culiacán Airport considers it unlikely to obtain an unfavorable resolution, has not recorded any provision in relation to these demands.
II. Amparo Trial related to the municipal licenses:
Chihuahua Airport.
In September 2019, the municipal authority of Chihuahua carried out verification visits at the commercial premises located at the Chihuahua Airport to request municipal operating licenses, likewise requiring the Chihuahua Airport to present its construction license.
A request for amparo was filed against such requirements by the Chihuahua Airport, challenging the visit order and the unconstitutionality of the municipal regulations applied. The court issued a ruling in favor of the Chihuahua airport, indicating that the commercial spaces of the Chihuahua airport are under federal not municipal jurisdiction.
The municipal authority challenged the judgment and as of the date of the financial statements, the resolution has not been issued in that instance, so the judgment continues in force since the judgment on the merits has not caused status.
III.
Conflict related with ownership of certain lands
Ciudad Juárez Airport
On November 15, 1995, parties purporting to be former owners of land comprising a portion of the Ciudad Juárez airport initiated legal proceedings against the Aeropuerto de Ciudad Juárez, S.A. de C.V. (“Ciudad Juárez Airport”) to reclaim the land (240 hectares), alleging that it was improperly transferred to the Mexican government. As an alternative to recovery of this land, the claimants also sought monetary damages of U.S.$120.0 million.
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Within the trial, the Company challenged the claims of the claimant based on the legitimacy of the possession derived from the Concession Agreement granted by the Ministry of Infrastructure, Communications and Transportation. The Ministry of Infrastructure, Communications and Transportation was called to trial in defense of the interests of the Mexican government.
On July 8, 2016, the local court in Ciudad Juárez ruled that the claims against the Ciudad Juárez airport are inadmissible, and on October 21, 2017, the claimants filed an appeal before the Appellate Court in Chihuahua against the court’s determination. On July 31, 2017, the First Civil Court overturned the lower court’s decision and ruled in favor of the plaintiffs, requiring the Mexican government to pay restitution to the plaintiffs for their loss of property and in accordance with the lawsuit.
The Mexican government filed a direct claim to appeal the decision, and on May 3, 2018, a favorable decision was issued, revoking the appealed decision, pursuant to which the claimant must return the title and payments claimed. The decision of the amparo trial was also favorable to the Ciudad Juárez airport as co-defendant.
On May 25, 2018, the First Civil Chamber in Chihuahua issued, in compliance with the execution of the amparo decision, a new decision absolving the defendants of the payments claimed.
This decision was appealed by the claimant in a direct amparo trial, requesting the Supreme Court of Justice of the Nation (“SCJN”) to resolve the matter definitively by exercising its authority to assert jurisdiction. However, the SCJN resolved not to exercise the power of attraction to hear the matter and ordered the return to the Collegiate Court for the resolution of the amparo trial.
On January 2, 2020, the First Collegiate Circuit Court in Chihuahua issued the judgment in the amparo trial promoted by the plaintiff and denied the amparo requested by the plaintiff. Against the sentence, the plaintiff filed the appeal for review and the Collegiate Court ordered the file to be forwarded to the SCJN for resolution of the appeal.
The session of the appeal for review before the SCJN was held on November 24, 2021, resolving the appeal to the effect that the First Collegiate Circuit Court in Chihuahua proceeds again to the analysis of the concepts of violation of the direct constitutional relief filed by the Creel estate. The resolution by the First Collegiate Circuit Court in Chihuahua is pending.
As of the date of the consolidated financial statements, the contingencies are maintained since there is still no decision to resolve the trial. However, in the event that the judgment is not favorable to the Ciudad Juarez Airport, the economic impact of the trial will be borne by the Mexican government, as established in the concession title. The Ciudad Juárez Airport has not recorded any provision in connection to these claims given that it does not expect an economic impact, even in case of an unfavorable resolution.
Durango Airport
On March 5, 2020, the Company was notified of the lawsuit filed against Aeropuerto de Durango, S.A. de C.V. (“Aeropuerto de Durango“), the Ministry of Infrastructure, Communications and Transportation, the Government of the State of Durango and the Ministry of Agrarian, Territorial and Urban Development. The plaintiff sued for the nullity of the expropriation decree dated September 8, 1975, which affected an area of 40 hectares of the Durango Airport and claims the payment of compensation for the affected area, as well as the payment of damages for the undue use of the property.
