20-F 1 omab-20201231x20f.htm 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

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

Plaza Metrópoli Patriotismo, Piso 5

Av. Patriotismo 201

Col. San Pedro de los Pinos, Benito Juárez

Ciudad de México, México

+ 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

OMAB

The NASDAQ Stock Market LLC*

*

Not for trading, but only in connection with the registration of ADSs, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

N/A

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

Title of each class:

Number of Shares

Series B shares

340,345,556

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.

 Yes  No

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).

 Yes  No

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

1

ITEM 3.

KEY INFORMATION

1

Selected Financial Data

1

Risk Factors

1

Forward-Looking Statements

28

ITEM 4.

INFORMATION ON THE COMPANY

29

History And Development Of The Company

29

Business Overview

34

Regulatory Framework

65

Organizational Structure

83

Property, Plant And Equipment

85

ITEM 4A.

UNRESOLVED STAFF COMMENTS

85

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

85

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

125

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED-PARTY TRANSACTIONS

134

Major Shareholders

134

Related-Party Transactions

136

ITEM 8.

FINANCIAL INFORMATION

138

Legal Proceedings

138

Dividends And Capital Stock Reimbursements

141

ITEM 9.

THE OFFER AND LISTING

142

Share Price History

142

Trading On The Mexican Stock Exchange

142

ITEM 10.

ADDITIONAL INFORMATION BYLAWS

143

Material Contracts

158

Exchange Controls

158

Taxation

158

Documents On Display

162


ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

163

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

163

ITEM 12A.

DEBT SECURITIES

163

ITEM 12B.

WARRANTS AND RIGHTS

163

ITEM 12C.

OTHER SECURITIES

163

ITEM 12D.

AMERICAN DEPOSITARY SHARES

163

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

165

ITEM 14.

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

165

ITEM 15.

CONTROLS AND PROCEDURES

165

ITEM 16.

[RESERVED]

168

ITEM 16A.

AUDIT COMMITTEE’S FINANCIAL EXPERT

168

ITEM 16B.

CODE OF ETHICS

169

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES AUDIT AND NON-AUDIT FEES

169

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

169

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

169

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

171

ITEM 16G.

CORPORATE GOVERNANCE

171

ITEM 16H.

MINE SAFETY DISCLOSURES

176

ITEM 17.

FINANCIAL STATEMENTS

177

ITEM 18.

FINANCIAL STATEMENTS

177

ITEM 19.

EXHIBITS

177


PART I

Item 1.          Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.          Offer Statistics and Expected Timetable

Not applicable.

Item 3.          Key Information

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 novel strain of coronavirus (“COVID-19”), first identified in Wuhan, China in December 2019, has spread to nearly all regions around the world. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The outbreak, and measures taken to contain or mitigate it, have had dramatic adverse consequences for the global economy, including on 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.

On March 19, 2020, the United States issued a travel advisory recommending that travelers avoid all international travel. The following day, on March 20, 2020, the United States closed its land border with Mexico, except to essential travel and trade and commerce. As of April 22, 2021, the land border remains closed. On January 26, 2021, the United States issued a decree, requesting negative COVID-19 test results for all inbound passengers traveling by air. Beginning on January 7, 2021, Canada established similar testing requirements for passengers traveling by air to the country. Subsequently, the Canadian government suspended flights between Canada, Mexico and the Caribbean until April 30, 2021. The full effect of the travel advisories and restrictions in other countries is not yet known and could impact our international passenger levels even after formal advisories and restrictions have been lifted.

On March 31, 2020, Mexico’s Ministry of Health issued a decree suspending all non-essential activities in the country through April 30, and on April 21, such suspension was extended through May 30, 2020. As a consequence of these suspensions, total passenger traffic in our airports experienced a sharp decline. In April and May, 2020, our total terminal passenger traffic decreased 92.8% and 93.5%, respectively, compared to the same periods of 2019. On May 29, 2020, Mexico’s Ministry of Health issued a decree establishing an epidemiological risk traffic light system by region, applicable both to municipalities and states which became effective on June 1, 2020 (and which remains in place as of the date of this report) that determines the level of health risk and the type of activities authorized to take place. As a result, different states of the country are experiencing different reactivation levels and, consequently, different types of economic activities are being allowed. As a result of this gradual reactivation of economic activity by region, passenger traffic started to show signs of recovery, with monthly decreases from 84.6% in June 2020 to 41.5% in December 2020, compared to the same periods of 2019. Throughout the pandemic, airports have been considered essential and our airports have remained operational. Given that OMA operates in 9 states of Mexico, the economic reactivation level and the gradual recovery of passenger flows in our airports could vary significantly from state to state, depending on the risk level established in each of the states in which we operate, as well as those in our main destinations. In response to this material deterioration in air traffic, we have taken a number of actions 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 the current levels of operations, (c) headcount reduction of approximately 100 positions

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implemented in the third quarter of 2020, and (d) deferral and discount agreements with commercial and aeronautical clients. Most of our cost structure is fixed, and the impact from these measures is not expected to be significant vis a vis the potential decline in revenues resulting from the disruption in passenger traffic across the Company’s operations.

Due to measures implemented by Mexico and other countries such as “shelter in place” or quarantine requirements, international and domestic travel restrictions or advisories, limitations on public gatherings, social distancing recommendations, remote work arrangements and closures of tourist destinations and attractions, as well as passenger perceptions of the safety, ease and predictability of air travel, our main airline customers and our commercial tenants have experienced an adverse economic environment, which has led to halts of operations, restructuring processes and the interruption of commercial relationships with the Company. For example, on June 30, 2020, Aeromexico and its affiliates, which accounted for 20.3% of our total passenger traffic in 2020, filed voluntary Chapter 11 petitions in the United States to implement a financial restructuring, while continuing to operate. In addition, since December 9, 2020, Interjet, which accounted for 5.6% of our total passenger traffic in 2020, stopped operating at our airports. We cannot measure the extent of the impact in our future operations and financial results as a consequence of these processes.

Historically, a substantial majority of our revenues have been derived from aeronautical services, and our principal source of aeronautical services revenues is passenger charges (Tarifa de Uso de Aeropuerto, TUA). Passenger charges are payable for each passenger (other than diplomats, infants, transfer and transit passengers) departing from the airport terminals we operate, collected by the airlines and paid to us. In 2018, 2019 and 2020, passenger charges represented 56.2%, 58.5% and 44.7%, respectively, of our total revenues and 65.7%, 65.9% and 58.4%, respectively, of the sum of our aeronautical and non aeronautical revenues.

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. Our total passenger traffic decreased 37.8% in the first quarter of 2021 compared to the first quarter of 2020. The sum of our aeronautical and non-aeronautical revenues for the first quarter of 2021 were Ps. 1,189,679 thousand, as compared to Ps.1,715,650 thousand in the first quarter of 2020. We have 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 are in place. We have also implemented a remote working policy for staff where possible. 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.

Because our revenues are largely dependent on the level of passenger traffic in our airports, any pandemics or outbreaks of health epidemics, such as SARS, Influenza A (H1N1), Ebola, Zika, Chikungunya and COVID-19, or other such international events or threats thereof (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry related to new regulatory procedures in order to preserve the health of the passengers and the airport community, which could not be recovered through our maximum tariffs and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition. For more information, see “Our operations could be adversely affected due to changes in the collection of passenger charges.”

Large scale international events, including acts of terrorism, or wars, 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.

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The terrorist attacks on the United States on September 11, 2001 had a severe adverse impact on the air travel industry, particularly on U.S. carriers and carriers operating international service to and from the United States. Airline traffic in the United States fell precipitously after the attacks. Our terminal passenger volumes declined 5.8% in 2002 as compared to 2001. Among other consequences, airport operations would be disrupted or suspended during the time necessary to conduct rescue operations, investigate the incident and repair or rebuild damaged or destroyed facilities, and our future insurance premiums would likely increase. In addition, our insurance policies do not cover all losses and liabilities resulting from terrorism. Any future terrorist attacks, whether or not involving aircraft, will likely adversely affect our results of operations and financial condition.

Any general increase of hostilities relating to terrorist organizations, reprisals thereof, further conflict in the Middle East, or other such international events or threats thereof, even if not made on or targeted directly at the air travel industry, or the fear of or the precautions taken in anticipation of such attack 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. The COVID-19 outbreak has and is materially reducing demand for and availability of, worldwide air travel and could therefore continue to have a material adverse effect on our business and results of operations. For more information, 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 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.

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

3


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 January 20, 2021, President Joe Biden issued a Memorandum for the Attorney General, and the Secretary of Homeland Security, to take action to preserve and fortify DACA, consistent with applicable law. 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. As a result, it is possible that the United States and/or Mexico will experience a significant economic downturn due to the effects of the COVID-19 outbreak. The United States and Mexico technically entered into a recession in 2020 following the COVID-19 outbreak. The extent and effect of this recession is difficult to predict, including whether such recession and any recovery thereof will be similar to past periods of recession and recovery.

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 3.1% in 2018, 2.3% in 2019 and decreased 3.5% in 2020, and our international passenger traffic increasing 4.4%, 7.9% and decreased 56.9%, 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 2020, exports from Mexico to the United States represented approximately 81.2% of Mexican exports, and 39.1 % of foreign direct investment in Mexico originated in the United States. According to the U.S. Bureau of Economic Analysis, in 2020, secondary income received from the United States, which includes government and private transfers, was approximately U.S.$17.6 billion.

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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. 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. Any substantial variation in fuel prices could have an adverse effect on our results of operations and financial condition.

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

In 2018, 2019 and 2020, approximately 42.9%, 43.0% and 40.0%, 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 Communications and Transportation announced in the Federal Official Gazette the General Guidelines for the allocation of slots at congested airports (see “Risk Factors⸻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 “Santa Lucía Airport”) to a civil airport, which is expected to start operations in March 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 when these renovations will be completed and what impact congestion may have on 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 or that the converted Santa Lucía Airport or expanded Mexico City and Toluca International Airports will start operations on time.

Security enhancements have resulted in increased costs and may require additional investments in the future.

In 2020, 10.7% of the passengers served by our airports were international passengers, of which, 76.8% 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

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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.”

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 is scheduled for 2021-2025, 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

6


with the baggage screening guidelines, but AFAC may require additional investments. These additional expenses could restrict our liquidity and adversely affect our results of operations.

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 eight of our thirteen airports and could be adversely impacted by any condition affecting those businesses.

In 2020, approximately 80.6% of the sum of our aeronautical and non-aeronautical revenues were generated from eight of our thirteen airports. The Monterrey airport generated the most significant portion of our revenues. The following table lists the percentage of the sum of aeronautical and non-aeronautical revenues generated at our airports, including the percentage of total revenues generated by our hotel services:

    

For Year Ended

 

Airport

December 31, 2020

 

Monterrey

42.7

%

Culiacán

10.0

%

Chihuahua

6.4

%

Mazatlán

6.0

%

Ciudad Juárez

5.8

%

Acapulco

3.5

%

San Luis Potosí

3.3

%

Zihuatanejo

2.8

%

Five other airports, Servicios Complementarios del Centro Norte, Terminal 2 NH Collection Hotel, and OMA Logística, S.A. de C.V. (“OMA Logística”)(1)

19.4

%

Total

100.0

%


(1)OMA Logística includes revenues from Consorcio Hotelero Aeropuerto Monterrey, S.A.P.I. de C.V. and OMA-VYNMSA Aero Industrial Park, S.A. de C.V.

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

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.”

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We are dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity risks.

We rely on a variety of information technology to manage our operations. The proper functioning of these systems is critical to the efficient operation and management of our business. In addition, these systems may require modifications or upgrades as a result of technological changes or growth in our business. These changes may be costly and disruptive to our operations, and could impose substantial demands on management time. Our systems may be vulnerable to damage or disruption caused by circumstances beyond our control, such as catastrophic events, power outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access and cyber-attacks. Currently, our information systems are protected with backup systems, including physical and software safeguards located outside of our offices for protection purposes, and a cold site on critical systems to recover information technology operations. Furthermore, we undertake other steps to secure our systems and electronic information from exogenous events. These safety components reduce the risk of disruptions, failures or security breaches of our information technology infrastructure and are reviewed periodically by external advisors. Any such disruption, failure or security breach of our information technology infrastructure, including our back-up systems, could have a negative impact on our operations.

Additionally, the security risks associated with information technology have increased in recent years due to an increase in more complex types of cyber-attacks. A failure of or attack to our information technology systems or those of our contractors could affect our business or result in the disclosure or misuse of confidential or personal information, which could cause significant interruptions in services or other operational difficulties and increases in costs, that could result in losses. 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.

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 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.

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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 2020, VivaAerobus represented 28.0%, Volaris represented 23.5%, Aeroméxico and its affiliates represented 20.0% and Interjet represented 5.7 %. 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, filed voluntary Chapter 11 petitions in the United States to implement a financial restructuring while continuing to operate. 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 current 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. In December 2020, the International Air Transport Association, or IATA, issued its 2021 financial forecast for the global commercial airline industry, estimating net post-tax loss of about U.S.$38.7 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 -8.4% in 2021. On February 21, 2021, the IATA announced that it did not expect the airline industry to be cash positive until 2022. 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, we provided payment extensions to our main airline customers, which allowed us to mitigate noncompliance risks. 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, which is mainly comprised of commercial tenants. We cannot assure you whether the COVID-19 pandemic will continue to cause an increase in our reserve for doubtful accounts receivable in 2021. 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.”

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

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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 16.21% increase of the general minimum wage nationwide as of January 1, 2019, a subsequent 20.0% increase of the general minimum wage as of January 1, 2020 , and a 15% increase as of January 1, 2021 and (iii) a 100% increase of the minimum wage in the municipalities near the northern border of Mexico on January 1, 2019, an additional 5.0% increase as of January 1, 2020, and a 15% increase as of January 1, 2021. 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, which include travel restrictions, stay-at-home ordinances, restrictions on non-essential activities and other restrictions on the overall operation of businesses across Mexico 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.

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, 2020), 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.

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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 prices 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) and the Ministry of Communications and Transportation (most recently in January 2013, covering the period from January 1, 2013 to December 31, 2015), pursuant to which we established specific prices for regulated aeronautical services applicable to our principal airline customers. Although this agreement has not been renewed as of April 22, 2021, all benefits continue to be provided on the same terms. Furthermore, we have expanded the benefits of the agreement to all domestic and international airlines operating at our airports, even to those airlines that are not affiliated to the Mexican National Air Transportation Chamber of Commerce. Historically, amounts paid under these agreements have not been material, and we do not expect any current agreement or any similar future agreements with the Mexican National Air Transportation Chamber of Commerce or any airline to have a material effect on our results of operations.

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

Our 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

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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 government 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.

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.183,930 thousand at December 31, 2020. 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.p. to our audited consolidated financial statements. See “Item 5. Operating and Financial Review and Prospects—Critical Accounting Policies—Deferred Income Taxes.”

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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.

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.

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

We are exposed to risks generally associated with properties rented to third parties, such as a decline in rental market demand, occupancy rates or rent levels, non-payment of minimum rent and royalties by tenants or a weakening of the real estate market. Moreover, our real estate assets are located on or adjacent to our airports and serve a particular sector of the rental market, thus exposing us to fluctuations in this specific market. Any of these risks could adversely affect the profitability of our real estate development activities and, consequently, our business, results of operations, prospects and financial position.

We are exposed to the risk of non-performance by our subcontractors.

We subcontract certain services (including security and surveillance services) 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), 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, we could be held jointly liable for the payment of social security obligations that such contractors may have, as well as any applicable penalties.

Our ability to expand certain of our airports and to comply with applicable safety guidelines could be limited by difficulties we encounter in acquiring additional land on which to operate our airports.

Certain guidelines established by the ICAO require the maintenance of a perimeter surrounding the land used for airport operations. At several of our airports, we do not control portions of the land within the required perimeters. If portions of such land adjacent to certain of our airports are developed by third parties in a manner that encroaches on the required perimeters, our ability to comply with applicable guidelines of the ICAO or to expand our airport operations could be adversely affected. Also, the growth of certain cities in the proximity of our airports could limit our ability to expand our airports.

To allow the future expansion of the Monterrey airport, including the construction of a second commercial runway and the relocation of the control tower, in February and June 2007, March and May 2008, July and December 2009 and February, July and December 2010, we completed acquisitions of land surrounding the airport with an aggregate area of 777 hectares (3 square miles), for an aggregate price of Ps.1,559,381 thousand (U.S.$121.3 million). Improvements made to airport facilities at our expense may be recognized by AFAC as part of our investment in the airport concession. We received authorization from AFAC to reallocate Ps.386,538 thousand (amount expressed in nominal 2009 pesos) of our investment in this land to investments included in the 2011–2015 Master Development Program for the Monterrey airport. The recovery of the remaining investment of Ps.695,759 thousand (amount expressed in nominal 2009 pesos), is 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 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,

14


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.

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

Discontinuation, reform or replacement of the London Interbank Offered Rate (or LIBOR) or other benchmark interest rates, or uncertainty related to the potential for any of the foregoing, may impact our business.

As of December 31, 2020, we had Ps. 13,503 thousand (U.S. $678,246 ) of variable rate indebtedness linked to LIBOR or other benchmark rates.  In July 2017, the U.K. Financial Conduct Authority, which regulates LIBOR,

15


announced its intention to phase out the use of LIBOR by the end of 2023.  In addition, other regulators have suggested reforming or replacing other benchmark rates including peso-denominated rates.  As there is not yet definitive information regarding the phase-out of LIBOR, we cannot currently predict the effect of the discontinuation, reform or replacement of LIBOR.  However, the phase out of LIBOR and the discontinuation, reform or replacement of other benchmark rates may have an unpredictable impact on, or cause disruption to, the broader financial markets or borrowing costs to borrowers.  These developments may in turn increase the cost of our variable rate indebtedness or otherwise have an adverse effect on our results of operations and financial condition.

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 2018, 2019 and 2020, approximately 65.0%. 67.5% and 54.8%, respectively, of the Company’s total revenues, and approximately 76.0%, 76.0% and 71.5%, 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 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.

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 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 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

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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 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. Even though AFAC has been formally established, its internal regulations and operation manuals are still pending as of the date of this report. As such, the Company cannot predict how this new agency will be organized, the scope of its authority, the actions that it will take in the future or the effect of any such actions on its business.

On February 20, 2014, a bill of the new 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.

In response to the Antitrust Commission’s findings, the Ministry of Communications and Transportation (Secretaría de 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 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 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 Communications and Transportation approved, based on the terms of the Company’s concessions, the

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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 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 July 30, 2010, the FAA downgraded Mexico’s aviation safety rating from an ICAO Category 1 rating to an ICAO Category 2 rating, as a result of the FAA’s visit to the Mexican Bureau of Civil Aviation (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 downgrade from a Category 1 rating to a Category 2 rating were the suspension of the right to operate code-shared flights and the restriction of Mexican airlines’ ability to increase the frequency of, or add new routes to, the United States and that the international routes of Mexicana de Aviación would not be flown by any Mexican carrier with a Category 2 rating.

Mexico regained its Category 1 safety rating on December 1, 2010; however, Mexico may be downgraded in the future, and the Company cannot be certain of how long this Category 1 rating will be maintained. 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 2020, the revenues subject to maximum rate regulation represented approximately 99.3% 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.

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If the Company exceeds the maximum rate at any airport at the end of any year, the Ministry of Communications and Transportation may assess a fine and may reduce the maximum rate at that airport in the subsequent year. The imposition of sanctions for violations of certain terms of a concession, including for exceeding an airport’s maximum rate, can result in termination of the concession if the relevant term has been violated and sanctions have been imposed at least three times. In the event that any one of 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, 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. On April 22, 2021, the exchange rate was Ps.19.87 per U.S.$1.00.

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

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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.

On February 5, 2014, the Mexican government announced in the Federal Official Gazette that the Ministry of Communications and Transportation granted to Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V., a concession for 20 years to construct, operate and exploit a civil-aviation airport in the municipality of Bocoyna, Chihuahua, located 250 kilometers (144 miles) from the city of Chihuahua, within an area of 95.5 hectares (0.4 square miles). The government of the state of Chihuahua owns 98% of the capital stock of Administradora de Servicios Aeroportuarios de Chihuahua, S.A. de C.V. The 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 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 January 15, 2021, the State of Chihuahua mentioned that the airport is expected to start operations in late 2021, due to constructions delays because of COVID-19. The airport is expected to be fully operational beginning in 2022 and will serve both commercial and general aviation flights. It will have an annual capacity to serve up to 450,000 passengers. 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 Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations. To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession. However, the Ministry of Communications and Transportation may authorize such an amendment and commercial aviation flights may operate from Aeropuerto del Norte in the future. 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 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.

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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.

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. 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.”

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 2020.

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 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. The amendments became effective April 24, 2021, except for certain legal provisions that will become effective August 1, 2021. Among the most important amendments made are: (i) prohibition of outsourcing of personnel, which consists of an individual or legal entity providing or making available its own workers for the benefit of another, including those provided by companies within the same business group; (ii) 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

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of the company receiving the services; (iii) companies that hire specialized services with a contractor who fails to comply with its labor obligations will be jointly and severally liable with such contractor; (iv) companies that provide specialized services will require to be registered with the Ministry of Labor and Social Welfare (STPS); (v) violation of the new rules will result in fines ranging from 2,000 to 50,000 UMAs (approximately between U.S.$9,003 to U.S.$225,077); and (vi) payments to subcontracting personnel will not have tax effects of income tax deduction or VAT accreditation; furthermore, irregularities will be prosecuted as a tax fraud offense. The Company is analyzing the effect that the amendments will have on its costs, which could have a negative impact on its results of operations.

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.

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 Company entered in 2017 into a power purchase agreement (PPA) with a wind electricity generator, which expires in 2028. In 2020, approximately 78% of the total electricity consumption of the Company was supplied under this agreement. As of the date of this memorandum, we cannot predict how these amendments to the EIL will affect the PPA.

In addition, 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.”

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 2018, 2019 and 2020, domestic terminal passengers have represented approximately 88.2%, 88.1% and 89.3%, 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

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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 -8.5%, -0.1% and 2.0% in 2020, 2019 and 2018, respectively, and is estimated to increase by 4.3% in 2021 and to grow by 2.5% in 2022, according to the World Economic Outlook published by the International Monetary Fund in January 2021.

During 2020, average reference interest rates in Mexico decreased by 253 basis points compared to 2019. The annualized interest rates on 28-day short-term Mexican treasury bills, or Cetes (Certificados de la Tesorería de la Federación), averaged approximately 4.2%, 6.7%, 7.6%, 7.8% and 5.3% for 2016, 2017, 2018, 2019 and 2020, 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.

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 will take place including mid-term elections for the Mexican Chamber of Deputies as well as governor elections in fifty states, including six of the states in which we operate our airports, which could lead to changes in the composition of the Mexican Chamber of Deputies as well as of the governing party in those states in which where we operate. 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.

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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, 2018 to December 31, 2019, the peso appreciated 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, an appreciation of 3.9%. 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 During the first months of 2021, the peso depreciated, reaching Ps.19.87 per U.S.$1.00 on April 22, 2021.

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, 2020, the Company had U.S.$4.1 million of liabilities denominated in U.S. dollars, representing 1.1% of its consolidated debt. As of March 31, 2021, U.S.$80.2 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.

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 September 8, 2020 (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, Nuevo León (including the metropolitan area of Monterrey), San Luis Potosí, 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, 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

24


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, on January 20, 2021 Mr. Joseph R. Biden became the 46th president of the United States. The Company cannot assure you that any policies adopted by the new 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.

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.

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, twelve 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). Our Monterrey airport is in the process of obtaining this certification, which is expected to be received in 2021. However, compliance with current or future environmental regulations may require us to incur additional costs in order to bring our airports

25


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.

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.

26


Risks Related to Our Shareholders

SETA controls our management, and its 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”), together (“Fintech”), through their direct subsidiary SETA, are the beneficial owners of 14.7% 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. 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.”

SETA’s continuing veto rights as holder of at least 7.65% of our capital stock in the form of Series BB shares and its right to nominate, appoint and remove certain directors and officers as holder of Series BB shares, which will continue for as long as it owns at least one Series BB share and the Technical Assistance Agreement remains in effect, could adversely impact our operations and constitute an obstacle for us to bring in a new strategic shareholder and/or operator. With the right to nominate, appoint and remove certain members of our senior management, SETA directs the actions of our management in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses. Should SETA’s shares fall below this threshold, our management could change significantly, and our operations could be adversely affected as a result. In the event of termination of the Technical Assistance Agreement, SETA would cease to have the special rights of the Series BB shares, which may adversely affect and disrupt our operations.

On 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.

The interests of SETA, Fintech, or any new controlling shareholder, 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,

27


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

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

We may not file a registration statement with the SEC in the future to allow holders of ADSs or shares in the United States to participate in a preemptive rights offering. In addition, under current Mexican law, sales by the depository of preemptive rights and distribution of the proceeds from such sales to you, the ADS holders, is not possible. As a result, your equity interest in the Company may be diluted proportionately.

Holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary.

Under Mexican law, a shareholder is required to deposit its shares with the Secretary of the Company, S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V. (“Indeval”), a Mexican or foreign credit institution or a brokerage house in order to attend a shareholders’ meeting. A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to attend shareholders’ meetings. A holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs, in accordance with the procedures provided for in the deposit agreement, but a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so.

FORWARD-LOOKING STATEMENTS

This Form 20-F contains forward-looking statements. We may from time to time make forward-looking statements in our annual and periodic reports to the SEC on Forms 20-F and 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others. Examples of such forward-looking statements include but are not limited to:

projections of operating revenues, net comprehensive income (loss), net income (loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios,

statements of our plans, objectives or goals,

changes in our regulatory environment,

statements about our future economic performance or that of Mexico, and

statements of assumptions underlying such statements.

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.

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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:

all of our Series BB shares, which in 2000 represented 15.0% of our outstanding capital stock;
an option to acquire from the Mexican government shares representing 36.0% of the capital stock in 2000. This option was subsequently assigned to and exercised by Aeroinvest (currently CONOISA);
an option to subscribe for up to 3% of newly issued Series B shares (1% of which expired unexercised on June 14, 2005, and 2% of which was exercised in September 2006); and
the right and obligation to enter into various agreements with us and the Mexican government, including a participation agreement setting forth the rights and obligations of each of the parties involved in the privatization (including SETA) (the “Participation Agreement”), a 15-year Technical Assistance Agreement setting forth SETA’s right and obligation to provide technical assistance to us in exchange for an annual fee and a shareholders’ agreement under terms established during the public bidding process. These agreements are described in greater detail under “Item 7. Major Shareholders and Related-Party Transactions.”

Currently, Series BB shares represent 12.8 % of our capital stock and the remainder consist of Series B shares.

SETA’s current shareholders are:

Fintech, through its wholly-owned subsidiaries , which own directly 100% of SETA. Bagual owns 19.6% of the capital stock of SETA; Grenadier owns 21.5% of the capital stock of SETA; Pequod owns 21.5% of the capital stock of SETA; Harpoon owns 20.4% of the capital stock of SETA and Expanse owns 17.1% of the capital stock of SETA. On June 10, 2020, each of the wholly-owned subsidiaries previously mentioned entered into a Stock Purchase Agreement with ICATEN and in the

29


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 5.47 Mexican pesos per share for 862,703,377 shares. SETA currently owns all of the outstanding Series BB shares representing 12.8% of our capital stock and also owns Series B shares representing 1.9% of our total capital stock.

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 2020 amounted to approximately Ps.81,164 thousand. This agreement is more fully described in “Item 7. Major Shareholders and Related-Party Transactions.”

Initial Public Offering

On November 29, 2006, a Mexican trust established by Nacional Financiera, S.N.C., or NAFIN (a Mexican national credit institution and development bank owned and controlled by the Mexican Government), acting pursuant to the instructions of the Ministry of Communications and Transportation, sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of ADSs and Series B shares, concurrently in the United States and Mexico. The net proceeds from the sale of the shares totaled approximately U.S.$432.2 million and were paid to the Mexican government.

Master Development Programs and Capital Expenditures

Master Development Program

Every five years, we are required to submit to the Ministry of Communications and Transportation for approval a Master Development Program for each of our concessions describing, among other matters, our traffic forecasts for the following 15 years, and detailed expansion, modernization and major and minor maintenance plans for the following five years. Each Master Development Program is required to be updated and resubmitted for approval to the Ministry of Communications and Transportation every five years. Upon such approval, the Master Development Program is binding for the following five years and deemed to constitute part of the relevant concession. Any major construction, renovation or expansion of an airport generally may only be made pursuant to a concession holder’s Master Development Program and upon approval by the Ministry of Communications and Transportation. In November 2020, the Ministry of 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 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 by
Airport for 2021 through 2025
(1)

For the Year Ended December 31, 

    

    

    

    

    

    

Total

2021

2022

2023

2024

2025

2021 - 2025

(in thousands of pesos)

Acapulco

 

169,017

54,220

45,189

19,988

40,858

 

329,272

Ciudad Juárez

 

233,915

202,913

313,188

195,768

62,014

 

1,007,799

Culiacán

 

279,206

301,991

333,872

72,891

88,512

 

1,076,472

Chihuahua

 

188,108

166,830

210,734

116,083

72,699

 

754,453

Durango

 

73,650

112,310

82,069

44,354

24,791

 

337,173

Mazatlán

 

79,162

70,696

131,412

15,272

40,001

 

336,542

Monterrey

 

947,082

1,336,164

1,238,833

1,871,495

1,688,744

 

7,082,318

Reynosa

 

104,664

44,173

44,805

35,838

28,960

 

258,440

San Luis Potosí

 

154,519

83,211

90,005

51,135

29,798

 

408,668

Tampico

 

104,325

69,792

54,446

10,940

51,502

 

291,004

Torreón

 

82,090

110,730

38,894

27,978

33,258

 

292,950

Zacatecas

 

71,296

24,093

18,759

16,843

22,386

 

153,377

Zihuatanejo

 

78,468

77,944

18,534

31,542

51,943

 

258,432

Total

 

2,565,502

 

2,655,068

 

2,620,741

 

2,510,125

 

2,235,465

 

12,586,901


(1)In pesos with purchasing power as of December 2020.

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)

For the Year Ended December 31, 

    

    

    

    

    

    

Total

2021

2022

2023

2024

2025

2021 - 2025

(in thousands of pesos)

Terminal capacity expansions and quality projects

 

610,054

1,051,955

1,295,208

1,444,221

1,438,497

 

5,839,936

Projects to meet ICAO directives

 

236,096

139,842

14,053

10,260

9,502

 

409,753

Operational Infrastructure Expansion

 

190,178

176,799

158,040

209,535

313,502

 

1,048,054

Runways and aprons

 

371,483

441,930

348,335

284,352

135,296

 

1,581,395

Machinery and equipment

 

437,868

527,027

198,793

159,582

217,715

 

1,540,984

Security, Safety and Information Technology Equipment

 

388,412

156,264

544,285

361,149

81,534

 

1,531,644

Other

 

331,412

161,252

62,027

41,027

39,418

 

635,135

Total

 

2,565,502

 

2,655,068

 

2,620,741

 

2,510,125

 

2,235,465

 

12,586,901


(1)In pesos with purchasing power as of December 2020.

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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 2016 through 2020:

Actual Capital Expenditures by Airport for 2016 through 2020

For the Year Ended December 31, 

    

2016

2017

    

2018

    

2019

2020

(in thousands of pesos)

Acapulco

 

77,069

372,253

 

279,099

 

12,221

34,592

Ciudad Juárez

 

10,005

33,404

 

9,096

 

29,839

78,794

Culiacán

 

9,896

44,389

 

34,035

 

65,480

40,919

Chihuahua

 

16,202

122,448

 

141,908

 

173,576

37,908

Durango

 

4,478

19,991

 

13,788

 

48,932

47,209

Mazatlán

 

19,632

30,222

 

31,306

 

37,812

23,805

Monterrey

 

98,585

505,445

 

282,514

 

244,038

748,245

Reynosa

 

23,944

127,353

 

153,562

 

63,443

30,191

San Luis Potosí

 

24,553

108,757

 

231,726

 

71,716

53,596

Tampico

 

32,157

46,742

 

26,169

 

111,210

50,152

Torreón

 

5,834

20,017

 

19,990

 

9,105

29,400

Zacatecas

 

7,789

19,174

 

9,656

 

17,555

29,443

Zihuatanejo

 

25,822

28,138

 

13,587

 

105,374

74,516

Other

 

173,427

103,626

 

67,927

 

58,625

122,714

Total

 

529,393

1,581,959

 

1,314,363

 

1,048,926

1,401,483

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The following table sets forth our actual capital expenditures by category across all of our airports for 2016, 2017, 2018, 2019 and 2020:

Actual Capital Expenditures by Category for 2016 through 2020

For the Year Ended

December 31, 

2016

2017

 

2018

2019

2020

(in thousands of pesos)

Capacity and quality project

140,989

 

882,289

961,580

598,829

946,848

Projects to meet ICAO directives

13,412

 

113,561

71,813

52,345

57,788

Facilities for disabled passengers

820

 

628

7,289

591

Environmental projects

6,616

 

12,429

6,655

3,350

4,279

Projects requested by competent authorities

2,283

 

8,216

4,126

692

16,806

Runways and aprons

12,552

 

1,735

220,647

95,033

Machinery and equipment

11,657

 

2,863

15,413

8,672

Operative standards equipment

19,669

 

78,735

25,804

10,027

33,475

Security — investments

7,287

 

27,309

6,074

17,305

29,398

Information systems — investments

5,565

 

58,545

43,738

16,972

14,432

Baggage-screening system — investments

775

 

81,942

12,538

820

22,363

Other

307,768

 

313,707

174,746

112,527

171,798

Total

529,393

 

1,581,959

1,314,363

1,048,926

1,401,483

In 2018, 2019 and 2020, our major maintenance expenditures totaled Ps. 139,320 thousand, Ps.305,133 thousand, and Ps.103,704 thousand, respectively. For a detailed reconciliation of expenditures actually made during 2018, 2019 and 2019 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 2018 through 2020 were allocated to the following types of investments at the majority of our airports:

Terminals. We started the construction of five building expansions, and we completed the construction of three expansion projects in 2019 and 2020. We also improved our airports’ terminals by, among others, updating our lighting and air conditioning systems, replacing our fire detection and suppression equipment, installing new elevators and escalators and upgrading our public information systems.
Paved surfaces. We performed major rehabilitation work on our runways, taxiways and service roads to meet ICAO standards, including the modernization of our illuminated navigation aid systems to improve the safety of our airports. We expanded several aircraft aprons for general and commercial aviation, particularly at the Monterrey airport. We also completed construction of two taxiways at each of the Culiacan airport and Monterrey airport, two new car rental facilities at each of the Monterrey and Acapulco airports, an expansion of the Chihuahua airport parking lot, and a new parking lot at Ciudad Juarez airport. We began the construction of three new parking lots at the Monterrey airport.
Machinery and equipment. We invested in machinery and equipment such as aircraft-approved fire-extinguishing vehicles, emergency back-up electricity generators, metal detectors and other security-related equipment. We purchased operational and passenger ground vehicles and completed construction of a new power main substation at the Acapulco airport. We also began the renewal of our runway light technology from halogen to solar LED in Reynosa, Tampico, Acapulco, Monterrey and Durango airports. We began the construction of a new electrical substation at the Monterrey airport.
Baggage-screening system – investments. We updated the screening equipment in six of our airports to facilitate compliance with the new baggage-screening guidelines that require a comprehensive screening process for the detection of explosives.

33


OMA-VYNMSA Industrial Park at the Monterrey airport. We continued with the expansion of our OMA-VYNMSA industrial park located at the Monterrey airport. As of December 31, 2020, we had a total construction of 9 warehouses with a total leasable area of 58,940 square meters (634,426 square-feet), of which all warehouses have already been leased and are currently in operation with lease terms ranging from 40 to 144 months. Construction of an additional warehouse with an area of 4,849 square meters (52,192 square-feet) was completed in January 2021.

BUSINESS OVERVIEW

Our Operations

Through our subsidiaries, we hold concessions to operate, maintain and develop 13 airports in Mexico, which are concentrated in the country’s central and northern regions. Each of our concessions has a term of 50 years beginning on November 1, 1998. The term of each of our concessions may be extended by the Ministry of Communications and Transportation under certain circumstances for up to 50 additional years. The terms of our concessions also include the right to occupy, use and improve the land appurtenant to our airports, which we do not own and which will revert to the Mexican government upon the termination of our concession. As operator of the 13 airports under our concessions, we charge fees to airlines, passengers and other users for the use of the airports’ facilities. We also derive rental and other income from commercial 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 14.2% of all arriving and departing total aviation passengers in Mexico in 2020.

In 2020, we recorded revenues of Ps.5,367,466 thousand (U.S.$269,604 thousand) and consolidated net income of Ps.1,097,879 thousand (U.S.$55,146 thousand), the sum of our aeronautical and non-aeronautical revenues was Ps. 4,113,597 thousand (U.S.$206,623 thousand) and our airports handled approximately 11.1 million terminal passengers, a decrease of 52.3% with respect to the 23.2 million terminal passengers handled in 2019.

Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, San Luis Potosí-Dallas, Monterrey-San Antonio, Chihuahua-Dallas, Mazatlán-Los Angeles, Mazatlán-Phoenix, Monterrey-Atlanta, Zihuatanejo-Los Angeles and Monterrey-Las Vegas. Our airports also serve several other major international destinations, including Dallas, Chicago, Houston, Los Angeles, Detroit, Minneapolis, Denver, Miami, New York, San Jose California and Phoenix in the United States, Havana, Cuba and Panama City. In addition, our airports serve major resort destinations, such as Acapulco, Mazatlán and Zihuatanejo, which are popular destinations in Mexico frequented by tourists from Mexico, the United States and Canada. Our airports also serve major domestic routes, including Monterrey-Mexico City, which was the country’s busiest domestic route in 2020, with approximately 1.6 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 Cancún-Monterrey, Tijuana-Culiacán and Chihuahua-Mexico City, with approximately 832,462, 608,145 and 406,554 total passengers, respectively, in 2020, according to the AFAC.

Our international traffic in 2020 decreased by 56.9% compared to 2019, principally as a result of temporary suspensions in the operations of United Airlines’ Monterrey-Houston route, American Airlines’ Monterrey-Dallas route,

34


Delta Airlines’ Monterrey-Atlanta route, United Airlines’ Monterrey-Chicago route, Alaska Airlines’ Mazatlán-Los Angeles route, Aeroméxico’ Monterrey-Los Angeles route, United Airlines’ San Luis Potosí-Houston route, Delta Airlines’ Monterrey-Detroit route, Aeroméxico’ Monterrey-New York route, Interjet’ Monterrey-Las Vegas route and Alaska Airlines’ Zihuatanejo-Los Angeles 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 2020, according to data published by the AFAC. In 2020, our Monterrey airport accounted for approximately 45.1% of our terminal passenger traffic, 47.7% of our total revenues and 42.7% 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 24th largest tourist destination, Mazatlán is the 10th and Zihuatanejo is the 12th, based on the number of international visitors in 2020 according to the AFAC. Acapulco is a principal port of call for cruise ships. In 2020, the Acapulco, Mazatlán and Zihuatanejo airports collectively accounted for 13.2% of our aggregate terminal passengers, 11.4% of our total revenues and 12.4% 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 2020, these seven regional airports collectively accounted for 32.5% of our aggregate terminal passengers, 27.6% of our total revenues and 28.8% of the sum of our aeronautical and non-aeronautical revenues.

The remaining two airports in the group, the Ciudad Juárez and Reynosa airports, serve cities situated along the border of Mexico and the United States. Both Ciudad Juárez and Reynosa are popular entry points to the United States. In 2020, the Ciudad Juárez and Reynosa airports collectively accounted for 9.2% of our aggregate terminal passengers, 7.3% of our total revenues and 7.5% 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. 

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.

35


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 2020 we had built a total of 9 warehouses with a total leasable area of 58,940 square meters (634,426 square-feet), of which all warehouses have already been leased and are currently in operation with lease terms ranging from 40 to 144 months. An additional warehouse was developed, which construction ended in January 2021, with an area of 4,849 square meters (52,192 square-feet).

