OMAB 20-F DEF-14A Report Dec. 31, 2009 | Alphaminr
Central North Airport Group
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OMAB 20-F Report ended Dec. 31, 2009

Balance Sheet
Cash Flow
Income Statement
Debt
20-F 1 form20f.htm GRUPO AEROPORTUARIO DEL CENTRO NORTE 20-F 12-31-2009 form20f.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
Form 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009

Commission File Number: 1-33168
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
(Exact name of registrant as specified in its charter)
Central North Airport Group
United Mexican States
(Translation of registrant’s name into English)
(Jurisdiction of incorporation or organization)
Aeropuerto Internacional de Monterrey
Zona de Carga
Carretera Miguel Alemán, Km. 24 s/n
66600 Apodaca, Nuevo León, Mexico
(Address of principal executive offices)

José Luis Guerrero
Aeropuerto Internacional de Monterrey
Zona de Carga
Carretera Miguel Aleman, Km. 24 s/n
66600 Apodaca Nuevo Leon, Mexico
+ 52 81 8625 4327
jlguerrero@oma.aero
(Name, Telephone, E-mail and/or facsimile number and address of Company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class:
Name of each exchange
on which registered
American Depositary Shares each representing 8 Series B shares
The NASDAQ Stock Market LLC
Series B shares
The NASDAQ Stock Market LLC*
__________________________________
*
Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
N/A
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Title of each class:
Number of Shares
Series B Shares
341,200,000

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No T
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o No T
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o IFRS o Other þ
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 o Item 18 þ
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes o No þ
Page
ITEM 1.
1
ITEM 2.
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ITEM 3.
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1
5
6
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ITEM 4.
28
28
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65
84
85
ITEM 4A.
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ITEM 5.
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ITEM 6.
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ITEM 7.
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ITEM 8.
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129
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ITEM 9.
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ITEM 10.
137
151
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ITEM 11.
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ITEM 12.
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ITEM 12A.
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TABLE OF CONTENTS
(continued)
ITEM 12B.
155
ITEM 12C.
155
ITEM 12D.
155
ITEM 13.
157
ITEM 14.
157
ITEM 15.
157
ITEM 16.
160
ITEM 16A.
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ITEM 16B.
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ITEM 16C.
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ITEM 16D.
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ITEM 16E.
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ITEM 16F.
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ITEM 16G.
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ITEM 17.
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ITEM 18.
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ITEM 19.
169


PART I
Identity of Directors, Senior Management and Advisers
Not applicable.
Offer Statistics and Expected Timetable
Not applicable.
Key Information
SELECTED FINANCIAL DATA
We publish our financial statements in Mexican pesos.  Pursuant to Mexican Financial Reporting Standards accepted in Mexico ( Normas de Información Financiera ), or MFRS, financial data for all periods up through December 31, 2009 in the financial statements included in Items 3, 5 and 8 and, unless otherwise indicated, throughout this Form 20-F have been restated in constant pesos as of December 31, 2007, and financial data for all periods from and after January 1, 2008 in the financial statements included in Items 3, 5 and 8 and unless otherwise indicated, throughout this Form 20-F are expressed in nominal pesos.
This Form 20-F 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. 13.06 to U.S.$1.00, the noon buying rate for Mexican pesos on December 31, 2009, as published by the Federal Reserve Bank of New York.  On May 28, 2010, the Federal Reserve Bank of New York’s noon buying rate for Mexican pesos was Ps. 12.86 to U.S.$1.00.
The following tables present a summary of our audited consolidated financial information and that of our subsidiaries for each of the periods indicated.  This information should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements, including the notes thereto.  Our consolidated financial statements are prepared in accordance with Mexican Financial Reporting Standards (“MFRS”, individually referred to as Normas de Información Financiera or “NIFs”), which differ in certain significant respects from generally accepted accounting principles in the United States, or U.S. GAAP.  A reconciliation to U.S. GAAP to our net income and total stockholders’ equity is also provided in this summary financial data.  Information relating to the nature and effect of the principal differences between MFRS and U.S. GAAP is presented in Note 24 to the consolidated financial statements.
In accordance with the guidelines set forth in NIF B-10, “Effects of Inflation,” calendar years 2008 and 2007 are considered noninflationary economic environments because the recording of inflation effects is only required in an environment where the cumulative inflation over the three preceding years is equal to or greater than 26%.  Therefore, from January 1, 2008, we suspended the recognition of the effects of inflation on our financial statements.  The amounts in the accompanying consolidated financial statements as of and for the years ended December 31, 2009 and 2008 are expressed in nominal values.
References in this annual report on Form 20-F to “dollars,” “U.S. dollars” or “U.S.$” are to the lawful currency of the United States of America.  References in this annual report on Form 20-F to “pesos” or “Ps.” are to the lawful currency of Mexico.  We publish our financial statements in pesos.

This annual report on Form 20-F 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.

The summary financial and other information set forth below reflects our financial condition, results of operations and certain operating data since the year ended December 31, 2005.
Year ended December 31,
2005
2006
2007
2008
2009
(thousands of Mexican pesos)
(thousands of Mexican pesos)
(thousands of dollars) (1)
Statement of Income data:
MFRS:
Revenues:
Aeronautical services (2)
1,192,249 1,370,968 1,549,827 1,617,195 1,526,965 116,918
Non-aeronautical services (3)
287,628 316,343 347,526 371,281 369,312 28,278
Total revenues
1,479,877 1,687,311 1,897,353 1,988,476 1,896,277 145,196
Operating costs:
Costs of services
389,037 397,465 420,777 460,074 457,767 35,052
Administrative expenses
244,707 237,475 256,730 317,069 320,770 24,561
Technical assistance fee (4)
40,016 49,541 57,416 55,604 51,710 3,959
Concession tax (5)
72,643 84,635 98,307 101,642 94,756 7,255
Depreciation and amortization:
Depreciation (6)
22,560 28,257 32,872 39,306 47,979 3,673
Amortization (7)
205,246 263,839 303,330 327,413 363,911 27,865
Total depreciation and amortization
227,805 292,096 336,202 366,719 411,890 31,538
Total operating costs
974,208 1,061,212 1,169,432 1,301,108 1,336,893 102,365
Income from operations
505,669 626,099 727,921 687,368 559,384 42,831
Other income (expenses) net
3,853 (30,679 ) (7,584 ) 104,792 10,051 770
Net comprehensive financing income (cost)
29,613 70,328 96,218 (11,451 ) (22,126 ) (1,694 )
Income before income taxes
539,135 665,748 816,555 780,709 547,309 41,907
Income tax expense
158,029 196,511 785,363 238,906 77,785 5,956
Consolidated net income
381,106 469,237 31,192 541,803 469,524 35,951
Basic and diluted earnings per share (8)
0.9722 1.1874 0.0781 1.3672 1.1889 0.091
Basic and diluted earnings per ADS (8)
7.7778 9.4992 0.6248 10.9376 9.5112 0.728
U.S. GAAP:
Revenues
1,479,878 1,687,311 1,897,353 1,988,476 1,896,277 145,196
Income from operations
600,249 697,879 811,103 804,380 663,929 50,837
Consolidated net income
445,812 548,798 (118,318 ) 1,013,454 302,380 23,153
Basic (loss) earnings per share (8)
1.1459 1.4013 (0.2961 ) 2.5574 0.7656 0.0586
Diluted (loss) earnings per share (9)
1.1372 1.3909 (0.2961 ) 2.5386 0.7600 0.0582
Basic (loss) earnings per ADS (8)
9.1673 11.2110 (2.3688 ) 20.4592 6.1248 0.4690
Diluted (loss) earnings per ADS (9)
9.0976 11.1271 (2.3688 ) 20.3088 6.0800 0.4655
Other operating data:
Total terminal passengers (thousands of passengers) (10)
10,599 11,784 14,212 14,061 11,518 11,518
Total air traffic movements (thousands of movements)
362 383 424 387 327 327
Total revenues per terminal passenger (11)
139 143 134 141 165 13



Year ended December 31,
2005
2006
2007
2008
2009
(thousands of Mexican pesos)
(thousands of Mexican pesos)
(thousands of dollars) (1)
Balance Sheet data:
MFRS:
Cash and cash equivalents
1,706,604 1,672,994 1,756,704 257,420 267,734 20,500
Total current assets
2,009,260 2,143,271 2,084,057 926,245 884,405 67,720
Airport concessions—net
781,971 764,198 746,426 728,655 710,882 54,432
Rights to use airport facilities—net
4,252,072 4,126,235 4,000,390 3,874,510 3,748,762 287,042
Total assets
8,591,575 8,873,950 9,134,388 9,859,832 10,276,678 786,884
Current liabilities
155,331 184,236 407,096 1,145,793 1,037,603 79,449
Total liabilities
744,522 891,999 1,660,046 2,330,072 2,601,715 199,214
Total stockholders’ equity (12)
7,847,053 7,981,951 7,474,342 7,529,760 7,674,963 587,670
U.S. GAAP:
Cash and cash equivalents
1,706,604 1,672,994 1,756,704 257,420 267,734 20,500
Total current assets
2,009,260 2,143,271 2,084,057 929,695 884,405 67,719
Assets under concession (“Rights to use airport facilities” under MFRS)
957,456 917,497 877,388 837,291 797,545 61,068
Total assets
5,220,539 5,495,086 5,263,692 6,292,200 6,614,260 506,452
Current liabilities
184,870 203,844 421,398 1,158,298 1,037,603 79,449
Total liabilities
240,789 264,653 680,277 1,203,591 1,538,221 117,781
Total stockholders’ equity
4,979,750 5,230,433 4,583,415 5,088,609 5,076,039 388,671
Dividend per share
1.1167 1.1103 1.0856 1.0000 0.0766
Other data:
MFRS:
Net cash flows from operating activities 1
735,464 448,811 34,365
Net cash flows provided by financing activities
(352,146 ) 158,637 12,148
Net cash flows generated by (used in) investing activities
(1,882,602 ) (597,134 ) (45,724 )
(Decrease) increase in cash and cash equivalents
(1,499,284 ) 10,314 789
Net resources generated by operating activities
701,405 729,090 1,070,588
Net resources used in financing activities
(322,465 ) (328,868 )
Net resources used in investing activities
(293,516 ) (440,235 ) (658,010 )
Increase (decrease) in cash and cash equivalents
407,889 (33,610 ) 83,710
U.S. GAAP (13) :
Net cash provided by operating activities
692,739 694,103 1,036,011 799,809 431,757 33,059
Net cash used in investing activities
(286,083 ) (458,262 ) (657,018 ) (1,948,393 ) (619,227 ) (47,414 )
Net cash used in financing activities
- (322,465 ) (328,868 ) (350,700 ) 197,784 15,144
Effect of inflation accounting
1,234 53,014 33,585 - - -
Increase (decrease) in cash and cash equivalents
407,889 (33,610 ) 83,710 (1,499,284 ) 10,314 789

_______________________

(1)
Translated into dollars at the rate of Ps.13.06 per U.S. dollar, the U.S. Federal Reserve noon buying rate for Mexican pesos at December 31, 2009.  Per share dollar amounts are expressed in dollars (not thousands of dollars). Operating data is expressed in units indicated.
(2)
Revenues from aeronautical services principally consist of a fee for each departing passenger, aircraft landing fees based on the aircraft’s weight and arrival time, an aircraft parking fee, a fee for the transfer of passengers from the aircraft to the terminal building, a security charge for each departing passenger and other sources of revenues subject to regulation under our maximum rates.
(3)
Revenues from non-aeronautical services represent sources of revenues not subject to regulation under our maximum rates, and consist of revenues from car parking charges, leasing of commercial space to tenants, advertising, taxis, hotel business and other ground transportation providers and other miscellaneous sources of revenues.  Pursuant to our concessions and to the Airport Law and the regulations thereunder, parking services are currently excluded from aeronautical services under our maximum rates, although the Ministry of Communications and Transportation could decide to regulate such rates, and such rates may be regulated by other authorities.
(4)
On January 1, 2001, we began paying SETA a technical assistance fee under the technical assistance agreement entered into in connection with SETA’s purchase of its Series BB shares.  This fee is described in “Item 7.  Major Shareholders and Related Party Transaction – Related Party Transactions – Arrangements with SETA.”
(5)
Each of our subsidiary concession holders is required to pay a concession tax to the Mexican government under the Mexican Federal Duties Law for the use of public domain assets pursuant to the terms of its concession.  The concession tax is currently equal to 5% of each concession holder’s gross annual revenues.
(6)
Reflects depreciation of fixed assets.
(7)
Reflects amortization of airport concessions and rights to use airport facilities.
(8)
For MFRS purposes, based on 392,000,000 weighted average common shares outstanding in 2005, 395,173,149 weighted average common shares outstanding in 2006, 399,611,578 weighted average common shares outstanding in 2007, 396,284,313 weighted average common shares outstanding in 2008 and 394,934,855 weighted average common shares in 2009.  For U.S. GAAP purposes, based on 391,624,384 weighted average common shares outstanding in 2006, 399,611,578 weighted average common shares outstanding in 2007, 396,284,313 weighted average common shares outstanding in 2008 and 394,934,855 weighted average common shares in 2009 .  Earnings per ADS are based on the ratio of 8 Series B shares per ADS.
(9)
Based on 399,611,578 , 399,224,413 and 397,874,855 weighted average common shares and common share equivalents outstanding for the year ended December 31, 2007, 2008 and 2009, respectively.  Earnings per ADS are based on the ratio of 8 Series B shares per ADS.
(10)
Includes arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft).  Excludes transit passengers (passengers who arrive at our airports but generally depart without changing aircraft).
(11)
Total revenues for the period divided by terminal passengers for the period.  Expressed in pesos (not thousands of pesos).
(12)
Total stockholders’ equity under MFRS reflects the value assigned to our concessions.  Under U.S. GAAP, no value has been assigned to our concessions.
(13)
U.S. GAAP cash flow data is expressed in nominal Mexican pesos.

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 Mexican pesos.  All amounts are stated in pesos and have not been restated in constant currency units. We make no representation that the Mexican peso amounts referred to in this annual report could have been or could be converted into U.S. dollars at any particular rate or at all.
Exchange Rate
Year Ended December 31,
High
Low
Period End
Average (1)
2005
11.41 10.41 10.63 10.88
2006
11.46 10.43 10.80 10.91
2007
11.27 10.67 10.92 10.93
2008
13.94 9.92 13.83 11.14
2009
15.41 12.63 13.06 13.50
December 2009
13.08 12.63 13.06 12.86
2010:
January 2010
13.03 12.65 13.03 12.81
February 2010
13.19 12.76 12.76 12.94
March 2010
12.74 12.30 12.30 12.57
April 2010
12.41 12.16 12.23 12.24
May 2010
13.14 12.27 12.86 12.73
___________________
(1)
Average of month-end rates or daily rates, as applicable.
Source:  Federal Reserve noon buying rate.
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 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 noon buying rate was Ps. 13.06 per U.S.$1.00. On May 28, 2010, the Federal Reserve noon buying rate was Ps. 12.86 per U.S. $1.00.
For a discussion of the effects of fluctuations in the exchange rates between the peso and the U.S. dollar, see “Item 10.  Additional Information—Exchange Controls.”

RISK FACTORS
Risks Related to the Regulation of Our Business
We provide a public service regulated by the Mexican government, and our flexibility in managing our aeronautical activities is limited by the regulatory environment in which we operate.
Our aeronautical fees charged to airlines and passengers are regulated, like most airports in other countries.  In 2007, 2008 and 2009, approximately 81.7%, 81.3% and 80.5% respectively, of our total revenues were earned from regulated services, which are subject to price regulation under our maximum rates.  These regulations may limit our flexibility in operating our aeronautical activities, which could have a material adverse effect on our business, results of operations, prospects and financial condition.  In addition, several of the regulations applicable to our operations that affect our profitability are authorized (as in the case of our master development programs) or established (as in the case of our maximum rates) by the Ministry of Communications and Transportation for five-year terms.  Except under limited circumstances, we generally do not have the ability to unilaterally change our obligations (such as the investment obligations under our master development programs or the obligation under our concessions to provide a public service) or increase our maximum rates applicable under those regulations should the passenger traffic or other assumptions on which the regulations were based change during the applicable term.  In addition, there can be no assurance that this price regulation system will not be amended in a manner that would cause additional sources of our revenues to be regulated.
Our maximum rates and annual efficiency adjustments will be renegotiated in 2010.
This year, the Ministry of Communications and Transportation will set our maximum rates and annual efficiency adjustments for 2011 through 2016.  For a discussion of the framework for establishing our maximum rates and the application of these rates, see “Item 4.  Information on the Company—Regulatory Framework—Revenue Regulation.”  We are unable to predict what our maximum rates or annual efficiency adjustments will be for this period, and we cannot assure you that any changes to our maximum rates or annual efficiency adjustments for this period will not have a material adverse impact on our results of operations.
We cannot predict how the regulations governing our business will be applied.
Many of the laws, regulations and instruments that regulate our business were adopted or became effective in 1999, and there is only a limited history that would allow us to predict the impact of these legal requirements on our future operations.  In addition, although Mexican law establishes ranges of sanctions that might be imposed should we fail to comply with the terms of one of our concessions, the Mexican Airport Law ( Ley de Aeropuertos ) and its regulations or other applicable laws, we cannot predict the sanctions that are likely to be assessed for a given violation within these ranges.  We cannot assure that we will not encounter difficulties in complying with these laws, regulations and instruments.
Moreover, when determining our maximum rates for the next five-year period (from 2011 to 2015), the Ministry of Communications and Transportations may be solicited by different entities (such as, for example, the Mexican Federal Competition Commission ( Comisón Federal de Competencia or the “Competition Comission”) and the carriers operating at our airports) to modify our maximum rates, thus reducing our profitability.  Therefore, there can be no assurance that the laws and regulations governing our business, including the rate-setting process and the Mexican Airport Law, will not change in the future or be applied or interpreted in a way that could have a material adverse effect on our results of operations.

On October 1, 2007, the Chairman of the Mexican Federal Competition Commission released an independent report on the competitiveness of Mexico’s airports relative to each other and to international airports.  The Chairman’s report made the following recommendations as ways to increase efficiency at Mexican airports:
make economic efficiency a basis of tariff regulation for new concessions;
include income from commercial services as one of the factors in determining tariffs for new concessions;
strengthen the independence of the regulatory agency and increase the transparency of airport regulation;
promote greater efficiency in scheduling at airports with heavy volumes of passenger traffic;
promote greater competition between airports;
eliminate Aeropuertos y Servicios Auxiliares ’ role as exclusive fuel service provider;
eliminate barriers to entry for taxi providers at airports; and
be mindful of vertical integration among airports and airlines.
On February 26, 2009, a legislative initiative was filed with the Chamber of Representatives ( Cámara de Diputados ) of the Congress of the Mexican Union ( Congreso de la Union ) by representantives of PRD ( Partido de la Revolución Democrática ), PT ( Partido del Trabajo ) and CONVERGENCIA.
This initiative seeks to reform a substantial part of the current Mexican Airport Law, which regulates airport-related matters.  The initiative was sent to the Transport and Communications Commissions of the Congress to be analyzed and, if each commission determines that the initiative includes all the elements necessary to reform the law, then the initiative will be submitted to the Congress for its approval.  On March 25, 2010, the Transport and Communications Commissions released a negative opinion on this initiative.  The negative opinion must now be submitted to Congress for its approval.  If Congress approves this negative opinion it would end this legislative process and the initiative would be discarded.  The approval by Congress is still pending.  There can be no assurance that Congress will approve the Commissions’ negative opinion or that these committees or Congress will file other initiatives that seek to reform the current Mexican Airport Law.  Should the current Mexican Airport law be amended with respect to matters that are related to our operations, such amendment could have a material impact on our operations.
The regulations pursuant to which the maximum rates applicable to our aeronautical revenues are established do not guarantee that our consolidated results of operations, or that the results of operations of any airport, will be profitable.
The regulations applicable to our aeronautical activities establish an annual maximum rate for each airport, which is the maximum annual amount of revenues per workload unit (which is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from services subject to price regulation.  In December 2005, the Ministry of Communications and Transportation determined, based on the terms of our concessions, the maximum rates for our airports from January 1, 2006 through December 31, 2010.  Under the terms of our concessions, there is no guarantee that the results of operations of any airport will be profitable.

Our concessions provide that an airport’s maximum rates will be adjusted periodically for inflation (determined by reference to the Mexican producer price index, excluding fuel).  Although we are entitled to request additional adjustments to an airport’s maximum rates under certain circumstances including, among others, required capital investments not foreseen in the master development programs, decreases in capital investments attributable to Mexican economy-related passenger traffic decreases or modifications of the concession tax payable by us to the Mexican government, our concessions provide that such a request will be approved only if the Ministry of Communications and Transportation determines that certain limited events specified in our concessions have occurred.  Therefore, there can be no assurance that any such request would be granted.  If a request to increase an airport’s maximum rates is not granted, our results of operations and financial condition could be adversely affected, and the value of Series B shares and ADSs could decline.
If we exceed the maximum rate at any airport at the end of any year, we could be subject to sanctions.
Historically, we have set the prices we charge for aeronautical services at each airport in order to come as close as possible to its authorized maximum rate for that airport in any given year.  For example, in 2009, our revenues subject to maximum rate regulation represented approximately 95.1% of the amounts we were entitled to earn under the maximum rates for all of our airports.  There can be no assurance that we will be able to establish prices in the future that allow us to collect substantially all of the revenue we are entitled to earn from services subject to price regulation.
The specific prices we charge for aeronautical services are determined based on various factors, including projections of passenger traffic volumes, the Mexican producer price index (excluding fuel), the Mexican consumer price index and the value of the peso relative to the U.S. dollar.  These variables are outside of our control.  Our projections could differ from the applicable actual data, and, if these differences occur at the end of any year, they could cause us to exceed the maximum rate at any one or more of ours airports during that year.
If we exceed the maximum rate at any airport at the end of any year, the Ministry of Communications and Transportation may assess a fine and may reduce the maximum rate at that airport in the subsequent year.  The imposition of sanctions for violations of certain terms of a concession, including for exceeding an airport’s maximum rate, can result in termination of the concession if the relevant term has been violated and sanctions have been imposed at least three times.  In the event that any one of our concessions is terminated, our other concessions may also be terminated.  As of today, no sanctions have been imposed for any reason with respect to any of our concessions.
The Mexican government may terminate or reacquire our concessions under various circumstances, some of which are beyond our control.
Our concessions are our principal assets, and we would be unable to continue operations without them.  A concession may be revoked by the Mexican government for certain prescribed reasons, including failure to comply with our master development programs, a temporary or permanent halt in our operations, actions affecting the operations of other concession holders in Mexico, failure to pay damages resulting from our operations, exceeding our maximum rates or failure to comply with any other material term of our concessions.  Violations of certain terms of a concession (including violations for exceeding the applicable maximum rate) can result in revocation of a concession only if sanctions have been imposed for violations of the relevant term at least three times.  Violations of other terms of a concession can result in the immediate termination of the concession.  Our concessions may also be terminated upon our bankruptcy or insolvency.  Violations of the Mexican Airport Law or its regulation could result in similar sanctions.  In the event that any one of our concessions is terminated, our other concessions may also be terminated.  For a discussion of events that may lead to a termination of a concession, see “Item 4. Information on the Company—Regulatory Framework—Penalties and Termination and Revocation of Concessions and Concession Assets.”

Under applicable Mexican law and the terms of our concessions, our concessions may also be made subject to additional conditions, including under our renewed master development programs, which we may be unable to meet.  Failure to meet these conditions may also result in fines, other sanctions and the termination of the concessions.
The Mexican government may also terminate one or more of our concessions at any time through reversion, if, in accordance with applicable Mexican law, it determines that it is in the public interest to do so.  The Mexican government may also assume the operation of any airport in the event of war, public disturbance or a threat to national security.  In addition, in the case of a force majeure event, the Mexican government may require us to implement certain changes in our operations.  In the event of a reversion of the public domain assets that are the subject of our concessions, the Mexican government under Mexican law is required to compensate us for the value of the concessions or added costs based on the results of an audit performed by appraisers or, in the case of a mandated change in our operations, the cost of that change.  Similarly, in the event of an assumption of our operations, other than in the event of war, the government is required to compensate us and any other affected parties for any resulting damages.  There can be no assurance that we would receive compensation equivalent to the value of our investment in or any additional damages related to our concessions and related assets in the event of such action.
In the event that any one of our concessions is terminated, whether through revocation or otherwise, our other concessions may also be terminated.  Thus, the loss of any concession would have a material adverse effect on our business and results of operations.
The Mexican government could grant new concessions that compete with our airports.
The Mexican government could grant additional concessions to operate existing government-managed airports or authorize the construction of new airports, which could compete directly with our airports.
In the future, we may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession.  Historically, Aeropuerto del Norte has been used solely for general aviation operations.  The state of Nuevo Leon has requested in the past that the Ministry of Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations.  To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession.  However , there can be no assurance that the Ministry of Communications and Transportation will not authorize such an amendment and that commercial aviation flights will not operate from Aeropuerto del Norte in the future.  In addition, we understand that Aeropuerto del Norte is not capable of accommodating commercial passenger traffic with its current infrastructure.
Any competition from other such airports could have a material adverse effect on our business and results of operations.  Under certain circumstances, the grant of a concession for a new or existing airport must be made pursuant to a public bidding process.  In the event that a competing concession is offered in a public bidding process, we cannot assure that we would participate in such process, or that we would be successful if we were to participate.  Please see “Item 4. Information on the Company—Regulatory Framework—Grants of New Concessions” below.

Risks Related to Our Operations
The global economic and financial crisis has adversely affected our business and may continue to do so.
T he current global economic and financial crisis has led to high volatility and lack of liquidity in the global credit and other financial markets.  Such downturns in the U.S. and global economies have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, decreased market valuations, increased market volatility, high financial risk premiums, and a widespread reduction of business activity generally.  These conditions have also limited the availability of credit and increased financial costs for companies around the world, including in Mexico and the United States.  The volatility of the credit and capital markets can significantly affect our ability to access credit to finance our future projects, therefore adversely affecting our business.
If the global economy does not recover or falls into a deeper recession, our business and results of operations will continue to be adversely affected. (See also “Risks Related to Mexico – Our business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico will adversely affect our business and results of operations” and “Risks Related to Mexico – Our business could be adversely affected by a downturn in the U.S. economy”).
Our revenues are highly dependent on levels of air traffic, which depend on factors beyond our control.
Our revenues are closely linked to passenger and cargo traffic volumes and the number of air traffic movements at our airports.  These factors directly determine our revenues from aeronautical services and indirectly determine our revenues from non-aeronautical services.  Passenger and cargo traffic volumes and air traffic movements depend on many factors beyond our control, including the current economic downturn in Mexico, the United States and the world, the political situation in Mexico and elsewhere in the world, the attractiveness of our airports relative to that of other competing airports, fluctuations in fuel prices (which can have a negative impact on traffic as a result of fuel surcharges or other measures adopted by airlines in response to increased fuel costs) and changes in regulatory policies applicable to the aviation industry.  Any decreases in air traffic to or from our airports as a result of factors such as these could adversely affect our business, results of operations, prospects and financial condition.
International events could adversely affect our business
Terrorist attacks have had a severe impact on the international air travel industry, have adversely affected our business and may continue to do so in the future.
As with all airport operators, we are subject to the threat of terrorist attacks.  The terrorist attacks on the United States on September 11, 2001 had a severe adverse impact on the air travel industry, particularly on U.S. carriers and on carriers operating international service to and from the United States.  Airline traffic in the United States fell precipitously after the attacks.  Our terminal passenger volumes declined 5.8% in 2002 as compared to 2001.  In the event of a terrorist attack involving one of our airports directly, airport operations would be disrupted or suspended during the time necessary to conduct rescue operations, investigate the incident and repair or rebuild damaged or destroyed facilities, and our future insurance premiums would likely increase.  In addition, our insurance policies do not cover all losses and liabilities resulting from terrorism.  Any future terrorist attacks, whether or not involving aircraft, will likely adversely affect our business, results of operations, prospects and financial condition.

Because a substantial majority of our international flights involve travel to and from the United States, we may be required to comply with security directives of the U.S. Federal Aviation Authority in addition to the directives of Mexican aviation authorities.  Security measures taken to comply with future security directives or in response to a terrorist attack or threat could reduce passenger capacity at our airports due to increased passenger screening and slower security checkpoints and increase our operating costs, which would have an adverse effect on our results of operations.
International events could have a negative impact on international air travel.
Historically, a substantial majority of our revenues have been derived from aeronautical services, and our principal source of aeronautical services revenues is passenger charges.  Passenger charges are payable for each passenger (other than diplomats, infants, transfer and transit passengers) departing from the airport terminals we operate, collected by the airlines and paid to us.  In 2007, 2008 and 2009, passenger charges represented 61.2%, 62.0% and 62.7%, respectively, of our total revenues.  Events such as the war in Iraq and public health crisis such as the Severe Acute Respiratory Syndrome, or SARS, crisis and the Influenza A(H1N1) crisis have negatively affected the frequency and pattern of air travel worldwide.
On April 30, 2009, President Felipe Calderon Hinojosa issued a presidential decree instructing Mexicans to remain in their homes for a period of five days to reduce the spread of the Influenza A(H1N1) virus.  The president also requested that travel should continue to operate subject to special passenger measures, including the use of thermographic cameras to prevent the spread of the A(H1N1) virus.
As a consequence of the presidential decree and public concerns, many people chose to cancel or delay scheduled travel, producing a reduction in passenger traffic and operations during the second quarter of 2009.  Although the World Health Organization recommended that borders remain open and international travel remain unrestricted, these factors affecting passenger traffic continued without change.
Because our revenues are largely dependent on the level of passenger traffic in our airports, any general increase of hostilities relating to reprisals against terrorist organizations, further conflict in the Middle East, further outbreaks of health epidemics such as SARS, Influenza A(H1N1) or other events of general international concern (and any related economic impact of such events) could result in decreased passenger traffic and increased costs to the air travel industry and, as a result, could cause a material adverse effect on our business, results of operations, prospects and financial condition.
High incidences of crime in Mexico, and drug trafficking in particular, could adversely affect our business.
A travel alert issued by the U.S. Department of State (Bureau of Consular Affairs) on April 12, 2010 (the “Travel Alert”), recommended the departure of dependents of U.S. government personnel from U.S. consulates in the Northern Mexican border cities of Tijuana, Nogales, Ciudad Juarez, Nuevo Laredo, Monterrey and Matamoros.  According to the Travel Alert, while millions of U.S. citizens safely visit Mexico each year, many are victims of violence.  The Travel Alert reported that gunfights involving the Mexican army, police and drug cartels have taken place in many towns and cities across Mexico but occur mostly in certain cities in northern Mexico, including Ciudad Juárez, Tijuana, Chihuahua City, Nogales, Matamoros, Reynosa and Monterrey.
U.S. government employees are restricted to travel within the state of Durango, certain parts of the state of Chihuahua and Ciudad Juarez, and all parts of the state of Coahuila.

The situation in Ciudad Juarez and surrounding areas is of special concern.  The U.S. Consulate General recommends U.S. citizens to defer non-essential travel to the southeast of Ciudad Juarez and to the northwest quarter of the state of Chihuahua.  In both areas U.S. citizens have been victims of drug-related violence and both areas are reached easily from the United States through various ports of entry.  While most crime victims are Mexican citizens, the Travel Alert warns that the uncertain security situation of the border region poses serious risks for U.S. citizens as well.
Higher incidences of crime throughout Mexico, and drug trafficking in particular, could have an adverse affect on our business as it may decrease the international passenger traffic directed to Mexico from abroad.
Increases in international fuel prices could adversely affect our business and results from operations.
International prices of fuel, which represent a significant cost for airlines using our airports, have increased in recent years, reaching record highs in the second quarter of 2008.  Such increases in airlines costs were among the factors leading to cancellations of routes, decreases in frequencies of flights, and in some cases even contributed to filings for bankruptcy by some airlines (such as Alma and Aladia).  For other airlines, such as Avolar and Aerocalifornia, such increased costs may have contributed to the denial of extensions of their concessions by the Mexican regulatory authorities for failure to satisfy security, service, coverage and quality requirement.  Although fuel prices in 2009 were below the prices in 2008, they may be subject to further increases resulting from any future terrorist attacks, a general increase in international hostilities or a reduction in output of fuel, voluntary or otherwise, by oil-producing countries, and there can be no assurances that future air business would not be further affected by increased fuel prices.
Our revenues and profitability may be adversely affected if we fail in our business strategy.
Our ability to increase revenue and profitability will depend in part on our business strategy, which consists of increasing passenger and cargo traffic at our airports and increasing revenue from commercial activities.
Our ability to increase commercial revenue is, among other factors, significantly dependent upon increasing passenger traffic at our airports and the profitability from other non-aeronautical commercial businesses, such as our Terminal 2 hotel and commercial project at the Mexico City International Airport.  We cannot assure you that we will be successful in implementing our strategy of increasing our passenger traffic or revenues from commercial activities.  The passenger traffic volume in our airports depends on factors beyond our control, such as the attractiveness of the commercial, industrial and tourist centers that the airports serve.  Accordingly, there can be no assurance that the passenger traffic volume in our airports will increase.
We may not fully recover our investment for the acquisition of the Terminal 2 commercial project.
In October 2008, we acquired 90% of the shares of Consorcio Grupo Hotelero T2, S.A. de C.V., which has the rights to develop and operate a 287-room hotel and approximately 5,000 square meters of commercial space inside the new Terminal 2 of the Mexico City International Airport, under a 20-year contract with the Mexico City International Airport.  The Spanish company NH Hoteles, S.A. de C.V. owns the other 10%.  The Terminal 2 Hotel opened in August 2009.
Part of the value of our investment in Terminal 2 of the Mexico City International Airport reflects the airport’s status as the only one in the proximity of Mexico City.  If a new airport were to be built near Mexico City, the Mexico City International Airport could be closed and we would therefore have no assurance of our ability to continue operating the hotel and the commercial areas or of our ability to recover our investment.  In addition, under certain circumstances, the operating lease agreement with the Mexico City International Airport can be terminated by the Mexico City International Airport with partial or no compensation to us.  Should a new Mexico City airport be constructed or the Mexico City International Airport terminates the operating lease agreement, there could be no assurances as to our ability to fully recover our investment in the Terminal 2 project.

As a new business endeavor, the NH Terminal 2 Hotel faces the challenge of gaining enough market share as it begins operations. We cannot assure you that the occupancy of the hotel will be sufficient to recover our investment.
Competition from other tourist destinations could adversely affect our business.
The principal factor affecting our results of operations and business is the number of passengers using our airports.  The number of passengers using our airports (particularly our Acapulco, Mazatlán and Zihuatanejo airports) may vary as a result of factors beyond our control, including the level of tourism in Mexico.  In addition, our passenger traffic volume may be adversely affected by the attractiveness, affordability and accessibility of competing tourist destinations in Mexico, such as Cancún, Puerto Vallarta and Los Cabos, or elsewhere, such as Puerto Rico, Florida, Cuba, Jamaica, the Dominican Republic and other Caribbean islands and destinations in Central America.  The attractiveness of the destinations we serve is also likely to be affected by perceptions of travelers as to the safety and political and social stability of Mexico.  Furthermore, the current global economic crisis affected our international passenger traffic, with particular reference to our tourist destinations airports.  There can be no assurance that tourism levels, and therefore the number of passengers using our airports, in the future will match or exceed current levels, which could have a direct and indirect impact on our aeronautical and non-aeronautical revenues.
Our business is highly dependent upon revenues from four of our airports and could be adversely impacted by any condition affecting those airports.
In 2009, approximately 68.6% of our revenues were generated from four of our 13 airports.  In particular, the Monterrey International Airport generates the most significant portion of our revenues.  The following table lists the percentage of total revenues generated at our airports:
Airport
For year ended December 31, 2009
Monterrey International Airport
45.5 %
Culiacán International Airport
8.0 %
Mazatlán International Airport
7.7 %
Acapulco International Airport
7.4 %
Nine other airports
31.4 %
Total
100.0 %

As a result of the substantial contribution to our revenues from these four airports, any event or condition affecting these principal airports could have a material adverse effect on our business, results of operations, prospects and financial condition.

If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.
Although we believe we currently maintain good relations with our labor force, if any conflicts with our employees were to arise in the future, including with our unionized employees (which accounted for 57% of our total employees as of December 31, 2009), resulting events such as strikes or other disruptions that could arise with respect to our workforce could have a negative impact on our results of operations.
Our operations may be affected by union activities .
Our unionized employees (which accounted for 57% of our total employees as of December 31, 2009) are represented by a national union of airport workers that operates throughout Mexico.  To the extent that any unionized airport workers throughout the country successfully negotiate different employment terms than those we offer at our airports, our operations could be adversely affected by union activities, including organized strikes or other work stoppages.  In addition, we could be required to increase our labor expenses to match the terms agreed by the union with other Mexican airport operators.
Our operations depend on certain key airline customers, and the loss of or suspension of operations of one or more of them could result in a loss of a significant amount of our revenues.
Of the total revenues generated at our airports in 2009, Aeroméxico and its affiliates accounted for 27.8%, Mexicana and its affiliates accounted for 15.7%, VivaAerobus represented 11.0% and Interjet represented 9.4%.  In recent years, discount carriers, charter carriers, low-cost carriers and other new market entrants have represented a growing proportion of the Mexican commercial airline market.  In 2009, passengers traveling on discount, charter and low-cost carriers, such as VivaAerobus, Interjet and Volaris accounted for approximately 31% of our commercial aviation passenger traffic.  Avolar, Alma and Aladia ceased operations during the last quarter of 2008 for not satisfying security, service, coverage and quality requirements (in the case of Avolar), or because of bankruptcy (in the case of Alma and Aladia).
Our airports could be affected by the reduction in aeronautical and non-aeronautical revenues resulting from a merger between Aeromexico and Mexicana or Volaris and Interjet. As of May 2010, we are not aware of any merger agreements between these airlines.
On June 3, 2009, the Ministry of Communications and Transportation, acting through the General Director for Civil Aviation, temporarily suspended the operation of 25 Aviacsa aircraft. Aviacsa received a judicial injunction that enabled it to continue operating, and it resumed operations on June 12.  On July 6, 2009 the Ministry of Communications and Transportation suspended Aviacsa’s right to use Mexican airspace, based on non-payment of royalties owed to the Navigation Services for Mexican Airspace. Aviacsa filed for insolvency protection on October 30, 2009.  Aviacsa accounted for 7.0% of our total passenger traffic during the January-June 2009 period and 96.7% of such passengers were domestic.
As a result of Aviacsa’s insolvency, we could encounter difficulties recovering the spaces leased to Aviacsa in our airports.  There can be no assurance that Aviacsa will voluntarily surrender the spaces leased in our airports.
None of our contracts with our airline customers obligate them to continue providing service to our airports, and we can offer no assurance that, if any of our key customers reduced their use of our airports, competing airlines would add flights to their schedules to replace any flights no longer handled by our principal airline customers.  Our business and results of operations could be adversely affected if we do not continue to generate comparable portions of our revenue from our key customers.

On August 5, 2008 the Mexican regulatory authorities announced the temporary suspension of Avolar.  This suspension was effective for 2 days.  Avolar resumed its operations on August 8, 2008.  On October 24, 2008, the Mexican regulatory authorities denied Avolar’s extension of its concession due to Avolar’s financial problems.  Avolar was operating in four of our airports during 2008 overall (Acapulco, Culiacán, Durango and Zacatecas).  This airline represented 0.6% of our terminal passengers as of the end of August 2008.
On October 21, 2008, the charter airline Aladia announced the suspension of its operations.  We cannot predict whether Aladia will resume it operations with us in the future.  This airline accounted for 1.4% of our total passenger traffic for the first 10 months of 2008.  The main airports served by Aladia were Monterrey, Chihuahua, Mazatlán and Ciudad Juárez.
On November 7, 2008, Aerolíneas Mesoamericanas, S.A. de C.V. ( Alma de México or Alma ) announced the suspension of its operations and filed for bankruptcy. Alma was operating in nine of our airports:  Chihuahua, Mazatlán, Monterrey, San Luis Potosí, Tampico, Zihuatanejo, Reynosa, Torreón, and Ciudad Juárez.  The airline accounted for 3.5% of total passenger traffic during the first ten months of 2008 and for 3.3% of our total passenger traffic in October 2008.
Due to increased competition, higher fuel prices and the general decrease in the demand consequent to the global volatility in the financial and exchange markets and economic crisis, many airlines are operating in adverse conditions.  Further increases in fuel prices or other adverse economic developments could cause one or more of our principal carriers to become insolvent, cancel routes, suspend operations or file for bankruptcy.  All such events could have a material adverse effect on our results from operations.
Revenues from passenger and other charges are not secured, and we may not be able to collect amounts invoiced in the event of the insolvency of one of our principal airline customers.
In recent years, many airlines have reported substantial losses.  In a few cases, our revenues from passenger charges and other aeronautical services are secured by a performance bond or other types of guarantees.  The rest of our revenues from passenger and other charges from other airline customers are not secured by a performance bond or any other collateral.  Thus, in the event of the insolvency of any of these airlines, we would not be assured of collecting any amounts invoiced to that airline in respect of passenger charges.
The main domestic airlines operating at our airports have in the past refused to pay certain increases in our specific prices for regulated aeronautical services and could refuse to pay additional increases in the future.
From January 2002 to November 2002, several domestic airlines operating at our 13 airports —Aeroméxico, Mexicana, Aeromar and Aeroméxico Connect (formerly Aerolitoral) — refused to pay certain increases in our airport service charges.  As of December 2002, the amount of invoiced fees subject to dispute was Ps.3.7 million.  As part of this dispute, these airlines brought proceedings challenging the privatization of the Mexican airport sector and the methodology for calculating the maximum rate system applicable under the privatization of all of the airport groups in Mexico.
Subsequently, we entered into an agreement with the National Air Transportation Board ( Cámara Nacional de Aerotransportes ) and the Ministry of Communications and Transportation pursuant to which we settled existing disputes with our principal airline customers and established specific prices for regulated aeronautical services applicable to those airlines.  Under the agreement, the National Air Transportation Board agreed to cause our principal airline customers to enter into (a) contracts governing charges for certain aeronautical services and (b) lease contracts for property used by the airlines.  Although our agreement with the National Air Transportation Board expired in December 2005, we continued to charge our principal airline customers in accordance with the terms of the agreement until December 31, 2008, at which time we entered into a new agreement with the National Air Transportation Board that offered incentives, including discounts, for the establishment of new routes and other measures expected to increase passenger traffic volume at our airports.  We recently entered into a new agreement covering the period from August 1, 2009 to December 31, 2011. We continue to charge our principal airline customers in accordance with the terms of this agreement.

Although passenger traffic volume (and therefore overall revenue) may increase, any agreed incentives and/or discounts could reduce our aeronautical revenues per terminal passenger in the future.  In addition, should any of our principal airline customers refuse to continue to make payment to us, or should they refuse to pay increases in our charges for aeronautical services in future years, our results of operations could be adversely impacted by decreased cash flows from operations.
Our operations could be adversely affected due to changes in the collection of passenger charges.
The passenger charges are collected by the airlines and then paid to us on the basis of contracts entered into with each airline operating at our airports.  We cannot guarantee that all the airlines will continue collecting the passenger charges for us.  Should one or more airlines stop collecting passenger charges for us, we would have to collect these charges directly ourselves, which would result in higher costs for us.
The operations of our airports may be affected by the actions of third parties, which are beyond our control.
As is the case with most airports, the operation of our airports is largely dependent on the services of third parties, such as air traffic control authorities, airlines and ground transportation providers.  We also depend upon the Mexican government or entities of the government for provision of services, such as electricity, supply of fuel to aircraft, air traffic control by immigration and customs services for our international passengers.  The disruption or stoppage of taxi or bus services at one or more of our airports could also adversely affect our operations.  We are not responsible for and cannot control the services provided by these parties.  Any disruption in, or adverse consequence resulting from, their services, including a work stoppage or other similar event, may have a material adverse effect on the operation of our airports and on our results of operations.
In addition, we depend on third-party providers of certain complementary services such as catering and baggage handling.  For example, Grupo Aeroméxico and Grupo Mexicana together control Servicios de Apoyo en Tierra, or SEAT, pursuant to a joint venture. SEAT is the largest provider of baggage and handling services at our airports.  If SEAT or any of its affiliates or shareholders encounters financial difficulties, its ability to provide services at our airports could be negatively affected.  If any service providers, including SEAT, were to halt operations at any of our airports, we could be required to seek a new provider of these services or provide these services ourselves, either of which is likely to result in increased costs and have an adverse impact on our results of operations.

Actions by parties purporting to be former owners of land comprising a portion of the Ciudad Juárez International Airport could cause our concession to operate the airport to be terminated.
Parties purporting to be former owners of land comprising a portion of the Ciudad Juárez International Airport initiated legal proceedings against the airport to reclaim the land, alleging that it was improperly transferred to the Mexican government.  As an alternative to recovery of this land, the claimants also sought monetary damages in the amount of U.S.$120 million.  On May 18, 2005 a Mexican court ordered us to return the disputed land to the plaintiffs.  However that decision and three subsequent constitutional claims ( juicios de amparo ) permitted the case to be reconsidered, and as a result of such constitutional claims, the original claimants must now include the Ministry of Communications and Transportation as a party to the litigation since the Ministry of Communications and Transportation is the grantor of the concession title to the Ciudad Juarez Airport.  On August 28, 2009, the Federal Government filed its answer to the claim, in which it requested that the trial be moved to Federal Jurisdiction.  This petition is still pending.
In the event that any subsequent action results in a decision substantially similar to the May 18, 2005 court order or that is otherwise adverse to us, and the Mexican government does not subsequently exercise its power of eminent domain to retake possession of the land for our use, which we believe the terms of our concessions would require, our concession to operate the Ciudad Juárez International Airport would terminate.  In 2009, the Ciudad Juárez International Airport represented 4.8% of our revenue.  Although we believe and have been advised by the Ministry of Communications and Transportation that under the terms of our concessions the termination of our Ciudad Juárez concession would not affect the validity of our remaining airport concessions and that the Mexican federal government would be obligated to indemnify us against any monetary or other damages resulting from the termination of our Ciudad Juárez concession or a definitive resolution of the matter in favor of the plaintiffs, there can be no assurance that we would be so indemnified.
We may be liable for property taxes as a result of claims asserted against us by certain municipalities.
Administrative law proceedings were asserted against us by the municipalities of Reynosa, Zihuatanejo, Ciudad Juárez and Tampico for the payment of property taxes with respect to the real property on which we operate our airports in those cities.  The claims of the municipalities of Reynosa, Zihuatanejo, Ciudad Juárez and Tampico amounted to Ps.59.5 million, Ps.2.8 million, Ps.1.8 and Ps.1.0 million, respectively. The claim of Zihuatanejo, Ciudad Juárez and Tampico were dismissed on January, 2009, March, 2009 and February, 2009, respectively. On November 2009, the municipality of Ciudad Juárez claimed that we owe Ps.7.5 million in property taxes. The total amounts of the property-tax claims outstanding, as recently updated to reflect additional amounts claimed since the proceedings were first asserted, in Reynosa and Ciudad Juárez are Ps.59.5 million and Ps.7.5 million, respectively, although these amounts could increase if the underlying claims are not resolved in our favor.  Moreover, other municipalities where we operate our airports could assert similar claims.
We do not believe that liabilities related to any claims or proceedings against us are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition or results of operations; should a court determine that these taxes must be paid in response to any future proceedings, we believe that only the owner of the land should be responsible for paying these taxes directly, and the obligation to pay these taxes is not otherwise contemplated in the terms of our concessions.  The Mexican government has not acknowledged any obligation to pay such taxes, however, and any changes to the Mexican Constitution and other applicable laws could render us liable to municipalities for property taxes in the future.


Other Mexican airport operators contesting the assessment of similar property tax claims have been required to post surety bonds in connection with their challenge of those assessments.  If we are required to post similar surety bonds in the future, the terms of the surety bonds may restrict our ability to pay dividends or otherwise limit our flexibility.
Future changes in applicable laws with respect to property taxes could have an adverse effect on us.
Changes to the Mexican Constitution and other laws on property taxes may be enacted in the future that could affect our business and results of operations.  We cannot predict the amount of any future property tax liabilities or the criteria that would be used to determine them.  If such changes were to take effect, and any amounts owed were substantial, these tax liabilities could have a materially adverse effect on our financial condition or results of operations.  If we believe that there is a substantial likelihood of an adverse result in a pending case, we will establish reserves to meet such liabilities consistent with MFRS.
Natural disasters could adversely affect our business.
From time to time, the Northern and Central regions of Mexico experience torrential rains, hurricanes (particularly during the months of July through September) and, depending on the region, earthquakes and volcanic activity.  In addition, the Mazatlán, Culiacán and Acapulco International Airports are susceptible to occasional flooding due to torrential rainfall.  Natural disasters may impede operations, damage infrastructure necessary to our operations or adversely affect the destinations served by our airports.  Any of these events could reduce our passenger and cargo traffic volume.  The occurrence of natural disasters in the destinations we serve could adversely affect our business, results of operations, prospects and financial condition.  We have insured the physical facilities at our airports against damage caused by natural disasters, accidents or other similar events, but do not have insurance covering losses due to resulting business interruption.  Moreover, should losses occur, there can be no assurance that losses caused by damages to the physical facilities will not exceed the pre-established limits on any of our insurance policies.
Our operations are at greater risk of disruption due to the dependence of several of our airports on a single commercial runway.
As is the case with many other domestic and international airports around the world, several of our airports, including the Culiacán, Mazatlán and Zihuatanejo International Airports, have only one commercial aviation runway.  While we seek to keep our runways in good working order and to conduct scheduled maintenance during off peak hours, we cannot assure you that the operation of our runways will not be disrupted due to required maintenance or repairs.  In addition, our runways may require unscheduled repair or maintenance due to natural disasters, aircraft accidents and other factors that are beyond our control.  The closure of any runway for a significant period of time could have a material adverse effect on our business, results of operations, prospects and financial condition.
We are exposed to risk related to construction projects.
The building requirements under our master development programs could encounter delays or cause us to exceed our budgeted costs for such projects, which could limit our ability to expand capacity at our airports, increase our operating or capital expenses and could adversely affect our business, results of operations, prospects and financial condition.  Such delays or budgetary overruns also could limit our ability to comply with our master development programs, which are established as a necessary requirement to our concessions.

Labor laws and recent reforms to the Social Security Act published in the “Diario Oficial de la Federación” on July 9, 2009, requires subcontractors to register their employees at the Instituto Mexicano del Seguro Social and makes anyone hiring the services of subcontractors that have failed to do so, jointly liable for the payment of social security obligations, as well as any applicable penalties.  Therefore, if subcontractors providing services at our airports do not have their employees registered at the Instituto Mexicano del Seguro Social, we could be held jointly liable for the payment of social security obligations that these may have, as well as any applicable penalties.
We are exposed to certain risks inherently associated with the rental of real property.
We are exposed to risks generally associated with ownership of properties rented to third parties, such as a decline in rental market demand, occupancy rates or rent levels, non-payment of minimum rent and royalties by tenants or a weakening of the real estate market.  Moreover, our real estate assets are located on or adjacent to our airports and serve a particular sector of the rental market, thus exposing us to fluctuations in this specific market.  Any of these risks could adversely affect the profitability of our real estate development activities and, consequently, our business results of operations, prospects and financial position.
We are exposed to the risk of non-performance by our subcontractors.
We subcontract certain services (including security and surveillance services, ramp handling and baggage handling services and checked baggage services) necessary to conduct our operations.  The airport is obligated to provide some specific services, like ramp handling services.  In the event that our subcontractors fail to perform their obligations under our agreements, we could incur extra costs in providing replacements and could be exposed to liability for operations that we may have to provide directly, which could adversely affect our results of operations.
Our ability to expand certain of our airports and to comply with applicable safety guidelines could be limited by difficulties we encounter in acquiring additional land on which to operate our airports.
Certain guidelines established by the International Civil Aviation Organization require the maintenance of a perimeter surrounding the land used for airport operations.  At several of our airports, we do not control portions of the land within the required perimeters.  If portions of such land adjacent to certain of our airports are developed by third parties in a manner that encroaches on the required perimeters, our ability to comply with applicable guidelines of the International Civil Aviation Organization or to expand our airport operations could be adversely affected.  Also, the growth of certain cities in the proximity of our airports could limit our ability to expand our airports.
Our future profitability and growth will depend upon our ability to expand our airports in the future. Potential limitations on our possibility of expansion, such as the ones described above, could restrict any such expansion and thus have a material adverse effect on the future profitability and growth of our business.
We are exposed to risks inherent to the operation of airports.
We are obligated to protect the public at our airports and to reduce the risk of accidents at our airports.  As with any company dealing with members of the public, we must implement certain measures for the protection of the public, such as fire safety in public spaces, design and maintenance of car parking facilities and access routes to meet road safety rules.  We are also obligated to take certain measures related to aviation activities, such as maintenance, management and supervision of aviation facilities, rescue and fire-fighting services for aircraft, measurement of runway friction coefficients, flood control at the Acapulco International Airport and measures to control the threat from birds and other wildlife on airport sites.  These obligations may require us to incur additional costs and could increase our exposure to liability to third parties for personal injury or property damage resulting from our operations.

Our insurance policies may not provide sufficient coverage against all liabilities.
While we seek to insure all reasonable risks, we can offer no assurance that our insurance policies would cover all of our liabilities in the event of an accident, terrorist attack or other incident.  The markets for airport insurance and construction insurance are limited, and a change in coverage policy by the insurance companies involved could reduce our ability to obtain and maintain adequate or cost-effective coverage.  A certain number of our assets cannot, by their nature, be covered by property insurance (notably aircraft movement areas, and certain civil engineering works and infrastructure).  In addition, we do not currently carry business interruption insurance.
Changes in Mexican environmental regulations could limit the growth of certain of our airports.
Several of our airports, such as the Ciudad Juárez, Tampico and Torreón International Airports, are located in densely populated urban areas, which are subject to more restrictive environmental regulations than less populated areas of Mexico.  Should environmental regulators adopt a more restrictive regulatory framework in any of these areas (such as limitations on noise pollution), our ability to expand these airports to meet growth in demand could be limited, which could adversely affect our results of operations.  Furthermore, compliance with future environmental regulations may require us to incur additional costs in order to bring our airports into compliance, and if we fail to comply with current or future environmental regulations, we may be subject to fines and other sanctions.
We are liable under Mexican Law for inspection of passengers and their carry-on luggage .
Under Mexican Airport Law ( Ley de Aeropuertos ) we are currently responsible for inspecting passengers and their carry-on luggage before they board aircraft.  Under Mexican law, we may be liable to third parties for personal injury or property damage resulting from the performance of such inspection.  In addition, we may be required to adopt additional security measures in the future or undertake capital expenditures if security measures for carry-on luggage are required to be enhanced, which could increase our liability or adversely affect our operating results.
We may be subject to potential liability for screening checked baggage.
The International Civil Aviation Organization established security guidelines requiring checked baggage on all international commercial flights as of January 2006, and all domestic commercial flights as of July 2006, to undergo a comprehensive screening process for the detection of explosives.  We are currently planning to purchase and install new screening equipment in all of our airports to facilitate our airline customers’ compliance with the new baggage screening guidelines. Until we agree on the contractual terms for the operation of this equipment with the airlines and the new screening equipment becomes operational, checked baggage will continue to be screened by hand by each airline in order to comply with the screening guidelines.  In some countries, such as the United States of America, the federal government (in the case of the United States, through the Transportation Security Administration) is responsible for screening checked baggage.  Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new equipment could increase our exposure to liability as a result of our involvement in the screening process.  In addition, although we are not currently obligated to screen checked baggage, we could become obligated to do so, and thus subject to potential liability, if Mexican law changes in the future.

Enforcing civil liabilities against us or our directors, officers and controlling persons may be difficult.
We are organized under the laws of Mexico, and all of our directors, officers and controlling persons reside in Mexico.  In addition, a substantial portion of our assets and the assets of our directors, officers and controlling persons are located in Mexico.  As a result, it may be difficult for investors to effect service of process on such persons within the United States or elsewhere outside of Mexico or to enforce judgments against us or our directors, officers and controlling persons, including in any action based on civil liabilities under U.S. federal securities laws.  There is doubt as to the enforceability in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts or other courts outside of Mexico, of liabilities based solely on U.S. federal securities laws.

Risks Related to Our Stockholders
Aeroinvest and SETA control our management, and their interests may differ from those of other stockholders.
Aeroinvest, S.A. de C.V. (Aeroinvest) is the beneficial owner of 54.4% of our total capital stock.  Aeroinvest directly owns Series B shares representing 42.0% of our total capital stock and Series A shares of SETA representing 74.5% of its capital stock.  SETA in turn owns Series BB shares and Series B shares that collectively represent 16.7% of our capital stock.  Pursuant to our bylaws, SETA (as holder of our Series BB shares) has the right to present to the Board of Directors the name or names of the candidates for appointment as our chief executive officer, to appoint and remove half of our executive officers, which currently include our chief financial officer, our chief operating officer and our commercial director, and to elect three members of our Board of Directors.  SETA (as holder of our Series BB shares) also has the right pursuant to our bylaws to veto certain actions requiring approval of our stockholders (including the payment of dividends, the amendment of our bylaws and the amendment of its right to appoint certain members of our senior management).  Additionally, most matters voted on by our Board of Directors require the affirmative vote of the directors appointed by our Series BB shareholders.  In the event of the termination of the Technical Assistance Agreement, the Series BB shares would be converted into Series B shares, resulting in the termination of all of SETA's special rights. If at any time before June 14, 2015 SETA were to hold less than 7.65% of our capital stock in the form of Series BB shares, it would lose its veto rights (but its other special rights would be unaffected).  If at any time after June 14, 2015 SETA were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares must be converted into Series B shares, which would cause SETA to lose all of its special rights.  As long as SETA retains at least 7.65% of our capital stock in the form of Series BB shares, whether before or after June 14, 2015, all of its special rights will remain in place.  Pursuant to our bylaws, the Technical Assistance Agreement, the Participation Agreement and the Bancomext Trust, SETA was required to retain at least 51% of its Series BB shares until June 14, 2007, after which it became entitled to transfer up to one eighth of such 51% during each year thereafter. To date, SETA has not executed its right to transfer its Series BB shares.  The rights and obligations of SETA in our management are explained in “Item 7. Major Shareholders and Related Party Transactions – Major Shareholders.”
So long as the technical assistance agreement remains in effect and SETA continues to hold any Series BB shares, it also has the obligation to appoint and nominate the same directors and officers that it currently is entitled to appoint under our bylaws.  The technical assistance agreement sets forth certain qualifications that members of our management appointed by them must have.  The technical assistance agreement will remain in effect until June 14, 2015, after which it will be automatically extended for successive five-year periods unless any party thereto elects otherwise.

SETA's continuing veto rights as holder of at least 7.65% of our capital stock in the form of Series BB shares, and its right to nominate and appoint certain directors and officers as holder of Series BB shares until June 14, 2015, will continue for so long as it owns at least one Series BB share and the technical assistance agreement remains in effect, could adversely impact our operations and constitute an obstacle for us to bring in a new strategic stockholder and/or operator.  Through the right to nominate, appoint and remove certain members of our senior management, SETA directs the actions of our management in areas such as business strategy, financing, distributions, acquisitions and dispositions of assets or businesses.
In addition to these special rights of SETA, Aeroinvest is entitled under Mexican law to elect one director to our board for each 10% of our capital stock that it owns.  Thus, Aeroinvest's ownership of at least 42.0% of our capital stock entitles it to elect four members of our Board of Directors. SETA and Aeroinvest are each subsidiaries of Empresas ICA.
The interests of SETA and Aeroinvest may differ from those of our other stockholders and can be contrary to the preferences and expectations of our other stockholders. We can offer no assurance that SETA and Aeroinvest and the officers nominated or appointed by them would exercise their rights in ways that favor the interests of our other stockholders.
If SETA or Aeroinvest, our principal stockholders, should sell or otherwise transfer all or a portion of their remaining interests in us, our operations could be adversely affected.
SETA and Aeroinvest currently exercise a substantial influence over our management, as described above.  Our bylaws and certain of the agreements executed in connection with the privatization process provided that SETA was required to retain at least 51% of its Series BB shares until June 14, 2007, after which it became entitled to transfer up to one eighth of such 51% during each year thereafter. SETA, as holder of the Series BB shares, is entitled to present to the Board of Directors the name or names of the candidates for appointment as our chief executive officer and to appoint and remove half of our executive officers, which currently includes our chief financial officer, our chief operating officer and our commercial director, and to elect three of our board members.  Elimination of these rights from our bylaws would require the consent of SETA for so long as it owns Series BB shares representing at least 7.65% of our capital stock. Should SETA fall below this threshold, our management could change significantly and our operations could be adversely affected as a result. In the event of termination of the technical assistance agreement, SETA would cease to have the special rights of the Series BB shares, which may adversely affect and disrupt our operations.
In addition, in December 2005, our parent company Aeroinvest entered into certain credit facilities to finance Aeroinvest’s acquisition from the Mexican government of the Series B shares currently representing 35.3% of our capital stock and to finance an additional loan to SETA for the exercise of the option to acquire 2% of our Series B shares.  These credit facilities were amended and restated to, among other things, increase the amount of the facility and the amount borrowed thereunder in October 2006 and again in April 2007.  Aeroinvest subsequently purchased additional Series B shares currently representing 6.7% of our capital stock in connection with our initial public offering in November 2006.  Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  If Aeroinvest were to default on its obligations under the refinancing agreements, Aeroinvest could lose its ability to vote its shares of our capital stock as well as its shares of SETA, and the trustee could in certain circumstances foreclose on the Series B shares and SETA shares held in trust.  The terms of the refinancing documents are described in “Item 5.  Operating and Financial Review and Prospects – Liquidity and Capital Resources.”  If Aeroinvest were to sell its Series B shares or lose its ability to vote its Series B shares, SETA and Aeroinvest may no longer control us, which could adversely affect our operations and result in a decrease in the price of our Series B shares and ADSs.

Our ability to make certain business decisions could be limited if Aeroinvest defaults on certain obligations under its refinancing facility.
As mentioned above, Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  In connection therewith, Aeroinvest has assigned its economic interests (including its right to receive dividends) in its Series B Shares representing 42.0% of our capital stock as well as 74.5% of the Series A shares of SETA.  Under the refinancing agreements, Aeroinvest is required to cause us to comply with numerous covenants, which include certain restrictions on our ability to create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change our business or make investments or capital expenditures outside of the master development plans.  In addition, Aeroinvest is required to cause us to distribute all of our available cash, subject to certain limitations, as quarterly dividends in accordance with our dividend policy, and is required to restrict us from making certain changes to the dividend policy.  If we do not distribute a minimum required amount of dividends on each dividend payment date, Aeroinvest will be in default under the refinancing documents.  If Aeroinvest defaults on its obligations under the refinancing documents, we would be further restricted in our ability create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change our business or make investments or capital expenditures outside of the master development plans, which could restrict our flexibility to capitalize on business opportunities or otherwise adversely affect our business and results of operations.  In addition, Aeroinvest could lose its ability to vote its shares of our capital stock as well as its shares of SETA, and the trustee could in certain circumstances foreclose on the Series B shares and SETA shares held in trust.  The terms of the refinancing documents are described in “Item 5.  Operating and Financial Review and Prospects – Liquidity and Capital Resources.”
Risks Related to Mexico
Our business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments in Mexico will adversely affect our business and results of operations.
In 2007, 2008 and 2009, domestic terminal passengers have represented approximately 82.6%, 83.4% and 84.3% respectively, of the passenger traffic volume in our airports.  In addition, all of our assets are located, and all of our operations are conducted, in Mexico.  Accordingly, our financial conditions and results of operations are substantially dependent on economic conditions prevailing from time to time in Mexico.  As a result, our business, financial condition and results of operations could be adversely affected by the general condition of the Mexican economy, by a devaluation of the peso, by inflation and high interest rates in Mexico, or by political, social and economic developments in Mexico.
In the past, Mexico has experienced economic crises, caused by internal and external factors, characterized by exchange rate instability (including large devaluations), high inflation, high domestic interest rates, economic contraction, a reduction of international capital flows, a reduction of liquidity in the banking sector and high unemployment rates.
Mexico experienced a period of slow growth from 2001 through 2003, primarily as a result of the downturn in the U.S. economy.  In 2001, Mexico’s GDP declined by 0.2%, while inflation reached 4.4%.  In 2002, GDP grew by 0.8% and inflation reached 5.7%.  In 2003, GDP grew by 1.4% and inflation was 4.0%.  In 2004, GDP grew by 4.2% and inflation increased to 5.2%.  In 2005, GDP grew by approximately 2.8% and inflation decreased to 3.3%.  In 2006, GDP grew by approximately 4.8% and inflation reached 4.1%.  In 2007, GDP grew by approximately 1.8% and inflation declined to 3.8%.  In 2008, GDP grew by approximately 1.3% and inflation increased to 6.5%. In 2009, GDP decreased by 6.5% and inflation was 3.6%.

During 2009, real and nominal interest rates in Mexico decreased more than 2% compared to 2008.  The annualized interest rates on 28 day Cetes ( Certificados de la Tesoreria de la Federación ) averaged approximately 9.2%, 7.2%, 7.2% 7.7% and 5.4% for 2005, 2006, 2007, 2008 and 2009, respectively.  To the extent that we incur Peso-denominated debt in the future, it could be at high interest rates.
The Mexican economy is undergoing an economic crisis that began in 2008 and continued in 2009 as a result of the impact of the global financial crisis, which affected many emerging economies.  The Mexican economy’s link with the U.S. economy remains very important, and therefore, any downside to the economic outlook of the U.S. may hinder any recovery in Mexico.  This crisis has adversely impacted our business and may have an even greater impact going forward to the extent that the global economy falls into an even deeper and longer lasting recession.  According to the Mexican National Statistical, Geographic and Information Institute, the Mexican gross domestic product decreased at an annualized rate of 2.3% during the fourth quarter of 2009.
In Mexico, the economic and financial crisis has adversely affected domestic traffic in 2009, which decreased substantialy compared to 2008, which itself had been adversely affected by the exit from the market of Aviacsa during that year and significant reductions in capacity by several other carriers. Furthermore, due to the suspension of operations by Aerocalifornia in July 2008 and the exit from the market of Aladia, Alma, and Avolar in the fourth quarter of 2008, our airports have lost terminal passenger traffic, with the main decreases being at the Ciudad Juárez (30.1%), Acapulco (22.9%), Monterrey (21.0%), San Luis Potosí (20.9%) and Tampico (19.2%) airports (in each case, 2009 as compared to 2008).  Generally all of our airports were affected during 2009 by the reductions in volume of passengers, the A(H1N1) virus and the exit from the market of 5 airlines in less than a year. We expect that domestic passenger traffic levels will continue to decrease until economic conditions improve in Mexico.
Moreover, if inflation or interest rates increase significantly or if the Mexican economy is otherwise further adversely impacted, our business, financial condition and results of operations could be materially and adversely affected because, among other things, demand for transportation services may decrease.  We cannot assure our investors that similar events may not occur, or that any recurrence of these or similar events will not adversely affect our business, results of operations, prospects and financial condition.
Depreciation of the peso relative to the U.S. dollar could adversely affect our results of operations and our financial condition.
Following the devaluation of the peso and the economic crisis beginning in 1994, the aggregate passenger traffic volume in our airports in 1995 (then operated by our predecessor) decreased as compared to prior years, reflecting a decrease in Mexican passenger traffic volume.  From September 30, 2008 to March 31, 2009, the peso depreciated by approximately 29.4%, from 10.98 pesos per U.S. dollar on September 30, 2008 to 14.21 pesos per U.S. dollar on March 31, 2009.  From September 30, 2009 to March 31, 2010, the peso appreciated by approximately 8.8%, from 13.49 pesos per U.S. dollar on September 30, 2009 to 12.30 pesos per U.S. dollar on March 31, 2010.  Between March 31, 2009, and September 30, 2009, the peso fluctuated between 13.00 and 14.00 pesos per U.S. dollar.  It began to appreciate, reaching 12.74 pesos per U.S. dollar on March 1, 2010.

A depreciation of the peso affects our business in the following ways: (i) international passengers and international flights pay tariffs denominated in U.S. dollars, while these tariffs are generally collected in Mexican pesos 60-115 days following the date of each flight, thus the depreciation of the Mexican peso had a positive impact on our results from operations which are denominated in Mexican pesos; and (ii) as of December 31, 2009, we had 9.4 million of liabilities denominated in U.S. dollars, causing foreign exchange rate losses.  Any depreciation in the peso may cause additional foreign exchange losses.
Moreover, the depreciation of the peso also affected some of our airline customers having transactions in U.S. dollars, including the purchases or leases of equipment, maintenance and fuel.
Severe devaluation or depreciation of the peso may also result in the disruption of the international foreign exchange markets and may limit our ability to transfer or to convert pesos into U.S. dollars and other currencies.
Changes to Mexican laws, regulations and decrees applicable to us could have a material adverse impact on our results of operations.
The Mexican government has in recent years implemented changes to the tax laws applicable to Mexican companies, including us.  The terms of our concessions do not exempt us from any changes to the Mexican tax laws.  Should the Mexican government implement changes to the tax laws that result in our having significantly higher tax income or Business Flat tax, we will be required to pay the higher amounts due pursuant to any such changes, which could have a material adverse impact on our results of operations. For example the issuance of the new “ Impuesto Empresarial a Tasa Unica ” or “ Business Flat Tax ”, which was published on October 1, 2007, adversely impacted our results of operations in 2007, 2008 and 2009. See Item 5 “Operating and Financial Review and Prospects – Taxation”.  In addition, changes to the Mexican constitution or to any other Mexican laws could also have a material adverse impact on our results of operations.
Developments in other countries may affect us.
The market value of securities of Mexican companies may be, to varying degrees, affected by economic and market conditions in other countries.  Although economic conditions in these countries may differ significantly from economic conditions in Mexico, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers.  In past years, prices of both Mexican debt and equity securities have been adversely affected by the sharp drop in Asian securities markets and the economic crises in Russia, Brazil, Argentina,Venezuela, Portugal, Italy, Greece, Spain and Dubai.
In addition, in recent years, economic conditions in Mexico have become increasingly correlated to economic conditions in the United States.  Therefore, the current economic downturn in the United States significantly adversely impacted the Mexican economy.  There can be no assurance that the market value of our securities will not be adversely affected by events elsewhere.
Delays in the process of obtaining necessary governmental approvals could affect our ability to expand our airports.
The expansion, development and growth of our airports from time to time may require governmental approvals, administrative proceedings or some other governmental action.  Any delay or inability to obtain such approvals or favorable outcomes of such proceedings could have a negative impact on the expansion, development and growth of our airports.

