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, 2008





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)





Victor Bravo


Aeropuerto International de Monterrey


Zona de Carga


Carretera Miguel Aleman, Km. 24 s/n


66600 Apodaca Nuevo Leon, Mexico


+ 52 81 8625 4327


vbravo@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:





InterAction Web Client.Ink
Title of each class:
Name of each exchange
on which registeredAmerican Depositary Shares each representing 8 Series B shares
The NASDAQ Stock Market LLCSeries 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 SharesSeries 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   £        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   £        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 T 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 (§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 o N/A





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 T 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           oIFRSoOtherT





Indicate by check mark which financial statement item the registrant has elected to follow:





Item 17 o Item 18 T





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 T













TABLE OF CONTENTS





PageITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
1ITEM 3.
KEY INFORMATION
1Selected Financial Data
1Exchange Rates
5Risk Factors
6Forward-Looking Statements
26ITEM 4.
INFORMATION ON THE COMPANY
27History and Development of the Company
27Business Overview
33Regulatory Framework
64Organizational Structure
82Property, Plant and Equipment
83ITEM 4A.
UNRESOLVED STAFF COMMENTS
84ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
84ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
108ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
123Major Shareholders
123Related Party Transactions
125ITEM 8.
FINANCIAL INFORMATION
127Legal Proceedings
127Dividends
130ITEM 9.
THE OFFER AND LISTING
132Stock Price History
132Trading on the Mexican Stock Exchange
134ITEM 10.
ADDITIONAL INFORMATION
134Corporate Governance
134Material Contracts
150Exchange Controls
150Taxation
150Documents On Display
153ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
153





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TABLE OF CONTENTS


(continued)





PageITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
154ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
155ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
155ITEM 15.
CONTROLS AND PROCEDURES
155ITEM 16.
[RESERVED]
157ITEM 16A.
SPECIAL COMMITTEE RESPONSIBLE FOR AUDIT FUNCTIONS’ FINANCIAL EXPERT
157ITEM 16B.
CODE OF ETHICS
158ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
158ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
158ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
158ITEM 17.
FINANCIAL STATEMENTS
160ITEM 18.
FINANCIAL STATEMENTS
160ITEM 19.
EXHIBITS
161





ii
 Table of Contents





PART I





Item 1.
Identity of Directors, Senior Management and Advisers





Not applicable.





Item 2.
Offer Statistics and Expected Timetable





Not applicable.





Item 3.
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, 2007 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. 13.83 to U.S.$1.00, the noon buying rate for Mexican pesos on December 31, 2008, as published by the Federal Reserve Bank of New York.  On May 29, 2009 the Federal Reserve Bank of New York’s noon buying rate for Mexican pesos was Ps.13.18 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 22 to the consolidated financial statements.





Through December 31, 2007, MFRS provided for the recognition of certain effects of inflation by restating non-monetary assets and non-monetary liabilities using the Mexican National Consumer Price Index, or NCPI, restating the components of stockholders’ equity using the NCPI and recording gains or losses in purchasing power from holding
monetary liabilities or assets.  Through December 31, 2007, MFRS required the restatement of all financial statements to constant Mexican pesos as of the date of the most recent balance sheet presented. Our audited financial statements and all other financial information through December 31, 2007 contained herein are accordingly presented in constant pesos with purchasing power as of December 31, 2007, unless otherwise noted.





1
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Effective January 1, 2008, we adopted several accounting changes pursuant to MFRS and their interpretations (INIFs).  In particular as per NIF B-10, “Effects of Inflation”, the effects of inflation will no longer be recognized in our financial statements, effective January 1, 2008, in a non-inflationary environment.  From
such date on, the recording of inflation effects will only be required in an environment where cumulative inflation over the three preceding years is equal to or greater than 26%.  As a result of this change, our financial statements starting January 1, 2008 and for all subsequent periods are expressed in nominal pesos.





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.





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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, 2004.





Year ended December 31,2004


2005


2006


2007


2008(in thousands of Mexican pesos)


(thousands of dollars)(1)Statement of Income data:MFRS:Revenues:Aeronautical services(2)


1,083,709



1,192,249



1,370,968



1,549,827



1,617,195



116,934Non-aeronautical services(3)


250,719



287,628



316,343



347,526



371,281



26,846Total revenues


1,334,428



1,479,877



1,687,311



1,897,353



1,988,476



143,780Operating costs:Costs of services


358,555



389,037



397,465



420,777



458,820



33,176General and administrative expenses


242,066



244,707



237,475



256,730



318,323



23,017Technical assistance fee(4)