We also have an investment with Grupo Hotelero Santa Fe, S. de R.L. 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, 2018, 2019 and 2020:

For the Year Ended December 31, 

2018

2019

2020

Aeronautical

Aeronautical

Aeronautical

Sum of

and Non-

Sum of

and Non-

Sum of

and Non-

Aeronautical

Aeronautical

Aeronautical

Aeronautical

Aeronautical

Aeronautical

and

Revenues

and

Revenues per

and

Revenues

Terminal

Non-Aeronautical

per Terminal

Terminal

Non-Aeronautical

Terminal

Terminal

Non-Aeronautical

per Terminal

Passengers

Revenues (1)

Passenger(2)

Passengers

Revenues(1)

Passenger (2)

Passengers

Revenues(1)

Passenger (2)

    

(Number

 

    

(in millions

    

    

    

(Number

    

    

(in millions

    

    

    

(Number

    

    

(in millions

    

    

(in pesos)

Airport

 

in millions)

%

 

of pesos)

%

(pesos)

 

in millions)

%

 

of pesos)

%

(pesos)

 

in millions)

%

 

of pesos)

%

Metropolitan destination:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Monterrey

 

10.7

 

49.8

%  

3,097.4

 

50.1

%

288.6

 

11.2

 

48.2

%  

3,367.7

 

48.5

%  

301.3

 

5.0

 

45.1

%  

1,757.6

 

46.7

%  

351.9

Total metropolitan destination

 

10.7

 

49.8

%

3,097.4

 

50.1

%

288.6

(3)  

11.2

 

48.2

%

3,367.7

 

48.5

%

301.3

(3)  

5.0

 

45.1

%

1,757.6

 

46.74

351.9

Tourist destinations:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Acapulco

 

0.7

 

3.4

%  

216.9

 

3.5

%

293.5

 

0.9

 

3.8

%  

268.2

 

3.9

%  

306.4

 

0.4

 

3.6

%  

144.4

 

3.8

%  

364.6

Mazatlán

 

1.0

 

4.9

%  

322.9

 

5.2

%

310.9

 

1.2

 

5.0

%  

374.2

 

5.4

%  

322.2

 

0.7

 

6.7

%  

248.6

 

6.6

%  

335.8

Zihuatanejo

 

0.6

 

2.6

%  

190.5

 

3.1

%

336.3

 

0.6

 

2.7

%  

217.1

 

3.1

%  

347.3

 

0.3

 

2.9

%  

117.0

 

3.1

%  

368.6

Total tourist destinations

 

2.3

 

10.9

%

730.3

 

11.8

%

311.6

(3)  

2.7

 

11.5

%

859.5

 

12.39

322.9

(3)  

1.4

 

13.2

510.0

 

13.56

350.80

Regional destinations:

 

  

 

  

 

  

 

  

 

 

  

 

  

 

  

 

  

 

 

  

 

  

 

  

 

  

 

Chihuahua

 

1.6

 

7.2

%  

420.9

 

6.8

%

270.4

 

1.7

 

7.3

%  

478.4

 

6.9

%  

281.4

 

0.8

 

7.4

%  

261.8

 

7.0

%  

320.0

Culiacán

 

2.3

 

10.5

%  

596.9

 

9.6

%

262.8

 

2.5

 

10.6

%  

684.3

 

9.9

%  

278.3

 

1.4

 

12.4

%  

411.3

 

10.9

%  

299.5

Durango

 

0.4

 

1.9

%  

123.1

 

2.0

%

293.9

 

0.5

 

2.3

%  

163.6

 

2.4

%  

310.4

 

0.3

 

2.5

%  

90.6

 

2.4

%  

334.0

San Luis Potosí

 

0.6

 

2.9

%  

197.3

 

3.2

%

314.9

 

0.6

 

2.8

%  

210.0

 

3.0

%  

326.4

 

0.3

 

2.8

%  

136.6

 

3.6

%  

441.5

Tampico

 

0.7

 

3.4

%  

217.4

 

3.5

%

295.1

 

0.7

 

3.2

%  

225.2

 

3.2

%  

304.7

 

0.3

 

2.4

%  

91.7

 

2.4

%  

338.7

Torreón

 

0.7

 

3.2

%  

207.1

 

3.3

%

303.8

 

0.7

 

3.1

%  

225.1

 

3.2

%  

317.7

 

0.3

 

2.9

%  

112.3

 

3.0

%  

350.1

Zacatecas

 

0.4

 

1.7

%  

117.6

 

1.9

%

320.4

 

0.5

 

2.1

%  

155.4

 

2.2

%  

327.1

 

0.2

 

2.1

%  

81.8

 

2.2

%  

352.1

Total regional destinations

 

6.7

 

30.8

%

1,880.3

 

30.3

%

282.4

(3)  

7.2

 

31.3

2,142.0

 

30.9

295.4

(3)  

3.6

 

32.5

1,186.1

 

31.5

329.9

Border destinations:

 

  

 

  

 

  

 

  

 

 

  

 

  

 

  

 

  

 

 

  

 

  

 

  

 

  

 

Ciudad Juárez

 

1.4

 

6.3

%  

356.2

 

5.8

%

261.1

 

1.6

 

6.9

%  

436.3

 

6.3

%  

273.1

 

0.8

 

7.1

%  

237.4

 

6.3

%  

300.5

Reynosa

 

0.5

 

2.2

%  

121.7

 

2.0

%

260.6

 

0.5

 

2.1

%  

131.8

 

1.9

%  

274.2

 

0.2

 

2.1

%  

69.5

 

1.8

%  

303.5

Total border destinations

 

1.9

 

8.5

%

477.9

 

7.8

%

261.0

(3)  

2.1

 

9.0

568.1

 

8.2

273.4

(3)  

1.0

 

9.2

306.9

 

8.2

301.2

Sum of aeronautical and non-aeronautical revenues(1)

 

21.6

 

100

6,185.8

 

100

%

286.8

(3)  

23.2

 

100

6,937.3

 

100

299.4

(3)  

11.1

 

100

%

3,761

 

100

339.9


(1)Defined as the sum of aeronautical and non-aeronautical revenues for each airport, which does not include eliminations among our subsidiaries and does not include revenues from construction services. Revenues in millions rounded to the decimal.
(2)Revenues per terminal passenger are calculated by dividing the sum of aeronautical and non-aeronautical revenues for each airport by the number of terminal passengers for each airport. The result has been rounded to the decimal.

(3)Represents average total revenues per terminal passenger for the applicable airports.

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 service 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 and thirteen individual airports, which have been grouped into four different regions according to their location: metropolitan, tourist, regional and border airports.

36


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 2018, 2019 and 2020, aeronautical services revenues represented approximately 65.0%, 67.5% and 54.8%, respectively, of our total revenues and 76.0%, 76.0% and 71.5%, 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 2020, the weighted average term of payment was 48 days.

International passenger charges are currently U.S. dollar-denominated but are collected in pesos based on the average exchange rate during the month prior to the flight, and the value of our revenues from those charges is therefore affected by fluctuations in the value of the U.S. dollar as compared to the peso. Domestic passenger charges are peso-denominated. In 2018, 2019 and 2020, passenger charges represented approximately 86.5%, 86.6% and 81.6%, respectively, of our aeronautical services revenues, 56.2%, 58.5% and 44.7%, respectively, of our total revenues and 65.7%, 65.9% and 58.4%, 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 2018, 2019 and 2020, these charges represented approximately 4.0%, 4.0% and 5.0%, respectively, of our aeronautical services revenues, 2.6%, 2.7% and 2.7%, respectively, of our total revenues and 3.0%, 3.0% and 3.6%, respectively, of the sum of our aeronautical and non-aeronautical revenues.

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.

37


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 2018, 2019 and 2020, these charges represented approximately 3.4%, 3.2% and 4.2%, respectively, of our aeronautical services revenues, 2.2%, 2.2% and 2.3%, respectively, of our total revenues and 2.5%, 2.5% and 3.0%, 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 2018, 2019 and 2020, these charges represented approximately 0.9%, 0.8% and 0.7%, respectively, of our aeronautical services revenues, 0.6%, 0.6% and 0.4%, respectively, of our total revenues and 0.7%, 0.6% and 0.5%, 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 2018, 2019 and 2020, these charges represented approximately 1.1%, 1.1% and 1.0%, respectively, of our aeronautical services revenues, 0.7%, 0.7% and 0.6%, respectively, of our total revenues and 0.8%, 0.8% and 0.7%, 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).

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.”

38


In response to the COVID-19 pandemic, we have implemented, among others, the following measures, which increased airport costs and expenses during 2020:

installed disinfectant gel dispensers based on alcohol at a minimum of 70% in public areas and strategic points,
mandated the use of face coverings in all areas,
installed temperature checkpoints at entry points for passengers and airport personnel,
provided personal protection equipment (PPE) (facemasks, gloves, face shields) to all our airport personnel,
installed disinfectant mats to eliminate viruses and bacteria on footwear at the entrances to the terminals and offices,
installed protective acrylics to minimize the transmission routes of COVID-19 between passengers and personnel in the airport facilities, including at information modules and commercial areas, such as stores and rental companies,
installed physical barriers to ensure entry only and exit only flows,
distributed the questionnaire required by AFAC for the “Identification of Risk Factors in Travelers” in paper and electronic form,
increased the cleaning and sanitation cycles in all areas of our facilities, including through the increased use of disinfectants and the daily cleaning of transport equipment,
established guidelines for effective, efficient and recurrent supervision of compliance with health measures to prevent the spread of COVID-19,
displayed COVID-19 information, including national and international regulations regarding the pandemic and other relevant information, on all our airport information screens,
instituted work from home and staggered activity policies in certain departments, and
circulated to airport personnel informational materials on preventive measures and questionnaires to detect health risks.

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 51 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.

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.  

39


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.

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% of our total revenues, while in 2018, 2019, and 2020 non-aeronautical revenues accounted for approximately 20.6%, 21.3% and 21.8% of our total revenues, respectively. Non-aeronautical revenues represented 24.0%, 24.0%, 28.5% in 2018, 2019 and 2020, 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. As a consequence of the outbreak of COVID-19, our revenues from commercial activities decreased by 37.6% in 2020 as compared to 2019 as revenues from commercial activities are largely dependent on passenger traffic. In order to reduce the impact from the outbreak of COVID-19 and to position our commercial revenues for future growth as demand for air travel recovers, the following initiatives have been implemented or expanded:

40


Expanding and reconfiguring the commercial space available in our airport terminals.  In order to increase our revenues from commercial activities, we have expanded and redesigned the layout of certain terminals in our airports to allow for the inclusion of more commercial businesses and larger individual commercial spaces, as well as to redirect the flow of passengers through our airports so as to increase passengers’ exposure to the commercial businesses operating in our airports.  As a result, during the last ten years, we increased the total area available for commercial activity in our 13 airports by approximately 59.7%, and have more than doubled the commercial area in the Monterrey airport.  As of December 31, 2020, the total area available for commercial activity at our 13 airports was 21,907.92 square meters (235,816.85 square feet), with an occupancy rate of 89.9%.
Supporting our commercial tenants through the effects of COVID-19 as a direct response to the pandemic, and ensuring that commercial services continue despite the pandemic by providing support programs, such as discounts and a payment deferral program, to certain commercial activities that were largely impacted by the decrease in passenger traffic. Such support programs are voluntary and solely to address the pandemic and do not represent ongoing obligations of the Company.
Renegotiating agreements with commercial tenants to be more consistent with market practice.  We improved our lease arrangements with existing tenants by adopting a new type of contract that provides for royalty payments based on a percentage of revenues, subject to a minimum fixed amount based partly on square footage, as opposed to the leases based solely on square footage that were used historically in Mexican airports.  We estimate, based on the nature of our commercial tenants, that approximately 57% of our commercial contracts are subject to royalty-based leasing arrangements.
Improving the quality of retail offerings in our airports.  Historically, commercial tenants in our terminals consisted of small, often similar, local businesses offering goods and services of limited variety.  We have leased redesigned space formerly occupied by such tenants, as well as newly available space, to more established, internationally recognized businesses in order to improve the quality, diversity and brand recognition of commercial goods and services available to our passengers, which we believe, based in part on market surveys conducted at several of our airports, will increase the sales revenues of our commercial tenants, thereby increasing our revenues from commercial activities.  As a result, our food and beverage service tenants currently offer internationally recognized brands such as Starbucks, Chili’s, Carl’s Jr, Krispy Kreme, Urban Corner, Sbarro and Gastro Hub.  In order to promote commercial development at all of our airports, we encourage commercial tenants to lease bundles of commercial spaces among multiple airports that we operate.
Providing timely commercial information. We use social media to communicate the commercial opportunities and activities at our airports on a daily basis. We believe that good communication is the best method to promote our commercial services. We advertise current deals and new commercial services and, in some cases, we offer seasonal deals in coordination with our tenants.
Improving travel experience.  Our commercial team works together with our operational team, airline clients and commercial tenants to devise customer-oriented solutions to deliver a better experience for all our passengers.

Commercial activities in each of our airports currently consist of the following:

Parking facilities. Our concessions provide us the right to operate the car parking facilities at all of our airports. Revenues from parking facilities at our airports currently are not regulated under our maximum rates, although they are subject to the regulatory oversight of the Ministry of Communications and Transportation. In 2020, we increased parking lot capacity at the Monterrey airport by adding 343 spaces, we opened a new parking lot at the Ciudad Juárez airport, with 201 spaces for long term stays, which increased existing spaces from 300 to 501.
Advertising. On October 4, 2018, we signed a lease and advertising services agreement with ISA Corporativo, SA de CV (“ISA”), effective as of October 4, 2018 through December 31, 2025.

41


Retail and duty free. We have completed several renovation projects as part of our overall effort (described above) to improve the product mix and brand recognition of retail stores in the commercial areas at our airports. We also have several duty-free retailers that cater to international passengers.
Food and beverage services. Through the years, we have upgraded our restaurant and bar offerings, which has allowed us to attract world-class operators of food and beverage outlets offering a wide variety of cuisine options and service concepts.
Car rentals. We have internationally known name-brand car rental providers at our airports and have encouraged car rental companies to establish on-site automobile pick-up and drop-off facilities at our airports.  We have also encouraged our car rental providers to differentiate their VIP services and modernize their facilities.
Time-share marketing and hotel promotion. We receive revenues from time-share developers and hotels to whom we rent space in our airports for the purpose of marketing and sales of time-share units as well as provide hotel transportation services.
Financial services. We lease space to financial services providers (such as currency exchange bureaus, banks and ATMs) at our airports, and we charge providers of these financial services fees based partly on a percentage of the revenues recorded by their operations.  ATM service is currently available at all of our airport terminals.
Communications. We offer telephone, mobile phone and internet services at our airports through contractual agreements with service providers and offer wireless internet access at all of our airports.
VIP Lounges. We lease space for the OMA Premium Lounge in the Monterrey, Mazatlán, Culiacán, Chihuahua, Acapulco and San Luis Potosí airports and for the American Express-Centurion VIP Lounge and CitiBanamex Beyond Lounge in the Monterrey airport, which provide their frequent flyers a luxury waiting lounge with comfortable seating, internet service, television and free newspapers, among other amenities.

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. 

As a consequence of the outbreak of COVID-19 our revenues from diversification activities decreased by 34.0% as compared to 2019. The following are our main diversification initiatives, of which, some of them were negatively affected during 2020:

Developments at Mexico City International Airport. In October 2008, we acquired 90% of the shares of Consorcio Grupo Hotelero Terminal 2, S.A. de C.V., which has the rights to develop and operate a 287-room hotel and approximately 5,000 square meters (53,820 square feet) of commercial space inside the new Terminal 2 of Mexico City International Airport, under a lease agreement with Mexico City International Airport that expires in 2029. A Mexican subsidiary of NH Hoteles SA, a Spanish company, owns the other 10%. The Terminal 2 NH Collection Hotel opened in August 2009. For the year ended December 31, 2020, total revenues decreased by 56.8% to Ps.110,299 thousand and annual average occupancy during such period was 40.2%, 4,390 basis points lower than in 2019. In 2020, the annual average rate per room was Ps.1,909.
Hotel at Monterrey Airport.  In July 2013, we partnered with Grupo Hotelero Santa Fe, a Mexican hospitality investment and operating company, to develop and operate a 134-room hotel at the

42


Monterrey airport under the Hilton Garden Inn brand. We own 85% of Consorcio Grupo Hotelero de Monterrey, S.A.P.I. de C.V. and Grupo Hotelero Santa Fe holds the remaining 15%.  The Hilton Garden Inn at the Monterrey airport includes a restaurant and bar, business centers and a fitness center and is easily accessible from Terminals A and B of the airport.  For the year ended December 31, 2020, total revenues decreased by 68.5% to Ps.32,614 thousand, compared to 2019, and annual average occupancy during such period was 36.1%, 4,160 basis points lower than in 2019.  In 2020, the annual average rate per room was Ps.2,288. The hotel suspended operations form April 6, 2020 to July 6, 2020 due to low occupancy derived from the outbreak of COVID-19.
OMA Carga Operations.  We operate four bonded warehouses 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.  Total revenues from OMA Carga Operations decreased by 5.9 % to Ps.11,554 thousand, in comparison to revenues from 2019.  This decrease resulted from a reduction in volume of imports and exports mainly during COVID-19 lockdown periods in which manufacturing operations were temporally halted.
Shopping Center and Office Plaza.  Located in the outside areas of Terminal A of the Monterrey airport, the shopping center and office plaza consists of a two-story building with commercial space on the lower level and office space for rent on the upper level.
Gasoline Service Station at Monterrey Airport.  In December 2012, a gasoline service station within the Monterrey airport began operations.  The 2,500 square meters (26,910 square feet) of land on which the service station is located is identified for diversification activities and was leased to Grupo ORSAN, an authorized distributor of Mobil, for a renewable term of 15 years.  Grupo ORSAN is responsible for the operation of and all investments in the service station.  In 2020, the leasing of this land to Grupo ORSAN generated revenues of Ps.2,540 thousand.
Strategic Alliance with VYNMSA. In November 2012, we, through our subsidiary OMA Logística, signed a strategic alliance agreement with VYNMSA, to build and operate an industrial park at the Monterrey airport, through the company OMA-VYNMSA Aero Industrial Park, S.A. de C.V. in which OMA Logística has a 51% ownership interest and VYNMSA has a 49% ownership interest. 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 2020 we had built a total of 9 warehouses with a total leasable area of 58,940 square meters (634,426 square-feet), of which all warehouses have already been leased and are currently in operation with lease terms ranging from 40 to 144 months. An additional warehouse with an area of 4,849 square meters (52,192 square-feet) was developed, which construction ended in January 2021.
Office Center for Cargo Logistics Agents.  Leasing of 1,045 square meters (11,248 square feet) of space at the Monterrey airport with an occupancy rate of 91.4% as of December 31, 2020.

Revenues from Complementary Activities

Our complementary activities generated 16.9% of our non-aeronautical revenues in 2020. These include:

Leasing of space. Revenues that we derive from the leasing of space in our terminals to airlines and complementary service providers for certain activities that are not essential to airport operations, such as first class/VIP lounges, are not subject to price regulation under our maximum rates and are classified as non-regulated commercial activities.
Baggage-Screening Services. The ICAO established security guidelines requiring checked baggage on all international commercial flights as of January 2006 and all domestic commercial flights as of July 2006 to undergo a comprehensive screening process for the detection of explosives. We

43


completed the purchase and installation of screening equipment in all of our airports in 2015 to facilitate our airline customers’ compliance with the baggage-screening guidelines. We negotiated an increase to maximum rates as of 2013 with the Federal Civil Aviation Agency to take into account the maintenance costs of baggage-screening systems in all of our airports required by mandatory circulars CO SA-17.2/10 R3 and CO SA-17.9/16. Our subsidiary Servicios Complementarios del Centro Norte, S.A. de C.V., has operated the checked-baggage screening systems at our airports since March 1, 2012. In 2020, our revenues from the operation of checked-baggage screening system service, which are not subject to maximum rates, amounted to Ps. 86,491 thousand.
Non-Permanent Ground Transportation. Our revenues from providers of ground transportation services deemed “nonpermanent” under applicable Mexican law, such as access fees charged to charter buses, are not subject to price regulation under our maximum rates and are classified as non-regulated commercial activities.
Access Rights. Revenues that we derive from granting access rights to transportation providers to terminal buildings at our airports are not subject to price regulation under our maximum rates and are classified as non-regulated commercial activities.

Our Airports

In 2018, 2019 and 2020, our airports served a total of approximately 21.6 million, 23.2 million and 11.1 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.

The following table sets forth the percentage of terminal passenger traffic generated at our airports per type of destination during 2018, 2019 and 2020:

Percentage of Total Passenger Traffic

 

Type of Destination

    

2018

    

2019

    

2020

 

Metropolitan (Monterrey)

 

49.8

%  

48.2

%  

45.1

%

Tourist (Acapulco, Mazatlán and Zihuatanejo)

 

10.9

%  

11.5

%  

13.2

%

Border (Ciudad Juárez and Reynosa)

 

8.5

%  

9.0

%  

9.2

%

Regional (Culiacán, Chihuahua, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas)

 

30.8

%  

31.3

%  

32.5

%

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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

For the Year Ended December 31, 

2016

2017

2018

2019

2020

    

Terminal(1)

    

Transit(2)

    

Total

    

Terminal(1)

    

Transit(2)

    

Total

    

Terminal(1)

    

Transit(2)

    

Total

    

Terminal(1)

    

Transit(2)

    

Total

    

Terminal(1)

    

Transit(2)

    

Total

Total passengers:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Acapulco

 

718,493

 

5,478

 

723,971

 

685,124

5,198

 

690,322

 

739,120

15,340

 

754,460

 

875,315

14,298

 

889,613

 

395,948

1,704

 

397,652

Ciudad Juárez

 

1,102,855

 

19,262

 

1,122,117

 

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

Culiacán

 

1,726,654

 

12,227

 

1,738,881

 

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

Chihuahua

 

1,305,961

 

31,791

 

1,337,752

 

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

Durango

 

424,415

 

7,817

 

432,232

 

395,905

3,442

 

399,347

 

418,914

2,711

 

421,625

 

527,004

5,521

 

532,525

 

271,231

1,317

 

272,548

Mazatlán

 

973,440

 

35,656

 

1,009,096

 

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

Monterrey

 

9,178,533

 

18,608

 

9,197,141

 

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

Reynosa

 

563,952

 

545

 

564,497

 

485,727

288

 

486,015

 

466,934

158

 

467,092

 

480,524

169

 

480,693

 

229,058

221

 

229,279

San Luis Potosí

 

504,313

 

1,467

 

505,780

 

553,353

1,639

 

554,992

 

626,512

2,282

 

628,794

 

643,224

2,509

 

645,733

 

309,311

823

 

310,134

Tampico

 

717,599

 

8,685

 

726,284

 

717,342

4,199

 

721,541

 

736,627

2,638

 

739,265

 

739,143

2,750

 

741,893

 

270,835

728

 

271,563

Torreón

 

646,898

 

9,123

 

656,021

 

618,930

4,191

 

623,121

 

681,551

5,164

 

686,715

 

708,563

6,153

 

714,716

 

320,820

1,591

 

322,411

Zacatecas

 

343,136

 

2,802

 

345,938

 

349,453

1,470

 

350,923

 

366,871

2,639

 

369,510

 

475,241

3,849

 

479,090

 

232,352

1,003

 

233,355

Zihuatanejo

 

557,389

 

5,835

 

563,224

 

597,902

2,068

 

599,970

 

566,497

1,331

 

567,828

 

625,186

501

 

625,687

 

317,395

637

 

318,032

Total

 

18,763,638

 

159,296

 

18,922,934

 

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


(1)Includes arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft).

(2)Terminal passengers who arrive at our airports but generally depart without changing aircraft.

45


For the Year Ended December 31, 

2016

2017

2018

2019

2020

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

Terminal departing passengers:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Acapulco

 

323,773

 

40,745

 

364,518

 

305,337

41,326

 

346,663

 

327,220

43,948

 

371,168

 

392,382

46,383

 

438,765

 

178,343

22,046

 

200,389

Ciudad Juárez

 

533,229

 

4,233

 

537,462

 

573,739

2,244

 

575,983

 

668,369

3,927

 

672,296

 

772,724

5,856

 

778,580

 

384,557

1,677

 

386,234

Culiacán

 

850,046

 

20,723

 

870,769

 

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

Chihuahua

 

587,020

 

64,486

 

651,506

 

638,836

65,574

 

704,410

 

701,064

72,745

 

773,809

 

762,680

80,957

 

843,637

 

370,880

40,497

 

411,377

Durango

 

181,066

 

30,084

 

211,150

 

161,252

36,228

 

197,480

 

171,650

37,542

 

209,192

 

208,049

56,567

 

264,616

 

105,226

30,968

 

136,194

Mazatlán

 

341,246

 

145,987

 

487,233

 

341,616

157,267

 

498,883

 

363,086

157,710

 

520,796

 

413,165

166,222

 

579,387

 

279,964

94,180

 

374,144

Monterrey

 

3,908,835

 

661,811

 

4,570,646

 

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

Reynosa

 

270,902

 

244

 

271,146

 

234,880

3,210

 

238,090

 

225,614

3,354

 

228,968

 

230,461

3,392

 

233,853

 

108,582

1,809

 

110,391

San Luis Potosí

 

167,369

 

83,748

 

251,117

 

185,349

91,558

 

276,907

 

207,879

104,717

 

312,596

 

211,770

108,127

 

319,897

 

105,942

48,709

 

154,651

Tampico

 

333,111

 

27,728

 

360,839

 

332,405

28,354

 

360,759

 

333,706

37,904

 

371,610

 

331,815

38,671

 

370,486

 

123,884

14,274

 

138,158

Torreón

 

291,377

 

35,472

 

326,849

 

277,275

37,673

 

314,948

 

299,449

43,274

 

342,723

 

306,625

47,316

 

353,941

 

144,792

16,840

 

161,632

Zacatecas

 

106,950

 

65,909

 

172,859

 

104,028

71,578

 

175,606

 

107,399

76,809

 

184,208

 

158,191

81,492

 

239,683

 

79,767

39,216

 

118,983

Zihuatanejo

 

159,999

 

116,872

 

276,871

 

177,623

121,440

 

299,063

 

167,886

116,800

 

284,686

 

197,126

116,593

 

313,719

 

95,487

67,842

 

163,329

Total

 

8,054,923

 

1,298,042

 

9,352,965

 

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

46


For the Year Ended December 31, 

2016

2017

2018

2019

2020

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

    

Domestic

    

International

    

Total

Terminal arriving passengers:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Acapulco

 

340,645

 

13,330

 

353,975

 

326,492

11,969

 

338,461

 

354,367

13,585

 

367,952

 

422,254

14,296

 

436,550

 

182,686

12,873

 

195,559

Ciudad Juárez

 

561,086

 

4,307

 

565,393

 

596,586

566

 

597,152

 

691,262

470

 

691,732

 

818,244

647

 

818,891

 

403,398

377

 

403,775

Culiacán

 

849,603

 

6,282

 

855,885

 

939,409

6,630

 

946,039

 

1,123,022

4,088

 

1,127,110

 

1,211,407

5,933

 

1,217,340

 

678,105

2,282

 

680,387

Chihuahua

 

610,388

 

44,067

 

654,455

 

659,426

45,743

 

705,169

 

734,964

47,997

 

782,961

 

802,503

53,676

 

856,179

 

381,813

24,961

 

406,774

Durango

 

194,669

 

18,596

 

213,265

 

177,219

21,206

 

198,425

 

191,524

18,198

 

209,722

 

224,717

37,671

 

262,388

 

110,487

24,550

 

135,037

Mazatlán

 

353,629

 

132,578

 

486,207

 

353,920

141,480

 

495,400

 

375,957

141,802

 

517,759

 

434,104

147,664

 

581,768

 

285,878

80,284

 

366,162

Monterrey

 

4,008,793

 

599,094

 

4,607,887

 

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

Reynosa

 

292,452

 

354

 

292,806

 

247,231

406

 

247,637

 

237,689

277

 

237,966

 

246,429

242

 

246,671

 

118,395

272

 

118,667

San Luis Potosí

 

190,596

 

62,600

 

253,196

 

210,794

65,652

 

276,446

 

243,290

70,626

 

313,916

 

242,306

81,021

 

323,327

 

115,160

39,500

 

154,660

Tampico

 

341,655

 

15,105

 

356,760

 

341,321

15,262

 

356,583

 

349,805

15,212

 

365,017

 

353,006

15,651

 

368,657

 

126,954

5,723

 

132,677

Torreón

 

300,763

 

19,286

 

320,049

 

286,981

17,001

 

303,982

 

322,643

16,185

 

338,828

 

331,013

23,609

 

354,622

 

149,194

9,994

 

159,188

Zacatecas

 

116,216

 

54,061

 

170,277

 

117,174

56,673

 

173,847

 

121,675

60,988

 

182,663

 

169,639

65,919

 

235,558

 

80,903

32,466

 

113,369

Zihuatanejo

 

172,528

 

107,990

 

280,518

 

188,412

110,427

 

298,839

 

177,154

104,657

 

281,811

 

208,721

102,746

 

311,467

 

97,830

56,236

 

154,066

Total

 

8,333,023

 

1,077,650

 

9,410,673

 

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

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The following table sets forth the air traffic movement capacity of each of our airports as of December 31, 2020:

Capacity(1) by Airport(2)

    

Peak Air Traffic

    

    

Movements per

Runway

% Capacity

Airport

Hour

Capacity(3)

Used

Acapulco

 

5

 

40

 

12.5

Ciudad Juárez

 

6

 

20

 

30.0

Culiacán

 

6

 

24

 

25.0

Chihuahua

 

6

 

40

 

15.0

Durango

 

3

 

40

 

7.5

Mazatlán

 

6

 

22

 

27.3

Monterrey

 

16

 

38

 

42.1

Reynosa

 

3

 

18

 

16.7

San Luis Potosí

 

4

 

20

 

20.0

Tampico

 

5

 

22

 

22.7

Torreón

 

3

 

20

 

15.0

Zacatecas

 

2

 

20

 

10.0

Zihuatanejo

 

5

 

20

 

25.0


(1)Capacity is calculated based on Hour 30 (the thirtieth hour of maximum activity during the year).
(2)2020 figures.
(3)Air traffic movements per hour.

The following table sets forth the terminal capacity of each of our airports as of December 31, 2020:

Capacity(1) by Airport(2)

    

Peak Passenger

    

    

Traffic Movements

Terminal

% Capacity

Airport

per Hour

Capacity(3)

Used

Acapulco

 

421

1,103

38.2

Ciudad Juárez

 

628

621

 

101.1

Culiacán

 

762

 

938

 

81.2

Chihuahua

 

735

 

1,297

 

56.7

Durango

 

275

 

606

 

45.4

Mazatlán

 

713

 

1,537

 

46.4

Monterrey Terminal A

 

972

 

2,091

 

46.5

Monterrey Terminal B

 

509

 

1,469

 

34.6

Monterrey Terminal C

 

1,047

 

1,246

 

84.0

Reynosa

 

351

 

911

 

38.5

San Luis Potosí

 

335

 

1,380

 

24.3

Tampico

 

519

 

683

 

76.0

Torreón

 

331

 

549

 

60.3

Zacatecas

 

322

 

579

 

55.6

Zihuatanejo

 

596

 

945

 

63.1


(1)Capacity is calculated based on Hour 30 (the thirtieth hour of maximum activity during the year).
(2)2020 figures.

48


(3)Passenger traffic during peak hours.

The following table sets forth the air traffic movements for each of our airports for the periods indicated:

Air Traffic Movements by Airport(1)

For the Year Ended December 31, 

    

2016

    

2017

    

2018

    

2019

    

2020

Acapulco

 

23,831

 

22,838

 

24,151

 

23,606

 

16,115

Ciudad Juárez

 

18,415

 

16,215

 

18,512

 

19,260

 

12,277

Culiacán

 

38,611

 

38,018

 

41,133

 

40,750

 

29,520

Chihuahua

 

33,869

 

29,361

 

30,760

 

30,222

 

20,990

Durango

 

17,324

 

14,559

 

15,324

 

16,039

 

11,556

Mazatlán

 

19,685

 

17,424

 

17,579

 

17,342

 

13,407

Monterrey

 

115,593

 

110,938

 

114,564

 

112,188

 

58,265

Reynosa

 

11,146

 

8,639

 

7,278

 

6,757

 

4,825

San Luis Potosí

 

21,719

 

21,605

 

21,394

 

19,813

 

12,628

Tampico

 

20,401

 

18,702

 

18,930

 

17,219

 

10,266

Torreón

 

17,922

 

14,842

 

16,863

 

16,912

 

10,350

Zacatecas

 

8,261

 

6,868

 

6,903

 

7,390

 

4,377

Zihuatanejo

 

11,584

 

12,343

 

11,959

 

12,582

 

9,580

Total

 

358,361

 

332,352

 

345,350

 

340,080

 

214,156


(1)Includes departures and landings.

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)

For the Year Ended December 31, 

    

2016

    

2017

    

2018

    

2019

    

2020

Acapulco

 

30.1

 

30.0

 

30.6

 

37.1

 

24.6

Ciudad Juárez

 

59.9

 

72.3

 

73.7

 

82.9

 

64.3

Culiacán

 

44.7

 

50.2

 

55.2

 

60.3

 

46.5

Chihuahua

 

38.6

 

48.0

 

50.6

 

56.2

 

39.0

Durango

 

24.5

 

27.2

 

27.3

 

32.9

 

23.5

Mazatlán

 

49.5

 

57.1

 

59.1

 

67.0

 

55.2

Monterrey

 

79.4

 

88.1

 

93.7

 

99.6

 

85.7

Reynosa

 

50.6

 

56.2

 

64.2

 

71.1

 

47.5

San Luis Potosí

 

23.2

 

25.6

 

29.3

 

32.5

 

24.5

Tampico

 

35.2

 

38.4

 

38.9

 

42.9

 

26.4

Torreón

 

36.1

 

41.7

 

40.4

 

41.9

 

31.0

Zacatecas

 

41.5

 

50.9

 

53.1

 

64.3

 

53.1

Zihuatanejo

 

48.1

 

48.4

 

47.4

 

49.7

 

33.1

Average of all airports

 

52.4

 

59.2

 

62.4

 

68.1

 

51.7


(1)Includes total passengers divided by total air traffic movements.

49


Air Traffic Movements by Aviation Category(1)

For the Year Ended December 31, 

    

2019

    

2020

Commercial aviation

 

238,630

 

125,975

Charter aviation

 

916

 

648

General aviation and other

 

100,534

 

87,533

Total

 

340,080

 

214,156


(1)Includes departures and landings for all 13 airports.

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 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, it accounted for approximately 49.8%, 48.2% and 45.1%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 10.7 million, 11.2 million and 5.0 million, terminal passengers, respectively, were served by the Monterrey airport. Of the terminal passengers in 2018, 87.6% were domestic, and 12.4% were international 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. This airport serves primarily business travelers and is also a hub for the transportation of goods.

A total of 12 commercial airlines operated at this airport during 2020. In 2020, airlines operating at this airport served 42 direct destinations, including 30 domestic destinations and 12 international destinations. In 2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Cancún, Guadalajara, Tijuana, Veracruz, Puerto Vallarta, Querétaro, Mérida, Villahermosa, Hermosillo, El Bajío, Chihuahua, Mazatlán, Puebla, Houston, Dallas, San Antonio, Atlanta, Las Vegas, Detroit, Chicago, Los Angeles, Miami, New York, La Havana and Panama City. In 2020, the principal domestic airlines operating at the airport were VivaAerobus, Volaris, Aeroméxico, Aeroméxico Connect, Interjet and Magnicharters.

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 67,103 square meters (722,291 square feet). The airport has three platforms for commercial aviation operations, one platform for general aviation operations, one platform for air freight operations and eleven taxiways.

The Terminal A building has a total area of approximately 29,269 square meters (315,049 square feet), of which 4,611 square meters (49,632 square feet) is commercial space, a 19-position apron for commercial aviation, one-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 2,213 vehicles.

50


The Terminal B building started operations on September 1, 2010, and is used by Aeroméxico, Aeroméxico Connect and Delta. Terminal B has a total area of approximately 20,568 square meters (221,392 square feet), of which 3,263 square meters (35,123 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 639 vehicles.

The Terminal C building has a total area of approximately 12,460 square meters (134,118 square feet), of which 1,711 square meters (18,417 square feet) is commercial space. This terminal, which commenced operation at year-end 2006, is used by the low-cost carrier VivaAerobus. Terminal C has eight boarding gates and serves 16 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 986 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 terminal warehouses. An area of 8,465 square meters (91,117 square feet) has been occupied by Federal Express and OMA Carga (which we operate directly) since 2004, United Parcel Service since 2005 and DHL since 2011. In 2017, OMA Logística (which we also operate directly) started operating a bonded warehouse 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, in 2009, we completed the acquisition of land strategically located adjacent to the Monterrey airport with an aggregate surface area of 777 hectares (3 square miles) for an aggregate price of Ps.1,159,631 thousand (U.S.$88.8 million) (amount expressed in nominal 2009 pesos). The acquired land is classified in our financial statements as land owned by the Company at its acquisition value, presented as a fixed asset. On October 1, 2012, we presented a proposal to the Mexican Bureau of Civil Aviation (currently AFAC) to recover the cost of our investment in the land, meaning that we requested that the Mexican Bureau of Civil Aviation (currently AFAC) recognize the acquired land as part of our future investment in the Monterrey airport concession included in the airport’s required Master Development Program investments, rather than as a fixed asset that we own. 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, Ps.77,306 thousand was reallocated due to extraordinary adjustment of the Monterrey airport’s maximum rate under its Master Development Program. We received authorization from AFAC to reallocate Ps.386,538 thousand (amount expressed in nominal 2009 pesos) of our investment in the land at this airport to investments included in the 2011–2015 Master Development Program for the Monterrey airport. The recovery of the remaining investment of Ps.695,759 thousand (amount expressed in nominal 2009 pesos), is included in the indicative period of our current 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%.

In September 2018, we completed a 1,200 square-meter (12,917 square-foot) expansion of the passenger waiting area for regional flights 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.

51


In November 2019, we started a major expansion project at the Monterrey airport. We expect to invest approximately Ps.4.2 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 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 2022. Phase 2 consists of the construction of a second new 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%. Phase 2 is expected to be completed by 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 Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations. To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession. The Ministry of 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 our sixth most important airport based on aeronautical revenues. According to the AFAC, the Acapulco airport was the 25th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, it accounted for approximately 3.4%, 3.8% and 3.6%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 739,120, 875,315 and 395,948 terminal passengers, respectively, were served by the Acapulco airport. Of the terminal passengers in 2018, 92.2% were domestic, and 7.8% were international. In 2019, 93.1% were domestic, and 6.9% were international. In 2020, 91.2% were domestic, and 8.8% 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 11 airlines (nine commercial airlines and two charter airlines) operated at this airport during 2020. In 2020, airlines operating at this airport served eleven direct destinations, including seven domestic destinations and four international destinations. In 2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Tijuana, Monterrey, Guadalajara, Toluca, Cancún and Querétaro. In 2020, the principal domestic airlines operating at the airport were Volaris, Interjet, Aeromar, Aeroméxico Connect, VivaAerobus, Aeroméxico and TAR.

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 14th 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.

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

52


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 2,053 square meters (22,098 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 15th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, it accounted for approximately 4.8%, 5.0% and 6.7%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 1,038,555, 1,161,155 and 740,306 terminal passengers, respectively, were served by the Mazatlán airport. Of the terminal passengers in 2018, 71.2% were domestic, and 28.8% were international. In 2019, 73.0% were domestic, and 27.0% were international. In 2020, 76.4% were domestic, and 23.6% 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 2020, airlines operating at this airport served 26 direct destinations, including ten domestic destinations and sixteen international destinations. Of these destinations, Mexico City, Tijuana, Monterrey, Cabo San Lucas, San José del Cabo, Chihuahua, La Paz, Ciudad Juárez, Querétaro and Hermosillo were the main domestic routes. The main international destinations served by this airport were Los Angeles, Phoenix, Dallas and Minneapolis in the United States and Calgary, Edmonton, Vancouver, Abbotsford and Winnipeg in Canada. In 2020, the principal commercial domestic airlines operating at this airport were Volaris, VivaAerobus, Aeroméxico Connect, Aero Calafía, Interjet, Magnicharters, TAR and Aeroméxico.