F-52
The trial hearing was held with the appearance of the parties and the evidentiary stage of the trial is pending. As of the date of the financial statements, the contingency is still in effect because the trial is still pending the judgment on the merits of the case. In the event that the resolution of the lawsuit is not favorable to Durango Airport, it is considered that the economic impact of the lawsuit will be borne by the Federal Government, as established in the concession title. Durango Airport has not recorded any provision in connection with this lawsuit.
Reynosa Airport
On October 16, 2020, the Company was notified of the lawsuit filed against the AFAC, in which Aeropuerto de Reynosa, S.A. de C.V. (“Aeropuerto de Reynosa“) was called as Interested Third Party. The nullity of the administrative resolution dated February 7, 2020, issued by the AFAC in the Appeal for Review filed by the plaintiff is demanded in order for the AFAC to study the plaintiff’s petition and recognize that the legal requirements for the reversion of the expropriation of 2.6 hectares included in the expropriation decrees of 1970 and 1971 have been met.
Reynosa Airport appeared in the lawsuit and is awaiting the conclusion of the pleadings stage of the proceeding. The lawsuit does not include a financial claim; however, the contingency is maintained until the final judgment in the annulment lawsuit is issued and the challenged resolution is confirmed or, if applicable, a judgment is issued, the effects of which must be complied with by the AFAC.
IV.
Conflict related to the purchase-sale of land
Monterrey Airport
On May 14, 2015, Banco Mercantil del Norte, S.A. (“Banorte”), acting as trustee of a certain trust, filed a civil lawsuit against the Monterrey airport in connection with the ownership of 240 hectares of land previously acquired (the “Land”) by the Monterrey airport, which book value in our financial statements as of December 31, 2021 amounted to Ps. 266,850.
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V.
Penalties (Federal Consumer Protection Agency)
Acapulco Airport
On November 11, 2021, inspectors of the Federal Consumer Protection Agency (“Profeco”) went to Acapulco Airport to request the presentation of documents related to the models or prototypes authorized in accordance with the Mexican Official Standard (NOM) and the calibration of the measuring devices (scales and parking clocks) in accordance with the list of measuring instruments (initial, periodic, or extraordinary mandatory verification). The Acapulco Airport appeared before Profeco to exhibit the requested documentation and disprove the existence of non-compliances.
On November 22, 2021, Profeco notified the summons to the administrative proceeding for violations to the Law and the Airport timely appeared in the proceeding.
On January 10, 2022, Profeco was notified of the resolution issued within the administrative procedure for violations to the Law, by which it determined the application of 38 fines to the Acapulco Airport for non-compliance with the NOM applicable to the time and weight measuring devices operated by the Airport, the total amount of the fines is Ps.14,554. The resolution was challenged by the Airport on January 31, 2022, through an appeal for review and is pending resolution.
As of December 31, 2021, Acapulco Airport has not recorded a provision as it considers the fines determined by Profeco to be inappropriate.
VI.
Tax on Assets
Pursuant to the provisions of the Third Transitory Article of the Single Rate Business Tax Law, Aeropuerto de Monterrey, S.A. de C.V. (the “Airport”) on December 20, 2019, and December 16, 2020, respectively, requested a refund of the tax on asset it had paid in prior years.
With respect to the 2018 and 2019 fiscal years the Airport requested the refund of the amounts of Ps.10,220 and Ps.10,624, respectively, which were denied by the tax authority.
On September 16, 2020, the Airport challenged the denial of the refund requested with respect to the 2018 fiscal year, which was resolved in favor of the Airport’s interests by the Federal Court of Administrative Justice.
On April 27, 2021, the Airport challenged the denial of the refund requested with respect to fiscal year 2019, which was also resolved favorably to the Airport’s interests by the Federal Court of Administrative Justice.