40,215



40,016



49,541



57,416



55,604



4,020Concession tax(5)


64,882



72,643



84,635



98,307



101,642



7,349Depreciation and amortization:Depreciation(6)


31,990



22,560



28,257



32,872



39,306



2,842Amortization(7)


183,857



205,246



263,839



303,330



327,413



23,674Total depreciation and amortization


215,847



227,805



292,096



336,202



366,719



26,516Total operating costs


921,565



974,208



1,061,212



1,169,432



1,301,108



94,078Income from operations


412,863



505,669



626,099



727,921



687,368



49,702Other income (expenses) net


4,607



3,853



(30,679
)


(7,584
)


104,792



7,577Net comprehensive financing income (expense)


(15,343
)


29,613



70,328



96,218



(11,451
)


(828
)Income before income taxes


402,129



539,135



665,748



816,555



780,709



56,451Income tax expense


93,858



158,029



196,511



785,363



238,906



17,275Consolidated net income


308,269



381,106



469,237



31,192



541,803



39,176Basic and diluted earnings per share(8)


0.7864



0.9722



1.1874



0.0781



1.3672



0.0989Basic and diluted earnings per ADS(8)


6.2911



7.7778



9.4992



0.6248



10.9376



0.7904U.S. GAAP:Revenues


1,334,429



1,479,878



1,687,311



1,897,353



1,988,476



143,780Income from operations


486,374



600,249



697,879



811,103



804,380



58,162Consolidated net income


184,107



445,812



548,798



(118,318
)


1,013,454



73,279Basic (loss) earnings per share(8)


0.4732



1.1459



1.4013



(0.2961
)


2.5574



0.1849Diluted (loss) earnings per share(9)


0.4696



1.1372



1.3909



(0.2961
)


2.5386



0.1836Basic (loss) earnings per ADS(8)


3.7860



9.1673



11.2110



(2.3688
)


20.4592



1.4793Diluted (loss) earnings per ADS(9)


3.7569



9.0976



11.1271



(2.3688
)


20.3088



1.4685Other operating data:Total terminal passengers (thousands of passengers)(10)


9,739



10,599



11,784



14,212



14,061



14,061Total air traffic movements (thousands of movements)


346



362



383



424



387



387Total revenues per terminal passenger(11)


137



139



143



134



141



11





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As of and for the year ended December 31,2004


2005


2006


2007


2008(in thousands of Mexican pesos)


(thousands of dollars)(1)Balance sheet data:MFRS:Cash and cash equivalents


1,298,715



1,706,604



1,672,994



1,756,704



257,420



18,613Total current assets


1,541,683



2,009,260



2,143,271



2,084,057



929,695



67,223Airport concessions—net


799,743



781,971



764,198



746,426



728,655



52,687Rights to use airport facilities—net


4,377,906



4,252,072



4,126,235



4,000,390



3,874,510



280,153Total assets


8,054,256



8,591,575



8,873,950



9,134,388



9,863,282



713,180Current liabilities


152,587



155,331



184,236



407,096



1,149,243



83,097Total liabilities


588,307



744,522



891,999



1,660,046



2,333,522



168,728Total stockholders’ equity(12)


7,465,949



7,847,053



7,981,951



7,474,342



7,529,760



544,452U.S. GAAP:Cash and cash equivalents


1,298,715



1,706,604



1,672,994



1,756,704



257,420



18,613Total current assets


1,561,685



2,009,260



2,143,271



2,084,057



929,695



67,223Assets under concession (“Rights to use airport facilities” under MFRS)


997,631



957,456



917,497



877,388



837,291



60,542Total assets


4,731,229



5,220,539



5,495,086



5,263,692



6,292,200



454,967Current liabilities


154,429



184,870



203,844



421,398



1,158,298



83,753Total liabilities


204,683



240,789



264,653



680,277



1,204,791



87,114Total stockholders’ equity


4,526,547



4,979,750



5,230,433



4,583,415



5,087,409



367,853Dividend per share










1.1167



1.1103



1.0856



0.0785Other data:MFRS:Net cash flows from operating activities


















735,464



53,178Net cash flows from financing activities


















(352,146
)


(25,461
)Net cash flows from investing activities


















(1,882,602
)


(136,124
)Net decrease in cash and cash equivalents


















(1,499,284
)


(108,407
)Net resources generated by operating activities


610,987



701,405



729,090



1,070,588Net resources used in financing activities










(322,465
)


(328,868
)Net resources used in investing activities


(278,938
)


(293,516
)


(440,235
)


(658,010
)Increase in cash and cash equivalents


332,049



407,889



(33,610
)