The Mazatlán airport is located approximately 18 kilometers (11 miles) from the city of Mazatlán, which has a population of 501,441. Mazatlán is the principal tourist destination of the Sinaloa region, with about 9,779 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 2,353 square meters (25,327 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.

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 façade of the airport, waiting area, check-in and inspection points, restrooms and offices. Commercial spaces were also expanded.

53


Zihuatanejo International Airport

The Zihuatanejo airport is our eighth most important airport based on passenger traffic. According to the AFAC, the Zihuatanejo airport was the 28st busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, it accounted for approximately 2.6%, 2.7% and 2.9% respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 566,497, 625,186 and 317,395 terminal passengers, respectively, were served by the Zihuatanejo airport. Of the terminal passengers in 2018, 60.9% were domestic, and 39.1% were international. In 2019, 64.9% were domestic, and 35.1% were international. In 2020, 60.9% were domestic, and 39.1% 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 2020, airlines operating at this airport served 18 direct destinations, including four domestic destinations and 14 international destinations. In 2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Tijuana, Toluca, Querétaro, Los Angeles, Calgary, Houston, Vancouver, Minneapolis, Chicago and Montreal. In 2020, the principal domestic airlines operating at this airport were Aeroméxico Connect, Volaris, Interjet, Aeromar, VivaAerobus, TAR, Aeroméxico and Magnicharters and the non-Mexican airlines included Alaska Airlines, Sunwing, United Airlines, Air Canada, WestJet, American Airlines and Sun Country.

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 5,826 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 1,453 square meters (15,640 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 140 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.158 million and construction is expected to be completed in June 2021.

Regional Destinations

Chihuahua International Airport

The Chihuahua airport is our third 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 12th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, it accounted for approximately 7.2%, 7.3% and 7.4%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 1,556,770, 1,699,816, and 818,151 terminal passengers, respectively, were served by the Chihuahua airport. Of the terminal passengers in 2018, 92.2% were domestic, and 7.8% were international. In 2019, 92.1% were domestic, and 7.9% were international. In 2020, 92.0% were domestic, and 8.0% 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.

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A total of ten commercial airlines operate at the airport. In 2020, airlines operating at this airport served 18 direct destinations, including fourteen domestic destinations and four international destinations. In 2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Guadalajara, Monterrey, Cancún, Tijuana, Mazatlán, Hermosillo, Querétaro, Culiacán, Mérida, Dallas, Denver, Houston and Phoenix. In 2020, the principal domestic airlines operating at this airport were Volaris, Aeroméxico Connect, VivaAerobus, Aeroméxico, Interjet and TAR and the principal non-Mexican airlines were American Airlines and United.

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. 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 36. 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 1,609 square meters (17,319 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 has six gates for international or domestic flights. 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, x-ray zones, 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 9th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, it accounted for approximately 10.5%, 10.6% and 12.4%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 2,270,834, 2,458,863 and 1,373,102 terminal passengers, respectively, were served by the Culiacán airport. Of the terminal passengers in 2018, 98.7% were domestic, and 1.3% were international. In 2019, 98.5% were domestic, and 1.5% were international. In 2020, 99.0% were domestic, and 1.0 % 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.

The airport’s terminal passenger traffic consists predominantly of commercial aviation. In 2018, 2019 and 2020, commercial aviation accounted for approximately 99.8%, 99.8% and 99.7%, respectively, and general aviation accounted for approximately 0.2%, 0.2% and 0.3%, respectively, of the airport’s terminal passenger traffic.

A total of seven commercial airlines operate at the airport. In 2020, airlines operating at this airport served twelve domestic destinations: Tijuana, Mexico City, Guadalajara, San José del Cabo, Monterrey, Mexicali, La Paz, Ciudad Juárez, Chihuahua, Hermosillo and Cabo San Lucas and one international destination to Phoenix. In 2020, the domestic airlines operating at this airport were Volaris, VivaAerobus, Aeroméxico Connect, Interjet, TAR, Aerocalafia and Aeroméxico.

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

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of beef and agricultural products. The potential for growth of exports to the United States could generate an increase in cargo operations at this airport, though growth may not occur, and therefore cargo operations may not increase as a result thereof.

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 2,098 square meters (22,593 square feet) of commercial space, a eight-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 2018, 2019 and 2020, the Durango airport accounted for approximately 1.9%, 2.3% and 2.5%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 418,914, 527,004 and 271,231 terminal passengers, respectively, were served by the Durango airport. Of the terminal passengers in2018, 86.7% were domestic, and 13.3% were international. In 2019, 82.1% were domestic, and 17.9% were international. In 2020, 79.5% were domestic, and 20.5% 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 five commercial airlines operate at the airport. In 2020, airlines operating at this airport served nine direct destinations, including six domestic destinations and three international destinations: Mexico City, Tijuana, Guadalajara, Monterrey, Ciudad Juárez, Querétaro, Dallas, Chicago and Los Angeles. In 2020, the domestic airlines operating at this airport were Volaris, Aeroméxico Connect, TAR and VivaAerobus and the principal non Mexican airline was American Airlines.

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 517 square meters (5,565 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.

San Luis Potosí International Airport

According to the AFAC, the San Luis Potosí airport was the 29th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, the San Luis Potosí airport accounted for approximately 2.9%, 2.8% and 2.8%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 626,512, 643,224, and 309,311 terminal passengers, respectively, were served by the San Luis Potosí airport. Of the terminal passengers in 2018, 72.0% were domestic, and 28.0% were international. In 2019, 70.6% were domestic, and 29.4% were international. In 2020, 71.5% were domestic, and 28.5% 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

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airport: Aeroméxico Connect, Volaris, Aeromar, VivaAerobus, TAR, Magnicharters, American Airlines and United Airlines. In 2020, airlines operating at this airport served seven destinations, including five domestic destinations and two international destinations. In 2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Cancún, Tijuana, Monterrey, Puerto Vallarta, Dallas and Houston.

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 1,229 square meters (13,229 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 32nd busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, it accounted for approximately 3.4%, 3.2% and 2.4%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020 a total of 736,627, 739,143 and 270,835 terminal passengers, respectively, were served by the Tampico airport. Of the terminal passengers in 2018, 92.8% were domestic, and 7.2% were international. In 2019, 92.7% were domestic, and 7.3% were international. In 2020, 92.6% were domestic, and 7.4% 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 six commercial airlines operate at the airport. In 2020, airlines operating at this airport served nine direct destinations, including eight domestic destinations and one international destination: Mexico City, Monterrey, Cancún, Ciudad del Carmen, Villahermosa, Guadalajara, Veracruz, Querétaro and Houston. In 2020, the domestic airlines operating at the airport were Aeroméxico Connect, VivaAerobus, Interjet, TAR and Volaris, and the non-Mexican airline was United Airlines.

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.

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, 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 6,833 square-meter (73,550 square-foot) terminal building, of which 1,077 square meters (11,593 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.

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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.196 million. After the project concludes, total area will be 7,763 square meters (85,907 square feet), an increase of approximately 14%.

Torreón International Airport

According to the AFAC, the Torreón airport was the 27th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, the Torreón airport accounted for approximately 3.2%, 3.2% and 2.9%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 681,551, 708,563 and 320,820 terminal passengers, respectively, were served by the Torreón airport. Of the terminal passengers in 2018, 91.3% were domestic, and 8.7% were international. In 2019, 90.0% were domestic, and 10.0% were international. In 2020, 91.6% were domestic, and 8.4% 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 seven commercial airlines operate at the airport. In 2020, airlines operating at this airport served seven direct destinations, including six domestic destinations and one international destination. In 2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Tijuana, Cancún, Guadalajara, Querétaro, Ciudad Juárez and Dallas. In 2020, the domestic airlines operating at the airport were Aeroméxico Connect, VivaAerobus, Volaris, Interjet, TAR and Aeroméxico, and the non-Mexican airline was American Airlines.

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’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 610 square meters (6,566 square feet) are commercial space, a six-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.

Zacatecas International Airport

According to the AFAC, the Zacatecas airport was the 36th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, the Zacatecas airport accounted for approximately 1.7%, 2.1% and 2.1%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 366,871, 475,241 and 232,352 terminal passengers, respectively, were served by the Zacatecas airport. Of the terminal passengers in 2018, 62.4% were domestic, and 37.6% were international. In 2019, 69.0% were domestic, and 31.0% were international. In 2020, 69.1% were domestic, and 30.9% 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 2020, airlines operating at this airport served six direct destinations, including two domestic destinations and four international destinations: Mexico City, Tijuana, Los Angeles, Chicago, San José, California and Dallas.

In 2020, the domestic airlines operating at this airport were Volaris, Aeroméxico Connect and VivaAerobus, and the non-Mexican airline was American Airlines.

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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 5,796 square meters (62,388 square feet), of which 508 square meters (5,468 square feet) is commercial area. It has a four-position apron for commercial aviation, a 14-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 2020 generated approximately 308,166 Kw/h for the airport, equivalent to approximately 45% of the airport’s total electricity requirements.

Border Destinations

Ciudad Juárez International Airport

According to the AFAC, the Ciudad Juárez airport was the 13th busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, the Ciudad Juárez airport accounted for approximately 6.3%, 6.9% and 7.1%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 1,364,028, 1,597,471, and 790,009 terminal passengers, respectively, were served by the Ciudad Juárez airport. Of the terminal passengers in 2018, 2019 and 2020, 99.7%, 99.6% and 99.7%, respectively, were domestic.

A total of six commercial airlines operate at the airport. In 2020, airlines operating at this airport served 12 direct destinations, all of which were domestic. In 2020, the principal routes to and from this airport, based on passenger traffic, were Mexico City, Guadalajara, Monterrey, Cancún, El Bajío, Tijuana, Hermosillo, Culiacán, Torreón, Durango, Mazatlán and Chihuahua. In 2020, the domestic airlines operating at the airport were VivaAerobus, Volaris, Aeroméxico Connect, Interjet, Aeroméxico and TAR. As of the date of this annual report, the airport does not have any active non-Mexican airlines.

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 923 square meters (9.935 square feet) of commercial space, five boarding gates and two air bridges. 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.959 million. After the project concludes total area will be 12,470 square meters (134,226 square feet), an increase of approximately 101%.

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Reynosa International Airport

According to the AFAC, the Reynosa airport was the 37rd busiest airport in Mexico in 2020 based on commercial and general aviation passenger traffic. In 2018, 2019 and 2020, the Reynosa airport accounted for approximately 2.2%, 2.1% and 2.1%, respectively, of our terminal passenger traffic.

In 2018, 2019 and 2020, a total of 466,934, 480,524 and 229,058 terminal passengers, respectively, were served by the Reynosa airport. Of the terminal passengers in 2018, 2019 and 2020, 99.2%, 99.2%, and 99.1% 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 2020, airlines operating at this airport served four direct destinations, all of which are domestic destinations: Mexico City, Cancún, Guadalajara and Veracruz. In 2020, the domestic 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.335 million and included an expansion of 4,550 square meters (48,976 square feet). Passenger capacity grew threefold to serve up to 900,000 passengers per year. The new terminal building is 7,286 square meters (78,426 square feet), which includes 1,047 square meters (11,270 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.

Principal Aeronautical Services Customers

Airline Customers

As of December 31, 2020, over 12 international commercial airlines and nine Mexican commercial airlines operated flights at our 13 airports. VivaAerobus and Grupo Aeroméxico operated the most flights at our airports, followed by Volaris, TAR and Interjet. In 2020, revenues from VivaAerobus were Ps.824,568 thousand (U.S.$41.4 million), revenues from Volaris were Ps.689,127 thousand (U.S.$34.6 million), revenues from Grupo Aeroméxico and its affiliates totaled Ps.588,903 thousand (U.S.$29.6 million) and revenues from Interjet were Ps.166,943 thousand (U.S.$8.8 million), representing 28.0%, 23.4%, 20.0% and 5.7%, respectively, of our aeronautical revenues from airline customers for 2020. 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.

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The following table sets forth the number of air traffic customers per airline for the years ended December 31, 2018, 2019 and 2020:

Terminal Passengers

Principal Air Traffic Customers Per Airline

    

2018

    

2019

    

2020

Domestic:

VivaAerobus

5,668,700

6,666,650

3,996,278

Grupo Aeroméxico

5,524,016

5,079,229

2,248,687

Volaris

4,189,679

5,300,929

2,900,985

Interjet

3,137,721

3,045,049

620,940

TAR Aerolíneas

486,151

437,626

136,962

Other

781,732

827,597

311,720

Total domestic

19,787,999

21,357,080

10,215,572

International:

American Airlines

516,367

544,886

306,241

United

494,861

507,277

162,630

Delta

203,812

192,509

42,201

Alaska Airlines

131,119

145,414

63,317

Sunwing Airlines

79,853

85,996

54,212

Other

149,566

165,887

91,573

Total international

1,575,578

1,641,969

720,174

General aviation

202,822

169,011

126,942

Total

21,566,399

23,168,060

11,062,688

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 2020, passengers traveling on discount and low-cost carriers, such as VivaAerobus, Interjet and Volaris, accounted for approximately 68.7% 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.

Aeroméxico is a publicly traded company and Delta Airlines currently owns approximately 50.7% 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.

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The following table sets forth our principal air traffic customers for the years ended December 31, 2018, 2019 and 2020:

Percentage of Aeronautical Revenues

 

Principal Air Traffic Customers

    

2018

    

2019

    

2020

 

Domestic:

 

  

 

  

 

  

VivaAerobus

 

21.2

%  

22.4

%

28.0

%

Volaris

 

17.5

%  

20.5

%

23.4

%

Grupo Aeroméxico (Aeroméxico and Aeroméxico Connect)

 

24.5

%  

21.8

%

20.0

%

Interjet

 

14.2

%  

13.2

%

5.7

%

Grupo Aeromonterrey (Magnicharters)

 

1.9

%  

2.0

%

1.4

%

TAR

 

2.1

%  

1.8

%

1.2

%

Aeromar

 

0.8

%  

0.8

%

0.9

%

DHL Express México

 

0.3

%  

0.3

%

0.6

%

Calafia Airlines

 

0.5

%  

0.4

%

0.3

%

Other

 

4.1

%  

4.0

%

6.1

%

Total domestic

 

87.1

%  

87.2

%  

87.6

%

International:

 

  

 

  

 

  

American Airlines

 

4.3

%

4.3

%

5.3

%

United

 

4.1

%

4.0

%

2.8

%

Alaska Airlines

 

1.1

%

1.1

%

1.1

%

Delta

 

1.4

%

1.3

%

0.6

%

Copa Airlines

 

0.3

%

0.2

%

0.1

%

Charters

 

1.3

%

1.3

%

1.3

%

Other

 

0.4

%

0.6

%

1.2

%

Total international

 

12.9

%  

12.8

%  

12.4

%

Total

 

100.0

%  

100.0

%  

100.0

%

Complementary Services Customers

As of December 31, 2020, 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.17,049 thousand of revenues in the form of access fees in 2020.

Principal Non-Aeronautical Services Customers

As of December 31, 2020, we were party to approximately 1,246 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 2020, our largest commercial customers were ISA Corporativo S. A. de C. V. (advertising), Aerocomidas, S.A. de C.V. (food and beverage), Alquiladora de Vehículos Automotores, S.A. de C.V. (car rental), DMC Transportación Ejecutiva, S. de R.L. de C. V. (VIP lounges), Operadora Aeroboutiques, S.A. de C.V. (duty paid stores) a subsidiary of Grupo Areas, Café Sirena, S. de R.L. de C.V (food and beverage), and Dufry México, S.A. de C.V. (duty free).

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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. For example, 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 1,236,409 passengers in 2020, representing a decrease of 49.2 % from 2019 traffic, mainly as a result of a decrease in passenger traffic to and from Querétaro, Ciudad Obregón and Colima.

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.

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.

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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.

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.

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.

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”).

Twelve 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. Our Monterrey airport is in the process of obtaining this certification, which is expected to be received in 2021.

In 2020, the Chihuahua, Culiacán, Mazatlán, Reynosa and Tampico airports maintained a Family Responsibility Company Certificate (Certificado de Empresa Familiarmente Responsable) granted by the Mexican Ministry of Labor and Social Welfare.

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 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, 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 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.

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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 General Law of Commercial Corporations (Ley General de Sociedades Mercantiles), enacted August 4, 1934;
the Mexican Airport Law, enacted December 22, 1995;
the regulations under the Mexican Airport Law (Reglamento del la Ley de Aeropuertos), enacted February 17, 2000;
the Mexican Communications Law (Ley de Vías Generales de Comunicación), enacted February 19, 1940;
the Mexican Civil Aviation Law (Ley de Aviación Civil), enacted May 12, 1995;
the regulations under the Mexican Civil Aviation Law (Reglamento de la Ley de Aviación Civil), enacted December 7, 1998;
the Mexican Federal Duties Law (Ley Federal de Derechos), enacted December 31, 1981, which may be revised on an annual basis and stipulates the applicable basis and rate for calculating the concession fee and duties payable under the current budget;
the Mexican National Assets Law (Ley General de Bienes Nacionales), enacted May 20, 2004;
the concessions that entitle our subsidiaries to operate our 13 airports for a term of 50 years beginning on November 1, 1998;
the Mexican Securities Market Law (Ley del Mercado de Valores), enacted December 30, 2005;
the General Provisions Applicable to Issuers of Securities and other Participants in the Securities Market (Disposiciones de Carácter General Aplicables a las Emisoras de Valores y a otros Mercados Participantes del Mercado de Valores), enacted March 19, 2003;
the Federal Labor Law, enacted April 1, 1970;
the Customs Law, enacted December 115, 1995;
the Value Added Tax Law, enacted December 29, 1978;
the Social Security Law, enacted December 21, 1995;
the Income Tax Law, enacted December 11, 2013;
the Mexican Federal Antitrust Law (Ley Federal de Competencia Económica), enacted May 23, 2014; and
the regulations under the Mexican Federal Antitrust Law (Reglamento de la Ley Federal de Competencia Económica), enacted October 12, 2007.

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

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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 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 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 12.8% 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 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 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.

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 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.

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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, 2021, 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 Communications and Transportation

The Ministry of Communications and Transportation is the principal regulator of airports in Mexico and is authorized by the Mexican Airport Law to perform the following functions:

plan, formulate and establish the policies and programs for the development of the national airport system;
construct, administer and operate airports and airport-related services for the public interest;
grant, modify and revoke concessions for the operation of airports;
establish air transit rules and rules regulating take-off and landing schedules through the Mexican air traffic control authority;
take all necessary action to create an efficient, competitive and non-discriminatory market for airport-related services and set forth the minimum operating conditions for airports;
establish safety regulations;
close airports entirely or partially when safety requirements are not being satisfied;
monitor airport facilities to determine their compliance with the Mexican Airport Law, other applicable laws and the terms of the concessions;
maintain the Mexican aeronautical registry for registrations relating to airports;
impose penalties for failure to observe and perform the rules under the Mexican Airport Law, the regulations thereunder and the concessions;
approve any transaction or transactions that directly or indirectly may result in a change of control of a concession holder;
approve the Master Development Programs prepared by each concession holder every five years;
determine each airport’s maximum rates;
approve any agreements entered into between a concession holder and a third party providing airport or complementary services at its airport; and
perform any other function specified by the Mexican Airport Law.

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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 Communications and Transportation is required to provide air traffic control, radio assistance and aeronautical communications at Mexico’s airports. The Ministry of Communications and Transportation provides these services through Services for Navigation in Mexican Air Space, the Mexican air traffic control authority, which is a division of the Ministry of Communications and Transportation. Since 1978, the Mexican air traffic control authority has provided air traffic control for Mexico’s airports.

On October 16, 2019, the Ministry of 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. Even though AFAC has been formally established, its internal regulations and operation manuals are still pending as of the date of this report. As such, the Company cannot predict how this new agency will be organized, the scope of its authority, the actions that it will take in the future or the effect of any such actions on 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 Communications and Transportation and to our compliance with the terms of our concession.

In order to renew a concession, the Ministry of 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 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 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.

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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 Communications and Transportation. No agreement documenting liens approved by the Ministry of Communications and Transportation may allow the beneficiary of a pledge to become a concession holder under any circumstances.

A concession holder may not assign any of its rights or obligations under its concession without the authorization of the Ministry of Communications and Transportation. The Ministry of Communications and Transportation is authorized to consent to an assignment only if the proposed assignee satisfies the requirements to be a concession holder under the Mexican Airport Law, undertakes to comply with the obligations under the relevant concession and agrees to any other conditions that the Ministry of Communications and Transportation may require.

General Obligations of Concession Holders

The concessions impose certain obligations on the concession holders, including, among others, (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.

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 Communications and Transportation. As of April 22, 2021, the Ministry of Communications and Transportation has not specified the required amounts of insurance. We may be required to obtain additional insurance once these amounts are specified. We, together with our subsidiary concession holders, are jointly and severally liable to the Ministry of Communications and Transportation for the performance of all obligations under the concessions held by our subsidiaries. Each of our subsidiary concession holders is responsible for the performance of the obligations set forth in its concession and in the Master Development Programs, 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 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:

Airport Services. Airport services may be rendered only by the holder of a concession or a third party that has entered into an agreement with the concession holder to provide such services. These services include the following:

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the use of airport runways, taxiways and aprons for landing, aircraft parking and departure;
the use of hangars, passenger walkways, transport buses and car parking facilities;
the provision of airport security services, rescue and firefighting services, ground traffic control, lighting and visual aids;
the general use of terminal space and other infrastructure by aircraft, passengers and cargo; and
the provision of access to an airport to third parties providing complementary services (as defined in the Mexican Airport Law) and third parties providing permanent ground transportation services (such as taxis).
Complementary Services. Complementary services for which the airlines are responsible may be rendered by an airline, by the airport operator or by a third party under agreements with airlines and the airport operator. These services include: ramp and handling services, checked-baggage screening, aircraft security, catering, cleaning, maintenance, repair and fuel supply (currently provided exclusively by the Mexican Airport and Auxiliary Services Agency) and related activities that provide support to air carriers.
Commercial Services. Commercial services involve services that are not considered essential to the operation of an airport or aircraft. These services include, among other things, the leasing of space to retailers, restaurants and banks and advertising; hotel services; air cargo logistics; and real estate services.

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 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 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 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

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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 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 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 Communications and Transportation. Information required to be presented in the Master Development Program includes:

airport growth and development expectations;
15-year projections for air traffic demand (including passenger, cargo and operations);
construction, conservation, maintenance, expansion and modernization programs for infrastructure, facilities and equipment;
a binding five-year detailed investment program and planned major investments for the following 10 years;
descriptive airport plans specifying the distinct uses for the corresponding airport areas;
any financing sources; and
environmental protection measures.

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 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 Communications and Transportation. The Ministry of Communications and Transportation may request additional information or clarification as well as seek further comments from airport users. The 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 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 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 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 Communications and Transportation is entitled to review our compliance thereunder (and apply sanctions accordingly) on a year-by-year basis. Although

71


historically the Ministry of 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 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 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 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 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 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.”

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 2018, 2019 and 2020, approximately 65.0%, 67.5%, and 54.8%, respectively, of our total revenues were earned from aeronautical services subject to price regulation under our maximum rates (76.0%, 76.0 %, and 71.5%, 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.”

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Maximum Rates

Each airport’s maximum rate is to be determined for each year by the Ministry of Communications and Transportation based on a general framework established in our concessions. This framework reflects, among other factors, projections of an airport’s revenues, operating costs and capital expenditures, as well as the estimated cost of capital related to regulated services and projected annual efficiency adjustments determined by the Ministry of Communications and Transportation. The schedule of maximum rates for each airport is to be established every five years.

Maximum Rates for 2016 through 2020

The following table sets forth the maximum rates for each of our airports under our 2016 to 2020 Master Development Programs that went into effect as of January 1, 2016:

Historical Maximum Rates(1)

For the Year Ended December 31, 

    

2016

    

2017

    

2018

    

2019

    

2020

Acapulco

 

330.39

328.08

325.77

323.50

321.24

Ciudad Juárez

 

250.18

248.42

246.68

244.95

243.24

Culiacán

 

266.39

264.53

262.68

260.84

259.02

Chihuahua

 

251.96

250.19

248.44

246.70

244.97

Durango

 

305.90

303.76

301.64

299.52

297.43

Mazatlán

 

293.86

291.81

289.76

287.74

285.72

Monterrey

 

244.15

242.43

240.73

239.05

237.37

Reynosa

 

285.53

283.53

281.54

279.57

277.61

San Luis Potosí

 

213.08

211.59

210.11

208.64

207.18

Tampico

 

286.87

284.87

282.88

280.91

278.95

Torreón

 

302.68

300.55

298.46

296.37

294.30

Zacatecas

 

320.22

317.97

315.75

313.55

311.35

Zihuatanejo

 

330.24

327.93

325.64

323.36

321.10


(1)Expressed in constant pesos as of December 31, 2020, as required by the maximum rate regulation. The maximum rate for each succeeding year from 2016 onwards is reduced by the efficiency factor of 0.70% per year.

Maximum Rates for 2021 through 2025

On December 28, 2020, the Ministry of 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)

For the Year Ended December 31, 

    

2021

    

2022

    

2023

    

2024

    

2025

Acapulco

 

330.62

328.30

326.01

323.73

321.46

Ciudad Juárez

 

271.00

269.11

267.22

265.35

263.49

Culiacán

 

288.89

286.87

284.87

282.87

280.89

Chihuahua

 

284.85

282.86

280.88

278.91

276.95

Durango

 

330.07

327.76

325.46

323.18

320.92

Mazatlán

 

321.57

319.32

317.09

314.87

312.66

Monterrey

 

270.47

268.58

266.70

264.83

262.98

Reynosa

 

286.31

284.30

282.31

280.33

278.36

San Luis Potosí

 

258.19

256.38

254.58

252.80

251.03

Tampico

 

316.50

314.28

312.08

309.89

307.73

Torreón

 

320.78

318.54

316.31

314.10

311.90

Zacatecas

 

343.94

341.53

339.14

336.76

334.40

Zihuatanejo

 

348.49

346.05

343.63

341.22

338.83


(1)Expressed in constant pesos as of December 31, 2020, as required by the maximum rate regulation. The maximum rate for each succeeding year from 2021 onwards is reduced by the efficiency factor of 0.70% per year.

Methodology for Determining Future Maximum Rates

The Rate Regulation provides that each airport’s annual maximum rates are to be determined in five-year intervals based on the following variables:

Projections for the following 15 years of workload units (each of which is equivalent to one terminal passenger or 100 kilograms (220 pounds) of commercial cargo), operating costs and expenses related to services subject to price regulation and pre-tax earnings from services subject to price regulation. The concessions provide that projections for workload units and expenses related to regulated services are to be derived from the terms of the relevant concession holder’s Master Development Program for the following 15 years.
Projections for the following 15 years of capital expenditures related to regulated services, based on air traffic forecasts and quality of standards for services to be derived from the Master Development Programs.
Reference values, which initially were established in the concessions and are designed to reflect the net present value of the regulated revenues minus the corresponding regulated operating costs and expenses (excluding amortization and depreciation), and capital expenditures related to the provision of regulated services plus a terminal value.
A discount rate to be determined by the Ministry of Communications and Transportation. The concessions provide that the discount rate shall reflect the cost of capital to Mexican and international companies in the airport industry (on a pre-tax basis), as well as Mexican economic conditions. The concessions provide that the discount rate shall be at least equal to the average yield of long term Mexican government debt securities quoted in the international markets during the prior 24 months plus a risk premium to be determined by the Ministry of Communications and Transportation based on the inherent risk of the airport business in Mexico.
An efficiency factor to be determined by the Ministry of Communications and Transportation. For the five-year period ending December 31, 2020, the maximum rates applicable to our airports reflect a projected annual efficiency improvement of 0.70%.

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Our concessions specify a discounted cash flow formula to be used by the Ministry of Communications and Transportation to determine the maximum rates that, given the projected pre-tax earnings, the efficiency adjustment, 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 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 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 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 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, 2021 was Ps.89.62. As a result, the maximum penalty at such date could have been Ps.4,481 thousand (U.S.$225,077) per airport.

As established by the Ministry of Communications and Transportation, the calculation of workload units does not include transit passengers for subsequent years. The current workload unit calculation is therefore equal to one terminal passenger or 100 kilograms (220 pounds) of commercial cargo.

Special Adjustments to Maximum Rates

Once determined, each airport’s maximum rates are subject to special adjustment only under the following circumstances:

Change in law or natural disasters. A concession holder may request an adjustment in its maximum rates if a change in law with respect to quality standards or safety and environmental protection results in operating costs or capital expenditures that were not contemplated when its maximum rates were determined. In addition, a concession holder may also request an adjustment in its maximum rates if a natural disaster affects demand or requires unanticipated capital expenditures. Requests on these grounds may not be approved in the future.
Macroeconomic conditions. A concession holder may also request an adjustment in its maximum rates if, as a result of a decrease of at least 5% in Mexican GDP in a 12-month period, the workload units processed in the concession holder’s airport are less than that projected when its Master Development Program was approved. To grant an adjustment under these circumstances, the Ministry of Communications and Transportation under the Master Development Program must have already allowed the concession holder to decrease its projected capital improvements as a result of the decline in passenger traffic volume. Requests on these grounds may not be approved in the future.
Increase in concession tax under Mexican Federal Duties Law. An increase in duty payable by a concession holder under the Mexican Federal Duties Law entitles the concession holder to request an adjustment in its maximum rates. Requests on these grounds may not be approved in the future.

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Failure to make required investments or improvements. The Ministry of Communications and Transportation is required to review annually each concession holder’s compliance with its Master Development Program (including the provision of services and the making of capital investments). If a concession holder fails to satisfy any of the investment commitments contained in its Master Development Program, the Ministry of Communications and Transportation is entitled to decrease the concession holder’s maximum rates and assess penalties.
Excess revenues. In the event that revenues subject to price regulation per workload unit in any year exceed the applicable maximum rate, the maximum rate for the following year will be decreased to compensate airport users for overpayment in the previous year. Under these circumstances, the Ministry of Communications and Transportation is also entitled to assess penalties against the concession holder.

Increases in Maximum Rates Associated with Baggage-Screening Services

On November 23, 2012, the Mexican Bureau of Civil Aviation (currently AFAC) published mandatory circulars CO SA-17.2/10 R1, superseded by circulars CO SA-17.2/10 R3 and CO SA-17.9/16, which required that all airlines screen checked baggage and that all airports have screening equipment that complies with specified guidelines to provide the service to the airlines. On November 30, 2012, after negotiation with the Mexican Bureau of Civil Aviation (currently AFAC), the maximum rates of our thirteen airports were increased to take into account the maintenance cost incurred due to the operation of baggage-screening equipment. The maximum rate increase became effective on January 1, 2013.

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 Communications and Transportation access to all airport facilities and information relating to an airport’s construction, operation, maintenance and development. Each concession holder is obligated to maintain statistical records of operations and air traffic movements in its airport and to provide the Ministry of Communications and Transportation with any information that it may request. Each concession holder is also required to publish its annual audited consolidated financial statements in a principal Mexican newspaper within the first four months of each year.

The Mexican Airport Law provides that any person or group directly or indirectly acquiring control of a concession holder is required to obtain the consent of the Ministry of Communications and Transportation to such control acquisition. For purposes of this requirement, control is deemed to be acquired in the following circumstances:

if a person acquires 35% or more of the shares of a concession holder;

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if a person has the ability to control the outcome of meetings of the shareholders of a concession holder;
if a person has the ability to appoint a majority of the members of the board of directors of a concession holder; or
if a person by any other means acquires control of an airport.

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 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 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:

the expiration of its term;
the surrender by the concession holder;
the revocation of the concession by the Ministry of Communications and Transportation;
the reversion (“rescate”) of the Mexican government-owned assets that are the subject of the concession (principally real estate, improvements and other infrastructure);
the inability to achieve the purpose of the concession, except in the event of force majeure;
the dissolution, liquidation or bankruptcy of the concession holder; or
the failure by the concession holder to satisfy the shareholding obligations set forth in the concession.

Following a concession’s termination, the concession holder remains liable for the performance of its obligations during the term of the concession.

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 Communications and Transportation under certain conditions, including:

the failure by a concession holder to begin operating, maintaining and developing an airport pursuant to the terms established in the concession;

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the failure by a concession holder to maintain insurance as required under the Mexican Airport Law;
the assignment, encumbrance, transfer or sale of a concession, any of the rights thereunder or the assets underlying the concession in violation of the Mexican Airport Law;
any alteration of the nature or condition of an airport’s facilities without the authorization of the Ministry of Communications and Transportation;
use, with a concession holder’s consent and without the approval of air traffic control authorities, of an airport by any aircraft that does not comply with the requirements of the Mexican Civil Aviation Law, that has not been authorized by the Mexican air traffic control authority or that is involved in the commission of a felony;
knowingly appointing a chief executive officer or board member of a concession holder that is not qualified to perform his functions under the law as a result of having violated criminal laws;
the failure by the concession holder to pay the Mexican government the concession tax;
the failure by the concession holder to beneficially own at least 51% of the capital stock of its subsidiary concession holders;
a violation of the safety regulations established in the Mexican Airport Law and other applicable laws;
a total or partial interruption of the operation of an airport or its airport or complementary services without justified cause;
the failure to maintain the airport’s facilities;
the provision of unauthorized services;
the failure to indemnify a third party for damages caused by the provision of services by the concession holder or a third-party service provider;
charging prices higher than those registered with the Ministry of Communications and Transportation for regulated services or exceeding the applicable maximum rate;
any act or omission that impedes the ability of other service providers or authorities to carry out their functions within the airport; or
any other failure to comply with the Mexican Airport Law, its regulations and the terms of a concession.

The Ministry of Communications and Transportation is entitled to revoke a concession without prior notice as a result of the first six events described above. In the case of other violations, a concession may be revoked as a result of a violation only if sanctions have been imposed at least three times with respect to the same violation.

Pursuant to the terms of our concessions, in the event the Ministry of Communications and Transportation revokes one of our concessions, it is entitled to revoke all of our 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

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declaration of “rescue,” or reversion, the assets that were subject to the concession are automatically returned to the Mexican government.

In the event of war, public disturbances or threats to national security, the Mexican government may assume the 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 the terms of a concession. The UMA as of January 1, 2021 was Ps.89.62. As a result, the maximum penalty at such date could have been Ps.35,848 thousand (U.S.$1.8 million) per airport.

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 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:

parties who hold permits to operate civil aerodromes and intend to transform the aerodrome into an airport so long as (i) the proposed change is consistent with the national airport development programs and policies, (ii) the civil aerodrome has been in continuous operation for the previous five years and (iii) the permit holder complies with all requirements of the concession;
current concession holders when necessary to meet increased demand so long as (i) a new airport is necessary to increase existing capacity, (ii) the operation of both airports by a single concession holder is more efficient than other options, and (iii) the concession holder complies with all requirements of the concession;

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current concession holders when it is in the public interest for their airport to be relocated;
entities in the federal public administration; and
commercial entities in which local or municipal governments have a majority equity interest if the entities’ corporate purpose is to manage, operate, develop and/or construct airports.

Additionally, under the Mexican Airport Law for the granting of a concession title or the resolution to extend the term thereof, the Ministry of Communications and Transportation shall file before the Ministry of Finance and Public Credit the following:

a favorable opinion regarding the economic profitability of the corresponding project,
the registry of the programs portfolio and investment projects, in terms of the Federal Budget and Fiscal Responsibility Law (Ley Federal de Presupuesto y Responsabilidad Hacendaria), in case public funds are used to finance an airport project, and
the assessment of the considerations that the concession holder shall pay to the federal government in terms of applicable law. For purposes of this section, the Ministry of Communications and Transportation shall submit a proposal of said considerations to the Ministry of Finance and Public Credit.

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

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underground waters or recipient water bodies. The use of underground waters is subject to restrictions pursuant to our concessions and the National Waters Commission.

In addition to the foregoing, 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.”

Environmental Certification

Since 2011 we have been selected to be one of the members of the Sustainability Index by the Mexican Stock Exchange. The Mexican Stock Exchange Sustainability Index members were selected from among the 70 most traded stocks on the Mexican Stock Exchange based on evaluation criteria of corporate governance, environmental management and social responsibility. In 2020, we were selected again to be one of the members of the Mexican Stock Exchange Sustainability Index (now called S&P/BMV Total México ESG Index).

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 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, 2021, including our direct and indirect ownership interest in each:

Name of Company

    

Jurisdiction of
Establishment

    

Percentage
Owned

    

Description

Aeropuerto de Acapulco, S.A. de C.V.

Mexico

100 

Holds concession for Acapulco
International Airport

Aeropuerto de Ciudad Juárez, S.A. de C.V.

Mexico

100 

Holds concession for Ciudad Juárez
International Airport. Is authorized to operate a bonded warehouse in such airport

Aeropuerto de Culiacán, S.A. de C.V.

Mexico

100 

Holds concession for Culiacán
International Airport

Aeropuerto de Chihuahua, S.A. de C.V.

Mexico

100 

Holds concession for Chihuahua
International Airport. Is authorized to operate a bonded warehouse in such airport

Aeropuerto de Durango, S.A. de C.V.

Mexico

100 

Holds concession for Durango
International Airport

Aeropuerto de Mazatlán, S.A. de C.V.

Mexico

100 

Holds concession for Mazatlán
International Airport

Aeropuerto de Monterrey, S.A. de C.V.

Mexico

100 

Holds concession for Monterrey
International Airport. Is authorized to operate a bonded warehouse in such airport

Aeropuerto de Reynosa, S.A. de C.V.

Mexico

100 

Holds concession for Reynosa
International Airport

Aeropuerto de San Luis Potosí, S.A. de C.V.

Mexico

100 

Holds concession for San Luis Potosí
International Airport

Aeropuerto de Tampico, S.A. de C.V.

Mexico

100 

Holds concession for Tampico
International Airport

Aeropuerto de Torreón, S.A. de C.V.

Mexico

100 

Holds concession for Torreón
International Airport

Aeropuerto de Zacatecas, S.A. de C.V.

Mexico

100 

Holds concession for Zacatecas
International Airport

Aeropuerto de Zihuatanejo, S.A. de C.V.

Mexico

100 

Holds concession for
Zihuatanejo International Airport

Servicios Aeroportuarios del Centro Norte, S.A. de C.V.

Mexico

100 

Provider of administrative and other services.

Operadora de Aeropuertos del Centro Norte, S.A. de C.V.

Mexico

100 

Provider of operational services.

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Name of Company

    

Jurisdiction of
Establishment

    

Percentage
Owned

    

Description

Holding Consorcio Grupo Hotelero T2, S.A. de C.V.

Mexico

100

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.

Mexico

90 

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.

Mexico

90 

Provider of administrative and other services.

Servicios Complementarios del Centro Norte, S.A. de C.V.

Mexico

100 

Provider of complementary services.

OMA Logística, S.A. de C.V.

Mexico

100 

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.

Mexico

100 

Provider of administrative and other services.

OMA-VYNMSA Aero Industrial Park, S.A. de C.V.

Mexico

51 

Entity created to build and operate an industrial park at the Monterrey airport.

Consorcio Hotelero Aeropuerto Monterrey, S.A.P.I. de C.V.

Mexico

85 

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.

Mexico

85 

Provider of administrative and other services.

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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 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 54.8% of our total revenues in 2020 were earned from aeronautical services and approximately 71.5% of the sum of our aeronautical and non-aeronautical revenues in 2020 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 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.

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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 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 2020, 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 most of 2020, as well as preserving liquidity.

Recent Developments

COVID-19 Outbreak

The United States government has put in place travel restrictions in response to the COVID-19 pandemic, and closed the United States border with Mexico, except to essential travel and trade and commerce, on March 20, 2020. As of April 22, 2021, the land border remains closed. On January 26, 2021, the United States issued a decree, requesting negative COVID-19 test results for all inbound passengers traveling by air. Beginning on January 7, 2021, Canada established similar testing requirements for passengers traveling by air to the country. Subsequently, the Canadian government suspended flights between Canada, Mexico and the Caribbean until April 30, 2021.