F-54
Currently, both lawsuits are pending final resolution since on June 30 and December 1, 2021, respectively, the tax authority filed appeals for review against the favorable resolutions issued by the Federal Court of Administrative Justice.
Aeropuerto de Monterrey, S.A. de C.V. maintains an asset in the amount of Ps. 28,619, in relation to amounts paid for tax on asset and corresponding to refunds for fiscal years 2018, 2019 and 2020. Since the Airport estimates that an unfavorable resolution is unlikely, it has not recorded any provision in relation to the recoverable amount of asset tax.
21. Financial risk management
a. Significant accounting policies
The Company is exposed to risks that are managed through the implementation of systems and processes related to identification, measurement, limitation of concentration, and supervision.
The basic principles defined by the Company in the establishment of its risk management policy are the following:
Risk management in the Company is mainly preventive and oriented to medium and long-term, risks taking into consideration the most probable scenarios of the variables affecting each risk.
The details of the significant accounting policies and adopted methods (including recognition, valuation and basis of recognition of related income and expenses) for each class of financial asset, financial liability and equity instrument is disclosed in note 4.
b. Categories of financial instruments and risk management policies
The principal categories of financial instruments, are:
Risk classification
Cash and cash equivalents and other investments held to maturity
Credit and interest rate
2,948,804
Receivables, net
Credit and exchange rate
Short-term and long-term debt
Interest rate, exchange rate and liquidity
Trade accounts payable(1)
Liquidity
Short-term and long-term financial leasing
224,736
220,860
Based on the nature of its activities, the Company is exposed to different financial risks, mainly as a result of its ordinary business activities and its debt contracts entered into to finance its operating activities. The Company’s corporate treasury department provides services to the operating units to coordinate the entry into domestic and international markets and monitors and manages the financial risks relating to the operations of the Company. These risks include market risk (interest rate risk and foreign currency risk), credit risk and liquidity risk.
Periodically, the Company’s management assesses risk exposure and reviews the alternatives for managing those risks, supervising and managing the financial risks through internal risk reports which analyze exposures by degree and magnitude of risks. The Board of Directors sets and monitors policies and procedures to measure and manage the risks to which the Company is exposed, which are described below.
c. Market risk
Interest rate risk management — This risk principally stems from changes in the future cash flows of debt entered into at variable interest rates (or with short-term maturity and presumable renewal) as a result of fluctuations in the market interest rates. The purpose of managing this risk is to lessen the impact in the cost of the debt due to fluctuations in such interest rates.
As of December 31, 2021, 2020 and 2019, the percentage in outstanding long-term debt at fixed and variable interest rates, is as follows:
% Fixed rate debt
% Variable rate debt (1)
The proportion of long-term debt have interest payments at a variable rate, which exposes the Company to interest rate risk as a result of fluctuations in market interest rates. The risk exposure is mainly caused by the variations that could occur in in the reference interest rate used.
F-56
The Company manages this risk by monitoring constantly the changes of such interest rates. In recent years, the 28-day TIIE has increased. The 28-day TIIE was at its highest level on December 29, 2021 (5.7157%) and its lowest level on May 21, 2021 (4.2745%). Therefore, if interest rates increase significantly, the Company could evaluate to enter into hedging instruments to mitigate the interest rate risk.
Sensitivity analysis for interest rates — The following sensitivity analysis is based on the assumption of an unfavorable movement of basis points in interest rates, in the indicated amounts applicable to each category of floating rate financial liabilities. The Company determines its sensitivity by applying the hypothetical interest rate (reference rate increased at the rate specified plus surcharge) for each category of financial liabilities accruing interest at a variable rate.
As of December 31, 2021, the Company maintained long-term debt, which accrue interest at a variable rate of Ps.1,000,000 (note 15, which disclose the outstanding balances and interest rates of the Company’s financial instruments). A hypothetical, instantaneous and unfavorable 10% change in the 28-day TIIE interest rate applicable to the outstanding debt with variable rates would have resulted in an additional financing expense of approximately Ps.3,736 for 2021.
