CALCULATION OF REGISTRATION FEE

 

 

Filed Pursuant to Rule 424(b)(5)
Registration No. 333-168486

Prospectus supplement
(To prospectus dated August 3, 2010)

 

 

Grupo Aeroportuario del Sureste, S.A.B. de C.V.

 

43,612,930 Series B shares

directly or in the form of

American depositary shares

 

The selling stockholder named in this prospectus supplement is offering 43,612,930 of our Series B shares, with no par value, directly or in the form of American depositary shares, or ADSs. Each ADS represents ten Series B shares. In this offering, the selling stockholder will offer 41,812,930 Series B shares (directly or in the form of ADSs) internationally and 1,800,000 Series B shares in a concurrent private placement in Mexico. We will not receive any proceeds from any Series B shares or ADSs sold in this offering.

 

The ADSs are listed on the New York Stock Exchange under the symbol “ASR” and the Series B shares are listed on the Bolsa Mexicana de Valores, S.A.B. de C.V. (Mexican Stock Exchange) under the symbol “ASUR.” On August 11, 2010, the last reported sales price of the ADSs on the New York Stock Exchange was US$45.73 per ADS and the last reported sales price of the Series B shares on the Mexican Stock Exchange was Ps.58.40 per Series B share (US$4.55 per Series B Share at an exchange rate of Ps.12.8306 per U.S. dollar).

 

Investing in the ADSs and Series B shares involves risks. See “Risk Factors” beginning on page 7 of our annual report on Form 20-F for the year ended December 31, 2009, incorporated by reference herein, as well as “Risk Factors” beginning on page S-13 hereof.

 

 

 

The selling stockholder has granted an option to the underwriters to purchase up to 4,361,290 additional Series B shares, directly or in the form of ADSs, to cover over-allotments, if any, within 30 days from the date of this prospectus supplement.

 

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the ADSs or the Series B shares, or determined if this prospectus supplement or the accompanying prospectus are truthful or complete. Any representation to the contrary is a criminal offense.

 

The Series B shares and ADSs described in this prospectus supplement and the accompanying prospectus are not being offered, sold or traded in Mexico pursuant to a public offering in accordance with the Ley del Mercado de Valores, as amended (the “Mexican Securities Market Law”), nor is the offering contemplated hereby being authorized by the Comision Nacional Bancaria y de Valores (Mexican Banking and Securities Commission, or “CNBV”), therefore, any such Series B shares and ADSs may not be offered or sold publicly, or otherwise be the subject of brokerage activities, in Mexico, except pursuant to a private placement exemption set forth under Article 8 of the Mexican Securities Market Law. THIS PROSPECTUS IS SOLELY OUR RESPONSIBILITY AND HAS NOT BEEN REVIEWED OR AUTHORIZED BY THE CNBV. As required under the Mexican Securities Market Law, we will notify the CNBV of the sale of the securities including the principal characteristics of the offering outside of Mexico pursuant to Article 7 of the Mexican Securities Market Law. Such notice will be delivered to the CNBV to comply with a legal requirement and for information purposes only, and the delivery to and the receipt by the CNBV of such notice does not constitute or imply any certification as to the investment quality of the Series B shares and ADSs, our solvency, liquidity or credit quality or the accuracy or completeness of the information provided in this prospectus supplement and the accompanying prospectus. In making an investment decision, all investors, including any Mexican investors who may acquire Series B share or ADSs from time to time, must rely on their own review and examination of our company. The acquisition of the Series B shares or ADSs by an investor who is a resident of Mexico will be made under its own responsibility. This prospectus supplement may not be distributed publicly in Mexico.

 

The underwriters expect that delivery will be made to investors on or about August 17, 2010 in book-entry form, in the case of the ADSs through The Depository Trust Company and in the case of Series B shares through S.D. Indeval, Institucion para el Deposito de Valores, S.A. de C.V.

 

 

August 11, 2010

 

Table of contents

 

Prospectus Supplement

 

 

Prospectus

 

 

 

 

 

You should rely only on the information contained in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference therein. We authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information appearing in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference therein may only be accurate as of their respective dates. Our business, financial condition, results of operations and prospects may have changed since such dates.

 

 

 

As used in this prospectus supplement, “ASUR”, “we,” “our”, “us” and the “company” refer to Grupo Aeroportuario del Sureste, S.A.B. de C.V. and its consolidated subsidiaries.

 

Our financial statements are prepared in accordance with Normas de Informacion Financiera (Financial Reporting Standards) accepted in Mexico (“Mexican NIF”), which differs in certain significant respects from generally accepted accounting principles in the United States (“U.S. GAAP”). Note 19 to our annual financial statements included in our annual report on Form 20-F for the year ended December 31, 2009, incorporated herein by reference (our “2009 Annual Report”), provides a description of the principal differences between Mexican NIF and U.S. GAAP as they relate to our business, and a reconciliation to U.S. GAAP of our net income and total stockholders’ equity as of and for the years ended December 31, 2007, 2008 and 2009. In addition, see “Results of Operations for the Six Months Ended June 30, 2009 and 2010—New Accounting Pronouncements” and “Recent Developments—Adoption of INIF 17” in this prospectus supplement for a discussion of recent changes to Mexican NIF.