The Mexican government has implemented various measures to control the spread of COVID-19, including extraordinary actions, such as school closures and the suspension of non-essential activities, in the regions most affected. On March 31, 2020, Mexico’s Ministry of Health issued a decree suspending all non-essential activities in the country through April 30, and on April 21, such suspension was extended through May 30, 2020. For purposes of these measures, airports are considered essential and our airports remain operational. On May 29, 2020, Mexico’s Ministry of Health issued a decree establishing an epidemiological risk traffic light system by region, applicable both to municipalities and states which became effective on June 1, 2020 (and which remains in place as of the date of this report) that determines the level of health risk and the type of activities authorized to take place. As a result, different states of the country are experiencing different reactivation levels and, consequently, different types of economic activities are being allowed.

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, which is mainly comprised of commercial tenants. We cannot assure you whether the COVID-19 pandemic will continue to cause an increase in our reserve for doubtful accounts receivable in 2021. 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. Our total passenger traffic decreased 52.3% in 2020 compared to 2019. The sum of aeronautical and non-aeronautical revenues for the first quarter of 2021 decreased to Ps.1,189,679 thousand, as compared to Ps.1,715,650 thousand in the first quarter of 2020. 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 served by airlines that operate in our airports in 2021.

While we are expecting a negative impact to our operational and our financial results due to the COVID-19 outbreak, we do not foresee a risk to the overall continuity of our business. We have carried out a preliminary analysis of

86


the financial results in the short, medium and long term, and we have not identified any significant asset deterioration. Nevertheless, the demand for travel may decrease more than expected, which could magnify the impact of the COVID-19 pandemic going forward. Accordingly, we will continue to monitor and analyze the situation closely. We do not expect interruptions to our business. We have the ability to continue as a going concern and do not foresee the cancellation of our operations at any of our airports.

We are unable to predict with certainty the impact of the COVID-19 outbreak on our business, clients, suppliers and employees, as well as on international air travel. We are also unable  to predict the degree to which the COVID-19 outbreak may impact air travel demand in the domestic regions in which we operate, or whether continuous travel restrictions, as well as general population fears with respect to air travel, may have a materially adverse effect on our business and on our operating results. The global and domestic impact of the COVID-19 outbreak on our business will depend on its duration and its impact on the economy of Mexico.

Stock Purchase Agreement

On September 14, 2020, Fintech filed Amendment No. 8 amending the Schedule 13D filed with the SEC, informing that on June 10, 2020, Fintech 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.

Potential Tender Offer 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) (the “Series B Shares”) which represented approximately 14.7% of our total outstanding capital stock.

 

Fintech informed on December 23, 2020 that it has considered from time to time making a tender offer, in Mexico or globally, for an additional interest in our Series B Shares, without exceeding an aggregate interest of 40% of our aggregate outstanding shares. In connection with consideration of such an offer, Fintech informed that it has evaluated alternative possibilities for the financial, legal and regulatory structures available for such an offer, and that it has engaged in exploratory discussions regarding those possibilities with, among others, potential providers of financing, potential dealer-managers and regulatory authorities in the United States and Mexico.

 

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, but has not determined to proceed, and has stated that there can be no assurance it will proceed with any offer. If Fintech were to proceed with such an offer, Fintech currently expects that any such offer would be for at least 19,505,578 Series B Shares (or 5% of the aggregate outstanding shares of OMA) and up to 97,527,889 Series B Shares (or 25% of the aggregate outstanding shares of OMA) for an expected purchase price of up to Ps.137 per Series B Share (or the corresponding price in US dollars per American Depositary Share representing Series B Shares, based on the applicable US Dollar/Mexican peso exchange rate upon settlement). Fintech stated that the expected offer amount and purchase price disclosed above and the willingness of the reporting persons to proceed with an offer are subject to change based on market conditions, obtaining financing, obtaining regulatory approval in the United States and Mexico, obtaining approval by the our board of directors and other factors, and has indicated that there can be no assurance that it will proceed with any offer. As of the date of Amendment No. 10, these plans remain preliminary and subject to change, and Fintech has not yet determined to proceed and has not commenced any tender offer. Fintech informed it does not expect to be in a position to commence an offer before the final week of January 2021. Fintech anticipates that it would try to finalize its financing commitments in the first ten business days of any offer, and if it is able to obtain satisfactory financing commitments, Fintech would disclose the terms of such financing commitments to the extent required by applicable law, any financing conditions would then be satisfied and Fintech would maintain the offer open for acceptances for the time prescribed by applicable law.

87


As of April 22, 2021, Fintech has not initiated any tender offer to purchase Series B shares.

Third amendment to the Technical Assistance Agreement

On December 14, 2020, the Technical Assistance Agreement was amended. Among the main modifications, the term was extended until December 31, 2021, with automatic renewals for one year periods starting on January 1, 2022, unless termination notice is provided by any of the parties involved. Additionally, the automatic renewals shall prevail 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.

2021-2025 Master Development Programs

On November 27, 2020, the 2021-2025 Master Development Programs for OMA’s 13 airports were authorized by AFAC. The Master Development Programs include major maintenance, minor expenses and capital investment for the expansion, improvement, modernization and maintenance of airport infrastructure and equipment according to national and international efficiency, operational and safety standards, considering the growth of estimated passenger traffic. The amount of the committed investment was Ps.11,979,621 in pesos with purchasing power as of December 31, 2019.

2020 Annual and Extraordinary Shareholders’ Meeting

The Annual Meeting for the Shareholders of the Company that was rescheduled due to COVID-19 took place on July 7, 2020. The Extraordinary General Shareholders’ Meeting, also held on July 7, 2020, approved the cancellation of 3,659,417 Series “B” shares, acquired by OMA pursuant to Article 56 of the Securities Market Law. As a result, shares outstanding after giving effect to the aforementioned cancellation of shares are 390,111,556.

2021 Annual Shareholders’ Meeting

The Annual Meeting for the Shareholders of the Company was held on April 21, 2021. The General Ordinary Shareholders’ Meeting approved the declaration and payment of a cash dividend to shareholders of up to Ps. 2,000 million and delegated to the Board of Directors the power to determine the amount to be paid out, which will come from accumulated earnings, as well as the date or dates and forms of payment. The declaration of the aforementioned dividend will become effective as of the date the Board makes its determination.

Operations of Hilton Garden Inn Hotel

On July 6, 2020, the Hilton Garden Inn Hotel that operates at the Monterrey airport restarted activities. The hotel had suspended operations since April 6, 2020 due to low occupancy derived from COVID-19.

Inauguration of Reynosa Airport Terminal Building

In February 2021, we inaugurated the terminal building at the Reynosa airport. The project involved a total investment of Ps.335 million and included an expansion of 4,550 square meters (48,976 square feet), for a total of 7,286 square meters (78,426 square feet). Passenger capacity grew threefold to serve up to 900,000 passengers per year.

Approval of Master Development Program for the 2021-2025 period

In November 2020, we received approval from the Ministry of Communications and Transportation, through the AFAC, of the Master Development Program for each of our thirteen airports, corresponding to the 2021-2025 period.

88


Issuance OMA21V and OMA21-2 (2021 Green Variable Rate Notes and 2021 Fixed Rate Notes)

On April 16, 2021, OMA issued Ps.1,000,000 thousand in five-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 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 was to finance green investments pursuant to our Master Development Programs for 2021-2025. The notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.

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.

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.”

Operating Results

Certain U.S. dollar amounts have been translated from Mexican pesos for convenience purposes at an exchange rate of Ps.19.9087 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2020.

Passenger and Cargo Volumes

In 2020, approximately 89.3% of the terminal passengers using our airports were domestic. Domestic traffic decreased by 51.6% and international traffic decreased by 56.9% as compared to 2019. 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.

In 2018, 2019 and 2020, our 13 airports handled approximately 100,914, 97,620 and 93,242 metric tons of cargo, respectively. The decrease in 2020 was due to a 5.7% decrease in cargo transportation at the Monterrey airport and a 9.0% decrease 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.

89


The following table sets forth certain operating and financial data relating to our revenues and passenger and cargo volumes for the periods indicated:

For the Year Ended December 31, 

 

    

2018

    

2019

    

2020

 

Domestic terminal passengers(1)

 

19,016.38

 

20,416.76

9,877.70

International terminal passengers(1)

 

2,550.02

 

2,751.30

1,184.99

Total terminal passengers(1)

 

21,566.40

 

23,168.06

11,062.69

Cargo units(1)

 

1,009.14

 

976.20

932.42

Total workload units(1)

 

22,575.54

 

24,144.26

11,995.11

Change in total terminal passengers(2)

 

9.7

%  

7.4

%

(52.3)

%

Change in workload units(2)

 

9.3

%  

6.9

%

(50.3)

%

Aeronautical revenues(3)

 

5,140,052

 

5,752,662

2,942,558

Change in aeronautical revenues(2)

 

18.2

%  

11.9

%

(48.8)

%

Aeronautical revenues per workload unit

 

227.7

 

238.3

245.3

Change in aeronautical revenues per workload unit(1)(2)

 

8.2

%  

4.6

%

3.0

%

Non-aeronautical revenues(3)

 

1,625,497

 

1,819,605

1,171,039

Change in non-aeronautical revenues(2)

 

11.6

%  

11.9

%

(35.6)

%

Non-aeronautical revenues per terminal passenger(4)

 

75.4

 

78.5

105.9

Change in non-aeronautical revenues per terminal passenger(2)

 

1.8

%  

4.2

%

34.8

%

Non-aeronautical revenues per terminal passenger, excluding hotel services(4)(5)

 

59.3

 

63.1

93.0

Change in non-aeronautical revenues per terminal passenger, excluding hotel services(2)(5)

 

4.6

%  

6.4

%

47.4

%


(1)In thousands. One cargo unit is equivalent to 100 kilograms (220 pounds) of cargo. Under the regulation applicable to our aeronautical revenues, one workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.

(2)In each case, as compared to previous period.

(3)In thousands of pesos.

(4)In pesos.

(5)Figures presented for comparison purposes, as revenues from hotel services do not increase as a function of terminal passengers.

In 2020, we served 11.1 million terminal passengers, of which 9.9 million were domestic and 1.2 million were international. The decrease in passengers in 2020 was principally due to the COVID-19 outbreak.

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 2020, 54.8% 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 71.5% of the sum of our aeronautical and non-aeronautical revenues.

Our revenues from aeronautical services are subject to price regulation under the applicable maximum rate at each of our airports and principally consist of passenger charges, aircraft landing and parking charges, airport security charges, passenger walkway charges, 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).

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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 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 2020, revenues from improvements to concessioned assets accounted for 23.4% 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, 2017 to December 31, 2018, the peso remained the same at Ps.19.64 per U.S.$1.00. 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. In the first months of 2021, the peso appreciated, reaching Ps.19.87 per U.S.$1.00 on April 22, 2021.

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, 2020, Ps.1,584 million of our cash balance was denominated in U.S. dollars.

As of December 31, 2020, international passenger charges amounted to Ps.542,933 thousand, and as of December 31, 2020, we had U.S.$4.1 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:

For the Year Ended December 31, 

 

2018

2019

2020

 

    

Amount

    

    %  

Amount

    

%      

Amount

    

    %  

(in thousands of pesos, except percentages)

 

Aeronautical revenues:

 

  

 

  

 

  

 

  

 

  

 

  

Domestic passenger charges

 

3,382,198

 

65.8

%

3,776,401

65.6

%

1,857,551

63.1

%

International passenger charges

 

1,061,793

 

20.7

%

1,207,989

21.0

%

542,933

18.5

%

Landing charges

 

205,787

 

4.0

%

229,919

 

4.0

%

147,387

 

5.0

%

Platform for embarking and disembarking

 

136,852

 

2.7

%

150,055

 

2.6

%

90,257

 

3.1

%

Aircraft parking charges on extended stay or overnight

 

36,402

 

0.7

%

35,910

 

0.6

%

31,905

 

1.1

%

Domestic and international passenger and carry-on baggage check

 

54,570

 

1.1

%

62,970

 

1.1

%

29,688

 

1.0

%

Aerocars and jetways

47,956

0.9

%  

48,074

0.8

%  

19,920

0.7

%  

Other airport services, leases and regulated access(1)

 

214,494

 

4.1

%

241,342

 

4.2

%

222,917

 

7.6

%

Total aeronautical revenues

 

5,140,052

 

100.0

%  

5,752,662

 

100.0

%

2,942,558

 

100.0

%


(1)Includes regulated access fees, leasing of space to airlines for their operations and leasing of space in the airside to cargo handling agents and shippers.

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 2020, passenger charges represented 81.6% of our aeronautical services revenues. In 2020, aeronautical services represented 54.8% of our total revenues and 71.5 % 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

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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.

Such initiatives undertaken in the future may not be carried out, and may not increase our passenger traffic volume or our revenues.

In 2020, our aeronautical revenues represented approximately 99.3% 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 21.8% in 2020. Our non-aeronautical revenues per terminal passenger increased from Ps.78.5 in 2019 to Ps.105.9 in 2020 due primarily to the fixed portion of rent embedded in most of our contracts from the commercial, diversification and complementary activities, combined with the effect of the decrease in passenger traffic due to COVID-19. Our non-aeronautical revenues in 2020 represented 28.5% of the sum of our aeronautical and non-aeronautical revenues, and our revenues from commercial activities per terminal passenger increased from Ps.39.5 in 2019 to Ps.51.7 in 2020, due primarily to the minimum guaranteed fixed amount of rent in our commercial contracts.

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:

For the Year Ended December 31, 

 

2018

2019

2020

 

    

Amount

    

%  

Amount

    

%  

Amount

    

%  

(in thousands of pesos, except percentages)

 

Non-aeronautical revenues:

Commercial activities:

Car parking charges

 

244,461

 

15.0

%

279,463

 

15.4

%

126,818

 

10.8

%

Advertising

 

68,475

 

4.2

%

76,200

 

4.2

%

59,695

 

5.1

%

Retail operations(1)

 

114,418

 

7.0

%

124,554

 

6.8

%

64,486

 

5.5

%

Food and beverage

 

120,828

 

7.4

%

144,374

 

7.9

%

87,499

 

7.5

%

Car rental operators

 

131,478

 

8.1

%

149,454

 

8.2

%

111,037

 

9.5

%

Time share developers

 

14,115

 

0.9

%

16,663

 

0.9

%

12,683

 

1.1

%

Financial services

 

9,255

 

0.6

%

10,367

 

0.6

%

7,853

 

0.7

%

Communication and services

 

15,551

 

1.0

%

16,006

 

0.9

%

17,800

 

1.5

%

Services to passenger

 

2,746

 

0.2

%

4,127

 

0.2

%

3,281

 

0.3

%

VIP lounges

 

36,649

 

2.3

%

51,176

 

2.8

%

36,538

 

3.1

%

Other commercial revenues(3)

 

36,607

 

2.3

%

43,542

 

2.4

%

44,300

 

3.8

%

Total commercial activities

 

794,583

 

49.0

%  

915,927

 

50.3

%

571,990

 

48.8

%

Diversification activities:

Hotel services

 

344,307

 

21.2

%

357,032

 

19.6

%

141,890

 

12.1

%

OMA Carga

 

177,396

 

10.9

%

194,936

 

10.7

%

183,382

 

15.7

%

Real estate services

 

16,352

 

1.0

%

18,181

 

1.0

%

16,499

 

1.4

%

Industrial services

 

26,340

 

1.6

%

39,451

 

2.2

%

51,272

 

4.4

%

Other diversification revenues(3)

 

4,061

 

0.2

%

4,966

 

0.3

%

7,547

 

0.6

%

Total diversification activities

 

568,456

 

34.9

%  

614,565

 

33.8

%

400,590

 

34.2

%

Complementary Activities:

Leasing of space(2)

 

74,887

 

4.6

%

83,477

 

4.6

%

85,729

 

7.3

%

Access rights

 

18,023

 

1.1

%

19,709

 

1.1

%

15,819

 

1.4

%

Documented baggage inspection

 

153,192

 

9.4

%

175,006

 

9.6

%

86,491

 

7.4

%

Other complementary revenues(4)

 

16,356

 

1.0

%

10,922

 

0.6

%

10,420

 

0.9

%

Total complementary activities

 

262,458

 

16.1

%  

289,113

 

15.9

%

198,459

 

16.9

%

Total revenues from non-aeronautical services

 

1,625,497

 

100.0

%  

1,819,605

 

100.0

%

1,171,039

 

100.0

%


(1)Includes revenues from duty-free operations.

(2)Includes the leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and other similar non-essential activities).

(3)Other revenues consist mainly of recovery of costs for utility, marketing, security and maintenance charges that are transferred to airlines and other tenants in our airports.

(4)Other complementary revenues consist of the recovery of costs for utility, marketing, security and maintenance charges that are transferred to airlines and other tenants in our airports, among others.

The majority of our non-aeronautical revenues are derived from commercial activities, which represented 48.8% of our non-aeronautical revenues in 2020. 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 2020, our most important source of non-aeronautical revenues was OMA Carga which provides air and ground cargo logistics services, and represented 15.7% of our non-aeronautical revenues in 2020 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 real estate services.

Complementary activities represented 16.9% of our non-aeronautical revenues in 2020. 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:

For the Year Ended December 31, 

 

2018

2019

2020

 

    

Amount

% Change

    

Amount

    

% Change

    

Amount

    

% Change

 

(in thousands of pesos, except percentages)

 

Operating Costs:

 

  

 

  

 

  

 

  

 

  

Cost of services:

 

  

 

  

 

  

 

  

 

  

Wages and salaries

 

231,753

 

5.4

%

242,237

 

4.5

%

227,076

 

(6.3)

%

Maintenance

 

152,583

 

(17.2)

%

177,191

 

16.1

%

124,563

 

(29.7)

%

Security and insurance

 

170,549

 

(3.2)

%

161,351

 

(5.4)

%

134,774

 

(16.5)

%

Utilities (electricity, cleaning and water)

 

210,158

 

11.1

%

177,250

 

(15.7)

%

122,961

 

(30.6)

%

Building lease

 

44,359

 

(1.8)

%

15,683

 

(64.6)

%

2,543

 

(83.8)

%

Allowance for doubtful accounts

 

(5,960)

 

(43.6)

%

(241)

 

(96)

%

17,738

 

(7,460)

%

Cost of hotel service

 

65,853

 

1.3

%

85,706

 

30.1

%

30,650

 

(64.2)

%

Employee statutory profit sharing

 

1,099

 

(29.9)

%

236

 

(78.5)

%

1,917

 

712.3

%

Equipment lease, fees and other

 

107,502

 

(2.5)

%

94,794

 

(11.8)

%

103,736

 

9.4

%

Total cost of services

 

977,896

 

(0.3)

%

954,207

 

(2.4)

%

765,958

 

(19.7)

%

Major maintenance provision

 

248,636

 

(14.6)

%

292,324

 

17.6

%

392,531

 

34.3

%

Cost of construction

 

1,141,505

 

(13.9)

%

954,834

 

(16.4)

%

1,253,868

 

31.3

%

Administrative expenses

 

563,151

 

(4.2)

%

542,664

 

(3.6)

%

518,059

 

(4.5)

%

Right to use airport facilities

 

319,180

 

17.6

%

363,561

 

13.9

%

199,202

 

(45.2)

%

Technical assistance fees

 

172,610

 

27.8

%

150,108

 

(13.0)

%

81,164

 

(45.9)

%

Depreciation and amortization(1)

 

351,745

 

17.6

%

415,252

 

18.1

%

435,344

 

4.8

%

Other income, net

 

(205)

 

(85.1)

%

(1,155)

 

463.4

%

(128)

 

(88.9)

%

Total operating costs

 

3,774,518

 

(3.0)

%

3,671,795

 

(2.7)

%

3,645,998

 

(0.7)

%


(1)Depreciation reflects depreciation of fixed assets, and amortization reflects amortization of our concessions and rights to use airport facilities.

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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Major maintenance provision

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.

Concession Tax

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 Communications and Transportation; however, the Ministry of Communications and Transportation may not honor such requests in the future.

96


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 has been 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 2020, our depreciation and amortization expenses increased by 4.8%, as compared to 2019, primarily due to an increase in the investment to improve our concessions’ assets during 2020.

The value of our concessions was determined in June 2000, when SETA won the bid to acquire Series BB shares currently representing 12.8% 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 inter-company agreements under which we provide services and make payments among us and 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, and our administrative services subsidiaries provide certain services and guarantees to our airport operating subsidiaries (which may include payments to certain of our airport operating subsidiaries), in exchange for which our airport operating subsidiaries make payments to GACN and the service subsidiaries. Each of our airports has entered into a “Solidarity Agreement” with our parent company, pursuant to which each of our airport operating subsidiaries pays a solidarity fee to GACN in exchange for which GACN guarantees the ongoing viability of that subsidiary’s concession, including, in the case of certain subsidiaries, by making payments to those subsidiaries to ensure that they have the resources to comply with their 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 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 Solidarity Agreements 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. The intercompany agreements also include agreements to provide other routine services, including negotiating regulated tariffs and interfacing with regulators, leasing of commercial real estate, trademark license royalties, marketing services and employee costs. The costs of these services and guarantees, including the solidarity fees, are actual costs that are charged to individual airports.

97


Expenditures pursuant to master development programs and other capital expenditures

In 2020, expenditures pursuant to master development programs and other capital expenditures were Ps.1,506,237 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, must be distributed among employees other than the chief executive officer.

Taxation

The recognition of a deferred tax asset from previous years represented Ps.85,731 thousand for the year ended December 31, 2020, while the current tax amounted to Ps. 480,322 thousand. In 2020, we had an effective tax rate of 26.4%, which reflects the permanent differences related primarily to inflationary effects for tax purposes.

The statutory Mexican corporate income tax rate in 2020, 2019 and 2018 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.”

Effects of Devaluation and Inflation

The following table sets forth, for the periods indicated, the percentage that the Mexican peso devalued or appreciated against the U.S. dollar, the Mexican inflation rate, the U.S. inflation rate and the percentage that Mexican GDP changed as compared to the previous period:

For the Year Ended December 31, 

 

    

2019

    

2020

 

Depreciation of the Mexican peso as computed to the U.S. dollar(1)

 

(3.9)

%  

5.5

%

Mexican inflation rate(2)

 

2.8

%  

3.2

%

U.S. inflation rate(3)

 

2.1

%  

1.4

%

Increase in Mexican GDP(4)

 

(0.1)

%  

(8.5)

%


(1)    Based on changes in the noon buying rate for Mexican pesos, as published by the U.S. Federal Reserve at the end of each period, which were as follows: Ps.18.86 per U.S.$1.00 as of December 31, 2019 and Ps.19.89 per U.S.$1.00 as of December 31, 2020.

(2)    Based on changes in the Mexican Consumer Price Index from the previous period, as reported by the Mexican Central Bank. The year-end Mexican Consumer Price Index was 105.9340 in 2019 and 109.271 in 2020.

(3)    Based on changes in the Consumer Price Index for all urban consumers before seasonal adjustment, as reported by the U.S. Department of Labor, Bureau of Labor Statistics.

(4)    In real terms, as reported by the Mexican Central Bank.

98


The general condition of the Mexican economy, the devaluation of the peso as compared to the U.S. dollar, inflation and high interest rates have in the past adversely affected, and may in the future adversely affect, the following:

Passenger charges. Passenger charges for international passengers are currently denominated in U.S. dollars (although invoiced and paid in Mexican pesos), while passenger charges for domestic passengers are denominated in pesos. Consequently, an appreciation of the peso against the U.S. dollar could cause declines in our revenues from passenger charges for international passengers and consequently our aeronautical revenues. This would also produce a decline in peso-denominated revenues when compared with the previous year, because our tariffs for the services we provide to international flights or international passengers are denominated in U.S. dollars but are generally invoiced and paid for in Mexican pesos based on the average exchange rate for the month prior to each flight on which the charge is incurred.

Exchange gains and losses. Our consolidated statement of comprehensive income reflects gains and losses from foreign exchange transactions and could be impacted by exchange rates (to the extent of our foreign currency transactions). A portion of our indebtedness is denominated in U.S. dollars. Given that a substantial portion of our revenues are collected or converted into Mexican pesos, a depreciation in the peso as against the dollar would result in us having to spend more pesos for payment of dollar-denominated indebtedness, whereas an appreciation of the peso would result in us spending fewer pesos for dollar-denominated indebtedness payments. In addition, our cash balance may be, from time to time, denominated in U.S. dollars, in which case a depreciation of the Mexican peso against the U.S. dollar could result in a foreign exchange gain.

Cash flows. Our cash flows are affected by changes in exchange rates as a result of holding monetary assets and liabilities in foreign currencies.

Maximum rates in Mexican pesos. The tariffs for the services that we provide for international flights or international passengers are generally denominated in U.S. dollars but are paid in Mexican pesos based on the average exchange rate for the month prior to each flight. Accordingly, depreciation of the peso, particularly late in the year, could cause us to exceed the maximum rates at one or more of our airports, which could lead to the imposition of fines and the subsequent termination of one or more of our concessions. In addition, if the Mexican 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.

99


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.

For the Year Ended December 31, 

 

    

2018

    

2019

    

2020

 

(in thousands of pesos, except percentages)

 

Metropolitan Destination

 

  

 

  

 

  

Monterrey:

 

  

 

  

 

  

Revenues:

 

  

 

  

 

  

Aeronautical services

 

2,447,993

2,641,052

1,278,255

Non-aeronautical services

 

649,393

726,684

479,322

Construction services

 

232,698

323,035

802,470

Total revenues

 

3,330,084

3,690,771

2,560,047

Operating costs:

 

  

  

  

Costs and administrative expenses

 

383,309

392,344

254,416

Major maintenance provision

 

56,985

63,673

78,811

Construction costs

 

232,698

323,035

802,470

Depreciation and amortization

 

103,454

111,020

122,507

Solidarity fee

 

1,738,583

2,327,084

855,891

Total operating costs

 

2,515,029

3,217,156

2,114,095

Income from operations

 

815,055

473,615

445,952

Operating margin(1)

 

24.5

%

12.8

%

17.4

%

100


For the Year Ended December 31, 

 

    

2018

    

2019

    

2020

 

(in thousands of pesos, except percentages)

 

Tourist Destinations

 

  

 

  

  

Acapulco:

 

  

 

  

  

Revenues:

 

  

 

  

  

Aeronautical services

 

182,663

227,954

117,218

Non-aeronautical services

 

34,279

40,242

27,159

Construction services

 

279,099

63,102

29,410

Total revenues

 

496,041

331,298

173,787

Operating costs:

 

  

  

  

Costs and administrative expenses

 

59,847

61,603

49,893

Major maintenance provision

 

9,211

9,374

13,536

Construction costs

 

279,099

63,102

29,410

Depreciation and amortization

 

33,125

43,286

44,780

Solidarity fee

 

71,299

100,121

14,580

Total operating costs

 

452,581

277,486

152,199

Income from operations

 

43,460

53,812

21,588

Operating margin(1)

 

8.8

%

16.2

%

12.4

%

Mazatlán:

 

  

  

  

Revenues:

 

  

  

  

Aeronautical services

 

276,126

321,313

211,184

Non-aeronautical services

 

46,754

52,857

37,431

Construction services

 

31,308

34,572

24,704

Total revenues

 

354,188

408,742

273,319

Operating costs:

 

  

  

  

Costs and administrative expenses

 

64,062

61,828

38,068

Major maintenance provision

 

16,297

16,796

13,282

Construction costs

 

31,308

34,572

34,572

Depreciation and amortization

 

16,594

17,514

18,699

Solidarity fee

 

144,273

225,406

105,593

Total operating costs

 

272,534

356,116

210,214

Income from operations

 

81,654

52,626

63,105

Operating margin(1)

 

23.1

%

12.9

%

23.1

%

Zihuatanejo:

 

  

  

  

Revenues:

 

  

Aeronautical services

 

167,578

191,512

98,645

Non-aeronautical services

 

22,934

25,596

18,360

Construction services

 

13,534

22,876

45,984

Total revenues

 

204,046

239,984

162,989

Operating costs:

 

  

  

  

Costs and administrative expenses

 

43,740

38,918

29,319

Major maintenance provision

 

17,228

32,792

40,780

Construction costs

 

13,534

22,876

45,984

Depreciation and amortization

 

18,266

18,660

19,091

Solidarity fee

 

67,683

83,124

14,855

Total operating costs

 

160,451

196,370

150,029

Income from operations

 

43,595

43,614

12,960

Operating margin(1)

 

21.4

%

18.2

%

8.0

%

101


For the Year Ended December 31, 

 

    

2018

    

2019

    

2020

 

(in thousands of pesos, except percentages)

 

Regional Destinations

 

  

 

  

  

Chihuahua:

 

  

 

  

  

Revenues:

 

  

 

  

  

Aeronautical services

 

364,755

411,392

215,728

Non-aeronautical services

 

56,128

67,022

46,049

Construction services

 

141,546

124,701

30,679

Total revenues

 

562,429

603,115

292,456

Operating costs:

 

  

  

  

Costs and administrative expenses

 

60,372

68,233

51,254

Major maintenance provision

 

20,392

34,802

52,396

Construction costs

 

141,546

124,701

30,679

Depreciation and amortization

 

13,462

17,974

25,274

Solidarity fee

 

222,676

290,026

82,815

Total operating costs

 

458,448

535,736

242,418

Income from operations

 

103,981

67,379

50,038

Operating margin(1)

 

18.5

%

11.2

%

17.1

%

Culiacán:

 

  

  

  

Revenues:

 

  

  

  

Aeronautical services

 

539,540

617,978

359,562

Non-aeronautical services

 

57,313

66,287

51,732

Construction services

 

33,888

68,961

68,142

Total revenues

 

630,741

753,226

479,436

Operating costs:

 

  

  

  

Costs and administrative expenses

 

76,788

80,460

57,683

Major maintenance provision

 

10,514

8,884

64,627

Construction costs

 

33,888

68,961

68,142

Depreciation and amortization

 

17,408

18,658

20,887

Solidarity fee

 

346,376

479,985

175,756

Total operating costs

 

484,974

656,948

387,095

Income from operations

 

145,767

96,278

92,341

Operating margin(1)

 

23.1

%

12.8

%

19.3

%

Durango:

 

  

  

  

Revenues:

 

  

  

  

Aeronautical services

 

112,310

150,130

79,515

Non-aeronautical services

 

10,822

13,433

11,083

Construction services

 

13,788

36,677

50,202

Total revenues

 

136,920

200,240

140,800

Operating costs:

 

  

  

  

Costs and administrative expenses

 

24,949

27,964

21,566

Major maintenance provision

 

13,951

14,506

26,418

Construction costs

 

13,788

36,677

50,202

Depreciation and amortization

 

6,558

7,537

8,259

Solidarity fee

 

48,335

90,542

24,135

Total operating costs

 

107,581

177,226

130,580

Income from operations

 

29,339

23,014

10,220

Operating margin(1)

 

21.4

%

11.5

%

7.3

%

102


For the Year Ended December 31, 

 

    

2018

    

2019

    

2020

 

(in thousands of pesos, except percentages)

 

San Luis Potosí:

Revenues:

Aeronautical services

 

167,030

 

174,340

 

108,045

Non-aeronautical services

 

30,275

 

35,631

 

28,508

Construction services

 

231,726

 

110,743

 

58,189

Total revenues

 

429,031

 

320,714

 

194,742

Operating costs:

Costs and administrative expenses

 

30,189

 

35,460

 

26,288

Major maintenance provision

 

30,698

 

26,093

 

12,962

Construction costs

 

231,726

 

110,743

 

58,189

Depreciation and amortization

 

8,711

 

12,857

 

21,569

Solidarity fee

 

88,041

 

107,623

 

41,086

Total operating costs

 

389,365

 

292,776

 

160,094

Income from operations

 

39,666

 

27,938

 

34,648

Operating margin(1)

 

9.2

%  

8.7

%  

17.8

%

Tampico:

Revenues:

Aeronautical services

 

190,502

 

197,161

 

74,330

Non-aeronautical services

 

26,891

 

28,056

 

17,414

Construction services

 

26,169

 

61,823

 

67,530

Total revenues

 

243,562

 

287,040

 

159,274

Operating costs:

Costs and administrative expenses

 

46,136

 

43,969

 

38,759

Major maintenance provision

 

8,327

 

11,593

 

29,466

Construction costs

 

26,169

 

61,823

 

67,530

Depreciation and amortization

 

8,605

 

9,218

 

9,920

Solidarity fee

 

106,706

 

128,629

 

3,441

Total operating costs

 

195,943

 

255,232

 

149,116

Income from operations

 

47,619

 

31,808

 

10,158

Operating margin(1)

 

19.6

%  

11.1

%  

6.4

%

Torreón:

Revenues:

Aeronautical services

 

184,396

 

201,446

 

94,892

Non-aeronautical services

 

22,655

 

23,683

 

17,425

Construction services

 

19,991

 

18,343

 

12,233

Total revenues

 

227,042

 

243,472

 

124,550

Operating costs:

Costs and administrative expenses

 

36,732

 

34,781

 

24,812

Major maintenance provision

 

11,198

 

17,457

 

19,327

Construction costs

 

19,991

 

18,343

 

12,233

Depreciation and amortization

 

9,426

 

9,883

 

10,605

Solidarity fee

 

100,811

 

131,350

 

33,913

Total operating costs

 

178,158

 

211,814

 

100,890

Income from operations

 

48,884

 

31,658

 

23,660

Operating margin(1)

 

21.5

%  

13.0

%  

19.0

%

Zacatecas:

Revenues:

Aeronautical services

 

105,626

 

141,500

 

71,292

Non-aeronautical services

 

11,935

 

13,945

 

10,512

Construction services

 

9,656

 

6,843

 

7,480

Total revenues

 

127,217

 

162,288

 

89,284

Operating costs:

Costs and administrative expenses

 

25,056

 

27,746

 

22,432

Major maintenance provision

 

10,230

 

12,129

 

1,243

Construction costs

 

9,656

 

6,843

 

7,480

Depreciation and amortization

 

7,460

 

7,813

 

8,024

Solidarity fee

 

47,148

 

76,622

 

29,349

Total operating costs

 

99,550

 

131,153

 

68,528

Income from operations

 

27,667

 

31,135

 

20,756

Operating margin(1)

 

21.7

%  

19.2

%  

23.2

%

103


For the Year Ended December 31, 

 

    

2018

    

2019

    

2020

 

(in thousands of pesos, except percentages)

 

Border Destinations

 

  

 

  

 

  

Ciudad Juárez:

 

  

 

  

 

  

Revenues:

 

  

 

  

 

  

Aeronautical services

 

310,892

 

380,271

199,685

Non-aeronautical services

 

45,287

 

55,999

37,736

Construction services

 

9,096

 

17,650

27,949

Total revenues

 

365,275

 

453,920

265,370

Operating costs:

 

  

 

  

  

Costs and administrative expenses

 

49,809

 

60,977

43,601

Major maintenance provision

 

30,915

 

31,050

18,155

Construction costs

 

9,096

 

17,650

27,949

Depreciation and amortization

 

11,631

 

11,799

12,717

Solidarity fee

 

174,273

 

271,070

102,706

Total operating costs

 

275,724

 

392,546

205,128

Income from operations

 

89,551

 

61,374

60,242

Operating margin(1)

 

24.5

%  

13.5

%

22.7

%

Reynosa:

 

  

 

  

  

Revenues:

 

  

 

  

  

Aeronautical services

 

106,867

 

113,515

58,010

Non-aeronautical services

 

14,810

 

18,240

11,500

Construction services

 

144,830

 

112,031

55,366

Total revenues

 

266,507

 

243,786

124,876

Operating costs:

 

  

 

  

  

Costs and administrative expenses

 

24,833

 

28,119

21,123

Major maintenance provision

 

12,690

 

13,177

21,528

Construction costs

 

144,830

 

112,031

55,366

Depreciation and amortization

 

7,909

 

8,189

9,553

Solidarity fee

 

46,141

 

55,895

8,135

Total operating costs

 

236,403

 

217,411

115,705

Income from operations

 

30,104

 

26,375

9,171

Operating margin(1)

 

11.3

%  

10.8

%

7.3

%


(1)We determine operating margin per airport by dividing income from operations at each airport by total revenues for that airport.

104


For the Year Ended December 31, 

 

2018

    

2019

    

2020

 

(in thousands of pesos, except percentages)

 

Hotels

 

  

  

 

  

Terminal 2 NH Collection Hotel:

 

  

  

 

  

Revenues:

 

  

  

 

  

Non-aeronautical services

 

246,065

 

255,393

110,299

Equity method (1)

476

220

226

Total revenues

 

246,541

 

255,613

110,525

Operating costs:

 

  

 

  

  

Costs and administrative expenses

 

156,322

 

138,742

78,833

Depreciation and amortization

 

22,969

 

39,546

40,301

Total operating costs

 

179,291

 

178,288

119,134

(Loss) income from operations

 

67,250

 

77,325

(8,609)

Operating margin

 

27.3

%  

30.3

%

(7.8)

%

Hilton Garden Inn Hotel:

 

  

 

  

  

Revenues:

 

  

 

  

  

Non-aeronautical services

 

100,051

 

103,474

32,614

Equity method (1)

203

(188)

336

Total revenues

100,254

 

103,286

32,950

Operating costs:

  

 

  

  

Costs and administrative expenses

60,440

 

59,559

28,438

Depreciation and amortization

10,840

 

11,382

11,430

Total operating costs

71,280

 

70,941

39,868

(Loss) income from operations

28,974

 

32,345

(6,918)

Operating margin

28.9

%  

31.3

%

(21.0)

%

For the Year Ended December 31, 

 

2018

2019

    

2020

 

(in thousands of pesos, except percentages)

 

Industrial Park

  

  

 

  

OMA-Vynmsa Aero Industrial Park:

  

  

 

  

Revenues:

  

  

 

  

Non-aeronautical services

28,190

41,981

56,454

Total revenues

28,190

41,981

56,454

Operating costs:

  

  

  

Costs and administrative expenses

5,654

6,811

8,751

Depreciation and amortization

14,260

19,548

23,621

Total operating costs

19,914

26,359

32,372

Income from operations

8,276

15,622

24,082

Operating margin

29.4

%

37.2

%

42.7

%


(1)Equity method revenue is eliminated in full on consolidation.

105


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, 

 

2018

2019

2020

 

    

Amount

    

Amount

    

% Change

    

Amount

    

% Change

 

(in thousands of pesos, except percentages)

 

Revenues:

 

  

 

  

 

  

 

  

 

  

Aeronautical services

 

5,140,052

 

5,752,662

 

11.9

%

2,942,558

 

(48.8)

%

Non-aeronautical services

 

1,625,497

 

1,819,605

 

11.9

%

1,171,039

 

(35.6)

%

Construction services

 

1,141,505

 

954,834

 

(16.4)

%

1,253,869

 

31.3

%

Total revenues

 

7,907,054

 

8,527,101

 

7.8

%

5,367,466

 

(37.1)

%

Operating costs and expenses:

 

  

 

  

 

  

 

Cost of services

 

977,896

 

954,207

 

(2.4)

%

765,958

 

(19.7)

%

Major maintenance provision

 

248,636

 

292,324

 

17.6

%

392,531

 

34.3

%

Construction costs

 

1,141,505

 

954,834

 

(16.4)

%

1,253,869

 

31.3

%

Administrative expenses

 

563,151

 

542,664

 

(3.6)

%

518,059

 

(4.5)

%

Concession taxes

 

319,180

 

363,561

 

13.9

%

199,202

 

(45.2)

%

Technical assistance fees

 

172,610

 

150,108

 

(13.0)

%

81,164

 

(45.9)

%

Depreciation and amortization

 

351,745

 

415,252

 

18.1

%

435,344

 

4.8

%

Other income

 

(205)

 

(1,155)

 

463.4

%

(128)

 

(88.9)

%

Total operating costs and expenses

 

3,774,518

 

3,671,795

 

(2.7)

%

3,645,998

 

(0.7)

%

Income from operations

 

4,132,536

 

4,855,306

 

17.5

%

1,721,468

 

(64.5)

%

Interest expense, net

 

(131,466)

 

(204,772)

 

55.8

%

(308,610)

 

50.7

%

Exchange loss, net

 

(15,488)

 

(50,878)

 

228.5

%

79,522

 

(256.3)

%

Income before income taxes

 

3,985,582

 

4,599,656

 

15.4

%

1,492,380

 

(67.6)

%

Income taxes

 

1,121,403

 

1,372,222

 

22.4

%

394,501

 

(71.3)

%

Consolidated net income

 

2,864,179

 

3,227,434

 

12.7

%

1,097,879

 

(66.0)

%

Other operating data:

 

  

 

  

 

  

  

 

  

Operating margin(1)

 

52.3

%  

56.9

%  

N/A

32.1

%  

N/A

Net margin(2)

 

36.2

%  

37.8

%  

N/A

20.5

%  

N/A


(1)Income from operations divided by total revenues, expressed as a percentage.