Our business could be adversely affected by a downturn in the U.S. economy.
The U.S. economy is affected by a recession, which has had a direct impact on our business and results of operations, and may have an even greater impact going forward to the extent that the global economy falls into an even deeper and longer lasting recession.
The global economic crisis has had a direct impact on our business and results of operations, and may have an even greater impact going forward to the extent that the global economy falls into an even deeper and longer lasting recession.  In the third and fourth quarters of 2009, according to the U.S. Bureau of Economic Analysis, the U.S. gross domestic product increased at annualized rates of 2.2% and  5.9%, respectively.  Likewise, according to the Mexican National Statistical, Geographic and Information Institute, the Mexican gross domestic product decreased at an annualized rate of 2.3% during the fourth quarter of 2009.  The air travel industry, and as a result, our results of operations, are substantially influenced by economic conditions in Mexico and the United States.  In 2009, approximately 80% of the international passengers in our airports arrived or departed on flights originating in or departing to the United States and approximately 16% of our revenues in 2009 were derived from passengers charges imposed on departures from or arriving in the United States.  Similarly, in 2009, approximately 84% of our passengers traveled on domestic flights, and approximately 47% of our revenues in 2009 were derived from domestic passenger charges.
Our international traffic in 2009 decreased 22.4% compared to 2008, principally as a result of the cancellation of routes, and the reduction of frequencies on scheduled international flights, largely on part of U.S. carriers.  The airports where these factors had the greatest impact include Monterrey and our tourist destination airports (Acapulco, Mazatlán and Zihuatanejo).  In the fourth quarter of 2009, international passenger traffic decreased 10.6% compared to the fourth quarter of 2008.  The reduction in frequencies of some scheduled international flights and the cancellation of routes, principally by Continental, Delta, Aviacsa, American, Frontier, and Alaska, affected international traffic in the majority of our airports. Monterrey, Zihuatanejo, Mazatlán, Acapulco, and Culiacán were the airports most affected followed by Ciudad Juárez, Torreón, San Luis Potosí, Durango, Tampico, and Chihuahua. Zacatecas and Reynosa were the only two airports that reported an increase in international traffic.
In addition, we cannot predict what effect any future terrorist attacks or threatened attacks on the United States or any retaliatory measures taken by the United States in response to these events may have on the U.S. economy.  The current economic downturn in the United States negatively affected our results of operations and a prolonged economic recession in the United States will likely have a further material adverse effect on our results of operations.

Minority shareholders may be less able to enforce their rights against us, our directors, or our controlling shareholders in Mexico.
Under Mexican law, the protections afforded to minority shareholders are different from those afforded to minority shareholders in the United States.  For example, because provisions concerning fiduciary duties of directors have only recently been incorporated into the new Mexican Securities Market Law, it may be difficult for minority shareholders to bring an action against directors for breach of this duty and achieve the same results as in most jurisdictions in the United States.  The grounds for shareholder derivative actions under Mexican law are extremely limited, which effectively bars most of these kinds of suits in Mexico.  Procedures for class action lawsuits do not exist under applicable Mexican law.  Therefore, it may be more difficult for minority shareholders to enforce their rights against us, our directors, or our controlling shareholders than it would be for minority shareholders of a U.S. company.
We are subject to different corporate disclosure and accounting standards than U.S. companies.
A principal objective of the securities laws of the United States is to promote full and fair disclosure of all material corporate information.  However, there may be less publicly available information about foreign issuers of securities listed in the United States than is regularly published by or about U.S. issuers of listed securities.  While we are required to reconcile our net income and stockholders’ equity to those amounts that would be derived under U.S. GAAP in our annual financial statements, the effects of inflation accounting under MFRS through December 31, 2007 are not eliminated in such reconciliation in our annual financial statements.  For this and other reasons, the presentation of MFRS consolidated financial statements and reported earnings may differ from that of U.S. companies in this and other important respects.  For further information about the differences between MFRS and US GAAP please see Note 24 to our financial statements.
FORWARD -LOOKING STATEMENTS
This Form 20-F contains forward-looking statements.  We may from time to time make forward-looking statements in our annual and periodic reports to the Securities and Exchange Commission on Forms 20-F and 6-K, in our annual report to shareholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to analysts, institutional investors, representatives of the media and others.  Examples of such forward-looking statements include:
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projections of operating revenues, net income (loss), net income (loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios,
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statements of our plans, objectives or goals,
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statements about our future economic performance or that of Mexico, and
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statements of assumptions underlying such statements.
Words such as “believe,” “anticipate,” “plan,” “expect,” “intend,” “target,” “estimate,” “project,” “predict,” “forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve inherent risks and uncertainties.  We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.  These factors, some of which are discussed above under “Risk Factors,” include material changes in the performance or terms of our concessions, developments in legal proceedings, economic and political conditions and government policies in Mexico or elsewhere, inflation rates, exchange rates, regulatory developments, customer demand and competition.  We caution you that the foregoing list of factors is not exclusive and that other risks and uncertainties may cause actual results to differ materially from those in forward-looking statements.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments.
Information on the Company
HISTORY AND DEVELOPMENT OF THE COMPANY
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., which we refer to by the acronym “GACN”, is a corporation ( sociedad anonima bursatil de capital variable ) organized under the laws of Mexico.  We were incorporated in 1998 as part of the Mexican government’s program for the opening of Mexico’s airports to private investment.  The duration of our corporate existence is indefinite.  We are a holding company and conduct substantially all of our operations through our subsidiaries.  The terms “GACN”, “we”, “us” and “our” in this annual report refer to Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. together with its subsidiaries, and to properties and assets that we own or operate, unless otherwise specified.  Our registered office is located at Aeropuerto Internacional de Monterrey, Zona de Carga, Carretera Miguel Alemán, Km. 24 s/n, 66600 Apodaca, Nuevo León, México, telephone +52.81.8625.4300.  Our U.S. agent is Puglisi & Associates.  Our U.S. agent’s address is 850 Library Avenue, Suite 204, Newark, Delaware 19711.
Investment by Servicios de Tecnolog í a Aeroportuaria, S.A. de C.V. and its Affiliates
In 2000, as part of the first stage of our privatization, the Mexican government sold Series BB shares currently representing 14.7% of our capital stock to Servicios de Tecnología Aeroportuaria, S.A. de C.V., or SETA (formerly Operadora Mexicana de Aeropuertos, S.A. de C.V.), in a public bidding process.  Pursuant to this transaction, SETA paid the Mexican government a total of Ps. 864,055,578 (nominal pesos, excluding interest) (U.S. $76 million based on the exchange rate in effect on the date of SETA’s bid) in exchange for:
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all of our Series BB shares, which currently represent 14.7% of our outstanding capital stock;
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an option to acquire from the Mexican government shares currently representing 35.3% of our capital stock (which subsequently was assigned to and exercised by Aeroinvest, S.A. de C.V., a principal shareholder of SETA);
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an option to subscribe for up to 3% of newly issued Series B shares (1% of which expired unexercised on June 14, 2005 and 2% of which was subscribed for in September 2006); and
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the right and obligation to enter into various agreements with us and the Mexican government, including a participation agreement setting forth the rights and obligations of each of the parties involved in the privatization (including SETA), a 15-year technical assistance agreement setting forth SETA’s right and obligation to provide technical assistance to us in exchange for an annual fee, and a shareholders’ agreement under terms established during the public bidding process.  These agreements are described in greater detail under “Item 7. Principal Stockholders and Selling Stockholder” and “Related Party Transactions.”

SETA’s current stockholders are:
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Aeroinvest, S.A. de C.V. (“Aeroinvest”), which owns 74.5% of SETA.  Aeroinvest is a wholly owned subsidiary of Empresas ICA, S.A.B. de C.V.  Aeroinvest also directly owns 42.0% of our Series B shares as a result of its exercise of an option to acquire these shares from the Mexican government and its subsequent purchase of additional Series B shares representing 6.7% of our capital stock.  Aeroinvest’s Series B shares were acquired in December 2005 from the Mexican government at an aggregate cost of U.S. $203.3 million (determined based on an initial price per share of U.S. $1.28 plus an annual 5% premium, subject to decreases corresponding to dividends declared and paid by us).  Empresas ICA, the parent of Aeroinvest, is the largest engineering, construction and procurement company in Mexico.  Empresas ICA’s principal lines of business are construction and engineering, housing and infrastructure operations, including the operation of airports (through SETA), toll roads and municipal services.  Empresas ICA is listed on the Mexican Stock Exchange and the New York Stock Exchange.  Through Aeroinvest, Empresas ICA controls a majority of our capital stock.
·
Aéroports de Paris Management, S.A., which owns 25.5% of SETA.  Aéroports de Paris Management is a wholly owned subsidiary of Aéroports de Paris, S.A., a French company recognized as a leading European airport group.  Aéroports de Paris, S.A. was previously the direct owner of the 25.5% participation in SETA until August 2006 when it transferred its participation in SETA to Aéroports de Paris Management. For more than 40 years, Aéroports de Paris has operated the Charles de Gaulle and Orly airports in France, which processed 83 million passengers in 2009.  Aéroports de Paris is listed on the Eurolist Market of Euronext Paris S.A.
In December 2005, our parent company Aeroinvest entered into certain credit facilities to finance Aeroinvest’s acquisition from the Mexican government of the Series B shares currently representing 35.3% of our capital stock and to finance an additional loan to SETA for SETA’s exercise of the option to acquire 2% of our Series B shares.  These credit facilities were amended and restated to, among other things, increase the amount of the facility and the amount borrowed thereunder in October 2006 and again in April 2007.  In November 2006 Aeroinvest purchased additional Series B shares representing 0.75% of our capital stock.  Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  In connection with the Merrill Lynch refinancing, Aeroinvest has assigned its economic interests (including its right to receive dividends) with respect to its Series B shares representing 42.0% of our capital stock as well as 74.5% of the Series A shares of SETA.  During 2007, 2008 and 2009, Aeroinvest purchased additional Series B shares representing 3.14%, 2.43% and 0.34%, respectively, of our capital stock, and from January 1, 2008 to December 31, 2008, Aeroinvest purchased additional Series B shares representing 2.43% of our capital stock.  Aeroinvest's economic interests with respect to these or any other additional Series B shares purchased by Aeroinvest may become subject to an assignment under the terms of the refinancing documents in certain circumstances, including any issuance of additional notes.  The terms of the refinancing documents are described in “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.”  In addition, Aeroinvest and SETA have entered into an agreement with Nacional Financiera, S.N.C., or NAFIN, a Mexican national credit institution and development bank owned and controlled by the Mexican Government, pursuant to which Aeroinvest has agreed, if certain conditions to be agreed by the parties are met, on or after December 2010, to either (i) sell the Series B shares it owns representing 35.3% of our capital stock or (ii) deposit such Series B shares in a voting trust.  The terms of this obligation are described more fully under “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.”

Under the technical assistance agreement, SETA provides management and consulting services and transfers industry expertise and technology to us in exchange for a fee, which in 2009 amounted to approximately Ps. 51.9 million.  This agreement is more fully described in “Item 7. Related Party Transactions.”
Initial Public Offering
On November 29, 2006, a Mexican trust established by NAFIN, or the NAFIN Trust , acting pursuant to the instructions of the Mexican Ministry of Communications and Transportation, sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of American Despositary Shares, or ADSs , and Series B shares, concurrently in the United States and Mexico.  The net proceeds from the sale of the shares totaled approximately U.S.$432.2 million and were paid to the Mexican government.
Master Development Programs
Every five years, we are required to submit to the Ministry of Communications and Transportation for approval a master development program for each of our concessions describing, among other matters, our traffic forecasts for the following 15 years, expansion, modernization and maintenance plans, and detailed investment plan for the following five years.  Each master development program is required to be updated and resubmitted for approval to the Ministry of Communications and Transportation every five years.  Upon such approval, the master development program is binding for the following five years and deemed to constitute part of the relevant concession.  Any major construction, renovation or expansion of an airport generally may only be made pursuant to a concession holder’s master development program and upon approval by the Ministry of Communications and Transportation.  In December 2005, the Ministry of Communications and Transportation approved the master development programs for each of our subsidiary concession holders for the 2006 to 2010 period.  These five-year programs will be in effect from January 1, 2006 until December 31, 2010.  During 2010, the master development program for the next five-year period will be prepared for each of our concessions.
The following tables set forth our historical committed investments and capital expenditures for the periods indicated.  Our capital expenditures have historically exceeded our committed investments pursuant to our master development programs, primarily due to capital expenditures intended to complement the minimum amounts required under our master development programs or that are otherwise necessary to accommodate the growth of our business (such as our investments at Terminal 2 at the Mexico City International Airport).  In addition, our master development programs include some commitments that are expensed rather than capitalized; thus, not all of our committed investments will constitute capital expenditures.  These capital expenditures are updated based on the Producer Price Index.

Historical Committed Investments Under Master Development Programs
Year ended December 31 ,
2007
2008
2009
Total
2007-2009
(thousands of pesos)
Acapulco
47,273 32,341 15,082 94,696
Ciudad Juárez
38,963 22,864 19,818 81,645
Culiacán
15,281 8,630 23,045 46,956
Chihuahua
9,800 31,258 7,849 48,907
Durango
29,834 20,686 24,486 75,006
Mazatlán
29,148 10,413 19,371 58,932
Monterrey
277,742 267,165 86,095 631,002
Reynosa
20,356 11,683 9,582 41,621
San Luis Potosí
13,740 21,049 25,108 59,897
Tampico
24,311 12,693 15,943 52,947
Torreón
10,951 31,332 6,407 48,690
Zacatecas
14,392 4,612 24,934 43,938
Zihuatanejo
15,139 21,979 28,367 65,485
Total
546,930 496,705 306,087 1,349,722

The following table sets forth our historical capital expenditures, which reflect our actual expenditures (as compared to its committed investments, which are presented above) by airport for the periods indicated.
Historical Capital Expenditures by Airport
Year ended December 31,
2007
2008
2009
(thousands of pesos)
Acapulco
42,917 36,275 37,366
Ciudad Juárez
21,421 52,641 18,465
Culiacán
12,517 37,111 35,743
Chihuahua
16,431 23,102 21,132
Durango
53,786 30,548 10,285
Mazatlán
22,550 24,021 10,324
Monterrey
396,142 1,743,039 395,964
Reynosa
17,130 13,644 19,386
San Luis Potosí
15,825 23,050 26,273
Tampico
20,845 25,028 18,430
Torreón
7,229 24,516 30,998
Zacatecas
9,230 15,177 17,222
Zihuatanejo
14,900 22,613 32,269
Other
7,087 156,796 193,799
Total
658,010 2,227,561 867,656

The following table sets forth our historical capital expenditures by type of investment across all of our airports for the periods indicated:
Year ended December 31,
2007
2008
2009
(thousands of pesos)
Terminals
407,928 232,961 328,271
Runways and aprons
159,888 263,000 181,465
Machinery and equipment
44,310 35,796 38,988
Land
0 1,455,904 62,725
Other
45,884 239,900 256,207
Total
658,010 2,227,561 867,656

Our capital expenditures from 2007 through 2009 were allocated to the following types of investments at the majority of our airports:
·
Terminals .  We remodeled many of the terminals at our airports by expanding departure areas (concourses and lounges), baggage claim areas and arrival areas, by improving lighting systems, adding office space, adding taxi and other ground transportation waiting areas, and by increasing handicapped services and remodeling restrooms.
·
Runways, access roads and aircraft parking .  We improved our runways and access roads (including their lighting systems), expanded aircraft parking areas, and made improvements and renovations to the fences on the outlying areas of our properties subject to our concessions.
·
Machinery and equipment .  We invested in machinery and equipment such as fire extinguishing vehicles, emergency back-up electricity generators, metal detectors and other security-related equipment, ambulances, moving walkways and public information systems.
·
Land .  As part of our strategic investments, in 2009 and 2008 territorial reserves of Ps. 62,725 and Ps. 1,455,904, respectively, were purchased to develop and expand our key airports.
·
Utility-related infrastructure .  We installed sewage treatment plants and systems at several of our airports, improved drainage systems, and installed underground electric wiring systems at several of our airports.
·
Developments at Mexico City International Airport .  In October 2008, we acquired 90% of the shares of Consorcio Grupo Hotelero Terminal 2, S.A. de C.V., which has the rights to develop and operate a 287-room hotel and approximately 5,000 square meters of commercial space inside the new Terminal 2 of the Mexico City International Airport, under a 20-year lease agreement with the Mexico City International Airport.  The Spanish company NH Hoteles, S.A. de C.V. owns the other 10%. The Terminal 2 Hotel opened in August 2009.
The following table sets forth our committed investments approved by the Ministry of Communications and Transportation for each airport for 2006 through 2010.  We will be required to comply with the investment obligations under these programs on a year-by-year basis.  These capital expenditures are updated based on the Producer Price Index.

Committed Investments by Airport
Year ended December 31 ,
2006 (1)
2007
2008
2009
2010
Total
2006-2010
(thousands of pesos)
Acapulco
108,790 47,273 32,341 15,082 15,292 218,778
Ciudad Juárez
52,097 38,963 22,864 19,818 12,411 146,153
Culiacán
69,324 15,281 8,630 23,045 2,467 118,747
Chihuahua
80,275 9,800 31,258 7,849 10,647 139,829
Durango
19,270 29,834 20,686 24,486 9,422 103,698
Mazatlán
100,740 29,148 10,413 19,371 2,293 161,965
Monterrey
351,599 277,742 267,165 86,095 24,417 1,007,018
Reynosa
20,747 20,356 11,683 9,582 1,788 64,156
San Luis Potosí
28,013 13,740 21,049 25,108 3,166 91,076
Tampico
44,999 24,311 12,693 15,943 4,592 102,538
Torreón
19,527 10,951 31,332 6,407 8,310 76,527
Zacatecas
18,831 14,392 4,612 24,934 7,960 70,729
Zihuatanejo
81,292 15,139 21,979 28,367 13,299 160,076
Total
995,504 546,930 496,705 306,087 116,064 2,461,290
______________
(1)           Amounts listed for 2006 include committed investments relating to the purchase and installation of new baggage screening equipment.  We expect to undertake these investments before the end of 2010 so as to comply with the master development program. Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new equipment could increase our exposure to liability as a result of our involvement in the screening process.

The following table sets forth our committed investments for 2006 through 2010 by type of investment, which are updated based on the Producer Price Index:
Committed Investments by Type
Year ended December 31 ,
2006 (1)
2007
2008
2009
2010
Total
2006-2010
(thousands of pesos)
Terminals
121,565 119,407 240,368 65,400 16,264 563,004
Runways and aprons
295,128 252,062 195,582 177,501 71,708 991,981
Machinery and equipment
74,087 90,802 50,181 56,185 28,092 299,347
Baggage screening system – investments
497,027 69,839 0 0 0 566,866
Other
7,697 14,820 10,574 7,001 0 40,092
Total
995,504 546,930 496,705 306,087 116,064 2,461,290
_______________
(1)           Amounts listed for 2006 include committed investments relating to the purchase and installation of new baggage screening equipment.  We expect to undertake these investments before the end of 2010 so as to comply with the master development program.  Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new equipment could increase our exposure to liability as a result of our involvement in the screening process.
For the year ended December 31, 2009, our capital expenditures totaled Ps. 867,656 million.  Our capital expenditures for 2009 were devoted primarily to our committed investments.
BUSINESS OVERVIEW
Our Operations
Through our subsidiaries, we hold concessions to operate, maintain and develop 13 airports in Mexico, which are concentrated in the country’s central and northern regions.  Each of our concessions has a term of 50 years beginning on November 1, 1998.  The term of each of our concessions may be extended by the Ministry of Communications and Transportation under certain circumstances for up to 50 additional years.  The terms of our concessions also include the right to occupy, use and improve the land appurtenant to our airports, which we do not own and which will revert to the Mexican government upon the termination of our concession.  As operator of the 13 airports under our concessions, we charge fees to airlines, passengers and other users for the use of the airports’ facilities.  We also derive rental and other income from commercial activities conducted at our airports, such as the leasing of space to restaurants and retailers.
We operate 13 airports, which serve a major metropolitan area (Monterrey), three tourist destinations (Acapulco, Mazatlán and Zihuatanejo), regional centers (Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón and Zacatecas) and border cities (Ciudad Juárez and Reynosa). Our airports are located in nine of the 31 Mexican states, covering a territory of approximately 926,421 square kilometers (approximately 575,667 square miles), with a population of approximately 24 million according to the Mexican National Institute of Statistics, Geography and Computer Science ( Instituto Nacional de Estadística, Geografía e Informática) and the Mexican National Population Council. All of our airports are designated as international airports under Mexican law, meaning that they are all equipped to receive international flights and to maintain customs and immigration services managed by the Mexican government, as well as refueling services.

According to figures published by the Mexican Bureau of Civil Aviation, our commercial aviation passenger traffic accounted for approximately 15.2 % of all arriving and departing commercial aviation passengers in Mexico in 2009.
In 2009, we recorded revenues of Ps. 1,896.3 million (U.S.$145.2 million) and net income of Ps. 469.5 million (U.S.$ 35.9 million).  In 2009 our airports handled approximately 11.5 million terminal passengers, a decrease of 18.1% with respect to the 14.1 million terminal passengers in 2008.
Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, Monterrey-Las Vegas, Monterrey-Atlanta, Monterrey-Chicago and Monterrey -New York. Our airports also serve several other major international destinations, including Houston, Los Angeles, Dallas and Phoenix.  In addition, our airports serve major resort destinations, such as Acapulco, Mazatlán and Zihuatanejo, which are popular destinations in Mexico frequented by tourists from Mexico, the United States and Canada.  Our airports also serve major domestic routes, including Monterrey-Mexico City, which was the country’s busiest domestic route in 2009, with approximately 2.2 million total passengers (including passengers flying directly to the nearby airport of Toluca, which are counted together with those flying to Mexico City), according to the Mexican Bureau of Civil Aviation.  Other major domestic routes served by our airports include Mexico City-Acapulco, Mexico City-Ciudad Juárez and Culiacán-Tijuana, with approximately 393 thousand, 347 thousand and 282 thousand total passengers, respectively, in 2009 according to the Mexican Bureau of Civil Aviation.
Monterrey is the third largest city in Mexico in terms of population, with a population of 4,199,292 in the greater metropolitan area.  Monterrey ranks among Mexico’s most established urban and commercial centers and is the capital of the state of Nuevo León, Mexico’s ninth largest state in terms of population.  It is home to many of Mexico’s largest companies in a wide variety of industries, as well as several major universities.  Business travelers account for a substantial portion of passengers at the Monterrey International Airport.  The airport is our leading airport in terms of passenger traffic volume, air traffic movements and contribution to revenues, and ranked fourth busiest airport in Mexico based on passenger traffic volume in 2009, according to data published by the Mexican Bureau of Civil Aviation. Our Monterrey International Airport accounted for approximately 46.8% and 45.1% of our terminal passenger traffic in 2008 and 2009, respectively.
Three of our airports, Acapulco International Airport, Mazatlán International Airport and Zihuatanejo International Airport, serve popular Mexican tourist destinations.  Of these tourist destinations, Acapulco and Mazatlán are the largest, with Acapulco constituting Mexico’s thirteenth largest international tourist destination and Mazatlán the seventeenth largest in terms of visitors in 2009, according to the Mexican National Institute of Immigration.  Acapulco is a principal port of call for cruise ships.  In 2009, the Acapulco International Airport, Mazatlán International Airport and Zihuatanejo International Airport collectively accounted for 18.5% of our aggregate terminal passengers and 20.4% of our total revenues.
Mexico was the tenth largest tourist destination in the world in 2008 in terms of international arriving tourists. Mexico had 22.6 million arriving tourists, according to the latest data published by the World Tourism Organization.  Within Latin America and the Caribbean, in October 2009 Mexico ranked nineteenth in terms of number of foreign visitors and income from tourism, according to the World Tourism Organization.
Seven of our airports serve small and mid-sized cities that are important regional centers of economic activity, with such diverse economic activities as mining (Durango International Airport and Zacatecas International Airport), maquiladora manufacturing (Chihuahua International Airport and Torreón International Airport), petroleum and chemical production (Tampico International Airport), agriculture and livestock (Culiacán International Airport) and transportation and logistics (San Luis Potosí International Airport).  In 2009, these seven regional airports collectively accounted for 29.0% of our aggregate terminal passengers and 27.7% of our total revenues.

The remaining two airports in the group, Ciudad Juárez International Airport and Reynosa International Airport, serve cities situated along the border of Mexico and the United States.  Both Ciudad Juárez and Reynosa are popular entry points to the United States. In 2009, the Ciudad Juárez International Airport and the Reynosa International Airport collectively accounted for 7.4% of our aggregate terminal passengers and 6.4% of our total revenues.
In addition, we entered into a joint investment with the international hotel operator NH Hoteles, S.A. de C.V., under Consorcio Grupo Hotelero T2 (“Consortium”) to develop and operate a 287-room hotel and more than 5,000 square meters of commercial space inside Terminal 2 of the Mexico City International Airport (the Mexico City International Airport), under a 20-year lease agreement with the Mexico City International Airport. The Terminal 2 Hotel opened in August 2009.
The Consortium is currently carrying out market and feasibility studies for the development of the commercial areas, with an expected beginning of operations of the first phase of the commercial development in 2010.
This project provides us with the opportunity to participate in the operation of the Mexico City International Airport Terminal 2 passenger terminal, which according to the Mexico City International Airport, served more than 24 million passengers in 2009.  Airlines based in Terminal 2 include Aeromar, Aeroméxico and Aeroméxico Connect, Continental, Copa, Delta and LAN.  We consider this a key part of our strategy to increase our non-aeronautical revenues.  This project, along with acquisitions of land reserves in 2008 to develop and expand our key airports, accounted for the significant increase in our balance of property, machinery and equipment at December 31, 2008 compared to our balance at December 31, 2007.

The following table provides summary data for each of our 13 airports for the years ended December 31, 2008 and 2009:
Year ended December 31, 2008
Year ended December 31, 2009
Airport
Terminal
Passengers
Revenues (1)
Revenues per terminal passenger (1)
Terminal
passengers
Revenues (1)
Revenues per terminal passenger (2)
Number (in millions)
%
(millions of pesos)
%
(pesos)
Number (in millions)
%
(millions of pesos)
%
(pesos)
Metropolitan area:
Monterrey International Airpo rt
6.6 46.8 924.2 46.3 140.3 5.2 45.1 858.6 45.5 165.1
Tourist destinations:
Acapulco International Airport
1.1 7.7 157.5 7.9 144.8 0.8 7.3 141.3 7.5 168.4
Mazatlán International Airport
0.8 5.9 139.2 7.0 167.0 0.7 6.5 144.5 7.7 194.3
Zihuatanejo International Airport
0.6 4.6 96.6 4.8 150.0 0.6 4.7 98.3 5.2 180.5
Total tourist destinations
2.6 18.2 393.3 19.7 153.3 2.1 18.5 384.1 20.4 180.5
Regional cities:
Chihuahua International Airport
0.8 5.9 120.5 6.0 144.5 0.7 6.5 116.1 6.2 155.8
Culiacán International Airport
1.1 7.8 140.5 7.0 127.9 1.1 9.2 150.1 8.0 141.2
Durango International Airport
0.2 1.7 33.5 1.7 143.4 0.2 1.8 34.0 1.8 159.3
San Luis Potosí International Airport
0.3 1.9 46.7 2.3 178.9 0.2 1.8 45.7 2.4 221.4
Tampico International Airport
0.6 4.1 79.8 4.0 137.0 0.5 4.1 70.6 3.7 150.1
Torreón International Airport
0.5 3.4 70.4 3.5 146.2 0.4 3.4 65.8 3.5 166.9
Zacatecas International Airport
0.3 1.9 37.2 1.9 139.1 0.3 2.2 40.0 2.1 159.0
Total regional destinations
3.8 26.7 528.5 26.5 140.6 3.4 29 522.3 27.7 156.2
Border cities:
Ciudad Juárez International Airport
0.9 6.4 117.5 5.9 130.1 0.6 5.5 90.0 4.8 142.6
Reynosa International Airport
0.2 1.8 30.6 1.6 123.7 0.2 1.9 31.2 1.6 144.5
Total border city destinations
1.2 8.2 148.1 7.5 128.7 0.8 7.4 121.2 6.4 143.1
TOTAL:
14.1 100.0 1,994.2 100.00 141.8 11.5 100 1,886.2 100.0 163.8
________________
(1)
Revenues do not include eliminations of transactions among our subsidiaries.
(2)
Revenues per terminal passenger are calculated by dividing the total revenues for each airport by the number of terminal passengers for each airport. The total numbers have been rounded to the decimal.

As of July 2006, Mexico and the United States are parties to an amended bilateral aviation agreement that increases, from two each to three each, the number of Mexican and U.S. carriers eligible to operate routes between certain pairs of cities, which may include any U.S. city and twelve specified cities in Mexico including Acapulco, Mazatlán and Zihuatanejo.  The agreement also provides for a future increase, from two each to three each, in the number of Mexican and U.S. carriers eligible to operate routes between U.S. cities and two specified additional Mexican cities, including Monterrey.  This subsequent increase took effect in October 2007.  To date, this bilateral agreement did not benefit our business as we expected, mainly because of the decrease in the tourism levels from the U.S. to Mexico connected with the U.S. economic recession.
Our Sources of Revenues
Aeronautical Services
Aeronautical services represent the most significant source of our revenues.  All of our revenues from aeronautical services are regulated under the maximum-rate price regulation system applicable to our airports.  In 2007, 2008 and 2009, aeronautical services revenues represented approximately 81.7%, 81.3% and 80.5% respectively, of our total revenues.
Our revenues from aeronautical services are derived principally from: passenger charges, landing charges, aircraft parking charges, charges for the use of passenger walkways and charges for the provision of airport security services.  Aeronautical services revenues are principally dependent on the following factors:  passenger traffic volume, the number of air traffic movements, the weight of the aircraft, the duration of an aircraft’s stay at the airport, the time of day the aircraft operates at the airport and the specific prices charged for the service.
Passenger Charges
We collect a passenger charge for each departing passenger on an aircraft (other than diplomats, infants and transfer and transit passengers) called the Tarifa de Uso de Aeropuerto .  We do not collect passenger charges from arriving passengers.  Passenger charges are automatically included in the cost of a passenger’s ticket and we issue invoices for those charges to each airline on a bi-weekly basis and record an account receivable for the invoice corresponding to a flight during the actual month of the flight.
Our principal airline customers were required to pay us no later than 152 days after the invoice delivery date.  The term for payment was dependent upon interest rates on short-term Mexican treasury bills, or Cetes , with longer payment terms during periods of lower interest rates (within a defined range).  In 2009, the weighted average term of payment was 81 days.
The new agreements between our airports and our principal airline customers provide that from May 1, 2010, payments for passenger charges will be 60 days after the invoice delivery date for Aeromexico, Mexicana and Volaris, 45 days after the invoice delivery date for VivaAerobus and 30 days after the invoice delivery date for Interjet.
International passenger charges are currently U.S. dollar-denominated, but are collected in pesos based on the average exchange rate during the month prior to the flight, and as such the value of our revenues from those charges is therefore affected by fluctuations in the value of the U.S. dollar as compared to the peso.  Domestic passenger charges are peso-denominated.  In 2007, 2008 and 2009, passenger charges represented approximately 75.0%, 76.3% and 77.9%, respectively, of our aeronautical services revenues and approximately 61.2%, 62.0% and 62.7%, respectively, of our total revenues.  Passenger charges vary at each airport and based on the destination of each flight.

Aircraft Landing Charges
We collect landing charges from carriers for their use of our runways and taxiways, illumination systems on the runways and taxiways and other visual landing assistance services.  Our landing charges are different for each of our airports and are based on each landing aircraft’s weight (determined as an average of the aircraft’s weight without fuel and maximum takeoff weight), the time of the landing, the origin of the flight and the nationality of the airline or client.  In 2007, 2008 and 2009, these charges represented approximately 7.7%, 6.9% and 6.2%, respectively, of our aeronautical services revenues and approximately 6.3%, 5.6% and 5.0%, respectively, of our total revenues.
Aircraft Parking, Boarding and Unloading Charges
We collect various charges from carriers for the use of our facilities by their aircraft and passengers after landing.  We collect aircraft parking charges based on the time an aircraft is at an airport’s gate or parking position.  Each of these charges varies based on the time of day or night that the relevant service is provided (with higher fees generally charged during peak usage periods and at night), the aircraft’s maximum takeoff weight, the origin and destination of the flight and the nationality of the airline or client.  We collect aircraft parking charges the entire time an aircraft is on our aprons.
Aircraft Long-Term Parking Charges
We collect charges from our carriers for the long-term use of facilities at our airports for aircraft long-term parking that does not involve the loading or unloading of passengers or cargo.  These charges are based on the time of day or night the aircraft is parked at our facilities, the length of time the aircraft is parked at our facilities and the nationality of the airline or client.  Together with our aircraft parking, boarding and unloading charges described above, in 2007, 2008 and 2009, these charges represented approximately 6.2%, 5.9% and 5.0%, respectively, of our aeronautical services revenues and 5.1%, 4.8% and 4.0%, respectively, of our total revenues.
Passenger Walkway Charges
Airlines are also assessed charges for the connection of their aircraft to our terminals through a passenger walkway and for the transportation of passengers between terminals and aircraft via buses and other vehicles.  These charges are generally based on the amount of time each service is used, the number of these services used, the time of day the services are used, the origin and destination of the flight and the nationality of the airline or client.  In 2007, 2008 and 2009, these charges represented approximately 1.5%, 1.5% and 1.1%, respectively, of our aeronautical services revenues and approximately 1.2%, 1.2% and 0.9%, respectively, of our total revenues.
Airport Security Charges
We also assess an airport security charge, which is collected from each airline, based on the number of its departing terminal passengers (excluding infants, diplomats and transit passengers), for use of our X-ray equipment, metal detectors and other security equipment and personnel.  These charges are based on the time of day the services are used, the number of departing passengers and the destination of the flight.  Independent subcontractors provide airport security services at our airports.  In 2007, 2008 and 2009, these charges represented approximately 1.5%, 1.4% and 1.3%, respectively, of our aeronautical services revenues and approximately 1.2%, 1.1% and 1.0%, respectively, of our total revenues.
The International Civil Aviation Organization, the General Office of Civil Aviation (Mexico’s federal authority on aviation) and the Office of Public Security issue guidelines for airport security in Mexico.  In response to the September 11, 2001 terrorist attacks in the United States, we have taken additional steps to increase security at our airports.  The International Civil Aviation Organization issued directives in October 2001 establishing new rules and procedures to be adopted at our airports.  Under these directives, these rules and procedures were to be implemented immediately and for an indefinite period of time.

To comply with these directives, we reinforced our security by:
·
updating and amending our emergency security and contingency plans and the responsibilities of security personnel relating thereto;
·
segregating flows of arriving and departing passengers;
·
improving security supervision committees at each of our airports, particularly those with significant international traffic;
·
updating our security screening technology, including increasing the sensitivity of metal detectors and introducing new procedures for x-ray inspection of luggage;
·
increasing and improving the training of security personnel;
·
coordinating security measures and emergency plans with operators of complementary and commercial services at our airports;
·
implementing a higher security employee identification system; and
·
increased collaboration with providers of security equipment installation services.
Certain of these improvements are expected to be expensed in our results of operations, while others are expected to require additional capital expenditures under our master development program.
Several of our airline customers have also contributed to the enhanced security at our airports as they have adopted new procedures and guidelines established by the International Civil Aviation Organization applicable to airlines.  Some measures adopted by the airlines include adding more points for verification of passenger identification, inspecting luggage prior to check-in and reinforcing controls over access to airplanes by various service providers (such as baggage handlers and food service providers).
The International Civil Aviation Organization established security guidelines requiring checked baggage on all international commercial flights as of January 2006, and all domestic commercial flights as of July 2006, to undergo a comprehensive screening process for the detection of explosives.  We are currently planning to purchase and install new screening equipment in all of our airports to facilitate our airline customers’ compliance with the new baggage screening guidelines. Until we agree on the contractual terms for the operation of this equipment with the airlines and the new screening equipment becomes operational, checked baggage will continue to be screened by hand by each airline in order to comply with the screening guidelines.  In some countries, such as the United States of America, the federal government (in the case of the United States, through the Transportation Security Administration) is responsible for screening checked baggage.  Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new equipment could increase our exposure to liability as a result of our involvement in the screening process.  In addition, although we are not currently obligated to screen checked baggage, we could become obligated to do so, and thus subject to potential liability, if Mexican law changes in the future.

Complementary Services
At each of our airports, we earn revenues from charging access and other fees from third-party providers of ramp handling and baggage handling services, catering services, aircraft security, aircraft maintenance and repair and fuel.  These access fees are included in the revenues that are regulated under our maximum-rate price regulation system and are determined for each third-party service provider based on a percentage of their total revenues.  We currently maintain contracts with thirteen companies that provide the majority of these complementary services at our 13 airports.
Under the Mexican Airport Law, we are required to provide complementary services at each of our airports if there is no third party providing such services.  For example, SEAT, which is controlled by Aeroméxico and Mexicana through a joint venture, currently provides the majority of ramp handling and baggage handling services at our airports.  If the third parties currently providing these services cease to do so, we will be required to provide these services or find another third party to provide such services.
The Mexican Airport and Auxiliary Services Agency ( Aeropuertos y Servicios Auxiliares ) maintains an exclusive contract to sell fuel at all of our airports and we charge the Mexican Airport and Auxiliary Services Agency a nominal access fee.  The Mexican Airport and Auxiliary Services Agency in turn is required to purchase all of its fuel from Petróleos Mexicanos, or PEMEX .
Leasing of Space to Airlines
We derive aeronautical revenue from leasing space in our airports to airlines that is necessary for their operations, such as ticket counters and offices.  Our lease agreements with airline customers for the use of space in our airports are typically for terms of three years with provisions for periodic inflation adjustments to our rental fees.
Cargo Handling
In 2007, 2008 and 2009, our 13 airports handled approximately 82, 79, and 72 thousand metric tons of cargo, respectively.  Increases in our cargo volume are beneficial to us for purposes of the maximum rate calculations, as cargo increases the number of our workload units.
Cargo-related revenues include revenues from the leasing of space in our airports to handling agents and shippers, landing fees for each arriving aircraft carrying cargo and a portion of the revenues derived from other complementary services provided in connection with cargo services.  Cargo-related revenue is largely aeronautical and therefore subject to maximum rates applicable to aeronautical revenue sources.
Revenues from cargo handling in our airports historically have represented a negligible portion of our total revenues, but we believe that Mexico has significant potential for growth in the volume of cargo transported by air.
Permanent Ground Transportation
We receive revenues from ground transportation vehicles and taxi companies who pay an access fee to operate on our airport premises.  Our revenues from providers of ground transport services deemed “permanent” under applicable Mexican law, such as access fees charged to taxis, are subject to price regulation.

Non-aeronautical Services
General
Our revenues from non-aeronautical services are principally derived from commercial activities.  Non-aeronautical services historically have generated a significantly smaller portion of our revenues as compared to aeronautical services.  Our revenues from non-aeronautical services are derived from commercial activities, such as the leasing of space in our airports to retailers, restaurants, airlines and other commercial tenants.  In 2007, 2008 and 2009, revenue from non-aeronautical services accounted for approximately 18.3% 18.7%, and 19.5%, respectively, of total revenue.
None of our revenues from non-aeronautical services are regulated under our maximum-rate price regulation system, though other authorities may regulate them.  For example, our parking facilities may be subject to certain municipal regulations.
Revenues from Commercial Activities
As the main part of our business strategy we have made it a priority to increase our revenues from commercial activities in our airports and to develop and promote the “OMA” brand, including the “OMA Plaza” retail brand described below.  As a result of our efforts, our revenues from commercial activities have increased from approximately 7% of revenues in 2000 to 18.4 % of revenues in 2009, primarily as a result of the following initiatives:
·
Expanding and reconfiguring the commercial space available in our airport terminals. In order to increase our revenues from commercial activities, we have expanded and redesigned the layout of certain terminals in our airports to allow for the inclusion of more commercial businesses and larger individual commercial spaces, as well as to redirect the flow of passengers through our airports so as to increase our exposure to the commercial businesses operating in our airports.  As a result, between 2000 and 2009, we increased the total area available for commercial activity in our 13 airports by approximately 50%, and have more than doubled the commercial area in the Monterrey International Airport.
·
Renegotiating agreements with terminal tenants to be more consistent with market practice. We have also improved our lease arrangements with existing tenants by adopting a new type of contract that provides for royalty payments based on a percentage of revenues, subject to a minimum fixed amount based partly on square-footage, as opposed to the leases based solely on square footage that were used historically in Mexican airports.  We estimate, based on the nature of our tenant operations, that approximately half of our commercial space is suitable for royalty-based leasing arrangements.  As of December 31, 2009, substantially all of the eligible contracts were represented by royalty-based leasing arrangements.
·
Improving the quality of retail offerings in our airports. Historically, commercial tenants in our terminals consisted of small, often similar, local businesses offering goods and services of limited variety.  We have leased redesigned space formerly occupied by such tenants, as well as newly available space, to more established, internationally recognized businesses in order to improve the quality, diversity and brand recognition of commercial goods and services available to our passengers, which we believe, based in part on market surveys conducted at several of our airports, will increase the sales revenues of our commercial tenants, thereby increasing our revenues from commercial activities.  As a result, our food and beverage service tenants currently offer internationally recognized brands such as Starbucks and Carl’s Jr.  In order to promote commercial development at all of our airports, we encourage commercial tenants to lease bundles of commercial spaces among multiple airports that we operate.

·
Development and promotion of “OMA Plaza” retail brand. In order to enhance our passengers’ confidence in the retailers operating in our airports, we have developed the “OMA Plaza” brand for our commercial spaces.  As part of this initiative, we have begun to standardize certain merchandising and design elements of our commercial spaces in order to create a more uniform and elegant image that is more appealing to retail customers.  In addition, we have developed promotional programs focusing on the further development of the OMA Plaza brand that are intended to stimulate retail sales in our airports.  We believe that a recognizable brand and familiar aesthetic for our commercial spaces will make passengers more likely to take advantage of the commercial goods and services available in our airports.
·
Developments at Mexico City International Airport. In October 2008, we acquired 90% of the shares of Consorcio Grupo Hotelero Terminal 2, S.A. de C.V., which has the rights to develop and operate a 287-room hotel and approximately 5,000 square meters of commercial space inside the new Terminal 2 of the Mexico City International Airport, under a 20-year lease agreement with the Mexico City International Airport.  The Spanish company NH Hoteles, S.A. de C.V. owns the other 10%.  The Terminal 2 Hotel opened in August 2009.
Commercial activities in each of our airports currently consist of the following:
·
Parking facilities – Our concessions provide us the right to operate the car parking facilities at all of our airports.  Revenues from parking facilities at our airports currently are not regulated under our maximum rates, although they are subject to the regulatory oversight of the Ministry of Communications and Transportation.
·
Advertising – In 2002, we entered into a contract with a subsidiary of Corporación Interamericana de Entretenimiento, S.A. de C.V., or CIE , pursuant to which we have developed a greater number of and more strategically located billboards, screens (projection and plasma) and other advertising space at our airports.  Under the agreement, CIE places advertising in our airports and we collect a percentage of the revenues that CIE receives from individual advertisers.
·
Leasing of space – Revenues that we derive from leasing of space in our terminals to airlines and complementary service providers for certain activities that are not essential to airport operations, such as first class/VIP lounges, are not subject to price regulation under our maximum rates and are classified as non-regulated commercial activities.
·
Retail stores – We have completed several renovation projects as part of our overall effort, described above, to improve the product mix and brand recognition of retail stores in the commercial areas at our airports.  Our retailer tenants currently offer such internationally recognized product brands as Hermes, Mont Blanc, Swatch, Christian Dior, Lancôme, L’Oreal, Swarovski, Lacoste, Cartier, Bulgari and Hugo Boss.  We also have several duty-free retailers that cater to international passengers.
·
Car rentals – We recently increased the presence of internationally known name-brand car rental providers at our airports, and have encouraged car rental companies to establish on-site automobile pick-up and drop-off facilities at our airports.

·
Food and beverage services – In recent years, we have completed “clean-up” projects with respect to our restaurant and bar leases, in order to attract world-class providers of high-quality food and beverage services offering a wider variety of cuisine options and service concepts.
·
Communications – We have consolidated most of the telephone and internet service at our airports with one provider and offer internet access (either wireless internet access or internet service kiosks) at all of our airports.
·
Financial services – We lease space to financial services providers (such as currency exchange bureaus, banks and ATMs), at our airports, and we charge providers of these financial services fees based partly on a percentage of the revenues recorded by their operations.  ATM service is currently available at all of our airports.
·
Ground transportation – Our revenues from providers of ground transportation services deemed “non-permanent” under applicable Mexican law, such as access fees charged to charter buses, are not subject to price regulation under our maximum rates and are classified as non-regulated commercial activities.
·
Time-share marketing and sales – We receive revenues from time-share developers to whom we rent space in our airports for the purpose of marketing and sales of time-share units.
Our Airports
In 2007, 2008 and 2009, our airports served a total of approximately 14.2 million, 14.1 million, and 11.5million terminal passengers, respectively.  Monterrey International Airport accounted for approximately 46.2%, 46.8% and 45.1% of our terminal passenger traffic in 2007, 2008 and 2009, respectively.  Acapulco International Airport, Mazatlán International Airport and Zihuatanejo International Airport, our main airports servicing the next most popular destinations in our airport group, collectively accounted for approximately 18.5%, 18.2% and 18.5% of our terminal passenger traffic in 2007, 2008 and 2009, respectively.  Ciudad Juárez International Airport, our largest airport servicing a border city, accounted for approximately 6.4%, 6.4% and 5.5% of our terminal passenger traffic in 2007, 2008 and 2009, respectively.  All of our airports are designated as international airports under applicable Mexican law, meaning that they are equipped to receive international flights and maintain customs and immigration facilities operated by the Mexican government.

The following tables set forth the passenger traffic volume presented in amounts of (1) total passengers, (2) terminal departing passengers and (3) terminal arriving passengers, for each of our airports for the periods indicated:
Passenger Traffic
Year Ended December 31 ,
2005
2006
2007
2008
2009
Terminal (1)
Transit (2)
Total
Terminal (1)
Transit (2)
Total
Terminal (1)
Transit (2)
Total
Terminal (1)
Transit (2)
Total
Terminal (1)
Transit (2)
Total
Total passengers:
Acapulco
880,190 39,291 919,481 994,286 45,445 1,039,731 1,057,347 49,444 1,106,791 1,087,974 26,098 1,114,072 839,048 7,186 846,234
Chihuahua
599,977 79,932 679,909 664,392 80,257 744,649 854,757 60,231 914,988 833,793 46,451 880,244 745,165 27,078 772,243
Ciudad Juárez
611,942 31,032 642,974 698,765 44,856 743,621 908,835 26,033 934,868 903,129 23,212 926,341 631,111 15,163 646,274
Culiacán
769,118 118,238 887,356 843,989 138,637 982,626 1,137,571 167,684 1,305,255 1,099,038 138,456 1,237,494 1,062,893 96,621 1,159,514
Durango
214,920 47,334 262,254 236,200 24,933 261,133 279,310 36,405 315,715 233,471 23,709 257,180 213,394 1,339 214,733
Mazatlán
799,801 106,125 905,926 819,214 91,839 911,053 905,010 120,261 1,025,271 833,714 109,124 942,838 743,556 54,638 798,194
Monterrey
4,660,138 360,213 5,020,351 5,253,600 300,737 5,554,337 6,559,613 304,195 6,863,808 6,586,190 163,050 6,749,240 5,199,895 93,411 5,293,306
Reynosa
146,250 1,777 148,027 136,991 1,417 138,408 191,326 1,208 192,534 247,339 991 248,330 215,392 384 215,776
San Luis Potosí
233,610 832 234,442 227,102 1,160 228,262 264,349 1,973 266,322 261,049 2,007 263,056 206,500 1,480 207,980
Tampico
402,122 13,292 415,414 485,125 12,570 497,695 580,117 14,880 594,997 582,328 13,452 595,780 470,304 3,825 474,129
Torreón
374,559 91,188 465,747 410,124 52,479 462,603 522,295 80,903 603,198 481,265 56,173 537,438 394,377 12,995 407,372
Zacatecas
297,137 72,469 369,606 332,224 122,865 455,089 277,339 57,191 334,530 267,344 40,791 308,135 251,602 7,888 259,490
Zihuatanejo
608,897 4,062 612,959 681,581 4,150 685,731 674,612 8,352 682,964 644,029 6,105 650,134 545,051 4,098 549,149
Total
10,598,661 965,785 11,564,446 11,783,593 921,345 12,704,938 14,212,481 928,760 15,141,241 14,060,663 649,619 14,710,282 11,518,288 326,106 11,844,394
________________
(1)
Includes arriving and departing passengers as well as transfer passengers (passengers who arrive at our airports on one aircraft and depart on a different aircraft).
(2)
Terminal passengers who arrive at our airports but generally depart without changing aircraft.


Year Ended December 31,
2005
2006
2007
2008
2009
Domestic
International
Total
Domestic
International
Total
Domestic
International
Total
Domestic International
Total
Domestic
International
Total
Terminal departing passengers:
Acapulco
256,715 192,531 449,246 296,841 207,896 504,737 348,822 189,869 538,691 382,157 167,744 549,901 296,995 122,194 419,189
Chihuahua
261,361 36,808 298,169 290,516 41,988 332,504 380,161 46,424 426,585 366,151 48,949 415,100 330,430 39,504 369,934
Ciudad Juárez
272,641 878 273,519 314,698 552 315,250 424,456 794 425,250 422,987 767 423,754 302,401 433 302,834
Culiacán
365,805 25,748 391,553 407,618 20,651 428,269 549,967 28,322 578,289 534,556 25,463 560,019 525,464 14,629 540,093
Durango
82,656 24,293 106,949 91,989 26,132 118,121 121,291 18,695 139,986 101,108 15,174 116,282 94,040 11,312 105,352
Mazatlán
178,758 222,324 401,082 173,150 237,725 410,875 221,627 233,579 455,206 212,322 208,419 420,741 194,543 178,082 372,625
Monterrey
1,779,871 515,697 2,295,568 2,042,616 497,271 2,539,887 2,668,059 509,709 3,177,768 2,732,645 517,040 3,249,685 2,200,697 384,942 2,585,639
Reynosa
65,674 117 65,791 65,008 68 65,076 90,877 488 91,365 116,668 1,101 117,769 103,818 1,322 105,140
San Luis Potosí
77,923 39,514 117,437 70,550 42,681 113,231 87,299 45,123 132,422 84,508 45,750 130,258 69,634 33,364 102,998
Tampico
171,153 30,307 201,460 208,718 33,604 242,322 259,532 30,346 289,878 259,107 30,483 289,590 209,326 25,088 234,414
Torreón
149,345 36,911 186,256 162,828 42,378 205,206 216,027 46,060 262,087 196,318 44,330 240,648 165,160 30,914 196,074
Zacatecas
99,691 52,973 152,664 118,673 52,517 171,190 91,539 50,736 142,275 92,056 44,394 136,450 81,436 46,203 127,639
Zihuatanejo
143,963 161,763 305,726 165,047 176,772 341,819 176,019 164,000 340,019 171,832 151,826 323,658 152,093 123,025 275,118
Total
3,905,556 1,339,864 5,245,420 4,408,252 1,380,235 5,788,487 5,635,676 1,364,145 6,999,821 5,672,415 1,301,440 6,973,855 4,726,037 1,011,012 5,737,049

Year ended December 31,
2005
2006
2007
2008
2009
Domestic
International
Total
Domestic
International
Total
Domestic
International
Total
Domestic
International
Total
Domestic
International
Total
Terminal arriving passengers:
Acapulco
298,273 132,671 430,944 341,685 147,864 489,549 391,401 127,255 518,656 436,514 101,559 538,073 339,423 80,436 419,859
Chihuahua
271,814 29,994 301,808 297,980 33,908 331,888 392,448 35,724 428,172 381,821 36,872 418,693 346,314 28,917 375,231
Ciudad Juárez
337,558 865 338,423 382,757 758 383,515 482,572 1,013 483,585 478,597 778 479,375 327,740 537 328,277
Culiacán
366,652 10,913 377,565 410,628 5,092 415,720 547,829 11,453 559,282 533,082 5,937 539,019 522,094 706 522,800
Durango
89,741 18,230 107,971 99,989 18,090 118,079 127,370 11,954 139,324 109,796 7,393 117,189 102,348 5,694 108,042
Mazatlán
201,781 196,938 398,719 191,529 216,810 408,339 234,667 215,137 449,804 224,663 188,310 412,973 200,326 170,605 370,931
Monterrey
1,867,610 496,960 2,364,570 2,271,885 441,828 2,713,713 2,948,821 433,024 3,381,845 2,898,749 437,756 3,336,505 2,315,744 298,512 2,614,256
Reynosa
80,190 269 80,459 71,903 12 71,915 99,822 139 99,961 129,484 86 129,570 109,952 300 110,252
San Luis Potosí
85,549 30,624 116,173 80,207 33,664 113,871 96,062 35,865 131,927 94,096 36,695 130,791 75,213 28,289 103,502
Tampico
185,451 15,211 200,662 223,699 19,104 242,803 272,511 17,728 290,239 271,800 20,938 292,738 221,332 14,558 235,890
Torreón
160,898 27,405 188,303 173,396 31,522 204,918 225,526 34,682 260,208 207,748 32,869 240,617 176,105 22,198 198,303
Zacatecas
98,085 46,388 144,473 116,784 44,250 161,034 93,788 41,276 135,064 95,619 35,275 130,894 84,398 39,565 123,963
Zihuatanejo
169,731 133,440 303,171 187,620 152,142 339,762 192,041 142,552 334,593 198,440 121,931 320,371 165,157 104,776 269,933
Total
4,213,333 1,139,908 5,353,241 4,850,062 1,145,044 5,995,106 6,104,858 1,107,802 7,212,660 6,060,409 1,026,399 7,086,808 4,986,146 795,093 5,781,239
The following table sets forth the air traffic movement capacity of each of our airports as of December 31, 2009.
Capacity by Airport (1)
Airport
Peak air traffic movements per hour
Runway Capacity (2)
Acapulco
7 40
Chihuahua
8 40
Ciudad Juárez
5 20
Culiacán
10 20
Durango
3 40
Mazatlán
7 22
Monterrey
26 38
Reynosa
4 18
San Luis Potosí
5 20
Tampico
5 22
Torreón
6 20
Zacatecas
4 20
Zihuatanejo
7 20
___________________________________
(1)
2009 figures.
(2)
Air traffic movements per hour.

The following table sets forth the air traffic movements for each of our airports for the periods indicated.
Air Traffic Movements by Airport (1)
Year ended December 31,
2005
2006
2007
2008
2009
Acapulco
26,336 28,015 30,016 30,248 26,671
Chihuahua
36,614 36,681 23,567 35,989 33,635
Ciudad Juárez
20,424 19,612 61,675 21,059 15,114
Culiacán
50,648 55,691 37,992 43,771 39,044
Durango
15,599 15,672 17,112 16,255 15,981
Mazatlán
23,965 24,046 25,292 25,942 23,514
Monterrey
94,292 101,736 116,826 110,150 85,260
Reynosa
6,513 7,877 9,483 10,403 8,388
San Luis Potosí
22,102 22,150 23,696 22,184 20,236
Tampico
21,299 22,730 27,938 24,453 20,575
Torreón
21,523 21,546 25,101 22,923 15,861
Zacatecas
9,112 10,381 9,169 9,001 8,742
Zihuatanejo
13,899 16,474 16,190 14,856 13,710
Total
362,326 382,611 424,057 387,234 326,731
_________________________________
(1)
Includes departures and landings.

The following table sets forth the average number of passengers per air traffic movement for each of our airports for the periods indicated:
Average Passengers per Air Traffic Movements by Airport (1)
Year ended December 31,
2005
2006
2007
2008
2009
Acapulco
33.4 35.5 35.2 36.0 31.5
Chihuahua
16.4 18.1 22.5 23.2 22.2
Ciudad Juárez
30.0 35.6 38.6 42.9 41.8
Culiacán
15.2 15.2 18.4 25.1 27.2
Durango
13.8 15.1 16.3 14.4 13.4
Mazatlán
33.4 34.1 35.8 32.1 31.6
Monterrey
49.4 51.6 56.1 59.8 61.0
Reynosa
22.5 17.4 20.2 23.8 25.7
San Luis Potosí
10.6 10.3 11.2 11.8 10.2
Tampico
18.9 21.3 20.8 23.8 22.9
Torreón
17.4 19.0 20.8 21.0 24.9
Zacatecas
32.6 32.0 30.2 29.7 28.8
Zihuatanejo
43.8 41.4 41.7 43.4 39.8
Average of all airports
29.3 30.8 33.5 36.3 35.3
_________________________________
(1)
Includes total passengers divided by total air traffic movements.
Metropolitan Area
Monterrey International Airport
Monterrey International Airport is our most important airport in terms of passenger traffic (including both domestic and international passengers), air traffic movements and contribution to revenues.  According to the Mexican Bureau of Civil Aviation, Monterrey International Airport was the fourth busiest airport in Mexico in 2009, in terms of commercial aviation passenger traffic.  In 2007, 2008 and 2009, it accounted for approximately 46.2%, 46.8% and 45.1%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 6.6 million terminal passengers, 6.6 million terminal passengers and 5.2 million terminal passengers, respectively, were served by Monterrey International Airport.  Of the terminal passengers in 2007, 85.6% were domestic and 14.4% were international passengers.  In 2008, 85.5% were domestic and 14.5% were international passengers.  In 2009, 86.9% were domestic and 13.1% were international passengers.  This airport serves primarily business travelers and is also a hub for the transportation of goods.
A total of 12 commercial airlines operate at this airport.  The principal ones are VivaAerobus, Aeroméxico, Mexicana, Interjet and Aeroméxico Connect.  On March 16, 2009, Mexicana Link started operations at this airport with the route to Guadalajara.  It later added new routes to Puebla, Queretaro, Cancún, and Veracruz.  Volaris, the low cost carrier, began flying to Tijuana in February 2009. On October 5, 2009, Aeromar restarted operations at this airport with the route to San Luis.  VivaAerobus stopped flying to Austin and started flying to Las Vegas on July 1, 2009 and to Guadalajara on April 1, 2009.  VivaAerobus reduced its flights to other cities . Aeroméxico stopped flying to Detroit and Madrid in January 2009, to Roma in April 2009 and to Havana and Tijuana in September 2009.  In April 2009, Mexicana stopped flying to Los Angeles and in October 2009 it started flying to New York.  Aviacsa was suspended on July 6, 2009 by the Ministry of Communications and Transportation.  Their principal routes during 2009 were México, Guadalajara, Ciudad Juarez, Cancún, and Las Vegas.  The principal non-Mexican airlines operating at this airport are American Airlines and Continental.  Airlines operating at this airport serve 34 direct destinations.  Of these direct destinations, 25 are domestic and 9 are international.  The principal direct routes from this airport are Mexico City, Guadalajara, Toluca, Cancún, Veracruz, Hermosillo, Tijuana, Ciudad Juárez, Dallas, Houston, Las Vegas, Chicago, Atlanta, Detroit, New York, and Los Angeles.  Domestic traffic was affected by the suspension of Aviacsa.  Since 2005, we have entered into agreements with five new Mexican carriers for the operation of various additional routes to and from the airport.  In addition, two of those new Mexican carriers have elected to establish their headquarters at this airport, one of which is VivaAerobus.

Monterrey International Airport is located approximately 21 kilometers (13 miles) from the city of Monterrey, which has a population (including its suburbs) of approximately 4,199,292.  Monterrey is Mexico’s third largest city in terms of population and is one of Mexico’s most productive industrial centers.  It is home to many of Mexico’s largest companies in a wide variety of industries, as well as several major universities.  Monterrey is the capital of the state of Nuevo León, the third highest contributor to Mexico’s gross domestic product (GDP).  As home to most of Nuevo León’s industry, Monterrey generates roughly 91.7% of the state’s GDP.
Monterrey International Airport operates 24 hours daily.  The airport currently has two operating runways, one with a length of 3,000 meters (9,842 feet), and the other with a length of 1,800 meters (5,905 feet).  The airport’s runway capacity is 38 air traffic movements per hour.  The airport also has an instrument landing system (ILS).  The airport occupies a total area of 821 hectares (88,371,705 square feet).  The airport’s facilities include a commercial passenger terminal building with a total area of approximately 28,966 square meters (311,787 square feet), of which 5,023 square meters (54,065 square feet) is commercial space, a 29-position apron for commercial aviation, a two-position apron for air freight, a ten-position apron for general aviation, five taxiways, nine air bridges, an ample boarding lounge for passengers making connections with other flights, and other boarding lounges.  Currently, the airport has 11 gates for international or domestic flights.
In November 2006 we completed construction of a new temporary passenger Terminal C building with a total area of approximately 4,800 square meters (51,668 square feet) to handle additional traffic from the new airlines serving the airport.  This new Terminal, which commenced operation at year-end 2006, is mainly used by the low cost carrier VivaAerobus.  The Terminal C has four boarding gates and serves five aircraft positions. In October 2007, in response to the request of low cost carrier VivaAerobus, we started an expansion for the passenger Terminal C. In particular, this expansion would lead to a development of a commercial area with 9 leased spaces for duty free, snacks, and boutiques, an enlargement of the waiting lounge and the construction of an additional baggage claim area with space for the principal customs and migration authorities. The aggregate expansion would amount to additional 2,794 square meters (or 30,075 square feet).
On June 4, 2007, construction began on Terminal B of the Monterrey International Airport, which is expected to begin operations in the end of the third quarter of 2010.  Terminal B is expected to have the capacity to service 2.0 million passengers per year.  The 21,000 square meter (226,049 square feet) facility is expected have two levels plus a mezzanine, and include six passenger jet ways (four of which are completed), seven contact positions for regional planes and four remote parking positions.  Our affiliate ICA has been engaged to construct the foundation, procure, fabricate and assemble the metallic structure and install the three-dimensional roofing structure for the facility. The relevant agreement was approved, in accordance with our Related Party Guidelines, by our Board of Directors upon the recommendation of our Committee responsible for Corporate Practices Functions, which concluded that the contract is on terms that the Committee believes are arm’s length.
With an area of 60,000 square meters (645,840 square feet) for freight operations, Monterrey International Airport is the leading air-cargo terminal in northern Mexico.  The airport offers one of Mexico’s most attractive air shipping options, both as a final destination and as a logistical hub.  Its current infrastructure servicing air cargo operations includes, among other facilities, terminal warehouses (including a 4,000 square meter (43,056 square foot) terminal warehouse occupied by United Parcel Service, Federal Express since 2004, DHL since January 2010 and OMA Carga, which we operate directly), merchandise checkpoint platforms (which can service nine trailers simultaneously), and parking for 359 cars and 32 trailers.  Roadways suitable for trailers and cars that serve the terminal and x-ray facilities are available.

In 2004, we completed a remodeling of the Monterrey International Airport Terminal A.  Among the upgraded facilities introduced to the public were automatic check-in kiosks, internet access points, new VIP lounges, and lounge areas for passengers awaiting connecting or regional flights.
Within our plans for future expansion of the Monterrey International Airport, on February and June 2007, March and May 2008, and July and December of 2009 we completed the acquisition of land surrounding the airport for an aggregate surface of 777 hectares for an aggregate price of Ps.1,608,370,907 (US$ 123,152,443).
As part of our strategy of offering incentives to carriers to encourage them to operate new routes and take other measures expected to increase passenger traffic at our airports, on November 22, 2006, we delivered a notice to the Mexican National Air Transportation Board setting forth certain criteria that carriers operating at the Monterrey International Airport must meet in order to receive a discount equal to Ps.75.00 per terminal passenger on passenger charges (representing approximately a 40% discount from our usual passenger charge).
VivaAerobus was the only airline that took advantage of these incentives.  VivaAerobus established its corporate and operational headquarters at the Monterrey International Airport.  In December 2006, VivaAerobus commenced operations with two aircraft operating nine routes.  By December 2008, VivaAerobus had 18 destinations with seven aircraft operating in their fleet and was serving 7 of our airports from Monterrey.  The principal routes served by VivaAerobus at the Monterrey International Airport are Veracruz, Cancún, Mérida, Culiacán, Villahermosa, and Chihuahua.  VivaAerobus opened its first international route to Austin, Texas, which started flying in May of 2008.  We believe that our participation in this agreement resulted in a decrease in our aeronautical revenues per terminal passenger in 2007 and 2008, and on September 10, 2008 we agreed with VivaAerobus to terminate the program. As a result, we will no longer provide financial incentives to VivaAerobus for the traffic it generates at Monterrey.
In the future, we may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession.  Historically, Aeropuerto del Norte has been used solely for general aviation operations.  The state of Nuevo Leon has requested in the past that the Ministry of Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations.  To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession.  However , there can be no assurance that the Ministry of Communications and Transportation will not authorize such an amendment and that commercial aviation flights will not operate from Aeropuerto del Norte in the future.  In addition, we understand that Aeropuerto del Norte is not capable of accommodating commercial passenger traffic with its current infrastructure.
Tourist Destinations
Acapulco International Airport
Acapulco International Airport is our third most important airport in terms of passenger traffic, air traffic movements and contribution to revenues.  According to the Mexican Bureau of Civil Aviation, Acapulco International Airport was the thirteenth busiest airport in Mexico in 2009, in terms of commercial aviation passenger traffic.  In 2007, 2008 and 2009, it accounted for approximately 7.4%, 7.7% and 7.3%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 1,057,347 terminal passengers, 1,087,974 terminal passengers and 839,048 terminal passengers, respectively, were served by Acapulco International Airport.  Of the terminal passengers in 2007, 70.0% were domestic and 30.0% were international passengers.  Of the terminal passengers in 2008, 75.2% were domestic and 24.8% were international passengers.  In 2009, 75.9% were domestic and 24.1% were international passengers.  Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are highly seasonal and affected by Mexican and international economic conditions.

A total of ten commercial airlines operate at the airport. The principal Mexican airlines are Interjet, Mexicana, Aeroméxico, Volaris and VivaAerobus.  The non-Mexican airlines operating at the airport are American and Continental.  Airlines operating at this airport serve 11 direct destinations.  Of these destinations, Mexico City, Toluca, Houston, Tijuana and Monterrey are the most popular.  In 2005 we entered into agreements with two new low-cost Mexican carriers for the operation of two additional routes: Acapulco-Toluca and Puebla-Acapulco-Tijuana.  VivaAerobus began operating a Monterrey-Acapulco route in December 2006.  On January 13, 2008, Aviacsa ceased its operations at the Acapulco airport (as a result of the high fuel prices), followed by Avolar, which cancelled the Acapulco-Puebla route in April 2008 and then had its operations suspended by the Mexican regulatory authorities on August 28, 2008.  On April 28, 2008, Volaris began operating the Acapulco-Tijuana route at this airport.
Acapulco International Airport is located approximately 15 kilometers (9 miles) from the city of Acapulco, which has a population (including its suburbs) of approximately 915,000.  Acapulco is Mexico’s twelfth largest city in terms of population and is one of Mexico’s most recognized tourist destinations, of particular importance as a port of embarkation and disembarkation for cruise ships.  We believe that these cruise ship passengers could represent a significant portion of the airport’s terminal passengers.
Acapulco International Airport operates 24 hours daily.  The airport has two operating runways and six taxiways.  The principal runway has a length of 3,300 meters (10,827 feet) and the auxiliary runway has a length of 1,700 meters (5,577 feet).  The apron servicing commercial aviation accommodates 15 airplanes.  Two of these spaces accommodate a B-737 model or equivalent, another two accommodate a B-747-400 model or equivalent, and the remaining eleven accommodate a B-757 model or equivalent.  Three of the 15 spaces have mechanical boarding bridges and 13 of the spaces have oil pumps.  The apron servicing general aviation accommodates 24 aircraft.
The runway capacity at Acapulco International airport is 40 air traffic movements per hour.  The airport also has an instrument landing system (ILS), which provides precise guidance to assist aircraft during landing.  The airport occupies a total area of 448.7 hectares (48,297,666 square feet) and has two buildings, one for commercial aviation and the other one for executive or general aviation.  The building for commercial aviation has four floors and occupies a total area of 19,943 square meters (214,666 square feet), of which 1,733 square meters (18,649 square feet) is commercial space.  Besides having the ILS, runway 10-28 has approach lights and flashes on both headers.
The general aviation platform has capacity to park either 6 aircraft category Bravo (B), and 20 aircraft category Alfa (A), or 8 aircraft category Bravo (B) and 12 aircraft category Alfa (A). It also has 2 positions for aircraft category Bravo (B) to load and unload. Additionally, a dual position area enables both types of aircraft to park in these positions. Runway 10-28 is 45 meters wide and meets Eco (E).
Due to its technical and geographic characteristics, Acapulco International Airport is the primary alternate airport of Mexico City.  The length of the airport’s runway as well as its elevation and average temperature makes it possible to operate airplanes at their maximum passenger, freight, and fuel capacities.  There is currently no airport in closer proximity to the airport of Mexico City with better air traffic conditions than those of the Acapulco International Airport.
Mazatlán International Airport
Mazatlán International Airport is our fifth most important airport in terms of passenger traffic.  According to the Mexican Bureau of Civil Aviation, Mazatlán International Airport was the 17th busiest airport in Mexico in 2009, in terms of commercial aviation passenger traffic.  In 2007, 2008 and 2009, it accounted for approximately 6.4%, 5.9%, and 6.5% respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 905,010 terminal passengers, 833,714 terminal passengers and 743,556 terminal passengers, respectively, were served by Mazatlán International Airport.  Of the terminal passengers in 2007, 50.4% were domestic and 49.6% were international passengers.  In 2008, 52.4% were domestic and 47.6% were international passengers.  In 2009, 53.1% were domestic and 46.9% were international passengers.  The airport’s passengers are predominantly domestic tourists who come from Mexico City, Monterrey and Tijuana among other cities, and international tourists who come primarily from the United States and Canada.  Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are highly seasonal and affected by Mexican and international economic conditions.