 

We publish our financial statements in Mexican pesos. Pursuant to Mexican NIF, financial data throughout this prospectus supplement and our 2009 Annual Report are stated in constant pesos as of December 31, 2007 for periods through and including December 31, 2007, and nominal pesos for periods beginning on and after January 1, 2008. Mexican NIF provides that if the cumulative inflation in Mexico measured by the índice nacional de precios al consumidor (national consumer price index, or “NCPI”) in the most recent three-year period is less than 26%, we are required to suspend recognition of the effects of inflation in our financial statements for the fiscal year following such period. Because the cumulative NCPI in each of the three-year periods ended December 31, 2007 and December 31, 2008 was below 26%, we suspended recognition of the effects of inflation in our financial statements as of and for the years ended December 31, 2008 and December 31, 2009 and as of and for the six months ended June 30, 2009 and 2010.

 

References in this prospectus supplement to “dollars,” “U.S. dollars” or “US$” are to the lawful currency of the United States of America. References in this prospectus supplement to “pesos” or “Ps.” are to the lawful currency of Mexico.

 

This prospectus supplement contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. These translations should not be construed as representations that the peso amounts actually represent such U.S. dollar amounts or could be converted into U.S. dollars at the rate indicated. Unless otherwise indicated, U.S. dollar amounts have been translated from Mexican pesos at an exchange rate of Ps.12.8306 to US$1.00, the exchange rate for pesos on June 30, 2010 as published by the Federal Reserve Board. On August 6, 2010, the exchange rate for pesos, as published by the Federal Reserve Board was Ps.12.6667 to US$1.00.

 

This prospectus supplement contains references to “workload units,” which are units measuring an airport’s passenger traffic volume and cargo volume. A workload unit currently is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.

 

Summary

		Year ended December 31,																				Six months ended June 30,
(in thousands)		2005				2006				2007				2008				2009				2009				2010
Cancún			9,301.5				9,728.1				11,340.0				12,646.5				11,174.9				6,052.6				6,749.7
Mérida			1,021.9				1,007.2				1,267.5				1,280.8				1,058.6				495.5				557.7
Cozumel			486.6				370.7				511.1				525.4				435.7				252.7				265.8
Villahermosa			717.4				725.0				853.8				959.0				766.4				375.7				357.0
Oaxaca			563.7				495.6				514.1				594.4				523.1				265.5				232.7
Veracruz			579.4				718.0				976.6				981.1				852.6				411.2				429.6
Huatulco			312.0				375.3				375.9				366.0				388.1				210.3				213.3
Tapachula			192.3				188.1				210.9				240.1				190.4				107.0				92.9
Minatitlán			146.5				171.9				188.9				159.0				146.0				68.4				67.9
Total			13,321.3				13,779.9				16,238.8				17,752.4				15,535.8				8,238.9				8,966.6

(1)		Excludes transit and general aviation.

		Year ended December 31,																				Six months ended June 30,
		2005				2006				2007				2008				2009				2009				2010
Cancún			93,761				97,228				114,067				121,397				110,937				66,618				66,017
Mérida			25,449				27,610				34,686				33,207				28,551				18,127				16,267
Cozumel			13,381				12,122				13,801				16,283				16,269				9,049				8,609
Villahermosa			19,892				21,098				27,351				25,295				20,541				14,116				10,008
Oaxaca			17,796				16,148				15,578				17,866				17,188				8,897				8,716
Veracruz			20,520				24,905				32,308				31,243				30,708				16,585				17,408
Huatulco			6,996				7,179				7,041				6,978				6,954				3,676				3,692
Tapachula			6,169				6,621				7,441				9,765				8,431				5,384				4,146
Minatitlán			5,937				7,625				9,999				8,050				6,910				3,964				3,087
Total			209,901				220,536				262,272				270,084				246,489				146,416				137,950

(1)		Includes departures and landings.

		Year ended December 31,												Six months ended June 30,
		2007(1)				2008(2)				2009(2)				2009(2)				2010(2)
Aeronautical services		Ps.	1,890,950			Ps.	2,101,879			Ps.	2,042,647			Ps.	1,083,561			Ps.	1,227,427
Non-Aeronautical services			894,941				1,066,828				1,088,537				579,505				641,977
Construction services			—				—				—				—				217,667
Total		Ps.	2,785,891			Ps.	3,168,707			Ps.	3,131,184			Ps.	1,663,066			Ps.	2,087,071

(1)		Thousands of constant pesos as of December 31, 2007.
(2)		Thousands of nominal pesos.

•	New category of revenues and cost. Under INIF 17, an operator of a service concession that is required to make capital improvements to concessioned assets, such as us, is deemed to provide construction or upgrade services. As a result, the operator is required to account for the revenues and expenses relating to those services. In our case, because we hire a third party to provide construction and upgrade services, our revenues relating to construction or upgrade services are equal to our expenses for those services. Revenues related to construction and upgrade services are presented in a new category of revenues called “Construction services” and expenses related to construction and upgrade services are presented in a new category of expenses called “Costs of construction”.
•	Intangible assets and change in amortization rates. Under INIF 17, all infrastructure to which an operator of a service concession is given access by the grantor of the concession service agreement and the upgrades to that infrastructure made by the operator are recognized as an intangible asset. These assets are amortized over the concession period. As a result, we are required to include all fixed assets under “Airport Concessions, net” and to modify amortization rates in accordance with the remaining period of the concession, using the straight line method, for those fixed assets constructed or acquired in the past. Previously we amortized fixed assets based on the estimated remaining useful life of the particular asset.