83,710U.S. GAAP:(13)Net cash provided by operating activities


606,224



692,739



694,103



1,036,011



799,809



57,831Net cash used in investing activities


(278,819
)


(286,083
)


(458,262
)


(657,018
)


(1,948,393
)


(140,882
)Net cash used in financing activities


-



-



(322,465
)


(328,868
)


(350,700
)


(25,358
)Effect of inflation accounting


4,645



1,234



53,014



33,585



-



-Increase (decrease) in cash and cash equivalents


332,049



407,889



(33,610
)


83,710



(1,499,284
)


(108,408
)
 _______________________





(1)
Translated into dollars at the rate of Ps.13.83 per U.S. dollar, the U.S. Federal Reserve noon buying rate for Mexican pesos at December 31, 2008.  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 consist of 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 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 from 2004 through 2005, 395,173,149 weighted average common shares outstanding in 2006, 399,611,578 weighted average common shares outstanding in 2007 and 396,284,313 weighted average common shares outstanding in 2008.  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 and 396,284,313 weighted average common shares outstanding in 2008.  Earnings per ADS are based on the ratio of 8 Series B shares per ADS.


(9)
Based on 394,564,384, 399,611,578 and 399,224,413 weighted average common shares and common share equivalents outstanding for the year ended December 31, 2006, 2007 and 2008, 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.




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EXCHANGE RATES





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 RateYear Ended December 31,

High


Low


Period End


Average(1)2004


11.64



10.81



11.15



11.312005


11.41



10.41



10.63



10.882006


11.46



10.43



10.80



10.912007


11.27



10.67



10.92



10.932008


13.94



9.92



13.83



11.14December 2008


13.83



13.09



13.83



11.142009:January 2009


14.33



13.33



14.33



13.88February 2009


15.09



14.13



15.09



14.61March 2009


15.41



14.02



14.21



14.65April 2009

13.89



13.05



13.80



13.39May 2009

13.82



12.88



13.18



13.19


______________


(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, 2008, the Federal Reserve noon buying rate was Ps. 13.83 per U.S.$1.00.On May 29, 2009, the Federal Reserve noon buying rate was Ps. 13.18 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.”





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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 2006, 2007 and 2008, approximately 81.3%, 81.7% and 81.3%, 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.





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” or COFECO) 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 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;





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·
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.





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 representatives of PRD (Partido
de la Revolución Democrática), PT (Partido del Trabajo) and CONVERGENCIA, leaded by Deputy Cuauhtémoc Velasco.





This initiative seeks to reform almost 65% 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 such initiative includes all the elements necessary to reform the law, then
the initiative will be submitted to the Congress for their approval in first instance.





Currently, the actual members of the Congress and the Commission need to be replaced and have not approved such initiative at this time. Although we cannot assure that the new members of the Transport and Communication Commissions will approve such initiative and continue with the legislative process to approve the initiative mentioned
in the foregoing paragraph, or suggest changes, amendments or dismiss it, there can be no assurance that changes to the airport regulatory framework will not occur in the future.





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.





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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 2008, our revenues subject to maximum rate regulation represented approximately 88.2% 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 substantiallyall 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.





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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.  Recently, the state of Nuevo Leon has requested 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 current global economic and financial crisis is likely to adversely affect our business.





The current global economic and financial crisis has led to high volatility and lack of liquidity in the global credit and other financial markets.  Such recent 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 and liquidity, increased market volatility 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.





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If the global economy continues to deteriorate and falls into an even deeper and longer lasting recession, or even a depression, 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 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.





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·
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 2006, 2007 and 2008, passenger charges represented 59.4%, 61.2% and 62.0%, respectively, of our total revenues.  Events such as the war in Iraq and public health crises 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.  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, 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 recent travel alert issued by the U.S. Department of State (Bureau of Consular Affairs) on February 20, 2009 (the “Travel Alert”), provides information for U.S. citizens on security issues in Mexico.  According to the Travel Alert, violent criminal activity fueled by an increasingly violent conflict (both among Mexican
drug cartels and between such cartels and Mexican security services) for control of narcotics trafficking routes continues along the U.S.-Mexico border and throughout other pars of Mexico.  The Travel Alert reports that large firefights, involving the Mexican army, police and the drug cartels, have taken place in many towns and cities across Mexico and most recently in northern Mexico, including Tijuana, Chihuahua and Ciudad Juarez. Although attacks are aimed primarily at members of drug trafficking
organizations and Mexican police forces, Mexican and foreign bystanders, including U.S. citizens, have been among the victims of violent attacks, homicides and kidnappings across Mexico.  According to the Travel Alert, moreover, a number of areas along the border are experiencing rapid growth in the rates of many types of crime such as robberies, homicides, petty thefts, and carjackings.  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 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 have decreased since the third quarter of 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.