A total of nine commercial airlines operate at the airport.  The Mexican airlines are Click, Mexicana Link, Aeroméxico Connect, VivaAerobus, Volaris and Magnicharters.  During 2008, four airlines ceased their operations at the airport: Aerocalifornia was suspended on July 24, 2008, Delta ceased its operations at the airport on July 16, 2008, Aeroméxico ceased its operations at the airport on September 12, 2008 and Alma de Mexico ceased its operations at the airport and filed for bankruptcy on November 7, 2008. As of June 10, 2008, Mexican regulatory authorities temporarily suspended Magnicharter’s operations due to safety issues; the airline then resumed its operations two weeks after its suspension.  Since August 2009, Mexicana Click and Mexicana Link carry on the operations of Cia Mexicana de Aviacion.
The non-Mexican airlines operating at the airport are Alaska Airlines, US Airways, Mesa Airlines, Continental Airlines West Jet and Frontier. The airlines’ operations at the airport serve 12 direct destinations.  Of these destinations, Mexico City, Toluca, Monterrey, Guadalajara, Tijuana, and Los Cabos are the national routes.  Volaris began operating a new Tijuana-Mazatlán-Toluca route on November 25, 2008.  Under the amended bilateral aviation agreement entered into between Mexico and the United States in December 2005, the international routes are Los Angeles, Phoenix, Houston, Denver and Seattle.  The non-Mexican airlines Northwest and West Jet operate the international routes coming from Minneapolis in the United States, and from Calgary, Winnipeg, Edmonton, Toronto, Regina, Vancouver and Saskatoon in Canada.
Mazatlán International Airport is located approximately 18 kilometers (11 miles) from the city of Mazatlán, which has a population of approximately 600,000.  Mazatlán is the principal tourist destination of the Sinaloa region, with about 9,600 hotel rooms, according to the Mexican Ministry of Tourism.  Mazatlán offers attractive beaches and is also a major producer of shrimp, sardines and tuna.
Mazatlán International Airport operates 24 hours daily.  Its runway capacity is 22 air traffic movements per hour.  The airport occupies approximately 458 hectares (49,298,709 square feet) of land.  The airport’s facilities include a terminal building with a total area of 16,300 square meters (175,453 square feet), of which 1,447 square meters (15,571 square feet) is commercial space.  The airport has a 71,709-square-meter (771,595-square-feet) commercial aviation apron with ten positions and a 33,669-square-meter (362,268-square-feet) general aviation apron with 60 positions.  In addition, the airport has four air bridges, multiple boarding lounges, and a public parking facility that accommodates 152 vehicles and included 5 handicapped spots.  The airport’s runway is 2,702 meters (8,865 feet) long, with four taxiways that connect the commercial and general aviation platforms.
Mazatlán International Airport has been extensively remodeled and upgraded since 2000 in order to improve its operational efficiency and appearance.  Its runway system was completely replaced in and its 2001 platform for general aviation was completely renovated in 2003.  The terminal building was also remodeled to include, among other amenities, tourist information services and new charter flight check-in counters.  The remodeling project was completed in 2003. Recent improvements to the airport included the separation of the arrival and departure areas, general improvements to the international boarding area and a helicopter-landing platform.
Zihuatanejo International Airport
Zihuatanejo International Airport is our seventh most important airport in terms of passenger traffic. According to the Mexican Bureau of Civil Aviation, Zihuatanejo International Airport was the 21 st busiest airport in Mexico in 2009, in terms of commercial aviation passenger traffic.  In 2007, 2008 and 2009, it accounted for approximately 4.7%, 4.6% and 4.7%, respectively, of our terminal passenger traffic.

In 2007, 2008 and 2009, a total of, 674,612 terminal passengers, 644,029 terminal passengers and 545,051 terminal passengers, respectively, were served by Zihuatanejo International Airport.  Of the terminal passengers in 2007, 54.6% were domestic and 45.4% were international passengers.  Of the terminal passengers in 2008, 57.5% were domestic and 42.5% were international passengers.  In 2009, 58.2% were domestic and 41.8% were international.  Because the airport’s passengers are predominantly tourists, the airport’s passenger traffic and results of operations are seasonal and are affected by Mexican economic conditions.
A total of eight commercial airlines operate at the airport; the principal domestic airlines are Aeroméxico, Interjet and Click Mexicana.  Non -Mexican airlines operating at the airport include Alaska Airlines, Continental and US Airways.  Alma ceased service to Zihuatanejo in April 2008 and filed for bankruptcy on November 7, 2008.  Airlines operating at this airport serve 8 destinations.  Of these destinations, Mexico City, Toluca, Houston, Phoenix and Los Angeles are the principal direct routes.
Zihuatanejo International Airport is located approximately 12 kilometers (7 miles) from the city of Zihuatanejo.  Situated in the state of Guerrero and with a population of approximately 100,000 people, the city of Zihuatanejo is one of Mexico’s most attractive tourist destinations, with approximately 6,004 hotel rooms according to Mexican Ministry of Tourism, a marina, world-class golf courses and a growing residential real estate market.
Zihuatanejo International Airport operates 14 hours daily, from 7:00 a.m. to 9:00 p.m., with an extended schedule from 5:00 a.m. to 12:00 a.m.  The airport has one runway, which is 2,500 meters (8,202 feet) long with a runway capacity of 20 air traffic movements per hour.  The airport’s facilities include a terminal building encompassing an area of 6,905 square meters (74,325 square feet), including ,1,033 square meters (10,798 square feet) of commercial space.  It has a six-position commercial aviation apron, a 30-position general aviation apron and two taxiways.  The airport has four gates for international or domestic flights.
The quality of services offered at the Zihuatanejo International Airport has improved as a result of the recent expansion and renovation of the baggage claim, passenger waiting and commercial areas.
Regional Cities
Chihuahua International Airport
Chihuahua International Airport is our fourth most important airport in terms of passenger traffic, air traffic movements and contribution to revenues.  According to the Mexican Bureau of Civil Aviation, Chihuahua International Airport was the sixteenth busiest airport in Mexico in 2009, in terms of commercial aviation passenger traffic.  In 2007, 2008 and 2009, it accounted for approximately 6.0%, 5.9% and 6.5%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 854,757 terminal passengers, 833,793 terminal passengers and 745,165 terminal passengers, respectively, were served by Chihuahua International Airport.  Of the terminal passengers in 2007, 90.4% were domestic and 9.6% were international passengers.  In 2008, 89.7% were domestic and 10.3% were international passengers.  In 2009, 90.8% were domestic and 9.2% were international.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of nine commercial airlines operate at the airport, of which the principal ones are Aeroméxico, Aeroméxico Connect (formerly Aerolitoral), VivaAerobus and Interjet. Aeromexico started flying to Albuquerque on February 9, 2009.  Mexicana Link started flying to Chihuahua, Torreón and Guadalajada on September 17, 2009. On October 22, 2008, the low-cost airline Volaris began operating a direct route to Toluca.  Airlines operating at this airport serve 11 destinations.  The principal routes are Toluca, Mexico City, Monterrey, Houston and Dallas.  On March 26, 2007, due to safety concerns and financial problems, Mexican regulatory authorities announced the immediate suspension of Azteca, which accounted for approximately 7.1% of this airport’s revenue in 2006.

Mexican regulatory authorities suspended Aerocalifornia’s operations effective July 24, 2008.  This airline accounted for 2.8% of our total terminal passengers in 2008.  Alma ceased its operations after filing for bankruptcy on November 7, 2008.  Alma accounted for 5.21% of our total terminal passengers in 2008.
Chihuahua International Airport is located approximately 18 kilometers (11 miles) from the City of Chihuahua, which is the capital of the state of Chihuahua.  The city’s population is approximately 787,479.  The state of Chihuahua ranks fifth largest in terms of GDP.  Chihuahua’s close proximity to the United States and its highly developed maquiladora industry account for the majority the airport’s incoming and outgoing traffic.
Chihuahua International Airport operates 14 hours daily, from 7:00 a.m. to 9:00 p.m. (local time), with an extended schedule from 5:00 a.m. to 12:00 a.m.  The airport has two runways, with lengths of 2,620 meters (8,596 feet), and 1,100 meters (3,609 feet), respectively.  The runway system has a capacity of 40 air traffic movements per hour.  The airport occupies a total area of approximately 921.4 hectares (99,178,670 square feet).  The airport’s facilities include a terminal building with a total area of approximately 6,292 square meters (67,724 square feet), including 773 square meters (8,319 square feet) of commercial space, a seven-position apron for commercial aviation, a 21-position apron for general aviation, four taxiways, a two-position apron for airfreight and one air bridge.  The airport has four gates for international or domestic flights.
To accommodate growing demand for airfreight services and an expanding local economy, we completed the construction of a cargo area, which includes a warehouse, a customs office, x-ray zones, storage areas and packaging offices.  We currently operate all international cargo operations at this airport directly.
Culiacán International Airport
Culiacán International Airport is our second most important airport in terms of passenger traffic, air traffic movements and contribution to revenues.  According to the Mexican Bureau for Civil Aviation, Culiacán International Airport was the eleventh busiest airport in Mexico in 2009, in terms of commercial aviation passenger traffic.  In 2007, 2008 and 2009, it accounted for approximately 8.0%, 7.8% and 9.2%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 1,137,571 terminal passengers, 1,099,038 terminal passengers and  1,062,893 terminal passengers respectively, were served by Culiacán International Airport.  Of the terminal passengers in 2007, 96.5% were domestic and 3.5% were international passengers.  In 2008, 97.1% were domestic and 2.9% were international passengers.  In 2009, 98.6% were domestic and 1.4% were international.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are highly affected by Mexican economic conditions.
The airport’s terminal passenger traffic consists predominantly of commercial aviation.  In 2007, 2008 and 2009, commercial aviation accounted for approximately 94.9%, 96.2% and 96.4%, respectively, and general aviation accounted for approximately 5.1% , 3.8% and 3.6%, respectively, of the airport’s terminal passenger traffic.
A total of six commercial airlines regularly operate at the airport, the principal ones of which are Aeroméxico, Aeroméxico Connect (formerly Aerolitoral), Click Mexicana, Volaris, VivaAerobus and Interjet. VivaAerobus started flying from Culiacán to La Paz, Los Cabos and Guadalajara on January 12, January 15 and June 1, respectively. Interjet started flying to Mexico on February 4, 2009 and stopped flying to Tijuana on August 21, 2009. On April 14, 2008, Avolar suspended its operations at the Culiacán airport as a consequence of the suspension of its operations by the Mexican regulatory authorities, followed by Aviacsa, which ceased its operations on May 12, 2008 (as a result of the high fuel prices).  Volaris and Aerocalifornia immediately absorbed the market served by Avolar.  Similarly, VivaAerobús immediately absorbed the market served by Aviacsa.  On July 24, 2008, the Mexican regulatory authorities suspended the operations of Aerocalifornia, due to safety concerns relating to the carrier’s fleet of aircraft.  Since its suspension, Aerocalifornia’s passenger portion to Tijuana and Guadalajara has been absorbed mainly by Volaris.  After its merger with Northwest, Delta ceased its operations at the Culiacán airport on August 17, 2008, and on April 30, 2008, Mexicana also canceled its Culiacán-Los Angeles route, leaving the direct Culiacán-Los Angeles route unattended.  Currently, Aeroméxico Connect serves the Culiacán-Los Angeles route with a layover in Hermosillo.

Airlines operating at this airport serve 9 direct destinations, which are Tijuana, Mexico City, Monterrey, Guadalajara, Toluca, Hermosillo, La Paz, Mexicali, and San José del Cabo.
Culiacán International Airport is located approximately 12 kilometers (7 miles) from downtown of the city of Culiacán, whose population is approximately 875,000 in the whole municipality.  Culiacán is the capital of the state of Sinaloa, an important producer of beef and agricultural products.  The potential for growth of exports to the United States could generate an increase cargo operations at this airport, though we can offer no assurances that such growth will in fact occur or that cargo operations would increase as a result thereof.
Although Culiacán International Airport operates 16 hours daily, from 6:00 a.m. to 10:00 p.m. (local time), it frequently extends its hours of operation to service either cargo operations or late scheduled commercial flights.  Its runway capacity is 12 to 15 air traffic movements per hour.  The airport occupies a total area of 289.9 hectares (31,204,576 square feet) and has two air bridges.
Within the development of the Culiacán International Airport, on May 2008 we completed the acquisition of land surrounding the airport for an aggregate surface of 32.5 hectares (3,498,270 square feet) at an aggregate price of Ps. 32.5 million (US$ 3.1 million).
In 2002, in order to improve efficiency, we completed the construction of a new 8,046-square meter (86,607-square foot) terminal that includes 1,138 square meters (12,247 square feet) of commercial space, a boarding lounge, 15 commercial establishments, a 238-space public parking area, a 73-space parking area for employees and authorities, a five-position apron for commercial aviation and two air bridges. In 2009, the commercial apron was reconfigured to simultaneously park up to eight aircfrat and still have the capacity to simultaneously accommodate up to five type C aircraft and at least one type B (regional) aircraft.
Culiacán International Airport also includes military installations.  The presence of these installations amid their operational activity may at some point affect the airport’s runway capacity at peak hours, thus affecting its civil aviation operations.  Military activity has been lately intensive in helicopter usage.
Durango International Airport
In each of 2007, 2008 and 2009, Durango International Airport accounted for approximately 2.0%, 1.7% and 1.9%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 279,310 terminal passengers, 233,471 terminal passengers and 213,394 terminal passengers, respectively, were served by Durango International Airport.   Of the terminal passengers in 2007, 89.0% were domestic and 11.0% were international passengers.  Of the terminal passengers in 2008, 90.3% were domestic and 9.7% were international passengers.  In 2009, 92.0% were domestic and 8.0% were international.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of two commercial airlines currently operate at the airport: Aeroméxico Connect (formerly Aerolitoral) and Contienental.  On April 14, 2008, Avolar suspended its operations at Durango as a consequence of the suspension of its operations by the Mexican regulatory authorities.  On July 24, 2008, the Mexican regulatory authorities suspended also the operations of Aerocalifornia due to safety concerns relating to the carrier’s fleet of aircraft.  On October 26, 2008, Aeromexico cancelled the Durango-Chicago route.

From February to September, Interjet operated in the Durango International Airport serving the Durango-Mexico route. During summer Interjet served the Durango-Tijuana route.
Airlines operating at this airport service 4 direct destinations.  Of these, Mexico City, Tijuana, and Houston were the most important routes at the end of the year 2009.
Durango International Airport is located approximately 16 kilometers (10 miles) from the City of Durango, which has a population of approximately 527,000 people.  The state of Durango is rich in natural resources and is Mexico’s leading producer of wood, gold and bentonite, and the second leading producer of silver.
Durango International Airport operates 14 hours daily, from 6:00 a.m. to 8:00 p.m. (local time).  The airport’s runway is 2,900 meters (9,514 feet) long.  The runway has five taxiways and a capacity of 40 air traffic movements per hour.
The airport’s total area is 552.2 hectares (59,438,313 square feet).  Its facilities include a 4,000 square meters (43,056 square feet) terminal building with 125 square meters (1,342 square feet) of commercial space.  It has a three-position commercial aviation apron, a 26-position general aviation apron, and a 142-space public parking area.  The airport has two gates for international or domestic flights.
Improvements to the airport in 2008 included an improved boarding lounge for international and domestic flights, the expansion of the concourse, the expansion of the check-in area, improvement of commercial spaces, the expansion of the public parking lots and the separation of the arrival and departure areas.
San Luis Potosí International Airport
In 2007, 2008 and 2009, San Luis Potosí International Airport accounted for approximately 1.9%, 1.9% and 1.8%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 264,349 terminal passengers, 261,049 terminal passengers and 206,500 terminal passengers, respectively, were served by San Luis Potosí International Airport.  Of the terminal passengers in 2007, 69.4% were domestic and 30.6% were international passengers.  In 2008, 68.4% were domestic and 31.6% were international.  In 2009, 70.1% were domestic and 29.9% were international.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of four commercial airlines operate at the airport, which are Aeroméxico Connect (formerly Aerolitoral), Aeromar, Continental Airlines and American Eagle.  Aeromexico Connect stopped flying to Monterrey on April 4, 2009 and Aeromar started flying from San Luis Potosi to Monterrey on October 5, 2009.  Airlines operating at this airport serve four destinations.  Of these destinations, the airport’s most important direct routes are Mexico City, Houston, Dallas and Monterrey.
San Luis Potosí International Airport is located approximately 15 kilometers (9 miles) from the northeast city of San Luis Potosí, which is the capital of the state of San Luis Potosí and has a population of approximately 730,950.  The city of San Luis Potosí is equidistant (300 kilometers approximately) from three of the most important cities in Mexico (Mexico City, Guadalajara and Monterrey).  It is located within an area that represents 80%, in the aggregate, of Mexico’s total economic consumption, making it a natural distribution center for packing and shipping companies.  We are developing efforts to take advantage of this potential for cargo activities.  For example, in 2005, in collaboration with Estafeta Mexicana S.A. de C.V., a major Mexican airfreight company, we completed the construction of an international cargo facility at this airport, which Estafeta Mexicana now occupies.  Estafeta Mexicana distributes approximately 100,000 shipments to over 2,500 destinations daily, has a network of 415 offices and several concessionaires, operates Boeing 737-300F and Bombardier CRJ aircraft flying daily to 12 domestic and 2 international destinations and maintains 1,500 vehicles for urban and interstate transportation. The facilities include a three-position platform for cargo activities.

The airport operates 24 hours daily and can serve as an alternate airport for Mexico City.  The airport has two runways and main runway capacity of 20 air traffic movements per hour.  The principal runway is 3,000 meters (9,843 feet) long and the secondary runway is 1,000 meters (3,281 feet) long. The airport has an extension of 527 hectares and has an elevation of 6,070 feet (1,850 meters) above sea level. The average temperatures in the Airport vary from 81° Fahrenheit (ºF) to 86 ºF (27 ºC to 30 ºC). With a total area of 527.7 hectares (56,801,155 square feet), the airport’s facilities include a terminal building with approximately 2,613 square meters (28,126 square feet), including 293 square meters (3,152 square feet) of commercial space, a three-position platform for commercial aviation, a 26-position platform for general aviation, three taxiways and a boarding lounge. The airport’s NAVAIDS facilities include PAPIs, VOR and ILS (instruments landing system) on the main runway.
The terminal building was remodeled in 2003.  As a result of the recent improvement and expansion project, the airport’s terminal building now includes additional arrival space with approximately 539 square meters for international and domestic flights. Recent improvements to the airport included the addition of separate domestic and international baggage claim areas.
Tampico International Airport
According to the Mexican Bureau of Civil Aviation, Tampico International Airport was the 25th busiest airport in Mexico in 2009, in terms of commercial aviation passenger traffic.  In 2007, 2008 and 2009, it accounted for approximately 4.1%, 4.1% and 4.1%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 580,117 terminal passengers, 582,328 terminal passengers and 470,304 terminal passengers, respectively, were served by Tampico International Airport.  Of the terminal passengers in 2007, 91.7% were domestic and 8.3% were international passengers.  In 2008, 91.2% were domestic and 8.8% were international passengers.  In 2009, 91.6% were domestic and 8.4% were international.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
At the beginning of 2009, six commercial airlines operated at the airport, the principal ones being Click Mexicana, Aeroméxico Connect (formerly Aerolitoral), Aviacsa, Interjet, Continental and American Eagle.  American Eagle cancelled its direct route to Dallas on January 6, 2009 and Aviacsa ceased operations at the airport on July 6, 2009.
At the end of 2009, four commercial airlines operated at this airport serving four direct destinations:  Mexico City, Monterrey, Veracruz, and Houston.
Tampico International Airport serves the industrial zone of Tampico, Ciudad Madero and Altamira, which have a combined population of approximately 1.0 million.  This industrial zone is home to companies in the petroleum and chemical industries.
Tampico International Airport operates daily from 6:30 a.m. to 9:30 p.m.  The airport has two runways in operation.  The principal runway is 2,550 meters (8,366 feet) long with a capacity of 22 air traffic movements per hour and includes an instrument landing system (ILS), which provides precise guidance to assist aircraft during landing.  The secondary runway is 1,300 meters (4,265 feet) in length.
The airport’s total area is 391.7 hectares (42,162,237 square feet).  Its facilities include a 6,250 square meter (67,275 square feet) terminal building, of which 498 square meters (5,360 square feet) are commercial spaces.  It has a four-position apron for commercial aviation, a 36-position apron for general aviation, two taxiways and a boarding lounge.  During 2009, the position apron for commercial aviation was remodeled, increasing to seven positions its capacity for aircraft category “C”.

The Tampico International Airport terminal was recently remodeled to include additional commercial space and an exhibition area.
Torreón International Airport
In 2007, 2008 and 2009, Torreón International Airport accounted for approximately 3.7%, 3.4% and 3.4% respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 522,295 terminal passengers, 481,265 terminal passengers and 394,377 terminal passengers, respectively, were served by Torreón International Airport.  Of the terminal passengers in 2007, 84.5% were domestic and 15.5% were international passengers.  In 2008, 84.0% were domestic and 16.0% were international passengers.  In 2009, 86.5% were domestic and 13.5 % were international.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
A total of six commercial airlines operate at the airport, serving five direct destinations: Mexico City, Chihuahua Guadalajara, Houston and Dallas. Mexicana Link started flying on September 17, 2009, the routes from Torreón to Guadalajara and Chihuahua.
The principal commercial airlines are Aeroméxico, Aeroméxico Connect (formerly Aerolitoral), Click Mexicana, Mexicana Link (since the fourth quarter of 2009), Continental and American Airlines.   After its merger with Northwest, Delta ceased its operations at the Torreón airport on August 15, 2008, leaving the direct route Los Angeles-Torreón-Los Angeles unserviced.  On July 24, 2008, the Mexican regulatory authorities suspended the operations of Aerocalifornia due to safety concerns relating to the carrier’s fleet of aircraft.  On November 7, 2008, Alma ceased its operations and filed for bankruptcy on November 7, 2008.
Torreón International Airport is located in the city of Torreón, which is part of the La Laguna region, which is Mexico’s top dairy-producing region and an important industrial and commercial region, with nearly 300 maquiladoras .  Approximately 530,000 people live in the city of Torreón and about one million live in La Laguna region.
Torreón International Airport operates 14 hours daily, from 7:00 a.m. to 9:00 p.m. (local time).  The airport has two runways.  The principal runway measures 2,750 meters (9,022 feet) in length and the secondary runway measures 1,740 meters (5,709 feet) in length.  The airport has a runway capacity of 20 air traffic movements per hour.
The airport’s total area is 460 hectares (49,513,987 square feet).  Its facilities include a terminal building, a seven-position apron for commercial aviation, a 14-position apron for general aviation, two taxiways, two boarding lounges, several VIP lounges, one air bridge and one boarding bridge.  The terminal building occupies approximately 5,275 square meters (56,780 square feet), including 547 square meters (5,888 square feet) of commercial space.
Zacatecas International Airport
In 2007, 2008, and 2009, Zacatecas International Airport accounted for approximately 2.0%, 1.9% and 2.2%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of 277,339 terminal passengers, 267,344 terminal passengers and 251,602 terminal passengers, respectively, were served by Zacatecas International Airport. Of the terminal passengers in 2007, 66.8% were domestic and 33.2% were international passengers.  In 2008, 70.2% were domestic and 29.8% were international.  In 2009, 65.9% were domestic and 34.1% were international.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.

Currently, the six Mexican commercial airlines that operate at the airport are Mexicana, Click Mexicana, Mexicana Link, Transportes Aeromar, Aeromexico Connect and Volaris, which serve four direct destinations.  The airport’s national routes are Mexico City and Tijuana.  Airlines serving the airport recently added service to the cities of Chicago and Los Angeles in the United States. Delta and Avolar ceased their operations on August 17, 2008 and on April 14, 2008, respectively.
Located in the center of Mexico, the state of Zacatecas (of which the city of Zacatecas is the capital) is Mexico’s leading silver producer and second leading producer of lead, copper, zinc and gold.  The state of Zacatecas has a population of approximately 1.4 million.
The airport currently operates 24 hours daily.  The airport has one runway, which measures 3,000 meters (9,843 feet) in length.  The runway capacity is 20 air traffic movements per hour.
The airport’s total area is 218 hectares (23,465,324 square feet).  The terminal building is 3,700 square meters (39,827 square feet), of which 200 square meters (2,157 square feet) is commercial area.  It has a three-position apron for commercial aviation, a 12-position apron for general aviation, a boarding lounge, and a parking lot with 202 parking spaces.
Border Cities
Ciudad Juárez International Airport
In 2007, 2008 and 2009, Ciudad Juárez International Airport accounted for approximately 6.4% 6.4% and 5.5% respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of, 908,835 terminal passengers, 903,129 terminal passengers and 631,111 terminal passengers, respectively, were served by Ciudad Juárez International Airport.  Of the terminal passengers in 2007, 2008 and 2009, 99.8% were domestic.
Four commercial airlines operate at the airport, serving eight destinations.  The airport serves five direct routes: Mexico City, Monterrey, Guadalajara, Tijuana and Hermosillo.  On July 6, 2009, Aviacsa stopped flying to this airport.
The airport is located in the city of Ciudad Juárez, which is near the U.S. border and has a population of approximately 1.3 million people.  The city is a major center of the maquiladora industry, with about 400 automobile, electric and textile plants.  Countries such as Singapore, Germany, France, Taiwan and the United States, as well as international companies such as Delphi, Lear, Toshiba, Johnson & Johnson, Ford and Motorola, have made investments in Ciudad Juárez.  In addition, because Ciudad Juárez is a popular entry point to the United States many of the airport’s passengers consist of Mexican migrant workers traveling to Ciudad Juárez in order to seek work in the United States.  Accordingly, although the airport’s passengers are predominantly domestic, its passenger traffic and results of operations are affected by economic conditions in both Mexico and the United States.
Ciudad Juárez International Airport operates 14 hours daily, from 7:00 a.m. to 9:00 p.m. (local time).  The airport has two runways.  The principal runway measures 2,700 meters (8,858 feet) in length with a capacity of 20 air traffic movements per hour, and the secondary runway measures 1,750 meters (5,741 feet) in length.
The airport’s total area is 921.4 hectares (99,178,670 square feet).  Its facilities include a terminal building of 4,275 square meters (46,016 square feet), consisting of 565 square meters (6,080 square feet) of commercial space, a boarding lounge and two air bridges.  The airport has a seven-position commercial aviation apron, a nine-position general aviation apron, a one-position freight services apron and three taxiways.  The airport has four gates for international and domestic flights.

A new international cargo terminal was completed in 2005, which we anticipate will allow the airport to grow as a center for the shipment and distribution of goods in Mexico’s northern region.  The new terminal includes a cargo apron, a warehouse, customs offices and public parking facilities.
Reynosa International Airport
In 2007, 2008 and 2009, Reynosa International Airport accounted for approximately 1.3%, 1.8% and 1.9%, respectively, of our terminal passenger traffic.
In 2007, 2008 and 2009, a total of, 191,326 terminal passengers and 247,339 terminal passengers and 215,392 terminal passengers, respectively, were served by Reynosa International Airport.  Of the terminal passengers in 2007, 99.7% were domestic. Of the passengers in 2008, 99.5% were domestic.  Of the passengers in 2009, 99.2% were domestic.  Because the airport’s passengers are predominantly domestic, the airport’s passenger traffic and results of operations are affected by Mexican economic conditions.
Three commercial airlines operate at the airport serving Mexico City, Veracruz and Poza Rica. On October 2, 2009, VivaAerobus started flying from Reynosa, being the first low cost commercial airline to operate at this airport. On November 7, 2008, Alma ceased its operations and filed for bankruptcy. On November 30, 2008, Volaris ceased its operations at this airport.
The airport is located in Reynosa, a city of 800,000 inhabitants bordering the United States near the Gulf of Mexico.  The city is a major maquiladora center, particularly for the electricity sector.  We believe that Reynosa’s robust industrial economic activity and proximity to the United States create the potential for growth in air cargo services at the Reynosa International Airport, and we recently completed the construction of a new international cargo facility at the airport.  In addition, because Reynosa is a popular entry point to the United States many of the airport’s passengers consist of Mexican migrant workers traveling to Reynosa in order to seek work in the United States.  Accordingly, although the airport’s passengers are predominantly domestic, its passenger traffic and results of operations are affected by economic conditions in both Mexico and the United States.
Reynosa International Airport operates 12 hours daily, from 7:00 a.m. to 7:00 p.m. (local time).  The airport has one runway, which is 1,900 meters (6,234 feet) in length and has a runway capacity of 18 air traffic movements per hour.
The airport’s total area is approximately 418 hectares (44,993,146 square feet).  The terminal building is 2,400 square meters (25,833 square feet), which includes 123 square meters (1,319 square feet) of commercial area.  It has a three-position apron for commercial aviation, a 15-position apron for general aviation, two taxiways, two private hangars, a boarding lounge, and a public parking area with 150 spaces.
Principal Customers
Principal Aeronautical Services Customers
Airline Customers
As of December 31, 2009, over 10 international airlines and 15 Mexican airlines operated flights at our 13 airports.  Grupo Aeroméxico and Grupo Mexicana operate the most flights at our airports, followed by VivaAerobus and Interjet.  In 2009, revenues from Aeroméxico and its affiliates totaled Ps. 424 million (U.S.$ 32.5 million), revenues from Mexicana and its affiliates were Ps. 240 million (U.S.$ 18.4 million), while revenues from VivaAerobus were Ps. 168 million (U.S.$ 12.9 million) and revenues from Aviacsa, which suspended their operations on July 6, 2009, were Ps.48 million (U.S.$ 3.7, million), representing 27.8%, 15.7%, 11.0% and 3.1%,  respectively, of our aeronautical revenues from airline customers for 2009.  These revenues were earned from passenger charges, landing charges, aircraft parking charges and the leasing of space to these airlines.

Historically, traditional carriers such as Aeroméxico and Mexicana have represented a substantial majority of the Mexican commercial airline market.  In recent years, however, international carriers, discount carriers, low-cost carriers and other new market entrants have represented a growing proportion of the Mexican commercial airline market.  In 2009, passengers traveling on discount and low-cost carriers, such as VivaAerobus, Interjet and Volaris, accounted for approximately 31.0% of our commercial aviation passenger traffic.  Since air transportation historically has been affordable only to the higher income segments of Mexico’s population, resulting in a comparatively low level of air travel, we believe that the entry of low-cost and discount carriers into the Mexican commercial airline market has the potential to significantly increase the use of air transportation in Mexico.
Aeroméxico was owned by the Mexican federal government.  In November 2007, the Mexican Government, through Nacional Financiera, S.N.C., or NAFIN (a Mexican national credit institution and development bank owned and controlled by the Mexican Government), and IPAB ( Instituto para la Protección al Ahorro Bancario ) sold all of its remaining ownership interest in Aeroméxico and its affiliates to a group of investors lead by Banamex, a subsidiary of Citigroup.
Until recently the Mexican government also owned Grupo Mexicana, whose subsidiaries include Mexicana and Click Mexicana (formerly known as Aerocaribe).  In December 2005, the Mexican government sold Grupo Mexicana to Grupo Posadas, S.A de C.V., the largest hotel operator in Mexico.  Grupo Aeroméxico and Grupo Mexicana also control other airlines operating in our airports, including Aeroméxico Connect (formerly Aerolitoral) and Click Mexicana, as well as the largest provider of baggage and ramp handling services at our airports SEAT, a joint venture between Grupo Aeroméxico and Grupo Mexicana.
Aeroméxico and Mexicana, along with Aeromar and Aeroméxico Connect (formerly Aerolitoral), have in the past refused to pay certain increases in our airport service charges.  In December 2001, we entered into an agreement with the National Air Transportation Board ( Cámara Nacional de Aerotransportes ) and the Ministry of Communications and Transportation pursuant to which we settled existing disputes with our principal airline customers and established specific prices for regulated aeronautical services applicable to those airlines.  Under the agreement, the National Air Transportation Board agreed to cause our principal airline customers to enter into (a) contracts governing charges for certain aeronautical services and (b) lease contracts for property used by the airlines.  Although our agreement with the National Air Transportation Board expired in December 2005, we continued to charge our principal airline customers in accordance with the terms of the agreement until December 31, 2008, at which time we entered into a new agreement with the National Air Transportation Board that offered incentives, including discounts, for the establishment of new routes and other measures expected to increase passenger traffic volume at our airports.  We recently entered into a new agreement covering the period from August 1, 2009 to December 31, 2011. We continue to charge our principal airline customers in accordance with the terms of this agreement.
In April 2006, Mexican regulatory authorities suspended the operations of Aerocalifornia, S.A. de C.V. or Aerocalifornia , which accounted for approximately 7.1% of our revenues in 2005, due to safety concerns relating to the carrier’s fleet of aircraft.  Although Aerocalifornia resumed limited operations in August 2006, it accounted for only 2.6% of our revenues in 2006 as a result of such suspension and for 3.6% in 2007.  Mexican regulatory authorities again suspended Aerocalifornia’s operations effective July 24, 2008 for failure to evidence payment of certain duties, and as a result Aerocalifornia accounted for only 1.5% of our revenues in 2008.  To date, Aerocalifornia has not resumed any part of its operations.  Any similar suspension affecting our principal airline customers could have a material adverse effect on out results of operations.

The following chart sets forth our principal air traffic customers as of December 31, 2009.
Principal Air Traffic Customers
Percentage of 2008 Revenues
Percentage of 2009 Revenues
Domestic:
Grupo Aeroméxico (Aeroméxico and Aeroméxico Connect)
24.6 % 27.8 %
Grupo Mexicana (Mexicana, Click Mexicana and MexicanaLink)
14.6 % 15.7 %
VivaAerobus
8.5 % 11.0 %
Interjet
9.2 % 9.4 %
Volaris
4.2 % 4.7 %
Aviacsa
6.9 % 3.1 %
Grupo Aeromonterrey
2.0 % 1.8 %
Aerocalifornia (1)
1.5 % 0.2 %
Alma
2.9 % 0.0 %
Líneas Aereas Azteca
0.1 % 0.0 %
Other
11.3 % 10.0 %
Total Domestic
85.8 % 83.7 %
International:
Continental
5.2 % 5.8 %
American Airlines (including American Eagle)
3.4 % 3.9 %
Alaska Airlines
1.7 % 1.9 %
Delta
1.1 % 0.8 %
America West (including Mesa Airlines)
1.0 % 0.1 %
Charters
1.0 % 1.2 %
Other
0.8 % 2.6 %
Total International
14.2 % 16.3 %
Total
100 % 100.0 %


Complementary Services Customers
Our principal complementary services clients are two principal providers of ramp handling and baggage handling services, Menzies Aviation and AGN Aviation Services, which provided Ps.8.3 million of revenues in the form of access fees in 2009.  Although Menzies is the primary provider of complementary services in our airports we earn only nominal portion of this revenue from Menzies.
Our primary catering client is Aerococina, S.A. de C.V., which provided Ps. 0.6 million in revenues in the aggregate in the form of access fees in 2009.
Principal Non-aeronautical Services Customers
As of December 31, 2009, we were party to approximately 723 contracts with providers of commercial services in the commercial space in our airports, including retail store operators, duty free store operators, food and beverage providers, financial services providers, car rental companies, telecommunications providers, VIP lounges, advertising, travel agencies, time-share sales and promotions services and tourist information and promotion services.  As a result, our revenues from non-aeronautical services commercial customers are spread across a large number of customers and are, therefore, not dependent on a limited number of principal customers.  In 2009, our largest commercial customers were Publitop (advertising), Aerocomidas (food and beverage), Aeroboutiques  (duty free and duty paid stores), Cenca  (magazines), Federal Express (leasing of warehouse space), Aeroméxico, Mexicana, American Express (VIP lounges for commercial aviation passengers) Estafeta (leasing of landing space) and ICCS e Interaccess (VIP lounges for executive aviation passengers).
Seasonality
Our business is subject to seasonal fluctuations.  In general, demand for air travel is typically higher during the summer months and during the winter holiday season, particularly in international markets, because there is more vacation travel during these periods.  Our results of operations generally reflect this seasonality, but have also been impacted by numerous other factors that are not necessarily seasonal, including economic conditions, war or threat of war, weather, air traffic control delays and general economic conditions, as well as the other factors discussed above.  As a result, our operating results for a quarterly period are not necessarily indicative of operating results for an entire year, and historical operating results are not necessarily indicative of future operating results.
Competition
Excluding our airports servicing tourist destinations, our airports currently are the only major airports in the geographic areas that they serve and generally do not face significant competition.
However, since the Acapulco, Mazatlán and Zihuatanejo International Airports are substantially dependent on tourists, these airports face competition from competing tourist destinations.  We believe that the main competitors to these airports are those airports serving vacation destinations in Mexico, such as Los Cabos, Cancún and Puerto Vallarta, and abroad, such as in Puerto Rico, Florida, Cuba, Jamaica, the Dominican Republic, other Caribbean islands and Central America.
The relative attractiveness of the locations we serve is dependent on many factors, some of which are beyond our control.  These factors include the general state of the Mexican economy, and to a significant degree the U.S. economy, and the attractiveness of other commercial and industrial centers in Mexico that may affect the attractiveness of Monterrey and other growing population centers in our airport group, such as Ciudad Juárez and San Luis Potosí.  In addition, with respect to Acapulco, Mazatlán and Zihuatanejo, these factors include promotional activities and pricing policies of hotel and resort operators, weather conditions, natural disasters (such as hurricanes and earthquakes) and the development of new resorts that may be considered more attractive.  There can be no assurance that the locations we serve will continue to attract the same level of passenger traffic in the future.

The Mexican Airport and Auxiliary Services Agency currently operates 12 small airports in Mexico’s central and northern regions.  The Mexican Airport and Auxiliary Services Agency estimates that its airports collectively account for less than 32.0% of the passenger traffic in this region.  This traffic was the result of the increase in the passenger traffic transported to and from the Toluca International Airport.
In the future, we may face competition from Aeropuerto del Norte, an airport near Monterrey operated by a third party pursuant to a concession.  Historically, Aeropuerto del Norte has been used solely for general aviation operations.  The state of Nuevo Leon has requested in the past, that the Ministry of Communications and Transportation amend Aeropuerto del Norte’s concession to allow it to serve commercial aviation operations.  To date, the Ministry of Communications and Transportation has not amended Aeropuerto del Norte’s concession.  However , there can be no assurance that the Ministry of Communications and Transportation will not authorize such an amendment and that commercial aviation flights will not operate from Aeropuerto del Norte in the future.  In addition, we understand that Aeropuerto del Norte is not capable of accommodating commercial passenger traffic with its current infrastructure.
In addition, the Mexican government could grant new concessions to operate existing government-managed airports or authorize the construction of new airports, which could compete directly with our airports.  Any competition from other such airports could have a material adverse effect on our business and results of operations.
REGULATORY FRAMEWORK
Sources of Regulation
The following are the principal laws, regulations and instruments that govern our business and the operation of our airports:
·
the Mexican Airport Law ( Ley de Aeropuertos ), enacted December 22, 1995;
·
the regulations under the Mexican Airport Law ( Reglamento del la Ley de Aeropuertos ), enacted February 17, 2000;
·
the Mexican Communications Law ( Ley de Vias Generales de Comunicación ), enacted February 19, 1940;
·
the Mexican Civil Aviation Law ( Ley de Aviación Civil ), enacted May 12, 1995;
·
the regulations under the Mexican Civil Aviation Law ( Reglamento de la Ley de Aviación Civil), enacted December 7, 1998;
·
the Mexican Federal Duties Law ( Ley Federal de Derechos ), enacted December 31, 1981, which may be revised on an annual basis and stipulates the applicable basis and rate for calculating the concession fee and duties payable under the current budget;
·
the Mexican National Assets Law ( Ley  de Bienes Nacionales ), enacted May 20, 2004;
·
the concessions that entitle our subsidiaries to operate our 13 airports for a term of fifty years beginning on November 1, 1998;
·
the Mexican Federal Economic Competition Law ( Ley Federal de Competencia Económica ), enacted December 24, 1992; and

·
the regulations under the Mexican Federal Economic Competition Law ( Reglamento de la Ley Federal de Competencia Económica ), enacted October 12, 2007.
The Mexican Airport Law and the regulations under the Mexican Airport Law establish the general framework regulating the construction, operation, maintenance and development of Mexican airport facilities.  The Mexican Airport Law’s stated intent is to promote the expansion, development and modernization of Mexico’s airport infrastructure by encouraging investment and competition.
Under the Mexican Airport Law, the holder of a concession granted by the Ministry of Communications and Transportation is required to construct, operate, maintain and develop a public service airport in Mexico.  A concession generally must be granted pursuant to a public bidding process, except for:  (i) concessions granted to either (a) entities considered part of “the federal public administration” as defined under Mexican law or (b) private companies whose principal stockholder may be a state or municipal government; (ii) concessions granted to operators of private airports (who have operated privately for five or more years) wishing to begin operating their facilities as public service airports; and (iii) complementary concessions granted to existing concession holders.  Complementary concessions may be granted only under certain limited circumstances, such as where an existing concession holder can demonstrate, among other things, that the award of the complementary concession is necessary to satisfy passenger demand.  On June 29, 1998, the Ministry of Communications and Transportation granted 13 concessions to operate, maintain and develop the 13 principal airports in Mexico’s Central North region to our subsidiaries.  Because our subsidiaries were considered entities of the federal public administration at the time the concessions were granted, the concessions were awarded without a public bidding process.  However, the process of selling Series BB shares currently representing 14.7% of our capital stock to our strategic stockholder pursuant to the privatization process was conducted through a public bidding process.  Each of our concessions was amended on September 12, 2000 in order, among other things, to incorporate each airport’s maximum rates and certain other terms as part of the concession.
On February 17, 2000, the regulations under the Mexican Airport Law were issued, and we believe we are currently complying in all material respects with the requirements of the Mexican Airport Law and its regulations.  Noncompliance with these regulations could result in fines or other sanctions being assessed by the Ministry of Communications and Transportation, and are among the violations that could result in termination of a concession if they occur three or more times.
On May 20, 2004, a new Mexican National Assets Law was adopted and published in the Official Gazette of the Federation ( Diario Oficial de la Federación ) which, among other things, establishes regulations relating to concessions on real property held in the public domain, including the airports that we operate.  The new Mexican National Assets Law establishes new grounds for revocation of concessions for failure to pay the applicable taxes, but does not specify which taxed must be paid, including whether certain taxes to municipalities must be paid by the concessionaire.
To the best of our knowledge as of the date hereof, the constitutionality of the new Mexican National Assets Law has not been challenged in Mexico’s court system.  If challenged in the future, a court could declare the tax void or determine an alternate amount.


Role of the Ministry of Communications and Transportation
The Ministry of Communications and Transportation is the principal regulator of airports in Mexico and is authorized by the Mexican Airport Law to perform the following functions:
·
plan, formulate and establish the policies and programs for the development of the national airport system;
·
construct, administer and operate airports and airport-related services for the public interest;
·
grant, modify and revoke concessions for the operation of airports;
·
establish air transit rules and rules regulating take-off and landing schedules through the Mexican air traffic control authority;
·
take all necessary action to create an efficient, competitive and non-discriminatory market for airport-related services, and set forth the minimum operating conditions for airports;
·
establish safety regulations;
·
close airports entirely or partially when safety requirements are not being satisfied;
·
monitor airport facilities to determine their compliance with the Mexican Airport Law, other applicable laws and the terms of the concessions;
·
maintain the Mexican aeronautical registry for registrations relating to airports;
·
impose penalties for failure to observe and perform the rules under the Mexican Airport Law, the regulations thereunder and the concessions;
·
approve any transaction or transactions that directly or indirectly may result in a change of control of a concession holder;
·
approve the master development programs prepared by each concession holder every five years;
·
determine each airport’s maximum rates;
·
approve any agreements entered into between a concession holder and a third party providing airport or complementary services at its airport; and
·
perform any other function specified by the Mexican Airport Law.
In addition, under the Mexican Organic Law of the Federal Public Administration ( Ley Orgánica de la Administración Pública Federal ), the Mexican Airport Law and the Mexican Civil Aviation Law, the Ministry of Communications and Transportation is required to provide air traffic control, radio assistance and aeronautical communications at Mexico’s airports.  The Ministry of Communications and Transportation provides these services through Services for Navigation in Mexican Air Space, the Mexican air traffic control authority, which is a division of the Ministry of Communications and Transportation.  Since 1978, the Mexican air traffic control authority has provided air traffic control for Mexico’s airports.

Concession Tax
Under Article 232-A of the Mexican Federal Duties Law, holders of airport concessions must pay a tax for the use of state-owned assets.  As such, each of our subsidiary concession holders is required to pay a concession tax based on its gross annual revenues from the use of public domain assets pursuant to the terms of its concession.  Currently, this concession tax is set at a rate of 5% and may be revised at any time by the Mexican government.  Our concessions provide that we may request an amendment of our maximum rates if there is a change in this concession tax, although there can be no assurance that this request will be honored.
Scope of Concessions
We hold (through subsidiary holding companies) concessions granted to us by the Mexican government to use, operate, maintain and develop 13 airports in the Central North region of Mexico in accordance with the Mexican Airport Law.  As authorized under the Mexican Airport Law, each of the concessions is held by one of our subsidiaries for an initial 50-year term beginning on November 1, 1998.  This initial term of each of our concessions may be renewed in one or more terms for up to an additional 50 years, subject to our acceptance of any new conditions imposed by the Ministry of Communications and Transportation and to our compliance with the terms of our concession.
The concessions held by our subsidiary concession holders allow the relevant concession holder, during the term of the concession, to:  (i) operate, maintain and develop its airport and carry out any necessary construction in order to render airport, complementary and commercial services as provided under the Mexican Airport Law and the Mexican Airport Law regulations; and (ii) use and develop the assets that comprise the airport that is the subject of the concession (consisting of the airport’s real estate and improvements but excluding assets used in connection with fuel supply and storage).  These assets are government-owned assets, subject to the Mexican National Assets Law.  Upon expiration of a concession, the use of these assets, together with any improvements thereto, automatically revert to the Mexican government.
Concession holders are required to provide airport security, which must include contingent and emergency plans in accordance with the regulations under the Mexican Airport Law.  The security regulations shall be implemented in accordance with the requirements set forth in the National Program for Airport Security.  In addition, the regulations pertaining to the Mexican Airport Law specify that an airport concession holder is responsible for the inspection of passengers and carry-on luggage prior to approaching the departure gates, and specify that the transporting airline is responsible for the inspection of checked-in luggage and cargo.  If public order or national security is endangered, the competent federal authorities are authorized to act to protect the safety of aircraft, passengers, cargo, mail, installations and equipment.
The International Civil Aviation Organization established security guidelines requiring checked baggage on all international commercial flights as of January 2006, and all domestic commercial flights as of July 2006, to undergo a comprehensive screening process for the detection of explosives.  We are currently planning to purchase and install new screening equipment in all of our airports to facilitate our airline customers’ compliance with the new baggage screening guidelines. Until we agree on the contractual terms for the operation of this equipment with the airlines and the new screening equipment becomes operational, checked baggage will continue to be screened by hand by each airline in order to comply with the screening guidelines.  In some countries, such as the United States of America, the federal government (in the case of the United States, through the Transportation Security Administration) is responsible for screening checked baggage.  Under Mexican law, however, airlines are responsible for screening checked baggage.  Although Mexican law holds airlines liable for screening checked baggage, the purchase, installation and operation of the new equipment could increase our exposure to liability as a result of our involvement in the screening process.  In addition, although we are not currently obligated to screen checked baggage, we could become obligated to do so, and thus subject to potential liability, if Mexican law changes in the future.

The shares of a concession holder and the rights under a concession may be subject to a lien only with the approval of the Ministry of Communications and Transportation.  No agreement documenting liens approved by the Ministry of Communications and Transportation may allow the beneficiary of a pledge to become a concession holder under any circumstances.
A concession holder may not assign any of its rights or obligations under its concession without the authorization of the Ministry of Communications and Transportation.  The Ministry of Communications and Transportation is authorized to consent to an assignment only if the proposed assignee satisfies the requirements to be a concession holder under the Mexican Airport Law, undertakes to comply with the obligations under the relevant concession and agrees to any other conditions that the Ministry of Communications and Transportation may require.
General Obligations of Concession Holders
The concessions impose certain obligations on the concession holders, including, among others, (i) the obligation to pay the concession tax described above, (ii) the obligation to deliver concession services in a continuous, public and non-discriminatory manner, (iii) the obligation to maintain the airports in good working condition and (iv) the obligation to make investments with respect to the infrastructure and equipment in accordance with the master development programs and the concessions.
Each concession holder and any third party providing services at an airport is required to carry specified insurance in amounts and covering specified risks, such as damage to persons and property at the airport, in each case as specified by the Ministry of Communications and Transportation.  To date the Ministry of Communications and Transportation has not specified the required amounts of insurance.  We may be required to obtain additional insurance once these amounts are specified.
We, together with our subsidiary concession holders, are jointly and severally liable to the Ministry of Communications and Transportation for the performance of all obligations under the concessions held by our subsidiaries.  Each of our subsidiary concession holders is responsible for the performance of the obligations set forth in its concession and in the master development programs, including the obligations arising from third-party contracts, as well as for any damages to the Mexican government-owned assets that they use and to third-party airport users.  In the event of a breach of one concession, the Ministry of Communications and Transportation is entitled to revoke all of the concessions held by our subsidiaries.
Substantially all of the contracts entered into prior to the grant of our concessions by the Mexican Airport and Auxiliary Services Agency with respect to each of our airports were assigned to the relevant concession holder for each airport.  As part of this assignment, each concession holder agreed to indemnify the Mexican Airport and Auxiliary Services Agency for any loss suffered by the Mexican Airport and Auxiliary Services Agency due to the concession holder’s breach of its obligations under an assigned agreement.
Classification of Services Provided at Airports
The Mexican Airport Law and the Mexican Airport Law regulations classify the services that may be rendered at an airport into the following three categories:
·
Airport Services. Airport services may be rendered only by the holder of a concession or a third party that has entered into an agreement with the concession holder to provide such services.  These services include the following:
·
the use of airport runways, taxiways and aprons for landing, aircraft parking and departure;
·
the use of hangars, passenger walkways, transport buses and car parking facilities;

·
the provision of airport security services, rescue and firefighting services, ground traffic control, lighting and visual aids;
·
the general use of terminal space and other infrastructure by aircraft, passengers and cargo; and
·
the provision of access to an airport to third parties providing complementary services (as defined in the Mexican Airport Law) and third parties providing permanent ground transportation services (such as taxis).
·
Complementary Services. Complementary services for which the airlines are responsible may be rendered by an airline, by the airport operator or by a third party under agreements with airlines and the airport operator.  These services include:  ramp and handling services, checked baggage screening, aircraft security, catering, cleaning, maintenance, repair and fuel supply (provided exclusively by the Mexican government's Aeropuertos y Servicios Auxiliares, or ASA) and related activities that provide support to air carriers.
·
Commercial Services. Commercial services involve services that are not considered essential to the operation of an airport or aircraft, and include, among other things, the leasing of space to retailers, restaurants and banks, and advertising.
Third parties rendering airport, complementary or commercial services are required to do so pursuant to a written agreement with the relevant concession holder.  We have entered into agreements with third parties for security and surveillance services, ramp handling and baggage handling services and checked baggage services only.  We provide all other airport, complementary and commercial services ourselves.  All agreements relating to airport or complementary services are required to be approved by the Ministry of Communications and Transportation.  The Mexican Airport Law provides that the concession holder is jointly liable with these third parties for compliance with the terms of the relevant concession with respect to the services provided by such third parties.  All third-party service providers are required to be corporations incorporated under Mexican law.
Airport and complementary services are required to be provided to all users in a uniform and regular manner, without discrimination as to quality, access or price.  Concession holders are required to provide airport and complementary services on a priority basis to military aircraft, disaster support aircraft and aircraft experiencing emergencies.  Airport and complementary services are required to be provided at no cost to military aircraft and aircraft performing national security activities.  Except for the airport, corporate and commercial services mentioned in the prior paragraph, the concession holders have not and do not provide complementary services as these services are provided by third parties.
In the event of force majeure , the Ministry of Communications and Transportation may impose additional regulations governing the provision of services at airports, but only to the extent necessary to address the force majeure event.  The Mexican Airport Law allows the airport administrator appointed by a concession holder to suspend the provision of airport services in the event of force majeure .
A concession holder is also required to allow for a competitive market for complementary services.  A concession holder may only limit the number of providers of complementary services in its airport due to space, efficiency and safety considerations.  If the number of complementary service providers must be limited due to these considerations, contracts for the provision of complementary services must be awarded through a competitive bidding process.
Master Development Programs
Concession holders are also required to submit to the Ministry of Communications and Transportation a master development program describing, among other things, the concession holder’s construction and maintenance plans.

Every five years, we are required to submit to the Ministry of Communications and Transportation for approval a master development program for each of our concessions describing, among other matters, our strategy, traffic forecasts, and expansion, modernization and maintenance plans for the following 15 years.  Each master development program is required to be updated every five years and resubmitted for approval to the Ministry of Communications and Transportation.  Upon such approval, the master development program is deemed to constitute a part of the relevant concession.  Any major construction, renovation or expansion of an airport may only be made pursuant to a concession holder’s master development program or upon approval by the Ministry of Communications and Transportation.  Information required to be presented in the master development program includes:
·
airport growth and development expectations;
·
15-year projections for air traffic demand (including passenger, cargo and operations);
·
construction, conservation, maintenance, expansion and modernization programs for infrastructure, facilities and equipment;
·
a binding five-year detailed investment program and planned major investments for the following ten years;
·
descriptive airport plans specifying the distinct uses for the corresponding airport areas;
·
any financing sources; and
·
environmental protection measures.
The concessions require the concession holder to provide for a 24-month period to prepare and submit the concession holder’s master development program and consider the necessary requirements of the airport users in the preparation of the master development program as well as the opinions of air carriers and operations and timetable’s committee.  The concession holder must submit a draft of the master development program to such committee and air carriers for their review and comments six months prior to its submission for approval to the Ministry of Communications and Transportation.  Further, the concession holder must submit, six months prior to the expiration of the five-year term, the new master development program to the Ministry of Communications and Transportation.  The Ministry of Communications and Transportation may request additional information or clarification as well as seek further comments from airport users.  The Ministry of Defense may also opine on the master development programs.
A concession holder may only undertake a major construction project, renovation or expansion relating to an airport pursuant to its master development program or with the approval of the Ministry of Communications and Transportation.  We are required to spend the full amounts set forth in each investment program under its master development programs.
Changes to a master development program and investment program require the approval of the Ministry of Communications and Transportation, except for emergency repairs and minor works that do not adversely affect an airport’s operations.
In December 2005, the Ministry of Communications and Transportation approved the master development programs for each of our subsidiary concession holders for the 2006 to 2010 period.  These five-year programs will be in effect from January 1, 2006 until December 31, 2010.
Pursuant to the terms of our concessions, we are required to comply with the investment obligations under the master development programs on a year-by-year basis and the Ministry of Communications and Transportation is entitled to review out compliance thereunder (and apply sanctions accordingly) on a year-by-year basis.  Although historically the Ministry of Communications and Transportation has indicated its intent to review our compliance with these obligations on an aggregate five-year basis, we understand that the Ministry may also conduct more limited reviews of our compliance with our obligations on a year-by-year basis going forward.

During 2010, we will negotiate the master development program for the 2011 to 2015 period with the Ministry of Communications and Transportation for each of our subsidiary concession holders.  This five-year program will be in effect from January 1, 2011 until December 31, 2015.
Revenue Regulation
The Mexican Airport Law provides for the Ministry of Communications and Transportation to establish price regulations for services for which the Antitrust Commission determines that a competitive market does not exist.  In 1999, the Antitrust Commission issued a ruling stating that competitive markets generally do not exist for airport services and airport access provided to third parties rendering complementary services.  This ruling authorized the Ministry of Communications and Transportation to establish regulations governing the prices that may be charged for airport services and access fees that may be charged to third parties rendering complementary services in our airports.  On September 12, 2000, a new regulation, the Rate Regulation, was incorporated within the terms of each of our concessions.  This regulation provides a framework for the setting by the Ministry of Communications and Transportation of five-year maximum rates.
Regulated Revenues
The majority of our revenues are derived from providing aeronautical services, which generally are related to the use of airport facilities by airlines and passengers and principally consist of a fee for each departing passenger, aircraft landing fees based on the aircraft’s weight and arrival time, an aircraft parking fee, a fee for the transfer of passengers from the aircraft to the terminal building and a security charge for each departing passenger.
Since January 1, 2000, all of our revenues from aeronautical services have been subject to a price regulation system established by the Ministry of Communications and Transportation.  This price regulation system establishes a “maximum rate” for each airport for every year in a five-year period.  The “maximum rate” is the maximum amount of revenues per “workload unit” that may be earned at an airport each year from regulated revenue sources.  Under this regulation, a workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.  We are able to set the specific prices for regulated services, other than complementary services and leasing of space to airlines, for each of our airports, every six months (or more frequently if accumulated inflation since the last adjustment exceeds 5%), as long as the combined revenue from regulated services at an airport does not exceed the maximum rate per workload unit at that airport on an annual basis.  Since our aggregate revenues resulting from regulated services are not otherwise restricted, increases in passenger and cargo traffic increase the workload units permit greater revenues overall within each five-year period for which maximum rates are established.
In 2009, approximately 95.1% of our total revenues were earned from aeronautical services subject to price regulation under the maximum rates.
Each airport’s maximum rate is to be determined for each year by the Ministry of Communications and Transportation based on a general framework established in our concessions.  This framework reflects, among other factors, projections of an airport’s revenues, operating costs and capital expenditures, as well as the estimated cost of capital related to regulated services and projected annual efficiency adjustments determined by the Ministry of Communications and Transportation.  The schedule of maximum rates for each airport is to be established every five years.
Our revenues from non-aeronautical services, including revenues that we earn from most commercial activities in our terminals, are not subject to this maximum-rate price regulation system and are therefore not subject to a ceiling.

Historical Maximum Rates and Maximum Rates for 2006 through 2010
In 2000, the Ministry of Communications and Transportation set each airport’s maximum rates for the period from January 1, 2001 through December 31, 2005 in connection with the process for the opening of Mexico’s airports to private investment.  These initial maximum rates are set forth in the concession for each airport.  In December 2005, the Ministry of Communications and Transportation set new airport maximum rates for the period from January 1, 2006 through December 31, 2010.
The following tables set forth the maximum rates for each of our airports for the periods indicated under our 2001 to 2005 master development programs and under the master development programs that went into effect as of January 1, 2006.  These maximum rates are subject to adjustment only under the limited circumstances described below under “Special Adjustments to Maximum Rates.”

Historical Maximum Rates (1)
Year Ended December 31,
2001
2002
2003
2004
2005
Acapulco
149.23 147.73 146.25 144.78 143.34
Ciudad Juárez
121.94 120.72 119.51 118.31 117.14
Culiacán
139.84 138.44 137.05 135.69 134.33
Chihuahua
146.66 145.20 143.75 142.30 140.89
Durango
155.19 153.64 152.10 150.57 149.07
Mazatlán
138.13 136.76 135.38 134.03 132.69
Monterrey
143.25 141.82 140.41 138.99 137.60
Reynosa
152.64 151.10 149.59 148.09 146.61
San Luis Potosí
162.87 161.23 159.61 158.03 156.44
Tampico
154.34 152.79 151.26 149.74 148.24
Torreón
144.95 143.51 142.08 140.65 139.24
Zacatecas
150.93 149.42 147.92 146.44 144.97
Zihuatanejo
129.61 128.31 127.02 125.77 124.51
_______________________________
(1)
Expressed in constant pesos as of December 31, 2009.
Current Maximum Rates (1)
Year ended December 31,
2006
2007
2008
2009
2010
Acapulco
157.46 156.26 155.10 153.93 152.78
Ciudad Juárez
123.03 122.10 121.19 120.28 119.38
Culiacán
136.16 135.14 134.13 133.12 132.12
Chihuahua
133.45 132.45 131.45 130.46 129.49
Durango
152.06 150.92 149.78 148.66 147.54
Mazatlán
156.28 155.11 153.94 152.79 151.65
Monterrey
125.94 124.99 124.05 123.13 122.21
Reynosa
142.62 141.56 140.49 139.44 138.39
San Luis Potosí
106.47 105.68 104.88 104.10 103.32
Tampico
150.84 149.71 148.60 147.48 146.36
Torreón
153.96 152.79 151.65 150.51 149.38
Zacatecas
159.53 158.34 157.15 155.97 154.80
Zihuatanejo
160.73 159.52 158.32 157.14 155.96
_______________________________
(1)
Expressed in constant pesos as of December 31, 2009.

Methodology for Determining Future Maximum Rates
The Rate Regulation provides that each airport’s annual maximum rates are to be determined in five-year intervals based on the following variables:
·
Projections for the following fifteen years of workload units (each of which is equivalent to one terminal passenger or 100 kilograms (220 pounds) of commercial cargo), operating costs and expenses related to services subject to price regulation and pre-tax earnings from services subject to price regulation.  The concessions provide that projections for workload units and expenses related to regulated services are to be derived from the terms of the relevant concession holder’s master development program for the following fifteen years.

·
Projections for the following fifteen years of capital expenditures related to regulated services, based on air traffic forecasts and quality of standards for services to be derived from the master development programs.
·
Reference values, which initially were established in the concessions and are designed to reflect the net present value of the regulated revenues minus the corresponding regulated operating costs and expenses (excluding amortization and depreciation), and capital expenditures related to the provision of regulated services plus a terminal value.
·
A discount rate to be determined by the Ministry of Communications and Transportation.  The concessions provide that the discount rate shall reflect the cost of capital to Mexican and international companies in the airport industry (on a pre-tax basis), as well as Mexican economic conditions.  The concessions provide that the discount rate shall be at least equal to the average yield of long-term Mexican government debt securities quoted in the international markets during the prior 24 months plus a risk premium to be determined by the Ministry of Communications and Transportation based on the inherent risk of the airport business in Mexico.
·
An efficiency factor to be determined by the Ministry of Communications and Transportation.  For the five-year period ending December 31, 2005, the maximum rates applicable to our airports reflect a projected annual efficiency improvement of 1.0%.  For the five-year period ending December 31, 2010, the maximum rates applicable to our airports reflect a projected annual efficiency improvement of 0.75%.
Our concessions specify a discounted cash flow formula to be used by the Ministry of Communications and Transportation to determine the maximum rates that, given the projected pre-tax earnings, the efficiency adjustment, capital expenditures and discount rate, would result in a net present value equal to the reference values established in connection with the last determination of maximum rates.  In connection with the preparation of the current master development programs, we prepared a proposal to submit to the Ministry of Communications and Transportation establishing the values we believe should be used with respect to each variable included in the determination of maximum rates, including the efficiency factor, projected capital expenditures and the discount rate.  The maximum rates ultimately established by the Ministry of Communications and Transportation reflect a negotiation between the Ministry and us regarding these variables.
The concessions provide that each airport’s reference values, discount rate and the other variables used in calculating the maximum rates do not represent an undertaking by the Ministry of Communications and Transportation or the Mexican government as to the profitability of any concession holder.  Therefore, whether or not the maximum rates (or the amounts up to the maximum rates that we have been able to collect) multiplied by workload units at any airport generate a profit or exceed our profit estimates, or reflect the actual profitability, discount rates, capital expenditures or productivity gains at that airport over the five-year period, we are not entitled to any adjustment to compensate for this shortfall.
To the extent that such aggregate revenues per workload unit exceed the relevant maximum rate, the Ministry of Communications and Transportation may proportionately reduce the maximum rate in the immediately subsequent year and assess penalties equivalent to 1,000 to 50,000 times the general minimum wage in the Federal District (Mexico City).  On December 31, 2009, the daily minimum wage in Mexico City was Ps. 54.80.  As a result, the maximum penalty at such date could have been Ps. 2.7 million (U.S 0.20 million) per airport.
Our concessions provide that, during 2000 and 2001 the calculation of workload units included only terminal passengers.  Beginning January 1, 2002, the Ministry of Communications and Transportation established that the calculation of workload units would also include commercial cargo for subsequent years.  The current workload unit calculation is therefore equal to one terminal passenger or 100 kilograms (220 pounds) of commercial cargo.

Special Adjustments to Maximum Rates
Once determined, each airport’s maximum rates are subject to special adjustment only under the following circumstances:
·
Change in law or natural disasters. A concession holder may request an adjustment in its maximum rates if a change in law with respect to quality standards or safety and environmental protection results in operating costs or capital expenditures that were not contemplated when its maximum rates were determined.  In addition, a concession holder may also request an adjustment in its maximum rates if a natural disaster affects demand or requires unanticipated capital expenditures.  There can be no assurance that any request on these grounds would be approved.
·
Macroeconomic conditions. A concession holder may also request an adjustment in its maximum rates if, as a result of a decrease of at least 5% in Mexican gross domestic product in a 12-month period, the workload units processed in the concession holder’s airport are less than that projected when its master development program was approved.  To grant an adjustment under these circumstances, the Ministry of Communications and Transportation under the master development program must have already allowed the concession holder to decrease its projected capital improvements as a result of the decline in passenger traffic volume.  There can be no assurance that any request on these grounds would be approved.
·
Increase in concession tax under Mexican Federal Duties Law. An increase in duty payable by a concession holder under the Mexican Federal Duties Law entitles the concession holder to request an adjustment in its maximum rates.  There can be no assurance that any request on these grounds would be approved.
·
Failure to make required investments or improvements. The Ministry of Communications and Transportation annually is required to review each concession holder’s compliance with its master development program (including the provision of services and the making of capital investments).  If a concession holder fails to satisfy any of the investment commitments contained in its master development program, the Ministry of Communications and Transportation is entitled to decrease the concession holder’s maximum rates and assess penalties.
·
Excess revenues. In the event that revenues subject to price regulation per workload unit in any year exceed the applicable maximum rate, the maximum rate for the following year will be decreased to compensate airport users for overpayment in the previous year.  Under these circumstances, the Ministry of Communications and Transportation is also entitled to assess penalties against the concession holder.
Ownership Commitments and Restrictions
The concessions require us to retain a 51% direct ownership interest in each of its 13 concession holders throughout the term of these concessions.  Any acquisition by us or one of our concession holders of any additional airport concessions or of a beneficial interest of 30% or more of another concession holder requires the consent of the Antitrust Commission.  In addition, the concessions prohibit us and our concession holders, collectively or individually, from acquiring more than one concession for the operation of an airport along each of Mexico’s southern and northern borders.
Air carriers are prohibited under the Mexican Airport Law from controlling or beneficially owning 5% or more of the shares of a holder of an airport concession.  We, and each of our subsidiaries, are similarly restricted from owning 5% or more of the shares of any air carrier.
Foreign governments acting in a sovereign capacity are prohibited from owning any direct or indirect equity interest in a holder of an airport concession.

Reporting, Information and Consent Requirements
Concession holders and third parties providing services at airports are required to provide the Ministry of Communications and Transportation access to all airport facilities and information relating to an airport’s construction, operation, maintenance and development.  Each concession holder is obligated to maintain statistical records of operations and air traffic movements in its airport and to provide the Ministry of Communications and Transportation with any information that it may request.  Each concession holder is also required to publish its annual audited consolidated financial statements in a principal Mexican newspaper within the first four months of each year.
The Mexican Airport Law provides that any person or group directly or indirectly acquiring control of a concession holder is required to obtain the consent of the Ministry of Communications and Transportation to such control acquisition.  For purposes of this requirement, control is deemed to be acquired in the following circumstances:
·
if a person acquires 35% or more of the shares of a concession holder;
·
if a person has the ability to control the outcome of meetings of the stockholders of a concession holder;
·
if a person has the ability to appoint a majority of the members of the Board of Directors of a concession holder; or
·
if a person by any other means acquires control of an airport.
Under the regulations to the Mexican Airport Law, any company acquiring control of a concession holder is deemed to be jointly and severally liable with the concession holder for the performance of the terms and conditions of the concession.
The Ministry of Communications and Transportation is required to be notified upon any change in a concession holder’s chief executive officer, Board of Directors or management.  A concession holder is also required to notify the Ministry of Communications and Transportation at least 90 days prior to the adoption of any amendment to its bylaws concerning the dissolution, corporate purpose, merger, transformation or spin-off of the concession holder.
Penalties and Termination and Revocation of Concessions and Concession Assets
Termination of Concessions
Under the Mexican Airport Law and the terms of the concessions, a concession may be terminated upon any of the following events:
·
the expiration of its term;
·
the surrender by the concession holder;
·
the revocation of the concession by the Ministry of Communications and Transportation;
·
the reversion of the Mexican government-owned assets that are the subject of the concession (principally real estate, improvements and other infrastructure);
·
the inability to achieve the purpose of the concession, except in the event of force majeure ;
·
the dissolution, liquidation or bankruptcy of the concession holder; or

·
the failure by the concession holder to satisfy the shareholding obligations set forth in the concession.
Following a concession’s termination, the concession holder remains liable for the performance of its obligations during the term of the concession.
Revocation of Concessions
A concession may be revoked by the Ministry of Communications and Transportation under certain conditions, including:
·
the failure by a concession holder to begin operating, maintaining and developing an airport pursuant to the terms established in the concession;
·
the failure by a concession holder to maintain insurance as required under the Mexican Airport Law;
·
the assignment, encumbrance, transfer or sale of a concession, any of the rights thereunder or the assets underlying the concession in violation of the Mexican Airport Law;
·
any alteration of the nature or condition of an airport’s facilities without the authorization of the Ministry of Communications and Transportation;
·
use, with a concession holder’s consent and without the approval of air traffic control authorities, of an airport by any aircraft that does not comply with the requirements of the Mexican Civil Aviation Law, that has not been authorized by the Mexican air traffic control authority, or that is involved in the commission of a felony;
·
knowingly appointing a chief executive officer or board member of a concession holder that is not qualified to perform his functions under the law as a result of having violated criminal laws;
·
the failure by the concession holder to pay the Mexican government the concession tax;
·
our failure to beneficially own at least 51% of the capital stock of its subsidiary concession holders;
·
a violation of the safety regulations established in the Mexican Airport Law and other applicable laws;
·
a total or partial interruption of the operation of an airport or its airport or complementary services without justified cause;
·
the failure to maintain the airport’s facilities;
·
the provision of unauthorized services;
·
the failure to indemnify a third party for damages caused by the provision of services by the concession holder or a third-party service provider;
·
charging prices higher than those registered with the Ministry of Communications and Transportation for regulated services or exceeding the applicable maximum rate;
·
any act or omission that impedes the ability of other service providers or authorities to carry out their functions within the airport; or

·
any other failure to comply with the Mexican Airport Law, its regulations and the terms of a concession.
The Ministry of Communications and Transportation is entitled to revoke a concession without prior notice as a result of the first six events described above.  In the case of other violations, a concession may be revoked as a result of a violation only if sanctions have been imposed at least three times with respect to the same violation.
Pursuant to the terms of our concessions, in the event the Ministry of Communications and Transportation revokes one of our concessions, it is entitled to revoke all of our other concessions.
According to the Mexican National Assets Law, Mexico’s national patrimony consists of private and government-owned assets of Mexico.  The surface area of our airports and improvements on such space are considered government-owned assets.  A concession concerning government-owned assets may be “rescued”, or revert to the Mexican government prior to the concession’s expiration, when considered necessary for the public interest.  In exchange, the Mexican government is required to pay compensation as determined by expert appraisers.  Following a declaration of “rescue,” or reversion, the assets that were subject to the concession are automatically returned to the Mexican government.
In the event of war, public disturbances or threats to national security, the Mexican government may assume the operations (through a process known as requisa ) of any airport, airport and complementary services as well as any other airport assets.  Such government action may exist only during the duration of the emergency.  Except in the case of war, the Mexican federal government is required to compensate all affected parties for any damages or losses suffered as a result of such government action.  If the Mexican government and a concession holder cannot agree as to the appropriate amount of damages or losses, the amount of damages shall be determined by experts jointly appointed by both parties and the amount of losses shall be determined based on the average net income of the concession holder during the previous year.
The Mexican Airport Law provides that sanctions of up to 200,000 times the minimum daily wage in the Federal District (Mexico City) may be assessed for failures to comply with the terms of a concession.  On December 31, 2009 the daily minimum wage in Mexico City was Ps.54.80.  As a result, the maximum penalty at such date could have been Ps. 10.96 million (U.S 0.84 million) per airport.
Consequences of Termination or Revocation of a Concession
Upon termination, whether as a result of expiration or revocation, the real estate and fixtures that were the subject of the concession automatically revert to the Mexican government.  In addition, upon termination the Mexican federal government has a preemptive right to acquire all other assets used by the concession holder to provide services under the concession at prices determined by expert appraisers appointed by the Ministry of Communications and Transportation.  Alternatively, the Mexican government may elect to lease these assets for up to five years at fair market rates as determined by expert appraisers appointed by the Mexican government and the concession holder.  In the event of a discrepancy between appraisals, a third expert appraiser must be jointly appointed by the Mexican government and the concession holder.  If the concession holder does not appoint an expert appraiser, or if such appraiser fails to determine a price, the determination of the appraiser appointed by the Mexican government will be conclusive.  If the Mexican government chooses to lease the assets, it may thereafter purchase the assets at their fair market value, as determined by an expert appraiser appointed by the Mexican government.
The Mexican Communications Law, however, provides that upon expiration, termination or revocation of a concession, all assets necessary to operate the airports will revert to the Mexican government, at no cost, and free of any liens or other encumbrances.  There is substantial doubt as to whether the provisions of our concessions would prevail over those of the Mexican Communications Law.  Accordingly, there can be no assurance that upon expiration or termination of our concessions the assets used by our subsidiary concession holders to provide services at our airports will not revert to the Mexican government, free of charge, together with government-owned assets and improvements permanently attached thereto.

