ASR

Business Context and Reporting Period

Company: Southeast Airport Group (Grupo Aeroportuario del Sureste, S.A. de C.V.)
Filing Type: Form 6-K (Foreign Private Issuer)
Reporting Period: Third Quarter (3Q) and Nine Months (9M) ended September 30, 2005.
Business Overview: ASUR operates nine airports in southeastern Mexico, including the major hubs of Cancun and Cozumel. The company is listed on the NYSE (ASR) and the Mexican Bolsa (ASUR).

Key Financial Metrics

Third Quarter 2005 (3Q05)

• Total Revenues: Ps. 537.9 million (up 1.68% YoY).
• EBITDA: Ps. 331.8 million (up 0.33% YoY); Margin 61.68%.
• Operating Income: Ps. 224.7 million (down 1.31% YoY); Margin 41.78%.
• Net Income: Ps. 168.3 million (up 19.70% YoY).
• Earnings Per Share (EPS): Ps. 0.5611 (US$ 0.5200 per ADS).
• Passenger Traffic: 3.375 million (down 4.82% YoY).

Nine Months 2005 (9M05)

• Total Revenues: Ps. 1,711.7 million (up 11.45% YoY).
• EBITDA: Ps. 1,082.4 million (up 10.71% YoY); Margin 63.24%.
• Operating Income: Ps. 762.4 million (up 13.16% YoY); Margin 44.54%.
• Net Income: Ps. 548.3 million (up 32.04% YoY).
• Earnings Per Share (EPS): Ps. 1.8278 (US$ 1.6938 per ADS).
• Passenger Traffic: 11.182 million (up 4.50% YoY).

Liquidity and Balance Sheet (as of Sept 30, 2005)

• Cash and Marketable Securities: Ps. 1,483.7 million.
• Total Assets: Ps. 13,683.8 million.
• Total Liabilities: Ps. 867.6 million (6.34% of total assets).
• Shareholder Equity: Ps. 12,816.2 million (93.65% of total assets).
• Capital Expenditures (9M): Ps. 438.0 million.

Material Changes vs. Prior Period

Revenue Drivers

• Non-Aeronautical Revenues: Increased 26.27% in 3Q05 and 31.78% in 9M05. This was primarily driven by a 29.39% (3Q) and 35.62% (9M) surge in commercial revenues.
• Arbitration Windfall: A significant portion of the commercial revenue increase resulted from a Ps. 32.5 million back-rent payment from Dufry Mexico and a Ps. 9.9 million payment from Aldeasa, mandated by an International Court of Arbitration ruling in ASUR's favor.
• Aeronautical Revenues: Declined 7.32% in 3Q05 due to lower passenger traffic but grew 4.74% over the nine-month period.

Cost Structure

• Operating Costs: Increased 3.94% in 3Q05 and 10.11% in 9M05.
• Cost of Services: Rose 10.26% (3Q) and 18.59% (9M), driven by higher maintenance, union wage increases (effective Oct 2004), and costs associated with direct operations of restaurants and convenience stores previously run by concessionaires.
• Administrative Expenses: Decreased 19.19% (3Q) and 8.67% (9M) due to lower consulting fees and organizational reorganization.

Traffic Trends

• 3Q05 Decline: Total traffic fell 4.82% YoY. Domestic traffic dropped 4.12% and international traffic dropped 5.34%. Management attributes this largely to the impact of Hurricane Emily (July 2005), which closed significant hotel inventory in Cancun and Cozumel.
• 9M05 Growth: Despite the Q3 decline, the nine-month period showed a 4.50% increase in total traffic, with international traffic up 7.60%.

Outlook, Risks, and Contingencies

Hurricane Wilma Impact (Critical Risk)

The filing explicitly states that the reported results do not reflect the impact of Hurricane Wilma, which struck the Yucatan Peninsula on October 20, 2005.

• Operational Status: Cancun and Cozumel airports were closed as of the filing date (Oct 25, 2005). Reopening dates and flight cancellation counts were not yet quantified.
• Damage Assessment: The company could not yet quantify damage to airport infrastructure, administrative offices, or regional hotel infrastructure.

Management Commentary

• Commercial Revenue Per Passenger: Increased 35.46% in 3Q05 to Ps. 44.13, largely due to the arbitration payments. Excluding these one-time items, revenue per passenger declined 1.80% due to the strong Mexican Peso.
• Tariff Regulation: Regulated revenues accounted for 75.01% of total income for the nine-month period. The Ministry of Communications and Transportation reviews compliance annually.

Investor Verification Checklist

• Hurricane Wilma Damage: Verify the extent of physical damage to Cancun and Cozumel airports and the timeline for reopening, as this is the primary near-term risk not reflected in the financials.
• One-Time Revenue Impact: Assess the sustainability of commercial revenue growth by excluding the Ps. 42.4 million in arbitration-related payments (Dufry and Aldeasa) to understand organic performance.
• Hotel Recovery: Monitor the recovery rate of hotel rooms in Cancun and Cozumel following Hurricane Emily, as this directly correlates with passenger traffic volumes.
• Cost Inflation: Review the trajectory of "Cost of Services," which rose significantly due to union wage increases and direct operational costs, to ensure margins remain stable.
• Currency Exposure: Evaluate the impact of the Mexican Peso's appreciation against the US Dollar on future commercial revenue per passenger.