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Our revenues and profitability may not increase 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 airportsand 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 investors 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, 5-star 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. owns the other 10% and will operate the hotel.  The commercial areas included in this project, excluding the hotel, are expected to increase by approximately 40% the total commercial space operated by OMA. As of May 29, 2009, the construction of the hotel was approximately 93% completed, and we expect the hotel to start operations in the third quarter of 2009.  The first stage of the commercial area is expected to begin operations
in 2010.





Part of the attractiveness of our investment in Terminal 2 of the Mexico City International Airport is that the Mexico City International Airport is currently the only airport in the proximity of Mexico City with an infrastructure capable of having a hotel within the airport facilities.  If a new airport were to be built near to
Mexico City, the Mexico City International Airport would 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 lease agreement with the Mexico City International Airport can be terminated early by the Mexico City International Airport with partial or no compensation for us.  Should a new Mexico City airport be constructed or the Mexico
City International Airport terminate the lease agreement other than in accordance with the terms thereof, there could be no assurances as to our ability to fully recover our investment in the Terminal 2 project.





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.





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Our business is highly dependent upon revenues from four of our airports and could be adversely impacted by any condition affecting those airports.





In 2008, approximately 68.4% 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, 2008Monterrey International Airport


46.4
%Acapulco International Airport


7.9
%Culiacán International Airport


7.1
%Mazatlán International Airport


7.0
%Nine other airports


31.6
%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, 2008), 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, 2008) 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 2008, Aeroméxico and its affiliates accounted for 24.6%, Mexicana and its affiliates accounted for 14.6%, Interjet represented 9.2%, VivaAerobus represented 8.5% and Aviacsa and its affiliates represented 6.9%.  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 2008, passengers traveling on discount, charter and low-cost carriers, such as VivaAerobus, Interjet, Alma, Volaris, Avolar and Aladia accounted for approximately 32.8% of our commercial aviation passenger traffic.  Of these carriers, Avolar, Alma and Aladia, which accounted for 4.7% of our commercial aviation passenger traffic in 2008, ceased to operate during the last
quarter of 2008 as a result of a denied extension of its concession by Mexican regulatory authorities either 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).





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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.  Through
December 2005, Cintra owned Aeroméxico, Mexicana and their respective affiliates, a Mexican holding company controlled by the Mexican government.  In December 2005, Cintra sold its interest in Mexicana and its affiliates to Grupo Posadas, S.A. de C.V.  Subsequent to this sale, Cintra was renamed Consorcio Aeroméxico, S.A. de C.V., or Consorcio Aeroméxico.  In addition, 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.  As
of today these airlines continue to use our airports, however we can offer no assurances that any of these airlines will continue to do so in the future.  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.





Aviacsa has cancelled routes and decreased operations as a result of the high fuel prices.  At the end of 2008, Aviacsa cut back its operations with us by 40.6% and experienced a 33.1% decrease in passenger traffic.  This represents a 21.4% decrease in our aeronautical revenues of about Ps. 30 million.  Furthermore,
during the first quarter of 2009, Aviacsa further reduced its flight schedules at our airports. On June 2, 2009, the Transport and Communication Commissions (SCT) through the General Board of Civil Aviation (DGAC) ordered the temporary suspension of operations of 25 aircraft of Aviacsa, as a result of an investigation conducted by the DGAC with respect to Aviacsa. Aviacsa has a period of 60 days from the date of such suspension to correct DGAC’s
observations. On June 5, 2009, the Fifth Federal Court in Ciudad Valles granted a temporary suspension pursuant to a constitutional proceeding (juicio de amparo) and ordered the revocation of the decision of the SCT to suspend temporarily the operation of the 25 Aviacsa aircraft.





In recent years, some airlines have had their operations suspended by regulatory authorities in different countries or have cancelled flights for safety reasons, for example, in the U.S., American Airlines recently cancelled thousands of flights in response to questions raised by the U.S. Federal Aviation Administration about safety concerns
on certain aircrafts.  As far as Mexican airlines are concerned, 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, and as a result Aerocalifornia accounted for only 1.5% of our aeronautical revenues in 2008.  To date, they have not resumed any part of their operations.





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 OMA airports during 2008 overall (Acapulco, Culiacán, Durango and Zacatecas).  This airline represented 0.6% of OMA’s 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 OMA’s total passenger traffic for the first 10 months of 2008.  The main airports served by Aladia
were Monterrey, Chihuahua, Mazatlán and Ciudad Juárez.