Grants of New Concessions
The Mexican government may grant new concessions to manage, operate, develop and construct airports. Such concessions may be granted through a public bidding process in which bidders must demonstrate their technical, legal, managerial and financial capabilities.  In addition, the government may grant concessions without a public bidding process to the following entities:
·
parties who hold permits to operate civil aerodromes and intend to transform the aerodrome into an airport so long as (i) the proposed change is consistent with the national airport development programs and policies, (ii) the civil aerodrome has been in continuous operation for the previous 5 years and (iii) the permit holder complies with all requirements of the concession;
·
current concession holders when necessary to meet increased demand so long as (i) a new airport is necessary to increase existing capacity, (ii) the operation of both airports by a single concession holder is more efficient than other options, and (iii) the concession holder complies with all requirements of the concession;
·
current concession holders when it is in the public interest for their airport to be relocated;
·
entities in the federal public administration; and
·
commercial entities in which local or municipal governments have a majority equity interest if the entities’ corporate purpose is to manage, operate, develop and/or construct airports.
Environmental Matters
Regulation
Our operations are subject to Mexican federal, state and municipal laws and regulations relating to the protection of the environment.  The major federal environmental laws applicable to our operations are: (i) the General Law of Ecological Balance and Environmental Protection ( Ley General del Equilibrio Ecológico y la Protección al Ambiente ) or the “General Environmental Law” , and its regulations, which are administered by the Ministry of the Environment and Natural Resources ( Secretaría de Medio Ambiente y Recursos Naturales ) and enforced by the Ministry’s enforcement branch, the Federal Office for the Protection of the Environment ( Procuraduría Federal de Protección al Ambiente ); (ii) the General Law for the Prevention and Integral Management of Waste ( Ley General para la Prevención y Gestión Integral de los Residuos ), or the “Law on Waste”, which is also administered by the Ministry of the Environment and Natural Resources and enforced by the Federal Office for the Protection of the Environment; and (iii) the National Waters Law ( Ley de Aguas Nacionales ) and its regulations, which are administered and enforced by the National Waters Commission, ( Comisión Nacional del Agua) , also a branch of the Ministry of the Environment and Natural Resources.
Under the General Environmental Law, regulations have been enacted concerning air pollution, environmental impact, noise control, hazardous waste, environmental audits and natural protected areas.  The General Environmental Law also regulates, among other things, vibrations, thermal energy, soil contamination and visual pollution, although the Mexican government has not yet issued enforceable regulation on the majority of these matters.  The General Environmental Law also provides that companies that contaminate soils are responsible for their clean up.  Further, according to the Law on Waste, which was enacted in January 2004, owners and/or possessors of real property with soil contamination are jointly and severally liable for the remediation of such contaminated sites, irrespective of any recourse or other actions such owners and/or possessors may have against the contaminating party, and aside from the criminal or administrative liability to which the contaminating party may be subject.  Restrictions on the transfer of contaminated sites also exist.  The Law on Waste also regulates the generation, handling and final disposal of hazardous waste.  The Mexican government is in the process of developing regulations under the Law on Waste, which we anticipate may be adopted in the near future.

Pursuant to the National Waters Law, companies that discharge waste waters into national water bodies must comply, among others, with maximum permissible contaminant levels in order to preserve water quality.  Periodic reports on water quality must be provided to competent authorities.  Liability may result from the contamination of underground waters or recipient water bodies.  The use of underground waters is subject to restrictions pursuant to our concessions and the National Waters Commission.
In addition to the foregoing, Mexican Official Norms ( Normas Oficiales Mexicanas ), which are technical standards issued by competent regulatory authorities pursuant to the General Normalization Law ( Ley General de Metrología y Normalización ) and to other laws that include the environmental laws described above, establish standards relating to air emissions, waste water discharges, the generation, handling and disposal of hazardous waste and noise control, among others.  Mexican Official Norms on soil contamination and waste management are currently being developed and may also soon be enacted.  Although not enforceable, the internal administrative criteria on soil contamination of the Federal Office for the Protection of the Environment are widely used as guidance in cases where soil remediation, restoration or clean up is required.
The Federal Office for the Protection of the Environment can bring administrative, civil and criminal proceedings against companies that violate environmental laws, and it also has the power to close non-complying facilities and impose a variety of sanctions.  Companies in Mexico are required to obtain proper authorizations, licenses, concessions or permits from competent environmental authorities for the performance of activities that may have an impact on the environment or that may constitute a source of contamination.  Companies in Mexico are also required to comply with a variety of reporting obligations that include, among others, providing the Federal Office for the Protection of the Environment and the National Waters Commission, as applicable, with periodic reports regarding compliance with various environmental laws.
Prior to the opening of Mexico’s airports to private investment, the Federal Office for the Protection of the Environment required that environmental audits be performed at each of our airports.  Based on the results of these audits, the Federal Office for the Protection of the Environment issued recommendations for improvements and corrective actions to be taken at each of our airports.  In connection with the transfer of the management of our airports from our predecessor, we entered into environmental compliance agreements with the Federal Office for the Protection of the Environment on January 1, 1999 and July 12, 2000 pursuant to which we agreed to comply with a specific action plan and adopt specific actions within a determined time frame.
The Federal Office for the Protection of the Environment has confirmed that we have complied with all of the relevant environmental requirements derived from the aforementioned environmental audits, and has renewed compliance certificates for all of our airports.  These certificates, which are known as Environmental Quality Certificates ( Certificados de Calidad Ambiental ), certify compliance with applicable Mexican environmental laws, regulations and applicable Mexican Official Norms and must be renewed on a bi-annual basis.  In addition, all of our airports, including the Monterrey International Airport, have received and renewed their ISO 9001:2008 service and quality certification as of December 9, 2009. The original certification was received on December 8, 2006 and it is valid until December 8, 2012. We were recognized as a Socially Responsible Company for the first time in March 2008, as a result of our commitment to the well being of our employees and their families, the communities where we operate, airport users, business partners, and the environment. This recognition was ratified in March 2009 and in March 2010.
Liability for Environmental Noncompliance
The legal framework of environmental liability applicable to our operations is generally outlined above.  Under the terms of our concessions, the Mexican government has agreed to indemnify us for any environmental liabilities arising prior to November 1, 1998 and for any failure by the Mexican Airport and Auxiliary Services Agency prior to November 1, 1998 to comply with applicable environmental laws and with its agreements with Mexican environmental authorities.  Although there can be no assurance, we believe that we are entitled to indemnification for any liabilities related to the actions our predecessor was required to perform or refrain from performing under applicable environmental laws and under their agreements with environmental authorities.

The level of environmental regulation in Mexico has significantly increased in recent years, and the enforcement of environmental laws is becoming substantially more stringent.  We expect this trend to continue and expect additional norms to be imposed by the North American Agreement on Environmental Cooperation entered into by Canada, the United States and Mexico in the context of the North American Free Trade Agreement, as well as by other international treaties on environmental matters.  We do not expect that compliance with Mexican federal, state or municipal environmental laws currently in effect will have a material adverse effect on our financial condition or results of operations.  However, there can be no assurance that environmental regulations or the enforcement thereof will not change in a manner that could have a material adverse effect on our business, results of operations, prospects or financial condition.
On April 18, 2008, we were notified about an administrative investigation by the Mexican Federal Environmental Protection Agency ( Procuraduría Federal de Protección al Ambiente or PROFEPA) with respect to potential violations of environmental regulations in connection with the construction of Terminal B at the Monterrey International Airport. For more information about this proceeding, please see “Item 8 – Legal Proceedings”.
Regulatory Changes Proposed by Mexico’s Antitrust Commission
On October 1, 2007, the Chairman of COFECO released an independent report on the competitiveness of Mexico’s airports relative to each other and to international airports.  The Chairman’s report made the following recommendations as ways to increase efficiency at Mexican airports:
make economic efficiency a basis of tariff regulation for new concessions;
include income from commercial services as one of the factors in determining tariffs for new concessions;
strengthen the independence of the regulatory agency and increase the transparency of airport regulation;
promote greater efficiency in scheduling at airports with heavy volumes of passenger traffic;
promote greater competition between airports;
eliminate Aeropuertos y Servicios Auxiliares ’ (“ASA”) role as exclusive fuel service provider;
eliminate barriers to entry for taxi providers at airports; and
be mindful of vertical integration among airports and airlines.
The Ministry of Communications and Transportation issued a response to the Competition Commission Chairman’s report that noted, among other matters, that according to its own calculations, Mexico’s airport charges were lower than 36 of the 50 international airports against which they were compared.  We also issued a joint press release along with the other two Mexican airport groups, Grupo Aeroportuario del Pacifico and Aeropuertos del Sureste, questioning the calculations and the comparisons drawn in the Competition Commission Chairman’s report, and stating that we are committed to participate in a comprehensive review of the report in order to demonstrate our commitment to the efficient development of the airport sector.  In addition, after the Competition Commission Chairman’s report was released, on October 1, 2007 initiatives were introduced in Mexico’s Congress to make several reforms to the Mexican Airports Law that, if enacted, could have a material adverse effect on us.

On February 26, 2009, a legislative initiative was filed with the Chamber of Representatives ( Cámara de Diputados ) of the Congress of the Mexican Union ( Congreso de la Union ) by representantives of PRD ( Partido de la Revolución Democrática ), PT ( Partido del Trabajo ) and CONVERGENCIA.
This initiative seeks to reform a substantial part of the current Mexican Airport Law, which regulates airport-related matters. The initiative was sent to the Transport and Communications Commissions of the Congress to be analyzed and, if each commission determines that the initiative includes all the elements necessary to reform the law, then the initiative will be submitted to the Congress for its approval.  On March 25, 2010, the Transport and Communications Commissions released a negative opinion on this initiative.  The negative opinion must now be submitted to Congress for its approval. If Congress approves this negative opinion it would end this legislative process and the initiative would be discarded.  The approval by Congress is still pending.  There can be no assurance that Congress will approve the Commissions’ negative opinion or that these committees or Congress will file other initiatives that seek to reform the current Mexican Airport Law. Should the current Mexican Airport law be amended with respect to matters that are related to our operations, such amendment could have a material impact on our operations.
As of May 28, 2010, no such regulatory changes had been enacted.  Although we do not expect that the Competition Commission Chairman’s report or the congressional initiative will result in any regulatory changes in the short term, there can be no assurance that changes to the airport regulatory framework will not occur in the future.


The following table sets forth our consolidated subsidiaries as of December 31, 2009, including our direct and indirect ownership interest in each:
Name of Company
Jurisdiction of Establishment
Percentage
Owned
Description
Aeropuerto de Acapulco, S.A. de C.V.
Mexico
100
Holds concession for Acapulco International Airport
Aeropuerto de Ciudad Juárez, S.A. de C.V.
Mexico
100
Holds concession for Ciudad Juárez International Airport
Aeropuerto de Culiacán, S.A. de C.V.
Mexico
100
Holds concession for Culiacán International Airport
Aeropuerto de Chihuahua, S.A. de C.V.
Mexico
100
Holds concession for Chihuahua International Airport
Aeropuerto de Durango, S.A. de C.V.
Mexico
100
Holds concession for Durango International Airport
Aeropuerto de Mazatlán, S.A. de C.V
Mexico
100
Holds concession for Mazatlán International Airport
Aeropuerto de Monterrey, S.A. de C.V.
Mexico
100
Holds concession for Monterrey International Airport
Aeropuerto de Reynosa, S.A. de C.V.
Mexico
100
Holds concession for Reynosa International Airport
Aeropuerto de San Luis Potosí, S.A. de C.V.
Mexico
100
Holds concession for San Luis Potosí International Airport
Aeropuerto de Tampico, S.A. de C.V.
Mexico
100
Holds concession for Tampico International Airport
Aeropuerto de Torreón, S.A. de C.V.
Mexico
100
Holds concession for Torreón International Airport
Aeropuerto de Zacatecas, S.A. de C.V.
Mexico
100
Holds concession for Zacatecas International Airport
Aeropuerto de Zihuatanejo, S.A. de C.V.
Mexico
100
Holds concession for Zihuatanejo International Airport
Servicios Aeroportuarios del Centro Norte, S.A. de C.V.
Mexico
100
Provider of administrative and other services at certain of our airports.


Name of Company
Jurisdiction of Establishment
Percentage
Owned
Description
Operadora de Aeropuertos del Centro Norte, S.A. de C.V.
Mexico
100
Provider of operational services to our concessionaries.
Holding Consorcio Grupo Hotelero T2, S.A. de C.V.
Mexico
100
Holds 90% of the shares of Consorcio Grupo Hotelero T2, S.A. de C.V. (the Consortium) to develop and operate an NH-branded hotel and commercial areas inside the new Terminal 2 of the Mexico City International Airport. The Spanish company NH Hoteles, S.A. de C.V. owns the other 10%.
Consorcio Grupo Hotelero T2, S.A. de C.V.
Mexico
90
Holds a 20 year lease agreement with the Mexico City International Airport to develop and operate a 287-room, 5-star hotel and more than 5,000 square meters in commercial space inside Terminal 2.
Servicios Corporativos Terminal T2, S.A. de C.V.
Mexico
90
Provider of administrative and other services to Consorcio Grupo Hotelero T2, S.A. de C.V..

PROPERTY , PLANT AND EQUIPMENT
Pursuant to the Mexican General Law of National Assets, all real estate and fixtures in our airports are owned by the Mexican nation.  Each of our concessions is scheduled to terminate in 2048, although each concession may be extended one or more times for up to an aggregate of an additional fifty years.  The option to extend a concession is subject to our acceptance of any changes to such concession that may be imposed by the Ministry of Communications and Transportation and our compliance with the terms of our current concessions.  Upon expiration of our concessions, these assets automatically revert to the Mexican nation, including improvements we may have made during the terms of the concessions, free and clear of any liens and/or encumbrances, and we will be required to indemnify the Mexican government for damages to these assets, including any improvements thereon, except for those caused by normal wear and tear.
We use the property constituting our airports pursuant to our concessions.  Our corporate headquarters are located on the property of our Monterrey International Airport.
We maintain comprehensive insurance coverage that covers the principal assets of our airports and other property, subject to customary limits, against damage due to natural disasters, accidents, terrorism or similar events.  We also maintain general liability insurance, but do not maintain business interruption insurance.  Among other insurance policies, we carry a U.S. $50 million insurance policy covering damages to our property resulting from certain terrorist acts and a U.S. $1 billion policy covering personal and property damages to third parties.  We also carry a U.S. $200 million insurance policy covering damage to our assets and infrastructure generally.

Item 4A.
Unresolved Staff Comments
None.
Operating and Financial Review and Prospects
The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated financial statements and the notes to those consolidated financial statements.  It does not include all of the information included in our consolidated financial statements.  You should read our consolidated financial statements to gain a better understanding of our business and our historical results of operations.
Our consolidated financial statements were prepared in accordance with MFRS, which differs in certain significant respects from U.S. GAAP.  Information relating to the nature and effect of such differences is presented in Note 24 to our consolidated financial statements.
Overview
We hold concessions to operate, maintain and develop 13 airports in Mexico, many of which are located in the northern and central regions of the country, pursuant to concessions granted by the Mexican government.  The substantial majority of our revenues are derived from providing aeronautical services, which generally are related to the use of our airport facilities by airlines and passengers.  For example, approximately 80.5% of our total revenues in 2009 were earned from aeronautical services.  Changes in our revenues from aeronautical services are principally driven by the passenger and cargo volume at our airports.  Our revenues from aeronautical services are also affected by the maximum rates we are allowed to charge under the price regulation system established by the Ministry of Communications and Transportation and the specific prices we negotiate with airlines for the provision of aeronautical services.  The maximum rate system of price regulation that applies to our aeronautical revenues is linked to the traffic volume (measured in workload units) at each airport; thus, increases in passenger and cargo volume generally permit greater revenues from aeronautical services.  In evaluating our aeronautical revenue, we focus principally on workload units, which measure volume, and aeronautical revenue per workload unit, which measures the contribution to aeronautical revenue from each workload unit.
We also derive revenue from non-aeronautical activities, which principally relate to the commercial activities carried out at our airports such as the operation of parking facilities, advertising and the leasing of space to restaurants and retailers.  Our revenues from non-aeronautical activities are not subject to the system of price regulation established by the Ministry of Communications and Transportation (though they may be subject to regulation by other authorities).  Thus, our non-aeronautical revenues are principally affected by the passenger volume at our airports and the mix of commercial activities carried out at our airports.  We evaluate our non-aeronautical revenue by analyzing changes in overall non-aeronautical revenue and changes in non-aeronautical revenue per terminal passenger.  Faced with the difficult environment, we undertook initiatives aimed at sustaining the level of our revenues.  These include: (a) expanding and improving commercial operations inside our airports; (b) ending the special incentive program at the Monterrey airport; and (c) investing in commercial businesses related to airports.  The first two initiatives contributed to the growth in both aeronautical revenues per passenger and non-aeronautical revenues per passenger during 2008.
Recent Developments
Economic Downturn
During 2009, the aeronautical industry confronted an adverse global environment marked by the high price of oil, inflationary pressures on the cost of goods and services, and the global financial crisis with its drying up of credit and volatility in the financial and exchange markets.  This situation has had an impact on all the participants in the industry, including airport operators, with cancellations of routes and/or reduction in flight frequencies, and the end of operations of some carriers.  In our full year 2009 results, these factors principally affected the number of flight operations and the volume of passengers.

The U.S. and Mexican economies are currently recovering from the global economic and financial crisis.  In the third and fourth quarters of 2008, according to the U.S. Bureau of Economic Analysis, the U.S. gross domestic product decreased at annualized rates of 0.5% and 6.2%, respectively.  In 2009 the U.S. gross domestic product continued to decline at an annualized rate of 2.4%, although the U.S. economy has shown signs of improvement and in the fourth quarter of 2009 the U.S. gross domestic product increased 0.1% from the fourth quarter of 2008.  Likewise, according to the Mexican National Statistical, Geographic and Information Institute, the Mexican gross domestic product decreased at an annualized rate of 3.4% during the fourth quarter of 2008, and an additional 6.5% in 2009.  The Mexican economy has recently shown signs of improvement as the gross domestic product rose 2.0% in the fourth quarter of 2009 from the third quarter of 2009.  The Mexican air travel industry, and as a result, our results of operations, are substantially influenced by economic conditions in Mexico and the United States.  In 2008 and 2009, approximately 81% and 80% respectively, of the international passengers in our airports arrived or departed on flights originating in or departing to the United States and approximately 10% and 16% of our revenues in 2008 and 2009 respectively, were derived from passenger charges imposed on passengers departing from or arriving to the United States.  Similarly, in 2008 and 2009, approximately 83% and 84% respectively, of our passengers traveled on domestic flights, and approximately 48% and 47% of our revenues in 2008 and 2009 respectively, were derived from domestic passenger charges.
We believe that the U.S. and Mexican economic and financial crises have each affected our results of operations differently.  International traffic in 2009 decreased 22.4% compared to 2008, principally as a result of the cancellation of routes, and the reduction of frequencies on scheduled international flights, largely on part of U.S. carriers.  The airports where these factors had the greatest impact include Monterrey and our tourist destination airports (Acapulco, Mazatlán and Zihuatanejo).  The reduction in frequencies of some scheduled international flights, the cancellation of routes, principally by Continental, Delta, American and Alaska, as well as the exit from the market of Aviacsa affected international traffic in the majority of our airports. Monterrey, Zihuatanejo, Mazatlán, Acapulco, and Culiacán were the airports most affected.  We expect that international passenger traffic levels will continue to decrease until economic conditions improve in the United States.
In Mexico, the economic and financial crisis adversely affected domestic traffic in 2009, which decreased substantialy compared to 2008, which itself had been adversely affected by the exit from the market of Aviacsa during that year and significant reductions in capacity by several other carriers. Furthermore, due to the suspension of operations by Aerocalifornia in July 2008 and the exit from the market of Aladia, Alma, and Avolar in the fourth quarter of 2008, our airports have lost terminal passenger traffic, with the main decreases being at the Ciudad Juárez (30.1%), Acapulco (22.9%), Monterrey (21.0%), San Luis Potosí (20.9%) and Tampico (19.2%) airports (in each case, 2009 as compared to 2008).  Generally all of our airports were affected during 2009 by the reductions in volume of passengers, the A(H1N1) virus and the exit from the market of 5 airlines in less than a year. We expect that domestic passenger traffic levels will continue to decrease until economic conditions improve in Mexico.
For further discussion of how economic conditions may impact our business, see “Item 3 – Risk Factors – Risks Related to Our Operations”.
Investment in Mexico City International Airport
We entered into a joint investment with the international hotel operator NH Hoteles, S.A. de C.V. to develop and operate a 287-room hotel and more than 5,000 square meters of commercial space inside Terminal 2 of the Mexico City International Airport, under a 20-year lease agreement with the Mexico City International Airport.
The Terminal 2 Hotel opened in August 2009.  NH Hoteles, S.A. de C.V. is operating the hotel and owns 10%.  The Consortium is currently carrying out market and feasibility studies for the development of the commercial areas.  The development of these commercial areas principally depends on the recovery from the economic and financial crisis.

This project provides us with the opportunity to participate in the operation of the Mexico City International Airport Terminal 2 passenger terminal, which according to the Mexico City International Airport, served 9.9 million passengers in 2009.  Airlines based in Terminal 2 include Aeromar, Aeroméxico and Aeroméxico Connect, Continental, Copa, Delta and LAN Chile.  This project is an important part of our strategy to increase our non-aeronautical revenues. This project, along with acquisitions of land reserves in 2008 to develop and expand our key airports, accounted for the significant increase in our balance of property, machinery and equipment at December 31, 2008, as compared to our balance at December 31, 2007.
New Financing
In February 2010, we increased from Ps. 500 million to Ps. 700 million the total amount of the long-term bank credit facility entered into on Februrary 3, 2009, which is scheduled to mature in 2017.  The facility bears interest at Tasa de Interés Interbancaria de Equilibrio (the Mexican interbank rate) plus 450 basis points.  On April 27, 2010, we entered into a long-term bank credit facility for the amount of Ps. 200 million, which is scheduled to mature in 2018.  The facility bears interest at Tasa de Interés Interbancaria de Equilibrio (the Mexican interbank rate) plus 450 basis points.  As of May 28, 2010, the total long-term debt outstanding was Ps. 841 million.
Management changes
The board of directors has approved changes in senior management, as part of a normal rotation of personnel. Victor Bravo Martin became our Chief Executive Officer effective July 1, 2009. He succeeded Rubén López, who has been granted a sabbatical to continue his professional development at Empresas ICA.
The board of directors also named José Luis Guerrero Cortes as the new Chief Financial Officer effective July 1, 2009.  Mr. Guerrero earned an MBA from the Harvard Business School and worked as a summer associate at Goldman Sachs in the debt capital markets and derivatives groups in 2008. Prior to his MBA, he served as a financial analyst at Empresas ICA and as an assistant brand manager at Procter & Gamble in Mexico.  Mr. Guerrero also worked in the environmental research group of Veolia Environment in France and as a research engineer for Vulcan Chemicals in Kansas.  Mr. Guerrero holds a degree in chemical engineering from the Universidad Iberoamericana and a diploma in Finance from Instituto Tecnológico de Estudios Superiores de Monterrey.
The board of directors also named Stephane Taysse as the new Commercial and Marketing Director effective December 1, 2009. He succeeds Jean Phillipe Percheron, who returned to France to continue his career in ADP. Prior to joining us, he was Commercial Manager at ADP-Roissy Charles de Gaulle Airport since 2007. Previously he served as Manager in the Business Unit and Project Manager at Galeries Lafayette during 8 years. He was also Head of the Departament of Marks Spencer Departament Stores, Mr Taysse has a strong leadership and an extensive vision of the Commercial and Duty Free Market.  He holds a Master Degree in International Sales and Marketing and a Bachelor Degree from the Business School of Toulouse.
The impact of the Influenza A(H1N1) outbreak
As a result of the preventive alert announced by the Mexican Ministry of Health on April 24, 2009, resulting from the Influenza A(H1N1) outbreak, the Mexican government established an emergency plan and increased epidemiological surveillance in order to inhibit the spread of the illness. This plan included the establishment of checkpoints in airports to provide information, as well as the provision of assistance to any person who showed signs of illness.
Concerned for the entire airport community, including passengers, employees of the airlines and of other service providers, as well as our own employees we established dedicated response teams at our headquarters and at each airport. We cooperated in the efforts coordinated by the federal government and provided health authorities any assistance they requested.

On April 29, 2009, the World Health Organization raised the pandemic alert level for the Influenza A(H1N1) to Phase 5. This increased the security measures that were implemented at our airports.  By order of the Ministry of Communications and Transportation, screening of every passenger traveling to international destinations was necessary in order to identify symptoms of viral infection, including visual inspection, passenger surveys and measure of body temperature. Personnel of the Ministry of Health were allowed to require additional tests, and had the authority to determine if a passenger was allowed to board a flight. This measure went into place on April 29, 2009.
Since this declaration of the World Health Organization, our airports have continued to operate normally. The World Health Organization recommended that borders remain open and that international travel remain unrestricted.  However, many passengers chose to cancel or delay scheduled travel, and there was a reduction in passenger traffic.
Although a number of countries, such as the United States, the United Kingdom, and France, as well as the Health Council of the EU initially recommended that travelers avoid non-essential travel to Mexico, all of these advisories were lifted by the end of May 2009.  Likewise, restrictions on travel to Mexico imposed by other countries as a result of the A(H1N1) virus were lifted by June 1, 2009.  As of January 2010, the World Health Organization reported that outbreaks of the A(H1N1) virus continued to decline or remained low in Mexico.  With the abatement of the outbreak and the lifting of travel restrictions, we believe that the A(H1N1) outbreak is no longer significantly affecting passenger or cargo traffic levels.
Passenger and Cargo Volumes
In 2009, approximately 84.3%of the terminal passengers using our airports were domestic, and decreased 17.2% as compared to 2008.  In addition, of the international passengers traveling through our airports, a majority has historically traveled on flights originating in or departing to the United States.  Accordingly, our results of operations are influenced strongly by changes to Mexican economic conditions and to a lesser extent influenced by U.S. economic and other conditions, particularly trends and events affecting leisure travel and consumer spending.  Many factors affecting our passenger traffic volume and the mix of passenger traffic in our airports are beyond our control.

The following table sets forth certain operating and financial data relating to our revenues and passenger and cargo volume for the periods indicated.
Year ended December 31,
2007
2008
2009
Domestic terminal passengers (1)
11,740.5 11,732.8 9,712.2
International terminal passengers (1)
2,471.9 2,327.8 1,806.1
Total terminal passengers (1)
14,212.5 14,060.7 11,518.3
Cargo (1)
818.3 790.3 722.0
Total workload units (1)
15,030.8 14,851.0 12,240.3
Change in total terminal passengers (2)
20.6 % (1.1 ) % (18.1 )%
Change in workload units (2)
19.3 % (1.2 ) % (17.6 )%
Aeronautical revenue (3)
1,549.8 1,617.2 1,527.0
Change in aeronautical revenue (2)
13.0 % 4.3 % (5.6 )%
Aeronautical revenue per workload unit
103.1 115.12 124.75
Change in aeronautical revenue per workload unit (1)( 2)
(5.3 ) % 11.7 % 8.4 %
Non-aeronautical revenue (3)
347.5 371.3 369.3
Change in non-aeronautical revenue (2)
9.9 % 6.8 % (0.5 )%
Non-aeronautical revenue per terminal passenger (4)
24.5 26.4 32.1
Change in non-aeronautical revenue per terminal passenger (2)
(8.9 ) % 7.8 % 21.6 %
_______________

(1)
In thousands.  One cargo unit is equivalent to 100 kilograms (220 pounds) of cargo.  Under the regulation applicable to our aeronautical revenues, one workload unit is equivalent to one terminal passenger or 100 kilograms (220 pounds) of cargo.
(2)
In each case, as compared to previous period.
(3)
In millions of constant pesos as of December 31, 2007 and in nominal pesos beginning on January 1, 2008.
(4)
Non-aeronautical revenues excluding revenues from the Hotel.

In 2009, we served 11.5 million terminal passengers, of which 9.7 million were domestic and 1.8 million were international, and approximately 0.3 million were transit passengers.
Classification of Revenues
We classify our revenues into two categories:  revenues from aeronautical services and revenues from non-aeronautical services.  Historically, a substantial majority of our revenues have been derived from aeronautical services.  For example, in 2009, 80.5% of our revenues were derived from aeronautical services, and the remainder of our revenues was derived from non-aeronautical services.
Our revenue from aeronautical services is subject to price regulation under the applicable maximum rate at each of our airports, and principally consist of passenger charges, aircraft landing and parking charges, airport security charges, passenger walkway charges, leasing of space in our airports to airlines (other than first class/VIP lounges and other similar activities not directly related to essential airport operations) and complementary services (i.e., fees from handling and catering providers, permanent ground transportation operators and access fees from fuel providers at our airports).
Our revenue from non-aeronautical services is not subject to price regulation under our maximum rates and generally includes revenues earned from car parking (which may be subject to certain municipal regulations, but not to our maximum rates), leasing of space in our airports to airlines (for first class/VIP lounges and similar activities not directly related to essential airport operations), rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as car rental agencies, food and beverage providers and retail and duty-free store operators, as well as advertising and fees collected from other miscellaneous sources, such as vending machines and timeshare companies.

For a detailed description of the components of our aeronautical and non-aeronautical revenue categories, see “Item 4. Information on the Company – Business Overview- Our Sources of Revenues.”
Fluctuations in the Peso
From September 30, 2008 to March 31, 2009, the peso depreciated by approximately 29.4%, from 10.98 pesos per U.S. dollar on September 30, 2008, to 14.21 pesos per U.S. dollar on March 31, 2009.  From September 30, 2009 to March 31, 2010, the peso appreciated by approximately 8.8%, from 13.49 pesos per U.S. dollar on September 30, 2009, to 12.30 pesos per U.S. dollar on March 31, 2010.  Between March 31, 2009 and November 25, 2009, the peso fluctuated between 13.00 and 14.00 pesos per U.S. dollar. It then began to appreciate, reaching 12.74 pesos per U.S. dollar on March 1, 2010.
A depreciation of the Peso affects our business in the following ways: (i) international passengers and international flights pay tariffs denominated in U.S. dollars, while these tariffs are generally collected in Mexican pesos 60-115 days following the date of each flight, thus the depreciation of the Mexican peso had a positive impact on our results from operations which are denominated in Mexican pesos; and (ii) as of December 31, 2009, we had 9.4 million of liabilities denominated in US dollars, causing foreign exchange rate losses.  Any depreciation in the peso may cause additional foreign exchange losses.
Aeronautical Revenue
The system of price regulation applicable to our aeronautical revenues establishes a maximum rate in pesos for each airport for each year in a five-year period, which is the maximum annual amount of revenue per workload unit (a workload unit is equal to one terminal passenger or 100 kilograms (220 pounds) of cargo) that we may earn at that airport from aeronautical services.  See “Item 4. Regulatory Framework – Aeronautical Service Regulation” for a description of our maximum rates and the rate setting procedures for future periods.  The maximum rates for our airports have been determined for each year through December 31, 2010.

The following table sets forth our revenue from aeronautical services for the periods indicated.
Aeronautical Revenue
Year ended December 31,
2007
2008
2009
Amount
Percent
Amount
Percent
Amount
Percent
(millions of pesos, except percentages)
Aeronautical Revenue:
Passenger charges
1,162.0 75.0 % 1,234.0 76.3 % 1,189.8 77.9 %
Landing charges
119.6 7.7 111.7 6.9 94.9 6.2
Aircraft parking charges
96.1 6.2 95.2 5.9 76.0 5.0
Airport security charges
22.6 1.5 22.8 1.4 19.6 1.3
Passenger walkway charges
23.1 1.5 23.9 1.5 17.2 1.1
Leasing of space to airlines
126.4 8.1 129.6 8.0 129.5 8.5
Total Aeronautical Revenue
1,549.8 100.0 % 1,617.2 100.0 % 1,527.0 100.0 %
_______________

(1)
Revenues from complementary service providers consist of access and other fees charged to third parties providing handling, catering and other services at our airports and makes up less than 0.01% of our total aeronautical revenue.
Under the regulatory system applicable to our aeronautical revenues, we can set the specific price for each category of aeronautical services, other than complementary services and leasing of space to airlines, every three months (or more frequently if accumulated inflation since the last adjustment exceeds 5%), as long as the total aeronautical revenue per workload unit each year at each of our airports does not exceed the maximum rate at that airport for that year.  We currently set the specific price for these categories of aeronautical services after negotiating with our principal airline customers.  Historically our specific prices have been structured such that the substantial majority of our aeronautical revenues are derived from passenger charges, and we expect this to continue to be the case in future agreements with our principal airline customers.  In 2009, passenger charges represented 77.9% of our aeronautical services revenues.  In 2009, aeronautical services represented 80.5% of our total revenues.
We seek to offer incentives, including significant discounts on charges for aeronautical services, to encourage carriers to establish new routes and take other measures expected to increase passenger traffic at our airports.  The Mexican Airport Law prevents discriminatory pricing, so incentives we offer must be available to any carrier meeting the conditions specified for those incentives.  At present, we are not offering any incentives to encourage carriers to establish new routes, but we have offered such incentives in the past and may do so again in the future.
For example, on November 22, 2006, we delivered a notice to the Mexican National Air Transportation Board and the Mexican Director General of Civil Aviation ( Dirección General de Aeronáutica Civil ) setting forth certain criteria that carriers operating at the Monterrey International Airport must meet in order to qualify for an incentive package that included a discount equal to Ps.75.00 per departing terminal passenger on passenger charges (representing approximately 40% of our usual passenger charge).
We offered this incentive only to airlines meeting the criteria set forth above that notified us in writing of their intent to take advantage of the incentive program within 180 days from the delivery of the notice on November 22, 2006.
VivaAerobus was the only airline that took advantage of these incentives.  VivaAerobus established its corporate and operational headquarters at the Monterrey International Airport.  In December 2006, VivaAerobus commenced operations with two aircraft operating nine routes.  By December 2007, VivaAerobus had 19 destinations with five aircraft operating in their fleet and was serving 7 of our airports from Monterrey.  By the end of 2008 VivaAerobus had a seven-plane fleet and an increment in its routes.  The principal routes served by VivaAerobus at the Monterrey International Airport are Veracruz, Cancún, Mérida, Culiacán, Villahermosa, and Chihuahua.  VivaAerobus opened its first international route to Austin, Texas, which started flying in May of 2008.

We believe that our participation in this agreement resulted in a decrease in our aeronautical revenues per terminal passenger in 2007 and 2008, and on September 10, 2008 we agreed with VivaAerobus to terminate the program. As a result, we will no longer provide financial incentives to VivaAerobus for the traffic it generates at Monterrey.
In December 2001, we entered into an agreement with the National Air Transportation Board ( Cámara Nacional de Aerotransportes ) and the Ministry of Communications and Transportation pursuant to which we settled existing disputes with our principal airline customers and established specific prices for regulated aeronautical services applicable to those airlines.  Under the agreement, the National Air Transportation Board agreed to cause our principal airline customers to enter into (a) contracts governing charges for certain aeronautical services and (b) lease contracts for property used by the airlines.  Although our agreement with the National Air Transportation Board expired in December 2005, we continued to charge our principal airline customers in accordance with the terms of the agreement until December 31, 2008, at which time we entered into a new agreement with the National Air Transportation Board that offered incentives, including discounts, for the establishment of new routes and other measures expected to increase passenger traffic volume at our airports.  We recently entered into a new agreement covering the period from August 1, 2009 to December 31, 2011. We continue to charge our principal airline customers in accordance with the terms of this agreement.
There can be no assurance that any such initiatives undertaken in the future will be carried out or will increase our passenger traffic volume or our revenues.
In 2009, our aeronautical revenues represented approximately 95.1% of the amount we were entitled to earn under the maximum rates applicable to all of our airports.  To the extent that we offer incentives to carriers to establish routes serving our airports in the future, or other changes to our sources of aeronautical revenue, this percentage could decrease.  There can be no assurance that we will be able to collect substantially all of the revenue we are entitled to earn from services subject to price regulation in the future.
Non-aeronautical Revenue
Non-aeronautical services historically have generated a significantly smaller portion of our total revenues as compared to aeronautical services.  The contribution to our total revenues from non-aeronautical services was 19.5% in 2009.  Since 2006, our non-aeronautical revenue per terminal passenger increased from Ps.26.9 in 2006 to Ps. 32.1 in 2009, due primarily to increases in passenger traffic from low-cost aviation companies.  However, passengers on such aviation companies typically are most cost-conscious and as a result make fewer purchases at our airports.
As part of our strategy to grow non-aernoautical revenues, we acquired an interest in the company Consorcio Grupo Hotelero T2 that developed and operates a hotel in Terminal 2 of the Mexico City International Airport and will develop and operate 5,000 square meters (53,820 square feet) of commercial space in Terminal 2 of the Mexico City International Airport.  Additionally, we are developing Terminal B in the Monterrey airport. Terminal B is currently under construction and it will comprise 2,100 square meters (22,604 square feet) commercial spaces.

The following table sets forth our revenue from non-aeronautical activities for the periods indicated.
Non-aeronautical Revenue
Year ended December 31,
2007
2008
2009
Amount
Percent
Amount
Percent
Amount
Percent
(millions of pesos, except percentages)
Non-aeronautical Revenue:
Commercial Activities:
Car parking charges
105.5 30.4 112.7 30.4 104.5 28.3
Advertising
36.9 10.6 39.3 10.6 39.4 10.7
Leasing of space (1)
39.9 11.5 36.6 9.8 39.9 10.8
Car rentals
29.6 8.5 32.2 8.7 31.3 8.4
Food and beverage operations
31.6 9.1 35.0 9.4 28.8 7.8
Retail operations
34.6 9.9 36.2 9.7 33.1 9.0
Duty-free operations
14.3 4.1 13.6 3.7 11.0 3.0
Communications
4.0 1.2 4.3 1.2 4.4 1.2
Financial services
1.8 0.5 1.9 0.5 2.5 0.7
Time share
18.0 5.2 18.1 4.9 18.1 4.9
Hotel
0 0 0 0 15.3 4.1
Other
16.1 4.6 20.6 5.5 21.0 5.7
Total commercial activities
332.3 95.6 350.5 94.4 349.3 94.6
Recovery of costs (2)
15.2 4.4 20.8 5.6 20.0 5.4
Total Non-aeronautical Revenue
Ps. 347.5
100.0 %
Ps. 371.3
100.0 % 369.3 100.0 %
_______________

(1)
Includes leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and other similar non-essential activities).
(2)
Recovery of costs consists of utility and maintenance charges that are transferred to airlines and other tenants in our airports.

The majority of our revenue from non-aeronautical services is derived from car parking (which may be subject to government regulation, but not to our maximum rates), leasing of space in our airports to airlines and complementary service providers (for first class/VIP lounges and similar activities not directly related to essential airport operations), rental and royalty payments from third parties operating stores and providing commercial services at our airports, such as car rental agencies, food and beverage providers, retail and duty free store operators, advertising and fees collected from other miscellaneous sources, such as timeshare companies, vending machines and telecommunications providers.

Operating Costs
The following table sets forth our operating costs and certain other related information for the periods indicated.
Operating Costs
Year ended December 31,
2007
2008
2009
Amount
% change
Amount
% change
Amount
% change
(In millions of Pesos except percentages)
Operating Costs:
Cost of services:
Employee costs
143.1 2.0 156.2 9.1 146.0 (6.5 )
Maintenance
53.9 (1.6 ) 54.0 0.2 63.2 17.0
Safety, security & insurance
74.9 8.7 81.0 8.1 86.1 6.3
Utilities
94.4 2.4 112.8 19.5 99.2 (12.1 )
Other
54.5 32.0 56.1 2.9 63.3 12.8
Total cost of services
420.8 5.9 460.1 9.3 457.8 (0.5 )
Administrative expenses
256.7 8.1 317.0 23.5 320.8 1.2
Technical assistance fees
57.4 16.0 55.6 (3.1 ) 51.7 (7.0 )
Concession taxes
98.3 16.2 101.7 3.4 94.8 (6.8 )
Depreciation and amortization:
Depreciation (1)
32.9 16.3 39.3 19.5 47.9 21.9
Amortization (2)
303.3 15.0 327.4 8.0 363.9 11.1
Total depreciation and amortization
336.2 15.1 366.7 9.1 411.8 12.3
Total operating costs
1,169.4 10.2 % 1,301.1 11.3 % 1,336.9 2.7 %
_______________

(1)
Reflects depreciation of fixed assets.
(2)
Reflects amortization of our concessions and rights to use airport facilities.

Cost of Services
Our cost of services consists primarily of employee, maintenance, safety, security and insurance costs, utilities (a portion of which we recover from our tenants) and other miscellaneous expenses.  In recent years, our cost of services has increased from Ps.420.8 million in 2007 to Ps. 457.8 million in 2009.  These proportionally greater increases in cost of services relative to the increases in revenue in recent years have contributed to the decrease in our operating margins (defined as income from operations divided by total revenue) from 38.4% in 2007 to 29.5% in 2009.
Administrative Expenses
Our administrative expenses consist primarily of administrative overhead costs, fees and expenses paid to consultants and other providers of professional services and other miscellaneous expenses.  Administrative expenses increased from Ps.317.0 million in 2008 to Ps. 320.8 in 2009.  The increase of 1.2% from 2008 to 2009 was principally the result of an increase in studies for the master devolpment plan for the next five-year period.
Our operating expenses have been, and we believe that they will continue to be, funded entirely from our results of operations.

Technical Assistance Fee and Concession Tax
Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers technical assistance and technological and industry knowledge and experience to us in exchange for a fee.  The technical assistance fee for each of 2001 and 2002 was fixed at U.S.$5.0 million (adjusted annually for U.S. inflation).  For the remainder of the contract term, the fee is equal to the greater of U.S.$3.0 million adjusted annually for inflation (measured by the U.S. consumer price index) or 5% of our annual consolidated operating income (calculated prior to deducting the technical assistance fee, taxes and depreciation and amortization, in each case determined in accordance with MFRS).
Beginning November 1, 1998, we became subject to Article 232-A of the Mexican Federal Duties Law, which requires that the holders of concessions pay a tax for the use of state-owned assets.  This tax is currently equal to 5% of the gross annual revenues of each concession holder obtained from the use of public domain assets pursuant to the terms of its concession.  The concession tax may be revised at any time by the Mexican government, and there can be no assurance that this tax may not increase in the future.  If the Mexican government increases the concession tax, we are entitled to request an increase in its maximum rates from the Ministry of Communications and Transportation; however, there can be no assurance that the Ministry of Communications and Transportation would honor any such request.
Depreciation and Amortization
Our depreciation and amortization expenses primarily reflect the amortization of our investment in our 13 concessions.  In 2009, our depreciation and amortization expenses increased 12.3%, as compared to 2008, as a result of the increase in improvements to our concession properties during 2009.
The value of our concessions was determined in June 2000, when SETA won the bid to acquire Series BB shares currently representing 14.7% of our capital stock, based on the value assigned by the independent company INGENIAL.  In addition, we depreciate the value of certain fixed assets we acquire or build at our airports pursuant to the investment requirements under our master development programs.
Capital Expenditures
In 2009, Capital Expenditures were Ps. 867,656 thousand. We funded our capital expenditures through cash flows from operations and debt, and we believe we will continue to do so in the future. Our ability to incur debt may be restricted by the Merrill Lynch refinancing entered into by our parent company Aeroinvest.  See “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.
Taxation
On October 1, 2007, the Business Flat Tax Law (IETU) was enacted, and it went into effect on January 1, 2008.  IETU applies to the sale of goods, the provision of independent services and the granting of use or enjoyment of goods, according to the terms of the IETU, less certain authorized deductions.  IETU payable is calculated by subtracting certain tax credits from the tax determined.  Revenues, as well as deductions and certain tax credits, are determined based on cash flows generated beginning January 1, 2008.  IETU establishes that the IETU rate will be 16.5% in 2008, 17% in 2009, and 17.5% as of 2010.  Therefore, as of December 31, 2007, we recorded a deferred IETU liability of Ps.1,073,859, and cancelled the deferred corporate income tax (“ISR”) liability of Ps.597,506, recognizing the effect net in the statement of income of Ps.476,353.  We continued to record a deferred IETU liability in 2008 and 2009, which did not affect our cash flows. In the future some of our subsidiaries will only have to pay ISR, while others only IETU.  We recognize deferred taxes based on the tax that we expect to pay in the future.
In addition, the Tax Benefits Decree and the Third Omnibus Tax Bill were published on November 5 and December 31, 2007, respectively, clarifying or expanding the transitory application of the law regarding transactions carried out in 2007 that will have an impact in the deferred IETU.

We regularly review our deferred tax assets for recoverability and, if necessary, establish a valuation allowance based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences.
Our effective tax rate in 2007, 2008 and 2009 was 96.2%, 30.6%, and 14.2% respectively.  Our relatively low effective tax rate prior to 2007 was the result on the effect on deferred taxes resulting from decreases in statutory income tax rates (from 30% in 2005 to 29% in 2006 and 28% thereafter).  The substantial increase in our effective tax rate in 2007 was principally due to the deferred tax effects from the adoption of the IETU Law.
In November 2009, the Mexican legislative branch approved the 2010 Mexican Tax Reform Bill.  The law was published in Mexico´s Official Gazette on December 7, 2009.
Under the 2010 Mexican Tax Reform Law, the corporate income tax rate will be increased from 28% to 30% for the period from January 1, 2010 throught December 31, 2012, and will then be scaled back to 29% in 2013, and finally back to 28% in 2014 and future years.
The 2010 Mexican Tax Reform Law contains reform provisions that may have a significant impact on many organizations with operations in México.  Areas of Mexican tax law impacted include: income tax rates, the tax consolidation regime, research and development tax credits, taxes on cash deposits, the excise tax, and the value-added tax.  Other than the impact on our deferred income taxes resulting from the changes in the corporate income tax rates described above, the reform provisions included in the 2010 Mexican Tax Reform Law did not affect us.
We are subject to the statutory employee profit sharing regime established under the Mexican Federal Labor Law.  Under this regime, 10% of each unconsolidated company’s annual profits (as calculated for tax purposes) must be distributed among its employees, if any, other than its chief executive officer.
Effects of Devaluation and Inflation
The following table sets forth, for the periods indicated: the percentage that the Mexican peso devalued or appreciated against the U.S. dollar, the Mexican inflation rate, the U.S. inflation rate, and the percentage that Mexican gross domestic product, or GDP, changed as compared to the previous period.

Year ended December 31,
2007
2008
2009
Depreciation (appreciation) of the Mexican peso as computed to the U.S. dollar (1)
1.1 % 26.7 % (5.6 )%
Mexican inflation rate (2)
3.8 % 6.5 % 3.6 %
U.S. inflation rate (3)
4.1 % 0.1 % 2.7 %
Increase (decrease) in Mexican gross domestic product (4)
3.3 % 1.3 % (6.5 )%
_______________
(1)
Based on changes in the rates for calculating foreign exchange liabilities, as reported by Banco de Mexico , or the Mexican Central Bank, at the end of each period, which were as follows: Ps.10.92 per U.S. dollar as of December 30, 2007, Ps.13.83 per U.S. dollar as of December 31, 2008 and Ps. 13.06 per U.S. dollar as of December 31, 2009.
(2)
Based on changes in the Mexican Consumer Price Index from the previous period, as reported by the Mexican Central Bank.  The Mexican Consumer Price Index at period-end was 125.564 in 2007, 133.761 in 2008 and 138.541 in 2009.
(3)
As reported by the U.S. Department of Labor, Bureau of Labor Statistics.
(4)
In real terms, as reported by the Mexican Central Bank.

Due to the relatively low rate of inflation in Mexico in recent years, inflation has not had a material impact on our revenues or results of operations during the past three years.  However, the general condition of the Mexican economy, the devaluation of the peso as compared to the U.S. dollar, inflation and high interest rates have in the past adversely affected, and may in the future adversely affect, the following:

Depreciation and amortization expense .  Through the end of 2007, MFRS required us to restate our non-monetary assets to give effect to inflation.  The restatement of these assets in periods of high inflation increases the carrying value of these assets in pesos, which in turn increases the related depreciation expense and risk of impairments.
Passenger charges .  Passenger charges for international passengers are currently denominated in U.S. dollars (although invoiced and paid in Mexican pesos), while passenger charges for domestic passengers are denominated in pesos.  Prior to December 31, 2007, MFRS required Mexican companies to restate their results of operations for prior periods in constant pesos as of the most recent balance sheet date, when the rate of inflation in a period exceeds the depreciation of the peso as compared to the U.S. dollar for that period, the peso value of U.S. dollar-denominated or U.S. dollar-linked revenues in the prior period will be higher than those of the current period.  This effect may occur despite the fact that the amount of such revenues in U.S. dollar terms may have been the same or greater in the current period.
Comprehensive financing cost .  As required by MFRS, our comprehensive financing cost reflects gains or losses from foreign exchange transactions and, through December 31, 2007, gains or losses from monetary position and, as a result, is impacted by both inflation and devaluations.
Maximum rates in pesos. Our passenger charges for international passengers are denominated in U.S. dollars, but are invoiced and paid in Mexican pesos based on the average exchange rate for the month prior to each flight.
Cash flows. Our cash flows are affected by changes in exchange rates as a result of holding monetary assets and liabilities in foreign currencies.


Operating Results by Airport
The following table sets forth our results of operations for the periods indicated for each of our principal airports.
Airport Operating Results
Year ended December 31,
2007
2008
2009
(millions of pesos, except percentages)
Monterrey:
Revenues:
Aeronautical services
667.9 728.4 675.4
Non-aeronautical services
179.9 195.8 183.2
Total revenues
847.8 924.2 858.6
Operating costs
804.9 867.7 785.2
Costs of services and Administrative expenses
675.7 726.1 640.8
Depreciation and amortization
84.5 93.4 101.1
Income from operations
42.9 56.5 73.4
Operating margin (1)
5.0 % 6.1 % 8.5 %
Acapulco:
Revenues:
Aeronautical services
125.9 133.9 119.9
Non-aeronautical services
22.5 23.7 21.4
Total revenues
148.4 157.6 141.3
Operating costs
142.1 147.9 128.6
Costs of services and Administrative expenses
92.3 95.1 72.8
Depreciation and amortization
42.2 44.9 48.8
Income from operations
6.3 9.7 12.7
Operating margin (1)
4.2 % 6.2 % 9.0 %
Mazatlán:
Revenues:
Aeronautical services
111.0 106.6 111.3
Non-aeronautical services
32.5 32.6 33.2
Total revenues
143.5 139.2 144.5
Operating costs
130.7 130.7 124.3
Costs of services and Administrative expenses
94.4 91.7 83.8
Depreciation and amortization
29.3 32.0 33.3
Income from operations
12.8 8.5 20.2
Operating margin (1)
8.9 % 6.1 % 14.0 %
Culiacán:
Revenues:
Aeronautical services
127.1 121.0 129.8
Non-aeronautical services
18.1 19.5 20.3
Total revenues
145.2 140.5 150.1
Operating costs
137.2 137.9 138.7
Costs of services and Administrative expenses
106.2 106.6 105.0
Depreciation and amortization
23.7 24.4 26.2
Income from operations
8.0 2.6 11.4
Operating margin (1)
5.5 % 1.8 % 7.6 %
Chihuahua:
Revenues:
Aeronautical services
98.0 100.0 96.2
Non-aeronautical services
18.7 20.4 19.9
Total revenues
116.7 120.4 116.1
Operating costs
103.0 104.8 96.2
Costs of services and Administrative expenses
75.8 76.4 66.0
Depreciation and amortization
21.2 22.4 24.4
Income from operations
13.7 15.7 19.9
Operating margin (1)
11.7 % 13.0 % 17.1 %


Zihuatanejo:
Revenues:
Aeronautical services
79.6 80.0 83.2
Non-aeronautical services
16.6 16.6 15.1
Total revenues
96.2 96.6 98.3
Operating costs
91.6 91.0 90.5
Costs of services and Administrative expenses
61.3 58.7 55.1
Depreciation and amortization
25.3 27.4 30.5
Income from operations
4.6 5.6 7.8
Operating margin (1)
4.7 % 5.8 % 7.9 %
Other : (2)
Revenues:
Aeronautical services
340.3 347.2 311.2
Non-aeronautical services
70.8 68.4 66.1
Total revenues
411.1 415.6 377.3
Operating costs
388.8 391.0 344.9
Costs of services and Administrative expenses
269.7 252.2 189.5
Depreciation and amortization
98.4 117.9 136.3
Income from operations
22.3 24.6 32.2
Operating margin (1)
5.4 % 5.9 % 8.5 %
Total : (3)
Revenues:
Aeronautical services
1,549.8 1,617.1 1,527.0
Non-aeronautical services
359.1 377.0 359.2
Total revenues
1,908.9 1994.1 1,886.2
Operating costs
1,798.3 1,871.0 1,708.4
Costs of services and Administrative expenses
1,375.4 1,406.8 1,213.0
Depreciation and amortization
324.6 362.4 400.6
Income from operations
110.6 123.0 177.6
Operating margin (1)
5.7 % 5.1 % 9.4 %
_______________
(1)
We determine operating margin per airport by dividing income from operations at each airport or group of airports by total revenues for that airport or group of airports.
(2)
Reflects the results of operations of our airports located in Ciudad Juárez, Durango, Reynosa, San Luis Potosí, Tampico, Torreón and Zacatecas.
(3)
Includes intercompany transactions between our subsidiaries and us and among our subsidiaries. In 2006 we implemented a new method for allocating revenues among our airports, treated as one single integrated economic entity. This new method consists of intercompany charges and credits for corporate expense that were designed to help less profitable airports in meeting their financial obligations.  The implementation of this method affects the operating income results reported by the individual airports but does not affect our consolidated results.

Historically, our most profitable airport has been our Monterrey International Airport, which handles the majority of our international passengers.  We determine profitability per airport by dividing income from operations in each airport by total revenues for that airport.

Summary Historical Results of Operations
The following table sets forth a summary of our consolidated results of operations for the years indicated.
Summary Consolidated Operating Results
Year ended December 31,
2007
2008
2009
Amount
% change
Amount
% change
Amount
% change
(thousands of pesos, except percentages)
Revenues:
Aeronautical services
1,549,827 13.0 % 1,617,195 4.3 % 1,526,965 (5.6 )%
Non-aeronautical services
347,526 9.9 % 371,281 6.8 % 369,312 (0.5 )%
Total revenues
1,897,353 12.4 % 1,988,476 4.8 % 1,896,277 (4.6 )%
Operating costs:
Cost of services
420,777 5.9 % 460,074 9.3 % 457,767 (0.5 )%
Administrative expenses
256,730 8.1 % 317,069 23.5 % 320,770 1.2 %
Technical assistance fees
57,416 15.9 % 55,604 (3.2 )% 51,710 (7.0 )%
Concession taxes
98,307 16.2 % 101,642 3.4 % 94,756 (6.8 )%
Depreciation and amortization
336,202 15.1 % 366,719 9.1 % 411,890 12.3 %
Total operating costs
1,169,432 10.2 % 1,301,108 11.3 % 1,336,893 2.7 %
Income from operations
727,921 16.3 % 687,368 (5.6 )% 559,384 (18.6 )%
Other income (expense)
(7,584 ) (75.3 )% 104,792 N/A 10,051 (90.4 )%
Net comprehensive financing income:
Interest income, net
126,660 (5.1 )% 63,167 (50.1 )% (26,195 ) N/A
Exchange gain (loss), net
11,905 (4.3 )% (74,618 ) N/A 4,069 N/A
Monetary position loss
(42,347 ) (44 )% - N/A - N/A
Net comprehensive financing income
96,218 36.8 % (11,451 ) N/A (22,126 ) (93.2 )%
Income before income taxes
816,555 22.7 % 780,709 (4.4 )% 547,309 (29.9 )%
Income taxes
785,363 299.7 % 238,906 (69.6 )% 77,785 (67.4 )%
Consolidated net income
31,192 (93.4 )% 541,803 1,636.9 % 469,524 (13.3 )%
Other operating data (unaudited) :
Operating margin (1)
38.4 % 34.6 29.5
Net margin (2)
1.6 % 27.2 24.8
_______________
(1)
Income from operations divided by total revenue, expressed as a percentage.
(2)
Net income divided by total revenues, expressed as a percentage.


Results of operations for the year ended December 31, 2009 compared to the year ended December 31, 2008.
Revenues
Total revenues for 2009 were Ps. 1,896.3 million, 4.6% lower than the Ps. 1,988.5 million recorded in 2008, as a result of decreases in both aeronautical and non-aeronautical revenue.
Aeronautical revenue decreased 5.6% to Ps. 1,527.0 million in 2009, as compared to Ps. 1,617.2 million in 2008, due primarily to a decrease in revenues from passenger charges from Ps. 1,234.0 in 2008 to Ps. 1,189.8 in 2009. This decrease in passenger charges was attributable to a decline in passenger traffic during the year.  Aeronautical revenue per workload unit in 2009 was Ps. 124.75 compared to Ps. 115.12 in 2008, an increase of 8.4%.
Non-aeronautical revenue decreased 0.5% from Ps. 371.3 million in 2008 to Ps. 369.3 million in 2009, principally due to decreases in revenues from car parking, which decreased 7.3% and was substantially offset by increases in other categories.  Non-aeronautical revenue per terminal passenger increased by 21.6%, from Ps. 26.4 in 2008 to Ps. 32.1 in 2009, primarily due to the expansion and improvement of the commercial areas in our airports, including the opening and remodeling of retail stores in Chihuahua, Ciudad Juárez, and Acapulco, restaurants in Reynosa, Ciudad Juárez, and Durango, and the start of operations of currency exchange services in Monterrey terminal A, Acapulco, and Zihuatanejo among others.
Revenues by Airport
Aeronautical revenues decreased by 7.3% from Ps. 728.4 million in 2008 to Ps. 675.4 million in 2009 at the Monterrey airport, due to route cancelations and Aviacsa´s exit in July 2009.  Non-aeronautical revenues decreased at the Monterrey airport by 6.4% from Ps. 195.8 in 2008 to Ps. 183.2 million in 2009, due primarily to a decrease in food and beverage operations of 20.6%, and a decrease in passenger traffic.  Revenues decreased by 7.1% from Ps. 924.2 million in 2008 to Ps. 858.6 million in 2009 at the Monterrey airport, due to a decrease in passenger traffic of 21%.  Revenues per workload unit at the Monterrey airport increased by 17.3% from Ps. 132.1 in 2008 to Ps. 154.9 in 2009, primarily due to an increase in revenues from passenger charges and a decrease in workload units.
Aeronautical revenues decreased by 10.5% from Ps. 133.9 million in 2008 to Ps. 119.9 million in 2009 at the Acapulco airport, due to flights and route cancellations by domestic airlines.  Non-aeronautical revenues decreased at the Acapulco airport by 9.7% from Ps. 23.7 million in 2008 to Ps. 21.4 million in 2009, due to primarily to a decrease in duty free sales of 35.4%, and a decrease in passenger traffic.  Revenues decreased by 10.3% from Ps. 157.6 million in 2008 to Ps. 141.3 million in 2009 at the Acapulco airport, due to a decrease in passenger traffic of 23%.  Revenues per workload unit at the Acapulco airport increased by 16.2% from Ps. 143.8 in 2008 to Ps. 167.1 in 2009, primarily due to an increase in revenues from passenger charges and a decrease in workload units.
Aeronautical revenues increased by 4.4% from Ps. 106.6 million in 2008 to Ps. 111.3 million in 2009 at the Mazatlán airport, due to an increase in revenues from international passenger charges. Non-aeronautical revenues increased at the Mazatlán airport by 1.8% from Ps. 32.6 million in 2008 to Ps. 33.2 million in 2009, due primarily to an increase in revenues from car parking of 17.1%.  Revenues increased by 3.8% from Ps. 139.2 million in 2008 to Ps. 144.5 million in 2009 at the Mazatlán airport, due to an increase in aeronautical and non aeronautical revenues.  Revenues per workload unit at the Mazatlán airport increased by 17.1% from Ps. 162.7 in 2008 to Ps. 190.6 in 2009, primarily due to an increase in revenues from passenger charges and a decrease in workload units.
Aeronautical revenues increased by 7.3% from Ps. 121.0 million in 2008 to Ps. 129.8 million in 2009 at the Culiacán airport, due to an increase in revenues from domestic passenger charges.  Non-aeronautical revenues increased at the Culiacán airport by 4.1% from Ps. 19.5 million in 2008 to Ps. 20.3 million in 2009, due primarily to an increase in advertising of 43.0%.  Revenues increased by 6.8% from Ps. 140.5 million in 2008 to Ps. 150.1 million in 2009 at the Culiacán airport, due to an increase in aeronautical and non aeronautical revenues.  Revenues per workload unit at the Culiacán airport increased by 10.5% from Ps. 123.4 in 2008 to Ps. 136.4 in 2009, primarily due to an increase in revenues from passenger charges and a decrease in workload units.

Aeronautical revenues decreased by 3.8% from Ps. 100.0 million in 2008 to Ps. 96.2 million in 2009 at the Chihuahua airport, due to a reduction in domestic airlines flights. Non-aeronautical revenues decreased at the Chihuahua airport by 2.5% from Ps. 20.4 million in 2008 to Ps. 19.9 million in 2009, due primarily to a decrease in airfreight services of 29.7%.  Revenues decreased by 3.8% from Ps. 120.4 million in 2008 to Ps. 116.1 million in 2009 at the Chihuahua airport, due to a decrease in passenger traffic of 11%.  Revenues per workload unit at the Chihuahua airport increased by 9.1% from Ps. 136.1 in 2008 to Ps. 148.5 in 2009, primarily due to an increase in revenues from passenger charges and a decrease in workload units.
Aeronautical revenues increased by 4.0% from Ps. 80.0 million in 2008 to Ps. 83.2 million in 2009 at the Zihuatanejo airport, due to an increase in revenues from passenger charges.  Non-aeronautical revenues decreased at the Zihuatanejo airport by 9.0% from Ps. 16.6 million in 2008 to Ps. 15.1 million in 2009, due primarily to a decrease in duty free sales of 19.1%.  Revenues increased by 1.8% from Ps. 96.6 million in 2008 to Ps. 98.3 million in 2009 at the Zihuatanejo airport, due to an increase in aeronautical revenues.  Revenues per workload unit at the Zihuatanejo airport increased by 20.2% from Ps. 149.0 in 2008 to Ps. 179.1 in 2009, primarily due to an increase in revenues from passenger charges and a decrease in workload units.
Aeronautical revenues at our other 7 airports decreased by 10.4% from Ps. 347.2 million in 2008 to Ps. 311.2 million in 2009, due to reductions and cancellations of domestic and international airline flights.  Non-aeronautical revenues decreased by 3.4% from Ps. 68.4 million in 2008 to Ps. 66.1 million in 2009, due principally to a decrease in revenues from car parking of 9.5%.  Revenues decreased by 9.2% from Ps. 415.6 million in 2008 to Ps. 377.3 million in 2009 at our other 7 airports, due to a decrease in aeronautical and non aeronautical revenues.  Revenues per workload unit at our other 7 airports increased by 10.1% from Ps. 128.6 in 2008 to Ps. 141.6 in 2009, primarily due to an increase in revenues from passenger charges and a decreased in workload units.
Operating Results
Cost of Services
Cost of services decreased 0.5%, in 2009 as compared to 2008, mainly as a result of decreases in various categories of expenses, payroll expenses (from Ps. 156.2 million to Ps. 146.0 million) and utilities (from Ps. 112.8 million to Ps. 99.2 million).  As a percentage of total revenues, cost of services increased from 23.1% of revenues in 2008 to 24.1% of revenues in 2009, mainly reflecting the increase in costs (maintenance, safety, security and insurance) and decrease in revenues.
Administrative Expenses
Our administrative expenses consist primarily of administrative overhead costs, fees and expenses paid to consultants and other providers of professional services and other miscellaneous expenses.  Administrative expenses increased from Ps. 317.1 million in 2008 to Ps. 320.8 million in 2009, mainly due to an increase in studies for the master devolpment plan for the next five year period as well as increased personnel expense as a result of the corporate reorganization that transferred most personnel to services subsidiaries, which is expected to improve operational efficiency.
Technical Assistance Fee and Concession Tax
Our technical assistance fee decreased 7.0% to Ps. 51.7 million in 2009, as compared to Ps. 55.6 million in 2008, reflecting a decrease in our profitability in 2009.  Our concession tax decreased 6.8% from Ps. 101.6 million in 2008 to Ps. 94.8 million in 2009, reflecting our decrease in revenues in 2009.

Depreciation and Amortization
Our 12.3% increase in depreciation and amortization, from Ps. 366.7 million in 2008 to Ps.411.9 million in 2009, was principally due to the increase in improvements to our concession properties during 2009.
Income from Operations
On a consolidated basis, operating income decreased 18.6% to Ps. 559.4 million in 2009, as compared to Ps. 687.4 million during 2008.  This decrease primarily reflected the 4.6% decrease in our total revenues in 2009.  Our operating margin decreased from 34.6% in 2008 to 29.5% in 2009.
Operating Income by Airport
On an airport-by-airport basis, the principal contributors to operating income in 2009 were the Monterrey International Airport (Ps. 73.4 million), the Chihuahua International Airport (Ps. 19.9 million), the Mazatlán International Airport (Ps. 20.2 million) and the Acapulco International Airport (Ps. 12.7 million).
Operating income for the Monterrey airport increased by 29.9% to Ps. 73.4 million in 2009 from Ps. 56.5 million in 2008, due to a decrease in costs of services and administrative expenses.  Operating income per workload unit at the Monterrey airport increased 64%.
Operating income for the Acapulco airport increased by 30.9% to Ps. 12.7 million in 2009 from Ps. 9.7 million in 2008, due to a decrease in costs of services and administrative expenses.  Operating income per workload unit at the Acapulco airport increased 69.7%.
Operating income for the Mazatlán airport increased by 137.6% to Ps. 20.3 million in 2009 from Ps. 8.5 million in 2008, due to an increase in revenues and a decrease in costs of services and administrative expenses.  Operating income per workload unit at the Mazatlán airport increased 168.2%.
Operating income for the Culiacán airport increased by 338.5% to Ps. 11.4 million in 2009 from Ps. 2.6 million in 2008, due to an increase in revenues and a decrease in costs of services and administrative expenses.  Operating income per workload unit at the Culiacán airport increased 538.4%.
Operating income for the Chihuahua airport increased by 26.7% to Ps. 19.9 million in 2009 from Ps. 15.7 million in 2008, due to a decrease in costs of services and administrative expenses.  Operating income per workload unit at the Chihuahua airport increased 71.1%.
Operating income for the Zihuatanejo airport increased by 39.3% to Ps. 7.8 million in 2009 from Ps. 5.6 million in 2008, due to an increase in revenues and a decrease in costs of services and administrative expenses.  Operating income per workload unit at the Zihuatanejo airport increased 64.5%.
Operating income for our 7 other airports increased by 30.9% to Ps. 32.2 million in 2009 from Ps. 24.6 million in 2008, due to a decrease in costs of services and administrative expenses.  Operating income per workload unit at the other 7 airports increased 36.1%.
Comprehensive Financing Result
Our net comprehensive financing result in 2009 resulted in a loss of Ps. 22.1 million, as compared to a loss of Ps. 11.4 million in 2008.  This change resulted primarily from an increase in interest expenses of Ps. 26.2 million in 2009.