•	an increase of Ps.217.7 million in revenues, all of which is attributable to the new category of revenues called “Construction services”;
•	an increase of Ps.217.7 million in operating expenses, all of which is attributable to the new category of expenses called “Costs of construction”;
•	a decrease of Ps.132.0 million in depreciation and amortization; and
•	an increase of Ps.19.7 million in deferred income tax and an increase of Ps.9.7 million in deferred IETU (Impuesto Empresarial a Tasa Unica).

•	a net increase of Ps.693.0 million in total assets;
•	a net increase of Ps.165.1 million in total liabilities; and
•	a net increase of Ps.527.9 million in stockholders’ equity.

Issuer		Grupo Aeroportuario del Sureste, S.A.B. de C.V.
Selling stockholder		JMEX B.V.
Shares offered		43,612,930 Series B shares, directly or in the form of ADSs. In this offering, the selling stockholder will offer 41,812,930 Series B shares (directly or in the form of ADS) internationally and 1,800,000 Series B shares in a concurrent private placement in Mexico, subject to reallocation.
ADSs		Each ADS represents ten Series B shares. See “Description of the ADSs” in the accompanying prospectus for further information.
Over-allotment option		The selling stockholder has granted an option to the underwriters to purchase up to 4,361,290 additional Series B shares, directly or in the form of ADSs, to cover over-allotments, if any, within 30 days from the date of this prospectus supplement.
Use of proceeds		We will not receive any proceeds from the sale of ADSs or Series B shares in this offering.
Listing		The ADSs are listed on the New York Stock Exchange under the symbol “ASR.” The Series B shares are listed on the Mexican Stock Exchange under the symbol “ASUR.”
ADS depositary		The Bank of New York Mellon
Settlement		Settlement of the ADSs will be made through The Depository Trust Company, or DTC. Settlement of Series B shares will be made through S.D. Indeval Institucion para el Depósito de Valores, S.A. de C.V., or Indeval.
Lock-up agreements		We and the selling stockholder have agreed that, for a period of 90 days from the date of this prospectus supplement, we and they will not, subject to certain exceptions, without the prior written consent of the representatives of the underwriters, directly or indirectly, sell, dispose of or hedge any ADSs or Series B shares or any securities convertible into or exchangeable for ADSs or Series B shares. See “Underwriting” for more information.
Authorized and outstanding capital stock of the issuer		300,000,000 ordinary shares, consisting of 277,050,000 Series B shares and 22,950,000 Series BB shares.

Voting rights		Holders of our ordinary shares are entitled to one vote per share; however, holders of our Series BB shares have certain special voting rights. Subject to Mexican law and the terms of the deposit agreement, holders of ADSs will have the right to instruct The Bank of New York Mellon how to vote the number of Series B shares represented by their ADSs. See “Description of Our Capital Stock” and “Description of the ADSs” in the accompanying prospectus.
Dividends		We do not have a dividend policy and cannot assure you that we will pay dividends in the future. The holders of ADSs will be entitled to receive dividends to the same extent as the owners of shares of our capital stock, subject to deduction of any fees and charges of the depositary. See “Dividends” in our 2009 Annual Report incorporated herein by reference.
Taxation		Under Mexican income tax law, dividends, either in cash or in kind, paid to non-resident holders with respect to the Series B shares or ADSs are not subject to any Mexican withholding taxes payable on behalf of the holders. Gain on the sale of ADSs by a non-resident holder will generally not be subject to any Mexican tax. Gain on the sale of Series B shares by a non-resident holder will not be subject to any Mexican tax if the transaction is carried out through the Mexican Stock Exchange or a securities market approved by the Mexican Ministry of Finance and Public Credit among other requirements. See “Taxation” in the accompanying prospectus.
Risk factors		See “Risk Factors” beginning on page S-13 as well as on page 7 of our 2009 Annual Report incorporated herein by reference for a discussion of certain risk factors relating to us, our business and an investment in the ADSs and Series B shares.

Conflicts of interest		The selling stockholder is an affiliate of Macquarie Capital (USA) Inc. Affiliates of Macquarie Capital (USA) Inc. (including the selling stockholder) beneficially own more than 10% of our capital stock. Because Macquarie Capital (USA) Inc. is an underwriter in this offering and its affiliates beneficially own more than 10% of our capital stock, the underwriters are deemed to have a “conflict of interest” under Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc., which are overseen by the U.S. Financial Industry Regulatory Authority (FINRA). Accordingly, this offering will be made in compliance with the applicable provisions of Rule 2720. Pursuant to Rule 2720, the appointment of a qualified independent underwriter is not necessary in connection with this offering, as the offering is of equity securities that have a bona fide public market. For more information, see “Conflicts of interest.”

 

We have set forth risk factors in our 2009 Annual Report incorporated herein by reference. We have also set forth below additional risk factors related to developments since our 2009 Annual Report. We may include further risk factors in subsequent reports on Form 6-K incorporated in the prospectus of which this prospectus supplement forms part. You should carefully consider all these risk factors in addition to the other information contained or incorporated by reference in this prospectus supplement and accompanying prospectus before making an investment decision regarding the ADSs and Series B shares.

 

Risks related to our operations

 

Fernando Chico Pardo, through his own investment vehicles and his interest in Inversiones y Tecnicas Aeroportuarias, S.A. de C.V., or ITA, has a significant influence as a stockholder and over our management, and his interests may differ from those of other stockholders.