As of December 31, 2020, and 2019, the Company maintained long-term debt, including the current portion, which accrue interest at a variable rate of Ps. 13,503 and Ps. 49,575, respectively (see note 15, which disclose the outstanding balances and interest rates of the Company’s financial instruments). A hypothetical, instantaneous and unfavorable 10% change in the three-month LIBOR interest rate applicable to the outstanding debt with variable rates would have resulted in an additional financing expense of approximately Ps. 40 and Ps.179 for 2020 and 2019, respectively.
The increase was calculated for U.S. dollar debt based on the year-end exchange rate of each year (Ps.19.9087, and Ps. 18.8727 for 2020 and 2019, respectively).
Exchange risk management – The Company performs transactions denominated in foreign currency; consequently, it is exposed to exchange rate risks, which are managed within the parameters of established and approved policies. The main risk related to the exchange rate involves changes in the value of the Mexican peso against the U.S. dollar.
Historically, a portion of the revenues generated by the Company’s airports (mainly derived from TUA charged to international passengers) are linked to U.S. dollars, although such revenues are collected in pesos based on the average exchange rate of the previous month. Of the Company’s consolidated revenues (excluding construction services revenues), 16.87%, 13.20% and 15.95% were from TUA of international passengers in 2021, 2020 and 2019, respectively. Substantially all other revenues of the Company are denominated in pesos. Based on an appreciation of 10% of the peso against the U.S. dollar, the Company believes that its revenues would have decreased by Ps.116,929, Ps.54,293 and Ps.120,798 in 2021, 2020 and 2019, respectively.
An appreciation of the Mexican peso against the U.S. dollar would reduce the U.S. dollar-denominated revenues and the Company’s obligations under U.S. dollar-denominated debt when expressed in pesos, whereas a depreciation of the peso against the U.S. dollar would increase the Company’s U.S. dollar-denominated revenues and obligations under debt agreements when expressed in pesos.
For the year ended December 31, 2021, the peso depreciated against the U.S. dollar by 2.8%, relative to the exchange rates prevailing at the end of 2020.
F-57
Foreign currency sensitivity analysis – The following sensitivity analyses are based on an instantaneous and unfavorable change in exchange rates which affect the foreign currencies in which the Company’s debt is expressed. These sensitivity analyses cover all the assets and liabilities denominated in foreign currency. Sensitivity is determined by applying a hypothetical exchange rate change to those items, including the outstanding debt expressed in foreign currency.
As of December 31, 2021, 2020 and 2019, a hypothetical, instantaneous and unfavorable change of 10% in the exchange rate of the peso against the U.S. dollar, applicable in the Company’s asset (liability) positions net of U.S.$ 17,459, U.S.$75,718 and U.S.$67,214 (amounts in thousands) would have resulted in an exchange (gain) loss of approximately Ps. (35,734), Ps. (150,745) and Ps. (126,851) as of December 31, 2021, 2020 and 2019, respectively.
The carrying values of monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are as follows (amounts in thousands):
Liabilities
Assets
Currency
(4,784)
(4,095)
(10,059)
22,243
81,189
79,208
The transactions in thousands of U.S. dollars for the years ended December 31, 2021, 2020 and 2019, are as follows:
Technical assistance
3,766
7,954
Insurance
1,392
1,039
935
Purchase of machinery and maintenance
5,071
7,065
7,685
Software
251
2,152
443
Professional services, fees and subscriptions
1,531
1,786
702
15,554
4,765
4,303
Pertinent exchange rate information at the date of the consolidated statements of financial position is as follows:
U.S. dollar exchange rate
As reported by the Mexican Central Bank
20.4672
19.9087
18.8727
As of March 31, 2022, the exchange rate as reported by the Mexican Central Bank was Ps. 19.8632
d. Credit risk
Credit risk management — Credit risk refers to the risk whereby one of the parties’ defaults on its contractual obligations, thereby generating a financial loss for the Company. The objective of this risk management is to reduce its impact by reviewing the solvency of the Company’s potential customers. The creditworthiness of uncollected amounts is periodically evaluated estimates of recoverable amounts are reviewed, resulting in reserves for those amounts whose recovery is considered doubtful, with corresponding entries to the statements of income and other comprehensive income in the period of review. The credit risk has historically been very limited.