Income Taxes
For 2009, income tax expense was Ps. 77.8 million, a decrease of 67.4% as compared to Ps. 238.9 million in 2008.  The decrease in income taxes was principally the net result of a decrease in current income tax expense of Ps. 92.0 million as a result of a decrease in pre-tax income, an increase of Ps. 17.5 million in deferred regular income tax, an increase in current IETU expense of Ps. 13.8 million, and a decrease of Ps. 100.4 million related to the deferred tax effects of the new IETU Law enacted in 2007.  We created a valuation allowance for the entire amount of tax loss carry forwards and recoverable asset taxes that can be offset against ISR taxable income in the calculation of the 2008 deferred taxes.  We continued to record a deferred IETU liability in 2008 and 2009, which did not affect our cash flows.  In the future some of our subsidiaries will only have to pay ISR, while others only IETU.  We recognize deferred taxes based on the tax that we expect to pay in the future.
Our effective tax rate in 2008 and 2009 was 30.6% and 14.2% respectively.
Net Income
Net income in 2009 was Ps. 469.5 million, a decrease of 13.3% as compared to the prior year period. Earnings per share were Ps.1.1889, and earnings per ADS were U.S. 0.7280. Each ADS represents eight Series B shares.
Results of operations for the year ended December 31, 2008 compared to the year ended December 31, 2007.
Revenues
Total revenues for 2008 were Ps. 1,988.5 million, 4.8% higher than the Ps. 1,897.4 million recorded in 2007, as a result of increases in both aeronautical and non-aeronautical revenue.
Aeronautical revenue increased 4.3% to Ps. 1,617.2 million in 2008, as compared to Ps. 1,549.8 million in 2007, due primarily to an increase in revenues from passenger charges from Ps. 1,162.0 in 2007 to Ps.1,234.0 in 2008. This increase in passenger charges was attributable to a better performance during the first half of the year.  Aeronautical revenue per workload unit in 2008 was Ps. 115.12 compared to Ps. 103.1 in 2007, an increase of 12%.
Non-aeronautical revenue increased 6.8% from Ps. 347.5 million in 2007 to Ps. 371.3 million in 2008, principally due to increases in revenues from car parking, which increased 6.8%, food and beverage operations, which increased 10.8%, as well as increases in other categories of non-aeronautical revenues.  Non-aeronautical revenue per terminal passenger increased by 7.8%, from Ps. 24.5 in 2007 to Ps. 26.4 in 2008 primarily due to the expansion and improvement of the commercial areas in our airports, including opening of a duty free store in the international arrivals area of Terminal A at the Monterrey airport, the remodeling two stores and a restaurant in Acapulco, the start of operations of baggage wrapping services in Durango, San Luis Potosí, Tampico and Torreón, and the start of operations of areas for tourist promotion and time shares in Monterrey, Ciudad Juárez, and Torreón.
Revenues by Airport
Aeronautical revenues increased by 9.1% from Ps. 667.9 million in 2007 to Ps. 728.4 million in 2008 at the Monterrey airport, due to an increase in revenues from passenger charges.  Non-aeronautical revenues increased at the Monterrey airport by 8.8% from Ps. 179.9 million in 2007 to Ps. 195.8 million in 2008, due primarily to an increase in revenues from car parking of 6.7%.  Revenues increased by 9.0% from Ps. 847.8 million in 2007 to Ps. 924.2 million in 2008 at the Monterrey airport, due to an increase in revenues from passenger charges.  Revenues per workload unit at the Monterrey airport increased by 8.7% from Ps. 121.6 in 2007 to Ps. 132.1 in 2008, due to an increase in revenues from passenger charges.

Aeronautical revenues increased by 6.4% from Ps. 125.9 million in 2007 to Ps. 133.9 million in 2008 at the Acapulco airport, due to an increase in revenues from passenger charges.  Non-aeronautical revenues increased at the Acapulco airport by 5.3% from Ps. 22.5 million in 2007 to Ps. 23.7 million in 2008, due primarily to an increase in revenues from car parking of 18.3%.  Revenues increased by 6.2% from Ps. 148.4 million in 2007 to Ps. 157.6 million in 2008 at the Acapulco airport, due to an increase in revenues from passenger charges.  Revenues per workload unit at the Acapulco airport increased by 3.5% from Ps. 138.9 in 2007 to Ps. 143.8 in 2008, due to an increase in revenues from passenger charges.
Aeronautical revenues decreased by 4.0% from Ps. 111.0 million in 2007 to Ps. 106.6 million in 2008 at the Mazatlán airport, due to a decrease in passenger traffic of 8%.  Non-aeronautical revenues increased at the Mazatlán airport by 0.3% from Ps. 32.5 million in 2007 to Ps. 32.6 million in 2008, due primarily to an increase in time shares of 2.0%.  Revenues decreased by 3.0% from Ps. 143.5 million in 2007 to Ps. 139.2 million in 2008 at the Mazatlán airport, due to a decrease in passenger traffic of 8%.  Revenues per workload unit at the Mazatlán airport increased by 5.5% from Ps. 154.2 in 2007 to Ps. 162.7 in 2008, due to an increase in revenues from passenger charges.
Aeronautical revenues decreased by 4.8% from Ps. 127.1 million in 2007 to Ps. 121.0 million in 2008 at the Culiacán airport, due to a decrease in passenger traffic of 3%.  Non-aeronautical revenues increased at the Culiacán airport by 7.7% from Ps. 18.1 million in 2007 to Ps. 19.5 million in 2008, due primarily to an increase in revenues from car parking of 11.8%.  Revenues decreased by 3.2% from Ps. 145.2 million in 2007 to Ps. 140.5 million in 2008 at the Culiacán airport, due to a decrease in passenger traffic of 3%.  Revenues per workload unit at the Culiacán airport increased by 0.4% from Ps. 122.9 in 2007 to Ps. 123.4 in 2008, due to an increase in revenues from passenger charges.
Aeronautical revenues increased by 2.0% from Ps. 98.0 million in 2007 to Ps. 100.0 million in 2008 at the Chihuahua airport, due to an increase in revenues from passenger charges.  Non-aeronautical revenues increased at the Chihuahua airport by 9.1% from Ps. 18.7 million in 2007 to Ps. 20.4 million in 2008, due primarily to an increase in revenues from car parking of 16.7%.  Revenues increased by 3.2% from Ps. 116.7 million in 2007 to Ps. 120.4 million in 2008 at the Chihuahua airport, due to an increase in revenues from passenger charges.  Revenues per workload unit at the Chihuahua airport increased by 7.3% from Ps. 126.9 in 2007 to Ps. 136.1 in 2008, due to an increase in revenues from passenger charges.
Aeronautical revenues increased by 0.5% from Ps. 79.6 million in 2007 to Ps. 80.0 million in 2008 at the Zihuatanejo airport, due to an increase in revenues from passenger charges.  Non-aeronautical revenues at the Zihuatanejo airport were Ps. 16.6 million in 2007 and 2008, due primarily to a decrease in duty free operations of 5.9%.  Revenues increased by 0.4% from Ps. 96.2 million in 2007 to Ps. 96.6 million in 2008 at the Zihuatanejo airport, due to an increase in revenues from passenger charges.  Revenues per workload unit at the Zihuatanejo airport increased by 5.2% from Ps. 141.6 in 2007 to Ps. 149.0 in 2008, due to an increase in revenues from passenger charges.
Aeronautical revenues at our other 7 airports increased by 2.0% from Ps. 340.3 million in 2007 to Ps. 347.2 million in 2008, due to an increase in revenues from passenger charges.  Non-aeronautical revenues decreased by 3.4% from Ps. 70.8 million in 2007 to Ps. 68.4 million in 2008, due primarily to a decrease in time shares and other revenues of 18.1%.  Revenues increased by 1.1% from Ps. 411.1 million in 2007 to Ps. 415.6 million in 2008 at our other 7 airports, due to an increase in revenues from passenger charges.  Revenues per workload unit at our other 7 airports increased by 2.6% from Ps. 125.4 in 2007 to Ps. 128.6 in 2008 due to an increase in revenues from passenger charges.
Operating Results
Cost of Services
Cost of services increased 9.3%, in 2008 as compared to 2007, mainly as a result of increases in various categories of expenses, including security expenses (from Ps. 74.9 million to Ps. 81.0 million), payroll expenses (from Ps. 143.1 million to Ps. 156.2 million) and other expenses (from Ps. 54.5 million to Ps. 54.8 million).  As a percentage of total revenues, cost of services increased from 22.2% of revenues in 2007 to 24.3% of revenues in 2008, mainly reflecting the increase in costs (mainly corporate reorganization costs, electricity and inflationary pressure) and decrease in revenues.

Administrative Expenses
Our administrative expenses consist primarily of administrative overhead costs, fees and expenses paid to consultants and other providers of professional services and other miscellaneous expenses.  Administrative expenses increased from Ps. 256.7 million in 2007 to Ps. 317.1 million in 2008, mainly due to an increase in the provisions for doubtful accounts in the fourth quarter of 2008 of Ps. 27.6 million, resulting principally from Alma’s exit from the market as well as increased personnel expense as a result of the corporate reorganization that transferred most personnel to services subsidiaries, which is expected to improve operational efficiency.
Technical Assistance Fee and Concession Tax
Our technical assistance fee decreased 3.1% to Ps. 55.6 million in 2008, as compared to Ps. 57.4 million in 2007, reflecting a decrease in our profitability in 2008.  Our concession tax increased 3.4% from Ps. 98.3 million in 2007 to Ps. 101.6 million in 2008, reflecting our increase in revenues in 2008.
Depreciation and Amortization
Our 9.1% increase in depreciation and amortization, from Ps. 336.2 million in 2007 to Ps. 366.7 million in 2008, was principally due to the increase in improvements to our concession properties during 2008.
Income from Operations
On a consolidated basis, operating income decreased 5.6% to Ps. 687.4 million in 2008, as compared to Ps. 727.9 million during 2007.  This decrease primarily reflected the 11.3% increase in our total operating cost in 2008.  Our operating margin decreased from 38.4% in 2007 to 34.6% in 2008.
Operating Income by Airport
On an airport-by-airport basis, the principal contributors to operating income in 2008 were the Monterrey International Airport (Ps. 56.5 million), the Chihuahua International Airport (Ps. 15.7 million), the Zihuatanejo International Airport (Ps. 5.6 million) and the Culiacán International Airport (Ps. 2.6 million).
Operating income for the Monterrey airport increased by 31.7% to Ps. 56.5 million in 2008 from Ps. 42.9 million in 2007, due to an increase in revenues.  Operating income per workload unit at the Monterrey airport increased 31.3%.
Operating income for the Acapulco airport increased by 54.0% to Ps. 9.7 million in 2008 from Ps. 6.3 million in 2007, due to an increase in revenues.  Operating income per workload unit at the Acapulco airport increased 50.1%.
Operating income for the Mazatlán airport decreased by 33.6% to Ps. 8.5 million in 2008 from Ps. 12.8 million in 2007, due to a decrease in revenues.  Operating income per workload unit at the Mazatlán airport decreased 27.8%.
Operating income for the Culiacán airport decreased by 67.5% to Ps. 2.6 million in 2008 from Ps. 8.0 million in 2007, due to a decrease in revenues.  Operating income per workload unit at the Culiacán airport decreased 66.3%.
Operating income for the Chihuahua airport increased by 14.6% to Ps. 15.7 million in 2008 from Ps. 13.7 million in 2007, due to an increase in revenues.  Operating income per workload unit at the Chihuahua airport increased 19.1%.

Operating income for the Zihuatanejo airport increased by 21.7% to Ps. 5.6 million in 2008 from Ps. 4.6 million in 2007, due to an increase in revenues and a decrease in operating costs.  Operating income per workload unit at the Zihuatanejo airport increased 27.5%.
Operating income for our 7 other airports increased by 10.3% to Ps. 24.6 million in 2008 from Ps. 22.3 million in 2007, due to an increase in revenues.  Operating income per workload unit at the other 7 airports increased 11.9%.
Comprehensive Financing Result
Our net comprehensive financing result in 2008 resulted in a loss of Ps. 11.5 million, as compared to income of Ps. 96.2 million in 2007.  This change resulted primarily from foreign exchange loss of Ps. 74.6 million in 2008, as well as from a decrease in interest income from Ps. 126.7 million in 2007 to Ps. 63.2 million in 2008.
Income Taxes
For 2008, income tax expense was Ps. 238.9 million, a decrease of 69.6% as compared to Ps. 785.3 million in 2007.  The decrease in income taxes was principally the net result of a decrease in current income tax expense of Ps. 6.7 million as a result of a decrease in pre-tax income, a decrease of Ps. 562.1 million in deferred regular income tax and a decrease of Ps. 987.3 million related to the deferred tax effects of the new IETU Law enacted in 2007.  We created a valuation allowance for the entire amount of tax loss carry forwards and recoverable asset taxes that can be offset against ISR taxable income in the calculation of the 2008 deferred taxes.  The Company continued to record a deferred IETU liability in 2008, which did not affect the Company’s cash flows.
Our effective tax rate in 2007 and 2008 was 96.2% and 30.6% respectively.  The substantial increase in our effective tax rate in 2007 was principally due to the deferred tax effects from the adoption of the IETU Law.
Net Income
Net income in 2008 was Ps. 541.8 million, an increase of 1,637.0 % as compared to the prior year period. Earnings per share were Ps. 1.4, and earnings per ADS were U.S. 0.79 Each ADS represents eight Series B shares.
Liquidity and Capital Resources
Historically, our operations have been funded through cash flows from operations, and we have not incurred any significant indebtedness.  In the last two years, we have also used debt to fund our operations.  In the future, we plan to use additional long-term debt as part of our strategy to finance capital expenditures and to improve our net working capital.  As of December 31, 2008 and December 31, 2009, we had Ps. 257.4 million and Ps. 267.7 million, respectively, of cash and cash equivalents.
In 2009, we generated Ps. 448.8 million in cash flows from operating activities, as compared to Ps. 735.5 million in 2008, was principally due to decreases in accounts payable.  Our cash flows used in investing activities during 2009 were Ps. 158.6 million for purchases of capital assets as summarized below in the table “Historical Capital Expenditures by Type.”  Our cash flows used in financing activities were Ps. 597.1 million for payments of dividends and share repurchases.  Also, as part of the strategic investments, we acquired land reserves for the development and expansion of the Monterrey and Culiacán airports.
In 2008, we generated Ps. 735.4 million in cash flows from operating activities, as compared to Ps. 1,070.6 million in 2007, principally due to increases in certain of our working capital accounts such as trade accounts receivable, recoverable taxes and other current assets, which decreased our cash balances in 2008 compared to 2007.  Our cash flows used in investing activities during 2008 were Ps. 352.1 million for purchases of capital assets as summarized below in the table “Historical Capital Expenditures by Type.” Our cash flows used in financing activities were Ps. 1,882.6 million for payments of dividends and share repurchases. Also, as part of the strategic investments, the Company acquired land reserves for the development and expansion of the Monterrey and Culiacán airports.

In 2007, we generated Ps. 1,070.6 million in resources from operating activities, as compared to Ps.729.1 million in 2006, principally due to decreases in certain of our working capital accounts such as trade accounts receivable, recoverable taxes and other current assets, which increased our cash balances in 2007 compared to 2006.  Our resources used in financing activities during 2007 were Ps. 328.9 million for payments of dividends and share repurchases.  Our resources used in investing activities were Ps. 658.0 million for purchases of capital assets as summarized below in the table “Historical Capital Expenditures by Type.”
In December 2005, our parent company Aeroinvest entered into certain credit facilities to finance Aeroinvest’s acquisition from the Mexican government of the Series B shares currently representing 35.3% of our capital stock and to finance an additional loan to SETA for SETA’s exercise of the option to acquire 2% of our Series B shares.  These credit facilities were amended and restated to, among other things, increase the amount of the facility and the amount borrowed thereunder in October 2006 and again in April 2007.  Aeroinvest subsequently purchased additional Series B Shares representing 6.7% of our capital stock from 2006, year of our initial public offering, to 2009.  Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  The refinancing consists of the issuance of the following series of notes by a Mexican trust, payable in U.S. dollars:  (i) Ps. 2,125,000,000 aggregate principal amount of Series 2007-1 Class A Notes due 2017, (ii) Ps. 325,000,000 aggregate principal amount of Series 2007-1 Class B Notes due 2017, and (iii) Ps. 355,000,000 aggregate principal amount of Series 2007-1 Class C Notes due 2017.  The refinancing was approved at the extraordinary shareholders meeting held January 31, 2007.
Aeronivest’s revenue is derived principally from dividend distributions in respect of its ownership of our capital stock and the capital stock of SETA.  Consequently, Aeroinvest’s ability to service its debt is greatly dependant on our dividend distributions.  As such, under the restructuring documents, Aeroinvest is required to cause us to distribute all of our available cash, subject to certain limitations, as quarterly dividends in accordance with our dividend policy, and is required to restrict us from making certain changes to the divided policy.  If we do not distribute a minimum required amount of dividends on each dividend payment date, Aeroinvest will be in default under the refinancing documents.  For additional information regarding our dividend policy, please see “Item 8.  Financial Information - Dividends”.
In addition, in connection with the Merrill Lynch refinancing, Aeroinvest has assigned its economic interests (including its right to receive dividends) with respect to its Series B shares currently representing 42.0% of our capital stock as well as 74.5% of the Series A shares of SETA.  If additional notes are issued to Aeroinvest pursuant to the restructuring documents, Aeroinvest may be required to pledge these Series B shares, as well as any other additional Series B shares purchased by Aeroinvest prior to such issuance, as collateral security for such additional notes.
Under the refinancing agreements, Aeroinvest is required to maintain at least its present ownership interest in us and SETA, majority control over us and our subsidiaries and a minimum interest expense to EBITDA ratio.  The terms of the refinancing agreements require that Aeroinvest cause us to comply with numerous covenants, which include certain restrictions on our ability to create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change our business or make investments or capital expenditures outside of the master development plans.  As a result, Aeroinvest would be required to obtain a waiver or amendment under the restructuring documents to permit us to undertake certain of these restricted actions, including the incurrence of any material amount of indebtedness, and there can be no assurances that such waivers or amendments would be obtained.  If Aeroinvest defaults on its obligations under the refinancing documents, we would be further restricted in our ability create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change our business or make investments or capital expenditures outside of the master development plans, Aeroinvest could lose its ability to vote its shares of our capital stock as well as its shares of SETA, and the trustee could in certain circumstances foreclose on the Series B shares and is SETA shares held in trust.Under the terms of our concessions, each of our subsidiary concession holders is required to present a master development program for approval by the Ministry of Communications and Transportation every five years, which includes investment commitments (including capital expenditures and improvements) applicable to us as concession holder for the succeeding five-year period.  For more information on our master development programs and historical and projected committed investments and capital expenditures, please see “Item 4. History and Development of the Company – Master Development Programs”.

Share Repurchase Program
On April 27, 2007, our shareholders approved the establishment of a share repurchase reserve in the amount of Ps. 400,000,000.  On April 3, 2008, our shareholders approved up to Ps. 400,000,000 for share repurchases and at our shareholder meeting held on April 24, 2009, our shareholders approved a reserve of Ps. 400,000,000 for share repurchases. Share repurchases began in October of 2007.  As of May 28, 2010, we had used Ps. 67.9 million to repurchase a total of 818,000 Series B shares in accordance with the share repurchase program.  On April 16, 2010, our shareholders authorized the use of an amount of up to Ps. 400,000,000 for repurchases of Series B shares during 2010.

Critical Accounting Policies
We prepare consolidated financial statements in conformity with MFRS.  As such, we are required to make estimates, judgments and assumptions that affect (i) certain reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the date of the financial statements, and (iii) certain reported amounts of revenues and expenses during the reporting period.  We base estimates and judgments on our historical experience and on various other reasonable factors that together form the basis for making judgments about the carrying values of our assets and liabilities.  Our actual results may differ from these estimates under different assumptions or conditions.  We evaluate our estimates and judgments on an ongoing basis.  Our significant accounting policies are described in Note 3 to our consolidated financial statements.  We believe our most critical accounting policies that result in the application of estimates and/or judgments are the following:
Income Taxes
In conformity with Bulletin D-4, Accounting for Income Tax, Asset Tax and Employee Statutory Profit Sharing , of MFRS, a provision or benefit for income tax is recorded in the results of the year in which such tax expense or benefit is incurred.  Deferred income tax assets and liabilities are recognized for temporary differences derived from comparing the accounting and tax values of assets and liabilities, plus any future benefits resulting from tax loss carry-forwards or any other tax credit.  The resulting deferred tax provision or benefit is reflected in our consolidated statements of income.  A deferred tax liability is recorded when there is a charge to results, and a deferred tax asset is recorded in the event of a credit to results.
Asset tax paid may be recognized as an asset tax credit, reducing the deferred income tax liability, if it is probable that we will generate sufficient taxable income to compensate or to recover the tax.
Deferred employee statutory profit sharing resulting from the temporary differences between the accounting results and the taxable income from operations are recognized as a deferred employees’ statutory profit sharing asset or liability.  The asset is recorded when there is a high probability that the asset will be realized and there is no evidence that such situation will change.  On the balance sheet, the deferred employee statutory profit sharing is shown net of the deferred income tax.
The calculation and recognition of deferred taxes and the related valuation allowance for deferred taxes and asset taxes requires the use of estimates, which may be affected by the amount of our future taxable income, the assumptions relied on by our management and our results of operations.

We periodically evaluate the fairness of deferred tax assets or liabilities based on historical tax results and estimated tax profits, among others.  A valuation allowance is recorded for any deferred tax assets that, in the opinion of our management, are not likely to be realized.  Any change in our estimates may have an effect on our financial condition and results of operations.
On October 1, 2007, the Business Flat Tax Law (IETU) was enacted, and it went into effect on January 1, 2008.  IETU applies to the sale of goods, the provision of independent services and the granting of use or enjoyment of goods, according to the terms of the IETU, less certain authorized deductions.  IETU payable is calculated by subtracting certain tax credits from the tax determined.  Revenues, as well as deductions and certain tax credits, are determined based on cash flows generated beginning January 1, 2008.  IETU establishes that the IETU rate will be 16.5% in 2008, 17% in 2009, and 17.5% as of 2010.  Therefore, as of December 31, 2007, we recorded a deferred IETU liability of Ps.1,073,859, and cancelled the deferred corporate income tax (“ISR”) liability of Ps.597,506, recognizing the effect net in the statement of income of Ps.476,353.  We continued to record a deferred IETU liability in 2008.   In the future some of our subsidiaries will only have to pay ISR, while others only IETU.  We recognize deferred taxes based on the tax that we expect to pay in the future.
Impairment in the Value of Long-Lived Assets
We must test for impairment in the value of long-lived assets when indicators of potential impairment in the carrying amount of tangible and intangible long-lived assets in use exist, unless there is conclusive evidence that the indicators of impairment are temporary.  Impairment indicators considered for these purposes are, among others, operating losses or negative cash flows in the period if they are combined with a history of projections of losses, depreciation and amortization charged to the results, which in percentage terms in relation to revenues are substantially higher than that of previous years, obsolescence, reduction of the installed capacity, physical damages and other legal and economic factors.
An impairment is recorded when the carrying amount of long-lived assets exceeds the greater of the present value of future net cash flows provided by the assets or the net sales price upon disposal.
Present value of future net cash flows is based on management’s projections of future cash flows generated by the asset, discounted using current interest rates.
Our management believes that we, together with our 13 airport subsidiaries, must be considered as an independent cash-generating unit, as all were part of the Central-North package included in the Mexican government’s bidding process.  Under the privatization process, each airport concessionaire must operate its airport, regardless of its individual results.  Our evaluations throughout the year and up to the date of this filing did not reveal any impairment of tangible and intangible long-lived assets.  We can give no assurance that our evaluations will not change as a result of new information or developments, which may change our future projections of net cash flows or the related discount rates and result in future impairment charges.  The Company performed its impairment analysis for the year ended December 31, 2008 and did not record any impairment.
Principal Differences Between MFRS and U.S. GAAP
Our consolidated financial statements are prepared in accordance with MFRS, which differs in certain respects from U.S. GAAP.
The principal differences between MFRS and U.S. GAAP as they relate to us are the treatment of our investments in our concessions and the rights to use our airport facilities, the treatment of SETA’s option and portion of shares held in trust, which are forfeitable, and the effects of deferred taxes.  Each of these differences affects both consolidated net income and stockholders’ equity.  See Note 24 to our audited financial statements for a discussion of these differences and the effect on our consolidated financial position and results of operation.

Off-balance Sheet Arrangements
We are not party to any off-balance sheet arrangements.
Tabular Disclosure of Contractual Obligations
Payments due by period
Total
Less than 1
year (2)
1-3 years
3-5 years
More than
5 years
(in millions of pesos)
Contractual Obligations
Master development programs
Ps.762.3
Ps.762.3
N/A (3) N/A (3) N/A (3)
Purchase obligations (1)
234.9 39.1 78.3 78.3 39.2
Total
Ps.997.2
Ps.801.4
78.3 78.3 39.2
_______________
(1)
Reflects minimum fixed annual payment of U.S.$3 million required to be paid under our Technical Assistance Agreement, assuming an average exchange rate of Ps. 13.05 per U.S. dollar and an annual U.S. inflation rate of 3.8%.  The amount ultimately to be paid in any year will depend on our profitability.
(2)
Amount for less than one year corresponds to obligations for the remainder of 2009.
(3)
In 2010, the fifth year of our current master development program, a negotiation will take place with the Ministry of Communications and Transportation to determine the new master development program commitments for the subsequent five-year period.

New Accounting Pronouncements
MFRS
With the purpose of making Mexican standards converge with International Financial Reporting Standards (“IFRS”), in 2009, the Mexican Board for Research and Development of Financial Reporting Standards (“CINIF”) issued the following NIFs and Interpretations of Financial Reporting Standards (“INIF”):
For fiscal years that begin on January 1, 2010:
C-1, Cash and Cash equivalents
Improvements to NIFs for 2010
INIF 14, Construction Contracts, Sale of Real Property and Rendering of Related Services
INIF 17, Service Concession Contracts
Some of the most important changes established by these standards are:
NIF C-1, Cash and Cash Equivalents, requires restricted cash and cash equivalents to be included within the cash and cash equivalents caption, as opposed to Bulletin C-1, which required presentation under separate captions; NIF C-1 replaces the caption on-demand temporary investments with the caption on-demand available investments clarifying that this type of investment has a maturity of up to three months from its acquisition date.
Improvements to NIFs for 2010 – The main improvements generating accounting changes that must be recognized retroactively are:
NIF B-1, Accounting Changes and Correction of Errors –Requires further disclosures in case the Company applies a particular Standard for the first time.

NIF B-2, Statement of Cash Flows – Requires recognition of the effects of fluctuations in exchange rates used for translating cash in foreign currencies, and changes in fair value of cash in the form of precious metal coins, and other cash items, at fair value, in a specific line item.
NIF B-7, Business Acquisitions – Requires recognition of  intangible assets or provisions because the acquired business has a contract whose terms and conditions are favorable or unfavorable with respect to market, only when the acquired business is the lessee in an operating lease.  This accounting change should be recognized retroactively and not go further than January 1, 2009.
NIF C-7, Investments in Associated Companies and Other Permanent Investments – Modifies how the effects derived from increases in equity percentages in an associated company are determined.  It also establishes that the effects due to an increase or decrease in equity percentages in associated companies should be recognized under equity in income (loss) of associated companies, rather than in the non-ordinary line item within the statement of income.
NIF C-13, Related Parties – Requires that, if the direct or ultimate controlling entity of the reporting entity does not issue financial statements available for public use, the reporting entity should disclose the name of the closest, direct / indirect, controlling entity that issues financial statements available for public use.
INIF 14, Construction Contracts, Sale of Real Property and Rendering of Related Services  - is a supplement to Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets, and requires segregation of the different components of the contracts in order to define whether the contract refers to construction of real property, sale of real property, or rendering related services, and establishes the rules for recognizing revenue and related costs and expenses, based on the different elements identified in the contract.  INIF 14 provides guidance for the appropriate use of the percentage-of-completion method for revenue recognition.
INIF 17, Service Concession Contracts - is a supplement to Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets, and establishes that, when the infrastructure of the service concession contracts falls within the scope of this INIF, it should not be recognized under property, plant and equipment.  It also establishes that when the operator renders construction or improvement services, as well as operation services under the same contract, revenues should be recognized for each type of service, based on the fair value of each consideration received at the time the service is rendered.  When amounts are clearly identified and, after they are quantified, the applicable revenue recognition criterion should be followed, taking the nature of the service rendered into consideration.  Also, INIF 17 establishes that, when the operator renders construction or improvement services, both revenues and the associated costs and expenses should be recognized under the percentage-of-completion method and consideration received, or receivable, should be recognized, initially, at fair value.  Revenues from operation services should be recognized as the services are rendered and suppletorily considering IAS 18.
For fiscal years that begin on January 1, 2011:
B-5, Financial Segment Information, and
B-9, Interim Financial Information
Some of the most important changes established by these standards are:
NIF B-5, Financial Segment Information – Uses a managerial approach to disclose financial information by segments, as opposed to Bulletin B-5, which also used a managerial approach but required that the financial information be classified by economic segments, geographical areas, or homogenous client groups.  NIF B-5 does not require different risks among business areas to separate them.  It allows areas in the preoperating stage to be classified as a segment, and requires separate disclosure of interest income, interest expense and liabilities, as well as disclosure of the entity’s information as a whole with respect to products, services, geographical areas and major customers and suppliers.  Like the preious Bulletin, this Standard is mandatory only for public companies or companies in the process of becoming public.

NIF B-9, Interim Financial Information – As opposed to Bulletin B-9, this Standard requires a condensed presentation of the statement of changes in stockholders’ equity and statement of cash flows, as part of the interim financial information.  For comparison purposes, it requires that the information presented at the closing of an interim period contain the information of the equivalent interim period of the previous year, and in the case of the balance sheet, presentation of the previous years’ annual balance sheet.
At the date of issuance of these financial statements, we have not fully assessed the effects of adopting these new standards on our financial information.
International Financial Reporting Standards
In January 2009, the Mexican Securities and Exchange Commission published the amendments to the Mexican Securities Law, including the obligation to prepare and present financial statements using International Financial Reporting Standards beginning 2012. Early adoption is permitted.
At the date of issuance of these financial statements, we have not fully assessed the effects of adopting these new standards on our financial information.
U.S. GAAP
In October 2009, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 105-10 (SFAS No. 168), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.  FASB ASC 105-10 (SFAS No. 168) establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial standards in conformity with U.S. GAAP. FASB ASC 105-10 (SFAS No. 168) is effective for interim and annual periods ending after September 15, 2009. On the effective date, all then-existing non-SEC accounting and reporting standards are superseded, with the exception of certain items listed in FASB ASC 105-10 (SFAS No. 168). The purpose of the Codification is not to create new accounting and reporting guidance, but rather to simplify user access to all authoritative U.S. GAAP. Accordingly, the adoption of FASB ASC 105-10 (SFAS No. 168) had no effect on our consolidated financial statements.
We adopted the disclosure requirements of ASC 820-10 (SFAS No. 157, Fair Value Measurements) in relation to nonfinancial assets and liabilities in 2009.  The adoption of this standard did not impact us because we did not record any fair value adjustments relating to our nonfinancial assets and liabilities in 2009.
In January 2009, we adopted FASB ASC 810-10 (SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51) which establishes the accounting and reporting standards for the noncontrolling interest in a subsidiary and the deconsolidation of a subsidiary, and also amends certain consolidation guidance for consistency with revised standards regarding business combinations. The accounting provisions of FASB ASC 810-10 (SFAS No. 160) must be applied prospectively as of the beginning of the fiscal year in which the provisions are initially adopted, while the presentation and disclosure requirements must be applied retrospectively, to provide comparability in the financial statements.  FASB ASC 810-10 (SFAS No. 160) was effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  As a result of adopting this standard, we reclassified the noncontrolling interest to stockholders’ equity in the year of adoption and in prior periods for purposes of comparability.  Refer to Note 24 of our consolidated financial statements for more information regarding such impact.

In January 2009, we adopted FASB ASC 805-10 (SFAS No. 141(R), Business Combinations – a replacement of FASB No. 141 (R)), which, among other changes, requires an acquirer in a business combination to (a) recognize assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at fair value as of the acquisition date, and (b) expense all acquisition-related costs.  FASB ASC 805-10 (SFAS No. 141(R)), also amends FASB ASC 740-10 (SFAS No. 109, Accounting for Income Taxes) to require that any reductions to an acquired entity’s valuation allowances on deferred taxes and acquired tax contingencies that occur after the measurement period is recorded as a component of income tax expense.  FASB ASC 805-10 (SFAS No. 141(R)) must be applied prospectively to all business combinations for which the acquisition date occurs during fiscal years beginning on or after December 15, 2008, with the exception to the amendments to ASC 740-10 (SFAS No. 109, Accounting for Income Taxes), which will also be applied to business combinations with acquisition dates prior to the effective date of this standard.  The adoption of this guidance did not have an impact on our consolidated financial statements and related disclosures and any future impact will be dependent on any future acquisitions.
In July 2009, we adopted FASB ASC 855-10 (SFAS 165, Subsequent Events). FASB ASC 855-10 (SFAS 165) establishes accounting and reporting standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In addition, FASB ASC 855-10 (SFAS 165) requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. FASB ASC 855-10 (SFAS 165) was effective for fiscal years and interim periods ending after June 15, 2009. The disclosures required pursuant to this new standard are presented in Note 24.
On June 12, 2009, the FASB issued ASC 860-10 (SFAS No. 166, Accounting for Transfer of Financial Assets – an amendment of FASB Statement No. 140), which eliminates the concept of a qualifying special purpose entity (“QSPE”) and modifies the derecognition provisions of a previously issued accounting standard. FASB ASC 860-10 (SFAS No. 166) also required additional disclosures that focus on the transferor’s continuing involvement with the transferred assets and the related risks retained. FASB ASC 860-10 (SFAS No. 166) is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. Early adoption is prohibited. We do not enter into transactions to transfer its financial instruments and as a result the adoption of this standard is not expected to impact our consolidated financial position, results of operations or cash flows.
On June 12, 2009, the FASB issued ASC 810-10 (SFAS No. 167, Amendments to FASB Interpretation No. 46 (R)), which amends the consolidation guidance that applies to variable interest entities. The new guidance requires an entity to carefully reconsider its previous consolidation conclusions, including (1) whether an entity is a variable interest entity (VIE), (2) whether the enterprise is the VIE’s primary beneficiary, and (3) what type of financial statement disclosures are required. FASB ASC 810-10 (SFAS No. 167) is effective as of the beginning of the first fiscal year that begins after November 15, 2009. The amendments to the consolidation guidance affect all entities and enterprises currently within the scope of FASB ASC 810-10 (SFAS No. 167), as well as qualifying special-purpose entities that are currently outside the scope of FASB ASC 810-10 (FIN 46(R)). Early adoption is prohibited.  We do not have any unconsolidated special purpose entities and the adoption of this standard is not expected to impact our consolidated financial position, results of operations or cash flows.
In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13, which contains new guidance on accounting for revenue arrangements with multiple deliverables. When vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. The guidance in the ASU will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning after June 15, 2010.  Early adoption is permitted. The adoption of this standard is not expected to impact our consolidated financial position, results of operations or cash flows.

On January 21, 2010, the FASB issued ASU 2010-06. The ASU amends ASC 820, Fair Value Measurements and Disclosures (SFAS No. 157) to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements.  It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value.  This ASU amends guidance on employers’ disclosures about postretirement benefit plan assets under ASC 715, Compensation – Retirement Benefits, to require that disclosures be provided by classes of assets instead of by major categories of assets.  The guidance in the ASU is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes. However, those disclosures are required for periods ending after initial adoption. Early adoption is permitted.
Directors, Senior Management and Employees
Directors
Our Board of Directors is responsible for the management of our business.  Pursuant to our bylaws, our Board of Directors must consist of an odd number of directors determined at an ordinary general meeting of shareholders and is required to have at least 11 members.  Our Board of Directors currently consists of 11 directors and one alternate director, each of who is elected or ratified at the annual shareholders’ meeting.  Under the Mexican Securities Market Law and our by-laws, at least 25% of our directors must be independent.
Our bylaws provide that (i) each person (or group of persons acting together) holding 10% of our capital stock in the form of Series B shares is entitled to designate one director, (ii) the holders of Series BB shares are entitled to elect three directors and their alternates pursuant to our bylaws, the participation agreement and the technical assistance agreement and (iii) the remaining members of the Board of Directors are to be elected by the holders of our capital stock (both the Series BB and the Series B shares, including those Series B holders that were entitled to elect a director by virtue of their owning 10% of our capital stock).
The following table lists our current directors as of the date of this annual report, their titles, dates of appointment and ages:
Name
Title
Director since
Age
Bernardo Quintana Isaac
Chairman and Director
December 21, 2005
68
Alberto Felipe Mulás Alonso
Independent Director
October 2, 2006
49
Salvador Alva Gómez
Independent Director
October 2, 2006
59
Manuel Francisco Arce Rincón
Independent Director
October 2, 2006
68
Luis Guillermo Zazueta Domínguez
Independent Director
October 2, 2006
64
Fernando Flores Pérez
Independent Director
April 29, 2007
64
Luis Fernando Zárate Rocha*
Director
September 22, 2000
66
Alonso Quintana Kawage*
Director
March 14, 2003
36
Sergio Fernando Montaño León
Director
December 21, 2005
62
José Luis Guerrero Álvarez
Director
December 21, 2005
66
Jean Marie Chevallier*
Director
December 13, 2006
65
Jacques Follain*
Alternate Director
December 13, 2006
54
__________________
*  Appointed by SETA
Bernardo Quintana Isaac .   Mr. Bernardo Quintana Isaac has been the Chairman of our Board of Directors since December 2005.  Mr. Quintana has been Chairman of the Board of Directors of Empresas ICA, S.A.B. de C.V. since December 1994 and was Chief Executive Officer of ICA from December 1994 through December 2006.  Previously, Mr. Quintana served as Executive Vice President and Vice President of ICA Tourism and Urban Development and as Director of Investments of Banco del Atlántico.  Mr. Quintana currently serves as a board member of several Mexican companies, including CEMEX, S.A.B. de C.V. and GRUMA, S.A.B. de C.V.  Mr. Quintana is also a member of Mexico’s National Council of Businessmen, a member of the Board of Trustees of the Universidad Nacional Autónoma de México and Chairman of the Board of Fundación ICA, A.C.  Mr. Quintana holds a degree in civil engineering from the Universidad Nacional Autónoma de Mexico and a Master’s in Business Administration from the University of California at Los Angeles.  Mr. Quintana is the father of fellow Director Alonso Quintana Kawage.

Alberto Felipe Mulás Alonso .  Mr. Mulás has been a member of our Board of Directors since December 2006.  Mr. Mulás currently serves on the Boards of Directors of several companies, including Empresas ICA, S.A.B. de C.V., Grupo Financiero Santander, Urbi Desarrollos Urbanos S.A.B. de C.V., one of Mexico’s largest housing developers, Comex, Mexico’s largest paint manufacturer and distributor, and Sociedad Hipotecaria Federal, S.N.C., Mexico’s government-owned housing development bank.  Since January 2003, he has been the managing director of CReSE Consultores, S.C., a consulting firm that specializes in corporate finance, corporate governance and strategic planning.  In January 2001, former President Vicente Fox appointed Mr. Mulás as national housing coordinator, with the responsibility of preparing and executing Mexico’s national housing strategy.  In this role, Mr. Mulás created, among others, Mexico’s National Housing Commission, and served as its first Commissioner and a member of the Cabinet through December 2002.  From 1999 to 2001 Mr. Mulás was Mexico Managing Director at Donaldson, Lufkin & Jenrette Securities Corp.  He was also Country Manager for Lehman Brothers from 1992 to 1997 and a vice-president at JP Morgan. Mr. Mulás received a degree in chemical engineering from the Universidad Iberoamericana and a Master’s in Business Administration from the Wharton School at the University of Pennsylvania.
Salvador Alva Gómez .  Mr. Salvador Alva has been a member of our Board of Directors since December 2006. Mr. Alva has worked for PepsiCo for 24 years.  He was the President of PepsiCo Latin America and a member of the PepsiCo Executive Committee.  Mr. Alva currently serves as a member of the Boards of Directors of Porcelanite Lamosa, 7-Eleven and Chapa Distribution Group, and the “EXEB” Businessmen’s Foundation for Basic Education.  Mr. Alva is also a member of CEAL, the Latin America Businessmen’s Association and serves on the Board Trustees of the John Langdon Down Foundation.  He is Chairman of AMECE, the Mexican Association of Electronic Commerce.  Within PepsiCo, Mr. Alva served as Chairman of Gamesa-Quaker and General Manager for Latin America of the Alegro International division; he also held several positions at Cervecería Moctezuma.  He holds a degree in chemical engineering from the Universidad Nacional Autónoma de México and a Master’s in Business Administration from the Universidad de las Américas.
Manuel F. Arce Rincón .  Mr. Manuel F. Arce Rincón has been a member of our Board of Directors since December 2006. Since 1995, Mr. Arce has been Managing Director and Partner at Grupo Consultor ACM, S.C., where he advises a wide range of clients in the public and private sectors.  For more than 30 years he has also served on the Board of Directors of many government-owned and private sector companies, including several companies listed on the Mexican Stock Exchange. He is also an independent Board of Directors member of more than 35 investment funds. In the public sector, Mr. Arce worked at the Federal Electricity Commission, the Coordinación de Abastos y Distribución and Servicios Metropolitanos S.A. Since 1966, he has been a professor at the Universidad Nacional Autonoma de México.  Mr. Arce graduated with honors from the Universidad Nacional Autónoma de México and holds a Master’s in Business Administration from Columbia University.
Luis Fernando Zárate Rocha .  Mr. Luis Fernando Zárate Rocha has been a member of our Board of Directors since September 2000.  Mr. Zárate is also a member of the Board of Directors and an Executive Vice President of Empresas ICA, S.A.B. de C.V.  Mr. Zárate oversees business development for Empresas ICA, as well as the operations of the airport operator SETA and Proactiva Medio Ambiente.  Mr. Zárate has been affiliated with Empresas ICA for over 40 years, during which time he has worked in business development as well in construction and infrastructure projects.  Mr. Zárate is also a member of the Board of Directors of Fundación ICA, S.C.  Mr. Zárate holds a degree in civil engineering from the Universidad Nacional Autónoma de México, where he has been a professor of engineering since 1978.

Luis Guillermo Zazueta Domínguez .  Mr. Luis Guillermo Zazueta Domínguez has been a member of our Board of Directors since December 2006.  In 1971, Mr. Zazueta founded Despacho Zazueta Hermanos, S.C., a professional accounting firm advising a wide range of clients on accounting and tax matters.  He is also on the Board of Directors of Seguros Argos S.A. de C.V., ANA Automóvil Club de Mexico, A.C., Almacenadora Gomex and Astered Union de Credito.  He is a member of the College of Certified Public Accountants and registered as a Fiscal Public Accountant at the Ministry of Finance and Public Credit, the Mexican Social Security Institute, INFONAVIT and the Federal District.  Mr. Zazueta holds a degree in public accounting from the Universidad Iberoamericana.
Alonso Quintana Kawage .  Mr. Alonso Quintana Kawage has been a member of our Board of Directors since March 2003.  Mr. Quintana is a member of the Board of Directors of Empresas ICA, S.A.B. de C.V. and has served as that company’s Chief Financial Officer since January 1, 2007.  Since joining Empresas ICA in 1994, he has served the company in various capacities, includingAeroinvest positions in its construction, corporate finance and project finance areas.  In the finance group, Mr. Quintana has overseen various transactions, including those relating to the financing of a bond and syndicated credit for the El Cajon Hydroelectric Project, a bond for the Corredor Sur project in Panama, a long-term loan financing for the Irapuato-La Piedad highway public-private partnership, various public offerings by Empresas ICA in the international capital markets and Aeroinvest’s acquisition in 2005 of Series B shares currently representing 35.3% of our capital stock.  Mr. Quintana received a degree in civil engineering from the Universidad Iberoamericana and a Master’s in Business Administration from the Kellogg School of Management at Northwestern University.  Mr. Quintana is the son of the Chairman of the Board of Directors, Mr. Bernardo Quintana Isaac.
Sergio Fernando Montaño León .  Mr. Sergio F. Montaño León has been a member of our Board of Directors since December 2005.  Mr. Montaño is member of the Board of Directors and Executive Vice President in charge of administration of Empresas ICA, S.A.B. de C.V.  Since 1972, Mr. Montaño has served in various capacities in the management and finance areas of several companies within the Empresas ICA group. Previously, Mr. Montaño held various management positions with such Mexican companies as Trebol S.A. de C.V. and Cervecería Cuauhtémoc Moctezuma, S.A. de C.V.  Mr. Montaño holds a degree in public accounting from the Universidad Nacional Autónoma de Mexico, a Master’s degree in taxation from the Instituto para la Especialización de Ejecutivos and a Specialization in Insurance from the Instituto Tecnológico Autónomo de México. Mr. Montaño has been a member of the Mexican Institute of Financial Executives since 1997.
José Luis Guerrero Álvarez .  Dr. José Luis Guerrero Álvarez has been a member of our Board of Directors since December 2005.  Dr. Guerrero became Chief Executive Officer of Empresas ICA, S.A.B. de C.V. effective January 1, 2007 and is a member of ICA’s Board of Directors.  Previously, he was Executive Vice President and Chief Financial Officer of Empresas ICA.  For the past 28 years, Dr. Guerrero has held various positions in the finance, administration, divestment, real estate, manufacturing and business development areas of Empresas ICA.  Before Empresas ICA, Dr. Guerrero served as the Planning Director of Combinado Industrial Sahagún, the Technical Director of Roca Fosforica Mexicana and held various other positions in Mexico and abroad.  Dr. Guerrero holds a Diploma D’Ingenieur I.S.M.C.M. from Institut Superieur des Materiaux et de la Construction Mecanique of Paris, and an M.S. and Ph.D. in engineering from the University of Illinois at Urbana-Champaign.
Jean-Marie Chevallier .  Mr. Jean-Marie Chevallier has served since December 2006 as Chairman of the Board and Chief Executive Officer of Aéroports de Paris Management (ADPM), the Aéroports de Paris (ADP) subsidiary that manages its overseas airports investments and operations.  Previously, he was ADP’s Director of Planning for both Paris-CDG and Orly airports.  He joined ADP in 1978 and until 1990 worked extensively on planning and engineering consulting for large overseas airport projects, including Jakarta-Cengkareng, Osaka-Kansai, Seoul-Incheon and more recently Dubai-Al Maktoum. Promoted to Vice-President in 1993, he was successively in charge of the Engineering Division, International Affairs and the CDG airport Facilities Division.  Mr. Chevallier is a chartered civil engineer from Ecole Nationale des Ponts et Chaussees (Paris, 1968).  Mr. Chevallier is a member and former Chairman of the ACI World Safety and Technical Committee and a member of the US TRB Airport Compatibility Committee.  Mr. Chevalier is Member of the Boards of Directors of several companies that operate airports in Belgium, Jordan, and Mauritius.

Jacques Follain (Alternate Director for Mr. Chevallier).  Mr. Jacques Follain is Managing Director of Aéroports de Paris Management (ADPM).  Mr. Follain joined the Aéroports de Paris Group in 1998 and has played a key role in the development of ADP as an international airport operator in China, Mexico, Egypt, Jordan, Belgium and Algeria.  Prior to joining ADP, Mr. Follain held several positions in L’Oreal starting in 1987, including heading its Mexico subsidiary, sales and marketing manager for Europe in the International Department, and responsibility for setting up the management information systems of the professional division.  He also worked for six years as an organizational consultant at Arthur Andersen Consulting (Accenture).  Mr. Follain is an aeronautical and telecommunications engineer, with degrees from the École Nationale Supérieure des Constructions Aéronautiques (Toulouse), the École Nationale Supérieure des Telecommunications (Paris) and a Master’s degree from Stanford University.
Fernando Flores Pérez .  Mr. Fernando Flores Pérez has been a member of our Board of Directors since April 2007. He is also a member of the Board of Directors of Empresas ICA S.A.B. de C.V.  He is also Chairman of the Board of Directors of GW Publishing, S.A. de C.V., which produces and markets the Spanish-language editions for Mexico, Latin America, and the United States for the ESPN sports network.  Mr. Flores is Founder and Managing Partner in EFE Consultores, S.C., and a strategic planning consultancy.  In February 2009, Mr. Flores became a Senior Counselor at A.T. Kearney.  During the government of Vicente Fox, he served as Executive Director and Chairman of the Board of the Mexican Social Security Institute (IMSS) from October 2005 until December 2006.  From December 2004 to October 2005, he was Undersecretary of Labor, Security, and Social Security at the Ministry of Labor and Social Security.  Mr. Flores joined Compañia Mexicana de Aviación in 1991 and served as Law and Administration Director from 1995 until 2004, when he became Executive Director and Chairman of the Board of Directors of the Compañia Mexicana de Aviación and Executive Vice president of Holding CINTRA, a company that was listed on the Mexican Stock Exchange.  Mr. Flores has also served as Executive Director of Aerovías de Mexico (AeroMexico) from March to December 2004.  From January 1997 to January 2000, he was the Chairman of the National Air Transportation Chamber.  Mr. Flores holds a law degree from the Universidad Iberoamericana, and in 2004 he received the “Gold Master in Executive Leadership” award from the Executive Leadership Forum in Spain.
Executive Officers
Pursuant to our bylaws, the holders of Series BB shares are entitled to nominate and propose the removal of our chief executive officer and to appoint and remove our chief financial officer, our chief operating officer and our commercial director.  The Series BB Directors are also entitled to appoint half of our executive officers, which appointment must be made in accordance with the Technical Assistance Agreement and the guidelines approved by our Board of Directors.
The following table lists our executive officers, their current position and their year of appointment as an executive officer.
Name
Current position
Executive
officer since (2)
Age
Victor Humberto Bravo Martin (1)
Chief Executive Officer
March 20, 2006
44
Nicolas Etienne Marcel Claude (1)
Chief Operating Officer
October 14, 2004
44
José Luis Guerrero Cortes (1)
Chief Financial Officer
July 1, 2009
29
Manuel de la Torre Melendez
General Counsel
January 1, 2004
46
Roberto Ontiveros
Infrastructure and Maintenance Director
July 22, 2008
45
Stephane Taysse (1)
Commercial and Marketing Director
December 1,2009
37
Porfirio González Alvarez
Airports Director
April 26, 2006
59
_________________________________
(1)
Appointed by SETA as holder of Series BB shares.
(2)
Date of Appointment.
Víctor Humberto Bravo Martín served as our Chief Financial Officer since March 2006 and in July 2009 he became our Chief Executive Officer.  Prior to joining us, he occupied various positions in Empresas ICA, including Corporate Finance Director, Project Finance Director, Corporate Finance Analysis Manager and Corporate Economic Analysis Manager.  Mr. Bravo holds a B.S. in economics from Instituto Tecnológico y de Estudios Superiores de Monterrey, a diploma in finance from Instituto Tecnológico Autónomo de México, an MBA from the Leonard N. Stern School of Business at New York University and an MBA from the Manchester School of Business.  He has also completed various specialization courses in the areas of finance and management.

Nicolas Etienne Marcel Claude has served as our Chief Operating Officer since October 2004.  Previously, he served as Master Planning Coordinator of ADP for the development of the Charles de Gaulle and Orly airports as well as other projects, including the Beijing Capital International Airport in China, and has also worked for ADP in strategic planning.  A systems engineer by training, Mr. Claude also holds a master’s degree in statistics and a specialization study in airport management from Ecole Nationale de l’Aviation Civile in Toulouse.
José Luis Guerrero Cortes has served as our Chief Financial Officer since July 2009. Previously he earned an MBA from the Harvard Business School and worked as a summer associate at Goldman Sachs in the debt capital markets and derivatives groups in 2008. Prior to his MBA, he served as a financial analyst at Empresas ICA and as an assistant brand manager at Procter & Gamble in Mexico.  Mr. Guerrero also worked in the environmental research group of Veolia Environment in France and as a research engineer for Vulcan Chemicals in Kansas.  Mr. Guerrero holds a degree in chemical engineering from the Universidad Iberoamericana and a diploma in Finance from Instituto Tecnológico de Estudios Superiores de Monterrey.
Manuel de la Torre Melendez has served as our General Counsel since January 2004.  Prior to joining us, Mr. de La Torre was a senior associate at Thacher, Proffitt & Wood LLP, where he advised a variety of corporate clients with a particular focus on labor law.  Mr. de la Torre was a professor of labor law and procedural labor law at the Instituto Tecnológico Autónomo de México and holds a law degree, magna cum laude, from the Universidad Nacional Autónoma de México.  He is a member of the Mexican Bar Association and a plenary member and head of the Mexico chapter of the Latin American Association for Airports and Space Law.  He has also carried out studies in aeronautical and space law at McGill University, the University of Leiden, and Daniel Webster College, and he is the author of the First Airport Code for Latin America.  Has been the Secretary of the Board of Directors since March 2007. He is now a member of the Royal Aeronautical Society, which in 2009 was in charge of the Mexican Chapter of the Latin American Association of Aeronautic and Space Law Presidency. He has been a guest speaker in many events and conferences concerning aeronautic and airport matters.  In 2009, he obtained the first place in the 2009 Aeronautic and Space International Law Contest.
Roberto Ontiveros Chávez has served as our Infrastructure and Maintenance Director since July 2008.  Previously, he was Construction Manager for Libra Desarrollos, S.A., Cementos del Yaqui, S.A and PROCASA, and Senior Engineer and Facilities Manager for the US Embassy in México.  Mr. Ontiveros holds a B.S. in civil engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey, a Master’s Degree in Construction by Universidad Nacional Autónoma de México, a diploma in Project Management from the Project Management Institute, a diploma as a reinforced concrete inspector from the American Concrete Institute and a diploma on asbestos materials, among other specialization courses in the construction sector.
Stephane Taysse has served as Commercial and Marketing Director since December 2009. Prior to joining us he was Commercial Manager at ADP-Roissy Charles de Gaulle Airport since 2007. Previously he served as Manager in the Business Unit and as Project Manager at Galeries Lafayette during 8 years. He was also Head of the Department of Marks Spencer Department Stores. Mr Taysse has a strong leadership and an extensive vision of the Commercial and Duty Free Market.  He holds a Master’s Degree in International Sales and Marketing and a Bachelor of Business from the School of Toulouse.
Porfirio González Álvarez has served as our Airports Director since April 2006.  Previously, he has served as our Business Unit Manager, as our Assistant Director of Operations and Development and as the Manager of our Monterrey International Airport.  He has also served in various capacities in the Mexican federal government and the state government of Nuevo León.  Mr. González holds a B.S. in civil engineering from the Universidad Autónoma de Nuevo León.

The business address of our directors and executive officers is our principal executive headquarters.
Compensation of Directors and Executive Officers
For 2009, the aggregate compensation earned by our 25 officers (including executive officers, corporate managers, coordinators and airport administrators) was approximately Ps. 48.5 million.  At the shareholders’ meeting held on April 24, 2009 and the Shareholders’ meeting held on April 16, 2010, the Shareholders approved the following compensation for Directors and Executive Officers: each of the Chief Executive Officer, the Chief Financial Officer, the General Counsel and the permanent invitees and secretaries for each meeting of the board or special committee receives compensation in the amount of Ps. 40,000 net of any required withholding for each board meeting and corporate committee meeting attended.  In addition, independent directors receives a fee of U.S.$ 250 net of any required withholding for each hour they dedicate to our affairs entrusted by the Board of Directors outside of board meetings and corporate committee meetings.
None of our directors or executive officers are entitled to benefits upon termination under their service contracts with us, except for what is due them according to the Federal Labor Law ( Ley Federal del Trabajo ).
Committees
The Mexican Securities Law and our Bylaws provide that the Board of Directors may receive assistance from one or more Special Committees created directly by the Board of Directors or by the Chief Executive Officer in order to carry out the functions that the Mexican Securities Law and our Bylaws assign to the Board of Directors with respect to audit and corporate practices.
We previously had two separate Special Committees, a Corporate Practices Committee and an Audit Committee, both of which have been supporting the Board of Directors in carrying out its responsibilities and providing opinions on various matters as requested by the Board of Directors.
Considering the complexity of the projects that are being undertaken by us, which involve financial and planning matters, the Board of Directors resolved on March 10, 2009, to unify in a single Special Committee the current Audit and Corporate Practices Functions and to confer on the committee additional responsibilities for financial and planning matters, which such functions are to be exercised jointly so that the Board of Directors may take decisions with the support of an intermediate body.  Such resolution was ratified by our shareholders’ meeting of April 24, 2009.
Our general shareholders’ meeting held on April 16, 2010 elected the Chairman of this Special Committee.  The current members of the Special Committee are Luis Guillermo Zazueta Domínguez, Alberto Felipe Mulás Alonso, Fernando Flores Pérez and Manuel F. Arce Rincón.  Luis Guillermo Zazueta Domínguez has been designated as an “audit committee financial expert” as defined by the Securities and Exchange Commission.
Our bylaws provide that the Committee or Committees responsible for the Audit and Corporate Practices Functions will be formed exclusively of Independent Directors and that a minimum of three members shall be appointed by the Board of Directors based on a recommendation from the Chairman of the Board all of whom must also be Independent Directors. Holders of the Series BB shares have the right to propose the appointment of at least one member.
If we are controlled by a shareholder or group of shareholders representing 50% (fifty percent) or more of our capital stock, the committee that conducts the Corporate Practices Functions will be formed by a majority of Independent Directors.

The Chairman of the Board of Directors will propose to the shareholders meeting one of the Independent Directors as a Chairman of the Special Committee, who should present the requirements of independence, experience, abilities and professional prestige in accordance with Articles 25, 26 and 43 of Mexican Securities Law.
The chairman of the Special Committee shall prepare an annual report to our Board of Directors with respect to the findings of such Special Committee, which must include the items mentioned in the “Financial and Planning Functions” section below.
Our shareholders’ meeting of April 3, 2008, in its amendments to the bylaws, eliminated the Nominations Committee, whose functions and responsibilities are now carried out by the Board of Directors.
Audit Functions of the Unified Special Committee
The Special Committee, which is responsible for the Audit Functions and is formed exclusively of Independent Directors, has the following responsibilities: (i) selecting the external auditor of the Company, recommending to the Board of Directors the appointment of such external auditor and providing an opinion about any removal of such external auditor, (ii) supervising our external auditors and analyzing their reports, (iii) analyzing and supervising the preparation of our financial statements, (iv) informing the board of our internal controls and their adequacy, (v) requesting reports from our executive officers whenever the committee deems appropriate, providing assistance to our Board of Directors in the preparation of the reports containing the main accounting and information guidelines used for the preparation of the financial information, and assistance to our Board of Directors in the preparation of the report on the operations and activities in which the Board of Directors had intervened pursuant to the Securities Market Law, (vi) informing the Board of Directors of any irregularities that it may encounter, (vii) receiving and analyzing recommendations and observations made by the shareholders, members of the Board of Directors, executive officers, our external auditors or any third party and taking the necessary actions, (viii) calling shareholders’ meetings, (ix) overseeing the execution of the shareholders’ and directors’ resolutions by the Chief Executive Officer in accordance with the instructions provided thereto by the shareholders or the directors and (x) providing an annual report to the Board of Directors.
The Chairman of the Special Committee responsible for Audit Functions shall prepare an annual report to our Board of Directors with respect to the findings of this Special Committee, which shall include (i) the status of the internal controls and internal audits and any deviations and deficiencies thereof, taking into consideration the reports of external auditors and independent experts, (ii) the results of any preventive and corrective measures taken based on results of investigations in respect of non-compliance of operating and accounting policies, (iii) the evaluation of external auditors, (iv) the main results from the review of our financial statements and those of our subsidiaries, (v) the description and effects of changes to accounting policies, (vi) the measures adopted as result of observations of shareholders, directors, executive officers and third parties relating to accounting, internal controls, and internal or external audits, and (vii) compliance of shareholders’ and directors’ resolutions.
Corporate Practices Functions of the Unified Special Committee
The Special Committee, which is responsible for the Corporate Practices Functions, has the following responsibilities: (i) providing opinions to our Board of Directors, (ii) requesting and obtaining opinions from independent experts, (iii) calling shareholders’ meetings, and (iv) assisting the board in the preparation of annual reports and other reporting obligations.
The chairman of the Special Committee shall prepare an annual report to our Board of Directors with respect to the findings of this Special Committee, which shall include (i) observations with respect to relevant directors and officers, (ii) the transactions entered into with related parties, (iii) the remunerations paid to directors and officers and (iv) any permissions granted for a director or officer to take advantage of a business opportunity.

Financial and Planning Functions
The Special Committee, which is responsible for the Financial and Planning Functions, has the following responsibilities: (i) analyzing the general principles for the determination of the strategic plan of the Company and the observance of such plan; (ii) evaluating and opining on the investment and financing policies of the Company propose it by the Chief Executive Officer; (iii) opining on the premises of the annual budget and the following of its application, such as its control system; (iv) analyzing and evaluating the risks factors of the Company, such as the mechanisms for its control; (v) evaluate that the investment and financing policies are consistent with the strategic plan of the Company; and (vi) evaluate that the financing projects are consistent with the strategic plan of the Company.
Employees
As of December 31, 2009, we had approximately 972 employees.  The total number of employees increased by 1.3% in 2008 and by 0.1% in 2009, due primarily to the addition of personnel operating our cargo facilities and security personnel.  At December 31, 2009, approximately 558 of our employees were unionized.
During 2008, we carried out a corporate restructuring through the establishment of a new subsidiary, Operadora de Aeropuertos del Centro Norte, S.A. de C.V. (“OACN”).  As a result, on August 7, 2008, employees ceased their employment with the individual airports and became employees of OACN.  OACN assumed all labor obligations.  We provisioned Ps. 6.8 million as of December 31, 2008, for the costs related to the assumption of such labor obligations by OACN.

The following table sets forth the number of employees and a breakdown of employees by main category of activity and geographic location as of the end of each period indicated.
Employees
December 31,
2007
2008 (2)
2009
Categories of activity:
Airport operations
508 510 515
Airport maintenance
155 151 159
Administration (1)
296 302 298
Geographic location:
Acapulco
93 93 90
Ciudad Juárez
48 51 52
Culiacán
54 56 57
Chihuahua
60 62 62
Durango
42 41 42
Mazatlán
70 71 68
Monterrey
193 182 192
Reynosa
31 34 34
San Luis Potosí
41 43 42
Tampico
57 58 58
Torreón
49 50 50
Zacatecas
40 43 42
Zihuatanejo
47 47 48
Servicios Aeroportuarios del Centro Norte, S.A. de C.V.
134 140 135
Total (1)
959 971 972
__________________________
(1)
As of December 31, 2007, 2008 and 2009, includes 134, 411 and 457 persons respectively, employed by Servicios Aeroportuarios del Centro Norte, S.A. de C.V., our administrative services subsidiary.
(2)
As of June 2008, Operadora de Aeropuertos del Centro Norte S.A de C.V. and Servicios Aeroportuarios del Centro Norte S.A. de C.V., due to a corporate reorganization, employed the operative and administrative employees of all airports

All of our unionized employees are members of local chapters of the Mexican National Union of Airport and Auxiliary Services Workers, an organization formed in 1998 whose members include employees of the Mexican Airport and Auxiliary Services Agency as well as of the three other airport groups (the Southeast Group (Grupo Aeroportuario del Sureste, S.A. de C.V.), the Mexico City Group (Grupo Aeroportuario de la Ciudad de México), and the Pacific Group (Grupo Aeroportuario del Pacifico, S.A. de C.V.)) operating in Mexico.  Labor relations with our employees are governed by 13 separate collective labor agreements, each relating to one of our 13 airport subsidiaries, and negotiated by the local chapter of the union.  As is typical in Mexico, wages are renegotiated every year, while other terms and conditions of employment are renegotiated every two years.
We maintain a savings plan available to all of our employees pursuant to which the employees may make bi-weekly contributions of up to 13% of their pre-tax salaries.  We make bi-weekly contributions matching each employee’s contribution.  Employees are entitled to withdraw the funds in their accounts on an annual basis.  In 2007, 2008 and 2009, we made a total of Ps.20.4 million, Ps. 36.5 million and Ps. 36.4 million, respectively, in payments to employees’ accounts pursuant to the savings plan.
Funds in the savings plan may be used to make loans to employees and are otherwise invested in securities listed on the Mexican Stock Exchange or in treasury bills issued by the Ministry of Finance and Public Credit.

Major Shareholders and Related Party Transactions
MAJOR SHAREHOLDERS
Aeroinvest is our controlling shareholder.  Aeroinvest directly owns 167,802,700 of our Series B shares that represent 42.0% of our outstanding capital stock.  Aeroinvest also directly owns 331,972,000 Series A shares of SETA that represent 74.5% of its capital stock.  SETA in turn owns 58,800,000 of our Series BB shares and 8,000,000 Series B shares that collectively represent 16.7% of our capital stock.  Consequently, Aeroinvest is the beneficial owner of 54.4% of our capital stock.
In November of 2006, a Mexican trust established by NAFIN, or the NAFIN Trust , acting pursuant to the instructions of the Ministry of Communications and Transportation, sold 48.02% of our outstanding capital stock through a global public offering of shares in the form of American Despositary Shares, or ADSs, and Series B Shares, concurrently in the United States and Mexico.  The net proceeds from the sale of the shares were paid to the Mexican government.  After the offering, the Mexican government ceased to be a shareholder.
The following table sets forth information with respect to beneficial ownership of our capital stock as of May 28, 2010:
Number of shares
Percentage of total
share capital
Identity of stockholder
B Shares
BB Shares
B Shares
BB Shares
Aeroinvest (1)
167,802,700 ----- 42.0 % -----
SETA (2)
8,000,000 58,800,000 2.00 % 14.7 %
Public
161,360,187 ----- 40.3 % -----
Officers and Directors
4,037,113 ----- 1.0 % -----
_______________________________
(1)
In addition to the Series B shares it directly owns, Aeroinvest may be deemed to beneficially own all of our shares owned by SETA by virtue of its ownership of 74.5 % of SETA’s capital stock.  Aeroinvest and SETA are subsidiaries of ICA.
(2)
Held in trust with Bancomext.  Aeroinvest and SETA are subsidiaries of ICA.
Arrangements relating to SETA
The rules governing the sale of our Series BB shares to SETA required that SETA place all of its Series BB shares in trust in order to guarantee SETA’s performance of its obligations under the Technical Assistance Agreement and SETA’s commitment to maintain its interest in us for a specified period.  Accordingly, SETA has placed its shares in trust with Bancomext or the Bancomext Trust .  Pursuant to our bylaws, the Technical Assistance Agreement, the Participation Agreement, and the Bancomext Trust, SETA was required to retain at least 51% of our shares until June 14, 2007, after which it became entitled to transfer up to one eighth of this 51% during each year thereafter.  The terms of the Bancomext Trust will be extended for an additional 15 years if, at the end of the initial 15-year term, SETA holds shares representing more than 10% of our capital stock.  SETA may terminate the Bancomext Trust before the second 15-year term begins if:  (i) SETA holds less than 10.0% of our capital stock at the end of the initial term; and (ii) the Technical Assistance Agreement has been terminated.  If the Bancomext Trust is not terminated within the second 15-year term, SETA is required to instruct Bancomext to transfer the shares to a new trust.  SETA is required to deposit in the trust any additional shares of our capital stock that it acquires.
Pursuant to our bylaws, SETA (as holder of our Series BB shares) has the right to present the Board of Directors the name or names of the candidates for appointment as our chief executive officer, to appoint and remove half of our executive officers, which currently include our chief financial officer, chief operating officer and commercial director to elect three members of our Board of Directors and to propose the appointment of at least one member of each of our committees.  SETA (as holder of our Series BB shares) also has the right pursuant to our bylaws to veto certain actions requiring approval of our stockholders (including the payment of dividends, the amendment of our bylaws and the amendment of its right to appoint certain members of our senior management).  Additionally, most matters voted on by the Board of Directors require the affirmative vote of the directors appointed by the holder of our Series BB shares.  In the event of the termination of technical assistance agreement, the Series BB shares would be converted into Series B shares, resulting in the termination of all of SETA’s special rights.  If at any time before June 14, 2015 SETA were to hold less than 7.65% of our capital stock in the form of Series BB shares, it would lose its veto rights (but its other special rights would be unaffected).  If at any time after June 14, 2015 SETA were to hold less than 7.65% of our capital stock in the form of Series BB shares, such shares must be converted into Series B shares, which would cause SETA to lose all of its special rights.  As long as SETA retains at least 7.65% of our capital stock in the form of Series BB shares, whether before or after June 14, 2015, all of its special rights will remain in place.  In addition, shareholders of SETA have allocated among themselves certain veto rights relating to the exercise by SETA of its veto and other rights, which increases the risk of impasse at the shareholders meeting of SETA and ultimately at our shareholders meetings.

Our bylaws, the Participation Agreement and the Technical Assistance Agreement also contain certain provisions designed to avoid conflicts of interest between SETA and us, such as approval of certain related party transactions by our Special Committee.
Under the terms of the Participation Agreement and the Bancomext Trust, (i) SETA’s key partners, currently ADPM and Aeroinvest, are required jointly to maintain at least 51% ownership of SETA until June 14, 2015, (ii) Aeroinvest must maintain at least a 25.5% ownership interest in SETA until such date and (iii) ADPM must maintain at least a 10.0% ownership interest in SETA until such date. To the extent that a key partner acquires shares of SETA in excess of its above-referred interest, such additional interest may be sold without restriction.  There can be no assurance that the terms of the Participation Agreement or the Bancomext Trust would not be amended to reduce or eliminate these ownership commitments.  If SETA or any of its stockholders defaults on any obligation contained in the trust agreement, or if SETA defaults on any obligation contained in the Participation Agreement or the Technical Assistance Agreement, after specified notice and cure provisions, the Bancomext Trust provides that the trustee may sell 5.0% of the shares held in the trust and pay the proceeds of such sale to us as liquidated damages.
Pursuant to the consortium agreement entered into among ADPM, Aeroinvest and VASA S.A. (a corporation organized under the laws of France, VASA ) on May 16, 2000 as amended and restated, or the consortium agreement, the shareholders of SETA agreed that ADPM shall have the right to appoint one member of our Board of Directors and that Aeroinvest shall have the right to appoint up to three directors, the third of whom must satisfy the independence criteria of the Sarbanes-Oxley Act of 2002.  The right to appoint certain of our officers under the consortium agreement is allocated as follows: Aeroinvest shall appoint our chief executive officer, chief financial officer, human resources director (subject to the approval of ADPM) and general counsel; ADPM shall appoint our chief operating officer, our commercial director and our chief safety and quality control officer (subject to the approval of Aeroinvest).
Aeroinvest and ADPM have also agreed that:
·
Aeroinvest will select two members of our Special Committee responsible for Audit Functions; and
·
Aeroinvest and ADPM will jointly select at least one member of our Special Committee responsible for Corporate Practices Functions.
The consortium agreement also requires the unanimous vote of Aeroinvest and ADPM to approve: (i) the pledging or creation of a security interest in any of our shares held by SETA and the shares issued by SETA; (ii) any amendments to SETA’s bylaws or the SETA shareholders’ agreement; (iii) our merger, split, dissolution or liquidation; (iv) the amendment or termination of our bylaws, the Participation Agreement, the technical assistance agreement, the technology transfer agreement or related ancillary agreements; (v) changes in our capital structure; (vi) the conversion of our Series BB shares into our Series B shares; and (vii) any sale or transfer of shares of SETA.