 

Servicios Estrategia Patrimonial, S.A. de C.V. (formerly, Agrupación Aeroportuaria Internacional, S.A. de C.V.) and Agrupación Aeroportuaria Internacional II, S.A. de C.V., entities indirectly owned and controlled by Fernando Chico Pardo, now own approximately 25.4% of our capital stock.

 

In addition, ITA, an entity, which, assuming consummation of the sale of Copenhagen Airports A/S’s interest to Mr. Chico Pardo, will be owned 100% by Mr. Chico Pardo, holds Series BB shares representing 7.65% of our capital stock. See “Recent Developments—Copenhagen Airports Agrees to Sell Its Ownership Interest in ITA”. These Series BB shares provide it with special management rights. For example, pursuant to our bylaws, ITA is entitled to present the board of directors the name or names of the candidates for appointment as chief executive officer, to remove our chief executive officer and to appoint and remove one half of the executive officers, and to elect two members of our board of directors. Our bylaws also provide ITA veto rights with respect to certain corporate actions (including some requiring approval of our stockholders) so long as its Series BB shares represent at least 7.65% of our capital stock. Special rights granted to ITA are more fully described in “Additional Information” and “Major Stockholders and Related Party Transactions” in our 2009 Annual Report, incorporated herein by reference.

 

As a result of this ownership and these transactions, Mr. Chico Pardo, who is also the Chairman of our Board of Directors and our Chief Executive Officer, directly and indirectly, would own 33.04% of our total capital stock, and is able to exert a significant influence over our management and matters requiring the approval of our stockholders. The interests of Mr. Chico Pardo may differ from those of our other stockholders, and there can be no assurance that Mr. Chico Pardo will exercise his rights in ways that favor the interests of our other stockholders. Furthermore, this concentration of ownership by Mr. Chico Pardo and the special rights indirectly granted to Mr. Chico Pardo through his ownership in ITA may have the effect of impeding a merger, consolidation, takeover or other business combination involving ASUR.

 

The effects of oil spills could adversely affect our business.

 

The Gulf of Mexico is the site of widespread deepwater oil drilling and extraction. Deepwater oil drilling inherently carries a number of significant risks.

 

On April 20, 2010, there was an explosion on the “Deepwater Horizon” drilling platform operated by BP in the Gulf of Mexico. The oil-drilling platform was located approximately

41 miles from the coast of Louisiana. The explosion and sinking of the platform caused a huge oil spill that is spreading along the U.S. coast in the Gulf of Mexico, and has reached parts of Florida, Louisiana, Mississippi, Alabama and Texas. BP has made several attempts to try to contain the spill and capture the oil. As of the date of this prospectus supplement, it is not known whether those attempts have been successful.

 

The U.S. National Oceanic and Atmospheric Administration has estimated that hurricane season this year in the Gulf of Mexico may be more severe than usual. According to experts, the sea currents in the Gulf of Mexico will be changing over the coming months with the development of weather patterns that could cause the oil spill in the Gulf of Mexico to reach the Mexican coast.

 

Some experts have said the oil spill caused by the explosion of the “Deepwater Horizon” platform could become the worst environmental disaster in U.S. history. We do not know whether the spill will reach the coast of Mexico or the extent of ecological damage that may result to areas served by our airports. Some estimates indicate that the worst of the damage may not be fully known or realized until October or November of 2010.

 

If the spill reaches destinations served by our airports or if other oil spills or similar disasters occur, these destinations could be adversely affected, thereby reducing our volume of passenger traffic. Oil spills or other similar disasters in or around the destinations used by our airport could adversely affect our business, operating results, prospects and financial condition.

 

The adoption of IFRS may result in changes to our results of operations, balance sheet and statement of cash flows.

 

All Mexican issuers are required to adopt International Financial Reporting Standards, or IFRS, as their accounting standard, no later than fiscal years beginning on or after January 1, 2012. We intend to adopt IFRS as our accounting standard for the fiscal year beginning January 1, 2011. We are currently evaluating the impact that the adoption of IFRS may have on our results of operations, balance sheet, and statement of cash flows. Because IFRS differs in certain material respects from Mexican FRS, we cannot assure you that the adoption of IFRS will not have a material adverse effect on our results of operations, balance sheet, and statement of cash flows.

 

The recent bankruptcy filing by Mexicana may affect our business and results of operations.

 

The global airline industry has recently experienced and continues to experience significant financial difficulties, marked by the filing for bankruptcy protection of several carriers and warnings regarding industry profitability. On August 2, 2010, Mexicana, one of Mexico’s two largest carriers, filed for bankruptcy protection in Mexico and in the United States. Mexicana (not including Mexicana Click, formerly known as Aerovías Caribe, or Mexicana Link, which are reportedly not under financial distress and were not part of the bankruptcy filing) accounted for Ps.62.2 million in accounts receivable at June 30, 2010 and accounted for 4.1% of our revenues for the six months ended June 30, 2010 and 4.3% of our revenues for the year ended December 31, 2009, primarily from domestic passengers. Although we anticipate that a significant portion of Mexicana’s traffic would migrate to other carriers if its operations were curtailed, we do not have contracts with any airlines, including Mexicana, that obligate them to continue providing service to our airports, and we can offer no assurance that competing airlines would seek to increase their flight schedules if Mexicana reduced its use of our airports. If Mexicana were to cease operations as a result of its bankruptcy filling, our business and

results of operations could be adversely affected if traffic does not migrate to our other airline customers.