F-58
The Company’s maximum credit risk exposure is presented in the amounts included in the table in subsection b) as well as within the past due but not impaired analysis of accounts receivable, included in note 7. The Company holds bonds and deposits that mitigate the credit risk, being the most relevant the guarantee deposits registered as a liability in the consolidated statements of financial position.
The Company adopted a policy to only carry out transactions with solvent parties and obtain sufficient collateral where appropriate as a means of mitigating the risk of financial loss due to possible default. The Company trades only with entities that have the best possible risk rating. The credit exposure is reviewed and approved by senior management committees of the Company. The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit ratings assigned by credit rating agencies. Financial instruments that potentially expose the Company to credit risk consist mainly of accounts receivable.
The customer’s balance is primarily comprised of TUA collected by airlines for each passenger traveling using air terminals and subsequently delivered to the Company. The Company has established three credit options: up to 60 days. These days are granted depending on the guarantee that the customer can provide. In case of default, customers will be subject to penalty interests and/or a legal collection process. For both credit customers and cash customers, there are established guarantees, which may include the following: trust, deposit, letter of credit, liquid credit, mortgage and collateral.
As of December 31, 2021, 2020 and 2019, the allowance for doubtful accounts, principally related with accounts receivable, are the amounts described in note 7.
e. Liquidity risk
Management of liquidity risk – This risk is generated by temporary differences between the funding required by the Company to fulfill business investment commitments, debt maturities, current asset requirements, etc., and the origin of funds generated by the regular activities of the Company and different types of bank financing. Also, different economic or industry factors, such as financial crises or suspension of operations of any airline could affect the cash flow of the Company. The objective of the Company in the management of this risk is to maintain a balance between the flexibility, period and conditions of credit facilities contracted to manage short, medium and long-term funding requirements. In this regard, the Company’s use of project financing and debt with limited resources described in note 15 and the short-term financing for working capital of current assets are significant. The Executive Committee of the Company is ultimately responsible for liquidity management.
This Committee has established an appropriate framework for liquidity management guidelines. The Company manages its liquidity risk by maintaining reserves, adequate financial facilities and adequate loans, while constantly monitoring projected and actual cash flows and reconciling the maturity profiles of financial assets and liabilities. Additionally, as mentioned in note 14, the Company has available credit lines for working capital.
F-59
The following table shows the remaining contractual maturities of the Company’s financial liabilities with agreed repayment periods. This table has been prepared based on the projected non-discounted cash flows of financial liabilities at the date on which the Company will make payments. The table includes projected interest cash flows and capital repayments of financial debt included in the consolidated statement of financial position. To the extent that interest is accrued at variable rates, the non-discounted amount is derived from interest rate curves at the end of the reporting period. Contractual maturity is based on the earliest date when the Company must make the respective payment.
2029 and
As of December 31, 2021
2023-2025
2026-2028
subsequently
Interest(1)
368,995
863,034
472,801
1,704,830
Interest Payable
Lease Liabilities(3)
Accounts payable with related parties
954,272
2,558,438
3,972,801
7,485,511
2028 and
As of December 31, 2020
2022-2024
2025-2027
1,500,001
Interest(2)
188,641
118,077
306,718
Lease Liabilities
3,644,743
1,786,288
5,431,031
2027 and
As of December 31, 2019
2021-2023
2024-2026
4,512,724
308,630
306,760
615,390
256,228
903,982
4,968,024
5,872,006
The amounts forming part of the debt contracted with credit institutions include fixed and variable rate instruments. Variable-rate financial liabilities are subject to change when variable interest rates differ from the estimated interest rates determined at the end of the reporting period based on their market value.
The Company expects to meet its obligations under its liabilities with its operational cash flows and resources received from the maturity of its financial assets. Additionally, the Company has access to lines of credit with certain financial institutions.
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f. Financial instruments at fair value
This note provides information about how the Company determines fair values of various financial assets and financial liabilities. Except as detailed in the following table, the Company considers that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values due to their short-term maturities.