Under the consortium agreement, transfers by either of Aeroinvest or ADPM of its shares in SETA to an unaffiliated third party are subject to limited rights of first refusal in favor of the non-transferring shareholder, and such transfers by Aeroinvest are subject, under certain conditions, to tag-along rights in favor of ADPM.  In addition, the consortium agreement includes put and call options in respect of shares of SETA held by Aeroinvest, whereby, from June 14, 2009 through the later of June 14, 2015 and the date that is six months following the termination of the technical assistance agreement, under certain conditions, ADPM may require Aeroinvest to purchase all or a portion of shares of SETA held by ADPM, and in the event of the parties’ inability to resolve definitely a matter to be decided by the Board of Directors or shareholders of SETA, Aeroinvest may require ADPM to sell to Aeroinvest all or a portion of shares of SETA held by ADPM.
Arrangements relating to Aeroinvest
In June 2005, SETA assigned to Aeroinvest an option to purchase Series B shares representing 36% of our then-outstanding capital stock (currently equivalent to 35.3% of our capital stock).  Aeroinvest purchased these shares from the Mexican government in December 2005 pursuant to this option, acquiring 141,120,000 Series B shares at an aggregate purchase price of U.S.$203.3 million (Ps.2,165.4 million) (determined based on an initial price per share of U.S.$1.13 (Ps.11.0198) plus an annual 5% premium, subject to decreases for any dividends declared and paid by us).  The acquisition of these Series B Shares was financed through credit facilities.  These credit facilities were amended and restated to, among other things, increase the amount of the facility and the amount borrowed thereunder in October 2006 and again in April 2007.  Aeroinvest subsequently purchased additional Series B shares representing 6.7% of our capital stock.  Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  In connection therewith, Aeroinvest has assigned its economic interests (including its right to receive dividends) in its Series B shares representing 42.0% of our capital stock as well as 74.5% of the Series A shares of SETA.  The terms of the refinancing documents are described in “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.”
On June 22, 2007, Aeroinvest, ADPM, SETA, Banco Nacional de Comercio Exterior, S.N.C., División Fiduciaria and Banca Múltiple, J.P. Morgan Grupo Financiero, División Fiduciaria entered into a voting agreement pursuant to which Aeroinvest agreed to vote its Series B shares currently representing 42.0% of our capital stock as a bloc in the same way SETA votes its shares of our capital stock at all ordinary and extraordinary shareholders meetings, subject to certain exceptions set forth in the agreement.  An English translation of this agreement is filed as an exhibit to this Form 20-F.
RELATED PARTY TRANSACTIONS
Arrangements with SETA and its Affiliates
The rules for the sale to SETA of the Series BB shares previously owned by the Mexican government required us to enter into a Participation Agreement with SETA and the Ministry of Communications and Transportation, which established the framework for certain related agreements: the Option Agreement, the Technical Assistance Agreement and the Bancomext Trust.  Our Board of Directors approved these agreements, in accordance with our Related Party Guidelines.
Under the Technical Assistance Agreement, SETA provides management and consulting services and transfers industry expertise and technology to us in exchange for a fee which in 2009 amounted to Ps. 51.7 million (U.S.$ 3.9 million).  The agreement provides us an exclusive license in Mexico to use all technical assistance and expertise transferred to us by SETA or its stockholders during the term of the agreement.  The agreement has an initial term of approximately 15 years beginning June 14, 2000 and expiring on the date of the expiration of the Participation Agreement, or June 14, 2015.  The agreement automatically renews for successive five-year terms unless one party provides the other a notice of termination at least 60 days prior to a scheduled expiration date.  A decision by us not to renew the Technical Assistance Agreement is subject to the approval of the holders of a majority of our Series B shares that are not owned by SETA or any of its affiliates.  A party may terminate the Technical Assistance Agreement prior to its expiration date upon non-compliance with its terms by the other party.  SETA provides us assistance in various areas, including development of our commercial activities, preparation of marketing studies focusing on increasing passenger traffic, assistance with the preparation of the master development programs that we are required to submit to the Ministry of Communications and Transportation and the improvement of our airport operations.

The Technical Assistance Fee for 2000 and 2001 was fixed at U.S.$5 million.  Subsequent to January 1, 2003, the Technical Assistance Fee is equal to the greater of U.S.$3 million adjusted annually for inflation since June 14, 2006 (measured by the U.S. consumer price index) or 5% of our annual consolidated operating income (calculated prior to deducting the technical assistance fee and depreciation and amortization and in each case determined in accordance with MFRS).  We believe that this structure creates an incentive for SETA to increase our annual consolidated earnings.  SETA is also entitled to reimbursement for the out-of-pocket expenses it incurs in its provision of services under the agreement.
The Technical Assistance Agreement allows SETA, its stockholders and their affiliates to render additional services to us only if our Special Committee determines that these related persons have submitted an arm’s length bid in a public bidding process.  For a description of this committee, see “Item 6. Directors, Senior Management and Employees—Committees.”
In 2006, 2007, 2008 and 2009 we recognized expenses of U.S.$4.3 million, U.S.$5.2 million, U.S.$4.1 million and U.S.$3.9 million, respectively, pursuant to the technical assistance agreement plus additional nominal expenses paid to SETA and its affiliates.
Under the Option Agreement, SETA was granted options to subscribe for newly issued Series B shares representing 3% of our capital stock.  These options were originally exercisable in three tranches of 1% each, the first one of which expired unexercised and the second and third of which were exercised in 2006 at the price of U.S.$1.3527 (Ps.14.6735) per share (determined based on an initial price per share of U.S.$1.1286 plus an annual 5% premium, subject to decreases corresponding to dividends declared and paid by us).
Arrangements with Aeroinvest and its Affiliates
Our parent company Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  In connection with the Merrill Lynch refinancing, Aeroinvest has assigned its economic interests (including its right to receive dividends) with respect to its Series B shares currently representing 42.0% of our capital stock as well as 74.5% of the Series A shares of SETA.  Aeroinvest has since purchased additional Series B Shares representing 6.7% of our capital stock. Aeroinvest’s economic interests with respect to these or any other additional Series B Shares purchased by Aeroinvest may become subject to an assignment under the terms of the refinancing documents in certain circumstances, including any issuance of additional notes.  Although we are not parties to the refinancing agreements, the refinancing agreements to require that Aeroinvest cause us to comply with certain restrictions on our ability to create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change or business or make investments or capital expenditures outside our master development plans.  The terms of the refinancing documents are described in “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.”
Arrangements with Other Affiliates
We periodically engage ICA and its affiliates to provide construction and related services to us.  In 2009, we paid U.S.$16.04 million, in connection with services provided by ICA and its affiliates.  Such agreements were approved, in accordance with our Related Party Guidelines, by our Board of Directors, upon the recommendation of our Special Committee responsible for Corporate Practices Functions and in accordance with the Mexican Securities Law.  The Committee considered these agreements to be arm’s length contracts based on the evaluation of these contracts by the engineering company Desarrollo de Ingeniería Civil y Tecnológica S.A. de C.V. (DICTEC), represented by Jorge Moreno Anaya, an independent expert contracted by us to evaluate offers made by ICA. DICTEC determined that ICA’s offers were consistent with market prices.

In 2009, we entered into an agreement with ICA for Ps. 46.6 million in connection with construction works on the new Terminal B of the Monterrey International Airport, which is expected to begin operations in the third quarter of 2010.  In particular, these works will concern Terminal B’s interior signs and regional flights corridor. In addition, in 2009 we entered into a multi-annual service agreement with ICA for the rehabilitation and maintenance of runways and aprons of the airports and for the amounts indicated in the table below.
Airport
Month
Amount (million of pesos)
Aeropuerto de Mazatlán, S.A. de C.V.
August
8.2
Aeropuerto de San Luis Potosí, S.A. de C.V.
July
9.4
Total
17.6

Financial Information
See “Item 18.  Financial Statements” beginning on page F-1.
LEGAL PROCEEDINGS
General
We are involved in certain legal proceedings from time to time that are incidental to the normal conduct of our business.  In addition, the Mexican Airport and Auxiliary Services Agency is currently engaged in some legal proceedings related to our airports, none of which is expected to have a material adverse effect on our business.
Disputed land ownership at Ciudad Juárez International Airport
Parties purporting to be former owners of land comprising a portion of the Ciudad Juárez International Airport initiated legal proceedings against the airport to reclaim the land, alleging that it was improperly transferred to the Mexican government.  As an alternative to recovery of this land, the claimants also sought monetary damages of U.S.$120 million.  On May 18, 2005 a Mexican court ordered us to return the disputed land to the plaintiffs. However that decision and three subsequent constitutional claims ( juicios de amparo ) permitted the case to be reconsidered, and as a result of such constitutional claims, the original claimants must now include the Ministry of Communications and Transportation as a party to the litigation since the Ministry of Communications and Transportation is the grantor of the concession title to the Ciudad Juarez Airport. On August 28, 2009, the Federal Government filed its answer to the claim, in which it requested that the trial be moved to Federal Jurisdiction.  This petition is still pending. In the event that any subsequent action results in a decision substantially similar to the May 18, 2005 court order or that is otherwise adverse to us, and the Mexican government does not subsequently exercise its power of eminent domain to retake possession of the land for our use, which we believe the terms of our concessions would require, our concession to operate the Ciudad Juárez International Airport would terminate.  In 2009, the Ciudad Juárez International Airport represented 4.8% of our revenue.  Although we believe and have been advised by the Ministry of Communications and Transportation that under the terms of our concessions the termination of our Ciudad Juárez concession would not affect the validity of our remaining airport concessions and that the Mexican federal government would be obligated to indemnify us against any monetary or other damages resulting from the termination of our Ciudad Juárez concession or a definitive resolution of the matter in favor of the plaintiffs, there can be no assurance that we would be so indemnified.

Property tax claims by certain municipalities
Administrative law proceedings were asserted against us by the municipalities of Chihuahua, Ciudad Juárez, Reynosa, Tampico, and Zihuatanejo for the payment of property taxes with respect to the real property on which we operate our airports in those cities.  The claims of the municipalities of Zihuatanejo, Chihuahua, Tampico and Ciudad Juárez (which amounted to Ps.2.8 million and Ps.25.3 million, and Ps.1.02 million and 1.8 million respectively) were dismissed on January 14, 2009, April 11, 2008 and May 9, 2008, and March 6, 2009, respectively.  The total amount of the property-tax claims outstanding, as recently updated to reflect additional amounts claimed since the proceedings were first asserted, in each of Reynosa and Zihuatanejo are Ps.59.5 million and Ps.2.8 million, respectively, although any of these amounts could increase if the underlying claims are not resolved in our favor.  Moreover, other municipalities where we operate our airports could assert similar claims.
On November 25, 2009, the municipality of Ciudad Juárez claimed that we owe Ps.7.5 million in property taxes. We have filed our answer to the claim denying any obligation to pay this property tax.  As of May 28, 2010, this claim is still pending.
On June 27, 2006, the municipality of Zihuatanejo issued a decree assessing taxes of Ps.4.3 million and a fine of Ps.4.3 million in respect property tax liability for the period from 1996 to 2000.  Pursuant to the decree, the municipality seized and attached two bank accounts of the Zihuatanejo International Airport and garnished rent paid by tenants located on concession property.  These two bank accounts contained no funds at the time of their seizure.  The monthly amount of rent subject to garnishment is approximately Ps.88,442.  We have filed claims seeking to (i) annul the assessment of the fine on substantive and procedural grounds, (ii) stay the seizure and attachment pending appeal and final resolution of our legal challenge to the constitutionality of the underlying tax liability and (iii) recover amounts paid by Zihuatanejo International Airport’s tenants to the municipality as a result of the ordered garnishment.  On April 23, 2008 the Administrative Court issued a resolution that dismissed a portion of the claim corresponding to Ps. 8.6 million, and on January 14, 2009 an administrative Court dismissed this claim.  We anticipate that the municipality may issue additional decrees assessing property taxes in respect of the period from 2000 to the present.
On May 14, 2007, the municipality of Reynosa gave notice of an update to the amount of property taxes and fines claimed of Ps. 59.2 million (in addition to the Ps 0.3 claimed in 2004).  We have filed claims contesting any obligation to pay any property tax, the newly updated amount claimed by the municipality and seeking to annul the assessment of the taxes and fines on constitutional grounds.  We anticipate that the municipality may issue additional decrees assessing property taxes claimed in respect of subsequent periods.
We do not believe that liabilities related to any claims or proceedings against us are likely to have, individually or in the aggregate, a material adverse effect on our consolidated financial condition or results of operations because, should a court determine that these taxes must be paid in response to any future proceedings, we believe that only the owners of the land should be responsible for paying these taxes directly, and the obligation to pay these taxes is not otherwise contemplated in the terms of our concessions.  The Mexican government has not acknowledged an obligation to pay such taxes, however, and changes to the Mexican Constitution and other applicable laws could render it liable to municipalities for property taxes in the future.  We cannot predict the amount of any such future tax liabilities or the criteria that would be used to determine them.  If such changes were to occur and any amounts owed were substantial, these resulting tax liabilities could have a materially adverse effect on our consolidated financial condition or results of operations.
Other Mexican airport operators contesting the assessment of similar property tax claims have been required to post surety bonds in connection with their challenge of those assessments.  If we are required to post similar surety bonds in the future, the terms of the surety bonds may restrict our ability to pay dividends or otherwise limit our flexibility.

Relocation of a cargo tenant at Monterrey International Airport
As part of the expansion and modernization of cargo operations at Monterrey International Airport, we have entered into agreements with most of our cargo customers and the Mexican customs authorities under which they have agreed to relocate their operations to new facilities.  Braniff Air Freight and Company, S.A. de C.V., or Braniff , a cargo customer that leases a portion of the area originally dedicated to customs activities at the airport from Mexican customs authorities, filed a claim in January 2004 challenging the validity of our relocation agreement with the Mexican customs authorities.  Although Braniff’s claim was dismissed, it has refused to vacate the space it occupies.  We brought a claim against the Mexican customs authorities seeking to cause them to relocate Braniff, and a Mexican court recently entered an initial judgment in our favor.  The Mexican customs authorities did not appeal such initial judgment and we are currently requesting the execution of the court’s order against the customs authorities.  Braniff and other cargo customers (Levisa, Salvador Daw Vidal and Braniff Despachos Advanales) challenged our efforts to seek this enforcement and obtained a suspension of the court order against the Mexican customs authority until the fulfillment of the court resolution.  On December 8, 2008, the constitutional trials ( or juicios de amparo) filed by Braniff and other cargo customers were dismissed, and, as a consequence, the prior judgment should be executed by the Court against the customs authorities in the near future. On October 30, 2009, the Mexican customs authority agreed with us and relocated in the new customs area by itself. Braniff filed a new constitutional trial against the relocation of the customs authority, which as of May 28, 2010, is still pending.
Outstanding amounts due from Airlines that suspended operations at our airports
Following the cessation of operations by Aerocalifornia, Avolar, Azteca, Aladia and Alma, we initiated legal proceedings against such airlines to recover outstanding amounts due, including rent, airport fees and passenger charges.
·
Aerocalifornia operated at the Culiacán, Ciudad Juárez, Chihuahua, Durango, Mazatlán, Monterrey and Torreón airports and suspended its operations as a result of a suspension by the Mexican regulatory authorities on July 24, 2008.  As of February 2009, this airline owed us Ps. 0.9 million for rent and passenger charges.  Moreover, Aerocalifornia is currently facing a strike by its former employees, which could further affect its financial conditions and its ability to repay us.
·
Avolar operated at the Acapulco, Culiacán, Durango and Zacatecas airports and suspended its operations as a result of a suspension by the Mexican regulatory authorities on August 5, 2008.  As of February 2009, this airline owed us Ps.5.4 million.
·
Azteca Airlines operated at the Acapulco, Ciudad Juárez, Culiacán, Chihuahua, Monterrey and Zacatecas airports and suspended its operations as a result of a suspension by the Mexican regulatory authorities on March 26, 2007.  As of February 2009, this airline owed us of Ps. 2.4 million, for rent, airport services fees and passenger charges.  This airline also suspended its operations on October 10, 2007, which could further affect its financial conditions and its ability to repay us.
·
Aladia operated at the Monterrey airport throughout the year and at the Ciudad Juarez, Chihuahua and Mazatlán airports in the summer months and suspended its operations on October 21, 2008.  As of February 2009, this airline owed us a total amount of Ps.$0.01 million for unpaid rent at Monterrey airport.  Aladia paid us a total of Ps. 4.0 million of airport services and passenger charges on November 6, 2008.
·
Alma operated at the Ciudad Juárez, Chihuahua, Mazatlán, Reynosa, Tampico, Torreón and Zihuatanejo airports and suspended its operations on November 7, 2008.  As of February 2009, the rent due amounted to Ps. 0.3 million and the amounts owed for airport service fees and passenger charges amounted to Ps22.7 million.  A Federal Court declared this airline’s bankruptcy on March 20, 2009, which could further affect its financial conditions and its ability to repay us.

·
On June 3, 2009, the Ministry of Communications and Transportation, acting through the General Director for Civil Aviation, temporarily suspended the operation of 25 Aviacsa aircraft. Aviacsa received a judicial injunction that enabled it to continue operating, and it resumed operations on June 12. On July 6, 2009 the Ministry of Communications and Transportation suspended Aviacsa’s right to use Mexican airspace, based on non-payment of royalties owed to the Navigation Services for Mexican Airspace. Aviacsa filed for insolvency protection on October 30, 2009. Aviacsa accounted for 7.0% of our total passenger traffic during the January-June 2009 period and 96.7% of such passengers were domestic.
The amounts mentioned above do not include interest.  Since most of these airlines are facing insolvency proceedings and other difficulties, there can be no assurance that we will be successful in the recovery of the amounts these airlines owe us. We have created allowances for all outstanding amounts.
Administrative proceeding for potential environmental violations in Monterrey
On April 18, 2008, we were notified about an administrative investigation by the Mexican Federal Environmental Protection Agency ( Procuraduría Federal de Protección al Ambiente or PROFEPA) with respect to potential violations of environmental regulations in connection with the construction of Terminal B at the Monterrey International Airport, which was constructed on an allegedly forested area.  The notification alleged that the construction took place without the required feasibility studies and environmental analysis, in violation of the environmental regulations.  We filed a formal answer with PROFEPA on May 12, 2008 in order to provide evidence that we have complied with all applicable environmental laws.  As part of the administrative proceeding, we signed an agreement with PROFEPA establishing our obligations, which includes the presentation of a study of possible damages, mitigation and compensation measures. As part of the measures to mitigate possible damages, we proposed the reforestation of the Municipality of Apodaca by planting 2,000 trees from February 2009 to November 2009. On February 26, 2010, we informed PROFEPA that we had fulfilled these measures and concluded the scheduled steps on mitigation and reforestation. On May 24, 2010, PROFEPA inspectors visited the Monterrey Airport in order to verify the successful implementation and fulfillment of our obligations. This visit ended the administrative proceeding. We expect PROFEPA to issue a compliance certification for the Monterrey Airport.
Mexican law requires that at least 5% of a company’s net income each year (after profit sharing and other deductions required by Mexican law) be allocated to a legal reserve fund until such fund reaches an amount equal to at least 20% of its capital stock from time to time (without adjustment for inflation).  Our legal reserve fund was Ps.124.2 million at December 31, 2009 (excluding reserve amounts corresponding to 2009 net income), which represented 2% of our capital stock as of such date.
Mexican companies may pay dividends only out of earnings (including retained earnings after all losses have been absorbed or paid up) and only after such allocation to the legal reserve fund.  The reserve fund is required to be funded on a stand-alone basis for each company, rather than on a consolidated basis.  The level of earnings available for the payment of dividends is determined under MFRS.  Our subsidiaries are required to allocate earnings to their respective legal reserve funds prior to paying dividends to us.  We are also required to allocate earnings to our legal reserve fund prior to distributing any dividend payments to our shareholders.
Dividends that are paid from a company’s distributable earnings that have not been subject to corporate income tax are subject to a corporate-level dividend tax (charged against cumulative net income and payable by us).  Companies are entitled to apply any corporate-level dividend tax on the distribution of earnings as a credit against their Mexican corporate income tax corresponding to the fiscal year in which the dividend was paid or against the Mexican corporate income tax of the two fiscal years following the date in which the dividend was paid.  Dividends paid from a company’s distributable earnings that have been subject to corporate income tax are not subject to this corporate-level dividend income tax.  Furthermore, dividends paid to resident and non-resident holders with respect to our Series B shares and ADSs are currently not subject to Mexican withholding tax.

Our current dividend policy seeks to ensure the tax efficient payment of dividends. Because any dividend we expect to pay will likely be subject to the corporate-level dividend tax referred to above, our dividend policy has been designed to ensure that any corporate level dividend tax we pay may be applied by us as a credit against its projected future corporate income tax liability in the year paid and in the subsequent two years.
Our current dividend policy has a fixed and a variable component paid annually in equal quarterly installments. The fixed component is Ps.325 million per year.  The variable component will be based on the funds available for distribution in excess of the fixed component.
Our dividend policy presupposes that the declaration and amount of dividends that are paid are subject to (and determined by) the following factors:
·
compliance with applicable law regarding the declaration and payment of dividends with respect to any year including the establishment of the statutory legal reserve fund of 5%;
·
we must maintain sufficient cash reserves, as determined by our Board of Directors, necessary to cover our projected investments for the subsequent twelve months and our expected operating expenses for the subsequent six months;
·
the amount of dividends to be paid may be limited to the extent necessary to avoid generating a tax liability that cannot be credited against our expected income tax liability in the subsequent two years (which is the period during which Mexican law allows us to credit the corporate level dividend tax against our income tax liability); and
·
we must maintain sufficient cash reserves, as determined by our Board of Directors, as to allow us to react to or prevent any adverse financial change in the operations of the business.
Our dividend policy was prepared based on current Mexican tax law and our current projections of our future earnings and corporate income tax liability.  Changes in Mexican tax law and our actual results of operations could cause our Board of Directors to propose to our shareholders to change the current dividend policy.
The declaration, amount and payment of dividends, if any, are subject to the approval of either (x) holders of a majority of our capital stock present at a shareholders’ meeting and, so long as the Series BB shares represent at least 7.65% of our outstanding capital stock, the approval of SETA (as the holder of the Series BB shares) or (y) holders of 95% of our capital stock.
On January 31, 2007, our shareholders approved a proposal to include quarterly payment of dividends in our dividend policy.  Subject to the satisfaction of the factors mentioned above and the approval of the shareholders, any dividends that are approved will be payable by us to the holders of our shares following the shareholder meeting that approved such dividends in four equal payments on the following dates in any given year: July 15, October 15, January 15 and April 15.
On April 3, 2008, our shareholders approved a cash dividend of Ps. 434.2 million and the use of up to Ps. 300 million to repurchase shares.  The dividend is Ps. 1.0856 per share, to be paid in four equal quarterly installments of Ps. 0.2714 per share each. Other resolutions of the Shareholders’ Meeting included: (i) ratification of the members of the Board of Directors that served from April 3, 2008 to April 23, 2009; (ii) designation of Independent Director Fernando Flores as the new Chairman of the Corporate Practices Committee (now the Special Committee responsible for Corporate Practices Functions); and (iii) modification of the Bylaws in order to strengthen corporate governance. The shareholders also agreed to postpone consideration of a proposal to modify the dividend policy to a future Extraordinary Shareholders’ Meeting.

On April 24, 2009, our shareholders approved a cash dividend of Ps. 400 million and the use of up to Ps. 400 million to repurchase shares in accordance with the share repurchase program.  The dividend is Ps. 1 per share, to be paid in four equal quarterly installments of Ps. 0.25 per share each.  Other resolutions of the Shareholders’ Meeting included: (i) ratification of all current members of the Board of Directors, and (ii) designation of Independent Director Luis Guillermo Zazueta Domínguez as the new Chairman of the Committee.
On April 16, 2010, our shareholders approved a cash dividend of Ps. 400 million and the use of up to Ps. 400 million to repurchase shares in accordance with the share repurchase program.  The dividend is Ps. 1.00 per share, to be paid in four equal quarterly installments of Ps. 0.25 per share each.  Other resolutions of the Shareholders’ Meeting included: (i) ratification of all current members of the Board of Directors, and (ii) designation of Independent Director Luis Guillermo Zazueta Domínguez as the Chairman of the Committee.
Prior to September 22, 2006, we had not paid any dividends.  On September 22, 2006, prior to the effectiveness of our new dividend policy, we paid an aggregate dividend of Ps.446.7 million.  On April 27, 2007, our shareholders’ meeting approved payment of a dividend of Ps.444.1 million, which was paid in four equal quarterly installments as follows:  Ps.107.4 on July 16, 2007, Ps.107.4 on October 15, 2007, Ps.107.4 on January 15, 2008 and Ps.107.4 on April 15, 2008. On April 3, 2008, our Shareholders’ meeting approved payment of a dividend of Ps.434.2 million, which during 2009 and 2010 was paid in 4 installments of Ps.108.5 each on July 15 th , October 15 th , January 15 Th . and April 15 th , pursuant to the dividends policy.  On April 24, 2009, our Shareholders’ meeting approved payment of a dividend of Ps.400 million which shall be paid in 4 installments of Ps.0.25 each, pursuant to the dividends policy. On April 16, 2010, our Shareholders approved the payment of a dividend of Ps.400 million, which, pursuant to our dividend policy, shall be paid in 4 installments of Ps. 0.25 each.
We declare our dividends in pesos.  In the case of Series B shares represented by ADSs, the cash dividends are paid to the depositary and, subject to the terms of the deposit agreement, converted into and paid in U.S. dollars at the prevailing rate of exchange, net of conversion expenses of the depositary and applicable Mexican withholding tax.  Fluctuations in exchange rates will affect the amount of dividends that ADS holders receive.
Distributions we make to our shareholders other than as dividends (in the manner described above), including capital reductions, amortization of shares or otherwise, would be subject to taxation in Mexico, including withholding taxes.  The tax rates applicable and the method of assessing and paying taxes applicable to any such non-dividend distributions will vary depending on the nature of the distributions.
Our parent company Aeroinvest entered into agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated to refinance its existing credit facilities in June 2007.  Under the refinancing agreements, Aeroinvest is required to cause us to distribute all of our available cash, subject to certain limitations, as quarterly dividends in accordance with our dividend policy, and is required to restrict us from making certain changes to the divided policy.  If we do not distribute a minimum required amount of dividends on each dividend payment date, Aeroinvest will be in default under the refinancing documents.  This requirement may cause Aeroinvest to vote in favor of a dividend in an amount greater than would otherwise be required by our dividend policy.  The terms of the refinancing agreements are more fully described under “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources.”
The Offer and Listing
STOCK PRICE HISTORY
The following table sets forth, for the periods indicated, the highest and lowest closing prices for (i) the ADSs on the NASDAQ in U.S. dollars and (ii) our common shares on the Mexican Stock Exchange in pesos.  For more information, see “Item 3. Key Information—Exchange Rates” for the exchange rates applicable during the periods set forth below.  The information set forth in the table below reflects actual historical amounts at the trade dates and has not been restated in constant pesos.
U.S.$ per ADS (1)
Pesos per Series B Share
Lowest
Highest
Lowest
Highest
2007
Fourth Quarter
24.49 31.00 33.23 42.21
2008
First Quarter
20.94 24.75 28.56 34.20
Second Quarter
16.58 23.98 21.51 31.72
Third Quarter
11.29 17.96 15.52 22.55
Fourth Quarter
7.06 11.60 12.29 19.25
2009
First Quarter
6.52 11.36 12.53 19.30
Second Quarter
7.37 11.3 12.77 19.02
Third Quarter
9.35 13.28 15.99 21.75
Fourth Quarter
11.39 14.02 18.97 22.98
U.S.$ per ADS (1)
Pesos per Series B Share
Lowest
Highest
Lowest
Highest
Monthly Prices
December, 2009
12.31 14.02 19.91 22.98
January, 2010
11.51 14.33 18.71 22.73
February, 2010
11.99 13.25 19.70 21.24
March, 2010
12.48 15.37 19.72 24.33
April, 2010
14.90 15.82 22.99 24.25
May, 2010
12.25 14.88 20.16 22.80
____________________________
(1)
8 Series B shares per ADS.
Sources:
Mexican Stock Exchange and the NASDAQ.
TRADING ON THE MEXICAN STOCK EXCHANGE
The Mexican Stock Exchange, located in Mexico City, is the only stock exchange in Mexico.  Founded in 1894, it ceased operations in the early 1900s, and was reestablished in 1907.  The Mexican Stock Exchange is organized as a corporation ( sociedad anónima de capital variable ) whose shares are held by brokerage firms.  These firms are exclusively authorized to trade on the floor of the Exchange.  Trading on the Mexican Stock Exchange takes place exclusively through an automated inter-dealer quotation system known as SENTRA, which is open between the hours of 8:30 a.m. and 3:30 p.m., Mexico City time, each business day.  Each trading day is divided into six trading sessions with ten-minute periods separating each session.  Trades in securities listed on the Mexican Stock Exchange can, subject to certain requirements, also be effected off the Exchange.  Due primarily to tax considerations, however, most transactions in listed Mexican securities are effected through the Exchange.  The Mexican Stock Exchange operates a system of automatic suspension of trading in shares of a particular issuer as a means of controlling excessive price volatility.  The suspension procedures will not apply to shares that are directly or indirectly (through ADSs or CPOs) quoted on a stock exchange outside Mexico.
Settlement is effected two business days after a share transaction on the Mexican Stock Exchange.  Deferred settlement, even if by mutual agreement, is not permitted without the approval of the CNBV.  Most securities traded on the Mexican Stock Exchange are on deposit with S.D. Indeval, S.A. de C.V., Instituto para el Deposito de Valores , a privately owned central securities depositary that acts as a clearing house, depositary, custodian and registrar for Mexican Stock Exchange transactions, eliminating the need for the physical transfer of shares.
The Mexican Stock Exchange is one of Latin America’s largest exchanges in terms of market capitalization, but it remains relatively small and illiquid compared to major world markets, and therefore subject to greater volatility.
As of December 31, 2009, 125 Mexican companies, excluding mutual funds, had equity listed on the Mexican Stock Exchange.  In 2009, the ten most actively traded equity issues (excluding banks) represented approximately 72.55% of the total volume of equity issues traded on the Mexican Stock Exchange.  Although the public participates in the trading of securities, a major part of the activity of the Mexican Stock Exchange reflects transactions by institutional investors.  There is no formal over-the-counter market for securities in Mexico.
The market value of securities of Mexican companies is, to varying degrees, affected by economic and market conditions in other emerging market countries and in the United States.  In late October 1997, for example, prices of both Mexican debt securities and Mexican equity securities dropped substantially following declines earlier in the year in the Asian, Russian and Brazilian securities markets.
Item 10.
Additional Information
Bylaws
This section summarizes certain provisions of Mexican law and our bylaws ( estatutos sociales ), a copy of which is attached to this Form 20-F as Exhibit 1.1.
At our Extraordinary Stockholders’ Meeting held on October 2, 2006, our shareholders adopted resolutions amending and restating of our bylaws to organize the company as a sociedad anonima bursatil , and conform our bylaws to the provisions of the Mexican Securities Market Law.  Some of the relevant changes included the enhancement of certain provisions applicable to the corporate governance of public companies, clarification of certain provisions relating to directors’ and officers’ liability, and the elimination of restrictions on ownership of our shares.
Our bylaws were further amended in the shareholders’ meeting held on April 3, 2008. In particular, the primary change concerned the elimination of the Nominations Committee and transfer of such Committee’s duties to the Shareholders Meeting and, where appropriate, to the Board of Directors.

Purposes
The purposes of our company include the following:
·
to acquire, as founder or through acquisitions, shares of or interests or participations in privately- or state-owned companies engaged in the management, operation (including the provision of aeronautical, complementary, commercial and construction services) and/or development of civilian airports pursuant to the Airport Law and its Regulations; to participate in the capital stock of companies engaged in the provision of all types of services; to vote, as a group and in the same manner, as prescribed by these bylaws or as directed by the Board of Directors, the shareholders’ meeting or any other person authorized by these bylaws to issue such a directive, any shares of stock of any other company owned thereby; and to sell, transfer or dispose of any such shares, participations or other securities in accordance with the applicable law;
·
to receive from any other Mexican or foreign entity, company or individual, and to provide to any company in which it may hold any interest or participation or to any other entity, company or individual, any services required to achieve its or their purposes, including, without limitation, any industrial, administrative, accounting, marketing or financial consulting services associated with the management, operation, construction and/or development of airports;
·
to apply for and obtain, by any means, directly or through its subsidiaries, concessions and permits to manage, operate, build and/or develop airports, provide airport development services or conduct other related activities, including, without limitation, storage and other activities to supplement or improve its service offerings, and grant guaranties in respect of such concessions and permits.  Subject to the applicable law and the terms of the relevant concessions, we may also receive, directly or through its subsidiaries, the proceeds from the use of any civilian airport infrastructure, the execution of any agreement, the provision of any service or the conduction of any business activity.  We may also provide merchandise handling, storage and custody services at bonded facilities in the manner prescribed by the applicable law and subject to any necessary concessions or authorizations.  We may also provide, coordinate, direct, supervise and/or render merchandise loading, unloading and handling services as provided by the applicable law;
·
to obtain, acquire, use, transfer and grant or secure licenses in respect of all types of patents, invention certificates, registered trademarks, trade names, copyrights or any rights associated therewith, whether in the United Mexican States or abroad;
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to obtain all types of secured and unsecured loans or credit facilities, and to grant loans to any association, company, entity or individual in which it holds more than 50% (fifty percent) of the capital stock with voting rights or which is otherwise under its control;
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to provide all types of collateral and guaranties in respect of any credit instrument issued or obligation assumed thereby or by any entity in which it holds more than 50% (fifty percent) of the shares of stock with voting rights or which is otherwise under its control;
·
to issue, subscribe, accept and endorse all types of credit instruments, including secured and unsecured debentures;
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to issue unsubscribed shares of any series of stock, which will be maintained as treasury shares for their delivery upon subscription, and to enter into option agreements with third parties providing for the right to subscribe and pay for any such shares.  We may also issue unsubscribed shares pursuant to Article 53 and other related provisions of the Securities Market Law;

·
to maintain, hold, sell, transfer, dispose of or lease all types of assets, personal and real property and rights thereto as may be necessary or convenient to achieve its corporate purpose or the purpose of any association or company in which it holds an interest or participation; and
·
generally, to carry out and execute any related, incidental or ancillary activities, agreements and transactions that may be necessary or convenient to achieve the abovementioned purposes.
Directors
Election of Directors
The Board of Directors is responsible for the management of our business.  Pursuant to our bylaws, the Board of Directors must consist of an odd number of directors determined at an ordinary general meeting of shareholders and is required to have at least 11 members.  Our Board of Directors currently consists of 11 directors and 1 alternate director, each of who is elected at the annual shareholders’ meeting.  Under the Mexican Securities Market Law and our by-laws, at least 25% of our directors must be independent.  Under Mexican law, the determination as to the independence of our directors made by our shareholders’ meeting may be contested by the National Banking and Securities Commission.
At each shareholders’ meeting for the election of directors (i) each person (or group of persons acting together) holding 10% of our capital stock in the form of Series B shares is entitled to designate one director, (ii) the holders of Series BB shares are entitled to elect three directors and their alternates pursuant to our bylaws, the participation agreement and the technical assistance agreement and (iii) the remaining members of the Board of Directors are to be elected by the holders of our capital stock (both the Series BB and the Series B shares, including those Series B holders that were entitled to elect a director by virtue of their owning 10% of our capital stock).  The candidates to be considered for election as directors by the shareholders will be proposed to the shareholders’ meeting by the Board.  Any slate of candidates proposed by the Board shall include independent directors to the extent required by the Mexican Securities Market Law and other applicable law.
Under the participation agreement, NAFIN, as trustee of the selling stockholder, Bancomext, ICA and SETA agreed that three of our directors are to be elected by SETA, as holder of the Series BB shares, three are to be elected by ICA. Five of our directors are independent.
Authority of the Board of Directors
The Board of Directors is our legal representative under Mexican law.  Pursuant to the Mexican Securities Market Law, the Board of Directors is required to approve, among other matters:
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our general strategy;
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annual approval of the business plan and the investment budget;
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capital investments not considered in the approved annual budget for each fiscal year;
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the proposal to increase our capital or that of our subsidiaries;
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the approval of our five-year master development program and any amendments thereto for each of our airports to be submitted to the Ministry of Communications and Transportation;
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the voting of the shares we hold in our subsidiaries;
·
our management structure and any amendments thereto;

·
the election of our Chief Executive Officer from the candidates proposed by the Series BB Directors and the approval of his compensation or his removal for cause;
·
any transfer by us of shares in our subsidiaries;
·
subject to the recommendation of the Special Committee responsible for Corporate Practices Functions, among other matters (i) the guidelines for the use or enjoyment of the goods that are part of our patrimony or that of our subsidiaries, by any related party, (ii) any transaction with related parties, subject to certain limited exceptions, (iii) the authorization for any member of our board, relevant officers or person with power of command, to take advantage of business opportunities for his own benefit or for the benefit of third parties, that originally corresponded to us or the companies under our control or in which we have a significant influence, and that exceed the limits set forth under item (iii) of the next paragraph, and (iv) the establishment of guidelines for the appointment and compensation of executive officers, which must be consistent with the guidelines established in the Technical Assistance Agreement;
·
subject to the recommendation of the Special Committee responsible for Audit Functions, among other matters (i) our financial statements and those of our subsidiaries, (ii) subject to certain limited exceptions, the acquisition and alienation by us, of our own stock, (iii) the guidelines for the granting of loans or any type of credits or guarantees to any related party, (iv) the guidelines regarding our internal controls, internal audits and those of our subsidiaries, (v) our accounting policies, including adjustments to our accounting principles to conform to or recognize those issued by the Commission, (vi) the hiring and termination of our external auditors, and (vii) unusual or non-recurrent transactions and any transactions or series of related transactions during any calendar year that involve (a) the acquisition or sale of assets with a value equal to or exceeding 5% of our consolidated assets or U.S.$20 million, or (b) the giving of collateral or guarantees or the assumption of liabilities equal to or exceeding 5% of our consolidated assets, U.S.$40 million or in excess of the debt level set forth in the annual business plan, which must not exceed a 50% debt to capital ratio;
·
the appointment and delegation of responsibilities, the creation of new committees or changing the responsibilities assigned to existing committees;
·
the appointment of members of the Special Committee responsible for Corporate Practices and for Audit Functions; with the understanding that at least one of its members shall be appointed from those proposed by the members of the board appointed by the holders of Series BB shares;
·
proposals to the shareholders’ meetings regarding (a) our dividend policy and (b) the use of our earnings;
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subject to certain conditions, the appointment of provisional members of the board, without the need for a shareholders’ meeting;
·
public tender offers;
·
the presentation at a general ordinary shareholders’ meeting of any of the following agenda items: (i) the annual reports of the Special Committee responsible for the Audit and the Corporate Practices Functions, (ii) the annual report given by the chief executive officer, the opinion of the external auditor and the opinion of the board on the content of such report, (iii) the report containing the main accounting and information guidelines used for the preparation of our financial information, and (iv) the report on the operations and activities in which the board had intervened pursuant to the Mexican Securities Market Law;
·
the appointment, removal, duties and responsibilities of our internal auditor;

·
communication policies with regards to providing information to our shareholders, the market and to other members of the board and relevant officers as well as decisions with regards to specific information to be released;
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actions to be taken in order to rectify any known irregularity and to implement any corrective measures;
·
the terms and conditions subject to which the chief executive officer shall exercise his power and duties; and
·
resolutions instructing our chief executive officer to disclose material information to the general public.
Under our bylaws, resolutions at board meetings with respect to any of the issues listed above will be valid only if approved by the members of the Board of Directors elected by the holders of the Series BB shares.
Powers of Series BB Directors
The Series BB directors are entitled to: (i) nominate the candidates for chief executive officer to our Board of Directors, (ii) move for the removal of our chief executive officer, (iii) appoint and remove half of our executive officers in accordance with the guidelines established in the technical assistance agreement and the guidelines approved by our Board of Directors, and (iv) appoint at least one member to each of our committees.
In addition, any matter requiring board approval under our bylaws, as indicated above, will require the approval of a majority of the directors appointed by the Series BB shareholders for so long as the Series BB shares represent at least 7.65% of our capital stock.
Our Capital Stock
The following table sets forth our authorized capital stock and our issued and outstanding capital stock as of May 28, 2010:
Capital Stock
As of May 28, 2010
Authorized
Issued and outstanding
Capital Stock:
Series B shares
341,200,000 341,200,000
Series BB shares
58,800,000 58,800,000
Total
400,000,000 400,000,000

All ordinary shares confer equal rights and obligations to holders within each series.  The Series BB shares have special voting and other rights described below.
Our bylaws provide that our shares have the following characteristics:
·
Series B .  Series B shares currently represent 85.3% of our capital.  Series B shares may be held by any Mexican or foreign natural person, company or entity.
·
Series BB .  Series BB shares currently represent 14.7% of our capital.  Series BB shares, which are issued pursuant to Article 112 of the Mexican General Law of Business Corporations, may be held by any Mexican or foreign natural person, company or entity.

Under the Mexican Airport Law and the Mexican Foreign Investments Law, foreign persons may not directly or indirectly own more than 49% of the capital stock of a holder of an airport concession unless an authorization from the Mexican Commission of Foreign Investments is obtained.
Voting Rights and Shareholders’ Meetings
Each Series B share and Series BB share entitles the holder to one vote at any general meeting of our shareholders.  Holders of Series BB shares are entitled to elect three members of our Board of Directors.
Under Mexican law and our bylaws, we may hold three types of shareholders’ meetings:  ordinary, extraordinary, and special.  Ordinary shareholders’ meetings are those called to discuss any issue not reserved for extraordinary shareholders’ meeting.  An annual ordinary shareholders’ meeting must be convened and held within the first four months following the end of each fiscal year to discuss, among other things, the report prepared by the Board on our financial statements, the appointment of members of the Board, declaration of dividends and the determination of compensation for members of the Board.  Under the Mexican Securities Market Law, our ordinary shareholders’ meeting, in addition to those matters described above, will have to approve any transaction representing 20% or more of our consolidated assets, executed in a single or a series of transactions, during any fiscal year.
Extraordinary shareholders’ meetings are those called to consider any of the following matters:
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extension of a company’s duration or voluntary dissolution;
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an increase or decrease in a company’s minimum fixed capital;
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change in corporate purpose or nationality;
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any transformation, merger or spin-off involving the company;
·
any stock redemption or issuance of preferred stock or bonds;
·
the cancellation of the listing of our shares with the National Registry of Securities or on any stock exchange;
·
amendments to a company’s bylaws; and
·
any other matters for which applicable Mexican law or the bylaws specifically require an extraordinary meeting.
Special shareholders’ meetings are those called and held by shareholders of the same series or class to consider any matter particularly affecting the relevant series or class of shares.
Shareholders’ meetings are required to be held in our corporate domicile, which is Mexico City.  Calls for shareholders’ meetings must be made by the Chairman, the Secretary, two members of the Board of Directors, the Special Committee responsible for Audit and Corporate Practices Functions.  Any shareholder or group of shareholders representing at least 10% of our capital stock has the right to request that the president of the Board of Directors, the Special Committee responsible for Audit and Corporate Practices Functions calls a shareholders’ meeting to discuss the matters indicated in the relevant request.  If the president of the Board of Directors, the Special Committee responsible for Audit and Corporate Practices Functions fails to call a meeting within 15 calendar days following receipt of the request, the shareholder or group of shareholders representing at least 10% of our capital stock may request that the call be made by a competent court.

Calls for shareholders’ meetings must be published in the Official Gazette of the Federation or in one newspaper of general circulation in Mexico City at least 15 calendar days prior to the date of the meeting.  Each call must set forth the place, date and time of the meeting and the matters to be addressed.  Calls must be signed by whoever makes them, provided that calls made by the Board of Directors, the Special Committee responsible for Audit and Corporate Practices Functions must be signed by the Chairman, the Secretary or a special delegate appointed by the Board of Directors, the Special Committee responsible for Audit and Corporate Practices Functions for that purpose.  Shareholders’ meetings will be validly held and convened without the need of a prior call or publication whenever all the shares representing our capital are duly represented.
To be admitted to any shareholders’ meeting, shareholders must:  (i) be registered in our share registry; and (ii) at least 24 hours prior to the commencement of the meeting submit (a) an admission ticket issued by us for that purpose, and (b) a certificate of deposit of the relevant stock certificates issued by the Secretary or by a securities deposit institution, a Mexican or foreign bank or securities dealer in accordance with the Mexican Securities Market Law.  The share registry will be closed three days prior to the date of the meeting.  Shareholders may be represented at any shareholders’ meeting by one or more attorneys-in-fact who may not be our directors.  Representation at shareholders’ meetings may be substantiated pursuant to general or special powers of attorney or by a proxy executed before two witnesses.
At or prior to the time of the publication of any call for a shareholders’ meeting, we will provide copies of the publication to the depositary for distribution to the holders of ADSs.  Holders of ADSs are entitled to instruct the depositary as to the exercise of voting rights pertaining to the Series B shares.
Quorums
Ordinary meetings are regarded as legally convened pursuant to a first call when more than 50% of the shares representing our capital are present or duly represented.  Resolutions at ordinary meetings of shareholders are valid when approved by a majority of the shares present at the meeting.  Any number of shares represented at an ordinary meeting of shareholders convened pursuant to a second or subsequent call constitutes a quorum.  Resolutions at ordinary meetings of shareholders convened in this manner are valid when approved by a majority of the shares present at the meeting.
Extraordinary shareholders’ meetings are regarded as legally convened pursuant to a first call when at least 75% of the shares representing our capital are present or duly represented and no minimum number of shares is required for a quorum at a second call for an extraordinary shareholders meeting.  Resolutions at extraordinary meetings of shareholders are valid if taken by the favorable vote of shares representing more that 50% of our capital.
Notwithstanding the foregoing, resolutions at extraordinary meetings of shareholders called to discuss any of the issues listed below are valid only if approved by a vote of shares representing at least 75% of our capital:
·
any amendment to our bylaws which:  (i) changes or deletes the authorities of our committees or  (ii) eliminates or modifies any minority rights;
·
any actions resulting in the cancellation of the concessions granted to us or our subsidiaries by the Mexican government or any assignment of rights arising therefrom;
·
termination of the participation agreement that was entered into by SETA and the Mexican government in connection with the Mexican government’s sale of the Series BB shares to SETA;
·
a merger by us with an entity the business of which is not related to the business of us or our subsidiaries; and
·
a spin-off, dissolution or liquidation of us.
Our bylaws also establish that a delisting of our shares requires the vote of holders of 95% of our capital stock.

Veto Rights of Holders of Series BB Shares
So long as the Series BB shares represent at least 7.65% of our capital stock, resolutions adopted at shareholders’ meetings with respect to any of the issues listed below will only be valid if approved by a vote of at least 95% of our capital stock or a majority of the Series BB shares:
·
approval of our financial statements and those of our subsidiaries;
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anticipated liquidation or dissolution;
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capital increases or decreases of us or of our subsidiaries;
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declaration and payment of dividends;
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amendment to our bylaws;
·
mergers, spin-offs, reclassifications, consolidations or share-splits;
·
grant or amendment of special rights of any series of shares of our capital stock;
·
any decision amending or nullifying a resolution validly taken by the Board of Directors with respect to decisions of the Board of Directors that require the affirmative vote of the directors elected by the holders of our Series BB shares; and
·
any shareholder resolution with respect to a matter requiring the affirmative vote of the directors appointed by the holders of our Series BB shares.
Right of Withdrawal
Any shareholder having voted against a resolution validly adopted at a meeting of our shareholders with respect to (i) a change in our corporate purpose or nationality, (ii) a change of corporate form, (iii) a merger involving us in which we are not the surviving entity or the dilution of its capital stock by more than 10% or (iv) a spin-off, may request redemption of its shares, provided that the relevant request is filed with us within fifteen days following the holding of the relevant shareholders’ meeting.  The redemption of the shareholders’ shares will be effected at the lower of (a) 95% of the average trading price determined based on the average of the prices of our shares on the 30 days on which the shares may have been quoted prior to the date of the meeting, or (b) the book value of the shares in accordance with the most recent audited financial statements approved by our shareholders’ meeting.
Dividends and Distributions
At our annual ordinary general shareholders’ meeting, the Board of Directors will submit to the shareholders for their approval our financial statements for the preceding fiscal year.  Five percent of our net income (after profit sharing and other deductions required by Mexican law) must be allocated to a legal reserve fund until the legal reserve fund reaches an amount equal to at least 20% of our capital stock (without adjustment for inflation).  Additional amounts may be allocated to other reserve funds as the shareholders may from time to time determine including a reserve to repurchase shares.  The remaining balance, if any, of net earnings may be distributed as dividends on the shares of common stock.  A full discussion of our dividend policy may be found in “Item 8. Financial Information - Dividends.”

Registration and Transfer
Our shares are registered with the Mexican National Securities Registry, as required under the Mexican Securities Market Law and regulations issued by the Mexican National Banking and Securities Commission.  Our shares are evidenced by share certificates in registered form, and registered dividend coupons may be attached thereto.  Our shareholders may either hold their shares directly, in the form of physical certificates, or indirectly, in book-entry form through institutions that have accounts with Indeval.  Indeval is the holder of record in respect of all such shares held in book-entry form.  Indeval will issue certificates on behalf of our shareholders upon request.  Accounts may be maintained at Indeval by the following “Indeval participants”:  brokers, banks, other financial entities or other entities approved by the National Banking and Securities Commission.  We maintain a stock registry and only those persons listed in such stock registry, and those holding certificates issued by Indeval indicating ownership and any relevant Indeval participants, will be recognized as our shareholders.  The transfer of shares must be registered in our stock registry.  In the case of the international offering, the Depositary will appear in such stock registry as the registered holder of the common shares represented by the ADSs.
Series BB shares may only be transferred after conversion into Series B shares, and are subject to the following rules:
·
SETA was required to retain at least 51% of its Series BB shares until June 14, 2007. Since June 14, 2007, SETA is free to sell in any year up to one eighth of such 51% interest in Series BB shares. To date, SETA has not elected to transfer any such shares.
·
If SETA owns Series BB shares that represent less than 7.65% of our capital stock after June 14, 2014, those remaining Series BB shares will be automatically converted into freely transferable Series B shares.
·
If SETA owns Series BB shares representing at least 7.65% of our capital stock after June 14, 2014, those Series BB shares may be converted into Series B shares, provided the holders of at least 51% of Series B shares (other than shares held by SETA and any of its “related persons”) approve such conversion.
For purposes of our bylaws, a “related person” means, with respect to any person:
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any corporation or person, directly or indirectly, controlling, controlled by or under common control with such person;
·
any corporation or person having the capacity to determine the business guidelines and policies of such person;
·
in the case of an individual, an individual having a blood or civil kinship in a direct line (ascending or descending) within and including the fourth degree with such person;
·
SETA; or
·
with respect to SETA, its shareholders, persons related to it or any party to the operating agreement pursuant to which SETA fulfills its obligations under the technical assistance agreement.
For purposes of our bylaws, “control” of a person, with respect to any person, is defined as:
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the ownership, directly or indirectly of 20% or more of the capital stock with voting rights of such person,
·
the contractual right to elect the majority of the members of the Board of Directors of the person,

·
the ability to veto resolutions that could otherwise be adopted by the majority of the person’s shareholders, or
·
existence of commercial relations representing the purchase of more than 15% of the total annual sales of such person.
Shareholder Ownership Restrictions and Anti-Takeover Protection
Under the Airport Law,
·
no more than 5% of our outstanding capital stock may be owned by air carriers, and
·
foreign governments acting in a sovereign capacity may not directly or indirectly own any portion of our capital stock.
The foregoing ownership restrictions do not apply to:
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The Mexican government, prior to the consummation of this offering,
·
NAFIN, including in its capacity as trustee of the selling stockholder,
·
Institutions that act as depositaries for securities, and
·
Financial and other authorized institutions that hold securities for the account of beneficial owners (including the ADS depositary), provided that such beneficial owners are not exempt from the ownership restrictions.
Air carriers and their subsidiaries and affiliates are not permitted, directly or indirectly, to “control” us or any of our subsidiary concession holders.
Under the Mexican Airport Law, any acquisition of control requires the prior consent of the Ministry of Communications and Transportation.
For purposes of these provisions, “related person” and “control” are defined above under “Registration and Transfer.”
Changes in Capital Stock
Increases and reductions of our capital must be approved at an extraordinary shareholders’ meeting, subject to the provisions of our bylaws and the Mexican General Law of Business Corporations.
Subject to the individual ownership limitations set forth in our bylaws, in the event of an increase of our capital stock, other than for purposes of conducting a public offering of the shares issued as a result of such increase, our shareholders will have a preemptive right to subscribe and pay for new stock issued as a result of such increase in proportion to their shareholder interest at that time, unless: (i) the capital increase relates to the issuance of shares for placement in public offerings, or (ii) the capital increase relates to the issuance of shares upon the conversion of debentures as provided in Section 210 bis of the Mexican General Law on Negotiable Instruments and Credit Transactions.  Said preemptive right shall be exercised by any method provided in Section 132 of the Mexican General Corporations Law, by subscription and payment of the relevant stock within fifteen business days after the date of publication of the corresponding notice to our shareholders in the Official Gazette of the Federation and in one of the newspapers of greater circulation in Mexico, provided that if at the corresponding meeting all of our shares are duly represented, the fifteen business day period shall commence on the date of the meeting.

Our capital stock may be reduced by resolution of a shareholders’ meeting taken pursuant to the rules applicable to capital increases.  Our capital stock may also be reduced upon withdrawal of a shareholder as provided in Section 206 of the Mexican General Corporations Law (See “—Voting Rights and Shareholders’ Meetings—Right of Withdrawal” above) or by repurchase of our own stock in accordance with the Securities Market Law (See “—Share Repurchases” below).
Share Repurchases
We may choose to acquire our own shares through the Mexican Stock Exchange and The NASDAQ National Market on the following terms and conditions:
·
the acquisition must be carried out through the Mexican Stock Exchange;
·
the acquisition must be carried out at market price, unless a public offer or auction has been authorized by the National Banking and Securities Commission;
·
the acquisition must be carried out against our paid in capital, and shares acquired will be held as treasury stock without any requirement to adopt a reduction in capital stock or to count them against capital stock, in which case, such shares will be converted to unsubscribed shares.  No shareholder consent is required for such purchases;
·
the amount and price paid in all share repurchases shall be made public;
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the annual ordinary shareholders meeting shall determine the maximum amount of resources to be used in the fiscal year for the repurchase of shares;
·
we may not be delinquent on payments due on any outstanding debt issued by us that is registered with the National Securities Registry; and
·
any acquisition of shares must be in conformity with the requirements of Article 54 of the Securities Market Law and we must maintain a sufficient number of outstanding shares to meet the minimum trading volumes required by the stock markets on which our shares are listed.
Ownership of Capital Stock by Subsidiaries
Our subsidiaries may not, directly or indirectly, invest in our shares, except for shares of our capital stock acquired as part of an employee stock option plan and in conformity with the Mexican Securities Market Law.
Repurchase Obligation
Pursuant to the Mexican Securities Market Law, in the event that we decide to cancel the registration of our shares in the Mexican National Securities Registry and the listing of our shares on the Mexican Stock Exchange or if the National Banking and Securities Commission orders such cancellation, we will be required to conduct a tender offer for the purchase of stock held by minority shareholders and to create a trust with a term of six months, with amounts sufficient to purchase all shares not participating in the tender offer.  Under the law, our controlling shareholders will be secondarily liable for these obligations.  The price at which the stock must be purchased shall be the higher of (i) the average of the trading price on the Mexican Stock Exchange during the last 30 days on which the shares were quoted prior to the date on which the tender offer is made or (ii) the book value of such shares as determined pursuant to our latest quarterly financial information filed with the National Banking and Securities Commission and the Mexican Stock Exchange.  If the tender for cancellation is requested by the National Banking and Securities Commission, it must be initiated within 180 days from the date of the request.  If requested by us, under the new Mexican Securities Market Law, the cancellation must be approved by 95% of our shareholders.

Liquidation
Upon our dissolution, one or more liquidators must be appointed at an extraordinary shareholders’ meeting to wind up our affairs.  All fully paid and outstanding shares will be entitled to participate equally in any distribution upon liquidation.  Partially paid shares participate in any distribution in the same proportion that such shares have been paid at the time of the distribution.
Other Provisions
Liabilities of the members of the Board of Directors
The Mexican Securities Market Law imposes a duty of care and a duty of loyalty on directors.  The duty of care requires our directors to act in good faith and in the best interests of the company.  For such purpose our directors are required to obtain the necessary information from the chief executive officer, the executive officers, the external auditors or any other person in order to act in our best interests.  Our directors are liable for damages and losses caused to us and our subsidiaries as a result of violations of this duty of care.
The duty of loyalty requires our directors to preserve confidential information received in connection with the performance of their duties and to abstain from discussing or voting on matters in which they have a conflict of interest.  In addition, the duty of loyalty is violated if a shareholder or group of shareholders is knowingly favored or if, without the express approval of the Board of Directors, a director usurps a corporate opportunity.  The duty of loyalty is also violated by (i) failing to disclose to the Special Committee responsible for Audit Functions or the external auditors any irregularities that the director encounters in the performance of his or her duties or (ii) disclosing information that is false or misleading or omitting to record any transaction in our records that could affect our financial statements.  Directors are liable for damages and losses caused to us and our subsidiaries for violations of this duty of loyalty.  This liability also extends to damages and losses caused as a result of benefits obtained by the director or directors or third parties, as a result of actions of such directors.
Our directors may be subject to criminal penalties of up to 12 years’ imprisonment for certain illegal acts involving willful misconduct that result in losses to us. Such acts include the alteration of financial statements and records.
Liability actions for damages and losses resulting from the violation of the duty of care or the duty of loyalty may be exercised solely for our benefit and may be brought by the company or by shareholders representing 5% or more of the capital stock of the company and criminal actions may only be brought by the Mexican Ministry of Finance, after consulting with the National Banking and Securities Commission.  As a safe harbor for directors, the liabilities specified above (including criminal liability) will not be applicable if the director acting in good faith (i) complied with applicable law, (ii) made the decision based upon information provided by our executive officers or third-party experts, the capacity and credibility of which would not give rise to reasonable doubt and (iii) selected the most adequate alternative in good faith or the negative effects of such decision were not foreseeable.
In addition to the duty of care and duty of loyalty required by the Mexican Securities Market Law, our bylaws provide that, from the date on which at least 51% of our capital stock is listed on a stock exchange, a member of the Board of Directors will be liable to us and our shareholders in the following circumstances:
·
negligence resulting in the loss of more than two-thirds of our capital stock and which results in our dissolution;

·
bankruptcy, subject to certain conditions, when the actions taken by the Board of Directors results in a declaration of insolvency ( concurso mercantil );
·
breaching any of the duties set forth under our bylaws; and
·
failure to report irregularities in the actions of former board members.
The members of the board are liable to our shareholders only for the loss of net worth suffered as a consequence of disloyal acts carried out in excess of their authority or in violation of our bylaws.
Information to Shareholders
The Mexican General Law on Business Corporations establishes that companies, acting through their boards of directors, must annually present a report at a shareholder’s meeting that includes the following:
·
a report of the directors on the operations of the company during the preceding year, as well as on the policies followed by the directors and on the principal existing projects;
·
a report explaining the principal accounting and information policies and criteria followed in the preparation of the financial information;
·
a statement of the financial condition of the company at the end of the fiscal year;
·
a statement showing the results of operations of the company during the preceding year, as well as changes in the company’s financial condition and capital stock during the preceding year;
·
the notes which are required to complete or clarify the above mentioned information; and
·
the report prepared by the Special Committee responsible for the Audit Functions with respect to the accuracy and reasonability of the above mentioned information presented by the Board of Directors.
In addition to the foregoing, our bylaws provide that the Board of Directors should also prepare the information referred to above with respect to any subsidiary that represents at least 20% of our net worth (based on the financial statements most recently available).
Duration
The duration of our corporate existence is indefinite.
Shareholders’ Conflict of Interest
Under Mexican law, any shareholder that has a conflict of interest with respect to any transaction must abstain from voting and from being present and participating in discussions thereon at the relevant shareholders’ meeting.  A shareholder that votes on a transaction in which its interest conflicts with ours may be liable for damages in the event the relevant transaction would not have been approved without such shareholder’s vote.
Directors’ Conflict of Interest
Under Mexican law, any director who has a conflict of interest in any transaction must disclose such fact to the other directors and abstain from voting on such transaction.  Any director who violates such provision will be liable to us for any resulting damages or losses.

Certain Differences between Mexican and U.S. Corporate Law
The Mexican General Corporations Law and the Mexican Securities Market Law, which apply to us, differ in certain material respects from laws generally applicable to U.S. corporations and their shareholders.
Independent Directors
The Mexican Securities Market Law requires that 25% of the directors of Mexican public companies be independent.  Pursuant to the rules and regulations of The NASDAQ National Market, foreign companies subject to reporting requirements under the U.S. federal securities laws and listed on the NASDAQ National Market must maintain a committee responsible for Audit Functions comprised entirely of independent directors as defined in the U.S. federal securities laws.
Mergers, Consolidations, and Similar Arrangements
A Mexican company may merge with another company only if a majority of the shares representing its outstanding capital stock approve the merger at a duly convened general extraordinary shareholders’ meeting, unless the company’s bylaws impose a higher threshold.  Dissenting shareholders are not entitled to appraisal rights.  Creditors have ninety days to oppose a merger judicially, provided they have a legal interest to oppose the merger.
Under Delaware law, with certain exceptions, a merger, consolidation, or sale of all or substantially all the assets of a corporation must be approved by the Board of Directors and a majority of the outstanding shares entitled to vote thereon.  Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which the shareholder may receive payment in the amount of the fair market value of the shares held by the shareholder (as determined by a court) in lieu of the consideration the shareholder would otherwise receive in the transaction.  Delaware law also provides that a parent corporation, by resolution of its Board of Directors and without any shareholder vote, may merge with any subsidiary of which it owns at least 90% of each class of capital share.  Upon any such merger, dissenting shareholders of the subsidiary would have appraisal rights.
Anti-Takeover Provisions
Subject to the approval of the Mexican National Banking and Securities Commission, the Mexican Securities Market Law permits public companies to include anti-takeover provisions in their bylaws that restrict the ability of third parties to acquire control of the company without obtaining approval of the company’s Board of Directors.
Under Delaware law, corporations can implement shareholder rights plans and other measures, including staggered terms for directors and super-majority voting requirements, to prevent takeover attempts.  Delaware law also prohibits a publicly held Delaware corporation from engaging in a business combination with an interested shareholder for a period of three years after the date of the transaction in which the shareholder became an interested shareholder unless:
·
prior to the date of the transaction in which the shareholder became an interested shareholder, the Board of Directors of the corporation approves either the business combination or the transaction that resulted in the shareholder becoming an interested shareholder;
·
upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owns at least 85% of the voting stock of the corporation, excluding shares held by directors, officers, and employee stock plans; or

·
at or after the date of the transaction in which the shareholder became an interested shareholder, the business combination is approved by the Board of Directors and authorized at a shareholders’ meeting by at least 66 2/3 % of the voting stock, which is not owned by the interested shareholder.
Shareholders’ Suits
As mentioned above, holders of 5% of our outstanding shares may initiate action against some or all of our directors for violations of their duty of care or duty of loyalty, for our benefit, in an amount equal to the damages or losses caused to us. Actions initiated on these grounds have a five-year statute of limitations and will not be applicable if the relevant directors acted under any of the exclusions set forth under the new Mexican Securities Market Law.  Class action lawsuits are not permitted under Mexican law.
Class actions and derivative actions are generally available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law.  In these kinds of actions, the court generally has discretion to permit the winning party to recover attorneys’ fees incurred in connection with the action.
Shareholder Proposals
Under Mexican law and our bylaws, holders of at least 10% of our outstanding capital stock are entitled to appoint one member of our Board of Directors and his or her alternate.
Delaware law does not include a provision restricting the manner in which nominations for directors may be made by shareholders or the manner in which business may be brought before a meeting.
Calling of Special Shareholders’ Meetings
Under Mexican law and our bylaws, a shareholders’ meeting may be called by the Board of Directors, any two directors, the chairman, the secretary, the Special Committee responsible for Audit and Corporate Practices Functions.  Any shareholder or group of shareholders with voting rights representing at least 10% of our capital stock may request that the chairman of the Board of Directors, the Special Committee responsible for Audit and Corporate Practices Functions call a shareholders’ meeting to discuss the matters indicated in the written request.  If the chairman of the Board of Directors, the Special Committee responsible for Audit or Corporate Practices Functions fails to call a meeting within 15 calendar days following date of the written request, the shareholder or group of shareholders may request that a competent court call the meeting.  A single shareholder may call a shareholders’ meeting if no meeting has been held for two consecutive years or if matters to be dealt with at an ordinary shareholders’ meeting have not been considered.
Delaware law permits the Board of Directors or any person who is authorized under a corporation’s certificate of incorporation or bylaws to call a special meeting of shareholders.
Cumulative Voting
Under Mexican law, cumulative voting for the election of directors is not permitted.
Under Delaware law, cumulative voting for the election of directors is permitted only if expressly authorized in the certificate of incorporation.

Approval of Corporate Matters by Written Consent
Mexican law permits shareholders to take action by unanimous written consent of the holders of all shares entitled to vote.  These resolutions have the same legal effect as those adopted in a general or special shareholders’ meeting.  The Board of Directors may also approve matters by unanimous written consent.
Delaware law permits shareholders to take action by written consent of holders of outstanding shares having more than the minimum number of votes necessary to take the action at a shareholders’ meeting at which all voting shares were present and voted.
Amendment of Certificate of Incorporation
Under Mexican law, it is not possible to amend a company’s certificate of incorporation (acta constitutiva) .  However, the provisions that govern a Mexican company are contained in its bylaws, which may be amended as described below.  Under Delaware law, a company’s certificate of incorporation generally may be amended by a vote of the majority of shareholders entitled to vote thereon (unless otherwise provided in the Certificate of Incorporation, subsequent to a resolution of the Board of Directors proposing such amendment.
Amendment of Bylaws
Under Mexican law, amending a company’s bylaws requires shareholder approval at an extraordinary shareholders’ meeting.  Mexican law requires that at least 75% of the shares representing a company’s outstanding capital stock be present at the meeting in the first call (unless the bylaws require a higher threshold) and that the resolutions be approved by a majority of the shares representing a company’s outstanding capital stock.  In addition, pursuant to our bylaws the amendment of our bylaws requires the approval of either (i) holders of at least 95% of our outstanding capital stock or (ii) holders of at least a majority of our outstanding capital stock, including, for so long as the Series BB shares represent at least 7.65% of our capital stock, a majority of holders of Series BB shares.
Under Delaware law, holders of a majority of the voting power of a corporation and, if so provided in the certificate of incorporation, the directors of the corporation, have the power to adopt, amend, and repeal the bylaws of a corporation.
Staggered Board of Directors
Mexican law does not permit companies to have a staggered Board of Directors, while Delaware law does permit corporations to have a staggered Board of Directors.
MATERIAL CONTRACTS
Our subsidiaries are parties to the airport concessions granted by the Ministry of Communications and Transportation under which we are required to construct, operate, maintain and develop the airports in exchange for certain benefits.  See “—Sources of Regulation” and “ — Scope of Concessions and General Obligations of Concession Holders” under “Regulatory Framework” in Item 4.
We are a party to a participation agreement with SETA and the Ministry of Communications and Transportation that establishes the framework for several other agreements to which we are a party.  See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Arrangements relating to SETA.”
We have entered into a technical assistance agreement with SETA providing for management and consulting services.  See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions—Arrangements relating to SETA.”

Aeroinvest and SETA have entered into a voting rights agreement providing for bloc voting with respect to their shares of our capital stock. See "Item 7. Major Shareholders and Related Party Transactions - Major Shareholders - Arrangements relating to Aeroinvest.  An English translation of this agreement is filed as an exhibit to this Form 20-F.
EXCHANGE CONTROLS
Mexico has had free market for foreign exchange since 1991 and the government has allowed the peso to float freely against the U.S. dollar since December 1994.  There can be no assurance that the government will maintain its current foreign exchange policies.  See “Item 3. Key Information—Exchange Rates.”
The following summary contains a description of the material anticipated U.S. and Mexican federal income tax consequences of the purchase, ownership and disposition of our Series B shares or ADSs by a beneficial holder that is a citizen or resident of the United States or a U.S. domestic corporation or that otherwise will be subject to U.S. federal income tax on a net income basis in respect of our Series B shares or ADSs and that is a “non-Mexican holder” (as defined below) (a “U.S. holder”), but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase our Series B shares or ADSs.  In particular, the summary deals only with U.S. holders that will hold our Series B shares or ADSs as capital assets and does not address the tax treatment of special classes of U.S. holders such as dealers in securities or currencies, U.S. holders whose functional currency is not the U.S. dollar, U.S. holders that own or are treated as owning 10% or more of our outstanding voting shares, tax-exempt organizations, financial institutions, U.S. holders liable for the alternative minimum tax, securities traders who elect to account for their investment in Series B shares or ADSs on a mark-to-market basis and persons holding Series B shares or ADSs in a hedging transaction or as part of a straddle, conversion or other integrated transaction for U.S. federal income tax purposes.  In addition, the summary does not address any U.S. or Mexican state or local tax considerations that may be relevant to a U.S. holder.
The summary is based upon the federal income tax laws of the United States and Mexico as in effect on the date of this Form 20-F, including the provisions of the income tax treaty between the United States and Mexico and protocol thereto (the “Tax Treaty”), all of which are subject to change, possibly with retroactive effect in the case of U.S. federal income tax law.  Prospective investors in our Series B shares or ADSs should consult their own tax advisors as to the U.S., Mexican or other tax consequences of the purchase, ownership and disposition of the Series B shares or ADSs, including, in particular, the effect of any foreign, state or local tax laws and their entitlement to the benefits, if any, afforded by the Tax Treaty.
For purposes of this summary, the term “non-Mexican holder” shall mean a holder that is not a resident of Mexico and that will not hold the Series B shares or ADSs or a beneficial interest therein in connection with the conduct of a trade or business through a permanent establishment or fixed base in Mexico.
For purposes of Mexican taxation, the definition of residency is highly technical and residency results in several situations.  Generally an individual is a resident of Mexico if he or she has established his or her home in Mexico, and a corporation is a resident if it is incorporated under Mexican law or it has its center of interests in Mexico.  An individual who has a home in Mexico and another country will be considered to be a resident of Mexico if Mexico is the individual’s significant center of interest.  An individual’s significant center of interest will be considered Mexico in the following circumstances, among other factors: (i) when more than 50% of such person’s total yearly income originates in Mexico, and (ii) when Mexico is the individual’s principal place of business.  Additionally, Mexican officers and employees working for the Mexican government but living outside of Mexico will be considered to be Mexican residents even if their significant center of interest is not in Mexico.  However, any determination of residence should take into account the particular situation or each person or legal entity.