(2)Consolidated net income divided by total revenues, expressed as a percentage.

Results of Operations for the Year Ended December 31, 2020, Compared to the Year Ended December 31, 2019.

Consolidated Revenues

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

106


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. 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 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.

Metropolitan Destination

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.

Tourist Destinations

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

107


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.

Regional Destinations

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

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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.

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.

Border Destinations

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.

Hotels

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

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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. For more information, see “Risk Factors—Risks Related to Our Operations— We face risks associated with our diversification activities, which could lead to our inability to recover our investment as planned.”

Industrial Park

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).

Operating Results

Cost of Services

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. For more information on cost cutting initiatives implemented during 2020, 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.”

Major maintenance provision

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.

Administrative Expenses

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.

Technical Assistance Fee

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.

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Concession Tax

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.

Depreciation and Amortization

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.

Income from Operations

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.

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 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).

Metropolitan Destination

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 method for its calculation and the decrease in aeronautical and non-aeronautical revenues.

Tourist Destinations

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 method for its calculation and the decrease in aeronautical and non-aeronautical revenues.

Operating income for the Mazatlán airport increased by 19.9% from Ps.52,616 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 method for its calculation 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 method for its calculation and the decrease in aeronautical and non-aeronautical revenues.

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Regional Destinations

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 method for its calculation 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 method for its calculation and the decrease in aeronautical and non-aeronautical revenues.

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 method for its calculation 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 method for its calculation 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 method for its calculation 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 method for its calculation 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 method for its calculation and the decrease in aeronautical and non-aeronautical revenues.

Border Destinations

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 method for its calculation 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

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declined mainly due to an update in the method for its calculation and the decrease in aeronautical and non-aeronautical revenues.

Hotels

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.

Industrial Park

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.

Exchange Gain (Loss)

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.

Net Interest Expense

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%.

Income Taxes

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.

Net Income and Comprehensive Income

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.

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Results of Operations for the Year Ended December 31, 2019, Compared to the Year Ended December 31, 2018.

For a comparison of the results of operations for the year ended December 31, 2019 as compared to the year ended December 31, 2018, see “Item 5—Operating and Financial Review and Prospects—Results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018” in our Fiscal Year 2019 Form 20-F.

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.

In November 2020, we received approval from the Ministry of 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.12,586,901 thousand in pesos as of December 31, 2020. 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 2021 through 2025, we anticipate investing Ps. 12,586,901 thousand as follows:

Expected Investments Under Master Development Programs by Category for 2021 to 2025

For the Year Ended December 31, 

    

Total

2021

2022

2023

2024

2025

2021 - 2025

Terminal capacity expansions and quality projects

 

610,054

1,051,955

1,295,208

1,444,221

1,438,497

 

5,839,936

Runways and aprons

 

371,483

441,930

348,335

284,352

135,296

 

1,581,395

Machinery and equipment

 

437,868

527,027

198,793

159,582

217,715

 

1,540,984

Security, Safety and Information Technology Equipment

 

388,412

156,264

544,285

361,149

81,534

 

1,531,644

Operational Infrastructure Expansion

 

190,178

176,799

158,040

209,535

313,502

 

1,048,054

Projects to meet ICAO directives

 

236,096

139,842

14,053

10,260

9,502

 

409,753

Other

 

331,412

161,252

62,027

41,027

39,418

 

635,135

Total

 

2,565,502

 

2,655,068

 

2,620,741

 

2,510,125

 

2,235,465

 

12,586,901

Our committed investments pursuant to our Master Development Programs for 2021 amount to Ps.2,565,502 thousand. Our committed investment for 2021 includes investments for additional capacity and equipment, among others. See “Item 4. Information on the Company—Master Development Programs and Capital Expenditures.”

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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, 2018, 2019 and 2020, we had Ps.2,958,902 thousand, Ps.3,429,873 thousand and Ps.2,958,804 , respectively, of cash and cash equivalents, of which 44.3%, 43.4% and 53.0% respectively, was denominated in U.S. dollars. We invested these resources in financial instruments in accordance with our investment policy.

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 interest and Ps.150,000 thousand in the repurchase of shares.

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.

In 2018, we generated Ps.3,709,346 thousand in cash flows from operating activities of which Ps.4,764,277 thousand was directly from operating activities and was offset mainly by Ps.995,258 thousand of income tax paid, Ps.139,320 thousand of major maintenance expenses and Ps.59,849 thousand of net trade accounts receivable. Our cash flow used in investing activities was Ps.1,088,373 thousand, mainly with respect to investments in our concessions, and our cash flow used in financing activities was Ps.1,940,463 thousand, mainly for payment of Ps.1,605,736 thousand in dividends and Ps.323,070 thousand in interest.

Indebtedness

Short-Term Indebtedness

As of April 22, 2021, we had unused lines of credit available for short-term issuances totaling Ps.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, Culiacan, 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 mxAAA by Standard and Poor’s and AA+ (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.

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Covenants

We will preserve our legal existence and that of our guarantors and will maintain an ongoing business.
We will do what is necessary to ensure that our obligations under the notes constitute our direct and unsecured obligations and that they have the same priority of payment, in the case of bankruptcy, as the rest of its direct and unsecured obligations, except for priorities established by the operation of law.
In the event of a Change of Control (as defined in the 2013 Indenture), we will be obligated to perform and initiate, through the Mexican Stock Exchange, a public offer to purchase with respect to the notes no more than 15 business days after the occurrence of such Change of Control. We shall offer, and the holders will have the right to accept, the repurchase of the notes in circulation in exchange for a price equal to 101% of the nominal value of the notes plus the interest accrued and not paid through the date of repurchase.
We cannot merge, divide, dissolve or liquidate, nor can we permit any of our subsidiaries to merge, divide, dissolve or liquidate, except for (i) mergers in which we or the subsidiary, as the case may be, is the surviving company, (ii) mergers in which the entity created by the merger assumes our obligations, (iii) mergers that do not imply a Change in Control or (iv) dissolutions and liquidations of subsidiaries that we consider advantageous in making our corporate structure more efficient and that do not directly result in an event of default.
We cannot sell, rent or otherwise dispose of Important Assets (as defined in the 2013 Indenture) (including the share capital of any subsidiary), nor permit that our subsidiaries do so, except for (i) sales in the ordinary course of business, (ii) sales of obsolete or discontinued equipment and (iii) sales between subsidiaries or between us and our subsidiaries.
We cannot incur nor permit our subsidiaries to incur any lien, except (i) if they are permitted liens or (ii) if, concurrently with the creation of any lien, we guarantee our obligations under the notes in the same manner.

Events of Default

If we do not pay interest within three business days following a payment date.
If we disclose financial, accounting or legal information to the public that is incorrect or false in any important respect, and such information is not corrected within 15 business days from the date on which any responsible officer had knowledge of such a situation.
If we or our subsidiaries breach any of the obligations incurred with the issuance of notes, with the understanding that it is considered a breach if the obligations are not remedied within 30 calendar days of the date on which we receive a notification from the common representative of the holders in which the breach of obligation is specified.
If the terms and conditions of the concessions are modified in such a manner that they limit or negatively and significantly affect the rights that they presently afford to us or to our subsidiaries, or if, for any reason, a governmental authority confiscates, rescues or seizes the installations and operations of an airport operated by us by means of a final and unappealable resolution or if a concession is revoked and terminated by means of a final and unappealable resolution.
If we or our subsidiaries do not make a payment on a payment date of principal or interest of any important debt or if an event of default is declared with respect to any important debt that obligates us or our subsidiaries to pay an amount greater than U.S.$10.0 million or its equivalent in any other currency before such debt’s scheduled maturity.

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If we or any of our subsidiaries are declared to be in bankruptcy by a final and unappealable resolution or if we or any of our subsidiaries admit in writing to our inability to pay our debts by maturity.
If any definitive judicial resolution is issued against us or our subsidiaries that, individually or together, with any other definitive judicial resolution exceeds the amount of U.S.$10.0 million or its equivalent in other currencies and said amount was not paid or guaranteed within 30 calendar days.
If we reject, question or dispute the validity or enforceability of the notes.
If we do not begin or perform the repurchase offer when a Change of Control has occurred.
If on the 30th day business day after the audited annual financial statements are available, the notes are not secured by guarantors that fulfill minimum requirements.

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, have 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 December 14, 2010, valid through December 21, 2021. As of December 31, 2020, the balance of credit was U.S.$678,000. These lines of credit are guaranteed by checked-baggage inspection equipment acquired by the airports. The interest rate is 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 notes received ratings of Baa1/Aaa.mx by Moody’s and AAA(mex) by Fitch Ratings at the moment of the issuance.

As part of the issuance process of the green notes, in March, 2021, OMA created a Green Bond Framework (the “Framework”), in order to meet the commitments therein and finance projects that will deliver environmental benefits to support the Company’s business strategy and vision. Under the Framework, the Company can issue bonds, where proceeds are used to finance eligible green projects, as defined therein. The Framework is in accordance with the International Capital Market Association (“ICMA”) Green Bond Principles (GBP) 2018 and also describes the manner in which a green bond issued by the Company supports and contributes towards meeting the United Nations Sustainable Development Goals.
The majority of resources from the green bond are focused on renewable energy and energy efficiency projects, particularly on the implementation of solar power throughout our airports, as well as other projects that reduce energy consumption. In order to assure proper implementation, OMA has established a Green Bond Working Group, that is responsible for the review and selection of projects that will qualify as eligible green projects. This group is chaired by the Chief Executive Officer of the Company and will meet on a semi-annual basis. Finally, the Company appointed Sustainalytics to

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provide an external review on the Framework, which issued its opinion on March 16, 2021. Sustainalytics opined that the Framework is credible and impactful and aligns with the four core components of the ICMA Green Bond Principles (GBP) 2018. For more information about the framework and Sustainalytics’ independent party opinion, visit OMA’s Investor Relations website at http://ir.oma.aero.

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:

We will preserve our legal existence and that of our guarantors and will maintain an ongoing business.
We will do what is necessary to ensure that our obligations under the notes constitute our direct and unsecured obligations and that they have the same priority of payment, in the case of bankruptcy, as the rest of its direct and unsecured obligations, except for priorities established by the operation of law.
We cannot merge, divide, dissolve or liquidate, nor can we permit any of our guarantors to merge, divide, dissolve or liquidate, except for (i) mergers in which we or the subsidiary, as the case may be, is the surviving company, and (ii) mergers in which the entity created by the merger assumes our obligations.
We and the guarantors cannot sell or otherwise dispose of assets, except for (i) sales in the ordinary course of business, (ii) sales agreed upon prior to the issuance of the notes, or (iii) sales that would not cause a material adverse effect on the Issuer or the guarantors.
We cannot incur nor permit our subsidiaries to incur any lien, except (i) if they are permitted liens or (ii) if, concurrently with the creation of any lien, we guarantee our obligations under the notes in at least the same manner.
We cannot pay dividends if an Event of Default has occurred and is continuing.

Events of Default

If we do not pay interest within 3 business days following a payment date.
If we or any guarantor are declared to be in bankruptcy or if we or any of our subsidiaries admit in writing to our inability to pay our debts by maturity.
If we or any of the guarantors reject, question or dispute the validity or enforceability of the notes.
If we disclose financial, accounting or legal information to the public that is incorrect or false in any important respect, and such information is not corrected within 10 business days from the date on which any responsible officer had knowledge of such a situation.
If the terms and conditions of the concessions are modified in such a manner that they limit or negatively and significantly affect the rights that they presently afford to us or to our subsidiaries, or if,

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for any reason, a governmental authority confiscates, rescues or seizes the installations and operations of an airport operated by us by means of a final and unappealable resolution or if a concession is revoked and terminated by means of a final and unappealable resolution.
If we or the guarantors do not make a payment on a payment date of principal or interest of any important debt or if an event of default is declared with respect to any important debt that obligates us or our subsidiaries to pay an amount greater than U.S.$20.0 million or its equivalent in any other currency before such debt’s scheduled maturity.
If we or the guarantors breach any of the obligations incurred with the issuance of notes, with the understanding that it is considered a breach of the obligations if not remedied within 30 calendar days of the date on which we receive a notification from the common representative of the holders in which the breach of obligation is specified.
If any definitive judicial resolution is issued against us or the guarantors that, individually or together with any other definitive judicial resolution exceeds the amount of U.S.$20.0 million or its equivalent in other currencies, and said amount was not paid or guaranteed within 30 calendar days.

As of the date of this annual report, we are in compliance with these covenants, and no event of default has been triggered.

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, 

    

Indebtedness

 

(in thousands of pesos)

2018

Ps.

4,584,594

2019

Ps.

4,543,609

2020

Ps.

4,510,388

Derivative Financial Instruments

As of December 31, 2020, we were not party to and did not hold any financial derivative instrument.

Other Restrictions

As of December 31, 2020, 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, 2020. The most significant policies currently in effect are as follows:

Investments in Financial Instruments. The Company shall invest its cash balance in a secure and diversified portfolio, including investments of varying terms and with multiple financial institutions, in accordance with the following:
The Company shall invest in instruments with a minimum credit rating of MxAA in Mexico or its equivalent from a recognized rating agency.

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The investment period shall never exceed 180 days.
No more than 50% of consolidated cash shall be invested in a single financial institution.
The financial institution with which the investment is made shall be recognized in the Mexican market and registered with the CNBV and shall have had positive earnings for the past three years and a minimum credit rating of MxA in Mexico or its equivalent from a recognized rating agency.
Investments in Foreign Financial Instruments. The Company shall invest its cash balance in U.S. dollars in a secure and diversified portfolio, including investments of varying terms and with multiple financial institutions, in accordance with the following:
Company shall invest in financial institutions recognized by the laws under the regulation of the United States, and by the Federal Reserve (FED), a minimum shareholders’ equity of U.S.$500 million, a minimum unsecured credit rating of A2 (Global rating) by Moody’s or A (global rating) by Standard and Poor’s.
The Company shall invest in instruments like certificates of deposit, checkbook deposits, checking accounts or money market funds with the highest credit rating from Moody’s or Standard and Poor’s through an investment account of the Foreign Financial Institution Authorized.
The investment period shall never exceed 90 days.
Indebtedness. The Company shall comply with any debt restrictions established in its debt agreements or in related parties debt agreements that include any restriction on the Company’s debt level.
Derivative Financial Instruments. The Company may only invest in derivative financial instruments that are strictly for coverage, with the objective of setting maximum financial costs and established on a national value. The derivative financial investments shall be tested for effectiveness, the type of coverage shall be designated, and calculations of the Value at Risk or its equivalent will be validated with a third party. The counterparty shall have a minimum risk rating of MxAA in Mexico or the equivalent international risk rating from a recognized rating agency.
Related-Party Transactions. Related-party transactions shall be entered into on market terms in accordance with the opinion of an external expert. Related-party transactions that exceed Ps.1,500 thousand in a single transaction or Ps.10,000 thousand in a series of transactions shall be authorized by the Board of Directors.
Loans Between Affiliates. Loans between affiliates shall only be vertical (from the holding company to its subsidiaries and from a subsidiary to the holding company) and never horizontal (between subsidiaries). Such loans shall be made at market rates and within the parameters established in annual price and transfer studies.
Payment to Service Providers. Payment to service providers shall be made within 30 calendar days after the date of receipt of the bill; provided that there may be special cases in which this period is shortened or lengthened.
Share Repurchase. The Company carries out repurchases of its shares in compliance with various policies, including, but not limited to: (i) being up-to-date on payment of cumulative dividends for Series BB shares, (ii) being up-to-date on payment of obligations derived from debt instruments registered with the Mexican National Registry of Securities, (iii) purchasing shares at market price,

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except with regard to public offerings or auctions authorized by the CNBV and (iv) ensuring that there are no relevant events that have not been disclosed to the investing public.

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 2018, 2019 and 2020 and their classification in our consolidated financial statements for such periods:

For the Year Ended December 31, 

    

2018

    

2019

    

2020

(in thousands of pesos)

Capital expenditures pursuant to master development programs

 

1,141,504

 

954,834

 

1,253,869

Other capital expenditures

 

172,859

 

94,090

 

147,614

Total capital expenditures

 

1,314,363

 

1,048,924

 

1,401,483

Expenditures made for major maintenance(1)

 

139,320

 

305,133

 

103,704

Other expenditures pursuant to master development programs

 

3,727

 

4,526

 

1,050

Expenditures pursuant to master development programs and other capital expenditures(2)

 

1,457,410

 

1,358,584

 

1,506,237


(1)The amounts disclosed in this table refer to increases in our investments in capital assets and represent both actual cash expenditures and capital additions, which are included in our accounts payable as of the end of each period, as the cash required for the capital additions has not yet been expended.

(2)Amounts represent cash outlays for major maintenance, which are provisioned in our major maintenance provision.

In 2020, we spent Ps.1,401,483 thousand on capital expenditures, principally in connection with works to improve our terminal and operating infrastructure. In 2019, we spent Ps.1,048,924 thousand on capital expenditures, principally in connection with works to improve our terminals. In 2018, we spent Ps.1,314,363 thousand on capital expenditures, principally in connection with works to improve our terminals.

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 approves the 2021 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, 2018 the share repurchase program generated a cash flow of Ps.0, for the year ended December 31,

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2019 the share repurchase program generated a cash outflow of Ps.244,201 thousand, and for the year ended December 31, 2020, the share repurchase program generated a cash outflow of Ps.150,000 thousand. On December 31, 2018, 2019, and 2020 the number of repurchased shares in treasury amounted to 324,507 and 2,145,651 and 0 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

We prepare consolidated financial statements in conformity with IFRS. As such, we are required to make estimates, judgments and assumptions that affect (i) certain reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the date of the financial statements, and (iii) certain reported amounts of revenues and expenses during the reporting period. We base estimates and judgments on our historical experience and on various other reasonable factors that together form the basis for making judgments about the carrying values of our assets and liabilities. Our actual results may differ from these estimates under different assumptions or conditions. We evaluate our estimates and judgments on an ongoing basis. Our significant accounting policies are described in Note 4 to our consolidated financial statements. The Board of Directors approves our accounting policies, taking into consideration the advice of the Audit Committee. For additional information, see Note 4 to our consolidated financial statements. We believe our most critical accounting policies that result in the application of estimates and/or judgments are the following:

IFRS 16, Leases

IFRS 16 (issued by the IASB in January 2016), which establishes new or modified requirements regarding lease accounting. It introduced significant changes to the lessee’s accounting, eliminating the distinction between an operating and financial lease, requiring the recognition of an asset for use rights and a lease liability on the start date of all leases, except those considered to be short term or low value assets. In contrast to lessee accounting, the requirements for the lessor remain significantly unchanged. Details of the effects of the adoption of IFRS 16 are described in Note 18 of the financial statements.   

Deferred Income Taxes

The Company recognizes deferred tax assets and liabilities based on the differences between the financial statement and tax values of assets and liabilities. Our deferred income taxes as of December 31, 2018, 2019 and 2020 were prepared taking into account that we will only be obligated to pay the Mexican corporate income tax.

Additionally, the Company’s subsidiaries have tax loss carryforwards available to be amortized in addition to other deferred income tax assets for which we assess their recoverability. We determine the recoverability of those assets based on our projections of future taxable income, which includes investments made under the Master Development Programs to which we are subject, as well as the maximum rates that we are able to charge, as established by the Mexican government.

Employee benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

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 statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur.

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Contingencies

We are a party to a number of legal proceedings. Under IFRS, liabilities are recognized in the financial statements when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the loss is neither probable nor estimable or if the likelihood of a loss is remote, no amounts are recognized in the financial statements. The factors considered in this analysis are the legal merits of the case, as substantiated by the opinion of our legal advisors.

Allowance for Doubtful Accounts

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.

Useful Lives of Long-Lived Assets

Our long-lived assets correspond to concessions granted by the Mexican government, represented as an intangible asset, and property and equipment, represented as tangible assets. We review the estimated useful lives, residual values and depreciation and amortization methods of tangible and intangible long-lived assets at the end of each reporting period. The level of uncertainty associated with estimates of useful lives is mainly related to changes in the market conditions in which the tangible and intangible assets are used, as well as utilization volumes and technological development.

Impairment of Tangible and Intangible Assets Excluding Goodwill

Our 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. Our management considers that the aggregate of all airport concessions is an “independent cash generating unit,” as each of our 13 airports formed part of the Central-North package included in the Mexican government’s original bidding process. In accordance with the terms established by the Mexican government, each of our 13 airports must be in operation, regardless of their individual results and are therefore evaluated for impairment on a consolidated basis. Our hotel segment is evaluated separately. Pursuant to IAS 36, during 2020 the effect of COVID-19 pandemic was deemed to be an indication of impairment. Accordingly management tested for impairment its concessions and hotels cash generating units, and concluded that no impairment charges were needed. We do not currently expect the COVID-19 pandemic to have a significant impact in the evaluation of impairment of our tangible and intangible assets, however, the severity and extent of the current COVID-19 pandemic may impact that determination.

Intangible assets with indefinite useful lives 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.

The 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 weighted average cost of capital 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.

Major Maintenance Provision

We have an obligation to perform major maintenance activities in our airports, per the terms of our concession agreements. The provision is recognized as accrued at an amount that represents the best estimate of the present value of

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future disbursements required to settle the obligation. Future disbursements are determined by considering the requirements of our Master Development Programs. The recognition of the major maintenance provision affects the results of the periods in which the infrastructure under concession becomes available for use through the date on which the maintenance and/or repair work is performed.

For more information regarding recently-issued accounting standards and how they may affect us, see Note 4 to our consolidated financial statements.

Off-Balance Sheet Arrangements

Except for operating lease agreements and purchase obligations as disclosed in the contractual obligations table below, we are not party to any off-balance sheet arrangements.

Tabular Disclosure of Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2020:

Payments Due by Period

 

    

    

2021

    

2022-2024

    

2025-2027

    

2028-on

 

    

Less than

More than

 

Total

1 Year(6)

1-3 Years

3-5 Years

5 Years

 

(in thousands of pesos)

 

Master Development Programs

Ps.

12,586,901

Ps.

2,565,502

Ps.

7,785,934

(7)  

Ps.

2,235,465

(7)  

N/A

(7)  

Purchase obligations(1)

 

75,997

 

75,997

N/A

 

N/A

 

N/A

Short-term debt

 

 

N/A

 

N/A

 

N/A

 

N/A

Long-term debt(2)

 

4,513,503

 

3,013,503

 

1,500,000

 

N/A

 

N/A

Interest(3)

 

306,718

 

188,641

 

118,077

 

 

Leases(4)

 

284,215

 

45,592

 

99,053

 

96,626

 

42,945

Power Purchase Agreement(5)

477,729

57,304

184,590

205,252

30,584

Total

Ps.

18,245,064

Ps.

5,946,539

Ps.

9,687,653

Ps.

2,537,342

Ps.

73,529


(1)Reflects minimum fixed annual payment to be paid under our Technical Assistance Agreement of U.S.$3.8 million updated to specific year using an annual U.S. inflation rate of 1.01%, as reported by the U.S. Department of Labor, Bureau of Labor Statistics for the period from December 2019 to December 2020, and assuming an exchange rate of Ps.19.9087 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2020, which is used for operations with related parties in our consolidated financial statements. The amount ultimately to be paid in any year will depend on our profitability. See “Item 7. Major Shareholders and Related-Party Transactions—Related-Party Transactions—Arrangements Relating to SETA.”
(2)Debt denominated in U.S. dollars was converted to pesos based on an exchange rate of Ps.19.9087 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2020, which is used for liabilities in our consolidated financial statements.
(3)Interest projected based on forward interest rates (LIBOR) and assuming an exchange rate of Ps.19.9087 per U.S.$1.00, the exchange rate as reported by the Mexican Central Bank on December 31, 2020, which is used for liabilities in our consolidated financial statements.
(4)In October 2008, we acquired 90% of the common stock of Consorcio Grupo Hotelero T2, S.A. de C.V. This entity held a lease agreement with Mexico City International Airport to construct and operate a five-star hotel at Terminal 2 of Mexico City International Airport, establishing a leasing amount of the higher of Ps.18.5 million per year, pesos as of December 2007, adjusted every year according to the Mexican national consumer price index, or a royalty of 18% of total annual revenues. Additionally, we entered into lease agreements for our corporate offices. The rent paid in 2020 was Ps.12,870 and is adjusted annually based on the NCPI. These agreements expire in September 2021 and April 2021. Lease obligations in the table are not determined at present value.
(5)Long-term agreement for the purchase of wind-generated energy. Minimum consumption amount was established at 41.4 million KwH. Price per KwH is adjusted annually based on the NCPI. This agreement expires on May 31, 2028.
(6)Amounts for less than one year correspond to obligations for 2021.
(7)In 2025, the fifth year of our current Master Development Program, we will negotiate new Master Development Program commitments for the 2026–2030 period with the Ministry of Communications and Transportation.

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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 23, 2018, in accordance with our by-laws, SETA approved the ratification of Diego Quintana Kawage, Guadalupe Phillips Margain, and Rodrigo Antonio Quintana Kawage as members of the Board of Directors. In addition, our shareholders approved the appointment of Christian Whamond as a director in substitution of Jacques Edouard Julien Follain and his alternate director, and the appointment of Martin Werner Wainfeld and Luis Solórzano Aizpuru as Independent Directors in substitution of Elsa Beatriz García Bojorges and Ricardo Gutiérrez Muñoz, respectively. Finally, our shareholders approved the ratification of all the other members of the Board of Directors and Diego Quintana Kawage was confirmed as Chairman and Director.

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 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 approves the 2021 results.

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The following table lists the members of the Board of Directors effective on April 22, 2021, confirmed at the shareholders’ meeting held on April 21, 2021 along with their titles, dates of appointment and ages:

Name

Title

Director Since

Age

Diego Quintana Kawage*

Chairman and Director

April 14, 2011

50

Guadalupe Phillips Margain*

Director

February 24, 2017

51

Rodrigo Antonio Quintana Kawage*

Director

February 24, 2017

43

Christian Whamond

Director

April 23, 2018

48

Bernardo Casas Godoy

Director

April 29, 2019

56

Próspero Antonio Ortega Castro

Director

February 24, 2017

50

Ricardo Maldonado Yáñez

Independent Director

April 14, 2016

54

Martin Werner Wainfeld

Independent Director

April 23, 2018

57

Luis Solórzano Aizpuru

Independent Director

April 23, 2018

49

Alejandro Ortega Aguayo

Independent Director

July 7, 2020

50

Federico Patiño Márquez

Independent Director

July 7, 2020

67


*    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.

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 has worked as Chief Restructuring Officer of ICA, 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 boards of directors of Grupo Televisa and Grupo Financiero Banorte and proprietary member of the board of directors of 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.

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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 and/or secretary of the Board of Directors of Consorcio Ara, Grupo Televisa, 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).

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

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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 and electricity, financial institutions, real estate, healthcare, and media and telecommunications. As of January 2020, he works as an independent board member in several public and private companies in Mexico, as well as an advisor of several Mexican and global companies and funds in their businesses both in Mexico and cross border.

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).

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.

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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.

Name

Current Position

Executive
Officer Since
(1)

Age

Ricardo Dueñas Espriu

Chief Executive Officer

November 12, 2018

41

Ruffo Pérez Pliego del Castillo

Chief Financial Officer

April 3, 2018

45

Adriana Díaz Galindo

General Counsel

June 1, 2018

51

Enrique Navarro Manjarrez

Airports Operations Director

April 26, 2018

62

E. Héctor H. Cortés

Commercial Director

October 7, 2015

52

Enrique Chacón Tinajero

Infrastructure and Maintenance Director

June 12, 2018

48


(1)Date appointed.

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. 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 startup 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 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 2020, the aggregate compensation earned by our 21 officers (including executive officers and airport administrators) was Ps.73.711 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.

As of December 31, 2020, the amount set aside or accrued under our defined contribution plan in our subsidiary Servicios Aero Especializados del Centro Norte, S.A. de C.V. and for each of our airport administrators’, was Ps.17,625 thousand.

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.

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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.

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.

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Employees

As of December 31, 2020, we had approximately 1,003 employees. The total number of employees decreased by 13.5% in 2020, due primarily to organizational restructuring. As of December 31, 2020, approximately 54.5% of our employees were unionized.

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:

As of December 31, 

    

2018

    

2019

    

2020

Categories of activity:

 

  

 

  

 

  

Airport operations

 

531

 

541

 

459

Airport maintenance

 

176

 

175

 

148

Administration

 

255

 

260

 

262

Hotel services(1)

 

186

 

184

 

134

Geographic location:

 

  

 

  

 

  

Acapulco

 

76

 

78

 

64

Ciudad Juárez

 

50

 

52

 

45

Culiacán

 

57

 

60

 

54

Chihuahua

 

53

 

55

 

51

Durango

 

43

 

44

 

37

Mazatlán

 

63

 

61

 

57

Monterrey

 

198

 

197

 

169

Reynosa

 

43

 

44

 

37

San Luis Potosí

 

48

 

48

 

43

Tampico

 

59

 

55

 

47

Torreón

 

46

 

46

 

38

Zacatecas

 

46

 

46

 

43

Zihuatanejo

 

44

 

46

 

39

Corporate offices

 

136

 

144

 

145

Hotel services(1)

 

186

 

184

 

134

Total(2)

 

1,148

 

1,160

 

1,003


(1)Employed by our subsidiaries Servicios Corporativos Terminal 2, S.A. de C.V. and Servicios Hoteleros Aeropuerto Monterrey, S.A. de C.V., providing services for the operation and administration of the Terminal 2 NH Collection Hotel and the Hilton Garden Inn Hotel, respectively. The human capital management for these employees is directly led by NH Hoteles SA, a Spanish company, and Grupo Hotelero Santa Fe, respectively.
(2)As of December 31, 2018, 2019 and 2020, includes 350,363 and 357 persons, respectively, employed by Servicios Aeroportuarios del Centro Norte, S.A. de C.V., and 27, 25 and 25 persons, respectively, employed by Servicios Aero Especializados del Centro Norte, S.A. de C.V., our administrative services subsidiaries. Each one of the airport administrators, previously hired by Servicios Aero Especializados del Centro Norte, S.A. de C.V. was incorporated as an employee of each of the corresponding airport operators.

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All of our unionized employees, who are employed by our subsidiary Operadora de Aeropuertos del Centro Norte, S.A. de C.V., 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 March 2021, we negotiated 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.

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 2018, 2019 and 2020, we made a total of Ps.64,682 thousand; Ps.60,132 thousand and Ps. 61,015 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.

As of the date of this report, Fintech Holdings, Inc. through Fintech, is the beneficial owner of 14.7% of our total capital stock through its direct subsidiary SETA. Bagual owns 19.6% of the capital stock of SETA; Grenadier owns 21.5% of the capital stock of SETA; Pequod owns 21.5% of the capital stock of SETA; Harpoon owns 20.4% of the capital stock of SETA and Expanse owns 17.1% of the capital stock of SETA. 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. 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 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, 2021, our fixed minimum social

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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, 2021, identifying each owner of more than 5% of any series of our shares:

Percentage of

Number of Shares

Outstanding Capital

Identity of Shareholder

    

B Shares

    

BB Shares

    

Total

    

B Shares

    

BB Shares

    

Total

SETA(1)

7,516,377

49,766,000

57,282,377

1.9

%  

12.8 

%  

14.7

%

Public

332,829,179

332,829,179

85.3

%  

%

85.3

%

Officers and Directors

%  

%

%

Total Shares Outstanding

340,345,556

49,766,000

390,111,556

87.2

%

12.8 

%

100

%

Shares held in Treasury

Total Authorized Shares

340,345,556

49,766,000

390,111,556


(1)SETA is a wholly owned subsidiary of Fintech.

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, however, after this conversion SETA’s shareholding of Series BB shares remains at 12.8% and its special rights were not affected. In addition, shareholders of SETA have allocated among themselves certain veto rights relating to the exercise by SETA of its veto and other rights, which increases the risk of impasse at the shareholders’ meeting of SETA and ultimately at our shareholders’ meetings.

Our bylaws, the Participation Agreement and the Technical Assistance Agreement also contain certain provisions designed to avoid conflicts of interest between 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.

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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 the Ministry of 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 2020 amounted to Ps.81,164 thousand (U.S.$3.8 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 has been 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 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. As of December 14, 2020, 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 and the economic terms of the agreement were not modified. 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 2019 and 2020, we recognized expenses of U.S.$8.0 million and U.S.$3.8 million, respectively, pursuant to the Technical Assistance Agreement plus additional nominal expenses paid to SETA and its affiliates.

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Arrangements with Other Affiliates

We periodically engage ICATEN and its affiliates to provide construction and related services to us. In 2020, we contracted Ps. 1,624,388 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 2020, for a total of Ps.564,563 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 37.5% of our expenditures under the Master Development Programs including major maintenance expenditures and other capital expenditures for an amount of Ps.1,506,237 thousand.

    

Amount

Service

 

2020

 

(in thousands of pesos)

Acapulco airport

 

4,236

Culiacán airport

 

6,650

Monterrey airport

461,620

San Luis Potosí airport

28,814

Tampico airport

38,883

Zihuatanejo airport

24,360

Total

Ps.

564,563

Transactions with Related Parties

As of December 31, 2020, we had Ps.167,704 thousand in accounts payable to related parties, and we engaged in the following transactions with related parties during 2020:

Transaction amounting to Ps.81,164 thousand in technical assistance fees with SETA;
In connection with the operations of the Terminal 2 NH Collection Hotel, the Hilton Garden Inn Hotel and OMA-VYNMSA Aero Industrial Park, transactions amounted to Ps.35,450 thousand in administrative services fees with our partners, NH Hotels, Grupo Hotelero Santa Fe and VYNMSA, respectively. This amount also includes the administrative services fees paid to a related party of ICATEN for related services, such as SAP support;
Services contracted with related parties for maintenance works at the OMA-VYNMSA industrial park, and maintenance services to our corporate offices which amounted to Ps.2,705 thousand.
Transactions amounting to Ps.100,194 thousand with our partner VYNMSA and its affiliates in connection with the development of the OMA-VYNMSA Industrial Park located in the Monterrey airport, as well as Ps.5,365 thousand in interests paid to our partner VYNMSA and its affiliates related to the financing for the construction of warehouses; and
Transactions amounting to Ps.564,563 thousand in improvements to concessioned assets and major maintenance contracted with related parties.

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Rents paid to ICA Servicios de Dirección Corporativa, S.A. de C.V., related to the lease of corporate offices located in Mexico City which amounted to $6.3 million. The present value of the outstanding liability generated by the lease agreement for the aforementioned offices amounted to $1.6 million as of December 31, 2020.

Item 8.          Financial Information

See “Item 18. Financial Statements” beginning on page F-1.

LEGAL PROCEEDINGS

General

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 to reclaim the 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 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 a non-conformity recourse that as of the date of this report is being heard by the Mexican Supreme Court. As of April 22, 2021, the proceedings are still under review by the Mexican Supreme Court and therefore final resolution is pending.

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 2020, the Ciudad Juárez airport represented 4.9% 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.

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Disputed Land Ownership at the Monterrey Airport

On May 8, 2015, Banco Mercantil del Norte, S.A., acting as trustee, filed a claim against the Monterrey airport in connection with the ownership of land previously acquired by the Monterrey airport. The plaintiff argued that the documents of sale to the Monterrey airport were null and void and sought restitution. On August 8, 2018, the court found that the plaintiff’s claims were inadmissible, and the plaintiff appealed the decision. In July 2019, the appeal was resolved against the Monterrey airport, and in August 2019 an Amparo trial was filed by the Monterrey airport to appeal the July 2019 sentence. As part of the Amparo trial, a stay of execution against the July 2019 sentence was granted. As of the date of this report, the Amparo proceeding is still under review and therefore final resolution is pending.

We believe that in the event of a resolution adverse to the airport’s interests, the seller of the land shall be liable for any economic losses resulting thereof; nonetheless, we cannot predict whether we may prevail in a legal action against the seller. 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 Durango Airport

On March 5, 2020, the Company was notified of the lawsuit filed against the Durango airport, the Ministry of 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.

Reynosa airport appeared in the lawsuit and the continuation of the procedural stages 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). The municipal authority filed a response which was determined as extemporaneous by the Court, and the municipality authorities challenged such ruling, which has not been resolved as of the date of this report. The Ministry of

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Communications and Transportation was asked to join the proceeding as interested party and as of the date of this report, has still not joined.

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, 2021 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 trial against these resolutions, one of which was found without merit and the rest are yet to be resolved as of April 22, 2021.

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, which as of April 22, 2021 have yet to be declared final.

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 as of April 22, 2021 is yet to be resolved.

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 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. The resolution of the annulment proceeding is still pending as of the date of this report.

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,

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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, 2020 (excluding reserve amounts corresponding to net income), which represented 20.2% 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:

dividends are subject to the approval of our shareholders, based on the recommendation of our Board of Directors;
compliance with applicable law regarding the declaration and payment of dividends with respect to any year, including the establishment of the statutory legal reserve fund of 5%;
both the fixed and the variable amount of dividends will be subject to our financial position and dependent upon there being no adverse financial changes; and
the payment of dividends must be tax efficient.

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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.1,598,680 thousand in 2018, Ps.1,598,681 thousand in 2019. 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.

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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, 2020, 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 held in treasury and capital reimbursements.

Purposes

The purposes of the Company include the following:

to acquire shares of or interests or participations in privately or state-owned companies engaged in the management, operation (including the provision of aeronautical, complementary, commercial and construction services) and/or development of civilian airports pursuant to the Mexican Airport Law (Ley de Aeropuertos) and its regulations and to participate in the capital stock of companies engaged in the provision of all types of services;
to receive from and to provide to any other Mexican or foreign entity, company or individual, and to provide to any company in which it may hold any interest or participation or to any other entity, company or individual, any services required to achieve its or their purposes;
to apply for and obtain, by any means, directly or through its subsidiaries, concessions and permits to manage, operate, build and/or develop airports;
to obtain, acquire, use, transfer and grant or secure licenses in respect of all types of patents, invention certificates, registered trademarks, trade names, copyrights or any rights associated therewith, whether in Mexico or abroad;
to obtain all types of secured and unsecured loans or credit facilities and to grant loans to any association, company, entity or individual in which it holds more than 50% of the capital stock with voting rights or which is otherwise under its control; and
to provide all types of collateral and guaranties in respect of any credit instrument issued or obligation assumed thereby or by any entity in which it holds more than 50% of the shares of stock with voting rights or which is otherwise under its control.