Long-term debt (note 15)
Book value
4,811,410
4,524,746
4,594,575
4,517,336
Hierarchy of fair value as of December 31, 2021
Level 1
Level 2
Level 3
Financial liabilities:
Long-term debt(1)
Hierarchy of fair value as of December 31, 2020
4,512,510
12,236
Hierarchy of fair value as of December 31, 2019
4,371,570
145,766
22. Shareholders’ equity
Contributed Capital
Fixed capital:
Series B Class I
262,447
Series BB Class I
38,375
Treasury Series B Class I shares
344,004,973
265,269
(2,470,158)
(1,905)
F-62
23. Accumulated other comprehensive loss
Accumulated other comprehensive loss is as follows:
Deferred taxes
8,494
4,684
Movements of the year
(4,340)
8,534
(17,379)
12,446
(13,098)
11,162
Labor obligations generate the effect of actuarial gains or losses.
24. Related party balances and transactions
ICA Constructora de Infraestructura, S.A. de C.V. (1)
7,964
178,977
ICA Constructora, S.A. de C.V. (1)
939
90,204
Actica Sistemas, S.A. de C.V. (1)
215,772
110,312
VCD Construcción y Desarrollo, S.A.P.I. de C. V. (1)
6,787
5,729
3,012
The accounts payable with related parties are as follows:
Payable:
Servicios de Tecnología Aeroportuaria, S.A. de C.V. “SETA”
78,939
80,504
Operadora Nacional Hispana, S.A. de C.V.
2,949
5,928
2,527
VCD Construcción y Desarrollo, S.A.P.I. de C.V.
3,508
5,772
5,335
ICA Ingeniería S. A. de C. V.
367
1,177
Actica Sistemas, S. de R.L. de C.V.
4,026
3,971
3,972
Autovía Golfo Centro S.A. de C.V.
30,757
16,442
GGA Capital, S.A.P.I. de C.V.
110,495
117,845
75,950
ICA Constructora de Infraestructura, S.A. de C.V.
16,652
ICA Constructora, S. A. de C. V.
27,419
16,564
Grupo ICA Constructora. S.A. de C.V.
794
Controladora de Operaciones de Infraestructura, S.A. de C.V.
10,298
Grupo Hotelero Santa Fe, S. A. de C. V.
491
604
The balance payable to GGA Capital, S.A.P.I. of C.V. for Ps. 110,495, Ps. 117,845 and Ps.75,950 corresponds to short term loans as of December 31, 2021, 2020 and 2019, respectively. Loans generated interest at a 91-day TIIE rate plus 3.5 percentage points, the interest rate was 5.7150% and 7.7430%, respectively.
The principal transactions with related parties performed in the normal course of business, are as follows:
Capital Expenditures:
Industrial warehouse
7,548
100,194
43,599
Expenses:
Payments from technical assistance received
133,458
Administrative services(1)
23,420
22,453
43,196
Revenues from Leases
2,401
23,828
Administrative services
Interests
14,922
28,633
Major maintenance of Concesioned Assets:
1,572
310
Concessioned Assets
Improvements and Major maintenance
564,563
553,405
Employee Benefits – Employee benefits granted to key management personnel of the Company were comprised solely of short-term benefits of Ps. 78,048, Ps.73,711 and Ps.58,989 in 2021, 2020 and 2019, respectively.
F-64
Technical Assistance – On December 14, 2020, a Third Amending Agreement to the Technical Assistance and Technology Transfer Agreement with SETA was signed with a term through December 31, 2021, and automatic annual renewals thereafter. The annual consideration under the amendment is the greater of U.S. $ 3,766,000 (updated annually according to the U.S. consumer price index) and 3% of the Company’s consolidated EBITDA before payment of the technical assistance fee. For purposes of this calculation, consolidated EBITDA before technical assistance considers exclusively airport concessions and companies that directly or indirectly provide employee services to airports.
In 2021 and 2019 the variable part of the consideration for this concept was greater than the fixed part of US$3,766 (thousand) and US$3,661 (thousand). In 2020 no variable part was generated.
