PAC

Business Context and Reporting Period

Company: Grupo Aeroportuario del Pacífico, S.A.B. de C.V. (Pacific Airport Group)

Filing Type: Form 20-F (Annual Report)

Reporting Period: Fiscal year ended December 31, 2009

Overview: The Company operates 12 airports in the Pacific and central regions of Mexico under 50-year concessions. It is the largest private airport operator in the Americas. The 2009 fiscal year was significantly impacted by the global economic recession, the H1N1 influenza outbreak, and the suspension of operations by several key airline customers.

Key Financial Metrics (MFRS)

Note: US$ amounts translated at Ps. 13.0576 per US$1.00 (Dec 31, 2009 rate). Financial statements prepared under Mexican Financial Reporting Standards (MFRS).

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 6.4% to Ps. 3,266.2 million. Aeronautical revenues fell 8.1% due to a 13.3% drop in terminal passenger traffic (19.3 million passengers in 2009 vs. 22.3 million in 2008). Non-aeronautical revenues remained flat (+0.1%) despite traffic declines, driven by higher per-passenger spending and inflation adjustments in commercial leases.
• Profitability Compression: Operating income decreased 10.6% to Ps. 1,293.9 million. Operating margin contracted by 190 basis points to 39.6% due to the disproportionate drop in revenue compared to fixed costs.
• Cost Management: Total operating costs decreased 3.4% to Ps. 1,972.4 million. Cost of services dropped 8.8% due to reduced utility usage, lower employee costs (restructuring), and a smaller provision for doubtful accounts compared to 2008.
• Financing Income Volatility: Net comprehensive financing income plummeted 72.9% to Ps. 58.2 million. This was primarily due to an exchange loss of Ps. 26.1 million (vs. a gain of Ps. 92.4 million in 2008) resulting from the appreciation of the Mexican peso against the US dollar in late 2009.
• Capital Expenditures: Capital expenditures were Ps. 542.1 million in 2009, primarily for runways and aprons. Funding shifted from 72.8% cash-flow funded in 2007 to 26.6% cash-flow funded in 2009, with the balance financed via bank loans.

Guidance, Outlook, Risks, and Unusual Items

Outlook and Guidance

• Capital Expenditures: The Company expects 2010 capital expenditures to be approximately Ps. 553.9 million, funded by cash flows and new bank loans.
• Regulatory Framework: New maximum rates for the 2010-2014 period were approved in December 2009. The Company intends to set prices close to these maximum rates.
• Accounting Transition: The Company plans to transition to International Financial Reporting Standards (IFRS) beginning January 1, 2012.

Material Risks and Contingencies

• Shareholder Dispute: A significant dispute arose regarding the validity of the Board of Directors and the Chairman following the April 2010 shareholder meeting. This led to a temporary suspension of trading on the NYSE and Mexican Stock Exchange (June 2-14, 2010). The Company asserts its Board is duly organized under Mexican law, but the dispute remains a governance risk.
• Economic Sensitivity: The business is highly sensitive to the US and Mexican economies. In 2009, 87.7% of international passengers traveled on flights to/from the US. A recession in either country directly impacts traffic.
• Airline Insolvencies: The suspension of operations by airlines such as Aviacsa, Aerocalifornia, and Avolar in 2008-2009 materially reduced traffic. The Company has renegotiated collection agreements to require collateral for grace periods to mitigate future credit risk.
• Regulatory Risks: The Company faces risks regarding the potential termination of concessions if maximum rates are exceeded (due to peso depreciation) or if investment obligations are not met. There are also ongoing legal proceedings regarding property tax claims by municipalities and land restitution claims at Tijuana International Airport.
• Health Crises: The H1N1 outbreak in 2009 caused a temporary but severe decline in traffic. While restrictions were lifted, the risk of future outbreaks remains.

Investor Verification Checklist

• Shareholder Dispute Resolution: Verify the outcome of the June 2010 Board meeting and the status of the July 22, 2010 shareholder meeting to confirm the stability of the Board of Directors and management.
• Airline Customer Concentration: Review the current status of major airline customers (Aeroméxico, Mexicana, Volaris) and their financial health, as they represent a significant portion of revenue.
• Exchange Rate Exposure: Monitor the MXN/USD exchange rate, as international passenger charges are dollar-denominated but collected in pesos; significant appreciation of the peso could reduce revenue realization.
• Concession Compliance: Confirm that the Company remains in compliance with the 2010-2014 Master Development Program investment obligations to avoid regulatory sanctions.
• Legal Proceedings: Track the status of the Tijuana airport land restitution case and municipal property tax claims, which could result in significant liabilities or operational disruptions.