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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 OMA 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 OMA’s 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 principal 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 October 31, 2006, 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.  This agreement expired in December of 2008 and we are currently negotiating its renewal.  We continue to charge our principal airline customers in accordance with the terms of this agreement during the
pending of the negotiations.  However, we cannot assure that the agreement will be actually renewed or that any airlines will adhere to the terms of such new agreement.





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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 by additional costs we may incur in the collection of passenger charges.





The passenger charges are collected by the airlines and then paid to OMA 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 incurrence of higher costs in connection with the collection of passenger charges could have an adverse effect on our operations.





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 formerly controlled Servicios de Apoyo en Tierra, or SEAT, pursuant to a joint venture.  Consorcio Aeroméxico, which owns Grupo Aeroméxico
and until recently owned Grupo Mexicana, sold its remaining ownership interests in SEAT and in Aeroméxico pursuant to a public offering in November of 2007 to a group of investors lead by Banamex, a subsidiary of Citigroup.  SEAT is currently one of the providers of baggage and handling services at our airports.  If SEAT or any of its affiliates or shareholders encounters financial difficulties, SEAT’s 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 would 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.  As of May 29, 2009, the Court has not yet notified the Federal Government the order to appear in the proceeding.  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 2008, the Ciudad Juárez International Airport represented 5.9% 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.





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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 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 Chihuahua, Tampico and Ciudad
Juárez (which amounted to Ps.25.3 million, Ps.1.02 million and Ps. 1.8 million respectively) were dismissed on April 11, 2008, 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.





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.





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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.  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 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 investors 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.





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 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.





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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.





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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 negotiating with
our principal airline customers to enter into service agreements pursuant to which we expect to agree to operate new screening equipment that we would purchase, install and to implement other security measures to facilitate our airline customers’ compliance with the new baggage screening guidelines.  Until we agree on the contractual terms 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 new 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 41.95% 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. As of  May 29, 2009 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.”





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So long as the technical assistance agreement remains in effect and SETA continues to hold any Series BB shares, SETA 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 SETA 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 41.95% 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 be contrary to the preferences and expectations of our other stockholders and we can offer no assurance that SETA and Aeroinvest and the officers nominated or appointed by SETA and Aeroinvest 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.





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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 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 currently representing 6.32% 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 trustee could in certain circumstances foreclose on the Series B shares and is 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 41.95%
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 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.  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 trustee could in
certain circumstances foreclose on the Series B shares and is 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.”





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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 2006, 2007 and 2008, domestic terminal passengers have represented approximately 78.6% 82.6% and 83.4% 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%.





Mexico also has, and is expected to continue to have, high real and nominal interest rates.  The annualized interest rates on 28 day Cetes (Certificados de la Tesoreria de la Federación) averaged approximately 6.8%, 9.2%, 7.2%, 7.2% and 7.7% for 2004, 2005, 2006, 2007
and 2008, respectively.  To the extent that we incur Peso-denominated debt in the future, it could be at high interest rates.





The Mexican economy is currently undergoing an economic crisis that began in 2008 as a result of the impact of the global financial crisis, which affected many emerging economies during the second half of last year.  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.  Such economic 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 (INEGI), the Mexican gross domestic product decreased at an annualized rate of 3.4% during the fourth quarter of 2008.





In Mexico, the economic and financial crisis had some impact on domestic traffic for the full year 2008, which decreased slightly as compared to 2007, despite the exit from the market of four airlines during the year and significant reductions in capacity by several other carriers.  Five airports increased domestic passenger traffic,
with the main increases at the Acapulco, Reynosa, and Monterrey airports.  However, although domestic passenger traffic increased by 4.0% during the first three quarters of 2008 (as compared to the first three quarters of 2007), domestic passenger traffic fell 11.9% in the fourth quarter (when compared to the fourth quarter of 2007).  Such decreases are principally due to reductions in the volume of passengers carried by Aviacsa and VivaAerobus; 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.  The airports with the largest decreases during 2008 were Monterrey, Ciudad Juárez, Culiacán, Mazatlán and Chihuahua.  The Zacatecas, Acapulco, and Reynosa airports recorded increases in domestic traffic, in large part as a result of the performance of Volaris, Interjet, and Click Mexicana.  We expect that domestic passenger traffic levels will continue to decrease
until economic conditions improve in Mexico.