Pursuant to the Company’s bylaws, SETA (as holder of the Company’s Series ”BB” shares) has the ability to appoint and remove the Company’s Chief Financial Officer, Chief Operating Officer and Commercial Director, the right to elect three members of the Company’s board of directors, and the right to veto certain actions requiring approval of the Company’s shareholders (including the payment of dividends and the right to appoint certain members of senior management). In the event of the termination of the technical assistance agreement, the Series ”BB” shares will be converted into Series ”B” shares resulting in the termination of these rights.
If at any time after June 14, 2015, SETA were to hold less than 7.65% of the Company’s capital stock in the form of Series ”BB” shares, such shares must be converted into Series ”B” shares, which would cause SETA to lose all of its special rights. So long as SETA retains at least 7.65% of the Company’s capital stock in form of Series ”BB” shares, all its special rights will remain in force.
SETA holds 12.8% of GACN outstanding capital stock in the form of Series “BB” shares and, additionally holds 1.9% in the form of Series “B” shares.
F-65
25. Operating segment data
The reportable segments are determined on the basis of which the Company internally reports its segment reporting to senior management for purposes of making operating decisions. Considering the same accounting basis described in note 4. The financial information of the holding company and its service companies have been combined and included in the “other” column.
Investments
Non-aeronautical
services
Operating
Assets per
Liabilities per
Capital
in airport
revenues
amortization
segment
investments
concessions
Metropolitan
9,851,832
2,328,736
1,013,223
4,656,916
Tourist
1,610,833
475,820
52,188
1,259,100
1,472,456
182,768
54,387
575,299
773,651
213,664
130,553
665,716
Regional
1,156,808
311,608
64,277
747,296
1,291,889
218,694
93,664
698,863
433,110
178,875
37,840
280,275
San Luis Potosi
975,174
592,318
69,963
722,596
607,634
263,087
133,222
504,349
Torreon
455,251
150,071
130,982
307,785
304,253
119,919
38,291
223,770
Border
Ciudad Juarez
908,182
322,338
200,447
528,488
889,245
490,399
86,752
652,159
Hotel
NH T2 Hotel
517,121
205,908
Hilton Garden Inn
309,245
32,992
Industrial Park:
VYNMSA
486,130
262,011
16,127
4,118,094
30,155
4,293,516
23,092,832
10,190,295
10,080
5,326,515
5,330,118
1,803,826
5,425,577
45,135,646
16,539,503
2,132,101
11,822,612
Eliminations
(48,787)
(3,676,739)
(14,922)
(1,315,188)
(22,246,505)
(4,888,594)
(14,923)
(141,928)
Consolidated
6,479,365
1,367,347
823,103
3,870,329
29,409
21,587
1,414,504
449,606
29,561
1,257,321
63,103
1,358,969
162,731
24,747
548,185
12,961
623,522
130,925
553,611
942,529
172,428
32,225
707,619
1,176,640
208,282
628,208
50,203
361,233
130,170
50,534
253,402
764,159
507,738
677,976
10,157
459,542
173,952
385,514
23,661
427,761
145,686
288,688
278,600
104,243
212,775
60,241
685,696
251,677
32,311
376,574
724,866
445,447
596,461
498,674
201,062
297,470
31,397
3,628
494,223
277,183
107,952
2,671,873
36,688
1,621,773
18,275,746
6,327,815
10,945
2,966,361
3,665,471
1,280,338
443,925
2,485,164
35,263,499
11,087,689
1,430,117
10,356,663
(23,803)
(2,494,432)
(26,469)
(8,581)
(763,696)
(17,071,919)
(3,722,356)
(28,634)
(127,007)
F-67
726,685
5,715,147
941,349
331,393
3,168,968
40,241
1,419,091
452,731
63,333
1,269,386
34,573
1,261,473
153,667
541,430
605,929
122,048
524,549
411,393
67,021
888,950
157,533
135,394
699,711
617,979
66,286
68,960
1,021,410
140,294
69,834
579,084
329,251
104,720
210,111
736,196
470,919
639,981
197,160
28,057
424,573
143,603
326,939
394,575
129,541
18,639
285,823
6,842
276,150
113,357
212,224
55,990
602,764
211,678
31,452
362,169
676,207
400,642
113,242
549,139
518,590
201,012
9,190
301,362
34,001
390,478
185,094
46,160
5,651,607
50,368
4,891,268
17,432,325
6,554,142
3,194
5,769,565
7,220,120
1,001,356
6,037,186
32,994,471
10,516,331
1,095,447
9,369,514
(16,903)
(5,400,515)
(46,522)
(1,181,880)
(15,717,510)
(3,126,865)
(102,403)
1,048,925
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26. Revenues
According to the General Airports Law on Airports and its regulations, Company revenues are classified as aeronautical services and non-aeronautical services.