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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:

our general strategy;
the business plan and the investment budget on an annual basis;
capital investments not considered in the approved annual budget for each fiscal year;
the proposal to increase our capital or that of our subsidiaries;
our five-year Master Development Program and any amendments thereto for each of our airports to be submitted to the Ministry of Communications and Transportation;
the voting of the shares we hold in our subsidiaries;
our management structure and any amendments thereto;
the election of our chief executive officer from the candidates proposed by the Series BB directors and the approval of his or her compensation or his or her removal for cause;
any transfer by us of shares in our subsidiaries;
subject to the recommendation of the Corporate Practices, Finance, Planning and Sustainability Committee, among other matters, (i) the guidelines for the use of the assets of our subsidiaries, (ii) any transaction with related parties, subject to certain limited exceptions, (iii) the authorization for any member of our Board of Directors, principal officers or other relevant persons to take advantage of business opportunities for his own benefit or for the benefit of third parties that originally corresponded to us or the companies under our control or in which we have a significant influence and

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that exceed the limits set forth under item (vii) of the next paragraph and (iv) the establishment of guidelines for the appointment and compensation of executive officers, which must be consistent with the guidelines established in the Technical Assistance Agreement;
subject to the recommendation of the Audit Committee, among other matters, (i) our financial statements and those of our subsidiaries, (ii) subject to certain limited exceptions, the acquisition and sale of our own stock, (iii) guidelines for the granting of loans or any type of credits or guarantees to any related party, (iv) guidelines regarding our internal controls, internal audits and those of our subsidiaries, (v) our accounting policies, including adjustments to our accounting principles to conform to or recognize those issued by the Commission, (vi) the hiring and termination of our external auditors and (vii) unusual or non-recurrent transactions and any transactions or series of related transactions during any calendar year that involve (a) the acquisition or sale of assets with a value equal to or exceeding 5% of our consolidated assets or U.S.$20.0 million, or (b) the giving of collateral or guarantees or the assumption of liabilities equal to or exceeding 5% of our consolidated assets, U.S.$40.0 million or in excess of the debt level set forth in the annual business plan, which must not exceed a 50% debt-to-capital ratio;
the creation of, and assignment of responsibilities to, new committees or changing the responsibilities assigned to existing committees;
the appointment of members of the Corporate Practices, Finance, Planning and Sustainability Committee in which at least one of its members shall be appointed from those proposed by the members of the Board of Directors appointed by the holders of Series BB shares;
proposals to the shareholders’ meetings regarding (i) our dividend policy and (ii) the use of our retained earnings;
subject to certain conditions, the appointment of provisional members of the Board of Directors, without the need for a shareholders’ meeting for such provisional appointment;
the presentation at a general ordinary shareholders’ meeting of any of the following agenda items: (i) the annual reports of the Audit Committee and the Corporate Practices, Finance, Planning and Sustainability Committee, (ii) the annual report given by the chief executive officer, the opinion of the external auditor and the opinion of the Board of Directors on the content of such report, (iii) the report containing the main accounting and information guidelines used for the preparation of our financial information and (iv) the report on the operations and activities in which the Board of Directors had intervened pursuant to the Mexican Securities Law;
the appointment, removal, duties and responsibilities of our internal auditor;
policies with regard to the disclosure of information to our shareholders, the market and to other members of the Board of Directors and relevant officers as well as decisions with regards to specific information to be released;
actions to be taken in order to rectify any known irregularity and to implement any corrective measures;
the terms and conditions subject to which the chief executive officer shall exercise his power and duties; and
resolutions instructing our chief executive officer to disclose material information to the general public.

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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 390,111,556 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:

On July 7, 2020, our shareholders approved the cancellation of 3,659,417 Series B shares that were repurchased by the Company in accordance with Article 56 of the Mexican Securities Law, reducing the capital stock of the Company. As a result of the cancellation of shares, the fixed minimum social capital, fully paid-in and subscribed, totals Ps.300,822,103, represented by 390,111,556 ordinary shares, nominative and without par value, of which 49,766,000 are Series BB shares and 340,345,556 are Series B shares.

We have not conducted any issuance of shares during the last three years, and 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, 2021:

    

Authorized

    

Issued and Outstanding

 

Capital Stock:

Series B shares

 

340,345,556

 

340,345,556

Series BB shares

 

49,766,000

 

49,766,000

Total

 

390,111,556

 

390,111,556

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:

Series B. Series B shares currently represent 87.2% of our capital. Series B shares may be held by any Mexican or foreign natural person, company or entity.

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Series BB. Series BB shares currently represent 12.8% of our capital. Series BB shares, which are issued pursuant to Article 112 of the Mexican General Law of Business Corporations (Ley General de Sociedades Mercantiles), may be held by any Mexican or foreign natural person, company or entity.

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:

extension of a company’s duration or voluntary dissolution;
an increase or decrease in a company’s minimum fixed capital;
change in corporate purpose or nationality;
any transformation, merger or spin-off involving the company;
any stock redemption or issuance of preferred stock or bonds;
the cancellation of the listing of our shares with the Mexican National Registry of Securities or on any stock exchange;
amendments to a company’s bylaws; and
any other matters for which applicable Mexican law or the bylaws specifically require a general extraordinary shareholders’ meeting.

Special shareholders’ meetings are those called and held by shareholders of the same series or class to consider any matter particularly affecting the relevant series or class of shares.

Shareholders’ meetings are required to be held in our corporate domicile, which is Mexico City. Calls for shareholders’ meetings must be made by the 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.

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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:

any amendment to our bylaws that: (i) changes or deletes the authorities of our committees or (ii) eliminates or modifies any minority rights;
any actions resulting in the cancellation of the concessions granted to us or our subsidiaries by the Mexican government or any assignment of rights arising therefrom;
termination of the Participation Agreement that was entered into by SETA and the Mexican government in connection with the Mexican government’s sale of the Series BB shares to SETA;
a merger with an entity that conducts business that is not related to the business of us or our subsidiaries; or
a spin-off, dissolution or liquidation.

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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:

approval of our financial statements and those of our subsidiaries;
anticipated liquidation or dissolution;
capital increases or decreases of us or of our subsidiaries;
declaration and payment of dividends;
amendment to our bylaws;
mergers, spin-offs, reclassifications, consolidations or share splits;
grant or amendment of special rights of any series of shares of our capital stock;
any decision amending or nullifying a resolution validly taken by the Board of Directors with respect to decisions of the Board of Directors that require the affirmative vote of the directors elected by the holders of our Series BB shares; and
any shareholder resolution with respect to a matter requiring the affirmative vote of the directors appointed by the holders of our 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.”

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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:

If SETA owns Series BB shares that represent less than 7.65% of our capital stock after June 14, 2015, those remaining Series BB shares will be automatically converted into freely transferable Series B shares.
If SETA owns Series BB shares representing at least 7.65% of our capital stock after June 14, 2015, those Series BB shares may be converted into Series B shares, provided the holders of at least 51% of Series B shares (other than shares held by SETA and any of its “related persons”) approve such conversion. For purposes of our bylaws, a “related person” means, with respect to any person:
any corporation or person, directly or indirectly, controlling, controlled by or under common control with such person;
any corporation or person having the capacity to determine the business guidelines and policies of such person;
in the case of an individual, an individual having a blood or civil kinship in a direct line (ascending or descending) within and including the fourth degree with such person;
SETA; or
with respect to SETA, its shareholders, persons related to it or any party to the operating agreement pursuant to which SETA fulfills its obligations under the Technical Assistance Agreement.

For purposes of our bylaws, “control” of a person, with respect to any person, is defined as:

the ownership, directly or indirectly of 20% or more of the capital stock with voting rights of such person;
the contractual right to elect the majority of the members of the Board of Directors of the person;
the ability to veto resolutions that could otherwise be adopted by the majority of the person’s shareholders; or
existence of commercial relations representing the purchase of more than 15% of the total annual sales of such person.

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Shareholder Ownership Restrictions and Anti-Takeover Protection

Under the Mexican Airport Law:

no more than 5% of our outstanding capital stock may be owned by air carriers; and
foreign governments acting in a sovereign capacity may not directly or indirectly own any portion of our capital stock. The foregoing ownership restrictions do not apply to:
the Mexican government;
NAFIN, in its capacity as trustee of the Ministry of Communications and Transportation;
institutions that act as depositaries for securities; and
financial and other authorized institutions that hold securities for the account of beneficial owners (including the depositary), provided that such beneficial owners are not exempt from the ownership restrictions.

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 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 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.

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:

holders of at least 10% of our outstanding capital stock:
-to vote (including in a limited or restricted manner) to request a call for a shareholders’ meeting;

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-to request that resolutions with respect to any matter on which they were not sufficiently informed be postponed; and

-to appoint one member of our Board of Directors and one alternate member of our Board of Directors.

holders of 20% of our outstanding capital stock to oppose any resolution adopted at a shareholders’ meeting and file a petition for a court order to suspend the resolution temporarily, within 15 days following the adjournment of the meeting at which the action was taken, provided that (i) the challenged resolution violates Mexican law or our bylaws, (ii) the opposing shareholders neither attended the meeting nor voted in favor of the challenged resolution and (iii) the opposing shareholders deliver a bond to the court to secure payment of any damages that we may suffer as a result of suspending the resolution, in the event that the court ultimately rules against the opposing shareholders; and
holders of 5% of our outstanding capital stock may initiate a shareholder derivative suit against some or all of our directors, for our benefit, for violations of their duty of care or duty of loyalty, in an amount equal to the damages or losses caused to us. Actions initiated on these grounds have a five year statute of limitations.

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.

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:

the acquisition must be carried out through the Mexican Stock Exchange;
the acquisition must be carried out at market price, unless a public offer or auction has been authorized by the CNBV;

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the acquisition must be carried out against our paid in capital, and shares acquired will be held as treasury stock without any requirement to adopt a reduction in capital stock or reduce our capital stock, in which case, such shares will be cancelled;
the annual ordinary shareholders’ meeting shall determine the maximum amount of funds to be used in the fiscal year for the repurchase of shares;
we may not be delinquent on payments due on any outstanding debt issued by us that is registered with the Mexican National Securities Registry; and
any acquisition of shares must be in conformity with the requirements of Article 54 of the Mexican Securities Law, and we must maintain a sufficient number of outstanding shares to meet the minimum trading volumes required by the stock markets on which our shares are listed.

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, our 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.

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

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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:

negligence resulting in the loss of more than two-thirds of our capital stock and that results in our dissolution;
bankruptcy, subject to certain conditions, when the actions taken by the Board of Directors results in a declaration of insolvency (concurso mercantil);
breaching any of the duties set forth under our bylaws; and
failure to report irregularities in the actions of former members of the Board of Directors.

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:

a report of the directors on the operations of the company during the preceding year, as well as on the policies followed by the directors and on the principal existing projects;

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a report explaining the principal accounting and information policies and criteria followed in the preparation of the financial information;
a statement of the financial condition of the company at the end of the fiscal year;
a statement showing the results of operations of the company during the preceding year, as well as changes in the company’s financial condition and capital stock during the preceding year;
the notes that are required to complete or clarify the above mentioned information; and
the report prepared by the Audit Committee with respect to the accuracy and reasonability of the above mentioned information presented by the Board of Directors.

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.

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

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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:

prior to the date of the transaction in which the shareholder became an interested shareholder, the board of directors of the corporation approves either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;

upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owns at least 85% of the voting stock of the corporation, excluding shares held by directors, officers and employee stock plans; or

at or after the date of the transaction in which the shareholder became an interested shareholder, the business combination is approved by the board of directors and authorized at a shareholders’ meeting by at least 66 2/3% of the voting stock, which is not owned by the interested shareholder.

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.

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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.

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

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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 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 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

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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

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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. Additionally, a U.S. holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead be eligible to claim a deduction for U.S. federal income tax purposes in respect of such withheld tax, but only for a year in which such holder does not elect to claim a credit for any creditable foreign income taxes. The rules governing the foreign tax credit are complex and U.S. holders are urged to consult their own tax advisors in this regard.

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 2019 and 2020 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 2021 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.

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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.

U.S. Federal Income Tax Considerations

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. 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.

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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.

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.

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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 2018, 2019 and 2020, 13.4%, 14.2% and 10.1%, 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 had a total of U.S.$0.7 million in U.S. dollar-denominated debt as of December 31, 2020. 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 and Ps.79,552 thousand on December 31, 2020. See Note 21 to our audited consolidated financial statements for additional disclosures about market risk.

Item 12.        Description of Securities Other Than Equity Securities

Not applicable.

Item 12A.     Debt Securities

Not applicable.

Item 12B.     Warrants and Rights

Not applicable.

Item 12C.     Other Securities

Not applicable.

Item 12D.     American Depositary Shares

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.

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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.

Service

    

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)

JPMorgan Chase Bank, N.A.

Any cash distribution to ADS registered holders

U.S.$0.05 (or less) per ADS

JPMorgan Chase Bank, N.A.

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

JPMorgan Chase Bank, N.A.

Depositary services

U.S.$0.05 (or less) per ADS per calendar year

JPMorgan Chase Bank, N.A.

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

JPMorgan Chase Bank, N.A.

Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)

Expenses of the depositary

JPMorgan Chase Bank, N.A.

Converting foreign currency to U.S. dollars

Expenses of the depositary

JPMorgan Chase Bank, N.A.

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

JPMorgan Chase Bank, N.A.

Other fees, as necessary

Any charges incurred by JPMorgan Chase Bank, N.A., or its agents for servicing the deposited securities

JPMorgan Chase Bank, N.A.

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

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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.

The following table sets forth the amounts that we received in 2020, directly or indirectly, from JPMorgan Chase Bank N.A., as depositary of our ADSs:

Description

    

Amount

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.

U.S.$

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

Not applicable.

Item 14.        Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15.        Controls and Procedures

(a)          Disclosure Controls and Procedures

We have evaluated, with the participation of our chief executive officer and chief financial officer, the design and operation of our disclosure controls and procedures as of December 31, 2020.

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, 2020, 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.

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(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:

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 and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

3.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. Under the supervision of our chief executive officer and chief financial officer, our management assessed the design and effectiveness of our internal control over financial reporting as of December 31, 2020.

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, 2019. 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.

166


(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, 2020, 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, 2020, 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, 2020, of the Company and our report dated April 30, 2021, 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.

167


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.

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 30, 2021.

(d)          Changes in Internal Control over Financial Reporting

There has been no change in internal controls over financial reporting during 2020 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 2020 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.”

168


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, 2019 and 2020:

    

2019

    

2020

(in thousands of pesos)

Audit fees

Ps.

12,153

Ps.

12,502

Tax fees

 

 

All other fees

 

 

Total fees

Ps.

12,153

Ps.

12,502

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 potential acquisition and 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

Not applicable.

Item 16E.     Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The tables below set forth, for the periods indicated, the total number of shares purchased by us or on our behalf, or by or on behalf of an “affiliated purchaser,” 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.

169


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

2020

purchased (issued)

share in pesos

programs (issued)

plans or programs

January 1–31

 

 

 

 

N/A

February 1–28

 

386,880

 

129

 

 

N/A

March 1–31

 

802,379

 

125

 

 

N/A

April 1–30

 

 

 

 

N/A

May 1–31

 

 

 

 

N/A

June 1–30

 

 

 

 

N/A

July 1–31

 

 

 

 

N/A

August 1–31

 

 

 

 

N/A

September 1–30

 

 

 

 

N/A

October 1–31

 

 

 

 

N/A

November 1–30

 

 

 

 

N/A

December 1–31

 

 

 

 

N/A

Total

 

1,189,259

 

126

 

 

N/A

SHARES PURCHASED BY SETA

    

    

    

(c)  Total number of

    

(d)  Maximum

shares purchased as

number of shares

(b)  Average price paid

part of publicly

that may yet be

(a) Number of shares

or received per share

announced plans or

purchased under the

2020

purchased

in pesos

programs

plans or programs

January 1–31

 

 

 

 

N/A

February 1–28

 

 

 

 

N/A

March 1–31

 

7,516,377

 

71

 

 

N/A

April 1–30

 

 

 

 

N/A

May 1–31

 

 

 

 

N/A

June 1–30

 

 

 

 

N/A

July 1–31

 

 

 

 

N/A

August 1–31

 

 

 

 

N/A

September 1–30

 

 

 

 

N/A

October 1–31

 

 

 

 

N/A

November 1–30

 

 

 

 

N/A

December 1–31

 

 

 

 

N/A

Total

 

 

 

 

N/A

170


SHARES PURCHASED BY FINTECH

    

    

    

(c)  Total number of

    

(d)  Maximum

shares purchased as

number of shares

(b)  Average price paid

part of publicly

that may yet be

(a) Number of shares

or received per share

announced plans or

purchased under the

2020

purchased

in pesos

programs

plans or programs

January 1–31

 

 

 

 

N/A

February 1–28

 

 

 

 

N/A

March 1–31

 

 

 

 

N/A

April 1–30

 

 

 

 

N/A

May 1–31

 

 

 

 

N/A

June 1–30

 

 

 

 

N/A

July 1–31

 

 

 

 

N/A

August 1–31

 

 

 

 

N/A

September 1–30

 

 

 

 

N/A

October 1–31

 

 

 

 

N/A

November 1–30

 

 

 

 

N/A

December 1–31

 

 

 

 

N/A

Total

 

 

 

 

N/A

Item 16F.      Change in Registrant’s Certifying Accountant

Not applicable.

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.

171


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.

172


NASDAQ Standards

Our Corporate Governance Practice

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

173


NASDAQ Standards

Our Corporate Governance Practice

intervened pursuant to the Mexican Securities Law;

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.

174


NASDAQ Standards

Our Corporate Governance Practice

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.

175


NASDAQ Standards

Our Corporate Governance Practice

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

Not applicable.

176


PART III

Item 17.        Financial Statements

Not applicable.

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.

    

Description

1.1*

An English translation of the Amended and Restated Bylaws (Estatutos Sociales) of GACN.

2.1

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).

2.2

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).

2.3

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).

2.4

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.

2.d*

Description of the registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.

3.1

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).

3.2

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).

177


Exhibit No.

    

Description

3.3

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).

4.2

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).

4.3

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).

4.4

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).

4.5

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).(i

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.

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).

178


Exhibit No.

    

Description

11.1

Code of Ethics of the Company (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 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 30, 2021.

12.2*

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 30, 2021.

13.1*

Certification of Chief Financial Officer and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 30, 2021.

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document.

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF*

XBRL Taxonomy Extension Definition Document.


*    Filed herewith

179


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 30, 2021

*****

180


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, 2020, 2019 and 2018, and Report of Independent Registered Public Accounting Firm Dated April 26, 2021

F-1


Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries

(Subsidiary of Servicios de Tecnología Aeroportuaria, S.A. de C.V.)

Report of Independent Registered Public Accounting Firm and Consolidated Financial Statements for the Years Ended December 31, 2020, 2019 and 2018

F-2


Index for Notes to Consolidated Financial Statements

Note

Description

Page

1

Nature of business operations

F-13

2

Significant event

F-13

3

Basis of presentation and consolidation

F-13

4

Significant accounting policies

F-17

5

Critical accounting judgments and key sources of estimation uncertainty

F-33

6

Cash and cash equivalents

F-35

7

Accounts receivable

F-35

8

Other accounts receivable and prepaid expenses

F-37

9

Property, leasehold improvements and equipment

F-37

10

Investment in airport concessions

F-38

11

Composition of GACN

F-41

12

Trade accounts payable

F-42

13

Payable taxes and other accrued expenses

F-42

14

Short-term debt

F-42

15

Long-term debt

F-43

16

Major maintenance provision

F-44

17

Labor obligations

F-45

18

Leases

F-48

19

Income taxes

F-50

20

Commitment and contingencies

F-52

21

Financial risk management

F-57

22

Shareholders’ equity

F-63

23

Accumulated other comprehensive income

F-65

24

Other Income

F-65

25

Related party balances and transactions

F-65

26

Operating segment data

F-67

27

Revenues

F-70

28

Cost of services

F-72

29

Subsequent event

F-72

30

Authorization for the issuance of the consolidated financial statements

F-72

F-3


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.

(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, 2020, 2019 and 2018, 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, 2020, 2019 and 2018, 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, 2020, 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 30, 2021, 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.

Basis for Opinion

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 Matters

The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were 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

F-4


challenging, subjective, or complex judgments. The communication of critical audit matters 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 matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of the investments in airport concessions, Hotel NH and Hotel Hilton Garden Inn cash generating units — Refer to Notes 4j, 10 and 18 to the consolidated financial statements

Critical Audit Matter Description

As of December 31, 2020, the book value of the cash generating units of investments in airport concessions, Hotel NH and Hotel Hilton Garden Inn (the “CGUs”) amounted to $10,229,656, $387,628 and $172,481, respectively.

The impact of the COVID-19 pandemic was an impairment indicator for the CGUs. The recoverable amount of the CGUs was determined based on their value in use, which used projections of estimated cash flows. The determination of estimated cash flows used for impairment testing required management to forecast future revenues. In particular, the forecasts of future aeronautical and hotel revenues incorporated estimation uncertainty, which was aggravated by the COVID-19 pandemic. In addition, market volatility added subjectivity to the determination of discount rates. A change in the forecasts of future passenger traffic and occupancy rates, as well as the discount rates, could have a significant impact on the recoverable amount of the CGUs. The recoverable amount of the CGUs exceeded their carrying values, and therefore, no impairment was recognized for the year ended December 31, 2020.

We identified the forecast of future revenues and the determination of the discount rates as a critical audit matter due to the uncertainty in the assumptions mentioned above. This required a high degree of auditor judgment and increased effort, including the involvement of our valuation specialists, in performing procedures to evaluate the reasonableness of the recoverable amounts of the CGUs.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future revenues and the determination of the discount rates included, among others, the following:

We obtained an understanding and evaluated the Company’s methodology for determining the recoverable amount of the CGUs, including the process for developing the forecast of future revenues and the determination of the discount rates.
We tested the effectiveness of controls over impairment testing, including those over management’s forecasts of future passenger traffic and occupancy rates and determination of the discount rates.
We evaluated the reasonableness of management’s forecasts of passenger traffic and occupancy rates by:
oComparing projected passenger traffic and occupancy rates to historical information, including the recovery after a previous economic crisis.
oComparing projected passenger traffic to that used in the basis for formulating the recently negotiated Master Development Program.
oComparing occupancy rates to those included in operating plans with hotel partners.
oPerforming sensitivity analyses to projections of passenger traffic and occupancy rates.

F-5


With the assistance of our valuation specialists, we evaluated the reasonableness of the discount rates by:
oTesting the source information underlying the determination of the discount rates and the mathematical accuracy of the calculation.
oDeveloping a range of independent estimates and comparing those to the discount rates selected by management.

Major maintenance provision— Refer to Notes 4l and 16 to the financial statements

Critical Audit Matter Description

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 maintain the infrastructure in optimal working condition. This results in the recognition of a major maintenance provision liability to provide for the estimated cost of the Company’s obligation. As of December 31, 2020, the major maintenance provision liability was $1,317,985.

The estimated major maintenance costs are based on the Master Development Program (MDP) for the period 2021-2025, which was reviewed and approved by the government in 2020. Accordingly, the major maintenance provision was reviewed to reflect any changes in the Company’s obligations under the MDP.

We identified the accuracy and completeness of the major maintenance provision as a critical audit matter since the recently approved MDP provided a revised basis for the Company’s obligations. This had an impact on the nature and extent of audit effort to address the reasonableness of the major maintenance provision.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures to test the accuracy and completeness of the major maintenance provision included, among others, the following:

We obtained an understanding of the obligations included within the new development program by performing inquiries of operating personnel and performing analytical procedures by comparing to the prior MDP.
We tested the effectiveness of controls over the accuracy and completeness of the major maintenance provision.
We tested the completeness of the obligations included in the major maintenance provision by:
oReading the MDP to understand the Company’s obligations to maintain the infrastructure.
oComparing the obligations in the MDP to those included in the Company’s provision.
We tested the mathematical accuracy of obligations included in the major maintenance provision against the amounts included for such obligations in the MDP.

Galaz, Yamazaki, Ruiz Urquiza, S.C.

Member of Deloitte Touche Tohmatsu Limited

/s/ Jorge Omar Esquivel Romero

C.P.C. Jorge Omar Esquivel Romero

F-6


México City, Mexico

April 30, 2021

We have served as the Company’s auditor since 2000.

F-7


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 Statements of Financial Position

(Thousands of Mexican pesos)

Thousands of

U.S. dollars

(Convenience

Translation

Note 3 d)

December 31, 

    

Notes

    

2020

    

2020

    

2019

    

2018

Assets:

 

  

 

  

 

  

 

  

Cash and cash equivalents

 

6

U.S.$

148,619

 

Ps.

2,958,804

 

Ps.

3,429,873

 

Ps.

2,958,902

Other investments held to maturity

 

 

 

 

19,657

Accounts receivable, net

 

7

 

41,873

 

833,643

 

757,756

 

696,566

Recoverable taxes

 

27,243

 

542,365

 

295,768

 

112,665

Advance Payment for constructions to related parties

 

25

 

10,760

 

214,209

 

181,989

 

38,347

Advance Payments to contractors

 

5,788

 

115,233

 

102,776

 

93,169

Other accounts receivable and prepaid expenses

 

8

 

3,344

 

66,575

42,742

 

40,261

Total current assets

 

237,626

 

4,730,829

 

4,810,904

 

3,959,567

Non-current assets:

 

  

 

  

 

  

 

  

Property, leasehold improvements and equipment, net

 

9

 

135,643

 

2,700,469

 

2,647,101

 

2,670,262

Investment in airport concessions, net

 

10

 

513,828

 

10,229,656

 

9,267,111

 

8,566,656

Rights of use of leased assets, net

18

8,953

178,247

210,788

Other assets, net

 

1,739

 

34,621

 

44,053

 

77,060

Deferred income taxes

 

19

 

15,961

 

317,758

 

297,004

 

316,939

Total non-current assets

 

676,124

 

13,460,751

 

12,466,057

 

11,630,917

Total assets

U.S.$

913,750

 

Ps.

18,191,580

 

Ps.

17,276,961

 

Ps.

15,590,484

F-8


Thousands of

U.S. dollars

(Convenience

Translation

Note 3 d)

December 31, 

    

Notes

    

2020

    

2020

    

2019

    

2018

Liabilities and shareholders’ equity:

Current liabilities:

Current portion of long-term debt

 

15

U.S.$

151,366

 

Ps.

3,013,502

 

Ps.

36,851

 

Ps.

41,425

Current portion of major maintenance provision

 

16

 

22,280

 

443,570

 

151,554

 

224,982

Current portion of financial leases

18

1,334

26,553

72,320

12,948

Trade accounts payable

 

12

 

10,249

 

204,048

 

196,791

 

203,999

Payable taxes and other accrued expenses

 

13

 

18,594

 

370,188

 

590,262

 

515,160

Accounts payable to related parties

 

25

 

8,424

 

167,704

 

187,515

 

226,202

Total current liabilities

 

212,247

 

4,225,565

 

1,235,293

 

1,224,716

Non-current liabilities:

Long-term debt

 

15

 

75,188

 

1,496,886

 

4,506,758

 

4,543,169

Major maintenance provision

 

16

 

43,921

 

874,415

 

802,342

 

718,566

Guarantee deposits

 

17,617

 

350,738

 

387,656

 

312,196

Labor obligations

 

17

 

5,811

 

115,691

 

106,160

 

79,905

Financial leases

8,449

168,210

148,540

15,858

Deferred income taxes

 

19

 

6,722

 

133,828

 

202,717

 

184,147

Total non-current liabilities

 

157,708

 

3,139,768

 

6,154,173

 

5,853,841

Total liabilities

 

369,955

 

7,365,333

 

7,389,466

 

7,078,557

Commitment and contingencies

 

20

Shareholders’ equity

 

22

Contributed capital:

Common stock

 

15,110

 

300,822

 

301,739

 

303,394

Additional paid-in capital

 

1,496

 

29,786

 

29,786

 

29,786

 

16,606

 

330,608

 

331,525

 

333,180

Earned capital:

Reserve for repurchase of shares

 

75,344

 

1,500,000

 

1,257,454

 

1,466,016

Retained earnings

 

443,257

 

8,824,666

 

8,121,937

 

6,534,804

Accumulated other comprehensive loss

 

(248)

 

(4,933)

 

4,194

 

13,178

 

518,353

 

10,319,733

 

9,383,585

 

8,013,998

Controlling interest

 

534,959

 

10,650,341

 

9,715,110

 

8,347,178

Non-controlling interest

 

8,836

 

175,906

 

172,385

 

164,749

Total shareholders’ equity

 

543,795

 

10,826,247

 

9,887,495

 

8,511,927

Total liabilities and shareholders’ equity

U.S.$

913,750

 

Ps.

18,191,580

 

Ps.

17,276,961

 

Ps.

15,590,484

The accompanying notes are an integral part of these consolidated financial statements.

F-9


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 Statements of Income and Other Comprehensive Income

(Thousands of Mexican pesos, except per share data)

Thousands of U.S.

dollars

(Convenience

Translation

Note 3 d)

For the years ended December 31, 

   

Notes

   

2020

   

2020

   

2019

   

2018

Revenues:

 

  

 

  

  

 

  

  

Aeronautical services

27

    

U.S.$

147,803

  

Ps.

2,942,558

    

Ps.

5,752,662

    

Ps.

5,140,052

Non-aeronautical services

 

27

 

58,820

1,171,039

 

1,819,605

 

1,625,497

Construction services

 

10

 

62,981

1,253,869

 

954,834

 

1,141,505

Total revenues

 

269,604

5,367,466

 

8,527,101

 

7,907,054

Operating costs and expenses:

 

  

  

 

  

 

  

Cost of services, excluding depreciation and amortization

 

28

 

38,474

765,958

 

954,207

 

977,896

Major maintenance provision

 

16

 

19,717

392,531

 

292,324

 

248,636

Cost of construction

10

 

62,981

1,253,869

 

954,834

 

1,141,505

Administrative expenses

 

26,022

518,059

 

542,664

 

563,151

Right to use airport facilities

 

10,006

199,202

 

363,561

 

319,180

Technical assistance fees

 

25

 

4,077

81,164

 

150,108

 

172,610

Depreciation and amortization

 

21,867

435,344

 

415,252

 

351,745

Other income, net

 

24

 

(7)

(129)

 

(1,155)

 

(205)

Total operating costs and expenses

 

183,137

3,645,998

 

3,671,795

 

3,774,518

Operating income

 

86,466

1,721,468

 

4,855,306

 

4,132,536

Interest expense

 

21,121

420,499

 

376,008

 

325,557

Interest income

 

(5,620)

(111,889)

 

(171,236)

 

(194,091)

Exchange loss, net

 

(3,994)

(79,522)

 

50,878

 

15,488

 

11,507

229,088

 

255,650

 

146,954

Income before income taxes

 

74,960

1,492,380

 

4,599,656

 

3,985,582

Income tax expense

 

19

 

19,815

394,501

 

1,372,222

 

1,121,403

Consolidated net income for the year

 

55,145

1,097,879

 

3,227,434

 

2,864,179

Other comprehensive income (loss):

 

  

  

 

  

 

  

Items that will not be subsequently reclassified to profit or loss:

 

  

  

 

  

 

  

Actuarial gain (loss) on labor obligations

 

17 and 23

 

(655)

(13,039)

 

(12,834)

 

24,173

Income tax relating to actuarial loss (gain) on labor obligations

 

23

 

196

3,912

 

3,850

 

(4)

Total other comprehensive income (loss)

 

(459)

(9,127)

 

(8,984)

 

24,169

Total comprehensive income for the year

U.S.$

54,686

  

Ps.

1,088,752

 

Ps.

3,218,450

 

Ps.

2,888,348

Consolidated net income attributable to:

 

  

  

 

  

 

  

Controlling interest

U.S.$

54,968

  

Ps.

1,094,358

 

Ps.

3,219,798

 

Ps.

2,851,822

Non-controlling interest

 

177

3,521

 

7,636

 

12,357

U.S.$

55,145

  

Ps.

1,097,879

 

Ps.

3,227,434

 

Ps.

2,864,179

Comprehensive income attributable to:

 

  

  

 

  

 

  

Controlling interest

U.S.$

54,509

  

Ps.

1,085,231

 

Ps.

3,210,814

 

Ps.

2,875,991

Non-controlling interest

 

177

3,521

 

7,636

 

12,357

U.S.$

54,686

  

Ps.

1,088,752

 

Ps.

3,218,450

 

Ps.

2,888,348

Basic and diluted earnings per share of controlling interest

U.S.$

0.14090

  

Ps.

2.8038

 

Ps.

8.1984

 

Ps.

7.2483

Weighted average shares outstanding

 

390,313,970

390,313,970

 

392,736,827

 

393,446,466

The accompanying notes are an integral part of these consolidated financial statements.

F-10


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 Statements of Changes in Shareholders’ Equity

(Thousands of Mexican pesos, except share data (Note 22))

Contributed capital

Retained earnings

Accumulated

  

  

  

  

Total

  

Reserve for

  

  

other

  

  

  

Total non-

  

Total

Number of

Additional

contributed

repurchase of

Retained

comprehensive

Total earned

Total controlling

controlling

shareholders’

shares

Common stock

paid-in capital

capital

shares

earnings

income

capital

interest

interest

equity

Balance as of January 1, 2018

 

393,446,466

 

Ps.

303,394

 

Ps.

29,786

 

Ps.

333,180

 

Ps.

1,466,016

 

Ps.

5,281,662

 

Ps.

(10,991)

 

Ps.

6,736,687

 

Ps.

7,069,867

 

Ps.

159,448

 

Ps.

7,229,315

Dividends paid

 

 

 

 

 

 

(1,598,680)

 

 

(1,598,680)

 

(1,598,680)

 

(7,056)

 

(1,605,736)

Consolidated comprehensive income

 

 

 

 

 

2,851,822

 

24,169

 

2,875,991

 

2,875,991

 

12,357

 

2,888,348

Balance as of December 31, 2018

 

393,446,466

 

Ps.

303,394

 

Ps.

29,786

 

Ps.

333,180

 

Ps.

1,466,016

 

Ps.

6,534,804

 

Ps.

13,178

 

Ps.

8,013,998

 

Ps.

8,347,178

 

Ps.

164,749

 

Ps.

8,511,927

Repurchase of shares, net

 

(2,145,651)

 

(1,655)

 

 

(1,655)

 

(242,546)

 

 

 

(242,546)

 

(244,201)

 

 

(244,201)

Dividends paid

 

 

 

 

 

 

(1,598,681)

 

 

(1,598,681)

 

(1,598,681)

 

 

(1,598,681)

Increase in reserve for repurchase of shares

 

 

 

 

 

33,984

 

(33,984)

 

 

 

 

 

Consolidated comprehensive income

 

 

 

 

 

 

3,219,798

 

(8,984)

 

3,210,814

 

3,210,814

 

7,636

 

3,218,450

Balance as of December 31, 2019

 

391,300,815

 

301,739

 

29,786

 

331,525

 

1,257,454

 

8,121,937

 

4,194

 

9,383,585

 

9,715,110

 

172,385

 

9,887,495

Repurchase of shares, net

 

(1,189,259)

 

(917)

 

 

(917)

 

(149,083)

 

 

 

(149,083)

 

(150,000)

 

 

(150,000)

Increase in reserve for repurchase of shares

 

 

 

 

 

391,629

 

(391,629)

 

 

 

 

 

Consolidated comprehensive income

 

 

 

 

 

 

1,094,358

 

(9,127)

 

1,085,231

 

1,085,231

 

3,521

 

1,088,752

Balance as of December 31, 2020

 

390,111,556

 

Ps.

300,822

 

Ps.

29,786

 

Ps.

330,608

 

Ps.

1,500,000

 

Ps.

8,824,666

 

Ps.

(4,933)

 

Ps.

10,319,733

 

Ps.

10,650,341

 

Ps.

175,906

 

Ps.

10,826,247

The accompanying notes are an integral part of these consolidated financial statements.

F-11


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 Statements of Cash Flows

(Thousands of Mexican pesos)

Thousands of U.S.

dollars

(Convenience

Translation

Note 3 d)

Year ended December 31, 

  

2020

  

2020

  

2019

  

2018

Cash flows from operating activities:

 

  

 

  

 

  

 

  

Income before income taxes

U.S.$

74,960

 

Ps.

1,492,380

 

Ps.

4,599,656

 

Ps.

3,985,582

Adjustments for:

Depreciation and amortization

 

21,867

 

435,344

 

415,252

 

351,745

Major maintenance provision

 

19,717

 

392,531

 

292,324

 

248,636

Decrease in allowance for doubtful accounts

 

921

 

18,342

 

(241)

 

(5,960)

Gain on sales of property and equipment

 

(270)

 

(5,380)

 

(1,162)

 

(205)

Present value of major maintenance provision

3,780

75,262

23,157

(23,392)

Interest income

 

(5,620)

(111,889)

 

(171,236)

(170,699)

Interest expense

 

17,341

 

345,237

 

352,851

 

325,557

Unrealized exchange rate fluctuation

 

(3,629)

 

(72,253)

 

44,007

 

53,013

 

129,067

 

2,569,574

 

5,554,608

 

4,764,277

(Increase) decrease trade accounts receivable, net 

 

(4,733)

 

(94,229)

 

(60,949)

 

(59,849)

(Increase) decrease recoverable tax

 

(12,386)

 

(246,597)

 

(183,103)

 

19,210

(Increase) decrease of repayment for contractors, other accounts receivable and prepaid expenses

 

(833)

 

(16,576)

 

(25,156)

 

4,740

Increase (decrease) trade accounts payable

 

371

 

7,384

 

(26,880)

 

61,653

(Decrease) increase payable taxes and other accrued  expenses

 

2,435

 

48,472

 

41,367

 

(27,596)

Income taxes paid

 

(37,565)

 

(747,867)

 

(1,324,834)

 

(995,258)

Increase (decrease) related parties, net

 

(3,644)

 

(72,554)

 

(42,276)

 

97,093

Major maintenance provision

 

(5,209)

 

(103,704)

 

(305,133)

 

(139,320)

Increase guarantee deposits and labor obligations

 

(2,031)

 

(40,425)

 

88,880

 

(15,604)

Net cash flows from operating activities

 

65,472

 

1,303,478

 

3,716,524

 

3,709,346

Cash flows from investment activities:

Acquisition of property improvements

 

(7,936)

 

(157,992)

 

(57,103)

 

(211,230)

Other non-current assets

 

(3)

 

(65)

 

(753)

 

(4,230)

Proceeds from sale of property and equipment

 

270

 

5,380

 

1,162

 

205

Acquisition of improvements in concessioned assets

 

(64,476)

 

(1,283,642)

 

(1,086,426)

 

(1,071,828)

Other investments held to maturity

 

 

 

19,657

 

29,681

Interest received

 

5,620

 

111,889

 

171,236

 

169,029

Net cash flows used by investing activities

 

(66,525)

 

(1,324,430)

 

(952,227)

 

(1,088,373)

Cash flow from financing activities:

Loans obtained from related parties

2,104

41,895

 

14,700

 

46,550

Payment of long-term debt

 

(2,139)

 

(42,592)

 

(40,790)

 

(49,563)

Interest paid

 

(16,117)

 

(320,866)

 

(327,309)

 

(323,070)

Dividends paid

 

 

 

(1,598,681)

 

(1,605,736)

Financial leases payments

 

(2,879)

 

(57,325)

 

(50,180)

 

(8,644)

Repurchase of shares

 

(7,534)

 

(150,000)

 

(244,201)

 

Increase in non-controlling interest

 

 

 

Net cash used by financing activities

 

(26,565)

 

(528,888)

 

(2,246,461)

 

(1,940,463)

Net increase (decrease) in cash and cash equivalents

 

(27,618)

 

(549,840)

 

517,836

 

680,510

Effects of exchange rate changes on the foreign currency cash balance

3,957

78,771

(46,865)

(54,615)

Cash and cash equivalents at the beginning of the year cash balance

 

172,280

 

3,429,873

 

2,958,902

 

2,333,007

Cash and cash equivalents at the end of the year

U.S.$

148,619

  

Ps.

2,958,804

 

Ps.

3,429,873

 

Ps.

2,958,902

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

U.S.$

12

 

Ps.

250

  

Ps.

593

  

Ps.

5,301

Acquisition of other assets

265

610

Acquisition of improvements in concessioned assets

1,474

 

29,342

 

29,068

 

22,094

The accompanying notes are an integral part of these consolidated financial statements

F-12


Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. and Subsidiaries

(Subsidiary of Servicios de Tecnología Aeroportuaria, S.A. de C.V.)