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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 or fluctuation 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 May 29, 2009, the peso depreciated
by approximately 20.1%, from 10.97 pesos per U.S. dollar on September 30, 2008 to 13.18 pesos per U.S. dollar on May 29, 2009.  This depreciation has affected 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, 2008, we had 22.8 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 income or asset tax liability, 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
and 2008. 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.





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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 and Venezuela.





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 currently 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 current 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 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.  Likewise, according to the Mexican National Statistical, Geographic and Information Institute (INEGI), the Mexican gross domestic product decreased at an annualized rate of 3.4% during the fourth quarter of 2008.  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 2008, approximately
81% of the international passengers in our airports arrived or departed on flights originating in or departing to the United States and approximately 10% of our revenues in 2008 were derived from passengers charges imposed on departures from or arriving in the United States.  Similarly, in 2008, approximately 83% of our passengers traveled on domestic flights, and approximately 48% of our revenues in 2008 was derived from domestic passenger charges.





Our international traffic in 2008 decreased 5.8% compared to 2007, 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 2008, international passenger traffic decreased 17.6% compared to the fourth quarter of 2007.  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 OMA’s airports. Monterrey, Zihuatanejo, Mazatlán, Acapulco, and Culiacán were the airports
most affected.





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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 this and
other important respects.  For further information about the differences between MFRS and US GAAP please see Note 22 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:





·
projections of operating revenues, net income (loss), net income (loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios,





·
statements of our plans, objectives or goals,





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·
statements about our future economic performance or that of Mexico, and





·
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.





Item 4.
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 “OMA”, 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 “OMA”, “we” 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 Tecnología 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:





·
all of our Series BB shares, which currently represent 14.7% of our outstanding capital stock;





·
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





·
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:





·
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 41.95% 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 87.1 million passengers in 2008.  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 41.95% of our capital stock as well as 74.5% of the Series A shares of SETA.  During 2007, Aeroinvest purchased additional Series B shares representing 3.14% 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 35.28% 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.”





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 Table of Contents





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 2008 amounted to approximately Ps. 55.6 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.





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.





29
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Historical Committed Investments Under Master Development Programs





Year ended December 31,2006(1)


2007


2008


Total 2006-2008(thousands of pesos)Acapulco


109,834



47,726



32,651



190,211Ciudad Juárez


52,597



39,337



23,083



115,017Culiacán


69,990



15,427



8,713



94,130Chihuahua


81,045



9,894



31,558



122,497Durango


19,455



30,121



20,884



70,460Mazatlán


101,707



29,428



10,513



141,648Monterrey


354,974



280,408



269,730



905,112Reynosa


20,947



20,552



11,795



53,294San Luis Potosí


28,282



13,872



21,251



63,405Tampico


45,431



24,545



12,815



82,791Torreón


19,714



11,056



31,633



62,403Zacatecas


19,012



14,530



4,656



38,198Zihuatanejo


82,073



15,284



22,190



119,547Total


1,005,061



552,180



501,472



2,058,713


______________


(1)           Amounts listed for 2006 include committed investments relating to the purchase and installation and operation 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.





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 31,2006


2007


2008(thousands of pesos)Acapulco


28,872



42,917



36,275Ciudad Juárez


21,561



21,421



52,641Culiacán


26,438



12,517



37,111Chihuahua


52,252



16,431



23,102Durango


9,657



53,786



30,548Mazatlán


25,204



22,550



24,021Monterrey


166,483



396,142



1,743,039Reynosa


10,596



17,130



13,644San Luis Potosí


16,019



15,825



23,050Tampico


26,090



20,845



25,028Torreón


22,073



7,229



24,516Zacatecas


10,315



9,230



15,177Zihuatanejo


22,777



14,900



22,613Other


1,898



7,087



156,796Total


440,235



658,010



2,227,561





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 Table of Contents





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 31,2006


2007


2008(thousands of pesos)Terminals


172,670



407,928



232,961Runways and aprons


230,585



159,888



263,000Machinery and equipment


26,479



44,310



35,796Other


10,501



45,884



1,695,804Total


440,235



658,010



2,227,561





Our capital expenditures from 2006 through 2008 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 handicap 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.





·
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, 5-star 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. owns the other 10% and will operate the hotel.  The commercial areas included in this project, excluding the hotel, are expected to increase by approximately 40% the total commercial space operated by OMA. As of May 29, 2009, construction of the hotel was approximately 93% completed, and we expect the hotel to start operations in the third quarter of 2009.  The first stage of
the commercial area is expected to begin operations in 2010.





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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.