 

The FAA downgraded Mexico’s air safety rating to Category 2, which may result in a decrease in air traffic between the United States and our airports.

 

On July 30, 2010, the United States Federal Aviation Administration (“FAA”) announced that, following an assessment of the country’s civil aviation authority, it had determined that Mexico was not in compliance with international safety standards set by the International Civil Aviation Organization (ICAO), and, as a result, downgraded Mexico’s aviation safety rating from “Category 1” to “Category 2”. Under FAA regulations, because of this downgrade, Mexican airlines will not be permitted to expand or change their current operations between the United States and Mexico except under certain limited circumstances, code-sharing arrangements between Mexican and U.S. airlines may be suspended, and operations by Mexican airlines flying to the United States will be subject to greater FAA oversight. These additional regulatory requirements may result in reduced service between our airports and the United States by Mexican airlines or an increase in the cost of that service, which may result in a decrease in demand for travel between our airports and the United States. Approximately 1.6% of the passengers that traveled through our airports traveled on flights to or from the United States operated by Mexican airlines in each of 2009 and the first six months of 2010, respectively. We cannot predict what impact the downgrade of the Mexican aviation safety rating will have on our passenger traffic or results of operations, or on the public perception of the safety of Mexican airports.

 

Risks relating to the ADSs and Series B shares

 

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

 

Future sales of substantial amounts of our common stock or the perception that such future sales may occur, may depress the price of our ADSs and Series B shares. Neither our stockholders (other than the selling stockholder in this offering) nor our directors and officers will be subject to any lock-up agreements in connection with the offering, and as a result, they will be able to freely transfer their Series B shares immediately following the offering. Any such sale may lead to a decline in the price of our ADSs and Series B shares. We cannot assure you that the price of our ADSs and Series B shares would recover from any such decline in value.

 

We will not receive any proceeds from the sale of ADSs or Series B shares by the selling stockholder.

 

The following table sets forth, for the periods indicated, the high, low, average and period-end, free-market exchange rate expressed in pesos per U.S. dollar. The average annual rates presented in the following table were calculated using the average of the exchange rates on the last day of each month during the relevant period. The data provided in this table is based on noon buying rates published by the Federal Reserve Bank of New York for cable transfers in pesos for the periods ended December 31, 2005 through December 31, 2008. The Federal Reserve Bank of New York discontinued the publication of foreign exchange rates on December 31, 2008, and therefore, the data provided for the periods beginning January 1, 2009 are based on the rates published by the U.S. Federal Reserve Board in its H.10 Weekly Release of Foreign Exchange Rates. We have not restated the rates in constant currency units. All amounts are stated in pesos. We make no representation that the peso amounts referred to in this prospectus supplement could have been or could be converted into U.S. dollars at any particular rate or at all.

 

 

 

 

Except for the period from September through December 1982, during a liquidity crisis, the Mexican Central Bank has consistently made foreign currency available to Mexican private-sector entities (such as us) to meet their foreign currency obligations. Nevertheless, in the event of renewed shortages of foreign currency, there can be no assurance that foreign currency would continue to be available to private-sector companies or that foreign currency needed by us to service foreign currency obligations or to import goods could be purchased in the open market without substantial additional cost.

 

Fluctuations in the exchange rate between the peso and the U.S. dollar will affect the U.S. dollar value of securities traded on the Mexican Stock Exchange, and, as a result, will likely also affect the market price of the ADSs. Such fluctuations will also affect the U.S. dollar conversion by the depositary of any cash dividends paid in pesos.

 

On December 31, 2009, the Federal Reserve Bank of New York noon buying rate was Ps.13.06 per US$1.00. On August 6, 2010, the exchange rate for pesos, as published by the Federal Reserve Board was Ps.12.67 to US$1.00.

 

The following table sets forth our consolidated capitalization under Mexican NIF, as of June 30, 2010. This table should be read together with our audited consolidated financial statements and the other financial information in our 2009 Annual Report, which is incorporated herein by reference, and our unaudited condensed consolidated interim financial statements as of and for the six months ended June 30, 2009 and 2010 included in this prospectus supplement.

 

 

 

The following table sets forth, for the five most recent financial years, the high and low market prices for (i) the ADSs on the New York Stock Exchange in U.S. dollars and (ii) our Series B shares on the Mexican Stock Exchange in pesos. The information set forth in the table below reflects actual historical amounts at the trade dates and has not been restated in constant pesos.

 

 

 

Sources: Mexican Stock Exchange and the New York Stock Exchange.

 

On August 11, 2010, the last reported sales price of the ADSs on the New York Stock Exchange was US$45.73 per ADS and the last reported sales price of the Series B shares on the Mexican Stock Exchange was Ps.58.40 per Series B share.

 

The following tables present a summary of our consolidated financial and operating information and that of our subsidiaries for each of the periods indicated. This information should be read in conjunction with, and is qualified in its entirety by reference to, our financial statements, including the notes thereto. Our financial statements are prepared in accordance with Mexican NIF, which differs in certain significant respects from generally accepted accounting principles in the United States, or U.S. GAAP. Note 19 to our audited annual consolidated financial statements included in our 2009 Annual Report, incorporated herein by reference, provides a description of the principal differences between Mexican NIF and U.S. GAAP as they relate to our business.