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020, 2019 and 2018

(In thousands of Mexican pesos, except otherwise indicated)

1.           Nature of business operations

Grupo Aeroportuario del Centro Norte, S. A. B. de C. V. (“GACN” or the “Company”), is a direct subsidiary of Servicios de Tecnología Aeroportuaria, S. A. de C.V. (“SETA”), the ultimate parent company. 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 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

2021-2025 Master Development Programs

On November 27, 2020, the 2021-2025 Master Development Programs for the 13 airports of the group were authorized by the Ministry of Communications and Transportation, through the Federal Civil Aviation Agency ("AFAC"). The Master Development Programs include major maintenance, minor expenses and capital investment for the expansion, improvement, modernization and maintenance of airport infrastructure and equipment according to national and international efficiency, operational and safety standards, considering the growth of estimated passenger traffic. The amount of the committed investment was Ps.11,979,621 in pesos with purchasing power as of December 31, 2019 (note 10).

GACN’s Annual Shareholders’ Meeting

At the Ordinary and Extraordinary General Stockholders’ Meeting held on July 7, 2020, the stockholders approved the cancellation of 3,659,417 series B shares representing the minimum or fixed capital stock. The shareholders also approved to increase the reserve for the repurchase of the Company’s shares to Ps.1,500,000, after taking into consideration the repurchase of shares during 2019 and the amounts used from January 1, 2020 to the day of the meeting.

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).

F-13


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:

Level 1: Inputs are quoted prices for identical assets or liabilities that the Company can access at the measurement date;

Level 2: Inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

Level 3: Inputs are unobservable inputs for the asset or liability.

d.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. On March 31, 2020, the Secretary of Health of the Government of Mexico issued a decree suspending all non-essential activities in Mexico until April 30, 2020, and on April 21, 2020, the suspension was extended to May 30 to mitigate the spread and transmission of COVID-19. Although under the March 31, 2020 decree, the airports were considered essential and remained in operation, passenger traffic suffered a severe drop because of the reduction in travel

F-14


demand and in the supply of seats by airlines. On May 29, 2020, the Federal Government published a decree in which, beginning on June 1, a traffic light of epidemiological risk was established by regions (municipal or state) that determined the level of sanitary alert and the type of activities authorized to be carried out, which resulted in the beginning of a recovery trend in passenger traffic.

As a result of the impact of COVID-19, in 2020 the sum of aeronautical and non-aeronautical revenues decreased 45.7% in 2020 compared to the previous year.

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.

Despite the fact that COVID-19 has had a significant impact on the airline industry, by strongly reducing the demand for airline tickets and causing a consequent reduction in the capacity of seats offered by airlines, the Company generated a positive net income of $1,097,879.  
A recovery in passenger demand is expected in 2021 and subsequent years, which will translate into an increase in the Company's revenue and profit levels.  
Management considers that liquidity levels are healthy, and the Company's leverage is low.
The Company's credit ratings have not been downgraded since the beginning of the pandemic and as of the date of this report remain at the same level as they were in March 2020.
Management considers that it has adequate access to sources of capital and estimates that with the generation of resources from operations and its cash level, it will allow the Company to meet its operating, investment, and debt obligations.

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, 2020 and for the year then ended have been translated into U.S. dollar amounts at the exchange rate of Ps.19.9087 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.

F-15


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:

Have power over the investee;

Are exposed, or have rights, to variable returns from involvement with the investee; and

Have the ability to use their power to affect their returns.

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.

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:

The percentage of the Company’s holding of voting rights relative to the percentage and dispersion of holdings of the other vote holders;

Potential voting rights held by the Company, other vote holders or other parties;

Rights arising from other contractual arrangements; and

Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

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.

F-16


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, 2020 were the same as those applied in the consolidated financial statements for 2019 and 2018, except for the standards and interpretations described in paragraph (a) (I) included below, which were applicable to the Company and were effective during 2020.

F-17


a.Adoption of new and revised International Financial Reporting Standards

I.Application of new and revised International Financing Reporting Standards (“IFRSs” or “IAS”) that are mandatorily effective for the accounting period beginning on or after 2020

In the current year, the Company applied new IFRSs issued by the IASB that are mandatorily effective for an accounting period beginning on or after January 1, 2020.

i.Impact of the initial application of Interest Rate Benchmark Reform amendments to IFRS 9, IAS 39 and IFRS 7.

In September 2019, the IASB issued the Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7). These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the on-going interest rate benchmark reforms.

The Company’s management determined that the application of these amendments did not have a material impact on the consolidated financial statements.

ii.Impact of the initial application of Covid-19-Related Rent Concessions Amendment to IFRS 16

In May 2020, the IASB issued Covid-19-Related Rent Concessions (Amendment to IFRS 16) that provides 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. The practical expedient permits a lessee to elect not to assess whether a COVID-19-related rent concession is a lease modification. A lessee that makes this election shall account for any change in lease payments resulting from the COVID-19-related rent concession the same way it would account for the change applying IFRS 16 if the change were not a lease modification.

The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the following conditions are met:

a.The change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
b.Any reduction in lease payments affects only payments originally due on or before June 30, 2021 (a rent concession meets this condition if it results in reduced lease payments on or before June 30, 2021or increased lease payments that extend after June 30, 2021); and
c.There is no substantive change to other terms and conditions of the lease.

F-18


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.

iii.Impact of the initial application of other new and amended IFRS Standards that are effective for the current year.

In the current year, the Company has applied the below amendments to IFRS Standards and Interpretations issued by the Board that are effective for an annual period that begins on or after 1 January 2020. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

Amendments to References to the

Conceptual Framework in IFRS

Standards

The Company has adopted the amendments included in Amendments to References to the Conceptual Framework in IFRS Standards for the first time in the current year. The amendments include consequential amendments to affected Standards so that they refer to the new Framework. Not all amendments, however, update those pronouncements with regard to references to and quotes from the Framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the Framework they are referencing to (the IASC Framework adopted by the IASB in 2001, the IASB Framework of 2010, or the new revised Framework of 2018) or to indicate that definitions in the Standard have not been updated with the new definitions developed in the revised Conceptual Framework.

The Standards which are amended are IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.

Amendments to IFRS 3 Definition of a business

The Company has adopted the amendments to IFRS 3 for the first time in the current year. The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

The amendments remove the assessment of whether market participants can replace any missing inputs or processes and continuing to produce outputs. The amendments also introduce additional guidance that helps to determine whether a substantive process has been acquired.

The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.

The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after 1 January 2020.

Amendments to IAS 1 and IAS 8 Definition of material

The Company has adopted the amendments to IAS 1 and IAS 8 for the first time in the current year. The amendments make the definition of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS Standards.

The concept of 'obscuring' material information with immaterial information has been included as part of the new definition.

F-19


The threshold for materiality influencing users has been changed from 'could influence' to 'could reasonably be expected to influence'. The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual

Framework that contains a definition of 'material' or refer to the term ‘material’ to ensure consistency.

II.New and revised IFRS Standards in issue but not yet effective

At the date of authorization of these financial statements, the Company has not applied the following new and revised 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, IFRS 9 Financial Instruments, IFRS 16 Leases.

1)Effective for annual periods beginning on the January 1, 2022
2)Effective for annual periods beginning on January 1, 2023
3) Effective day has not yet been defined by the IASB.

Management does not expect that the adoption of these and modifications will have a significant impact on the consolidated financial statements of the Company.

b.Foreign currency transactions

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.

c.Cash and cash equivalents

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.

d.Financial instruments

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.

F-20


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 2020, 2019 and 2018, all of the Company’s financial assets have been recognized at amortized cost.

i)Amortized cost and effective interest method

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.

ii)Financial assets at fair value through other comprehensive income (FVTOCI)

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, 2020, the Company does not have financial assets at fair value through other comprehensive income.

iii)Financial assets at fair value through profit or loss (FVTPL)

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, 2020, 2019 and 2018, the Company does not have financial assets at fair value through profit.

F-21


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.

i)Definition of default

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:

When there is a breach of financial covenants by the debtor; or
The information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Company, in full (without taking into account any collateral held by the Company).

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.

ii)Credit-impaired financial assets

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.

iii)Write-off policy

F-22


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.

iv)Measurement and recognition of expected credit losses

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.

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.

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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.

e.Property, leasehold improvements and equipment, net

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

 

20

Machinery and equipment

 

10

Furniture and office equipment

 

10

Transportation equipment

 

4

Computer equipment

 

3.3

The depreciation of property, leasehold improvements and equipment is recorded in results.

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.

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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.

f.Leases

-    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.

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:

Fixed payments, (including in-substance fixed payments; ), less any lease incentives receivable;
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Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
The amount expected to be payable by the lessee under a residual value guarantees;
The exercise price of purchase options if the lessee is reasonably certain to exercise the options, and
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

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.

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.

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g.Guarantee deposits

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.

h.Borrowing costs

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 are 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.

i.Investment in airport concessions

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 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 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.

Investments in airport concessions are amortized on a straight-line basis over the term of the concession, which is 50 years, or from the date of capitalization of additions or improvements considering the remaining term of the concession.

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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).

j.Impairment of tangible and intangible 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.

k.Provisions

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.

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).

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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 taxes

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.

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.

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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 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, 2020, 2019 and 2018, 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.

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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:

Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements)

Net interest expense or income
Remeasurement

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 benefits 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:

Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

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.

Aeronautical services

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 Communications and Transportation, which establishes a maximum rate for such aeronautical and

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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).

Non-aeronautical services

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).

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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. 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.

Evaluation of the existence of control on investments in subsidiaries (see note 11).
Defined benefit obligations to the Company’s employees are discounted at a rate set by reference to market rates at the end of the reference period of Mexican government bonds.
The Company is subject to transactions or contingent events over which it applies professional judgment to determine the probability of occurrence. Factors considered in this determination are the legal situation as of the date on which the estimation is made and the opinion of legal advisors.

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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:

The Company performs an allowance for doubtful accounts analysis based on the expected credit losses required by IFRS 9, considering key factors such as the customers’ financial and operating situation, conditions of past due accounts and the economic conditions of the country. This estimate is reviewed periodically and the condition of past due accounts is determined considering the terms established in the agreements.

The Company’s long-lived assets correspond to concessions granted by the Mexican Government, properties, leasehold improvements and equipment. The Company reviews the carrying amounts of its long-lived assets to determine whether there are indications of impairment.

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 53% in 2021, gradually recovering to an average of 82% by 2024 onwards. It is also estimated that the average fare would exceed 2019 levels in 2022 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 27%. Management estimates that the value in use considering an average rate reduction of 16.7% or an occupancy rate 1,230 basis points lower than estimated during the projection period would equal the carrying value of the cash generating unit.

The Company’s management reviews the estimated useful lives of property, leasehold improvements and equipment at the end of each annual period. Based on detailed analyses, the Company’s management could modify the useful life of certain assets of property, leasehold improvements and equipment. The degree of uncertainty associated with estimates of useful lives is related to market changes, use of assets and technological development.

Determining the recoverability of deferred tax assets.

The Company’s management determines and recognizes, based on estimates, the major maintenance provision as per concession contracts with the Mexican Government to maintain and restore the airports’ infrastructure, which affects the results of periods ranging from the moment concession infrastructure becomes available for use through the date on which the maintenance and/or repair works are performed. The Company also calculates the appropriate discount rate for determining the present value of expected expenses that are required to meet its obligations. The short- and long-term classification of the provision is based on the best estimate of the Company of the period in which the work is expected to be carried out. There is also a judgment in determining the accounting policy of recognition of this provision.

Although these estimates were made based on the best information available as of December 31, 2020, 2019 and 2018 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

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basis by recognizing the effects of changes in estimates in the corresponding consolidated financial statements.

6.           Cash and cash equivalents

Cash and cash equivalents are composed as follows:

December 31, 

    

2020

    

2019

    

2018

Cash

 

Ps.

2,360,422

 

Ps.

2,916,936

 

Ps.

1,456,207

Cash equivalents:

 

 

 

  

Bank notes

 

598,382

 

512,027

 

630,537

Commercial paper

 

 

 

217,074

Money market investment funds

 

 

910

 

655,084

 

Ps.

2,958,804

 

Ps.

3,429,873

 

Ps.

2,958,902

7.           Accounts receivable

a.           The balance of accounts receivable is as follows:

December 31, 

    

2020

    

2019

    

2018

Receivables

 

Ps.

854,402

 

Ps.

766,748

 

Ps.

728,552

Allowance for doubtful accounts (note 7 b.)

 

(20,759)

 

(8,992)

 

(31,986)

 

Ps.

833,643

 

Ps.

757,756

 

Ps.

696,566

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, 2020, 2019 and 2018, amounts receivable for passenger charges amounted to Ps. 658,269. Ps. 625,246 and Ps.577,391, 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, 2020, 2019 and 2018, the balance of the allowance for doubtful accounts was Ps.20,759, Ps.8,992 and Ps.31,986 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.

December 31, 

    

2020

    

2019

    

2018

%

  

%

%

Accounts receivable:

 

  

  

 

  

Aeroenlaces Nacionales, S. A. de C. V.

 

33.00

21.16

23.76

Concesionaria Vuela Compañía de Aviación, S.A.P.I. de C.V.

 

28.10

27.40

24.20

Aerolitoral, S. A. de C. V.

 

8.98

20.88

21.47

Aerovías de México, S. A. de C.V.

 

4.74

6.70

7.15

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Year ended December 31, 

    

2020

    

2019

    

2018

%

%

%

Revenues by client:

 

  

 

  

 

  

Aerolitoral, S. A. de C. V.

 

10.49

 

13.26

 

14.99

Aeroenlaces Nacionales, S. A. de C. V.

 

21.07

 

17.79

 

16.84

ABC Aerolíneas, S. A. de C. V.

 

4.24

 

10.38

 

11.19

Concesionaria Vuela Compañía de Aviación, S. A. P. I. de C. V.

 

17.36

 

16.11

 

13.79

Aerovías de México, S. A. de C. V.

 

4.07

 

4.07

 

4.41

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, 2020, 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, 2020 is not material.

b.           The changes in the allowance for doubtful accounts are as follows:

December 31, 

    

2020

    

2019

    

2018

Beginning balance

 

Ps.

8,992

 

Ps.

31,986

 

Ps.

38,223

Increases(Decrease)

 

18,342

 

(241)

 

(5,960)

Cancelation

(5,542)

Write-off

 

(1,033)

 

(22,753)

 

(277)

Ending balance

 

Ps.

20,759

 

Ps.

8,992

 

Ps.

31,986

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 2020, with the expected loss model used by the Company, are presented below:   

    

Airports

    

Others

    

Total

 

  

 

  

 

  

Gross book value

 

Ps.

784,108

 

Ps.

28,251

 

Ps.

812,359

Collateral

1,584,553

 

8,048

 

1,592,601

Probability of default in range

0% - 100%

0% - 100%

 

Loss due to default range

0% - 100%

0% - 100%

Beginning balance of impairment of account receivable

Ps.

8,847

Ps.

145

Ps.

8,992

(Decrease) increase in the provision

15,156

3,186

18,342

Cancelations

(5,542)

(5,542)

Write-off

 

(1,033)

(1,033)

Ending balance

 

Ps.

17,428

Ps.

3,331

Ps.

20,759

F-36


8.           Other accounts receivable and prepaid expenses

Other accounts receivable and prepaid expenses are comprised as follows:

December 31, 

    

2020

    

2019

    

2018

Prepaid expenses

 

Ps.

59,033

 

Ps.

33,310

 

Ps.

27,296

Guarantee deposits

 

6,167

 

5,897

 

5,897

Others

 

1,375

 

3,535

 

7,068

 

Ps.

66,575

 

Ps.

42,742

 

Ps.

40,261

9.           Property, leasehold improvements and equipment

Property, leasehold improvements and equipment are as follows:

December 31, 

    

2020

    

2019

    

2018

Net carrying value:

 

  

 

  

 

  

Land (see note 10)

 

Ps.

1,709,508

 

Ps.

1,709,508

 

Ps.

1,709,508

Leasehold improvements

 

854,829

 

786,085

 

783,221

Machinery and equipment

 

72,867

 

83,611

 

99,194

Furniture and office equipment

 

27,940

 

35,105

 

42,674

Transportation equipment

 

287

 

1,555

 

25,326

Computer equipment

 

2,838

 

2,212

 

4,930

Construction in progress for leasehold improvements

 

32,200

 

29,025

 

5,409

 

Ps.

2,700,469

 

Ps.

2,647,101

 

Ps.

2,670,262

    

    

    

    

    

    

    

Construction

    

Machinery

Furniture

in progress of

Leasehold

and

and office

Transportation

Computer

leasehold

Cost

Land

improvements

equipment

equipment

equipment

equipment

improvements

Total

Balance as of January 1, 2018

 

Ps.

1,709,508

 

Ps.

825,481

 

Ps.

201,114

 

Ps.

153,355

 

Ps.

61,043

 

Ps.

67,697

 

Ps.

22,341

 

Ps.

3,040,539

Acquisitions

 

53,347

2,293

5,444

1,038

1,102

104,038

 

167,262

Disposals

 

 

 

(321)

 

 

 

(666)

 

(987)

Transfers

 

 

120,970

 

 

 

 

 

(120,970)

 

Other

 

 

 

(127)

 

(687)

 

(351)

 

(402)

 

 

(1,567)

Balance as of December 31, 2018

 

1,709,508

 

999,798

 

202,959

 

158,112

 

61,730

 

67,731

 

5,409

 

3,205,247

Acquisitions

 

49,345

3,386

2,168

869

80,290

136,058

Disposals

 

 

 

 

(525)

 

 

 

 

(525)

Transfers

 

9,403

 

 

 

(34,283)

 

(430)

 

(55,656)

 

(80,966)

Other

 

 

 

 

(20)

 

(5,792)

 

(595)

 

(1,018)

 

(7,425)

Balance as of December 31, 2019

 

1,709,508

 

1,058,546

 

206,345

 

159,735

 

21,655

 

67,575

 

29,025

 

3,252,389

Acquisitions

8,380

440

3,973

134,821

147,614

Transfers

 

 

130,420

 

 

 

 

 

(130,420)

 

Other

 

 

 

 

(206)

 

 

(3,097)

 

(1,226)

 

(4,529)

Balance as of December 31, 2020

 

Ps.

1,709,508

 

Ps.

1,188,966

 

Ps.

214,725

 

Ps.

159,969

 

Ps.

21,655

 

Ps.

68,451

 

Ps.

32,200

 

Ps.

3,395,474

F-37


    

    

    

    

    

    

Construction in

    

Furniture and

progress of

Accumulated

Leasehold

Machinery and

 

office

Transportation

Computer

 

leasehold

depreciation

improvements

equipment

equipment

equipment

equipment

 

improvements

Total

Balance as of January 1, 2018

 

Ps.

(164,892)

 

Ps.

(84,997)

 

Ps.

(106,242)

 

Ps.

(24,797)

 

Ps.

(58,214)

 

Ps.

 

Ps.

(439,142)

Depreciation

 

(51,685)

 

(18,902)

 

(9,883)

 

(11,630)

 

(5,655)

(97,755)

Disposals

 

 

134

 

 

 

666

 

 

800

Other

 

687

23

402

 

 

1,112

Balance as of December 31, 2018

 

(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)

Disposals

 

 

525

 

 

 

 

525

Other

 

12

21,110

489

21,611

Balance as of December 31, 2019

 

(272,461)

 

(122,734)

 

(124,630)

 

(20,100)

 

(65,363)

 

 

(605,288)

Depreciation

 

(61,676)

 

(19,124)

 

(7,720)

 

(1,268)

 

(2,532)

 

(92,320)

Disposals

 

 

 

 

 

 

 

Other

321

2,282

2,603

Balance as of December 31, 2020

 

Ps.

(334,137)

 

Ps.

(141,858)

 

Ps.

(132,029)

 

Ps.

(21,368)

 

Ps.

(65,613)

 

Ps.

 

Ps.

(695,005)

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 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:

a.The concessionaire has the right to manage, operate, maintain and use the airport facilities and carry out any construction, improvements or maintenance of the related facilities in accordance with its five-year period Master Development Program, and to provide airport, complementary and commercial services.

b.The concessionaire will use the airport facilities only for the purposes specified in the concession agreement, will provide services in conformity with the law and applicable regulations and will be subject to inspections by the Ministry of Communications and Transportation.

c.The concessionaire must pay a concession tax for the right to use airport facilities (currently 5% of the concessionaire’s annual gross revenues derived from the use of public property), in conformity with the Mexican Federal Duties Law.

d.The Mexican Airport and Auxiliary Services Agency (Aeropuertos y Servicios Auxiliares) has the exclusive right to supply fuel at the concessionaire’s airports.

e.The concessionaire must grant free access to specific airport areas to certain Mexican government agencies, so that they may carry out their activities within the airports.

f.The concession may be revoked if the concessionaire breaches any of its obligations established in the concession title, as established in Article 26 and 27 of the Mexican Airport Law and in the concession title. The breach of certain concession terms may be cause for revocation if the Ministry of Communications and Transportation has applied sanctions in three different instances with respect to the same concession term.

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 Communications and

F-38


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, 2020, 2019 and 2018.

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, 2020, 2019 and 2018, the carrying value of the right to use airport facilities, airport concessions and improvement to concessioned assets classified as intangible assets are as follows:

December 31, 

    

2020

    

2019

    

2018

Projects completed and in operation:

 

  

 

  

 

  

Airport concessions

 

Ps.

605,643

 

Ps.

605,643

 

Ps.

605,643

Rights to use airport facilities

 

3,356,762

 

3,356,762

 

3,356,762

Improvements to concessioned assets (see note 15)

 

8,594,136

 

7,331,450

 

6,165,810

Improvements to concessioned assets in progress

615,246

624,063

834,868

Accumulated amortization

 

(2,942,131)

 

(2,650,807)

 

(2,396,427)

 

Ps.

10,229,656

 

Ps.

9,267,111

 

Ps.

8,566,656

The changes in investment in concessions are as follows:

December 31, 

    

2020

    

2019

    

2018

Investment in airport concessions

 

  

 

  

 

  

Beginning balance

 

Ps.

11,917,919

 

Ps.

10,963,084

 

Ps.

9,821,579

Increase

 

1,253,868

 

954,835

 

1,141,505

Ending balance

 

13,171,787

 

11,917,919

 

10,963,084

Amortization of airport concessions:

 

  

 

  

 

  

Beginning balance

 

(2,650,807)

 

(2,396,427)

 

(2,173,162)

Increase

 

(291,323)

 

(254,380)

 

(223,266)

Ending balance

 

(2,942,131)

 

(2,650,807)

 

(2,396,427)

Net investment in airport concessions

 

Ps.

10,229,656

 

Ps.

9,267,111

 

Ps.

8,566,656

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. As mentioned in note 2, the Master Development Program for 2021-2025 is Ps.11,979,621 in pesos with purchasing power of December 31, 2019 and Ps.12,586,901 in pesos with purchasing power of December 31, 2020, as updated with the National Producer Price Index (INPPIC) of the construction industry, in accordance with the

F-39


concession contract, which is anticipated to be carried out as follows:

Amount

Year

2021

 

 

2,565,502

2022

 

 

2,655,068

2023

2,620,741

2024

2,510,125

2025

 

 

2,235,465

 

 

12,586,901

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, in accordance with the concession contract. The amount pending to be exercised as of December 31, 2020 is Ps.264,783, which will be exercised until the projects are completed.

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 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.

F-40


11.         Composition of GACN

a.

The following tables set forth information about the composition of GACN as of December 31, 2020, 2019 and 2018:

Place of

Number of subsidiaries

incorporation and

December 31, 

Principal activity

operation

2019, 2018, 2017

Airports

 

Mexico

 

13

Hotels

 

Mexico

 

2

Services

 

Mexico

 

9

 

  

 

24

b.

The consolidated subsidiaries are as follows:

Name of subsidiary

Ownership Percentage

 

Airport services;

 

  

Aeropuerto de Monterrey, S. A. de C. V.

 

100

%

Aeropuerto de Acapulco, S. A. de C. V.

 

100

%

Aeropuerto de Mazatlán, S. A. de C. V.

 

100

%

Aeropuerto de Zihuatanejo, S. A. de C. V.

 

100

%

Aeropuerto de Culiacán, S. A. de C. V.

 

100

%

Aeropuerto de Ciudad Juárez, S. A. de C. V.

 

100

%

Aeropuerto de Chihuahua, S. A. de C. V.

 

100

%

Aeropuerto de Torreón, S. A. de C. V.

 

100

%

Aeropuerto de Durango, S. A. de C. V.

 

100

%

Aeropuerto de Tampico, S. A. de C. V.

 

100

%

Aeropuerto de Reynosa, S. A. de C. V.

 

100

%

Aeropuerto de Zacatecas, S. A. de C. V.

 

100

%

Aeropuerto de San Luis Potosí, S. A. de C. V.

 

100

%

Hotels and Services:

 

  

Operadora de Aeropuertos del Centro Norte, S. A. de C. V.

 

100

%

Servicios Aeroportuarios del Centro Norte, S. A. de C. V.

 

100

%

Servicios Aero Especializados del Centro Norte, S. A. de C. V.

 

100

%

OMA Logística, S. A. de C. V.(1)

 

100

%

Holding Consorcio Grupo Hotelero T2, S. A. de C. V.(2)

 

100

%


(1)Includes subsidiaries with interest in; OMA VYNMSA Aero Industrial Park, S.A. de C.V (VYNMSA) of which the Company owns 51% of the shares, Consorcio Hotelero Aeropuerto de Monterrey, S.A.P.I de C.V. with 85% and Servicios Hoteleros Aeropuerto de Monterrey, S.A. de C.V. with 85%.
(2)Provides hotel services and includes its subsidiaries: Servicios Complementarios del Centro Norte S.A. de C.V., with 100% of the shares, Consorcio Grupo Hotelero T2, S.A. de C.V. and Servicios Corporativos Terminal 2, S.A. de C.V. with 90% of the shares.

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, 2020, 2019 and 2018, the Company has not made investments in shares of any structured or investment-related entity.

F-41


12.         Trade accounts payable

Trade accounts payable consist of the following:

December 31, 

    

2020

    

2019

    

2018

Suppliers and contractors

 

Ps.

107,507

 

Ps.

140,806

 

Ps.

155,904

Customer advances

 

91,841

 

43,102

 

39,877

Statutory employee profit sharing

 

4,700

 

12,883

 

8,218

 

Ps.

204,048

 

Ps.

196,791

 

Ps.

203,999

13.         Payable taxes and other accrued expenses

Tax payable and other accrued expenses are comprised of the following:

December 31, 

    

2020

    

2019

    

2018

Accrued expenses

 

Ps.

172,847

 

Ps.

202,363

 

Ps.

166,588

Taxes payable other than income tax

 

153,046

 

345,461

 

308,345

Accrued interest

 

44,295

 

42,438

 

40,227

 

Ps.

370,188

 

Ps.

590,262

 

Ps.

515,160

14.         Short-term debt

As of December 31, 2020 the Company has short-term credit lines available with financial institutions for Ps.650,000, which are not in use.

F-42


15.         Long-term debt

The long-term debt with credit institutions, debt issuances and other marketable securities before amortization of financing commissions and is comprised as follows:

December 31, 

    

2020

    

2019

    

2018

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

 

Ps.

3,000,000

 

Ps.

3,000,000

 

Ps.

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

 

1,500,000

 

1,500,000

 

1,500,000

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, 2020, 2019 and 2018, outstanding amounts were U.S.$ 678 thousand, U.S.$ 2,495 thousand and US.$ 4,583 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, 2020, 2019 and 2018, the interest rate was 1.49%, 3.15% and 4.04%, respectively.

 

13,503

 

49,575

 

90,156

Line of credit with UPS Capital Business Credit (supported by Ex-Im Bank) for U.S.$ 3,120,000. The amount was drawn down upon in April 20, 2014, and the line of credit terminates on January 25, 2019. As of December 31, 2018, the outstanding balance was, U.S.$ 156 thousand. The line of credit is secured by firefighting equipment ⁽¹⁾. The loan bears interest at three-month LIBOR plus 2.65 percentage point with quarterly principal payments. As of December 31, 2018, the interest rate was 5.44%.

 

 

 

3,067

Total long-term debt

 

4,513,503

 

4,549,575

 

4,593,223

Less:

 

  

 

  

 

  

Financing commissions

 

(3,115)

 

(5,966)

 

(8,629)

 

4,510,388

 

4,543,609

 

4,584,594

Current portion long-term debt

 

(3,013,502)

 

(36,851)

 

(41,425)

Long-term debt

 

Ps.

1,496,886

 

Ps.

4,506,758

 

Ps.

4,543,169


(1)Carrying value amounts to Ps. 266,181, Ps. 275,095 and  Ps.284,008  as of December 31, 2020, 2019 and 2018, respectively, and is recorded in improvements to concessioned assets (note 10). The Company is not authorized to grant such equipment as collateral in other loans or sell them to another Company.

Carrying values are Ps. 35,760 as of December 31, 2018, recorded as improvements to concessioned assets (note 10). The Company is not authorized to use these as collateral or sell them.

The movement of the initial balance to the final balance of the bank loans for the years ended December 31, 2020, 2019 and 2018 correspond to debt principal payments of $42,592, $40,790 and $49,563, respectively, and the exchange (loss) gain effects of Ps. $(6,520), Ps. 2,858, and Ps. 1,601, respectively. There is no new loan or other movement associated with these loans.

F-43


Maturity of long-term debt as of December 31, 2020, 2019 and 2018 is described in note 21.

Outstanding long-term loans include certain restrictive clauses such as, but not limited to, limiting bank loans to subsidiaries, pledge provision, tax payments, other obligations, disposal of fixed assets and other noncurrent assets, as well as the obligation to maintain certain financial ratios. For the years ended December 31, 2020, 2019 and 2018, 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 7.89%, 8.00% and 9.67% as of December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2020, 2019 and 2018, the composition and changes of the Company’s major maintenance provision was as follows:

December 31, 

December 31, 2020

    

2019

    

Additions

    

Disbursements

    

Short-term

    

Long-term

Major maintenance of concessioned assets

Ps.

953,896

Ps.

467,793

(1)  

Ps.

(103,704)

Ps.

443,570

Ps.

874,415

December 31, 

December 31, 2019

    

2018

    

Additions

    

Disbursements

    

Short-term

    

Long-term

Major maintenance of concessioned assets

Ps.

943,548

Ps.

315,481

(1)  

Ps.

(305,133)

Ps.

151,554

Ps.

802,342

December 31, 

December 31, 2018

    

2017

    

Additions

    

Disbursements

    

Short-term

    

Long-term

Major maintenance of concessioned assets

Ps.

857,624

Ps.

225,244

(1)  

Ps.

(139,320)

Ps.

224,982

Ps.

718,566


(1)Includes Ps. 75,262, Ps. 23,157 and Ps. (23,392), recognized as interest cost (income) in the consolidated statement of income and other comprehensive income, for the unwinding effect of the present value calculation as of December 31, 2020, 2019 and 2018, respectively.

The provision for major maintenance as of December 31, 2020 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 as indicated in Note 2.

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17.          Labor obligations

a.         Defined contribution plans

The Company offers defined contribution plans for all employees who qualify. The plan assets are kept separate from the Company’s assets in funds kept in a trust under the control of trustees. If the employee leaves the plan before fully vesting, the trust will pay the employee up to 50% as of the fifth year in which he or she adhered to such plan and increase by 10% each year until reaching 100%.

The total contributions to these plans based on the specific rates in the plan amounted to Ps.894, Ps.967, and Ps.1,454 in 2020, 2019 and 2018, respectively. A total of Ps.175, Ps.133 and Ps.541 in 2020, 2019 and 2018, respectively, is pending of payment to the trust.

b.         Defined benefit plans

This liability for employees derives from a pension plan, 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 exceeding twice the current minimum wage established by law and the payments for the pension plan consist of an equivalent of 20 days for each year worked and 90 days based on the pensionable salary determined on actuarial calculations performed by external actuaries, using the projected unit credit.

As of December 2011, the pension plan was modified, establishing an early retirement from age 60 for all employees with at least 10 years of service to the Company.

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 in to 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.

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The actuarial calculation of the defined benefit obligation was calculated as of December 31, 2020, 2019 and 2018 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:

Year ended December 31, 

 

    

2020

    

2019

    

2018

 

Discount rate (see note 5 a.)

 

7.40

%  

8.00

%  

9.00

%

Expected rate of salary increase

 

5.80

%  

5.80

%  

5.80

%

Average longevity at retirement age for current pensioners (years)

 

12

 

14

 

13

Inflation

 

4.00

%  

5.00

%  

4.00

%

The amounts recognized in the consolidated statement of income and other comprehensive income in respect of these defined benefit plans are as follows:

Year ended December 31, 

    

2020

    

2019

    

2018

Service cost:

 

  

 

  

 

  

Current service cost

Ps.

8,276

Ps.

7,465

Ps.

7,467

Net interest expense

 

8,490

 

7,156

 

7,677

Reductions and liquidations advance

(9,131)

Components of defined benefit costs recognized in profit or loss

 

7,635

 

14,621

 

15,144

Remeasurement on the net defined benefit liability:

 

  

 

  

 

  

Actuarial gains and losses arising from changes in financial assumptions

 

2,653

 

(161)

 

(10,131)

Actuarial gains and losses arising from experience adjustments

 

10,386

 

12,995

 

(14,042)

Components of defined benefit costs recognized in other comprehensive income (loss)

 

13,039

 

12,834

 

(24,173)

Total

Ps.

20,674

Ps.

27,455

Ps.

(9,029)

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:

December 31, 

    

2020

    

2019

    

2018

Present value of defined benefit obligations

Ps.

115,691

Ps.

106,160

Ps.

79,905

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Movements in the present value of the defined benefit obligation in the current year are as follows:

December 31, 

    

2020

    

2019

    

2018

Present value of defined benefit obligation as of January 1,

Ps.

106,160

Ps.

79,905

Ps.

127,479

Current service cost

 

8,276

 

7,465

 

7,467

Interest cost

 

8,490

 

7,156

 

7,677

Reductions and Liquidations advance

(9,131)

Remeasurement (gains)/losses:

 

 

 

  

Actuarial gains and losses arising from changes in financial and demographic assumptions

 

2,653

 

(161)

 

(10,131)

Actuarial gains and losses arising from experience adjustments

 

10,386

 

12,995

 

(14,042)

Benefits paid

 

(11,143)

 

(1,200)

 

(38,545)

Present value of defined benefit obligation

Ps.

115,691

Ps.

106,160

Ps.

79,905

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.

If the discount rate increases (decreases) by 1%, the defined benefit obligation would decrease to Ps.17,706 (increase by Ps.10,053).

If the expected salary growth increases (decreases) by 1%, the defined benefit obligation would increase to Ps. 15,962 (decrease by Ps. 16,177).

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, 2020 is 11.78 years (2019: 13.97 years and 2018: 16.75 years).

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Expected cash flows from pension plans and seniority premium benefits for the next 10 years are as follows:

    

    

Seniority premium

    

Year

Pensions plan

benefits

Total

2021

Ps.

Ps.

845

Ps.

845

2022

 

 

961

 

961

2023

 

551

 

1,179

 

1,730

2024

 

9,837

 

1,420

 

11,257

From 2025 and subsequently

 

43,161

 

14,016

 

57,177

Total

Ps.

53,549

Ps.

18,421

Ps.

71,970

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.31,171 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.

a.The following is a summary of the right-of-use assets and the lease liability

Cost

    

Buildings

    

Other

 

Total

Balance as of January 1, 2019

Ps.

213,342

Ps.

18,475

Ps.

231,817

Additions

10,732

5,508

16,240

Balance as of December 31, 2019

224,074

23,983

248,057

Additions

9,771

769

10,540

Decreases

(1,055)

(1,475)

(2,530)

Balance as of December 31, 2020

Ps.

232,790

Ps.

23,277

Ps.

256,067

Depreciation

Balance as of January 1, 2020

Ps.

(30,803)

Ps.

(6,466)

Ps.

(37,269)

Depreciation of the year

(31,463)

(9,885)

(41,348)

Decreases

-

797

797

Balance as of December 31,2020

Ps.

(62,266)

Ps.

(15,554)

Ps.

(77,820)

b.Amounts recognized in consolidated statement of profit or loss statement:

    

2020

    

2019

Depreciation expense of right of use assets

Ps.

41,348

37,269

Interest expense on lease liabilities

22,431

22,983

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c.The following is a summary of the lease liability:

2020

    

2019

Maturity analysis:

  

 

  

Less than one year

Ps.

26,553

72,320

Greater than 1 year and less than 3 years

 

55,134

 

73,975

Greater than 3 years

 

113,076

 

74,565

Total

Ps.

194,763

220,860

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, 2020 and 2019, the total cash outflow for leases amounted to Ps. 57,325 and Ps.57,061 (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, 2020, 2019 and 2018, the committed future rents to be received are as follows:

Year ended December 31, 

    

2020

    

2019

     

2018

Duration:

 

  

 

  

  

Less than 1 year

Ps.

444,523

Ps.

546,671

Ps.

562,681

Greater than 1 year and less than 5 years

 

753,230

 

843,404

 

1,002,351

Greater than 5 years

 

118,256

 

161,109

 

240,584

Total

Ps.

1,316,009

Ps.

1,551,184

Ps.

1,805,616

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, 2020, 2019, and 2018 were Ps. 136,181, Ps. 229,727 and Ps. 204,172, 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, 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 27.

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19.         Income taxes

The Company is subject to Income Tax (“ISR”), whose tax rate was 30% for 2020, 2019 and 2018, and will continue to be 30% for later years.

a.            Income tax are as follows:

Year ended December 31, 

    

2020

    

2019

    

2018

Current ISR

Ps.

480,232

Ps.

1,329,867

Ps.

1,113,712

Deferred ISR

(85,731)

 

42,355

 

7,691

Income tax expense

Ps.

394,501

Ps.

1,372,222

Ps.

1,121,403

b.            As of December 31, 2020, 2019 and 2018, the principal items comprising the balance of the deferred ISR asset (liability) were:

December 31, 

    

2020

    

2019

    

2018

Liabilities:

  

Provisions, allowances and labor obligations

Ps.

244,982

Ps.

157,560

Ps.

163,406

Investment in airport concessions, property, leasehold improvements and equipment, net

 

(426,325)

 

(407,173)

 

(401,735)

Tax loss carryforwards (1)

 

15,883

 

14,937

 

25,563

Recoverable tax on assets (2)

 

28,619

 

28,619

 

28,619

Others

3,013

3,340

Total liabilities

Ps.

(133,828)

Ps.

(202,717)

Ps.

(184,147)

Assets:

 

  

 

  

 

  

Provisions, allowances and labor obligations

Ps.

230,532

Ps.

205,834

Ps.

188,294

Investments in airport concessions, property, leasehold improvements and equipment, net

 

(172,806)

 

(184,649)

 

(179,805)

Tax loss carryforwards(1)

 

268,930

 

285,045

 

308,450

Others

(8,898)

(9,226)

Total assets

Ps.

317,758

Ps.

297,004

Ps.

316,939

Net deferred ISR asset

Ps.

183,930

Ps.

94,287

Ps.

132,792


(1)As of December 31, 2020, 2019 and 2018, the Company recognized a deferred tax asset of Ps. 284,813, Ps. 299,982 and Ps. 334,013, respectively, corresponding to the tax losses generated by its subsidiaries. All subsidiaries of the Company expect to benefit from losses in future years based on projections of taxable income and various strategies with favorable tax consequences.

(2)The Company recognized the IMPAC paid during 2002 through 2007. In 2013, the Company recognized the deferred tax asset, which it expects to recover subject to certain conditions established in the Income Tax Law. The updated amount as of December 31, 2020 was Ps. 28,619.

c.            The changes in deferred tax during the year are as follows:

December 31, 

    

2020

    

2019

    

2018

Beginning balance of deferred tax liability, net

Ps.

94,287

Ps.

132,792

Ps.

150,953

Deferred ISR in profit or loss

 

85,731

 

(42,355)

 

(7,691)

Recoverable tax on assets

 

 

 

(10,466)

Income tax effects recognized in other comprehensive income

 

3,912

 

3,850

 

(4)

Ending balance of deferred tax asset, net

Ps.

183,930

Ps.

94,287

Ps.

132,792

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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:

Year ended December 31, 

 

    

2020

2019

2018

Amount

Rate %

Amount

Rate %

Amount

Rate %

Income before income taxes

Ps.

1,492,380

Ps.

4,599,656

Ps.