Committed Investments by Airport





Year ended December 31,2006(1)


2007


2008


2009


2010


Total 2006-2010(thousands of pesos)Acapulco


109,834



47,726



32,651



15,227



15,439



220,877Ciudad Juárez


52,597



39,337



23,083



20,009



12,530



147,556Culiacán


69,990



15,427



8,713



23,266



2,491



119,887Chihuahua


81,045



9,894



31,558



7,924



10,749



141,170Durango


19,455



30,121



20,884



24,721



9,512



104,693Mazatlán


101,707



29,428



10,513



19,557



2,315



163,520Monterrey


354,974



280,408



269,730



86,921



24,651



1,016,684Reynosa


20,947



20,552



11,795



9,674



1,805



64,773San Luis Potosí


28,282



13,872



21,251



25,350



3,196



91,951Tampico


45,431



24,545



12,815



16,096



4,636



103,523Torreón


19,714



11,056



31,633



6,469



8,390



77,262Zacatecas


19,012



14,530



4,656



25,173



8,037



71,408Zihuatanejo


82,073



15,284



22,190



28,640



13,426



161,613Total


1,005,061



552,180



501,472



309,027



117,177



2,484,917


______________


(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.





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The following table sets forth our committed investments for 2006 through 2010 by type of investment:





Committed Investments by Type





Year ended December 31,2006(1)


2007


2008


2009


2010


Total 2006-2010(thousands of pesos)Terminals


122,732



120,553



242,676



66,028



16,420



568,409Runways and aprons


297,960



254,482



197,460



179,205



72,397



1,001,504Machinery and equipment


74,798



91,674



50,663



56,724



28,360



302,219Baggage screening system – investments


501,798



70,510



0



0



0



572,308Other


7,773



14,961



10,673



7,070



0



40,477Total


1,005,061



552,180



501,472



309,027



117,177



2,484,917


______________


(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, 2008, our capital expenditures totaled Ps. 2,227,562 million.  Our capital expenditures for 2008 were devoted primarily to our committed investments and secondarily to the construction of a new passenger terminal B in the Monterrey International Airport.





We plan to fund our operations and capital expenditures in the short-term and long-term through cash flows from operations and debt.  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 Returns.





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) andborder 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 24million according to the Mexican National Institute of Statistics, Geography and Computer Science (Instituto Nacional
de Estadística, Geografía e Informática)and the Mexican National PopulationCouncil.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.





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According to figures published by the Mexican Bureau of Civil Aviation, our commercial aviation passenger traffic accounted for approximately 15.9 % of all arriving and departing commercial aviation passengers in Mexico in 2008.





In 2008, we recorded revenues of Ps.1.988 million (U.S.$143.8 million) and net income of Ps. 542 million (U.S.$ 39.2million).  In 2008 our airports handled approximately 14.1 million terminal passengers, a
decrease of 1.1% with respect to the 14.2 million terminal passengers in 2007.





Our airports serve several major international routes, including Monterrey-Houston, Monterrey-Dallas, Monterrey-Las Vegas, Monterrey-Atlanta and Monterrey-Chicago.  Our airports began serving other routes, including Monterrey -New York and Monterrey-Austin started to be served in May 2008.  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 2008, with approximately 2.7 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 725.0 thousand, 448.1 thousand and 293.7 thousand total passengers, respectively, in 2008 according to the Mexican Bureau of Civil Aviation.





Monterrey is the third largest city in Mexico in terms of population, with a population of 4.3 million 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 2008, according to data published by the Mexican Bureau
of Civil Aviation. Our Monterrey International Airport accounted for approximately 46.2% and 46.8 % of our terminal passenger traffic in 2007 and 2008, 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 eighteenth largest in terms of visitors in 2008, according to the Mexican National Institute of Immigration.  Acapulco is a principal port of call for cruise ships.  In 2008, the Acapulco International Airport, Mazatlán International Airport and Zihuatanejo International Airport collectively accounted for 18.2% of our aggregate terminal passengers and 19.7% of our total revenues.





Mexico was the tenth largest tourist destination in the world in 2008 in terms of international arriving tourists (21.4 million), according to the latest data published by the World Tourism Organization.  Within Latin America and the Caribbean, Mexico ranked first in 2008 in terms of number of foreign visitors and income from tourism,
according to the World Tourism Organization.





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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 2008, these seven regional airports collectively accounted for 26.7% of our aggregate terminal passengers and 26.5% 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 2008, the Ciudad Juárez International Airport and
the Reynosa International Airport collectively accounted for 8.2% of our aggregate terminal passengers and 7.5% of our total revenues.