In general, for U.S. federal income tax purposes, holders of ADSs will be treated as the beneficial owners of the Series B shares represented by those ADSs.
Taxation of Dividends
Mexican Tax Considerations
Under Mexican Income Tax Law provisions, dividends paid to non-Mexican holders with respect to our Series B shares or ADSs are not subject to any Mexican withholding tax.
U.S. Federal Income Tax Considerations
The gross amount of any distributions paid with respect to the Series B shares or ADSs, to the extent paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, generally will be includible in the gross income of a U.S. holder as ordinary income on the date on which the distributions are received by the depositary and will not be eligible for the dividends received deduction allowed to certain corporations under the U.S. Internal Revenue Code of 1986, as amended.  To the extent that a distribution exceeds our current and accumulated earnings and profits, it will be treated as a non-taxable return of basis to the extent thereof, and thereafter as capital gain from the sale of Series B shares or ADSs.  Distributions, which will be made in pesos, will be includible in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date they are received by the depositary whether or not they are converted into U.S. dollars.  If such distributions are converted into U.S. dollars on the date of receipt, a U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the distributions.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual U.S. holder prior to January 1, 2011 with respect to the ADSs will be subject to taxation at a maximum rate of 15% if the dividends are “qualified dividends.”  Dividends paid on the Series B shares or ADSs will be treated as qualified dividends if: (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that has been approved for the purposes of the qualified dividend rules, and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the years in which the dividend is paid, a passive foreign investment company (PFIC).  The income tax treaty between the United States and Mexico has been approved for the purposes of the qualified dividend rules.  Based on our audited financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2008 and 2009 taxable years. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2010 taxable year.
Taxation of Dispositions of Shares or ADSs
Mexican Tax Considerations
Gain on the sale or other disposition of ADSs by a non-Mexican holder will not be subject to any Mexican tax.  Deposits and withdrawals of our Series B shares in exchange for ADSs will not give rise to Mexican tax or transfer duties.
Gain on the sale of our Series B shares by a non-Mexican holder will not be subject to any Mexican tax if the transaction is carried out through the Mexican Stock Exchange or other securities markets approved by the Mexican Ministry of Finance, and provided certain requirements set forth by the Mexican Income Tax Law are complied with.  Sales or other dispositions of Series B shares made in other circumstances generally would be subject to Mexican tax, except to the extent that a holder is eligible for benefits under an income tax treaty to which Mexico is a party.  Under the Tax Treaty, a holder that is eligible to claim the benefits of the Tax Treaty will be exempt from Mexican tax on gains realized on a sale or other disposition of the Series B shares in a transaction that is not carried out through the Mexican Stock Exchange or such other approved securities markets, so long as the holder did not own, directly or indirectly, 25% or more of our capital stock (including ADSs) within the 12-month period preceding such sale or other disposition.

For non-Mexican holders that do not meet the requirements referred to above, gross income realized on the sale of the Series B shares will be subject to a 5% Mexican withholding tax if the transaction is carried out through the Mexican Stock Exchange.  Alternatively, a non-Mexican holder can choose to be subject to a 20% withholding rate on the net gain obtained, as calculated pursuant to Mexican Income Tax Law provisions.
U.S. Federal Income Tax Considerations
Upon the sale or other disposition of the Series B shares or ADSs, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized on the sale or other disposition and such U.S. holder’s tax basis in the Series B shares or ADSs.  Gain or loss recognized by a U.S. holder on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the Series B shares or ADSs have been held for more than one year.  Long-term capital gain recognized by a U.S. holder that is an individual is subject to lower rates of federal income taxation than ordinary income or short-term capital gain.  The deduction of a capital loss is subject to limitations for U.S. federal income tax purposes.  Deposits and withdrawals of Series B shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.
Gain, if any, realized by a U.S. holder on the sale or other disposition of the Series B shares or ADSs generally will be treated as U.S. source income for U.S. foreign tax credit purposes.  Consequently, if a Mexican withholding tax is imposed on the sale or disposition of the Series B shares, a U.S. holder that does not receive significant foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of these Mexican taxes.  U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, Series B shares.
Other Mexican Taxes
There are no Mexican inheritance, gift, succession or value added taxes applicable to the ownership, transfer or disposition of the Series B shares or ADSs by non-Mexican holders; provided, however, that gratuitous transfers of the Series B shares or ADSs may in certain circumstances cause a Mexican federal tax to be imposed upon the recipient.  There are no Mexican stamp, issue, registration or similar taxes or duties payable by non-Mexican holders of the Series B shares or ADSs.
U.S. Backup Withholding Tax and Information Reporting Requirements
In general, information reporting requirements will apply to payments by a paying agent within the United States to a non-corporate (or other non-exempt) U.S. holder of dividends in respect of the Series B shares or ADSs or the proceeds received on the sale or other disposition of the Series B shares or ADSs, and a backup withholding tax may apply to such amounts if the U.S. holder fails to provide an accurate taxpayer identification number to the paying agent.  Amounts withheld as backup withholding tax will be creditable against the U.S. holder’s U.S. federal income tax liability, provided that the required information is furnished to the U.S. Internal Revenue Service.
DOCUMENTS ON DISPLAY
The materials included in this annual report on Form 20-F, and exhibits hereto, may be viewed at the U.S. Securities and Exchange Commission’s public reference room in Washington, D.C.  Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms.  The Securities and Exchange Commission maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports and information statements and other information regarding us.  The reports and information statements and other information about us can also be downloaded from the Securities and Exchange Commission’s website.

Item 11.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in currency exchange rates.
Our principal exchange rate risk involves changes in the value of the peso relative to the dollar.  Historically, a significant portion of the revenues generated by our airports (principally derived from passenger charges for international passengers) has been denominated in or linked to the U.S. dollar, although such revenues are collected in pesos based on the average exchange rate for the prior month.  In 2007, 2008 and 2009, approximately 14.6%, 14.0% and 15.6%, respectively, of our consolidated revenues were derived from passenger charges for international passengers.  Substantially all of our other revenues are denominated in pesos.  We estimate that substantially all of our consolidated costs and expenses are denominated in pesos (other than the technical assistance fee, to the extent paid based on the fixed minimum annual payment).  Based upon a 10% depreciation of the peso compared to the U.S. dollar as of December 31, 2009, we estimate that our revenues would have increased by Ps. 29.6 million.
As of December 31, 2007, 2008 and 2009, 15.4%, 1.2% and 17.0%, respectively, of our cash and cash equivalents were denominated in dollars.  Based upon a 10% depreciation of the peso compared to the U.S. dollar as of December 31, 2009, we estimate that the value of our cash and cash equivalents would have increased by Ps. 4.5 million.
We did not have any foreign currency indebtedness at December 31, 2007.  As of December 31, 2008, we incurred in foreign currency indebtedness contracts of 22.8 million U.S. dollars.  Based upon a 10% depreciation of the peso compared to the U.S. dollar as of December 31, 2008, we estimate that the value of our liability would have increased by Ps. 31.5 million and will result in a foreign exchange loss for such amount.   As of December 31, 2009, we have incurred in foreign currency indebtedness contracts of 9.4 million U.S. dollars.  Based upon a 10% depreciation of the peso compared to the U.S. dollar as of December 31, 2009, we estimate that the value of our liability would have increased by Ps. 12.2 million and will result in a foreign exchange loss for such amount.
At December 31, 2007, 2008 and 2009, we did not have any outstanding forward foreign exchange contracts or other derivative contracts.
Item 12.
Description of Securities Other Than Equity Securities
Not applicable.
Item 12A .
Debt Securities
Not applicable.
Item 12B.
Warrants and Rights
Not applicable.
Item 12C.
Other Securities
Not applicable.
Item 12D.
American Depositary Shares
The following table sets forth the fees and charges that a holder of our ADSs may have to pay, directly or indirectly.
Service
Fee or Charge Amount
Payee
Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
Bank of New York Mellon
Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates *
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
Bank of New York Mellon
Any cash distribution to ADS registered holders *
$.02 (or less) per ADS
Bank of New York Mellon
Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders *
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs
Bank of New York Mellon
Depositary services *
$.02 (or less) per ADSs per calendar year
Bank of New York Mellon
Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares *
Registration or transfer fees
Bank of New York Mellon
Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) *
Expenses of the depositary
Bank of New York Mellon
Converting foreign currency to U.S. dollars *
Expenses of the depositary
Bank of New York Mellon
Other fees, as necessary *
Taxes and other governmental charges the Bank of New York Mellon or the custodian has to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes
Bank of New York Mellon
Other fees, as necessary *
Any charges incurred by Bank of New York Mellon or its agents for servicing the deposited securities
Bank of New York Mellon


The depositary of our ADSs, The Bank of New York Mellon, collects its fees directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.  The depositary collects these fees by deducting them from the amounts distributed or by selling a portion of distributable property to pay the fees.  For example, the depositary may deduct from cash distributions, directly bill investors or charge the book-entry system accounts of participants acting for them.  The depositary may generally refuse to provide fee-attracting services until its fees for these services are paid.

The following table sets forth the amounts we received in 2009, directly or indirectly, from The Bank of New York Mellon, as depositary of our ADSs:
Description
Amount
For expenses related to the establishment of the facility including, but not limited to, investor relations expenses, the initial NASDAQ application and listing fees or any other program related expenses.
U.S.$                                0
For expenses related to the administration and maintenance of the facility including, but not limited to, investor relations expenses, the annual NASDAQ listing fees or any other program related expenses.
U.S.$                                0

The Bank of New York Mellon, as depositary of our ADSs, has agreed to reimburse us for expenses they incur that are related to establishment and maintenance expenses of the ADS program.  The depositary has agreed to reimburse us for its continuing annual stock exchange listing fees.  It has also agreed to reimburse us annually for certain investor relationship programs.  There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors.
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15.
Controls and Procedures
(a)           Disclosure Controls and Procedures
We have evaluated, with the participation of our chief executive officer and chief financial officer, the design and operation of our disclosure controls and procedures as of December 31, 2009.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based upon our evaluation, our chief executive officer and chief financial officer concluded that as of December 31, 2009, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b)           Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934.  Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Our internal control over financial reporting includes those policies and procedures that:
1.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
2.
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
3.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.  Under the supervision of our chief executive officer and chief financial officer, our management assessed the design and effectiveness of our internal control over financial reporting as of December 31, 2009.

In making its assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control — Integrated Framework.
Based on our assessment and those criteria, our management believes that our company maintained effective internal control over financial reporting as of December 31, 2009.
(c)           Report of Independent Registered Public Accounting Firm
Galaz, Yamazaki, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu, the independent registered public accounting firm that has audited our consolidated financial statements, has also issued an attestation report on the effectiveness of our internal control over financial reporting. That report appears directly below.
To the Board of Directors and Stockholders of
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.:
We have audited the internal control over financial reporting, of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and subsidiaries (the “Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.  Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.  Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.  We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.  Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2009 of the Company and our report dated May 7, 2010 expressed an unqualified opinion on those financial statements based on our audit and includes explanatory paragraphs regarding (1) the adoption of new Mexican financial reporting standards NIF B-2, Cash Flow Statement and NIF B-10, Effects of Inflation , (2) the nature and effect of differences between Mexican financial reporting standards and accounting principles generally accepted in the United States of America and (3) that our audit also comprehended the translation of Mexican peso amounts into U.S. dollar amounts in conformity with the basis stated in Note 2 to such consolidated financial statements.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu
/s/ Alejandra Villagómez García
C.P.C. Alejandra Villagómez García
Monterrey, México
May 7, 2010
(d)           Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during 2009 that has materially affected, or is reasonably likely to materially affect, or internal control over financial reporting.
Item 16.
[Reserved]
Item 16A.
Special Committee responsible for Audit Functions’ Financial Expert
Our Board of Director has determined that Mr. Luis Guillermo Zazueta Domínguez, a member of our Committee responsible for the Audit Functions, qualifies as an “audit committee financial expert” and as independent within the meaning of this 16A. The shareholders’ meeting of April 3, 2008 ratified Mr. Luis Guillermo Zazueta Domínguez, as the independent director required by the Mexican Securities Market Law and applicable NASDAQ listing standards, as an “audit committee financial expert” within the meaning of this Item 16A.  See “Item 6. Directors, Senior Management and Employees—Directors.”

Item 16B.
Code of Ethics
We have adopted a code of ethics, as defined in Item 16B of Form 20-F under the Securities Exchange Act of 1934, as amended.  Our code of ethics applies to our chief executive officer, chief financial officer, chief accounting officer and persons performing similar functions as well as to our other officers and employees.  Our code of ethics is filed as an exhibit to this Form 20-F and is available on our website at www.oma.aero.  If we amend the provisions of our code of ethics that apply to our chief executive officer, chief financial officer, chief accounting officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address.
Item 16C.
Principal Accountant Fees and Services
Audit and Non-Audit Fees
The following table sets forth the fees billed to us by our independent auditors, Galaz, Yamazaki, Ruiz Urquiza, S.C., a member of Deloitte Touche Tohmatsu (Deloitte), during the fiscal years ended December 31, 2008 and 2009:
2008
2009
Audit fees
Ps. 4,956
Ps. 5,036
Audit-related fees
0 0
Tax fees
465 0
Other fees
1,225 1,680
Total fees
Ps. 6,646
Ps. 6,716

Audit fees in the above table are the aggregate fees billed by Deloitte in connection with audits of both our consolidated financial statements and those financial statements of our subsidiaries and other statutory audit reports.
Tax fees in the above table are fees billed by Deloitte for tax compliance.
Other fees in the above table are fees billed by Deloitte in connection with social security annual compliance review, Sarbanes-Oxley compliance and a Technical Assistance Agreement compliance report.
Audit Committee Pre-Approval Policies and Procedures
Our Special Committee responsible for Audit Functions expressly approves on a case-by-case basis any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us.
Item 16D.
Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The tables below set forth, for the periods indicated, the total number of shares purchased by us or on our behalf, or by or on behalf of an “affiliated purchaser”, the average price paid per share, the total number of shares purchased as a part of a publicly announced repurchase plan or program and the maximum number (or approximate dollar value) of shares that may yet be purchased under our plans and programs.

Shares repurchased by us pursuant to the share repurchase program
2009
(a) Total number of shares purchased
(b) Average price paid per share in Pesos
(c) Total number of shares purchased as part of publicly announced plans or programs
(d) Maximum number of shares that may yet be purchased under the plans or programs
January 1-31
706,000 17.75 706,000 N/A
February 1-29
204,500 14.90 204,500 N/A
March 1-31
178,400 12.86 178,400 N/A
April 1-30
(327,700 ) 14.08 (327,700 ) N/A
May 1-31
95,000 14.83 95,000 N/A
June 1-30
25,000 17.25 25,000 N/A
July 1-31
0 N/A 0 N/A
August 1-31
105,100 19.37 105,100 N/A
September 1-30
(644,300 ) 20.33 (644,300 ) N/A
October 1-31
(644,300 ) 20.96 (644,300 ) N/A
November 1-30
(1,255,500 ), 19.53 (1,255,500 ) N/A
December 1-31
(1,524,900 ) 21.34 (1,524,900 ) N/A
2009  Total
(3,082,700 ) (3,082,700 ) N/A


Shares purchased by Aeroinvest

2009
(a) Total number of shares purchased
(b) Average price paid per share in Pesos
(c) Total number of shares purchased as part of publicly announced plans or programs
(d) Maximum number of shares that may yet be purchased under the plans or programs
January 1-31
0 N/A N/A N/A
February 1-29
0 N/A N/A N/A
March 1-31
1,027,500 12.91 N/A N/A
April 1-30
338,600 13.74 N/A N/A
May 1-31
0 N/A N/A N/A
June 1-30
0 N/A N/A N/A
July 1-31
0 N/A N/A N/A
August 1-31
0 N/A N/A N/A
September 1-30
0 N/A N/A N/A
October 1-31
0 N/A N/A N/A
November 1-30
0 N/A N/A N/A
December 1-31
0 N/A N/A N/A
2009 Total
1,366,100 N/A N/A N/A

Item 16F.
Change in Registrant’s Certifying Accountant
Not applicable

Ite m 16G.
Corporate Governance
Pursuant to Rule 5615(a)(3) of the NASDAQ Stock Market, Inc. (NASDAQ) Marketplace Rules, we are required to provide a summary of the significant ways in which our corporate governance practices differ from those required for U.S. companies under the NASDAQ listing standards.  We are a Mexican corporation with shares listed on the Mexican Stock Exchange.  Our corporate governance practices are governed by our bylaws, the Securities Market Law and the regulations issued by the Mexican National Banking and Securities Commission.
On December 30, 2005, a new Mexican Securities Market Law was published in the Diario Oficial de la Federación , which became effective on June 28, 2006.
The table below discloses the significant differences between our corporate governance practices and the NASDAQ standards.
NASDAQ Standards
Our Corporate Governance Practice
Director Independence .  Majority of Board of Directors must be independent and directors deemed independent must be identified in a listed company’s proxy statement (or annual report on Form 10-K or 20-F if the issuer does not file a proxy statement).  “Controlled companies,” which would include our company if we were a U.S. issuer, are exempt from this requirement.  A controlled company is one in which more than 50% of the voting power is held by an individual, group or another company, rather than the public.  Rules 5605(b)(1), 5615(c)(1) & (c)(2).
Director Independence . Pursuant to the Mexican Securities Market Law, we are required to have a Board of Directors composed of a maximum of 21 members, 25% of whom must be independent.  One alternate director may be appointed for each principal director; provided that the alternates for the independent director must also be independent.  Certain persons are per se non-independent, including insiders, control persons, major suppliers, and any relatives of such persons.  In accordance with the Mexican Securities and Market Law, our shareholders’ meeting is required to make a determination as to the independence of our directors, though such determination may be challenged by the National Banking and Securities Commission.  There is no exemption from the independence requirement for controlled companies.
Our by-laws provide that our Board of Directors shall be composed of at least 11 members.  Currently, our board has eleven members, of which five are independent under the Mexican Securities Market Law and the Sarbanes-Oxley Act of 2002.
Executive Sessions .  Independent directors must meet regularly in executive sessions at which only independent directors are present.  Rule 5605(b)(2).
Executive Sessions. Our non-management and independent directors are not required to meet in executive sessions and generally do not do so.  Under our bylaws and applicable Mexican law, executive sessions are not required.
Audit Committee . Audit committee satisfying the independence and other requirements of Rule 10A-3 under the Exchange Act and the more stringent requirements under the NASDAQ standards is required.  Rule 5605(c)(1).
Special Committee responsible for the Audit Functions . We previously had an Audit Committee, which our shareholders’ meeting of April 24, 2009 combined with the Corporate Practices Committee to form a sole Special Committee.  We are in compliance with the independence requirements of Rule 10A-3.  Marketplace Rule 4350(a)(1) permits us to follow our home country governance practices in lieu of certain NASDAQ requirements, and as such the members of our Special Committee responsible for Audit Functions are not required to satisfy the NASDAQ independence and other Audit Committee standards that are not prescribed by Rule 10A-3.


NASDAQ Standards
Our Corporate Governance Practice
The principal characteristics of our Committee responsible for Audit Functions are as follows:
●
Our Special Committee is composed of four members, all of whom are members of our Board of Directors.
●
All of the members of our Special Committee and the committee’s chairman are independent.
●
The Chairman of the Special Committee is appointed and/or removed exclusively by the general shareholders’ meeting.
●
Our Special Committee operates pursuant to provisions in the Mexican Securities Market Law and our bylaws.
●
Our Special Committee submits an annual report regarding its activities to our Board of Directors.
●
The duties of our Special Committee include, among others, the following:
●
selecting the external auditor of the Company, recommending to the Board of Directors the appointment of such external auditor and providing an opinion about any removal of such external auditor;
●
supervising our external auditors and analyzing their reports;
●
analyzing and supervising the preparation of our financial statements;
●
informing the board of our internal controls and their adequacy;


NASDAQ Standards
Our Corporate Governance Practice
● requesting reports from our executive officers whenever the committee deems appropriate, providing assistance to our Board of Directors in the preparation of the reports containing the main accounting and information guidelines used for the preparation of the financial information, and assistance to our Board of Directors in the preparation of the report on the operations and activities in which the Board of Directors had intervened pursuant to the Securities Market Law;
● informing the board of any irregularities that it may encounter;
●
receiving and analyzing recommendations and observations made by the shareholders, members of the Board, executive officers, our external auditors or any third party and taking the necessary actions;
●
calling shareholders’ meetings;
●
overseeing the execution of the shareholders’ and directors’ resolutions by the Chief Executive Officer in accordance with the instructions provided thereto by the shareholders or the directors; and
●
providing an annual report to the Board.


NASDAQ Standards
Our Corporate Governance Practice
Compensation Committee. CEO compensation must be determined, or recommended to the board for determination, either by compensation committee comprised solely of independent directors or a majority of the independent directors and the CEO may not be present during voting or deliberations.  Compensation of all other executive officers must be determined in the same manner, except that the CEO, and any other executive officers, may be present.  “Controlled companies” are exempt from this requirement.  Rules 5605(e)(1)(B) & 5615(c)(2).
Special Committee responsible for the Corporate Practices Functions. Pursuant to the Mexican Securities Market Law, we are required to have a committee responsible for Corporate Practices Functions, although we are not required to have a separate compensation committee.  The Mexican Securities Market Law requires that committees consist of at least 3 independent directors appointed by the Board of Directors.  All committee members must be independent (except to the extent a controlling shareholder or shareholders own 50% or more of our outstanding capital stock, in which case the majority must be independent).
Pursuant to our bylaws and the Mexican Securities Market Law, the duties of our Special Committee responsible for Corporate Practices Functions include, among others, the following:
(i)    providing opinions to our Board of Directors;
(ii)   requesting and obtaining opinions from independent experts;
(iii)  calling shareholders’ meeting; and
(iv)  assisting the board in the preparation of annual reports and other reporting obligations.
The duties of our Special Committee responsible for Corporate Practices Functions are, among others, the following:
·
evaluating the performance of relevant officers,
·
reviewing related-party transactions, and
·
determining the total compensation package of the chief executive officer.
Equity Compensation Plans .  Equity compensation plans require shareholder approval, subject to limited exemptions.  Rule 5635(c).
Equity Compensation Plans .  Shareholder approval is not expressly required under our bylaws for the adoption and amendment of an equity-compensation plan.  Such plans must provide from similar treatment of executives in comparable positions.  No equity-compensation plans have been approved by our shareholders.
Shareholder Approval for Issuance of Securities. Issuances of securities (1) that will result in a change of control of the issuer, (2) in connection with certain acquisitions of the stock or assets of another company, or (3) in connection with certain transactions other than public offerings require shareholder approval. Rules 5635(a)(2), (b) & (d)(1-2).
Shareholder Approval for Issuance of Securities. Mexican law and our bylaws require us to obtain shareholder approval for the issuance of equity securities.  Treasury stock, however, may be issued by the Board of Directors without shareholder approval.


NASDAQ Standards
Our Corporate Governance Practice
Code of Business Conduct and Ethics . Corporate governance guidelines and a code of business conduct and ethics is required, with disclosure of any waiver and the reasons for such waiver for directors or executive officers.  The code must include an enforcement mechanism . Rule 5610.
Code of Business Conduct and Ethics .  We have adopted a code of ethics applicable to all of our directors and executive officers, which is available to you free of charge upon request and at www.oma.aero .  We are required by Item 16B of Form 20-F to disclose any waivers granted to our chief executive officer, chief financial officer and persons performing similar functions, as well as to our other officers/employees.
Conflicts of Interest. Appropriate review of all related party transactions for potential conflict of interest situations and approval by an Audit Committee or another independent body of the Board of Directors of such transactions is required. Rule 5630(a-b).
Conflicts of Interest. In accordance with Mexican law and our bylaws, the Special Committee responsible for Audit Functions must provide an opinion regarding any transaction with a related party that is outside of the ordinary course of business, and such transactions must be approved by the Board of Directors.  Pursuant to the Mexican Securities Market Law, our Board of Directors and our Special Committee responsible for Audit Functions are required to establish certain guidelines regarding related party transactions that do not require board approval.
Solicitation of Proxies. Solicitation of proxies and provision of proxy materials is required for all meetings of shareholders. Copies of such proxy solicitations are to be provided to NASDAQ. Rule 5620(b).
Solicitation of Proxies. Under the Mexican Securities Market Law, we are obligated to make available proxy materials for meetings of shareholders.  In accordance with Mexican law and our bylaws, we inform shareholders of all meetings by public notice, which states the requirements for admission to the meeting and provides a mechanism by which shareholders can vote by proxy.  Under the deposit agreement relating to our ADSs, holders of our ADSs receive notices of shareholders' meetings and, where applicable, requests for instructions to the ADS depositary for the voting of shares represented by ADSs.
Peer Review. A listed company must be audited by an independent public accounting firm that is registered as a public accounting firm with the Public Company Accounting Oversight Board.  Rule 5250(c)(3).
Peer Review. Under Mexican law, we must be audited by an independent public accountant that has received a "quality control review" as defined by the National Banking and Securities Commission.  Galaz, Yamazaki, Ruiz Urquiza, S.C., a member of Deloitte & Touche Tohmatsu, our independent auditor, is not subject to "peer review" as such term is defined in Marketplace Rule 4350(k).


PART III
Item 17.
Financial Statements
Not applicable.
Item 18.
Financial Statements
See pages F-1 through F-46, incorporated herein by reference.


Item 19.
Exhibits
Documents filed as exhibits to this annual report:
Exhibit No.
Description
1.1
An English translation of our Amended and Restated Bylaws ( Estatutos Sociales ) of GACN.
2.1
Deposit Agreement among GACN, the Bank of New York and all registered holders from time to time of any American Depositary Receipts, including the form of American Depositary Receipt (incorporated by reference to our amended registration statement on Form F-1/A (File No. 333-138710) filed on November 22, 2006).
3.1
Trust Agreement among GACN, Operadora Mexicana de Aeropuertos, S.A. de C.V. (now Servicios de Tecnología Aeroportuaria, S.A. de C.V.), or SETA, and Banco Nacional de Comercio Exterior, S.N.C., División Fiduciaria, or Bancomext, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
3.2
Amendment to the Trust Agreement among GACN, SETA, and Bancomext, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
3.3
Voting Agreement among Aeroinvest, ADPM, SETA, Banco Nacional de Comercio Exterior, S.N.C., División Fiduciaria and Banca Múltiple, J.P. Morgan Grupo Financiero, División Fuduciaria, English translation (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2006, filed on July 2, 2007).
4.1
Amended and Restated Monterrey Airport Concession Agreement and annexes thereto, English translation and a schedule highlighting the differences between this concession and GACN’s other concessions (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.2
Participation Agreement among GACN, the Mexican Federal Government through the Ministry of Communications and Transportation, Nacional Financiera, S.N.C., Dirección Fiduciaria, or NAFIN, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., Aeropuerto de Acapulco, S.A. de C.V., Aeropuerto de Chihuahua, S.A. de C.V., Aeropuerto de Ciudad Juárez, S.A. de C.V., Aeropuerto de Culiacán, S.A. de C.V., Aeropuerto de Durango, S.A. de C.V., Aeropuerto de Mazatlán, S.A. de C.V., Aeropuerto de Monterrey, S.A. de C.V., Aeropuerto de Reynosa, S.A. de C.V., Aeropuerto de Tampico, S.A. de C.V., Aeropuerto de Torreón, S.A. de C.V., Aeropuerto de San Luis Potosí, S.A. de C.V., Aeropuerto de Zacatecas, S.A. de C.V. and Aeropuerto de Zihuatanejo, S.A. de C.V. (collectively, the "Concession Companies"), SETA, Constructoras ICA, S.A. de C.V., Aéroports de Paris and Vinci, S.A., with the appearance of Bancomext, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).


Exhibit No.
Description
4.3
Amendment to Participation Agreement among GACN, the Mexican Federal Government through the Ministry of Communications and Transportation, NAFIN, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., the Concession Companies, SETA, Constructoras ICA, S.A. de C.V. and Aéroports de Paris, with the appearance of Bancomext, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.4
Agreement entered into among NAFIN, Aeroinvest, SETA and the Mexican Federal Government through the Ministry of Communications and Transportation with respect to certain provisions of the Participation Agreement, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.5
Technical Assistance and Transfer of Technology Agreement among the Registrant, Servicios Aeroportuarios del Centro Norte, S.A. de C.V., the Concession Companies, SETA and Constructoras ICA, S.A. de C.V., Aéroports de Paris and Vinci, S.A., English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.6
Shareholders Agreement among NAFIN, SETA and Bancomext, with the appearance of the Registrant and the Mexican Federal Government through the Ministry of Communications and Transportation, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.7
Termination Agreement in respect of the Shareholders Agreement among NAFIN, SETA and Bancomext, with the appearance of GACN and the Mexican Federal Government through the Ministry of Communications and Transportation, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.8
Stock Purchase Agreement between the Mexican Federal Government through the Ministry of Communications and Transportation and SETA, with the appearance of Constructoras ICA, S.A. de C.V., Aéroports de Paris and Vinci, S.A., and the Mexican Federal Treasury, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.9
Shareholders Agreement among NAFIN, SETA and Bancomext, with the appearance of the Registrant and the Mexican Federal Government through the Ministry of Communications and Transportation, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.10
Termination Agreement in respect of the Shareholders Agreement among NAFIN, SETA and Bancomext, with the appearance of GACN and the Mexican Federal Government through the Ministry of Communications and Transportation, English translation (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).
4.11
Lease Agreement among Aereopuerto Internacional de la Ciudad de Mexico S.A. de C.V. and Consorcio Grupo Hotelero T2 S.A. de C.V. dated as of March 22, 2007.*
8.1
List of subsidiaries of GACN (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).


Exhibit No.
Description
11.1
Code of Ethics of the Company (incorporated by reference to our annual report on Form 20-F for the year ended December 31, 2006, filed on July 2, 2007).
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
Certification of Chief Financial Officer and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

_________
*Filed herewith


SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.
GRUPO AEROPORTUARIO DEL CENTRO NORTE, S.A.B. DE C.V.
By:/s/ José Luis Guerrero Cortés
Name:   José Luis Guerrero Cortés
Title:     Chief Financial Officer

Dated:  June 9, 2010

Consolidated Financial Statements
for Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
and Subsidiaries

Report of Independent Registered Public Accounting Firm to the Board of Directors and Stockholders of Grupo Aeroportuario del Centro Norte, S.A.B de C.V
F-3
Consolidated Balance Sheets as of December 31, 2009 and 2008
F-4
Consolidated Statements of Income for the Years Ended December 31, 2009, 2008 and 2007
F-5
Consolidated Statements of Changes in Stockholders’ Equity (Note 11) for the Years Ended December 31, 2009, 2008 and 2007
F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008
F-8
Consolidated Statement of Changes in Financial Position for the Year Ended December 31, 2008
F-9
Notes to the Consolidated Financial Statements for the Years Ended December 31, 2009, 2008 and 2007
F-10


Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
(Subsidiary of Aeroinvest, S.A. de C.V.)
Consolidated Financial Statements for the Years Ended December 31, 2009, 2008 and 2007, and Report of Independent Registered Public Accounting Firm Dated May 7, 2010

Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Grupo Aeroportuario del Centro Norte, S.A.B de C.V.:
We have audited the accompanying consolidated balance sheet of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended, as well as the consolidated statements of income, changes in stockholders’ equity and changes in financial position for the year ended December 31, 2007, all expressed in thousands of Mexican pesos. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As disclose in Note 3 to the accompanying financial statements, beginning on January 1, 2008, the Company adopted the following new financial reporting standards: NIF B-2, “Statement of Cash Flows”, NIF B-10, “Effects of Inflation”, NIF D-3, “Employee Benefits”, and NIF D-4, “Income Taxes”, issued by the Mexican Board for Research and Development of Financial Reporting Standards (“CINIF”).
In our opinion, based on our audits, such consolidated financial statements present fairly, in all material respects, the financial position of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the years then ended, as well as the consolidated statements of income, changes in stockholders’ equity and changes in financial position for the year ended December 31, 2007, in conformity with Mexican Financial Reporting Standards.
Mexican financial reporting standards vary in certain significant respects from accounting principles generally accepted in the United States of America.  Information relating to the nature and effect of such differences is presented in Note 24 to the consolidated financial statements.
Our audits also comprehended the translation of the Mexican peso amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2.  The translation of the financial statement amounts into U.S. dollars and the translation of the financial statements into English have been made solely for the convenience of readers in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated May 7, 2010 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu
C.P.C. A. Alejandra Villagómez García
Monterrey, N.L., Mexico
May 7, 2010

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
Consolidated Balance Sheets
At December 31, 2009 and 2008
(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.))
2009
(Convenience Translation; See Note 2)
2009
2008
Assets
Current assets:
Cash and cash equivalents (Note 4)
$ 20,500
Ps. 267,734
Ps. 257,420
Trade accounts receivable –  net (Note 5)
32,407 423,236 388,565
Recoverable taxes
7,212 94,194 167,324
Accounts receivable from related parties (Note 13)
6,180 80,712 83,538
Other current assets
1,421 18,529 29,398
Total current assets
67,720 884,405 926,245
Property, machinery and equipment  – net (Note 6)
167,199 2,183,613 1,935,641
Investment in airport concessions – net (Note 7)
548,612 7,164,874 6,955,015
Other assets – net
3,353 43,786 42,931
Total
786,884
Ps.10,276,678
Ps. 9,859,832
Liabilities and stockholders’ equity
Current liabilities:
Short term debt (Note 8)
$ 15,548
Ps. 203,057
Ps. 130,863
Current portion of long-term debt (Note 9)
4,504 58,824 -
Trade accounts payable
23,233 303,418 394,706
Accrued expenses and taxes payable
7,497 97,909 202,556
Accounts payable to related parties (Note 13)
21,349 278,820 320,022
Advances from customers
84 1,094 3,967
Dividends payable
7,051 92,085 90,841
Statutory employee profit sharing
183 2,396 2,838
Total current liabilities
79,449 1,037,603 1,145,793
Guarantee deposits
1,475 19,258 20,461
Long –term debt (Note 9)
31,529 411,765 -
Employee benefits (Note 10)
1,914 24,991 23,402
Deferred income taxes (Note 15)
84,847 1,108,098 1,140,416
Total liabilities
199,214 2,601,715 2,330,072
Commitments and contingencies (Notes 7, 16 and 17)
Stockholders’ equity (Note 11):
Capital stock – nominal value
336,177 4,390,474 4,356,361
Restatement for inflation of capital stock
135,705 1,772,299 1,758,524
Additional paid in capital
2,281 29,785 29,785
Retained earnings
85,890 1,121,733 1,050,745
Reserve for repurchase of shares
26,940 351,836 333,186
Noncontrolling interest
677 8,836 1,159
Total stockholders’ equity
587,670 7,674,963 7,529,760
Total
786,884
Ps.10,276,678
Ps. 9,859,832
See accompanying notes to consolidated financial statements.

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2009, 2008 and 2007
(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.), except share and per share data)
2009 (Convenience Translation; See Note 2)
2009
2008
2007
Revenues (Note 19):
Aeronautical services
116,918
Ps. 1,526,965
Ps. 1,617,195
Ps. 1,549,827
Non-aeronautical services
28,278 369,312 371,281 347,526
145,196 1,896,277 1,988,476 1,897,353
Operating costs:
Cost of services (Note 20)
35,052 457,767 460,074 420,777
Administrative expenses
24,561 320,770 317,069 256,730
Concession taxes
7,255 94,756 101,642 98,307
Technical assistance fees (Note 13)
3,959 51,710 55,604 57,416
Depreciation and amortization
31,538 411,890 366,719 336,202
102,365 1,336,893 1,301,108 1,169,432
Income from operations
42,831 559,384 687,368 727,921
Other income (expenses) – net (Note 14)
770 10,051 104,792 (7,584 )
Net comprehensive financing income (cost):
Interest (expense) income – net
(2,006 ) (26,195 ) 63,167 126,660
Exchange (loss) gain – net
312 4,069 (74,618 ) 11,905
Monetary position loss
- - (42,347 )
(1,694 ) (22,126 ) (11,451 ) 96,218
Income before income taxes
41,907 547,309 780,709 816,555
Income tax (Note 15)
5,956 77,785 238,906 785,363
Consolidated net income
$ 35,951
Ps. 469,524
Ps. 541,803
Ps. 31,192
Controlling interest
$ 36,063
Ps. 470,988
Ps. 541,844
Ps. 31,192
Noncontrolling interest
(112 ) (1,464 ) (41 ) -
Consolidated net income
$ 35,951
Ps. 469,524
Ps. 541,803
Ps. 31,192
Weighted average number of common shares outstanding (Note 11c.)
394,934,855 394,934,855 396,284,313 399,611,578
Basic and diluted earnings per share:
Controlling interest
$ 0.0913
Ps. 1.1926
Ps. 1.3673
Ps. 0.0781
Noncontrolling  interest
(0.0003 ) (0.0037 ) (0.0001 ) -
Basic and diluted earnings per share
$ 0.0910
Ps. 1.1889
Ps. 1.3672
Ps. 0.0781
See accompanying notes to consolidated financial statements.


Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (Note 11)
For the years ended December 31, 2009, 2008 and 2007
(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.), except share data)
Capital stock
Number of shares
Nominal
value
Restatement for inflation of capital stock
Additional paid-in capital
Retained earnings
Reserve for repurchase of shares
Additional liability for employee benefits
Noncontrolling interest
Cumulative initial effect of deferred income taxes
Total stockholders’ equity
Balances as of January 1, 2007 400,000,000
Ps.4,408,447
Ps.1,779,985
Ps.29,785
Ps.1,501,745
Ps. -
Ps.(11,872)
Ps. -
Ps. 273,861
Ps.7,981,951
Dividends declared (Ps. 1.1103 per share)
- - - - (444,125 ) - - - - (444,125 )
Capitalization approved by shareholders
- - - - (11,872 ) - 11,872 - - -
(Reserve for repurchase) reissuance of shares, net
(2,604,700 ) (28,706 ) (11,828 ) - (412,628 ) 353,518 - - - (99,644 )
Comprehensive income
- - - - 31,192 - 4,968 - - 36,160
Balances as of December 31, 2007
397,395,300 4,379,741 1,768,157 29,785 664,312 353,518 4,968 - 273,861 7,474,342
Dividends declared (Ps. 1.0856 per share
- - - - (434,240 ) - - - - (434,240 )
(Reserve for repurchase) reissuance of shares, net
(2,121,400 ) (23,380 ) (9,633 ) - - (20,332 ) - - - (53,345 )
Reclassification of  the cumulative initial effect of deferred income taxes and the effect of additional liability for employee benefits
- - - - 278,829 - (4,968 ) - (273,861 ) -
Increase of noncontrolling  interest
- - - - - - - 1,200 - 1,200
Net income
- - - - 541,844 - (41 ) - 541,803
Balances as of December 31, 2008
395,273,900 4,356,361 1,758,524 29,785 1,050,745 333,186 - 1,159 - 7,529,760
Dividends declared (Ps.1.0000 per share)
- - - - (400,000 ) - - - - (400,000 )
Reissuance (reserve for repurchase) of shares, net
3,082,700 34,113 13,775 - - 18,650 - - - 66,538
Increase of noncontrolling  interest
- - - - - - - 9,141 - 9,141
Net income
- - - - 470,988 - - (1,464 ) - 469,524
Balances as of December 31, 2009 398,356,600
Ps.4,390,474
Ps.1,772,299
Ps.29,785
Ps.1,121,733
Ps.351,836
Ps.
-
Ps. 8,836
Ps.
-
Ps. 7,674,963


Capital stock
Number of shares
Nominal
value
Restatement for inflation of capital stock
Additional paid-in capital
Retained earnings
Reserve for repurchase of shares
Noncontrolling interest
Total stockholders’ equity
Balances as of December 31,  2008 (Convenience translation;  Note 2)
395,273,900 $ 333,565 $ 134,650 $ 2,281 $ 80,455 $ 25,512 $ 89 $ 576,552
Dividends declared ($0.0766 per share)
- - - - (30,628 ) - - (30,628 )
Reissuance (reserve for repurchase) of shares, net
3,082,700 2,612 1,055 - - 1,428 - 5,095
Increase of noncontrolling  interest
- - - - - - 700 700
Net income
- - - - 36,063 - (112 ) 35,951
Balances as of December 31, 2009
398,356,600 $ 336,177 $ 135,705 $ 2,281 $ 85,890 $ 26,940 $ 677 $ 587,670
See accompanying notes to consolidated financial statements.

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2009 and 2008
(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.))
2009
(Convenience Translation; See Note 2)
2009
2008
Operating activities:
Income before income taxes
$ 41,907
Ps.547,309
Ps. 780,709
Items related to investment activities:
Depreciation and amortization
31,538 411,890 366,719
Interest income
(1,691 ) (22,093 ) (65,813 )
Items related to financing activities:
Interest expense
3,697 48,288 2,646
Exchange (gain) loss
(392 ) (5,119 ) 67,835
75,059 980,275 1,152,096
(Increase) decrease in:
Trade accounts receivables
(2,655 ) (34,671 ) (127,965 )
Recoverable taxes
(10,902 ) (142,384 ) (274,323 )
Other receivables
832 10,869 2,387
(Increase) decrease in:
Trade accounts payable
(18,199 ) (237,676 ) (11,574 )
Accrued expenses and taxes
58 764 (40,896 )
Accounts payable to related parties
(9,604 ) (125,437 ) 158,101
Advances from customers
(220 ) (2,873 ) 1,666
Guarantee deposits
(92 ) (1,203 ) 984
Employee benefits
122 1,589 (14,273 )
Employee profit sharing
(34 ) (442 ) (6,509 )
Deferred statutory employee profit sharing
- - (104,230 )
Net cash provided by operating activities
34,365 448,811 735,464
Investing activities:
Payments for purchase of land, machinery and equipment
(16,599 ) (216,777 ) (1,375,586 )
Payments for improvements to concessioned properties
(30,521 ) (398,592 ) (558,310 )
Other investing activities
(295 ) (3,858 ) (14,519 )
Interest collected
1,691 22,093 65,813
Net cash used in investing activities
(45,724 ) (597,134 ) (1,882,602 )
Cash required before net cash generated by (used) in financing activities
(11,359 ) (148,323 ) (1,147,138 )
Financing activities:
Proceeds from short term debt
5,528 72,194 130,863
Proceeds from long term debt
36,033 470,589 -
Noncontrolling  interest
700 9,141 1,200
Interest paid
(3,697 ) (48,288 ) (2,646 )
Dividends paid
(31,511 ) (411,537 ) (428,218 )
Reissuance (repurchase) of shares, net
5,095 66,538 (53,345 )
Net cash provided by (used in) financing activities
12,148 158,637 (352,146 )
Net increase (decrease) in cash and cash equivalents
789 10,314 (1,499,284 )
Cash and cash equivalents at beginning of year
19,711 257,420 1,756,704
Cash and cash equivalents at end of year
$ 20,500
Ps.267,734
Ps. 257,420
See accompanying notes to consolidated financial statements

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
Consolidated Statement of Changes in Financial Position
For the year ended December 31, 2008
(In thousands Mexican pesos (Ps.))
2007
Operating activities:
Net income
Ps. 31,192
Items that did not require (generate) resources :
Depreciation and amortization
336,202
Employee benefits – net
5,313
Deferred statutory employee profit sharing
(6,112 )
Deferred income tax
552,985
919,580
Changes in operating assets and liabilities:
(Increase) decrease in:
Trade accounts receivable – net
(9,271 )
Recoverable taxes
96,380
Other current assets
55,815
Increase (decrease) in:
Trade accounts payable
(13,407 )
Accrued expenses and taxes
29,611
Accounts payable to related parties
384
Advances from customers
(9,046 )
Guarantee deposits
125
Employee profit sharing
417
Net resources generated by operating activities
1,070,588
Financing activities:
Dividends paid
(229,224 )
Repurchase of shares
(99,644 )
Net resources used in investing activities
(328,868 )
Investing activities – Additions to property, machinery and equipment and improvements to concessioned properties
(658,010 )
Cash and cash equivalents:
Net increase
83,710
Balance at beginning of year
1,672,994
Balance at end of year
Ps.1,756,704
See accompanying notes to consolidated financial statements.


Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2009, 2008 and 2007
(In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps., except share and per share data)
1.            Activities and significant events
Activities – Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (“GACN”, or collectively with its subsidiaries, the “Company”), a direct subsidiary of Aeroinvest, S.A. de C.V. and Empresas ICA, S.A.B. de C.V., the ultimate controlling company, is a holding company, whose subsidiaries are engaged in the administration, operation and use of 13 airports under a concession granted by the Mexican government through the Ministry of Communications and Transportation (“SCT”). The airports are located in the following cities: Monterrey, Acapulco, Mazatlán, Zihuatanejo, Ciudad Juárez, Reynosa, Chihuahua, Culiacán, Durango, San Luis Potosí, Tampico, Torreón, and Zacatecas.
The Company and its subsidiaries began operations on November 1, 1998. The Company’s formation was part of the Mexican government’s plan to open the Mexican Airport System to private investors under a two-stage program developed by the SCT.
On June 29, 1998, the SCT granted to the subsidiaries of GACN, concessions to manage, operate and develop the 13 airports that comprise the Central-North Group, and benefit from the use of the airport facilities for a period of 50 years beginning November 1, 1998.  The term may be extended by the SCT in one or more instances, not to exceed a total of an additional 50 years.
As a result of the public bidding process discussed above, in June 2000, a stock purchase agreement was executed between the Mexican government and Servicios de Tecnología Aeroportuaria, S.A. de C.V. (“SETA”), whereby the Mexican government sold 15% of its then-outstanding equity interests in the Company to SETA.  SETA paid the Mexican government Ps. 1,214,375 (Ps. 864,056 historical pesos), excluding interest, in exchange for: (i) 58,800,000 Class I Series “BB” shares; (ii) an option to acquire from the Mexican government an additional 36% of the then-outstanding equity interest held by the Mexican government in the Company, in the event that such shares were not sold in a public offering within a specified time period (which was subsequently assigned to one of SETA’s stockholders; see below); (iii) the right and obligation to enter into various agreements, including a technical assistance and transfer-of-technology agreement as defined in the public bidding process; and (iv) a stock option agreement, according to which SETA had the option to subscribe up to 3% of the new Series “B” shares.
Significant events:
In October 2008, the Company acquired 90% of the common stock shares of Consorcio Grupo Hotelero T2, S.A. de C.V, (Consorcio).  This entity held a lease agreement with the Mexico City International Airport to construct and operate a five-star hotel and commercial premises at the Mexico City Airport Terminal 2. The partner operating the hotel is Nacional Hispana Hoteles, S. de R.L de C.V., (“NH Hoteles”), with a 10% partnership interest. The hotel started operations during August, 2009.
On October 1, 2007, the Business Flat Tax Law (“IETU Law”) was enacted and went into effect on January 1, 2008. IETU applies to the sale of goods, the provision of independent services and the granting of use or enjoyment of goods, according to the terms of the IETU Law, less certain authorized deductions. IETU payable is calculated by subtracting certain tax credits from the tax determined.  Revenues, as well as deductions and certain tax credits, are determined based on cash flows generated beginning January 1, 2008. The IETU Law establishes that the IETU rate will be 16.5% in 2008, 17% in 2009, and 17.5% as of 2010. Therefore, as of December 31, 2007, the Company recorded a deferred IETU liability of Ps.1,073,859, and cancelled the deferred corporate income tax (“ISR”) liability of Ps.597,506, recognizing the net effect in the statement of income of Ps.476,353. The impact of the IETU on the Company’s deferred tax balances did not affect the Company’s cash flows.

2.            Basis of presentation and consolidation
Basis of presentation – The accompanying consolidated financial statements of GACN and Subsidiaries have been prepared in conformity with Mexican Financial Reporting Standards (MFRS).
MFRS require that management make certain estimates and use certain assumptions that affect the amounts reported in the consolidated financial statements and their related disclosures. Such estimates are based on the information available and management’s best knowledge and judgment, based on experience and events; however, actual results may vary. The Company has implemented control procedures to ensure that their accounting policies are timely and adequately applied. Although actual results may vary from such estimates, management believes they were adequate under the circumstances.
Monetary unit of the financial statements – The financial statements and notes as of December 31, 2009 and 2008, and for the year then ended, include balances and transactions denominated in Mexican pesos of different purchasing power, while those as of and for the year ended December 31, 2007 are presented in Mexican pesos of purchasing power of December 31, 2007.
Translation into English – The accompanying consolidated financial statements have been translated from Spanish into English for use outside of Mexico. These consolidated financial statements are presented in accordance with Mexican Financial Reporting Standards (“MFRS”, individually referred to as Normas de Información Financiera or “NIFs”). Certain accounting practices applied by the Company vary in certain significant respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”). See Note 24 for a discussion of such differences and for a reconciliation of the Company’s financial statements between MFRS and U.S. GAAP.
Convenience translation – The consolidated financial statements are stated in Mexican pesos, the currency of the country in which the Company is incorporated and operates.  The translations of Mexican peso amounts into U.S. dollar amounts are included solely for the convenience of readers in the United States of America and have been made at the rate of 13.06 Mexican pesos to one U.S. dollar, the noon buying rate of the Federal Reserve Bank of New York on December 31, 2009. Such translations should not be construed as representations that the Mexican peso amounts have been, could have been, or could in the future, be converted into U.S. dollars at that rate or any other rate.
Basis of consolidation –The consolidated financial statements include the financial statements of GACN and those of the subsidiaries where the Company has either over 50%, or less when have the control. All significant intercompany balances, transactions and investments have been eliminated in the accompanying consolidated financial statements.
The subsidiaries which financial statements are consolidated with those of GACN are as follows:
Aeropuerto de Acapulco, S.A. de C.V.
100 %
Aeropuerto de Ciudad Juárez, S.A. de C.V.
100 %
Aeropuerto de Culiacán, S.A. de C.V.
100 %
Aeropuerto de Chihuahua, S.A. de C.V.
100 %
Aeropuerto de Durango, S.A. de C.V.
100 %
Aeropuerto de Mazatlán, S.A. de C.V.
100 %
Aeropuerto de Monterrey, S.A. de C.V.
100 %
Aeropuerto de Reynosa, S.A. de C.V.
100 %
Aeropuerto de San Luis Potosí, S.A. de C.V.
100 %
Aeropuerto de Tampico, S.A. de C.V.
100 %
Aeropuerto de Torreón, S.A. de C.V.
100 %
Aeropuerto de Zacatecas, S.A. de C.V.
100 %
Aeropuerto de Zihuatanejo, S.A. de C.V.
100 %
Servicios Aeroportuarios del Centro Norte, S.A. de C.V. (“SACN”)
100 %
Operadora de Aeropuertos del Centro Norte, S.A. de C.V. (“OACN”)
100 % (1)
Holding Consorcio Grupo Hotelero T2, S.A. de C.V.  (“Holding”)
100 % (2)
Consorcio Grupo Hotelero T2, S.A de C.V. (“Consorcio”)
90 % (2)

(1)
This company incorporated in August 2008. The operating personnel from all the airports and related employee benefits were transferred to this company and SACN.
(2)
In October 2008, the Company acquired the shares of Holding Consorcio Grupo Hotelero T2, S.A de C.V., which owns an equity holding of 90% in Consorcio Grupo Hotelero T2, S.A. de C.V.
Comprehensive income – Comprehensive income presented in the accompanying consolidated statements of changes in stockholders’ equity represents the Company’s total activity during each year and is comprised of the net income for the year, plus other comprehensive income (loss) items for the same period which are presented directly in stockholders’ equity without affecting the consolidated statements of income.  In 2009 and 2008 there were no other items in comprehensive income. In 2007, the other comprehensive loss item consists of the additional liability recognized for labor obligations.
Classification of costs and expenses – Costs and expenses presented in the consolidated statements of operations were classified according to their function due to the various business activities of the subsidiaries. Consequently, cost of services is presented separately from other costs and expenses.
Income from operations – Income from operations is the result of subtracting cost of sales and general expenses from net revenues. While NIF B-3, “Income Statements”, does not require inclusion of this line item in the consolidated statements of income, it has been included for a better understanding of the Company’s economic and financial performance.
Reclassifications – Certain amounts in the financial statements as of and for the year ended December 31, 2008 have been reclassified to conform to the presentation of the 2009 financial statements.
3.            Summary of significant accounting policies
The accompanying consolidated financial statements have been prepared in conformity with MFRS. The significant accounting policies of the Company are as follows:
a.
Recognition of the effects of inflation –The cumulative rate of inflation in the previous three years ended December 31, 2008 and 2007 was 15% and 11.56%, respectively. As a result, in accordance with the guidelines set forth in NIF B-10, “Effects of Inflation” (NIF B-10), the calendar years 2008 and 2007 are considered noninflationary economic environments. Consequently, beginning January 1, 2008, the Company suspended the recognition of the effects of inflation in its financial statements. The amounts presented in the accompanying consolidated financial statements as of December 31, 2009 and 2008 are expressed in nominal values.
Inflation rates for the years ended December 31, 2009, 2008 and 2007 were 3.57%, 6.53%, and 3.75%, respectively.
b.
Cash and cash equivalents – Cash and cash equivalents consist mainly of bank deposits in checking accounts and short-term investments, highly liquid and easily convertible into cash, which are subject to insignificant value change risks. Cash is stated at nominal value and cash equivalents are valued at fair value; any fluctuations in value are recognized in comprehensive financing (cost) income of the period. Cash equivalents are represented mainly by investments in Treasury Certificates (CETES), investment funds and money market funds.

c.
Property, machinery and equipments –These amounts are recorded at acquisition cost. Balances from acquisitions made through December 31, 2007 were restated for the effects of inflation by applying factors derived from the National Consumer Price Index (“NCPI”) through that date. Expenditures for property, machinery and equipment, including improvements that form part to the concessioned properties and that increase the value of assets by increasing their service capacity, improving their efficiency or prolonging their useful lives, are capitalized.  Depreciation is calculated using the straight-line method beginning with the month following the purchase date, using final restated balances, based on the estimated remaining useful lives of the related assets, as follows:
Total
years
Building
20
Machinery and equipment
10
Office furniture and equipment
10
Vehicles
4
Computers
3.3

d.
Investment in airport concessions – This item consists of the rights to use airport facilities, airport concessions and improvements to concessioned properties and represents the amount allocated by the Ministry of Communications and Transportation (SCT), to each one of the airport concessions, in addition to capitalizable improvements.
As per the independent appraisal made by an expert appraiser, the Company assigned values to airport terminals, runways, platforms and machinery. The assets identified as such were recorded as “Rights to use airport facilities.” The improvements whose purpose is to increase the asset value, whether because their service capacity has increased, efficiency has improved or the asset has a longer useful life, are capitalized. These investments are recorded at cost.  The balances arising from acquisitions made before January 1, 2008 are restated applying factors derived from the NCPI to such date. Depreciation and amortization are calculated using the straight line method based on the assets’ useful lives.
In those airports where the cost of the concession exceeded the appraisal value, the excess was classified as “Airport concessions”.
Airport concessions were restated until December 31, 2007 using factors derived from the NCPI to such date and are amortized using the straight-line method over fifty years, which is the length of the concession.
e.
Impairment of long-lived assets in use – The Company reviews the carrying amounts of long-lived assets in use when an impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed the greater of the amounts mentioned above. Impairment indicators considered for these purposes are, among others, operating losses or negative cash flows in the period if they are combined with a history or projection of losses, depreciation and amortization charged to results, which in percentage terms in relation to revenues are substantially higher than that of previous years, obsolescence, and other legal and economic factors. In accordance with NIF C-15 “Impairment of Long-lived Assets and their Disposal”, management considers that GACN, together with its 13 airport subsidiaries, can be considered an “independent cash generating unit”, as all formed part of the Central-North package included in the Mexican government’s bidding process.  In accordance with the terms established by the Mexican government, all of the Company’s 13 airports must be in operation, regardless of their individual results and are therefore evaluated for impairment on a consolidated basis.  For the year ended December 31, 2009, 2008 and 2007, based on the analysis performed, the Company did not recognize any impairment losses.

f.
Direct employee benefits – Direct employee benefits are calculated based on the services rendered by employees, considering their most recent salaries. The liability is recognized as it accrues.  These benefits include mainly PTU payable, compensated absences, such as vacation and vacation premiums, and incentives.
g.
Employee benefits from termination, retirement and other – Seniority premiums and severance payments, are recognized as costs over employee years of service and are calculated by independent actuaries using the projected unit credit method using nominal rates in 2009 and 2008 and inflation adjusted rates in 2007.  Accordingly, the liability is being accrued which, at present value, will cover the obligation from benefits projected to the estimated retirement date of the Company’s employees.
h.
Goodwill – Goodwill represents the excess of cost over the fair value of the subsidiary’s shares, as of the date of acquisition. It is presented at cost and at least once a year is subject to impairment tests.
i.
Provisions – Provisions are recognized for current obligations that result from past events, that are probable to result in the use of economic resources , and that can be reasonably estimated.
j.
Statutory employee profit sharing – Statutory employee profit sharing is recorded in the results of the year in which it is incurred and presented under other income and expenses in the accompanying consolidated statements of income.  Beginning January 1, 2008, pursuant to NIF D-3 “Employee Benefits,” deferred PTU is recognized applying a 10% rate to the temporary differences that resulted from comparing the accounting and tax basis of assets and liabilities. Until 2007, Deferred PTU is derived from temporary differences between the accounting result and income for PTU purposes and is recognized only when it can be reasonably assumed that such difference will generate a liability or benefit, and there is no indication that circumstances will change in such a way that the liabilities will not be paid or benefits will not be realized. PTU is determined based on taxable income, according to Section I of Article 10 of the Income Tax Law.
k.
Income taxes – Income taxes are recorded in the results of the year in which they are incurred. Income tax (ISR) and the IETU are recorded in the results of the year they are incurred. To recognize deferred income taxes, based on its financial projections, since October 2007 the Company determines whether it expects to incur ISR or IETU and accordingly recognizes deferred taxes based on the tax it expects to pay.  Deferred taxes are calculated by applying the corresponding tax rate to the applicable temporary differences resulting from comparing the accounting and tax bases of assets and liabilities, and including, if any, future benefits from tax loss carryforwards and certain tax credits.  Deferred tax assets are recorded only when there is a high probability of recovery. According to NIF D-4, “Income Taxes,” the balance of the initial cumulative effect of deferred income taxes was reclassified to retained earnings (accumulated deficit) as of January 1, 2008.
Tax on assets (“IMPAC”) – The IMPAC that is expected to be recovered is recorded as a tax credit and is presented in the balance sheet under deferred taxes.
l.
Foreign currency transactions – Foreign currency transactions are recorded at the applicable exchange rate in effect at the transaction date.  Monetary assets and liabilities denominated in foreign currency are translated into Mexican pesos at the applicable exchange rate in effect at the balance sheet date. Exchange fluctuations are recorded as a component of net comprehensive financing income (cost) in the consolidated statements of income.

m.
Concentrations of credit risk – Financial instruments that are subject to a potential credit risk due to non–compliance by the counterparty primarily consist of cash and cash equivalents and trade receivables from the Company’s principal domestic and international airline customers.  Cash and cash equivalents are maintained in different prestigious financial institutions in Mexico and mainly refer to bank deposits and immediately realizable investments. With respect to trade accounts receivable, to reduce its credit risk, the Company conducts periodic evaluations of the financial situation of its customers and also requests specific guarantees or advances when deemed necessary. The Company believes that its potential credit risk is adequately covered by the allowance for doubtful accounts that it has recognized. In 2009, 2008 and 2007, approximately 10.00%, 9.11% and 18.8%, respectively, of the Company’s accounts receivable correspond to amounts due from Compañía Mexicana de Aviación, S.A. de C.V. (“Mexicana”), approximately 16.8%, 18.2% and 24.2%, respectively, correspond to amounts due from Aerovías de México, S.A. de C.V. (“Aeromexico”), and approximately 21.2%, 16.8% and 16.6%, respectively, correspond to amounts due from Aerolitoral, S.A. de C.V. (“Aerolitoral”) and approximately 10.1%, 6.8% and 4.6%, respectively, correspond to amounts due from Aerovías Caribe, S.A. de C.V. (“Click de Mexicana”). In addition, of the Company’s consolidated revenues for the years ended December 31, 2009, 2008 and 2007, approximately 6.5%, 8.5% and 9.3%, respectively, correspond to revenues generated by Mexicana, approximately 11.2%, 11.4% and 13.2%, respectively, correspond to revenues generated by Aeromexico, approximately 11.9%, 9.1% and 7.7%, respectively, correspond to Aerolitoral and approximately 5.5%, 3.5% and 2.2%, respectively, correspond to revenues generated by Click de Mexicana.
n.
Revenue recognition – Revenue is generated mainly from the rendering of aeronautical services (regulated revenues), which refer to the use of the airport facilities by airlines and passengers.  Aeronautical services consist of services that generate revenues necessary for the operation and proper functioning of an airport.  These revenues are subject to a system of prices regulated by the SCT, which establishes a maximum rate for such aeronautical and complementary services provided at each airport.  Such revenues are recognized when the services are rendered.
The Company also generates revenue from non-aeronautical services, which consist mainly of the leasing of commercial spaces in airport terminals, revenues from the operation of parking lots, fees from access to third parties that provide catering services and other services at airports.  Spaces in the airport terminals are rented through operating lease agreements that contain either fixed monthly rent (increased annually based on the INPC) or fees based on a minimum monthly fee or a percentage of the monthly income of the lessee, whichever is higher.  The fixed portion of lease revenues is recognized when the services are rendered or based on the terms of the related lease.
The contingent rentals generated from the percentage of lessee monthly income are recognized in income once the contingency is met.  Therefore, during the year, the percentage of lessee monthly revenues is recognized in the following month, once the Company has received information related to its tenants’ revenues.  Though each year reported includes twelve months of revenues, this accounting treatment results in a one-month lag with respect to the commercial revenues for those tenants whose stated percentage of monthly income is greater than the minimum monthly fee.  However, the Company monitors the effect of this one-month lag at each reporting date and does not believe such effect to be material to its reported results.
Hotel service revenues are recognized when the services are rendered.

o.
Earnings per share – Basic earnings per common share are calculated by dividing consolidated net income by the weighted average number of shares outstanding during the year.  The Company does not have diluted securities for purposes of MFRS; therefore basic and diluted earnings per share are the same.
4.            Cash and cash equivalents
2009
2008
Cash equivalents
Ps.185,282
Ps.232,090
Cash
82,452 25,330
Ps.267,734
Ps.257,420

5. Trade accounts receivable
2009
2008
Accounts receivable
Ps.475,396
Ps.426,998
Allowance for doubtful accounts
(52,160 ) (38,433 )
Ps.423,236
Ps.388,565
Passenger charges are payable for each passenger (other than diplomats, infants, transfer and transit passengers) departing from the airport terminals operated by the Company and are collected by the airlines and subsequently remitted to the Company.
Accounts receivable includes balances invoiced to domestic and international airlines for passenger charges at December 31, 2009 and 2008, amounting to Ps.393,488 and  Ps. 354,866, respectively.
The Company periodically reviews the sufficiency of its allowance for doubtful accounts considering the nature and aging of its receivables as well as other factors including the credit risks associated with individual customers, the airline industry as a whole and existing macro-economic conditions. Past due or delinquency status is determined on the basis of the terms of the relevant contract, at which point the Company employs all efforts to collect the amount.  When an account is deemed uncollectible, such account is written-off once the Company has exhausted all collection means at its disposal, which generally occurs following a judicial determination that a particular receivable is not collectible.
6.            Property, machinery and equipment - net
2009
2008
Land
Ps.1,640,847
Ps.1,578,123
Building
294,483 -
Machinery and equipment
318,613 287,631
Office furniture and equipment
73,698 50,737
Vehicles
95,685 122,161
Computers
26,791 22,596
2,450,117 2,061,248
Accumulated depreciation and amortization
(272,225 ) (267,993 )
2,177,892 1,793,255
Construction in-progress
5,721 142,386
Ps.2,183,613
Ps.1,935,641


Depreciation for the years ended December 31, 2009, 2008 and 2007 related to fixed assets was Ps.47,979, Ps. 39,306 and Ps. 33,603, respectively. In addition, for the years ended December 31, 2009, 2008 and 2007, the Company incurred Ps.3,003, Ps. 1,243 and Ps. 8,388, respectively related to the amortization of other assets.
As part of its strategic investments, in 2009 and 2008 territorial reserves of Ps.62,724 and Ps.1,455,904, respectively, were purchased to develop and expand the Company’s key airports.
During 2009, the Company capitalized construction-in-progress related to the hotel located at the Mexico City International Airport Terminal 2. The related capitalized comprehensive financing cost as of December 31, 2009 is Ps.20,778.
7. Investment in airport concessions - net
The investment in airport concessions is comprised of the improvements to concessioned properties, the rights to use the airport facilities and the airport concessions. As described in Note 3d., effective January 1, 2003, the total cost of the concession was assigned proportionally to rights to use airport facilities on the basis of the net replacement value of the assets determined by an independent appraiser; at any airport concession where the cost exceeded the appraised value, such excess was recognized within the airport concessions caption.  The allocation was determined as set forth below:
Period of Remaining Amortization
in Years
Cost of the concession from the SCT (Note 1 and 3d.)
Ps. 5,813,656
Appraised amount assigned to:
Rights to use airport facilities:
Runways, aprons and platforms
Ps. 1,528,878
25
Buildings
1,002,794 27
Other infrastructure
349,935 19
Land
2,043,447 40
4,925,054
Airport concessions
888,602 40
Total cost
Ps. 5,813,656

Amortization of the concessioned properties improvements is calculated using the straight-line method beginning in the month after the date they are acquired, based on the assets’ estimated useful lives, which vary from 8 to 20 years.
As of December 31, 2009 and 2008, the net values of the rights to use the airport facilities, airport concessions and improvements to concessioned properties consist of the following:
2009
2008
Rights to use airport facilities
Ps.4,925,054
Ps.4,925,054
Less – Accumulated amortization
(1,176,292 ) (1,050,544 )
Ps.3,748,762
Ps.3,874,510
Airport concessions
Ps. 888,602
Ps. 888,602
Less – Accumulated amortization
(177,720 ) (159,947 )
Ps. 710,882
Ps. 728,655
Improvements to concessioned properties
Ps.3,561,157
Ps.2,990,390
Less – Accumulated amortization
(855,927 ) (638,540 )
Ps.2,705,230
Ps.2,351,850
Total investment in airport concessions
Ps.7,164,874
Ps.6,955,015


As of December 31, 2009 and 2008, as part of the concessioned properties improvements, there is construction-in-process amounting to Ps.235,557 and Ps.475,939, respectively.  As of December 31, construction-in-process refers mainly to the Monterrey Airport’s Terminal B. The unamortized capitalized comprehensive financing cost as of December 31, 2009 is Ps.17,493.
Amortization for rights to use the airport facilities and airport concessions for the years ended December 31, 2009, 2008 and 2007 were Ps. 143,521 Ps. 143,693 and Ps. 143,617, respectively. Amortization for the years ended December 31, 2009, 2008 and 2007 related to improvements to concessioned properties was Ps.217,387, Ps.182,477 and Ps.150,594, respectively.
Each airport concession agreement contains the following terms and basic conditions:
·
The concessionaire has the right to manage, operate, maintain and use the airport facilities and carry out any construction, improvements or maintenance of the related facilities in accordance with its Master Development Program, and to provide airport, complementary and commercial services.
·
The concessionaire will use the airport facilities only for the purposes specified in the concession agreement, will provide services in conformity with the law and applicable regulations and will be subject to inspections by the SCT.
·
The concessionaire must pay a tax for the operation of the assets under concession (currently 5% of the concessionaire’s annual gross revenues derived from the use of public property), in conformity with the Mexican Federal Duties Law.
·
Aeropuerto y Servicios Auxiliares (“ASA”) has the exclusive right to supply fuel at the concessionaire’s airports.
·
The concessionaire must grant free access to specific airport areas to certain Mexican government agencies, so that they may carry out their activities within the airports.
·
According to Article 27 of the General Law on Airports, the concession may be revoked if the concessionaire breaches any of its obligations established therein or falls under any of the causes for revocation referred to in Article 26 of the law and in the concession agreement.  The breach of certain concession terms may be cause for revocation if the SCT has applied sanctions in three different instances with respect to the same concession term.
·
The SCT may modify concession terms and conditions that regulate the Company’s operations.
·
The concession may be renewed in one or more instances, for terms not to exceed an additional 50 years.
The Company is required to invest in fixed assets and improvements in the concessioned properties according to a five-year Master Development Program (“MDP”) established in the concession agreement The Company has the obligation to invest in fixed assets and make improvements to the concessioned assets, according to the Master Development Program (PMD), which foresees regulated investments and the security system for screening luggage.  The total investment is Ps. 2,461,921 (Ps. 1,890,102 historical pesos of purchasing power of September 2004) and represents the investment to be made from 2006 to 2010. The amount to be invested, as per the PMD as of December 31, 2009 is Ps.762,317, which considers the investment planned for the luggage review system of Ps.499,611.