3,985,582

Current ISR

480,232

1,329,867

1,113,712

Deferred ISR

(85,731)

42,355

7,691

Income tax expense and effective rate

 

Ps.

394,501

26.43

%  

Ps.

1,372,222

29.83

%  

Ps.

1,121,403

28.14

%  

Add effects of permanent differences, primarily, non-deductible expenses and inflationary effects for financial and tax purposes.

 

53,213

3.57

%  

7,675

0.17

%  

74,272

1.86

%  

Statutory rate

 

Ps.

447,714

30.00

%  

Ps.

1,379,897

30.00

%  

Ps.

1,195,675

30.00

%  

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, 2020 are as follows:

    

Tax loss

Year of Origin

carryforwards

2001

Ps.

5,999

2002

160,499

2003

 

197,796

2004

 

229,480

2005

 

28,073

2006

 

18,953

2007

 

78,672

2008

 

34,168

2009

 

5,648

2011

 

32,203

2012

 

56,125

2013

15,549

2018

 

5,370

2019

 

21,248

2020

 

25,011

Ps.

914,794

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.34,826 the duration of which is 10 years under the Income Tax Law, and the expiration date of which is between 2020 and 2028.

g.            In 2020, the Company utilized tax loss carryforwards in the amount of Ps.133,053.

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i.

The balances of shareholders’ equity tax accounts as of December 31 are:

    

December 31, 

2020

2019

2018

Contributed capital account

Ps.

4,694,822

Ps.

4,584,512

Ps.

4,458,342

Net consolidated tax profit account

 

3,144,619

 

2,878,878

 

1,684,563

Total

Ps.

7,839,441

Ps.

7,463,390

Ps.

6,142,905

j.            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 Company and nine of its airports are guarantors of the debt securities and must provide a minimum guarantee equal to 80% of EBITDA. The debt securities of $3,000,000 are presented in the financial statements as short-term debt, given their maturity in June 2021.

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:

a)

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 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

F-52


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 lawsuits are 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.

Chihuahua Airport

In September 2019, the Municipal Treasury of Chihuahua determined Aeropuerto de Chihuahua, S.A. de C.V. (Chihuahua Airport) tax credits for property tax, corresponding to two cadastral keys segregated by the municipal authority.

By tax code 271-090-050, tax credits were determined for the period from the first two months of 1990 to the sixth quarter of 2014 for the amount of Ps. 95,411 and for the period from the first two months of 2015 to the fourth quarter of 2019 for the amount of Ps. 12,577.

Tax credits for the period from the second two-month period of 2013 to the sixth two-month period of 2014 for the amount of Ps. 2,091 were determined by cadastral code 271-090-051, and for the period from the first two-month period of 2015 to the fourth two-month period of 2020 for the amount of Ps. 3,449.

Nullity claims were filed against these resolutions, and the Secretary of Communications and Transportation was also called to trial as an interested third party. The trials are in process and no sentence has been passed. The procedural stages of the trials were completed and on August 20, 2020, November 24, 2020 and January 19, 2021, the rulings in favor of the airport were issued; the authority filed an amparo lawsuit to challenge two of the rulings issued, which are pending resolution.

As of the date of these consolidated financial statements, the contingencies remain due to the fact that the lawsuits are still in force, since the judgment on the merits to resolve these cases is still pending. However, in the event that the resolution of the judgments is not favorable for the Chihuahua Airport, it is considered that the economic repercussion of the same would be in charge of the Federal Government, by virtue of the foregoing and given that the Chihuahua Airport estimates an unfavorable resolution unlikely, no provision has been recorded in relation to these claims.

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Tampico Airport

In December 2019, the Directorate of Cadaster and Real Estate Taxes of Tampico, Tamaulipas, determined Aeropuerto de Tampico, S.A. de C.V. (“Tampico Airport”) a tax credit for property tax for the period from January 1999 to the date of the resolution (September 2019) in the amount of Ps. 18,840.

A nullity claim was filed against this resolution in February 2020, and the Secretary of Communications and Transportation was also called to trial as an interested third party. The procedural stages of the trial were completed and on December 17, 2020 a favorable ruling was issued in favor of the airport. The municipal authority may challenge the ruling, and therefore the favorable ruling for the airport has not yet become final.

As of the date of these consolidated financial statements, the contingencies are maintained due to the fact that the trial is still in force, since the judgment on the merits to resolve this case is still pending. However, in the event that the resolution of the trials is not favorable for the Tampico Airport, it is considered that the economic repercussion of the same would be the responsibility of the Federal Government, by virtue of the foregoing and given that the Tampico Airport considers an unfavorable resolution unlikely, no provision has been recorded in relation to these claims.

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.

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 Communications and Transportation.

The Ministry of Communications and Transportation was called to trial in defense of the interests of the Mexican government.

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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 review sentence is pending.

As of the date of the consolidated financial statements, the contingencies are maintained due to the fact that 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 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 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

F-55


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 the continuation of the procedural stages is pending. 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, filed a lawsuit against Aeropuerto de Monterrey, S.A. de C.V. (“Monterrey Airport”) in relation to the ownership of land previously acquired by the Monterrey Airport and whose book value in our financial statements as of December 31, 2020 amounts to Ps. 266,850.

Due to the lawsuit filed, the plaintiff exercised the plenary action for possession and claimed from the Monterrey Airport the legal non-existence of the sale documents, including the deed of sale of the property, the possession of the property allegedly owned by him, and the legal and material restitution of the claimed surface, with the improvements and rights that exist.

Monterrey Airport appeared at the trial and asked to call the company DIAV, S.A. de C.V., as a defendant in its capacity as seller of the property in conflict. In the eventual affectation that the sentence could cause, DIAV, S.A. de C.V. appeared in court.

On August 8, 2018, a final judgment of the trial was issued in which it was determined that the plaintiff did not prove his action and the claimed benefits were declared inadmissible. The plaintiff challenged this judgment by means of an appeal in both effects, likewise, the airport challenged the sentence, considering that the ruling incorrectly determined the lack of passive legitimacy of DIAV, S.A. de C.V.

On July 25, 2019, the judgment was issued within the appeal and the ruling was unfavorable for Monterrey Airport, in the first instance the sentence was revoked and the Monterrey Airport was ordered to pay the benefits claimed. On August 21, 2019, the Monterrey Airport filed a direct application for amparo against the judgment, which was admitted for processing and is pending resolution by a Collegiate Circuit Court. In that amparo trial, the execution of the claimed sentence was suspended.

The amount sought by the plaintiff is not quantified in the claim; however, it is maintained until the judgment of the amparo issued by the Monterrey Airport against the second instance judgment is definitively resolved. In the event that the resolution of the amparo judgment is not favorable for the Monterrey Airport, the economic repercussion must be borne by the seller of the land (DIAV, S. A. de C.V.), for which reason the Monterrey Airport has not recorded any provision in relation to with this claim.

IV.

Tax Credits

Acapulco Airport

On February 5, 2020, the Ministry of Finance of the State of Guerrero notified a tax credit against Aeropuerto de Acapulco, S.A. de C.V. (Aeropuerto de Acapulco) in the amount of Ps.24,813 for omitted ISR contributions and VAT payments for the period from January 1, 2015 to December 31, 2015.

F-56


The credit was challenged through the Recurso de Revocación (the “Recurso”) and on July 23, 2020 the resolution was issued declaring the nullity of the tax credit and ordering the authority to reinstate the procedure since the tax credit was determined within a procedure flawed from its origin. Acapulco Airport filed a nullity action against the resolution to the “Recurso” since it would allow the authority to correct the deficiencies of the procedure, without respecting the requirements and terms of the tax audit procedure.

The nullity lawsuit was admitted for processing and the authority appeared in the trial, the development of the procedural stages of the trial will continue. The Acapulco Airport has recorded a provision in relation to this claim.

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:

Compliance with Corporate Governance Standards.

Establishment, by each different business line and subsidiary, of risk management controls necessary to ensure that market transactions are conducted in accordance with the policies, rules and procedures of the Company.

Special attention to financial risk management, basically composed by interest rate, exchange rate, liquidity and credit risks.

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:

December 31, 

Financial assets

    

Risk classification

    

2020

    

2019

    

2018

Cash and cash equivalents and other investments held to maturity

 

Credit and interest rate

Ps.

2,948,804

Ps.

3,429,873

Ps.

2,978,559

Receivables, net

 

Credit and exchange rate

 

833,643

 

757,756

 

696,566

F-57


December 31, 

Financial liabilities

    

Risk classification

    

2020

    

2019

    

2018

Short-term and long-term debt

 

Interest rate, exchange rate and liquidity

Ps.

4,513,503

Ps.

4,549,575

Ps.

4,593,223

Trade accounts payable(1)

 

Liquidity

 

204,048

 

196,791

 

203,999

Accrued interest

 

Liquidity

 

44,295

 

42,438

 

40,227

Short-term and long-term financial leasing

Liquidity

194,763

220,860

28,806

Accounts payable to related parties

 

Liquidity

 

167,704

 

187,515

 

226,202


(1)Does not include the payments of employee statutory profit-sharing amounts, which were Ps. 4,700, Ps.12,883 and Ps. 8,218 as of December 31, 2020, 2019 and 2018, respectively.

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, 2020 and 2019, the Company had an approximate Ps. 4,513,503 and Ps. 4,594,575, respectively, in outstanding long-term debt, of which 99% had a fixed interest rate and 1.0% a variable interest rate. As of December 31, 2018, the Company had an approximate Ps. 4,593,223 in outstanding long-term debt, of which 98% had a fixed interest rate and 2.0% a variable interest rate.

The contracted credit lines 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 the three-month LIBOR rate.

The Company manages this risk by monitoring constantly the changes of such interest rates. In recent years, the three-month LIBOR has decreased. The three-month LIBOR was at its highest level on January 2, 2020 (1.91%) and its lowest level on December 9, 2020 (0.22%). Therefore, the Company has not entered into hedging instruments to hedge the risk of a rise in such interest rates. In the future, if the behavior of the referenced rates established in its debt instruments changes and trends upward, the Company may decide to enter into hedging instruments.

Due to the Interest Rate Benchmark Reform, the Company has closely monitored the market and the output of various industry working groups managing the transition to the new benchmark interest rate. This includes announcements made by the IBOR regulators. The regulators have made it clear that, at the end of 2021, it will no longer seek to persuade, or compel, banks to submit to IBORs.

F-58


For variable rate debt, the Company determined that modifications will not be necessary as the debt expires in 2021.

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, 2020, 2019 and 2018, the Company maintained long-term debt, including the current portion, which accrue interest at a variable rate, of Ps. 13,503, Ps. 49,575 and Ps. 93,223, respectively (see notes 14 and 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, Ps.179 and Ps.260 for 2020, 2019 and 2018, respectively. The increase was calculated for U.S. dollar debt based on the year-end exchange rate of each year (Ps.19.9087, Ps. 18.8727, and Ps. 19.6566 for 2020, 2019 and 2018, 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), 13.20%, 15.95% and 15.69% were from TUA of international passengers in 2020, 2019 and 2018, 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.54,293, Ps.120,798 and Ps.106,179 in 2020, 2019 and 2018, 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, 2020, the peso depreciated against the U.S. dollar by 5.5%, relative to the exchange rates prevailing at the end of 2019.

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, 2020, 2019 and 2018, 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.$ 77,094, U.S.$69,149 and U.S.$53,944 (amounts in thousands) would have resulted in an estimated exchange (gain) loss of approximately Ps. (150,745), Ps.(130,503) and Ps.(106,035) as of December 31, 2020, 2019 and 2018, respectively.

F-59


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

December 31, 

December 31, 

Currency

    

2020

2019

2018

    

2020

2019

2018

U.S. dollars

 

U.S.$

(4,095)

 

U.S.$

(10,059)

 

U.S.$

(13,185)

 

U.S.$

81,189

 

U.S.$

79,208

 

U.S.$

67,129

The transactions in thousands of U.S. dollars for the years ended December 31, 2020, 2019 and 2018, are as follows:

December 31, 

    

2020

2019

2018

Technical assistance

 

U.S.$

3,766

 

U.S.$

7,954

 

U.S.$

8,781

Insurance

 

1,039

 

935

 

2,227

Purchase of machinery and maintenance

 

7,065

 

7,685

 

9,527

Software

 

2,152

 

443

 

437

Professional services, fees and subscriptions

 

1,786

 

702

 

2,147

Other

 

4,765

 

4,303

 

8,043

Pertinent exchange rate information at the date of the consolidated statements of financial position is as follows:

December 31, 

    

2020

2019

2018

U.S. dollar exchange rate

 

  

 

  

 

  

As reported by the Mexican Central Bank

    

Ps.

19.9087

  

Ps.

18.8727

  

Ps.

19.6566

As of March 24, 2021, the exchange rate as reported by the Mexican Central Bank was Ps. 20.5788.

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.

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.

F-60


The customers 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, 2020, 2019 and 2018, 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 14 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.

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.

    

    

    

    

2028 and

    

As of December 31, 2020

2021

2022-2024

2025-2027

subsequently

Total

Long-term debt

Ps.

3,013,502

Ps.

1,500,001

Ps.

Ps.

Ps.

4,513,503

Interest(1)

 

188,641

 

118,077

 

 

 

306,718

Trade accounts payable

 

204,048

 

 

 

 

204,048

Interest Payable

44,295

44,295

Lease Liabilities

 

26,553

 

168,210

 

 

 

194,763

Accounts payable with related parties

 

167,704

 

 

 

 

167,704

Total

 

Ps.

3,644,743

  

Ps.

1,786,288

 

Ps.

  

Ps.

 

Ps.

5,431,031

F-61


    

    

    

    

2027 and

    

 

As of December 31, 2019

    

2020

    

2021-2023

    

2024-2026

    

subsequently

    

Total

Long-term debt

Ps.

36,851

Ps.

4,512,724

Ps.

Ps.

Ps.

4,549,575

Interest(1)

 

308,630

 

306,760

 

 

 

615,390

Trade accounts payable

 

256,228

 

 

 

 

256,228

Interest Payable

42,438

42,438

Lease Liabilities

 

72,320

 

73,975

 

46,893

 

27,672

 

220,860

Accounts payable with related parties

 

187,515

 

 

 

 

187,515

Total

 

Ps.

903,982

  

Ps.

4,893,459

 

Ps.

46,893

  

Ps.

27,672

 

Ps.

5,872,006

    

    

    

    

2026 and

    

 

As of December 31, 2018

    

2019

    

2020-2022

    

2023-2025

    

subsequently

    

Total

Long-term debt

    

Ps.

41,425

Ps.

3,051,798

Ps.

1,500,000

Ps.

Ps.

4,593,223

Interest(1)

 

309,877

 

596,259

 

19,680

 

 

925,816

Trade accounts payable

 

208,729

 

 

 

 

208,729

Interest Payable

 

40,227

 

 

 

 

40,227

Accounts payable with related parties

 

226,202

 

 

 

 

226,202

Total

 

Ps.

826,460

  

Ps.

3,648,057

 

Ps.

1,519,680

  

Ps.

 

Ps.

5,994,197


(1)The projected interest is determined, in the case of obligations with a variable rate, based on LIBOR and assuming an exchange rate of Ps.19.9087, Ps. 18.8727 and Ps. 19.6566 (as of December 31, 2020, 2019 and 2018, respectively) per U.S. $1.00.

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.

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.

Financial liabilities

Long-term debt

December 31, 2020

December 31, 2019

December 31, 2018

Book value

    

Fair value

    

Book value

    

Fair value

    

Book value

    

Fair value

Ps.

4,513,503

  

Ps.

4,524,746

    

Ps.

4,594,575

  

Ps.

4,517,336

    

Ps.

4,593,223

  

Ps.

4,326,267

Hierarchy of fair value as of December 31, 2020

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial liabilities:

 

  

 

  

 

  

 

  

Long-term debt(1)

 

Ps.

4,512,510

  

Ps.

12,236

    

Ps.

  

Ps.

4,524,746

F-62


Hierarchy of fair value as of December 31, 2019

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial liabilities

 

  

 

  

 

  

 

  

Long-term debt(1)

    

Ps.

4,371,570

  

Ps.

145,766

    

Ps.

  

Ps.

4,517,336

Hierarchy of fair value as of December 31, 2018

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial liabilities:

 

  

 

  

 

  

 

  

Long-term debt(1)

    

Ps.

4,129,695

  

Ps.

196,572

    

Ps.

  

Ps.

4,326,267


(1)The fair values of the financial assets and financial liabilities included in the level 2 category above have been determined in accordance with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that reflects the credit risk of counterparties. The fair value of the financial liabilities included in Level 1, corresponds to stock certificates listed on the Mexican Stock Exchange.

22.          Shareholders’ equity

a.Subscribed and paid-in capital stock as of December 31, 2020, 2019 and 2018, is comprised of ordinary, nominal shares, composed as follows:

December 31, 2020

    

Number of Shares

    

Contributed Capital

Fixed capital:

 

  

 

  

Series B Class I

    

340,345,556

    

Ps.

262,447

Series BB Class I

 

49,766,000

 

38,375

 

390,111,556

 

Ps.

300,822

December 31, 2019

    

Number of Shares

    

Contributed Capital

Fixed capital:

 

  

 

  

Series B Class I

 

344,004,973

    

Ps.

265,269

Series BB Class I

 

49,766,000

 

38,375

Treasury Series B Class I shares

 

(2,470,158)

 

(1,905)

 

391,300,815

 

Ps.

301,739

December 31, 2018

    

Number of Shares

    

Contributed Capital

Fixed capital:

 

  

 

  

Series B Class I

 

344,004,973

    

Ps.

265,269

Series BB Class I

 

49,766,000

 

38,375

Treasury Series B Class I shares

 

(324,507)

 

(250)

 

393,446,466

 

Ps.

303,394

b.At the Ordinary Shareholders’ Meetings held on July 7, 2020, April 29, 2019 and April 28, 2018, the results for the years ended December 31, 2019, 2018 and 2017, respectively, were approved.

c.During 2020 and 2019, 1,189,250 and 2,145,651 shares were repurchased, respectively, for amount of Ps. 150,000 and Ps. 244,201, respectively. In 2018, there were no shares repurchases or sales. As of December 31, 2020, 2019, and 2018, the market price per share was Ps. 128.39, Ps.141.83 and Ps. 93.65, respectively.

F-63


As of December 31, 2019, and 2018, the Company had in treasury repurchased shares in the amount of Ps. 244,201 and Ps. 34,234 such amount is represented by 2,470,158 and 324,507 Series B Class I shares.

d.At the Ordinary General and Extraordinary Shareholders’ Meetings held on July 7, 2020 the shareholders approved the following:
It was approved to increase the reserve for the repurchase of the Company’s shares to $1,500,000, for which the total amount used for the repurchase of shares during 2019 was transferred, as well as the amount used from January 1, 2020 to the date of the Meeting. Likewise, it was approved to exercise up to said amount, in the period between the date of this Meeting and the date of the Meeting that approves the results of the 2020 fiscal year.
The cancellation of 3,659,417 Series B shares for a notional value of $2,822 held in the Company's treasury was approved.
The decrease of the fixed portion of the Company’s capital stock to $300,822, representing a total of 390,111,556 common shares, of which 49,766,000 shares correspond to Series BB and 340,345,556 correspond to Series B shares.

e.At the Ordinary General Shareholders' Meeting held on April 29, 2019 the shareholders approved the following:

The payment of a cash dividend of Ps.1,600 million, to be paid in a single installment of Ps. 4.0633 per share (the amount effectively paid was Ps.1,598,680), corresponding to the shares outstanding less the treasury stock at the payment date (May 31, 2019);

It was approved to increase the share repurchase reserve to Ps.1,500,000, for which Ps. 33,984 of retain earnings are transferred to the reserve.

f.At the Ordinary General Shareholders’ Meeting held on April 23, 2018 the shareholders approved the following:

The payment of a cash dividend of Ps.1,600 million, to be paid in a single installment of Ps. 4.0633 per share (the amount effectively paid was Ps.1,598,680), corresponding to the shares outstanding less the treasury stock at the payment date (May 30, 2018);

A share repurchase reserve of Ps.1,466 million and authorized use of up to that amount to repurchase Series B shares during 2019 and until the next annual meeting approves the 2019 result.

g.Shareholders’ equity, except restated paid-in capital and tax-retained earnings, will be income tax on dividends by the Company to the effect upon the distribution rate. Any tax paid on such distribution may be credited against income tax for the year in which the tax on dividends and the following two years, against the tax for the year and interim payments thereof is paid.

h.Retained earnings include the statutory legal reserve. Under the Mexican General Corporations Law, at least 5% of the year’s net profits must be placed in a legal reserve until the reserve equals an amount representing 20% of capital stock at par value. The legal reserve may be capitalized but may not be distributed unless the Company is dissolved, and must be replenished if it is reduced for any reason. As of December 31, 2020 and 2019 Ps. 60,729 and 2018 Ps.61,689, in each year.

F-64


23.         Accumulated other comprehensive loss

Accumulated other comprehensive loss is as follows:

Labor obligations

    

Amount

    

Deferred taxes

    

Total

Balance as of January 1, 2018

    

Ps.

(15,679)

  

Ps.

4,688

 

Ps.

(10,991)

Movements of the year

24,173

(4)

 

24,169

Balance as of December 31, 2018

8,494

Ps.

4,684

 

Ps.

13,178

Movements of the year

(12,834)

3,850

 

(8,984)

Balance as of December 31, 2019

(4,340)

8,534

 

4,194

Movements of the year

(13,039)

3,912

 

(9,127)

Balance as of December 31, 2020

Ps.

(17,379)

  

Ps.

12,446

 

Ps.

(4,933)

24.         Related party balances and transactions

a.Advance payments for construction to related parties are as follows:

December 31, 

2020

2019

2018

ICA Constructora de Infraestructura, S.A. de C.V. (1)

Ps.

7,964

Ps.

178,977

Ps.

28,363

ICA Constructora, S.A. de C.V. (1)

    

90,204

  

  

6,859

Autovía Golfo Centro, S.A. de C.V. (1)

110,312

VCD Construcción y Desarrollo, S.A.P.I. de C. V. (1)

 

5,729

 

3,012

 

3,125

 

Ps.

214,209

  

Ps.

181,989

  

Ps.

38,347

b.

The accounts payable with related parties are as follows:

December 31, 

Payable:

    

2020

2019

2018

Servicios de Tecnología Aeroportuaria, S.A. de C.V. (SETA) (1)

 

Ps.

Ps.

80,504

Ps.

140,294

Operadora Nacional Hispana, S.A. de C.V.(1)

 

5,928

2,527

6,900

VCD Construcción y Desarrollo, S.A.P.I. de C.V.(1)

 

5,772

5,335

5,947

ICA Ingeniería S. A. de C. V.(1)

 

367

1,177

367

Actica Sistemas, S. de R.L. de C.V.(1)

 

3,971

3,972

5,588

Autovía Golfo Centro S.A. de C.V.

16,442

GGA Capital, S.A.P.I. de C.V.(1)

117,845

75,950

61,250

ICA Constructora de Infraestructura, S.A. de C.V.(1)

16,652

5,222

ICA Constructora, S. A. de C. V. (1)

16,564

Grupo ICA Constructora. S.A. de C.V.(1)

794

794

Grupo Hotelero Santa Fe, S. A. de C. V. (1)

 

21

604

634

 

Ps.

167,704

  

Ps.

187,515

  

Ps.

226,202


(1)Affiliated company

The balance payable to GGA Capital, S.A.P.I. of C.V. for Ps. 117,845, Ps. 75,950 and Ps.61,250 corresponds to short term loans as of December 31, 2020, 2019 and 2018, respectively. Loans generated interest at a 91-day TIIE rate plus 3.5 percentage points, the interest rate was 7.7430% and 10.1412% and 11.8500%, respectively.

F-65


c.

The principal transactions with related parties performed in the normal course of business, are as follows:

Year ended December 31, 

    

2020

    

2019

    

2018

Capital Expenditures:

 

  

 

  

 

  

Industrial warehouse

 

Ps.

100,194

 

Ps.

43,599

 

Ps.

94,938

Financial Leases:

Building

6,323

5,269

Expenses:

 

 

 

Payments from technical assistance received

 

81,164

 

150,108

 

172,610

Administrative services

 

35,450

 

43,196

 

69,887

Maintenance

2,705

1,887

226

Interests

5,365

4,507

5,037

Revenues:

Revenues from Leases

 

 

72

 

258

Concessioned Assets

 

 

 

Improvements and Major maintenance

 

564,563

 

553,405

 

359,736

Remuneration to directors and officers who sit on the Board of Directors and Executive, Audit, Corporate Governance, Finance and Sustainability Committees totaled Ps. 12,453, Ps.14,546 and Ps.23,950 for 2020, 2019 and 2018, respectively.

Employee Benefits – Employee benefits granted to key management personnel of the Company were comprised solely of short-term benefits of Ps. 73,711 Ps.58,989 and Ps.96,344 in 2020, 2019 and 2018, respectively.

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 2019 and 2018 the variable part of the consideration for this concept was greater than the fixed part of US$3,661 (thousand) and US$3,517 (thousand). In 2020 no variable part was generated in excess of the fixed part of US$3,766 (thousand).

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-66


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.

Construction

Depreciation

Investments

Aeronautical

Non-aeronautical

services

and

Operating

Assets per

Liabilities per

Capital

in airport

December 31, 2020

    

revenues

    

revenues

    

revenues

    

amortization

    

income

    

segment

    

segment

    

investments

    

concessions

Metropolitan

Monterrey

    

Ps.

1,278,255

  

Ps.

479,322

    

Ps.

802,470

  

Ps.

122,507

    

Ps.

445,952

    

Ps.

6,479,365

  

Ps.

1,367,347

    

Ps.

823,103

  

Ps.

3,870,329

Tourist

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Acapulco

 

117,218

 

27,159

 

29,409

 

44,780

 

21,587

 

1,414,504

 

449,606

 

29,561

 

1,257,321

Mazatlán

 

211,184

 

37,431

 

24,704

 

18,699

 

63,103

 

1,358,969

 

162,731

 

24,747

 

548,185

Zihuatanejo

 

98,645

 

18,360

 

45,984

 

19,091

 

12,961

 

623,522

 

130,925

 

45,984

 

553,611

Regional

 

  

 

 

 

 

 

  

 

 

 

Chihuahua

 

215,728

46,049

30,679

25,274

50,038

942,529

172,428

32,225

707,619

Culiacan

 

359,562

51,732

68,142

20,887

92,341

1,176,640

208,282

68,142

628,208

Durango

 

79,515

11,083

50,203

8,259

10,220

361,233

130,170

50,534

253,402

San Luis Potosi

 

108,045

28,508

58,189

21,569

34,648

764,159

507,738

58,189

677,976

Tampico

 

74,330

17,414

67,530

9,920

10,157

459,542

173,952

67,530

385,514

Torreon

 

94,892

17,425

12,233

10,605

23,661

427,761

145,686

12,233

288,688

Zacatecas

 

71,292

10,512

7,480

8,024

20,756

278,600

104,243

7,480

212,775

Border

 

 

 

 

 

 

 

 

 

Ciudad Juarez

 

199,685

37,736

27,949

12,717

60,241

685,696

251,677

32,311

376,574

Reynosa

 

58,010

11,500

55,366

9,553

9,171

724,866

445,447

55,366

596,461

Hotel

 

 

 

 

 

 

 

 

 

NH T2 Hotel

 

110,299

40,301

(8,609)

498,674

201,062

187

Hilton Garden Inn

 

32,614

11,430

(6,918)

297,470

31,397

3,628

Industrial Park:

 

  

 

 

 

 

 

 

 

 

VYNMSA

 

56,454

23,621

24,082

494,223

277,183

107,952

Other

 

2,671,873

36,688

1,621,773

18,275,746

6,327,815

10,945

Total

 

2,966,362

 

3,665,473

 

1,280,339

 

443,927

 

2,485,163

 

35,263,499

 

11,087,689

 

1,430,117

 

10,356,661

Eliminations

 

(23,804)

(2,494,434)

(26,470)

(8,583)

(763,696)

(17,071,919)

(3,722,356)

(28,634)

(127,006)

Consolidated

 

Ps.

2,942,558

  

Ps.

1,171,039

 

Ps.

1,253,869

  

Ps.

435,344

 

Ps.

1,721,468

 

Ps.

18,191,580

  

Ps.

7,365,333

 

Ps.

1,401,483

  

Ps.

10,229,656

F-67


    

    

    

Construction

    

Depreciation

    

    

    

    

    

Investments

Aeronautical

Non-aeronautical

services

and

Operating

Assets per

Liabilities per

Capital

in airport

December 31, 2019

revenues

revenues

revenues

amortization

income

segment

segment

investments

concessions

Metropolitan

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Monterrey

    

Ps.

2,641,052

  

Ps.

726,685

    

Ps.

323,035

  

Ps.

111,020

    

Ps.

473,615

  

Ps.

5,715,147

  

Ps.

941,349

    

Ps.

331,393

  

Ps.

3,168,968

Tourist

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Acapulco

 

227,954

 

40,241

 

63,102

 

43,286

 

53,812

 

1,419,091

 

452,731

 

63,333

 

1,269,386

Mazatlán

 

321,313

 

52,857

 

34,573

 

17,514

 

52,626

 

1,261,473

 

153,667

 

34,573

 

541,430

Zihuatanejo

 

191,512

 

25,596

 

22,876

 

18,660

 

43,614

 

605,929

 

122,048

 

22,876

 

524,549

Regional

 

  

 

  

 

  

 

 

 

 

 

 

Chihuahua

 

411,393

67,021

124,701

17,974

67,379

888,950

157,533

135,394

699,711

Culiacan

 

617,979

66,286

68,960

18,658

96,278

1,021,410

140,294

69,834

579,084

Durango

 

150,130

13,433

36,677

7,537

23,014

329,251

104,720

36,677

210,111

San Luis Potosi

 

174,340

35,631

110,743

12,857

27,938

736,196

470,919

110,743

639,981

Tampico

 

197,160

28,057

61,823

9,218

31,808

424,573

143,603

61,823

326,939

Torreon

 

201,446

23,683

18,343

9,883

31,658

394,575

129,541

18,639

285,823

Zacatecas

 

141,500

13,945

6,842

7,813

31,135

276,150

113,357

6,842

212,224

Border

 

  

 

  

 

  

 

 

 

 

 

 

Ciudad Juarez

 

380,271

55,990

17,650

11,799

61,374

602,764

211,678

31,452

362,169

Reynosa

 

113,515

18,240

112,031

8,189

26,375

676,207

400,642

113,242

549,139

Hotel

 

  

 

  

 

  

 

 

 

 

 

 

NH T2 Hotel

 

255,393

39,546

77,325

518,590

201,012

9,190

Hilton Garden Inn

 

103,474

11,382

32,345

301,362

34,001

82

Industrial Park:

  

 

  

 

  

 

 

 

 

 

 

VYNMSA

41,981

19,548

15,622

390,478

185,094

46,160

Other

 

5,651,607

50,368

4,891,268

17,432,325

6,554,142

3,194

Total

 

5,769,565

 

7,220,120

 

1,001,356

 

415,252

 

6,037,186

 

32,994,471

 

10,516,331

 

1,095,447

 

9,369,514

Eliminations

 

(16,903)

(5,400,515)

(46,522)

(1,181,880)

(15,717,510)

(3,126,865)

(46,522)

(102,403)

Consolidated

 

Ps.

5,752,662

  

Ps.

1,819,605

 

Ps.

954,834

  

Ps.

415,252

 

Ps.

4,855,306

 

Ps.

17,276,961

  

Ps.

7,389,466

 

Ps.

1,048,925

  

Ps.

9,267,111

F-68


    

    

    

Construction

    

Depreciation

    

    

    

    

    

Investments

Aeronautical

Non-aeronautical

services

and

Operating

Assets per

Liabilities per

Capital

in airport

December 31, 2018

revenues

revenues

revenues

amortization

income

segment

segment

investments

concessions

Metropolitan

Monterrey

    

Ps.

2,447,993

  

Ps.

649,393

    

Ps.

232,698

  

Ps.

103,454

    

Ps.

815,055

  

Ps.

5,350,950

  

Ps.

742,350

    

Ps.

282,514

  

Ps.

2,935,333

Tourist

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Acapulco

 

182,663

 

34,279

 

279,099

 

33,125

 

43,460

 

1,415,909

 

467,444

 

279,099

 

1,246,261

Mazatlán

 

276,126

 

46,754

 

31,308

 

16,594

 

81,654

 

1,256,447

 

164,075

 

31,306

 

523,655

Zihuatanejo

 

167,578

 

22,934

 

13,534

 

18,266

 

43,595

 

617,071

 

117,245

 

13,587

 

518,134

Regional

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Chihuahua

 

364,755

56,128

141,546

13,462

103,980

874,960

170,457

141,908

590,944

Culiacan

 

539,540

57,313

33,888

17,408

145,767

978,514

153,687

34,035

526,881

Durango

 

112,310

10,822

13,788

6,558

29,339

294,355

76,831

13,788

179,567

San Luis Potosi

 

167,030

30,275

231,726

8,711

39,665

635,811

385,551

231,726

540,721

Tampico

 

190,502

26,891

26,169

8,604

47,618

333,070

75,739

26,169

273,340

Torreon

 

184,396

22,655

19,990

9,426

48,883

352,659

111,946

19,990

276,164

Zacatecas

 

105,626

11,935

9,655

7,460

27,667

261,320

86,236

9,656

212,093

Border

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Ciudad Juarez

 

310,892

45,287

9,096

11,631

89,551

496,472

153,823

9,096

353,807

Reynosa

 

106,867

14,810

144,830

7,909

30,104

567,054

309,368

153,562

443,771

Hotel

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

NH T2 Hotel

 

246,065

22,969

67,250

308,727

29,626

5,772

Hilton Garden Inn

100,051

10,840

28,973

248,633

7,260

5,208

Industrial Park:

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

VYNMSA

28,190

14,260

8,276

344,931

139,277

97,153

Other

 

4,433,390

41,068

4,135,788

15,504,577

6,069,798

5,616

Total

 

5,156,278

 

5,837,172

 

1,187,327

 

351,745

 

5,786,625

 

29,841,460

 

9,260,713

 

1,360,185

 

8,620,671

Eliminations

 

(16,226)

(4,211,675)

(45,822)

(1,654,089)

(14,250,976)

(2,182,156)

(45,822)

(54,015)

Consolidated

 

Ps.

5,140,052

  

Ps.

1,625,497

 

Ps.

1,141,505

  

Ps.

351,745

 

Ps.

4,132,536

 

Ps.

15,590,484

  

Ps.

7,078,557

 

Ps.

1,314,363

  

Ps.

8,566,656

F-69


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 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 “work load unit” that may be earned at an airport each year from regulated sources. Under this regulation, a work load 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 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:

Year ended December 31, 

2020

    

2019

    

2018

Aeronautical services:

  

 

  

 

  

Domestic TUA

Ps.

1,857,551

  

Ps.

3,776,401

  

Ps.

3,382,198

International TUA

542,933

 

1,207,989

 

1,061,793

Landing charges

147,387

 

229,919

 

205,787

Platform for embarking and disembarking

90,257

 

150,055

 

136,852

Aircraft parking charges on extended stay or overnight

31,905

 

35,910

 

36,402

Domestic and international passenger and carry-on baggage check

29,688

 

62,970

 

54,570

Aerocars and jetways

19,920

 

48,074

 

47,956

Other airport services, leases and regulated access rights(2)

222,917

 

241,344

 

214,494

Total revenues from aeronautical services

Ps.

2,942,558

  

Ps.

5,752,662

  

Ps.

5,140,052

F-70


Year ended December 31, 

    

2020

    

2019

    

2018

Non-aeronautical services:

 

  

 

  

 

  

Commercial activities

 

  

 

  

 

  

Car parking charges

    

Ps.

126,818

  

Ps.

279,463

  

Ps.

244,461

Advertising(1)(2)

 

59,695

76,200

68,475

Retail operations(1)(2)

 

64,486

124,554

114,418

Food and beverage(1)(2)

 

87,499

144,374

120,828

Car rental operators(1)(2)

 

111,037

149,454

131,478

Time share developers(1)(2)

 

12,683

16,663

14,115

Financial services(2)(3)

 

7,853

10,367

9,255

Communication and services(1)(2)

 

17,800

16,006

15,551

Services to passenger

 

3,281

4,127

2,746

VIP lounges

 

36,538

51,176

36,649

Other services

 

44,300

43,542

36,607

Total revenue from commercial activities

 

571,990

915,926

 

794,583

Diversification activities:

 

  

  

 

  

Hotel services

 

141,890

357,032

 

344,307

OMA Carga

 

183,382

194,936

 

177,396

Real estate services

 

16,499

18,181

 

16,352

Industrial services

 

51,272

39,451

 

26,340

Other services

 

7,547

4,966

 

4,061

Total diversification activities

 

400,590

614,566

 

568,456

Complementary activities:

 

  

  

 

  

Leasing of space(1)(2)

 

85,729

83,477

 

74,887

Access rights

 

15,819

19,709

 

18,023

Documented baggage inspection

 

86,491

175,006

 

153,192

Other services (CUSS and CUTE)

 

10,420

10,921

 

16,356

Total of complimentary activities

 

198,459

289,113

 

262,458

Total revenue from non-aeronautical services

 

Ps.

1,171,039

  

Ps.

1,819,605

  

Ps.

1,625,497


(1)These revenues are considered as commercial concessions.

(2)Revenues from commercial concessions and complementary activities are generated principally based on the terms of Company’s operating lease agreements. Lease agreements are based on either a monthly rent (which generally increases each year based on the NCPI) and/or the greater of a monthly minimum guaranteed rent or a percentage of the lessee’s monthly revenues. Monthly rent and minimum guaranteed rent are included under the caption “Commercial concessions” above.

Approximately 77%, of consolidated revenues for the years ended December 31, 2020 and 2019 and 2018 generated by the Monterrey, Acapulco, Mazatlán, Culiacán, Chihuahua, Ciudad Juárez, and San Luis de Potosí airports.

F-71


27.         Cost of services

The cost of services is as follows:

Year ended December 31, 

    

2020

    

2019

    

2018

Wages and salaries

    

Ps.

227,076

  

Ps.

242,237

  

Ps.

231,753

Maintenance

 

124,563

 

177,191

 

152,583

Security and insurance

 

134,774

 

161,351

 

170,549

Utilities (electric, cleaning and water)

 

122,961

 

177,250

 

210,158

Building lease

 

2,543

 

15,683

 

44,359

Allowance for doubtful accounts

 

17,738

 

(241)

 

(5,960)

Cost of hotel service

 

30,650

 

85,706

 

65,853

Employee statutory profit sharing

 

1,917

 

236

 

1,099

Equipment lease, fees and others

 

103,736

 

94,794

 

107,502

 

Ps.

765,958

  

Ps.

954,207

  

Ps.

977,896

28. Subsequent event

Issuance OMA Debt

On April 16, 2021, the Company issued Ps. 3,500,000 through 5- and 7-year term debt securities in the Mexican market. The 5-year debt security, with a principal amount of Ps. 1,000,000, accrues interest at a variable rate of 28-day TIIE plus 75 basis points with principal amount to be paid at maturity on April 10, 2026. The 7-year debt security, with a principal amount of Ps. 2,500,000, accrues interest at a fixed rate of 7.83% with principal amount to be paid at maturity on April 7, 2028. The proceeds of the issuances were used to redeem, on April 19, 2021, the Ps. 3,000,000 debt securities maturing in June 2021 and will fund eligible investments under the Company’s Master Development Program.

2021 Annual Shareholders’ Meeting

The Annual Meeting for the Shareholders of the Company was held on April 21, 2021. The General Ordinary Shareholders’ Meeting approved the declaration and payment of a cash dividend to shareholders of up to Ps. 2,000 million and delegated to the Board of Directors the power to determine the amount to be paid out, which will come from accumulated earnings, as well as the date or dates and forms of payment. The declaration of the aforementioned dividend will become effective as of the date the Board makes its determination.

29.         Authorization for the issuance of the consolidated financial statements

The Company’s consolidated financial statements were authorized for issuance on April 30, 2021, 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.

* * * * * *

F-72