Aeronautical services include those services provided to airlines and passengers as well as complementary services.
Non-aeronautical services include those services that are not essential for operating an airport, such as the lease of commercial premises, restaurants and banks.
Revenues generated by aeronautical services are under a price regulation system administered by the Ministry of Infrastructure, Communications and Transportation for airport concessions, which establishes a maximum rate (TM) for each year in a five-year period. The TM is the maximum amount of revenue 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.
Non-aeronautical services are not covered by the regulation system administered by the Ministry of Infrastructure, Communications and Transportation. However, in some cases, they may be regulated by other authorities, as is the case with revenues generated from the operation of parking lots.
Under the General Airports Law and its regulations, revenues generated from the operation of parking lots are considered aeronautical revenues. For purposes of these financial statements, such revenues are classified as non-aeronautical.
Following is a detail of the composition of revenues of the Company, using the classification established by the General Airports Law and its related regulations, with the exception of non-aeronautical revenues as mentioned in the preceding paragraph:
Aeronautical services:
Domestic TUA
International TUA
Other airport services, leases and regulated access rights
241,344
Total revenues from aeronautical services
Non-aeronautical services:
Commercial activities
Advertising(1)(2)
Retail operations(1)(2)
Food and beverage(1)(2)
Car rental operators(1)(2)
Time share developers(1)(2)
Financial services(1)(2)
Communication and services(1)(2)
Other services
Total revenue from commercial activities
Complementary activities:
Leasing of space(1)(2)
Other services (CUSS and CUTE)
Total of complimentary activities
Total revenue from non-aeronautical services
Approximately 76% of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, generated by the Monterrey, Acapulco, Mazatlán, Culiacán, Chihuahua, Ciudad Juárez, and San Luis de Potosí airports.
F-70
27. Cost of services
The cost of services is as follows:
Utilities (electric, cleaning and water)
Equipment lease, fees and others
28. Subsequent event
On January 19, 2022, a single dividend payment was made in the amount of Ps. 4,325,841 in the amount of Ps. 11.201923995 pesos per share upon delivery of coupon number 4. The dividend was declared in resolutions adopted by its General Ordinary and Extraordinary Shareholders’ Meeting, held on December 22, 2021, in which the Board of Directors was delegated to determine the amount and date of payment of the dividend.
Debt issuance and bank loans repayment
On March 31, 2022, GACN completed of its issuance of Ps. 4,000,000 in bonds linked to long-term sustainability, in two tranches, one at a variable rate and the other at a fixed rate The variable rate tranche in the amount of Ps. 1,700,000 in 5-year bonds at a variable rate at 28-day TIIE plus 14 basis points. The fixed rate tranche Ps. 2,300,000 in 7-year bonds at a fixed rate of 9.35%. The Bonds will be paid at maturity. With these issuances proceeds of the Issuances, GACN has prepaid short-term loans for a total amount of Ps. 2,700,000. The remaining proceeds will be used primarily to finance investments committed under the Master Development Program for the Group's airports.
Dividend declaration
On April 22, 2022, at the Shareholders’ Meeting, shareholders approved, among other matters, the payment of a cash dividend to shareholders of Ps.2,300,000 which will be paid in two installments: the first installment of Ps.1,800,000 no later than May 31, 2022, and a second installment of Ps.500,000, no later than July 31, 2022.
29. Authorization for the issuance of the consolidated financial statements
The Company’s consolidated financial statements were authorized for issuance on April 29, 2022, by the Chief Executive Officer, Ricardo Dueñas Espriu and Ruffo Pérez Pliego del Castillo, General Director of Administration and Finance and, consequently do not reflect the events occurred after that date.
* * * * * *