Concession tax – According to the Article 232-A of the Mexican Federal Duties Law and the terms of the Company’s concession agreements, the Company must pay the Mexican government an annual tax for the rights to use the airport facilities, which is currently equal to 5% of annual gross revenues.
8.            Short term debt
As of December 31, 2009, the loans bear interest at TIIE at 28 days plus 4.00 points. Interest matures monthly. As of December 31, 2009 and 2008, the interest rates were 8.93% and 12.71%, respectively.
As of December 31, 2009, the Company was in compliance with its financial covenants related to its short term debt.
9.            Long term debt
Bank line of credit of Ps.500,000 with no collateral bearing interest at TIIE plus 4.5 points, which as of December 31, 2009 was 9.42%.
Ps. 470,589
Less – Current portion
58,824
Ps. 411,765
As of December 31, 2009, long-term debt matures as follows:
2011
Ps. 58,824
2012
58,824
2013
58,824
2014
58,824
Thereafter
176,469
Ps.411,765
The Company’s long term loans include certain restrictive clauses that limit its ability to obtain new bank loans, offer its assets as collateral, sell fixed assets and require the Company to maintain certain financial ratios as well as to pay its tax obligations on a timely basis. As of December 31, 2009, the Company was complying with the restrictions and financial covenants related to its long term debt.
10.          Employee benefits
The related liability and annual cost of such benefits are calculated by an independent actuary on the basis of formulas defined in the plans using the projected unit credit method.
The present values of these obligations and the rates used for the calculations are:
2009
2008
Vested benefit obligation
Ps.(24,664)
Ps.(23,300)
Unrecognized items:
Changes to the plan
(1,802 ) (2,402 )
Prior service costs
937 1,197
Initial transition asset
538 711
Career wage concept
- 392
Projected net liability
Ps.(24,991)
Ps.(23,402)


Actuarial rates used:
2009
2008
%
%
Discount of projected benefit obligations at present value
8.50 8.50
Wage increase
5.50 5.50
Minimum wage increase
4.50 4.00
Unamortized items are recognized in earnings over a five year period.
11. Stockholders’ equity
a.
As of December 31, 2009, 2008 and 2007, authorized Class I shares consist of 400,000,000, of which 58,800,000 are Series “BB” and 341,200,000 Series “B”.
b.
The subscribed and paid-in capital stock at December 31, 2009, 2008 and 2007 is solely comprised of fixed  capital and is represented by ordinary, registered no-par shares and is comprised as follows:
2009
Number of shares
Historical
value
Restatement effect
Restated capital stock
Fixed capital:
Series B, Class I
341,200,000
Ps.3,763,828
Ps.1,515,334
Ps.5,279,162
Series BB, Class I
58,800,000 644,619 264,651 909,270
Treasury shares
(1,643,400 ) (17,973 ) (7,686 ) (25,659 )
Total
398,356,600
Ps.4,390,474
Ps.1,772,299
Ps.6,162,773

2008
Number of shares
Historical
value
Restatement effect
Restated capital stock
Fixed capital:
Series B, Class I
341,200,000
Ps.3,763,828
Ps.1,515,334
Ps.5,279,162
Series BB, Class I
58,800,000 644,619 264,651 909,270
Treasury shares
(4,726,100 ) (52,086 ) (21,461 ) (73,547 )
Total
395,273,900
Ps.4,356,361
Ps.1,758,524
Ps.6,114,885

2007
Number of shares
Historical
value
Restatement effect
Restated capital stock
Fixed capital:
Series B, Class I
341,200,000
Ps.3,763,828
Ps.1,515,334
Ps.5,279,162
Series BB, Class I
58,800,000 644,619 264,651 909,270
Treasury shares
(2,604,700 ) (28,706 ) (11,828 ) (40,534 )
Total
397,395,300
Ps.4,379,741
Ps.1,768,157
Ps.6,147,898
c.
As of December 31, 2009, the Company held in treasury shares repurchased with a cost basis of Ps.86,451. This amount is represented by 1,643,400 Series “B” shares, which appear in the Statement of Changes in Stockholders’ Equity reducing the capital stock and the reserve for the repurchase of shares by Ps.25,659 and Ps.60,792, respectively. The weighted average number of shares outstanding during the year as disclosed in Note 3.o. is affected considering the dates in which the shares were repurchased.  On December 31, 2009, the market value of the Company’s shares as listed on the Mexican Stock Exchange at the close of business was 22.12 pesos.

d.
On April 24, 2009, at the Stockholders’ Ordinary and Extraordinary General Meeting, the following  matters were approved: to increase the legal reserve by Ps.27,092; to declare dividends of Ps.400,000, of which a payment of  Ps. 200,000 is outstanding as of December 31, 2009.
e.
On April 3, 2008, at the Stockholders’ Ordinary and Extraordinary General Meeting, the following  matters were approved: to increase the legal reserve by Ps. 1,560; to declare dividends of Ps. 434,240.
f.
On April 27, 2007, at the Stockholders’ Ordinary General Meeting, the following matters were approved:  to increase the legal reserve by Ps. 23,354; to declare dividends of Ps. 444,125; the creation of a reserve to repurchase the Company’s shares of Ps. 412,628 and the capitalization of the balance related to the additional liability for labor obligations of Ps.11,872 against retained earnings.
g.
Mexican General Corporate Law requires that at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value in historical pesos.  The legal reserve may be capitalized but may not be distributed, except in the form of a stock dividend, unless the entity is dissolved.  The legal reserve must be replenished if it is reduced for any reason. On December 31, 2009, 2008 and 2007 the legal reserve amounted to Ps.124,206, Ps 97,114, and Ps. 95,554, respectively.
h.
Stockholders’ equity, except restated paid-in capital and tax retained earnings will be subject to income taxes payable by the Company at the rate in effect upon distribution.  Any tax paid on such distribution may be credited against annual and estimated income taxes of the year in which the tax on dividends is paid and the following two fiscal years.
The balances of the stockholders’ equity tax accounts as of December 31 are as follows:
2009
2008
Contributed capital account
Ps.6,436,090
Ps.6,214,242
Net taxable income account
69,458 145,420
Reinvested net taxable income account
36,962 35,688
Total
Ps.6,542,510
Ps.6,395,350
12.          Foreign currency balances and transactions
As of December 31 the foreign currency monetary position in thousands of U.S. dollars is as follows:
2009
2008
Monetary assets
$ 3,484 $ 191
Monetary liabilities
(9,412 ) (22,788 )
Monetary asset position
$ (5,928 ) $ (22,597 )
Equivalent in Mexican pesos
Ps.(77,795)
Ps.(311,276)


Transactions denominated in foreign currency in thousands of U.S. dollars for the years ended December 31 were as follows:
2009
2008
2007
Technical assistance fee
$ 3,235 $ 4,063 $ 5,154
Payment of insurance policies
1,249 1,347 1,509
Payments for machinery and maintenance safety equipment
2,881 4,780 2,202
Professional services, fees and subscriptions public offering
419 684 2,866
Purchase of land
- 36,082 -
Construction in-progress
3,135 - -
Other
810 583 -


The exchange rate of Mexican pesos per one U.S. dollar, were as follows:
December 31,
2009
2008
Purchase
Sale
Purchase
Sale
Interbank
Ps.13.0525
Ps.13.1040
Ps.13.6850
Ps.13.7750
As of March 8, 2010, the exchange rate was Ps.12.6315 and Ps.12.6335 pesos for the purchase and sale of one U.S. dollar respectively.
13. Balances and transactions with related parties
Balances with related parties at December 31 were as follows:
2009
2008
Accounts receivable – Empresas ICA, S.A.B. de C.V. (EMICA) (1)
Ps. 80,712
Ps. 83,538
Accounts payable:
SETA (2)
Ps. 56,480
Ps. 61,825
Dividends payable to Aeroinvest, S.A. de C.V.
83,901 93,823
Nacional Hispana Hoteles, S.R.L. de C.V. (3)
24,053 -
Ingenieros Civiles Asociados, S.A. de C.V. (4)
114,386 164,374
Ps.278,820
Ps. 320,022
Transactions with related parties, carried out in the ordinary course of business, for the years ended December 31 were as follows:
2009
2008
2007
Expenses:
Technical assistance fees and related out-of-pocket costs (2)
Ps. 51,710
Ps. 55,604
Ps. 57,416
Administrative services provided by Grupo ICA, S.A. de C.V.
- 3,014 -
Capital expenditures (4)
567,556 422,104 223,237
(1)
The accounts receivable from EMICA represents the estimated ISR payments and dividends in favor of the Company.
(2)
The accounts payable to SETA include dividends of Ps.33,400 and Ps.36,258 in 2009 and 2008, respectively. The expenses are related to the technical support service provided and travel expenses.
(3)
Loan received from NH Hotels to pay contractors related to the construction of the hotel located at the Mexico City International Airport Terminal 2.
(4)
The accounts payable at December 31, 2009 is composed of Ps.39,008 for Terminal “B” at the Monterrey Airport, Ps.43,647 for construction of the hotel at the Mexico City International Airport Terminal 2and Ps.31,731 for different construction services. The capital investments refer to the construction of Terminal B, construction of the hotel, rehabilitation of the Torreón and San Luis Potosí airport runways and platform constructions at the Monterrey and Chihuahua airports.
The Company has entered into an agreement with Ingenieros Civiles y Asociados, S.A. de C.V. for the purpose of conducting remedial work and pavement construction on operational areas of the Company’s airports, foreseen in the Master Development Plan for the 2006-2010 period, in the understanding that for each specific work, a construction agreement shall be set forth at per unit prices or a lump sum price construction agreement.

The Company uses the services of an independent expert to supervise and ensure that the construction services are provided at current market rates for similar services.
The benefits granted to key personnel of the Company, were as follows:
2009
2008
2007
Short- and long-term direct benefits
Ps.48,522
Ps.48,964
Ps.43,842
Technical assistance – The Company has executed a technical assistance and transfer-of-technology contract with SETA, which will be in effect for 15 years.  Currently, the Company is required to pay the greater of the fixed $3,000 component or 5% of consolidated operating income (as defined in the contract) annually for such services.  Beginning in 2006, the fixed $3,000 component will be updated according to the consumer price index of the United States of America.  In 2009, 2008 and 2007, 5% of consolidated operating income was greater than of the fixed $3,000.
As of December 31, 2009, SETA’s, stockholders were Aeroinvest, S.A. de C.V. (“Aeroinvest”) (subsidiary of Empresas ICA, S.A.B. de C.V.) with 74.5% and Aéroports de Paris Management, S.A. (“ADP”) with 25.5%.  Pursuant to the Company’s bylaws, SETA (as holder of the Company’s Series “BB” shares) has the right to present to the board of directors the name or names of the candidates for appointment of certain of the Company’s senior management, the right to appoint and remove the Company’s chief financial officer, chief operating officer and commercial director, the right to elect three members of the Company’s board of directors and the right to veto certain actions requiring approval of the Company’s stockholders (including the payment of dividends, the amendment of the Company’s bylaws and the amendment of its right to appoint certain members of senior management).  In the event of the termination of the technical assistance agreement, the Series “BB” shares will be converted into Series “B” shares resulting in the termination of these rights.  If at any time, prior to June 14, 2015, SETA were to hold less than 7.65% of the Company’s capital stock in the form of Series “BB” shares, it would lose its veto rights (but other special rights it possess as a Series “BB” shareholder would be unaffected) .  If at any time after June 14, 2015, SETA were to hold less than 7.65% of the Company’s capital stock in the form of Series “BB” shares, such shares must be converted into Series “B” shares, which would cause SETA to lose all of its special rights.  So long as SETA retains at least 7.65% of the Company’s capital stock in form of Series “BB” shares, all its special rights will remain in force.
Pursuant to the Company’s bylaws, the technical assistance agreement and the participation agreement, SETA may not transfer more than 51% of its Series “BB” shares until after June 14, 2008. After such date, SETA is entitled to transfer up to one eighth of such 51% during each year thereafter. As of December 31, 2009, SETA has not transferred any of its representative Series “BB” shares.
14.          Other income (expenses) - net
Detail is as follows:
2009
2008
2007
Statutory employee profit sharing – current
Ps. (1,321)
Ps. (2,626)
Ps. (9,587)
Statutory employee profit sharing – deferred
- 104,230 2,097
Other income (expenses)
11,372 3,188 (94 )
Ps.10,051
Ps.104,792
Ps. (7,584)


15.          Taxes on income
The Company is subject to ISR and to IETU in 2009 and 2008, and was subject to ISR and IMPAC in 2007.
The ISR rate for 2007 was 29%, and for 2009 and 2008 was 28%, and based on changes to the Mexican Tax Law in 2009 will be 30% for 2010 to 2012, 29% for 2013, and 28% for 2014 and thereafter.
The Company is subject to ISR on an individual entity basis.  The related tax results are combined in the consolidated financial statements.
IETU - Revenues, as well as deductions and certain tax credits, are determined based on cash flows of each fiscal year.  The IETU rate is 17% and 16.5%, in 2009 and 2008, respectively; and 17.5% as of 2010.  The Asset Tax Law was repealed upon enactment of the IETU Law; however, under certain circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid, may be recovered, according to the terms of the law.
Based on its financial projections and according to INIF 8, “Effects of the Business Flat Tax”, the Company, determined that in certain subsidiaries it will pay only ISR in future periods, while in others, it will pay IETU, therefore, it recognizes deferred taxes based of the taxes it expects to pay in the future.
In 2007, IMPAC was calculated by applying 1.25% to the value of the assets of the year, without deducting any debt amounts. IMPAC is payable only to the extent that it exceeded ISR payable for the same period.
To determine the deferred ISR as of December 31, 2009 and 2008, the Company applied the rates that will be in effect according to their estimated date of completion to the temporary differences.
Income tax is as follows:
2009
2008
2007
Income tax:
Current
Ps. 88,455
Ps. 180,504
Ps. 187,248
Deferred
(16,029 ) (33,571 ) (475,744 )
IETU:
Current
19,214 5,385 -
Deferred
(13,855 ) 86,588 1,073,859
Ps.77,785
Ps. 238,906
Ps. 785,363
The reconciliation of the statutory income tax rate and the effective tax rate as a percentage of income before income taxes for the years ended December 31 is as follows:
2009
%
2008
%
2007
%
Statutory rate
28.00 28.00 28.00
Effect of permanent differences, mainly non-deductible expenses, restatement of taxes and effects of inflation for financial and tax purposes
(14.77 ) (9.18 ) (4.86 )
Change in valuation allowance for recoverable tax on assets paid and tax loss carryforwards
- - 14.70
Effect of canceling the deferred ISR liability
- - (73.17 )
Effect of adding the deferred IETU liability
0.98 11.78 131.51
Effective rate
14.21 30.60 96.18


At December 31, the main items comprising the liability balance for deferred taxes are as follows:
2009
2008
Deferred ISR:
Assets (liabilities):
Labor obligations and other current liabilities
Ps. 29,492
Ps. 43,732
Other liabilities
(197 ) (25,965 )
Machinery and equipment
2,062 (369 )
Net deferred ISR asset
31,357 17,398
Tax loss carryforwards
851,083 945,578
Recoverable tax on assets paid
243,488 235,095
1,125,928 1,198,071
Valuation allowance
(1,087,435 ) (1,178,040 )
Net deferred ISR asset
38,493 20,031
Deferred IETU:
Assets:
Fixed assets acquired between January 1998 to August 2007
76,602 106,259
IETU credits
274,722 213,555
Fixed assets acquired between September 2007 to December 2007
16,356 17,399
Credit from for the immediate deduction of tax loss carryforwards
12,800 4,992
Other liabilities
86,170 68,955
Deferred IETU asset
466,650 411,160
Liabilities:
Rights to use airport facilities and concessions
(780,435 ) (805,551 )
Improvements to concessioned properties, property, machinery, and equipment
(724,545 ) (724,175 )
Other liabilities
(93,599 ) (41,881 )
Deferred IETU liability
(1,598,579 ) (1,571,607 )
Valuation allowance
(14,662 ) -
Net deferred IETU liability
(1,146,591 ) (1,160,447 )
Total
Ps.(1,108,098)
Ps.(1,140,416)
As of December 31, 2009 and 2008, the valuation allowance represents a reserve against the recognized benefit of the tax on assets paid by the Company’s airports.
The Company created a valuation allowance for the entire amount of tax loss carryforwards that can be offset against ISR taxable income in the calculation of the 2009 deferred taxes as a result of applying the guidance established by INIF 8.  Each airport concession has received approval from the Mexican Tax Authorities to carryforward their tax losses up to the earlier of the date such tax loss carryforwards are utilized by the airport or the date of expiration or liquidation of the concession.  Amounts as of December 31, 2009, as restated for inflation, are as follows:
Year of
origin
Tax loss carryforwards
1998
Ps. 2,147
1999
51,510
2000
383,965
2001
626,612
2002
654,108
2003
550,914
2004
475,814
2005
52,613
2006
74,298


Year of
origin
Tax loss carryforwards
2007
73,639
2008
55,489
2009
38,472
Ps.3,039,581
In the calculation of deferred IETU, according to the disclosures above, the effects of recoverable IMPAC paid of Ps.243,488 were included; however, they have been fully reserved because there is not a high probability of recovering such amounts:
Year of
expiration
Recoverable tax on assets
2012
Ps. 77,331
2013
69,306
2014
60,615
2015
16,782
2016
9,244
2017
10,210
Ps.243,488
16.          Contingencies
At December 31, 2009, resolution is pending on lawsuits filed against the following subsidiaries:
a.
A claim against the Ciudad Juárez airport was filed on November 15, 1995 claiming repossession of part of the land (240 hectares) where the International Airport of Ciudad Juárez is located, claiming that the land was incorrectly transferred to the Mexican government. The plaintiff claims payment of $120,000 (Ps.1,653,000), given the impossibility of repossessing the land because of its utilization as an airport.  In May 2005, the Appeals Court ordered the Ciudad Juarez airport to return such land. An appeal (seeking court relief on constitutional grounds) was filed by the Ciudad Juárez airport against this verdict, which was filed to request that the Appeals Court consider certain additional evidence and on such basis issue a new judgment.  On November 8, 2007, the Appeals Court overruled the May 2005 court order, nullified the underlying legal proceeding and dismissed the plaintiff’s claim without prejudice. The plaintiff then filed a new appeal against this verdict. At the date of the accompanying consolidated financial statements, the contingency remains because the trial is still ongoing, as the Federal Government has yet to respond. If the resolution is not favorable to the Company, the economic repercussions of the lawsuit are expected to be the responsibility of the Mexican government, as established in the concession agreement, for which reason the Company has not recognized any liability in relation to this claim.
b.
Administrative law proceedings were asserted against the Company by the municipalities of Reynosa, Zihuatanejo, Ciudad Juárez and Tampico for the payment of property taxes with respect to the real property on which its airports operate in those cities.  The claims of the municipalities of Reynosa, Zihuatanejo, Ciudad Juárez and Tampico amounted to Ps.59,500, Ps.2,800, Ps.1,800 and Ps.1,020, respectively. The claim of Zihuatanejo, Ciudad Juárez and Tampico were dismissed on January, 2009, March, 2009 and February, 2009, respectively. On November 2009, the municipality of Ciudad Juárez claimed that the Company owes Ps.7,500 in property taxes. The total amounts of the property-tax claims outstanding, as recently updated to reflect additional amounts claimed since the proceedings were first asserted, in Reynosa and Ciudad Juárez are Ps.59,500 and Ps.7,500, respectively, although these amounts could increase if the underlying claims are not resolved in the Company’s favor.  Moreover, other municipalities where the Company operates its airports could assert similar claims.

c.
The Company determines PTU based on Section I of Article 10 of the Mexican Income Tax Law; however, the tax authorities and/or the employees may disagree with this treatment, in which case the Company will file the necessary appeals in order to continue calculating PTU using its current methodology.
17.           Commitments
a.
As discussed in Note 13, the Company has executed a technical assistance and transfer-of-technology contract with SETA, which will be in effect for 15 years. Currently, the Company is required to pay the greater of the fixed $3,000 component or 5% of consolidated operating income (as defined in the contract) annually for such services.  Beginning in 2007, the fixed $3,000 component will be updated according to the consumer price index of the United States of America.
b.
In October 2008, the Company acquired the shares of Consorcio (see Note 1). As a result of the acquisition, the Company assumed the commitments set forth in the lease agreement signed with the Mexico City Airport for a 20-year period to construct, prepare and operate a hotel, and manage the commercial premises at Terminal 2 of the Mexico City International Airport, establishing a minimum guaranteed income (MGI) of Ps. 18,453 annually as rent, plus a share of the 18% of the hotel’s gross income obtained. The MGI will be adjusted on an annual basis using the NCPI.
c.
In June 2007, Aeroinvest settled its aforementioned debts held with financial institutions through the issuance of a 10-year, three-series bond of Ps. 2,805 (par value). Such issuance was made through a trust with JP Morgan and was issued to qualified U.S. investors and listed on the Irish Alternative Securities Market. As collateral, the following assets were contributed to the trust: 1) the rights to collect the dividends that the Company distributes, corresponding to 36.04% of its capital stock; ii) the rights to collect the dividends that SETA distributes, corresponding to 74.5% of its capital stock; iii) the rights to collect the loans granted to SETA; iv) the reimbursements of the capital contributions made to SETA; v) guarantee of Aeroinvest in the event of breach and vi) corporate guarantees from EMICA.
If Aeroinvest defaults on its obligations under the refinancing documents, the Company would be further restricted in its ability to create liens, incur indebtedness, sell, transfer or encumber assets, engage in merger transactions or otherwise change its business or make investments or capital expenditures outside of the master development plans, which could restrict its flexibility to capitalize on business opportunities or otherwise adversely affect its business and results of operations.  In addition, Aeroinvest could lose its ability to vote its shares of the Company’s capital stock as well as its shares of SETA, and the trustee could in certain circumstances foreclose on the Series B shares and SETA shares held in trust.
18.           Information by industry segments
The Company determines and evaluates its airports’ individual performances before allocating personnel-related costs and other costs incurred by SACN, the subsidiary that includes the Company’s senior management.  The following table shows a summary of the Company’s financial information by segment as it relates to the Monterrey Airport, the Acapulco Airport, the Mazatlán Airport, the Culiacán Airport, the Chihuahua Airport and the Zihuatanejo Airport. The financial information relating to the remaining seven airports, as well as that of SACN, OACN, Holding and Consorcio, the last three beginning in 2008 and the Company (including investment in its subsidiaries) was combined and included under “Other”.  The elimination of the investment of the Company in its subsidiaries is included under “Eliminations”.


December 31,  2009
Monterrey
Acapulco
Mazatlán
Culiacán
Chihuahua
Zihuatanejo
Other
Eliminations
Total
Total revenues
Ps.858,606
Ps.141,272
Ps.144,478
Ps.150,081
Ps.116,126
Ps. 98,385
Ps. 2,019,675
Ps. (1,632,346)
Ps.1,896,277
Operating income
73,450 12,649 20,157 11,357 19,943 7,857 600,039 (186,068 ) 559,384
Interest income - net
(6,045 ) 17,732 23,431 2,040 11,528 3,503 (78,384 ) - (26,195 )
Income tax
- - - - - - 72,426 - 72,426
Business flat tax expense
11,810 (1,369 ) 1,645 (16 ) (604 ) 1,133 (7,240 ) - 5,359
Total assets
4,885,854 890,176 800,162 574,229 589,015 575,977 11,070,664 (9,109,399 ) 10,276,678
Total liabilities
1,509,447 127,603 91,213 94,981 82,127 100,014 1,974,601 (1,378,271 ) 2,601,715
Capital expenditures
395,964 37,366 10,324 35,743 21,132 32,269 334,858 - 867,656
Investment in airport concesions
2,960,558 613,343 472,650 473,197 422,417 501,957 1,720,752 - 7,164,874
Depreciation and amortization
101,089 48,810 33,279 26,197 24,358 30,500 147,657 - 411,890

December 31, 2008
Monterrey
Acapulco
Mazatlán
Culiacán
Chihuahua
Zihuatanejo
Other
Eliminations
Total
Total revenues
Ps.924,174
Ps.157,532
Ps.139,203
Ps.140,530
Ps.120,466
Ps.96,610
Ps.1,914,617
Ps.(1,504,656)
Ps.1,988,476
Operating income
56,479 9,609 8,491 2,577 15,657 5,643 709,239 (120,327 ) 687,368
Interest income - net
38,118 12,618 16,481 2,655 8,701 3,183 (18,589 ) 63,167
Income tax
146,933 146,933
Business flat tax expense
58,482 5,689 747 2,358 7,260 3,822 13,615 91,973
Total assets
4,699,129 859,262 791,498 565,413 555,556 565,718 10,366,875 (8,543,619 ) 9,859,832
Total liabilities
1,384,797 129,040 124,798 99,490 80,919 100,262 1,584,684 (1,173,918 ) 2,330,072
Capital expenditures
1,743,039 36,275 24,021 37,111 23,102 22,613 341,401 2,227,562
Investment in airport concesions
2,723,142 624,383 492,430 481,295 426,699 498,153 1,708,913 6,955,015
Depreciation and amortization
93,434 44,947 32,042 24,379 22,361 27,411 122,145 366,719

December 31, 2007
Monterrey
Acapulco
Mazatlán
Culiacán
Chihuahua
Zihuatanejo
Other
Eliminations
Total
Total revenues
Ps.847,764
Ps.148,388
Ps.143,430
Ps.145,194
Ps.116,693
Ps.96,193
Ps.1,018,524
Ps.(618,833)
Ps.1,897,353
Operating income
42,955 6,297 12,768 8,008 13,706 4,629 231,205 408,353 727,921
Interest income - net
106,584 9,808 12,950 2,127 4,628 1,402 (10,839 ) - 126,660
Income tax
(358,508 ) (15,730 ) (28,738 ) (27,245 ) (26,859 ) (17,723 ) 186,307 - (288,496 )
Business flat tax
411,342 107,935 84,279 74,378 64,541 76,295 255,089 - 1,073,859
Total assets
4,121,808 842,262 744,157 551,894 534,103 560,300 9,734,982 (7,955,118 ) 9,134,388
Total liabilities
834,573 132,473 107,979 92,084 85,853 104,459 1,038,058 (735,433 ) 1,660,046
Capital expenditures
396,147 42,622 22,378 12,487 16,422 14,753 153,201 - 658,010
Investment in airport concesions
2,502,215 639,765 509,619 490,936 424,152 500,945 1,655,244 6,722,876
Depreciation and amortization
84,495 42,244 29,258 23,697 21,249 25,303 109,956 336,202
19.          Revenues
According to the General Law on Airports and its regulations, Company revenues are classified as airport services (to airlines and passengers), complementary and commercial.
Aeronautical services include those services provided to airlines and passengers as well as complementary services.
Non-aeronautical services include those services that are not essential for operating an airport, such as the lease of commercial premises, restaurants and banks.
Revenues generated by aeronautical services are under a price regulation system administered by the SCT for airport concessions, which establishes a maximum rate (“TM”) for each year in a five-year period.  The TM is the maximum amount of revenue per “work load unit” that may be earned at an airport each year from regulated sources.  Under this regulation, a work load unit is equivalent to one passenger (excluding transit passengers) or 100 kilograms (220 pounds) of cargo.

Non-aeronautical services are not covered by the regulation system administered by the SCT.  However, in some cases, they may be regulated by other authorities, as is the case with revenues generated from the operation of parking lots.
Under the General Law on Airports and its regulations, revenues generated from the operation of parking lots should be classified as aeronautical; however, for purposes of these financial statements, such revenues are classified as non-aeronautical.
The following table presents an analysis for the years ended December 31, 2009, 2008 and 2007 of the Company’s revenues.
2009
2008
2007
Aeronautical services
Airport services:
Landing
Ps. 94,915
Ps. 111,693
Ps. 119,624
Parking on embarking/disembarking platform
56,953 72,911 79,573
Parking on extended stay or overnight platform
19,031 22,293 16,513
Aerocars and jetways
17,172 23,847 23,093
Passenger and carry-on baggage check, national and international
19,580 22,796 22,614
Domestic passenger charges
894,113 955,466 884,738
International passenger charges
295,711 278,579 277,255
Complementary services – Airport real estate services and rights of access to other operators and complementary services
129,490 129,610 126,417
Total aeronautical services revenues
1,526,965 1,617,195 1,549,827
Non-aeronautical services
Car parking charges
104,465 112,694 105,499
Commercial concessions  (1):
Retail operations
33,119 36,197 34,723
Food and beverages
28,777 35,001 31,596
Duty free
10,950 13,567 14,321
VIP lounges
39,917 36,644 33,980
Financial services
2,464 1,877 1,796
Communications and networks
4,361 4,350 3,981
Car rentals
31,338 32,175 29,633
Advertising
39,444 39,304 36,937
Time share
18,081 18,068 18,014
Complementary service providers
2,374 2,475 5,908
Attention to passengers
1,697 - -
Expense recovery
20,086 20,777 15,221
OMA freight
13,537 14,578 11,762
Non-airport access fees
3,391 3,574 4,155
354,001 371,281 347,526
Hotel service revenues
15,311 - -
Total non-aeronautical services
369,312 371,281 347,526
Total revenues
Ps.1,896,277
Ps.1,988,476
Ps.1,897,353
(1)
Non-aeronautical service revenues are earned based on the terms of Company’s operating lease agreements.  Lease agreements are based on either a monthly rent (which generally increases each year based on the INPC) or the greater of a monthly minimum guaranteed rent or a percentage of the lessee’s monthly revenues.  Monthly rent and minimum guaranteed rent earned on the Company’s operating lease agreements are included under the caption “Commercial concessions” above.

At December 31, 2009, future minimum rentals are as follows:
Year
Amount
2010
Ps.230,942
2011
145,168
2012
45,535
2013
33,174
Thereafter
91,924
Total
Ps.546,743
Future minimum rentals, which generally include rents that are increased each year by the INPC, do not include the contingent rentals related to increases based on the INPC or contingent rentals that may be paid under certain commercial leases on the basis of a percentage of the lessee’s monthly revenues in excess of the monthly minimum guaranteed rent.  Contingent rentals earned during the years ended December 31, 2009, 2008 and 2007 were Ps.48,219, Ps. 70,278 and Ps. 68,379, respectively.
Approximately 80%, 79% and 79% of consolidated revenues during the years ended December 31, 2009, 2008 and 2007, respectively, were generated by the Monterrey, Acapulco, Mazatlán, Culiacán, Chihuahua and Zihuatanejo airports.
20.          Cost of services
Cost of services for the years ended December 31 is as follows:
2009
2008
2007
Employee cost
Ps.146,000
Ps.156,183
Ps.143,067
Maintenance
63,177 54,020 53,900
Safety, security and insurance
86,106 80,992 74,933
Utilities
99,225 112,793 94,408
Real property leases
12,414 1,183
Other
50,845 54,903 54,469
Ps.457,767
Ps.460,074
Ps.420,777
21.          New accounting pronouncements
With the purpose of making Mexican standards converge with International Financial Reporting Standards (“IFRS”), in 2009, the Mexican Board for Research and Development of Financial Reporting Standards (“CINIF”) issued the following NIFs and Interpretations of Financial Reporting Standards (“INIF”):
a)           For fiscal years that begin on January 1, 2010:
C-1, Cash and Cash equivalents
Improvements to NIFs for 2010
INIF 14, Construction Contracts, Sale of Real Property and Rendering of Related Services
INIF 17, Service Concession Contracts

Some of the most important changes established by these standards are:
NIF C-1, Cash and Cash Equivalents , requires restricted cash and cash equivalents to be included within the cash and cash equivalents caption, as opposed to Bulletin C-1, which required presentation under separate captions; NIF C-1 replaces the caption on-demand temporary investments with the caption on-demand available investments clarifying that this type of investment has a maturity of up to three months from its acquisition date.
Improvements to NIFs for 2010 – The main improvements generating accounting changes that must be recognized retroactively are:
NIF B-1, Accounting Changes and Correction of Errors –Requires further disclosures in case the Company applies a particular Standard for the first time.
NIF B-2, Statement of Cash Flows – Requires recognition of the effects of fluctuations in exchange rates used for translating cash in foreign currencies, and changes in fair value of cash in the form of precious metal coins, and other cash items, at fair value, in a specific line item.
NIF B-7, Business Acquisitions – Requires recognition of intangible assets or provisions because the acquired business has a contract whose terms and conditions are favorable or unfavorable with respect to market, only when the acquired business is the lessee in an operating lease.  This accounting change should be recognized retroactively and not go further than January 1, 2009.
NIF C-7, Investments in Associated Companies and Other Permanent Investments – Modifies how the effects derived from increases in equity percentages in an associated company are determined.  It also establishes that the effects due to an increase or decrease in equity percentages in associated companies should be recognized under equity in income (loss) of associated companies, rather than in the non-ordinary line item within the statement of income.
NIF C-13, Related Parties – Requires that, if the direct or ultimate controlling entity of the reporting entity does not issue financial statements available for public use, the reporting entity should disclose the name of the closest, direct / indirect, controlling entity that issues financial statements available for public use.
INIF 14, Construction Contracts, Sale of Real Property and Rendering of Related Services – is a supplement to Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets , and requires segregation of the different components of the contracts in order to define whether the contract refers to construction of real property, sale of real property, or rendering related services, and establishes the rules for recognizing revenue and related costs and expenses, based on the different elements identified in the contract.  INIF 14 provides guidance for the appropriate use of the percentage-of-completion method for revenue recognition.
INIF 17, Service Concession Contracts – is a supplement to Bulletin D-7, Construction and Manufacturing Contracts for Certain Capital Assets, and establishes that, when the infrastructure of the service concession contracts falls within the scope of this INIF, it should not be recognized under property, plant and equipment.  It also establishes that when the operator renders construction or improvement services, as well as operation services under the same contract, revenues should be recognized for each type of service, based on the fair value of each consideration received at the time the service is rendered.  When amounts are clearly identified and, after they are quantified, the applicable revenue recognition criterion should be followed, taking the nature of the service rendered into consideration.  Also, INIF 17 establishes that, when the operator renders construction or improvement services, both revenues and the associated costs and expenses should be recognized under the percentage-of-completion method and consideration received, or receivable, should be recognized, initially, at fair value.  Revenues from operation services should be recognized as the services are rendered and suppletorily considering IAS 18.

b)
For fiscal years that begin on January 1, 2011:
B-5, Financial Segment Information, and
B-9, Interim Financial Information
Some of the most important changes established by these standards are:
NIF B-5, Financial Segment Information – Uses a managerial approach to disclose financial information by segments, as opposed to Bulletin B-5, which also used a managerial approach but required that the financial information be classified by economic segments, geographical areas, or homogenous client groups.  NIF B-5 does not require different risks among business areas to separate them.  It allows areas in the preoperating stage to be classified as a segment, and requires separate disclosure of interest income, interest expense and liabilities, as well as disclosure of the entity’s information as a whole with respect to products, services, geographical areas and major customers and suppliers.  Like the previous Bulletin, this Standard is mandatory only for public companies or companies in the process of becoming public.
NIF B-9, Interim Financial Information – As opposed to Bulletin B-9, this Standard requires a condensed presentation of the statement of changes in stockholders’ equity and statement of cash flows, as part of the interim financial information.  For comparison purposes, it requires that the information presented at the closing of an interim period contain the information of the equivalent interim period of the previous year, and in the case of the balance sheet, presentation of the previous years’ annual balance sheet.
At the date of issuance of these financial statements, the Company has not fully assessed the effects of adopting these new standards on its financial information.
22.          International Financial Reporting Standards
In January 2009, the National Securities and Banking Commission published the amendments to the Mexican Securities Law, including the obligation to prepare and present financial statements using International Financial Reporting Standards (“IFRS”) beginning in 2012 (early adoption is permitted).  The Company is in the process of determining the impacts the adoption of IFRS will have on its financial information.
23.          Authorization for issuance of financial statements
On March 8, 2010, the issuance of the Company’s MFRS financial statements was authorized by Lic. Víctor Bravo Martín General, Chief Executive Officer of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.  Such consolidated financial statements are subject to approval at the ordinary stockholders’ meeting, where they may be modified based on provisions set forth by the Mexican General Corporate Law.

24.          Differences between MFRS and U.S. GAAP
The Company’s consolidated financial statements are prepared in accordance with MFRS, which differs in certain respects from U.S. GAAP.  Through December 31, 2007, the consolidated financial statements prepared under MFRS include the effects of inflation as provided for under Bulletin B-10, “Recognition of the Effects of Inflation in Financial Information”, whereas financial statements prepared under U.S. GAAP are ordinarily presented on a historical cost basis.  The reconciliations to U.S. GAAP do not include the reversal of the adjustments required under Bulletin B-10.  The application of Bulletin B-10 represented a comprehensive measure of the effects of price level changes in the Mexican economy and, as such, was considered a more meaningful presentation than historical cost-based financial reporting.  Bulletin B-10 also required the restatement of all financial statements to pesos as of the date of the most recent balance sheet presented.
As mentioned in Note 3, NIF B-10, became effective January 1, 2008.  NIF B-10 revised the accounting for inflation such that the inflation accounting methods summarized in Note 3(c) will no longer apply unless the economic environment in Mexico qualifies as “inflationary” for purposes of MFRS. Given the cumulative inflation in Mexico for the three years prior to December 31, 2007 and 2008, the Mexican economic environment did not qualify as inflationary, thereby eliminating inflationary accounting in the Company’s consolidated financial statements for periods beginning after January 1, 2008.
The principal differences, other than inflation accounting, between MFRS and U.S. GAAP and their effects on consolidated net income and consolidated stockholders’ equity are presented below with an explanation of such adjustments:
2009
2008
2007
Reconciliation of net income (loss):
Consolidated net income according to MFRS
Ps.469,524
Ps. 541,803
Ps. 31,192
U.S. GAAP adjustments:
(i)  Amortization of assets under concession
85,734 85,734 85,734
(ii)  Amortization of airport concession
17,772 17,772 17,771
(iii)  Depreciation of fixed assets recorded at predecessor cost basis
- (2,903 ) (3,164 )
(iv)  Deferred fees for technical assistance services
(10,811 ) 30,696 (10,133 )
(v)  Accrued vacation
9,055 (2,817 ) (3 )
(vi)  Provisions for seniority premiums and severance payments
4,116 (8,844 ) (4,232 )
(vii) Deferred statutory employee profit sharing
- (104,230 ) (6,112 )
Total U.S. GAAP adjustments before the effect of income taxes
105,866 15,408 79,861
(viii) Income taxes
(273,010 ) 456,243 (229,371 )
Consolidated net income (loss) according to U.S. GAAP
Ps.302,380
Ps.1,013,454
Ps.(118,318)

2009
2008
Reconciliation of stockholders’ equity:
Consolidated stockholders’ equity according to MFRS
Ps.7,674,963
Ps.7,529,760
U.S. GAAP adjustments:
(i)  Cost of assets under concession
(3,683,547 ) (3,683,547 )
(i)  Accumulated amortization of assets under concession
732,011 646,277
(ii)  Amortized cost of airport concessions
(710,882 ) (728,654 )
(iii)  Accrued vacation
- (9,055 )
(iv)  Provision for seniority premiums and severance payments
5,015 (1,410 )
Total U.S. GAAP adjustments before the effect of income taxes
(3,657,403 ) (3,776,389 )
(viii) Income taxes
1,058,479 1,335,238
Consolidated stockholders’ equity according to U.S. GAAP
Ps.5,076,039
Ps.5,088,609


A summary of the changes in consolidated stockholders’ equity after giving effect to the aforementioned U.S. GAAP adjustments is as follows:
Common
stock
Additional paid-in capital
Retained
earnings
Reserve for repurchase of shares
Accumulated other comprehensive income
Noncontrolling
interest
Total stockholders’ equity
Balances at January 1, 2008
Ps.1,789,630
Ps.44,422
Ps.2,386,264
Ps.353,518
Ps. 9,581
Ps.
-
Ps.4,583,415
Dividends paid
- - (434,240 ) - - - (434,240 )
Deferred fees for technical assistance services
- (30,696 ) - - - - (30,696 )
Contribution by noncontrolling interest
1,200 1,200
Comprehensive income:
Net income
- - 1,013,495 - - (41 ) 1,013,454
Labor obligations
- - - - 8,821 - 8,821
Total comprehensive income
- - 1,013,495 - 8,821 (41 ) 1,022,275
(Repurchase) of shares, net
(33,013 ) - - (20,332 ) - - (53,345 )
Balances at December 31, 2008
Ps.1,756,617
Ps.13,726
Ps.2,965,519
Ps.333,186
Ps. 18,402
Ps. 1,159
Ps.5,088,609
Dividends paid
- - (400,000 ) - - - (400,000 )
Deferred fees for technical assistance services
- 10,811 - - 10,811
Contribution by noncontrolling interest
9,141 9,141
Comprehensive income:
Net income
- - 303,844 - - (1,464 ) 302,380
Labor obligations
- - - - (1,440 ) (1,440 )
Total comprehensive income
- - 303,844 - (1,440 ) (1,464 ) 300,940
Reissuance (reserve for repurchase) of shares, net
47,888 - - 18,650 - - 66,538
Balances at December 31, 2009
Ps.1,804,505
Ps. 24,537
Ps.2,869,363
Ps.351,836
Ps. 16,962
Ps. 8,836
Ps.5,076,039

Condensed consolidated balances sheets and statements of operations including the aforementioned U.S. GAAP adjustments, as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007.
2009
2008
Assets
Current assets:
Cash and cash equivalents
Ps. 267,734
Ps. 257,420
Other current assets
616,671 672,275
Total current assets
884,405 929,695
Property, machinery and equipment  – net
2,183,613 1,935,637
Investment in airport concessions – net
3,502,456 3,189,158
Long-term deferred income taxes
- 194,780
Other assets – net
43,786 42,930
Total
Ps.6,614,260
Ps.6,292,200
Liabilities and stockholders’ equity:
Current liabilities
Ps.1,037,603
Ps.1,158,298
Long-term deferred income taxes
41,750 -
Other long-term liabilities
458,868 45,293
Total liabilities
1,538,221 1,203,591
Common stock
1,804,505 1,756,617
Additional paid-in capital
24,537 13,726
Retained earnings
2,869,363 2,965,519
Reserve for repurchase of shares
351,836 333,186
Accumulated other comprehensive income
16,962 18,402
Noncontrolling interest
8,836 1,159
Total stockholders’ equity
5,076,039 5,088,609
Total liabilities and stockholders’ equity
Ps.6,614,260
Ps.6,292,200


2009
2008
2007
Net revenues
Ps.1,896,277
Ps.1,988,476
Ps.1,897,353
Cost of operations:
Cost of services
459,486 460,539 419,725
General and administrative expenses
306,148 328,350 255,959
Concession taxes
94,756 101,642 98,307
Technical assistance fees
62,521 24,908 67,550
Depreciation and amortization
308,116 266,031 235,122
Statutory employee profit sharing
1,321 2,626 9,587
Total costs
1,232,348 1,184,096 1,086,250
Income from operations
663,929 804,380 811,103
Net comprehensive financing (loss) income
(22,126 ) (11,451 ) 67,369
Other income (expenses) – net
11,372 3,188 (94 )
Income tax expense(benefit)
350,795 (217,337 ) 996,696
Consolidated net income (loss)
Ps. 302,380
Ps.1,013,454
Ps. (118,318)
Weighted average number of common shares outstanding
394,934,855 396,284,313 399,611,578
Weighted average number of common shares and common share equivalents (unless antidilutive)
397,874,855 399,224,413 399,611,578
Basic earnings per share (in Mexican pesos)
0.7656 2.5574 (0.2961 )
Diluted earnings per share (in Mexican pesos)
0.7600 2.5386 (0.2961 )
(i) Amortization of assets under concession (treated as intangible “rights to use airport facilities” under Investment in Airport Concessions for MFRS)
Under MFRS, the cost of the concessions to operate the airports and the related facilities was determined on a basis proportionate to the amount SETA paid to the Mexican government for its investment in 15% of the common stock of the Company.  This amount is reflected as two intangible assets: “rights to use airport facilities,” which reflects the value of the land and facilities used to operate each airport (up to the total amount of the concession for each individual airport to the extent such fair value was in excess) and “airport concessions”, both part of the investment in airport concessions (Note 7).  As discussed in Notes 3.d and 7, for purposes of MFRS, the portion of the cost of the concession allocated to the rights to use airport facilities was determined based on an independent appraisal of the assets at each airport concession, and is amortized over the useful lives of the related assets, with total lives ranging from 8 to 37 years from the date such concessions were granted.  The remainder of the appraised value over the cost of the concession was recorded as airport concessions, and is amortized over a total life equal to the concession term of 50 years.
For purposes of U.S. GAAP, since the concession arrangement provides the Company with the right to use the airports and related facilities for a 50-year term, and since the Company was created and controlled by the Mexican government at the date of the grant of the concessions, the arrangement is accounted for based on its economic substance as a contribution by the Mexican government of fixed assets including runways, aprons, platforms, buildings and other infrastructure, used to operate the airport facilities under the related concession agreements.  Throughout the 50-year concession term, the Mexican government retains title to the assets under concession.  Upon expiration of the concession term, use of the assets reverts to the Mexican government.  Pursuant to U.S. GAAP, the transfer of fixed assets was made among entities under common control.  Thus, under U.S. GAAP, the related assets were recognized at their carrying value in the records of the Mexican government, and are reflected as “assets under concession.”  The assets are depreciated over their remaining useful lives, or 22 years for other infrastructure, 30 years for buildings, and 28 years for runways, aprons and platforms.  Useful lives were determined by an independent appraiser and take into account major maintenance overhauls that the Company is required to perform on the assets to prolong their lives in accordance with its Master Development Programs.

In addition, as the transfer of fixed assets included land and buildings, the Company compared the fair values of the fixed assets as obtained from the independent appraisal of such assets performed for MFRS purposes.  Based on the appraisals, the fair value of the land transferred at all airports except for the Acapulco airport was considered significant in relation to the total fair value of all assets transferred.  Accordingly, at such airports, the value included within the caption assets under concession for U.S. GAAP purposes does not include the value of the land transferred.  With respect to the Acapulco airport, the land has been recorded as a single unit with the building transferred and is amortized over the economic life of the building of 26 years.  Accordingly, this treatment results in a difference in amortization expense between MFRS and U.S. GAAP.
In addition, as described in Note 7, the concession arrangements require the Company to pay a concession tax, pursuant to the Mexican Federal Duties Law, currently equal to 5% of annual gross revenues, which is classified within operating expenses.  The Mexican Federal Duties Law is a law of general applicability and is not specifically directed to airport concession holders.  The concession tax under the Mexican Federal Duties Law is applicable to and payable by any concession-holder that uses state-owned assets, without regard to the value of state-owned assets used.  This annual payment is considered a tax rather than consideration paid in exchange for the Mexican government’s contribution of the concessioned assets, and is recognized as an operating expense when it becomes payable for both U.S. GAAP and MFRS purposes.
Accordingly, the reconciliation to stockholders´ equity under U.S. GAAP includes an adjustment to reduce the basis of the concessioned assets under MFRS to the net historical cost basis as recorded in the accounting records of the Mexican government at the time of transfer.  A corresponding adjustment is recognized to the Company’s consolidated net income for the related effects on depreciation expense
(ii) Airport concessions
There is no asset recorded under U.S. GAAP for the “airport concessions” as the Mexican government’s carrying value of such asset was zero.  Accordingly, with respect to the intangible airport concession asset, annual amortization is removed from consolidated net income under MFRS and the amortized cost of such asset under MFRS is removed from consolidated stockholders’ equity each year in the U.S. GAAP reconciliation.
(iii) Depreciation of fixed assets recorded at predecessor cost basis
As part of the grant of the concession, the Company also acquired certain machinery, furniture and equipment from the Mexican government.  Under MFRS, the value of these fixed assets was recorded based on an independent appraisal obtained by the Company.
The acquisition of these fixed assets also constitutes a transfer of assets between entities under common control, for which reason under U.S. GAAP such assets must be recognized at the cost basis of the predecessor at the time of transfer.  Accordingly, the reconciliation includes an adjustment to the value of such assets and the effect of the related depreciation.

(iv) Deferred fees for technical assistance services
As discussed in Note 1, in June 2000, the Company and SETA entered into a stock option agreement, whereby the Company granted SETA the right to acquire an additional three percent of the Company’s outstanding Series “B” common stock provided that SETA had complied with its obligations under the technical assistance agreement.  The option was exercisable in three tranches of one percent each, exercisable during a two-year period beginning June 14, 2003, June 14, 2004 and June 14, 2005, respectively, at an exercise price of $1.1286 (Ps.11.0198 nominal value), plus a 5% annual premium, subject to decrease based on any dividends paid by the Company.  1% expired, unexercised during 2005; the remaining 2% was exercised by SETA during 2007.
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, (previously, SFAS No. 123 (R), “Share-Based Payment”), requires that all transactions in which equity instruments are issued to other than employees in conjunction with the selling of goods or services be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.
Further, ASC 718, (previously EITF 96-18, “Accounting for Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services”), provides guidance to establish a measurement date for awards issued to other than employees.  As the Company did not believe that SETA had sufficiently large disincentives for nonperformance, and thereby SETA did not have a performance commitment as defined by U.S. GAAP, it established the measurement date as the date performance by SETA is complete, and consequently recognized the related cost of the award using variable accounting, as illustrated in ASC 718 (previously FIN No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.”)
In 2007, for MFRS purposes, at the date of exercise of the option by SETA, the Company recognized Ps. 94,439 of common stock and Ps. 29,785 of additional paid-in capital for the difference between the book value of the shares and the amount paid by SETA for such shares.  In addition to the stock option, SETA also holds forfeitable shares of the Company’s common stock in a trust.  Upon SETA’s initial acquisition of 15% of the Company’s common stock, pursuant to the terms of the participation agreement between SETA and the Company, SETA signed a trust agreement with Banco Nacional de Comercio Exterior, S.N.C, and assigned to the trust, all of the Series “BB” shares it acquired.  In the trust agreement, the Company was named as secondary beneficiary only in the instance in which SETA does not comply with the terms of the technical assistance agreement, in which case 5% of the Series “BB” shares would be forfeited and sold, with the proceeds of the sale to be provided to the Company as liquidated damages and penalties.
Based on the fact that the five percent of SETA’s original investment held in the trust is forfeitable subject to compliance with the technical assistance agreement, the Company considers those shares to be compensatory and has recorded the fair value of these compensatory shares in a manner consistent with the stock option, applying variable accounting, resulting in a related (income) expense and corresponding (decrease) increase to additional paid-in capital of Ps.10,811, Ps. (30,696) and Ps.10,133 in 2009, 2008 and 2007, respectively.
(v) Accrued vacation
MFRS currently requires that vacation benefits be accrued.  As a result this reconciling difference, which was presented in previous years, has been eliminated in 2009.  Under U.S. GAAP, ASC 710, Compensation – General (previously SFAS No. 43, “Accounting for Compensated Absences”), requires that such vacation benefits be accrued.

(vi) Provisions for seniority premiums and for severance payments
Under both MFRS and U.S. GAAP, the Company recognizes a liability for its seniority premiums based on actuarial computations using the project unit credit method.  Differences exist in the discount rates used for actuarial purposes between U.S. GAAP and MFRS.  U.S. GAAP required that nominal rates be used while MFRS allows the use of real or “inflation-free” rates up to December 31, 2007. Beginning in 2008, such computations consider nominal rates.
Beginning January 1 2009, NIF D-3 eliminates the recognition of the additional liability because its determination does not incorporate a salary increase, incorporates the career salary concept, and the amortization period of most unrecognized items (those not related to retirement benefits) is reduced to five years, with the option to fully amortize them against current earnings of 2008 under other income and expense. The Company chose to amortize such items over a period of five years. Additionally, the beginning balance of actuarial gains and losses was recorded against results of 2008 for purposes of MFRS, in other income and expense.
The Company applies ASC 715, Compensation – Retirement Benefits (previously SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”, which requires companies to recognize the overfunded or underfunded status of a defined benefit plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income.  U.S. GAAP also requires that a company measure the funded status of its plans as of the date of its year-end balance sheet, as well as prescribes additional disclosure requirements. ASC 715 is applicable to the Company’s seniority premium plan, as well as its liability recognized for severance benefits.  Disclosures related to the Company’s seniority premiums and severance payment benefits required by U.S. GAAP are as follows:
The Company uses a December 31 measurement date for its seniority premiums plan and severance obligations.
Seniority Premium
Benefits
Severance
Benefits
2009
2008
2009
2008
Projected benefit obligation – unfunded status
Ps. (4,381)
Ps. (3,621)
Ps. (22,191)
Ps. (21,252)

Seniority Premium Benefits
Severance Benefits
Seniority Premium Benefits
Severance Benefits
2009
2009
2008
2008
Amounts recognized in accumulated other comprehensive income
Prior service costs, net of deferred tax of Ps.4,550 and Ps. 4,879 for 2009 and 2008, respectively
Ps. (16,250)
Ps. -
Ps.(12,546)
Ps. -
Actuarial net gain, net of deferred tax of Ps.2,045 and Ps.2,277 for 2009 and 2008, respectively
(1,924 )
Ps. (5,380)
(1,558 ) (4,298 )
Ps. (18,174)
Ps. (5,380)
Ps.(14,104)
Ps. (4,298)


Seniority Premium
Benefits
Severance
Benefits
2009
2008
2009
2008
Change in benefit obligation:
Projected benefit obligation at beginning of year
Ps. (3,621
)
Ps. (3,716
)
Ps.(21,252
)
Ps. (30,709
)
Service cost
(517 ) (580 ) (2,052 ) (3,006 )
Interest cost
(294 ) (281 ) (1,657 ) (2,270 )
Actuarial loss
(81 ) 779 (76 ) 12,012
Benefits paid
132 177 2,846 2,721
Projected benefit obligation at end of year
Ps. (4,381
)
Ps. (3,621
)
Ps.(22,191
)
Ps.(21,252
)

Seniority Premium
Benefits
Severance
Benefits
2009
2008
2009
2008
Components of net periodic pension cost:
Service costs
Ps. 517
Ps. 580
Ps. 2,052
Ps. 3,006
Interest costs
294 281 1,657 2,270
Amortization of net actuarial (gain) or loss and prior service costs
(1,333 ) (1,259 ) (513 ) 719
Net periodic pension cost
Ps. (522
)
Ps. (398
)
Ps. 3,196
)
Ps. 5,995

Seniority Premium
Benefits
Severance
Benefits
2009
2008
2009
2008
Weighted-average assumptions used to determine benefit obligations at  December 31:
Discount rate
8.00 % 8.00 % 8.00 % 8.00 %
Rate of compensation increase
5.00 % 5.00 % 5.00 % 5.00 %
Weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31:
Discount rate
8.50 % 8.50 % 8.50 % 8.50 %
Rate of compensation increase
5.50 % 5.00 % 5.50 % 5.00 %
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Seniority Premium Benefits
Severance Benefits
2009
Ps. 420
Ps. 3,723
2010
379 3,567
2011
417 3,457
2012
433 3,362
2013
548 3,276
Thereafter
3,477 15,131
Ps. 5,674
Ps. 32,516
(vii) Deferred statutory employee profit sharing
As discussed in Note 3j, under MFRS, the Company calculates deferred employee profit sharing based on taxable income, according to Section I of Article 10 of the Income Tax Law.  The Company only recognizes a deferred statutory employee profit sharing asset or liability when it can be reasonably assumed that such difference will generate a liability or benefit, and there is no indication that circumstances will change in such a way that the liabilities will not be paid or benefits will not be realized.

However, for purposes of U.S. GAAP, the Company must calculate deferred statutory employee profit sharing based on the temporary differences between the financial reporting basis and the statutory employee profit sharing basis of assets and liabilities for those subsidiaries of the Company that have employees in Mexico.  Using such methodology, because of the adjustments to the accounting value of the rights to use airport facilities and airport concessions under U.S. GAAP, a net deferred statutory employee profit sharing asset results.  U.S. GAAP prohibits the recognition of deferred statutory employee profit sharing assets.  Accordingly, the U.S. GAAP reconciliation includes an adjustment to remove the liability recognized for MFRS purposes but does not reflect the recognition of any deferred statutory employee profit sharing asset.
In addition, current statutory employee profit sharing is included in other (expenses) income for MFRS purposes.  Under U.S. GAAP, such cost is classified as an operating expense.  Accordingly, this difference, which does not affect the determination of consolidated net income for U.S. GAAP purposes, would decrease operating income by Ps 1,321 Ps. 2,626 and Ps. 9,587 for the years ended December 31, 2009, 2008 and 2007, respectively.
(viii) Income taxes
For U.S. GAAP purposes, under ASC 740 – Income Taxes, the Company is required to address the tax consequences of both the ISR and the IETU regimes by scheduling the reversal of its temporary differences and to use the tax rates that are expected to apply each year.  Based on its financial projections, for purposes of U.S. GAAP, which were performed through the period its taxable temporary differences are expected to reverse, the Company concluded that it expects to alternate between both the ISR and IETU regimes.  As such, it scheduled the reversal of its inventories of temporary differences and determined by year whether the applicable reversing temporary differences were those under ISR or those under IETU and similarly what rate to apply to determine the appropriate amount of deferred tax assets and liabilities.  In addition, as the Company’s subsidiaries have net operating loss (NOL) carryforwards under the ISR regime, it used scheduling to demonstrate the amount of the NOL carryforwards it expects will more likely than not be realized.
As a result of U.S. GAAP adjustments to certain assets and liabilities, their U.S. GAAP accounting value differs from their accounting value under MFRS.  Accordingly, all adjustments for deferred income taxes for purposes of the U.S. GAAP reconciliation were determined based on the difference between the accounting values of assets and liabilities under U.S. GAAP and MFRS versus the tax values and applicable tax rates of such assets and liabilities.
In addition, deferred taxes are classified as non-current for MFRS purposes while they are based on the classification of the related asset or liability for U.S. GAAP purposes.
The most significant adjustments to deferred income taxes in the U.S. GAAP reconciliation are due to the differences in accounting for the cost of the airport concessions and the rights to use airport facilities, the cost of fixed assets acquired from the Mexican government and the accounting for tax loss carryforwards.
A reconciliation of the net deferred income tax liability from MFRS to a deferred tax asset and deferred tax liability under U.S. GAAP and the composition of the deferred income taxes under U.S. GAAP at December 31, 2009 and 2008, respectively are as follows:
Reconciliation of deferred income taxes:
2009
2008
Deferred income tax liability under MFRS
Ps.(1,108,098)
Ps.(1,140,416)
Effect of cost of airport concession and rights to use airport facilities
587,535 595,344
Effect of fixed assets acquired
277,490 301,876
Tax loss carryforwards
471,514 679,314
IETU Tax credits
(274,722 ) (213,555 )
Other
4,531 (27,783 )
Total U.S. GAAP adjustments to net deferred income tax liability
1,066,348 1,335,196
Net deferred income tax asset (liability) under U.S. GAAP
Ps. (41,750)
Ps. 194,780
Composition of net deferred income tax assets (liabilities):
2009
2008
Assets:
Provisions
Ps. 41,853
Ps. 35,222
Advances from customers
317 1,109
Total current assets
42,170 36,331
Liabilities:
Other liabilities
(15,773 ) (28,497 )
Net current deferred  tax asset  (liability)
Ps. 26,397
Ps. 7,834
Non-current assets (liabilities):
Assets:
IETU tax credits
Ps. 9,286
Ps. 9,416
ISR tax loss carryforwards
847,343 945,342
Recoverable tax on assets
243,488 235,095
Valuation allowance for tax loss carryforwards and recoverable tax on assets
(608,667 ) (493,498 )
Total non-current assets
491,450 696,355
Liabilities:
Airport concessions and assets under concession
(192,900 ) (210,399 )
Property, real estate, machinery, equipment and improvements to concessioned properties
(366,697 ) (299,010 )
Total non-current liabilities
(559,597 ) (509,409 )
Net non-current deferred income tax asset (liability)
Ps. (41,750)
Ps. 186,946
It is the Company’s policy to classify interest and penalties related to income tax related matters within income tax expense and other expenses, respectively.  The Company’s operations are all located in Mexico.  The Mexican Tax Law allows the tax authorities five tax years that remain subject to examination.
(ix) Other U.S. GAAP disclosures
(a) Earnings per share according to U.S. GAAP – In accordance with ASC 260 – Earnings per Share (previously SFAS No. 128), basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding.  The computation of diluted earnings per share is adjusted to include any potential common shares.  Potential common shares include the forfeitable five percent of SETA’s shares held in the trust.
Diluted earnings per share for the years ended December 31, 2009 and 2008 includes 2,940,000 equivalent shares from the forfeitable shares, which are considered to be contingently issuable under U.S. GAAP, and thereby are included in the calculation of diluted EPS until such time as the contingency is resolved, at which time they will become a part of basic EPS. For the year ended December 31, 2008, such potentially dilutive shares were excluded from the computation of diluted earnings per share because it was considered antidulitve.

With respect to the stock option, in 2007, as 8,000,000 shares were exercised by SETA, such shares form part of the weighted average shares outstanding during the year for purposes of computing basic EPS and no further dilutive effects exist with respect to the option.
The computation and reconciliation of basic and diluted earnings per share for the years ended December 31, prepared in accordance with U.S. GAAP, are as follows:
2009
2008
2007
Numerator
Net income (loss) under U.S. GAAP
Ps. 302,380
Ps.1,013,454
Ps. (118,318)
Denominator (share amounts)
Weighted average number of common shares outstanding
394,934,855 396,284,313 399,611,578
Dilutive effects of forfeitable shares
2,940,000 2,940,000 -
Total potential dilutive shares
397,874,855 399,224,413 399,611,578
Basic earnings per share
Ps. 0.7656
Ps. 2.5574
Ps. (0.2961)
Diluted earnings per share
Ps. 0.7600
Ps. 2.5386
Ps. (0.2961)

(b) Statement of cash flows — Under MFRS, through  December 2007, the Company presents a consolidated statement of changes in financial position in accordance with Bulletin B-12, “Statement of Changes in Financial Position”, which identifies the generation and application of resources as the differences between beginning and ending financial statement balances in constant Mexican pesos.
Beginning on January 1, 2008, the Company must apply the requirements of NIF B-2 “Statement of Cash Flows”.  NIF B-2 requires that the statement shows a company’s cash inflows and outflows during the period and establishes general rules for the presentation, structure and preparation of a cash flow statement and replaces the statement of changes in financial position on a prospective basis.
For U.S. GAAP purposes, the Company presents its supplemental cash flow information in accordance with ASC 230 – Statement of Cash Flows (previously SFAS No. 95),, presenting cash movements, excluding of the effects of inflation in each individual line item in the balance sheet reported under U.S. GAAP. Such information for the years ended December 31, 2009, 2008, and 2007 is presented below:
2009
2008
2007
Cash flows from operating activities:
Consolidated net income (loss)
Ps. 302,380
Ps.1,013,454
Ps. (118,318)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization
308,116 266,031 235,122
Deferred fees for technical assistance services
10,811 (29,596 ) 10,133
Bad debt expense
14,455 33,523 387
Provisions for seniority premium and severance benefits
4,439 (9,552 ) (5,530 )
Unrealized exchange loss
(5,119 ) 67,835 -
Deferred income tax
236,530 (403,227 ) 772,999
Changes in operating assets and liabilities:
Accounts receivable
(49,126 ) (161,488 ) (18,763 )
Recoverable taxes
(30,742 ) (222,913 ) 91,621
Other current assets
9,874 2,387 52,641
Accounts payable and other accruals
(239,906 ) 89,113 17,570
Accounts payable to related parties
(125,437 ) 158,101 1,649
Advances from customers
(2,873 ) 1,666 (8,635 )
Value-added tax payable
- - 3,569
Statutory employee profit sharing
(442 ) (6,509 ) 740
Guarantee deposits
(1,203 ) 984 826
Net cash provided by operating activities
431,757 799,809 1,036,011
Cash flows from investing activities:
Acquisitions of property, machinery, equipment and improvements to concessioned properties
(615,369 ) (1,933,874 ) (657,018 )
Other investing activities
(3,858 ) (14,519 ) -
Net cash used in investing activities
(619,227 ) (1,948,393 ) (657,018 )
Cash flows from financing activities:
Proceeds from short term debt
72,194 130,863 -
Proceeds from long term debt
470,589 - -
Dividends paid
(411,537 ) (428,218 ) (229,224 )
Reissuance (repurchase) of shares
66,538 (53,345 ) (99,644 )
Net cash provided by (used in) financing activities
197,784 (350,700 ) (328,868 )
Effect of inflation on cash and cash equivalents
- - 33,585
Net increase (decrease) in cash and cash equivalents
10,314 (1,499,284 ) 83,710
Cash and cash equivalents at beginning of the year
257,420 1,756,704 1,672,994
Cash and cash equivalents at end of the year
Ps. 267,734
Ps. 257,420
Ps.1,756,704


Cash paid for:
Income taxes
Ps.318,346
Ps. 289,188
Ps. 134,680
Supplemental schedule of noncash investing activities:
Acquisitions of property, machinery, equipment and improvements to concessioned properties on account
Ps.251,349
Ps. 452,690
Ps. 20,193
(c) Valuation and qualifying accounts (MFRS) –
Description
Balance at beginning of the year
Additions charged to costs and expenses
Inflation effects
Deductions
Balance at the end of the year
Allowance for doubtful accounts
2009
38,433 14,455 (728 ) 52,160
2008
9,294 33,523 (4,384 ) 38,433
2007
9,242 2,285 (467 ) (1,766 ) 9,294
Valuation allowance
2009
493,498 115,169 608,667
2008
770,226 (276,728 ) 493,498

(d) Fair value
The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, accounts payable and current notes payable approximate fair value because they have relatively short-term maturities and bear interest at rates tied to market indicators, as appropriate.  The Company’s long-term debt consists of debt instruments that bear interest at variable rates tied to market indicators and therefore approximates its fair value.

(e) New U.S. GAAP accounting standards
In October 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“FASB ASC”) 105-10 (SFAS No. 168), The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.  FASB ASC 105-10 (SFAS No. 168) establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial standards in conformity with U.S. GAAP. FASB ASC 105-10 (SFAS No. 168) is effective for interim and annual periods ending after September 15, 2009. On the effective date, all then-existing non-SEC accounting and reporting standards are superseded, with the exception of certain items listed in FASB ASC 105-10 (SFAS No. 168). The purpose of the Codification is not to create new accounting and reporting guidance, but rather to simplify user access to all authoritative U.S. GAAP. Accordingly, the adoption of FASB ASC 105-10 (SFAS No. 168) had no effect on the Company’s consolidated financial statements.
The Company adopted the disclosure requirements of ASC 820-10 (SFAS No. 157, Fair Value Measurements) in relation to nonfinancial assets and liabilities in 2009.  The adoption of this standard did not impact the Company given that it did not record any fair value adjustments as it relates to its nonfinancial assets and liabilities in 2009.
In January 2009, the Company adopted FASB ASC 810-10 (SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51) which establishes the accounting and reporting standards for the noncontrolling interest in a subsidiary and the deconsolidation of a subsidiary, and also amends certain consolidation guidance for consistency with revised standards regarding business combinations. The accounting provisions of FASB ASC 810-10 (SFAS No. 160) must be applied prospectively as of the beginning of the fiscal year in which the provisions are initially adopted, while the presentation and disclosure requirements must be applied retrospectively, to provide comparability in the financial statements.  FASB ASC 810-10 (SFAS No. 160) was effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  As a result of adopting this standard, the Company reclassified the noncontrolling interest to stockholders’ equity in the year of adoption and in prior periods for purposes of comparability.
In January 2009, the Company adopted FASB ASC 805-10 (SFAS No. 141(R), Business Combinations – a replacement of FASB No. 141 (R)), which, among other changes, requires an acquirer in a business combination to (a) recognize assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at fair value as of the acquisition date, and (b) expense all acquisition-related costs.  FASB ASC 805-10 (SFAS No. 141(R)), also amends FASB ASC 740-10 (SFAS No. 109, Accounting for Income Taxes) to require that any reductions to an acquired entity’s valuation allowances on deferred taxes and acquired tax contingencies that occur after the measurement period be recorded as a component of income tax expense.  FASB ASC 805-10 (SFAS No. 141(R)) must be applied prospectively to all business combinations for which the acquisition date occurs during fiscal years beginning on or after December 15, 2008, with the exception to the amendments to ASC 740-10 (SFAS No. 109, Accounting for Income Taxes), which will also be applied to business combinations with acquisition dates prior to the effective date of this standard.  The adoption of this guidance did not have an impact on the Company’s consolidated financial statements and related disclosures and any future impact will be dependent on any future acquisitions.
In July 2009, the Company adopted FASB ASC 855-10 (SFAS 165, Subsequent Events). FASB ASC 855-10 (SFAS 165) establishes accounting and reporting standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In addition, FASB ASC 855-10 (SFAS 165) requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. FASB ASC 855-10 (SFAS 165) was effective for fiscal years and interim periods ending after June 15, 2009.

On May 7, 2010, the issuance of these consolidated financial statements, which include Note 24 and the accompanying U.S. GAAP financial information, was authorized by Lic. Víctor Bravo Martín, Chief Executive Officer of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.  The Company has evaluated events subsequent to December 31, 2009 to assess the need for potential recognition or disclosure in the accompanying consolidated financial statements. Such events were evaluated through May 7, 2010, the date these consolidated financial statements were available to be issued and included the following transactions:
·
On April 27, 2010, we entered into a long-term bank credit facility obtaining Ps. 200 million in proceeds, which is scheduled to mature in 2018.
·
On May 7, 2010, our short-term line of credit agreement decreased from Ps. 200 million to Ps. 100 million.
On June 12, 2009, the FASB issued ASC 860-10 (SFAS No. 166, Accounting for Transfer of Financial Assets – an amendment of FASB Statement No. 140), which eliminates the concept of a qualifying special purpose entity (“QSPE”) and modifies the derecognition provisions of a previously issued accounting standard. FASB ASC 860-10 (SFAS No. 166) also required additional disclosures which focus on the transferor’s continuing involvement with the transferred assets and the related risks retained. FASB ASC 860-10 (SFAS No. 166) is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. Early adoption is prohibited. The Company does not enter into transactions to transfer its financial instruments and as a result the adoption of this standard is not expected to impact its consolidated financial position, results of operations or cash flows.
On June 12, 2009, the FASB issued ASC 810-10 (SFAS No. 167, Amendments to FASB Interpretation No. 46 (R)), which amends the consolidation guidance that applies to variable interest entities. The new guidance requires an entity to carefully reconsider its previous consolidation conclusions, including (1) whether an entity is a variable interest entity (VIE), (2) whether the enterprise is the VIE’s primary beneficiary, and (3) what type of financial statement disclosures are required. FASB ASC 810-10 (SFAS No. 167) is effective as of the beginning of the first fiscal year that begins after November 15, 2009. The amendments to the consolidation guidance affect all entities and enterprises currently within the scope of FASB ASC 810-10 (SFAS No. 167), as well as qualifying special-purpose entities that are currently outside the scope of FASB ASC 810-10 (FIN 46(R)). Early adoption is prohibited.  The Company does not have any unconsolidated special purpose entities and the adoption of this standard is not expected to impact its consolidated financial position, results of operations or cash flows.
In October 2009, the FASB issued Accounting Standards Update (ASU) 2009-13, which contains new guidance on accounting for revenue arrangements with multiple deliverables. When vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. The guidance in the ASU will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning after June 15, 2010.  Early adoption is permitted. The adoption of this standard is not expected to impact the Company’s consolidated financial position, results of operations or cash flows.
On January 21, 2010, the FASB issued ASU 2010-06. The ASU amends ASC 820, Fair Value Measurements and Disclosures (SFAS No. 157) to add new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements.  It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value.  This ASU amends guidance on employers’ disclosures about postretirement benefit plan assets under ASC 715, Compensation – Retirement Benefits, to require that disclosures be provided by classes of assets instead of by major categories of assets.  The guidance in the ASU is effective for the first reporting period (including interim periods) beginning after December 15, 2009, except for the requirement to provide the Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. In the period of initial adoption, entities will not be required to provide the amende disclosures for any previous periods presented for comparative purposes. However, those disclosures are required for periods ending after initial adoption. Early adoption is permitted.
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F-46
TABLE OF CONTENTS
Part IItem 1. Identity Of Directors, Senior Management and AdvisersItem 2. Offer Statistics and Expected TimetableItem 3. Key InformationItem 4. Information on The CompanyItem 4A. Unresolved Staff CommentsItem 5. Operating and Financial Review and ProspectsItem 6. Directors, Senior Management and EmployeesItem 7. Major Shareholders and Related Party TransactionsItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosures About Market RiskItem 12. Description Of Securities Other Than Equity SecuritiesItem 12A . Debt SecuritiesItem 12AItem 12B. Warrants and RightsItem 12C. Other SecuritiesItem 12D. American Depositary SharesPart IIItem 13. Defaults, Dividend Arrearages and DelinquenciesItem 14. Material Modifications To The Rights Of Security Holders and Use Of ProceedsItem 15. Controls and ProceduresItem 16. [reserved]Item 16A. Special Committee Responsible For Audit Functions Financial ExpertItem 16B. Code Of EthicsItem 16C. Principal Accountant Fees and ServicesItem 16D. Exemptions From The Listing Standards For Audit CommitteesItem 16E. Purchases Of Equity Securities By The Issuer and Affiliated PurchasersItem 16F. Change in Registrant S Certifying AccountantPart IIIItem 17. Financial StatementsItem 18. Financial StatementsItem 19. Exhibits

Exhibits

12.1 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 12.2 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 13.1 Certification of Chief Financial Officer and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *