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, 2005

Business Overview: ASUR operates nine airports in the southeastern region of Mexico under 50-year concessions granted by the Mexican government. The portfolio includes Cancun International Airport (the second busiest in Mexico), Cozumel, Merida, Huatulco, Oaxaca, Veracruz, Villahermosa, Tapachula, and Minatitlan. Revenues are derived from aeronautical services (regulated) and non-aeronautical services (commercial activities).

Key Financial Metrics (Year Ended Dec 31, 2005)

Note: Financial data is presented in constant Mexican Pesos (Ps.) as of December 31, 2005, in accordance with Mexican GAAP. U.S. Dollar translations are provided for convenience at an exchange rate of Ps. 10.6344 to U.S.$1.00.

Material Changes vs. Prior Period (2004)

• Revenue: Total revenues increased 1.1% to Ps. 2,063.8 million. This was driven by an 18.8% increase in non-aeronautical revenues (commercial activities), which offset a 4.8% decline in aeronautical revenues.
• Passenger Traffic: Total passengers decreased 4.1% to 13.3 million. International passenger traffic declined 5.4%, primarily due to the impact of Hurricanes Wilma and Emily on the Cancun and Cozumel regions.
• Operating Income: Decreased 7.6% to Ps. 799.4 million. The decline was caused by the failure of revenue growth to offset a 7.5% increase in operating expenses.
• Net Income: Decreased 10.2% to Ps. 563.2 million (Mexican GAAP) compared to Ps. 627.2 million in 2004.
• Extraordinary Items: The company recorded a net loss on natural disasters of Ps. 8.964 million related to Hurricane Wilma, which caused severe damage to infrastructure in Cancun and Cozumel.

Guidance, Outlook, Risks, and Unusual Items

Management Commentary and Outlook

• Hurricane Wilma Impact: The storm caused extensive damage to hotel infrastructure in Cancun and the Mayan Riviera, leading to a 33.1% drop in passenger traffic in Q4 2005. The charter terminal at Cancun remains closed, with passengers routed to the main terminal.
• Recovery: As of December 31, 2005, only 54.7% of hotel rooms in Cancun were operational. Management expects tourism levels to recover but notes uncertainty regarding the timeline.
• Capital Projects: Construction began on a new terminal at Cancun International Airport in December 2005, estimated to cost U.S.$100 million. Studies for a second runway at Cancun are underway.
• Dividends: Stockholders approved a net ordinary cash dividend of Ps. 0.682 per share for 2005, payable in May 2006.

Risks and Contingencies

• Natural Disasters: The southeast region is prone to hurricanes. The company has property damage insurance but lacks business interruption insurance. Insurance premiums increased significantly following Hurricane Wilma.
• Regulatory Risk: Revenues are subject to a "dual-till" price regulation system. Exceeding maximum rates can result in fines or concession termination. The company is not in compliance with certain regulatory requirements, which could lead to sanctions if repeated.
• Concession Termination: Concessions may be terminated for non-performance, failure to make committed investments, or if the government determines it is in the public interest to revoke them.
• Customer Concentration: The company relies heavily on a few major airlines (Mexicana, American Airlines, Aeromexico, Continental) and the operations of Mexico City International Airport for domestic traffic.
• Competition: The Mexican government intends to grant a concession for a new airport in the Mayan Riviera, which could compete with Cancun International Airport.

Important Facts for Investor Verification

• Accounting Standards: Verify the significant differences between Mexican GAAP and U.S. GAAP, particularly regarding the amortization of airport concessions and the treatment of inflation, which result in vastly different equity and asset valuations.
• Hurricane Recovery Timeline: Monitor the actual recovery rate of hotel occupancy in Cancun and the Mayan Riviera to assess the sustainability of passenger traffic volumes.
• Regulatory Compliance: Review the status of the company's compliance with the Mexican Airport Law and the Ministry of Communications and Transportation's stance on the noted violations.
• Concession Fee Structure: Confirm the stability of the 5% concession fee paid to the Mexican government and the potential for future increases.
• ITA Relationship: Understand the influence of ITA (Inversiones y Tecnicas Aeroportuarias), which holds 15% of capital stock and has veto rights over certain corporate actions and management appointments.