 

Information as of and for the six months ended June 30, 2009 and 2010 has been derived from, should be read in conjunction with and is qualified in its entirety by reference to, our unaudited consolidated interim financial statements and the notes thereto, included in this prospectus supplement. The unaudited financial information presented below has been prepared on the same basis as our audited annual consolidated financial statements, and, in our opinion, includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial condition and results of operation as of the dates and for the periods specified. Results for the six months ended June 30, 2010 are not, however, necessarily indicative of results to be expected for the full year 2010.

 

 

 

 

The following discussion should be read in conjunction with, and is entirely qualified by reference to, our unaudited consolidated condensed financial statements as of and for the six months ended June 30, 2010 and the notes thereto, included in this prospectus supplement. Our unaudited consolidated condensed financial statements have been prepared in accordance with Mexican NIF, which differs in certain significant respects from U.S. GAAP. Our results of operations for the six-month period ended June 30, 2010 are not necessarily indicative of results to be expected for the entire fiscal year. The following discussion should also be read in conjunction with “Operating and Financial Review and Prospects” in our 2009 Annual Report, incorporated herein by reference.

 

Our results as of and for the six months ended June 30, 2010 include the effects of INIF 17 and, as a result, may not be comparable to prior periods. See “Recent Developments—Adoption of INIF 17”.

 

Passenger traffic

 

For the first half of 2010, total passenger traffic increased by 8.8% as compared to the first half of 2009. International passenger traffic increased by 11.4% while domestic passenger traffic increased by 4.8%. The 11.4% increase in international passenger traffic resulted mainly from an increase of 11.7%, 12.5%, 17.7% and 11.0% in international traffic at the Cancún, Mérida, Veracruz and Villahermosa airports, respectively. The 4.8% increase in domestic passenger traffic resulted mainly from increases of 11.1%, 12.6%, and 3.4% in domestic traffic at the Cancún, Mérida and Veracruz airports, respectively.

 

On April 28, 2009, the World Health Organization announced the outbreak of the H1N1 Influenza in Mexico. Mainly as a result of the outbreak and the global recession, total passenger traffic in 2009 declined 2.1% in April, 50.7% in May, 28.4% in June, 16.7% in July, 12.8% in August, 10.7% in September, 7.2% in October, 7.1% in November and 4.1% in December, as compared to the corresponding months in 2008. During 2010, total passenger traffic declined by 4.6% in January, 6.9% in February, increased 0.2% in March, decreased 0.9% in April, and increased 85.8% in May and 25.5% in June, as compared to the corresponding months in 2009.

Domestic passengers

 

 

Note: Passenger figures exclude transit and general aviation passengers.

 

International passengers

 

 

Note: Passenger figures exclude transit and general aviation passengers.

Total passengers

 

 

Note: Passenger figures exclude transit and general aviation passengers.

 

Consolidated results

 

Consolidated revenues for the first half of 2010 increased by 25.5% as compared to the first half of 2009 to Ps.2,087.1 million. This was mainly due to: increases of 13.3% in revenues from aeronautical services, principally as a result of the 8.8% increase in passenger traffic during the period and 10.8% in revenues from non-aeronautical services, principally as a result of the 10.3% rise in commercial revenues detailed below; and initial recognition of Ps.217.7 million in revenues from construction services as a result of our adoption of INIF 17. See “Recent Developments—Adoption of INIF 17” in this prospectus supplement. Total revenues per workload unit increased 14.8% from Ps.196.4 in the first half of 2009 to Ps.225.4 in the first half of 2010 due to a 25.5% increase in revenues which more than offset the 9.4% increase in workload units from 8.5 million in the first half of 2009 to 9.3 million in the first half of 2010.

 

Our consolidated revenues from aeronautical services, net of rebates, increased 13.3% to Ps.1, 227.4 million in the first half of 2010 from Ps.1,083.6 million in the first half of 2009. Revenues from passenger charges increased 14.4% to Ps. 949.1 million over the same period in 2010 (77.3% of our aeronautical revenues during the period) from Ps.829.5 million in the first half of 2009 (76.6% of our aeronautical revenues during the period), principally because of an increase in passenger volume and an increase in rates that took effect in the third quarter of 2009. See “Information on the Company—Regulatory Framework—Price Regulation-Current Maximum Rates” in our 2009 Annual Report, incorporated herein by reference, for a discussion of the increase in maximum rates. Aeronautical revenues per workload unit increased 3.6% from Ps.128.0 in the first half of 2009 to Ps.132.6 in the first half of 2010.

 

Revenues from non-aeronautical services increased 10.8% to Ps.642.0 million in the first half of 2010 from Ps.579.5 million in the first half of 2009. The primary factor influencing the change in non-aeronautical revenue was a 10.3% increase in commercial revenues, in large part due to the 8.8% increase in passenger volume. There were increases in revenues of: 7.0% in duty-free stores; 11.9% in retail operations; 14.8% in food and beverage; 68.9% in banking and currency

exchange services; 17.2% in car rentals; 25.7% in ground transportation services and 9.1% in other revenues. These increases were partially offset by revenue declines of: 5.7% in parking lot fees; 9.2% in advertising; and 23.1% in teleservices. Non-aeronautical revenue per terminal passenger increased 1.3%, to Ps.69.3 per passenger in the first half of 2010 from Ps.68.4 per passenger in the first half of 2009.

