ASR

Business Context and Reporting Period

Company: Southeast Airport Group (Grupo Aeroportuario del Sureste, S.A.B. de C.V. or ASUR)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2009
Accounting Standards: Mexican Financial Reporting Standards (MFRS), with reconciliations to U.S. GAAP provided.
Business Overview: ASUR operates nine airports in the southeast region of Mexico under 50-year concessions. The portfolio is heavily concentrated in Cancún International Airport, which generated 77.3% of total revenues in 2009. The company derives revenue from aeronautical services (regulated) and non-aeronautical services (commercial activities).

Key Financial Metrics (2009)

Note: All figures in thousands of Mexican Pesos unless otherwise noted. 2009 figures are in nominal pesos; 2008 figures are in nominal pesos. 2007 figures were in constant pesos.

Material Changes vs. Prior Period

• Revenue Decline: Total revenues decreased 1.2% to Ps. 3,131.2 million, driven by a 12.5% drop in passenger traffic (15.5 million passengers in 2009 vs. 17.8 million in 2008). This decline was attributed to the global economic recession and the H1N1 influenza outbreak in early 2009.
• Net Income Drop: Net income fell 24.0% to Ps. 797.4 million. The decrease was primarily due to lower interest income (resulting from lower Mexican interest rates) and foreign exchange losses due to peso appreciation, partially offset by stable non-aeronautical revenues.
• Non-Aeronautical Resilience: Despite the traffic drop, non-aeronautical revenues increased 2.0% to Ps. 1,088.5 million. Revenue per passenger increased 17.2%, driven by higher commercial spending and favorable exchange rate effects on dollar-denominated contracts.
• Cost Management: Total operating expenses increased slightly by 0.5% to Ps. 1,793.9 million, primarily due to a 4.7% increase in depreciation and amortization related to new assets (Terminal 3 and second runway at Cancún).
• Liquidity Reduction: Cash and marketable securities decreased significantly by 44.5% to Ps. 961.4 million, largely due to a substantial dividend payment of Ps. 1,884.0 million.

Guidance, Outlook, and Risks

• Outlook: Management expects the U.S. and Mexican economies to continue recovering. The company believes its airports are well-positioned to benefit from the recovery due to the relative affordability of Mexican destinations compared to Florida or the Caribbean.
• Capital Expenditures: The company has committed investments of Ps. 4,688.1 million for the period 2009–2013 under its Master Development Plans. In 2009, capital expenditures were Ps. 676.7 million, primarily for the second runway at Cancún.
• Key Risks:
  • Concentration Risk: 77.3% of revenues and 71.9% of passenger traffic come from Cancún International Airport.
  • Regulatory Risk: Revenues are subject to a "dual-till" price regulation system. Exceeding maximum rates can result in penalties or concession termination. A new airport in the Mayan Riviera is being planned, which could impact Cancún traffic.
  • Customer Concentration: Top five airline customers accounted for approximately 25% of revenues in 2009.
  • Foreign Exchange: Fluctuations in the peso affect the dollar value of dividends and the conversion of dollar-denominated tariffs into pesos, potentially causing the company to exceed maximum regulated rates.
  • Natural Disasters: The region is prone to hurricanes, which have historically disrupted operations.

Investor Verification Checklist

• Verify Passenger Traffic Trends: Confirm the recovery trajectory of passenger traffic, particularly from the U.S., given the 12.5% decline in 2009.
• Review Regulatory Compliance: Assess the company's ability to manage regulated tariffs without exceeding maximum rates, especially given peso volatility.
• Monitor Mayan Riviera Airport: Track the bidding process and potential impact of the new Mayan Riviera airport on Cancún's market share.
• Assess Dividend Sustainability: Evaluate the ability to maintain high dividend payouts (Ps. 6.28 per share in 2009) given the reduction in cash reserves and net income.
• Check Airline Solvency: Monitor the financial health of major airline customers (e.g., Mexicana, Aeromexico, American, Continental) to assess credit risk on passenger charges.