 

Our revenues from regulated sources in the first half of 2010 were Ps.1,287.5 million, a 12.9% increase compared to Ps.1,140.2 million during the first half of 2009, mainly due to the increase in total passenger traffic of 8.8%. During the first half of 2010, Ps.581.9 million of our revenues was derived from non-regulated sources, a 11.3% increase from the Ps.522.9 million of revenues derived from non-regulated sources for the first half of 2009. This increase was primarily due to the 10.3% increase in commercial revenues described above, from Ps.502.7 million in the first half of 2009 to Ps.554.5 million in 2010. See “Operating and Financial Review and Prospects—Classification of Revenues and Price Regulation” in our 2009 Annual Report, incorporated herein by reference, for a discussion of our price regulation system.

 

Total operating expenses for the first half of 2010 increased 16.0% as compared to the first half of 2009. This was primarily due to: increases of 45.4% in general and administrative expenses, principally in labor costs resulting from the reassignment of employees from certain operating areas of Cancún airport (whose employee costs are recorded as a cost of service) to corporate (whose employee costs are recorded as a general and administrative expense) and higher professional fees; 4.9% in cost of services resulting from the increase in passenger traffic and higher energy cost and equipment lease charges; 13.3% in technical assistance fees, reflecting the corresponding increase in our consolidated earnings before comprehensive financing costs, income taxes, and depreciation and amortization, which is the basis used to determine the technical assistance fees during the period; and 14.3% in concession fees paid to the Mexican government, mainly due to higher revenues and an increase in the taxable base (a factor in the calculation of the fee); as well as initial recognition of Ps.217.7 million in costs of construction services as a result of our adoption of INIF 17. See ‘‘Operating and Financial Review and Prospects—Operating Costs—Technical Assistance Fee and Government Concession Fee” in our 2009 Annual Report, incorporated herein by reference, for a discussion of the technical assistance and government concession fees, and “Recent Developments—Adoption of INIF 17” in this prospectus supplement for a discussion of the adoption of INIF 17. These increases were partially offset by a 43.5% decline in depreciation and amortization resulting from the difference between new investments in fixed assets, improvements made to concession assets and the end of their useful life and from the adoption of INIF 17, which requires us to amortize fixed assets constructed or acquired since 2008 in accordance with the remaining period of the concession, using the straight line method, whereas before, these assets were amortized in accordance with their estimated remaining useful life. Our operating expenses per workload unit increased 6.0% from Ps.105.39 in the first half of 2009 to Ps.111.75 in the first half of 2010.

 

Our operating margin increased to 50.4% in the first half of 2010 from 46.3% in the first half of 2009. This was mainly the result of a 25.5% increase in revenues that more than offset the 16.0% increase in operating expenses during the period.

 

Comprehensive financing cost for the first half of 2010 declined by Ps.8.0 million compared to the first half of 2009. During the first half of 2010, we reported net interest income of Ps.8 million, an exchange rate net gain of Ps.7.8 million and a mark-to-market loss in an interest rate swap of Ps.2.3 million. Net interest income resulted from interest income of Ps.25.3 million and accrued interest expense of Ps.17.3 million.

Income taxes

 

Following the changes in Mexican tax law that took effect January 1, 2008, which established a new flat rate business tax (Impuesto Empresarial a Tasa Unica, or “IETU”) and eliminated the asset tax, we evaluated and reviewed our deferred assets and liabilities position under Mexican NIF.

 

Under current tax law, our airports are taxed based on the higher of IETU or income tax. Any IETU amounts paid during the taxable year are applied to offset income tax liabilities. The provision for income taxes for the first half of 2010 declined by 7.2% to Ps.289.9 million, compared to Ps.312.5 million in the first half of 2009.

 

Of the total Ps.22.6 million reduction in income taxes, our provision for IETU decreased by Ps.66.9 million, which was partially offset by a Ps.44.3 million increase in the provision for income taxes as compared to the first half of 2009 because we currently estimate that Cancún airport will generate income tax liability rather than IETU in 2010.

 

Net income

 

Net income for the first half of 2010 increased 65.9% to Ps.775.1 million from Ps.467.2 million in the first half of 2009. Earnings per ordinary (Series B and Series BB) share for the first half of 2010 were Ps.2.5838, or earnings of US$2.0116 per ADS (one ADS represents ten Series B shares). This compares with earnings of Ps.1.5572 per ordinary share, or earnings of US$1.2124 per ADS, for the first half of 2009.

 

Balance sheet

 

On June 30, 2010, Airport Concessions represented 84.8% of our total assets, with current assets representing 11.7% and other assets representing 3.5%.

 

Cash and marketable securities on June 30, 2010 were Ps.590.7 million, a 38.6% decline from Ps.961.4 million on December 31, 2009. This was mainly the result of a Ps.750.0 million cash dividend paid in the second quarter of 2010 and bank loan payments in May and June of 2010 totalling Ps.363.6 million.

 

Stockholder’s equity as of June 30, 2010 was Ps.14,308.1 million and total liabilities were Ps.2,954.4 million, representing 82.9% and 17.1% of total assets, respectively. Total deferred tax liabilities represented 77.3% of our total liabilities.

 

Capital expenditures

 

During the first half of 2010, we made investments of Ps.217.7 million as part of our ongoing plan to modernize our airports pursuant to our master development plans.

 

Liquidity and capital resources

 

In the first six months of 2010, we generated Ps.1,250.7 million in cash flow from operating activities. Cash flow used in financing activities was Ps.1,409.4 million, as a result of payment of dividends of Ps.750.0 million and Ps.295.7 million of tax on dividends paid, and Ps.363.6 million in amortization of our bank loans. Cash flow used in investing activities in the first six months

of 2010 was Ps.212.0 million, principally for purchases of machinery, furniture, equipment and construction expenses related to our concessioned assets.

 

Total bank debt at June 30, 2010 was Ps.187.6 million. This reflects borrowings of Ps.600.0 million incurred in May and June 2009, total principal payments of Ps.418.2 million made in the fourth quarter of 2009 and the first half of 2010, and interest payable of Ps.5.8 million generated during the first half of 2010.

 

New accounting pronouncements

 

Mexican NIFs B-5 (“Financial Information by Segments”), B-9 (“Financial Information at Interim Dates”), C-1 (“Cash and Cash Equivalents”) and INIF 17 (“Service Concession Contracts”), issued by the CINIF, went into effect on January 1, 2010. We believe that these reporting standards and interpretation will not have a significant impact on our financial information with the exception of INIF 17, which addresses the accounting standards to be applied to concession contracts which require improvements to be made to concessioned assets. See “Recent Developments—Adoption of INIF 17” in this prospectus supplement.

 

Challenge to Riviera Maya bidding process

 

On May 11, 2010, the Mexican federal government initiated a public bidding process for a concession to build and operate a new airport in the Riviera Maya region, which is currently served primarily by Cancún International Airport. See “Risk Factors—Risks Related to the Regulation of Our Business—The Mexican government could grant new concessions that compete with our airports, including the Cancún International Airport” in our 2009 Annual Report, incorporated by reference herein.

 

On June 25, 2010, we filed a challenge (amparo) against the bidding process for the Riviera Maya Airport in the first district court of Mexico. The court has agreed to consider the challenge but did not grant our request for an injunction to temporarily stop the bidding process for the Riviera Maya airport concession. It is currently our intention to participate in the public bidding process for this airport, but we cannot assure you that we will participate, that we would be successful if we did participate, that the Comision Federal de Competencia (Federal Competition Commission) will permit us to participate in the bidding process, or under what conditions we will be permitted to participate.

 

ASUR to adopt IFRS beginning in 2011

 

All Mexican issuers are required to adopt International Financial Reporting Standards, or IFRS, as their accounting standard, no later than fiscal years beginning on or after January 1, 2012. We intend to adopt IFRS as our accounting standard for the fiscal year beginning January 1, 2011. We are currently evaluating the impact that the adoption of IFRS may have on our results of operations, balance sheet, and statement of cash flows. See “Risk Factors—Risks Related to Our Operations—The adoption of IFRS may result in changes to our results of operations, balance sheet and statement of cash flows” in this prospectus supplement.

 

Copenhagen Airports agrees to sell its ownership interest in ITA

 

On June 22, 2010, Copenhagen Airports A/S (“CPH”) entered into an agreement to sell its 49% aggregate interest in Inversiones y Tecnicas Aeroportuarias, S.A. de C.V., or ITA, to CPH’s local Mexican business partner and our CEO and Chairman, Fernando Chico Pardo. ITA is our strategic partner and the holder of our Series BB shares, which have special voting and management rights. See “Description of Our Capital Stock” in the accompanying prospectus for more information on the Series BB shares. Consummation of CPH’s sale of its stake in ITA to Fernando Chico Pardo is conditioned upon, among other things, approval by the Mexican authorities, including the Ministry of Communications and Transportation. We cannot assure you that such approvals will be obtained. If the sale is completed, CPH will no longer hold any interest in ITA, however, our Technical Assistance Agreement with ITA will continue in force until its scheduled termination. See “Operating and Financial Review and Prospects—Operating Costs—Technical Assistance Fee and Government Concession Fee” in our 2009 Annual Report, incorporated herein by reference, for a discussion of the technical assistance fee.

 

Adoption of INIF 17

 

On July 30, 2010, we announced that we had concluded our analysis of the effects of the adoption of INIF 17, “Service Concession Contracts”. INIF 17 was issued by the CINIF and became

effective in 2010. This new standard arose from the need to provide clarification on the accounting treatment to be followed for service concession contracts for services that are considered public in nature. INIF 17 incorporates into NIF C-3 the accounting treatment for the present value of the recognition of a long term receivable, and additionally, it modifies NIF D-7 to allow the recognition of executed and approved work to be collected or work to be approved as a non-current asset.

 

The following are the principal effects of INIF 17 on our results of operation and balance sheet:

 

 

The effects of INIF 17 are reflected in our unaudited interim financial statements as of and for the period ending June 30, 2010, and include the following net changes to our income statement:

 

 

Because of these net changes to our income statement, the adoption of INIF 17 resulted in an increase in net income of Ps.102.6 million during the first half of 2010.

 

In addition, the adoption of INIF 17 resulted in the following net changes to our balance sheet as of June 30, 2010:

 

 

The following table sets forth certain information regarding the shares of our capital stock, including shares represented by ADSs, held by the selling stockholder as of August 3, 2010 and as adjusted to show the effects of the offering.