In addition, OMA made a joint investment with the international hotel operator NH Hoteles to develop and operate a 287-room, 5-star 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 Company will operate the commercial areas, and NH Hoteles will operate the hotel. The construction of the hotel is 93% completed as of May 29, 2009, and is expected to begin its activities at the end of the third quarter of 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 9.7million passengers in 2008.  Airlines based in Terminal 2 include Aeromar, Aeroméxico and Aeroméxico
Connect, Continental, Copa, Delta and LAN Chile.  OMA considers this a key project within its efforts to increase its non-aeronautical revenues.





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The following table provides summary data for each of our 13 airports for the years ended December 31, 2007 and 2008:





Year ended December 31, 2007


Year ended December 31, 2008Airport

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 Airport


6.6



46.2



847.8



44.4



129.2



6.6



46.8



924.2



46.3



140.3Tourist destinations:Acapulco International Airport


1.1



7.4



148.4



7.8



140.3



1.1



7.7



157.5



7.9



144.8Mazatlán International Airport


0.9



6.4



143.4



7.5



158.5



0.8



5.9



139.2



7.0



167.0Zihuatanejo International Airport


0.7



4.7



96.2



5.0



142.6



0.6



4.6



96.6



4.8



150.0Total tourist destinations


2.6



18.6



388.0



20.3



147.1



2.6



18.2



393.3



19.7



153.3Regional cities:Chihuahua International Airport


0.9



6.0



116.7



6.1



136.5



0.8



5.9



120.5



6.0



144.5Culiacán International Airport


1.1



8.0



145.2



7.6



127.6



1.1



7.8



140.5



7.0



127.9Durango International Airport


0.3



2.0



38.2



2.0



136.8



0.2



1.7



33.5



1.7



143.4San Luis Potosí International Airport


0.3



1.9



46.3



2.4



175.1



0.3



1.9



46.7



2.3



178.9Tampico International Airport


0.6



4.1



72.5



3.8



125.0



0.6



4.1



79.8



4.0



137.0Torreón International Airport


0.5



3.7



75.0



3.9



143.5



0.5



3.4



70.4



3.5



146.2Zacatecas International Airport


0.3



2.0



38.5



2.0



138.8



0.3



1.9



37.2



1.9



139.1Total regional destinations


3.9



27.6



532.3



27.9



135.9



3.8



26.7



528.5



26.5



140.6Border cities:Ciudad Juárez International Airport


0.9



6.4



109.6



5.7



120.6



0.9



6.4



117.5



5.9



130.1Reynosa International Airport


0.2



1.3



30.4



1.6



158.9



0.2



1.8



30.6



1.6



123.7Total border city destinations


1.1



7.7



140.1



7.3



127.3



1.2



8.2



148.1



7.5



128.7TOTAL:


14.2



100.0



1,908.2



100.0



134.3



14.1



100.0



1,994.2



100.00



141.8


______________


(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.





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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 2006, 2007 and 2008, aeronautical services revenues represented approximately 81.3%, 81.7% and 81.3% 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 are required to pay us no later than 152 days after the invoice delivery date. The actual term for payment is 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 2008, the weighted average term of payment was 71 days.





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 2006, 2007 and 2008, passenger charges represented approximately 73.2%, 75.0% and 76.3%, respectively, of our aeronautical services revenues and approximately 59.4%, 61.2% and 62.0%, 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 2006, 2007 and 2008, these charges represented approximately 8.3%, 7.7% and 6.9%, respectively, of our aeronautical services revenues and approximately 6.8%, 6.3% and 5.6%, respectively, of our total revenues.





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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 2006, 2007 and 2008, these charges represented approximately 6.7%, 6.2% and 5.9%, respectively, of our aeronautical services revenues and 5.5%, 5.1% and 4.8%, 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 2006, 2007 and 2008, these charges represented approximately 1.8%, 1.5% and 1.5%, respectively, of our aeronautical services revenues and approximately 1.5%, 1.2% and 1.2%, 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.  Airport security services at our airports are provided by independent subcontractors.  In 2006, 2007 and 2008, these charges represented approximately 1.4%, 1.5% and 1.4%, respectively, of our aeronautical services revenues and approximately 1.1%, 1.2% and 1.1%, 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.





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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 negotiating with
our principal airline customers to enter into service agreements pursuant to which we expect to agree to operate new screening equipment that we would purchase and install and to implement other security measures to facilitate our airline customers’ compliance with the new baggage screening guidelines.  Until we agree on the contractual terms 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 new 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.





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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, is currently one of our providers 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 2006, 2007 and 2008, our 13 airports handled approximately 81, 82, and 79 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.





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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 2006, 2007 and 2008,revenue from non-aeronautical services accounted for approximately 18.7% 18.3%, and 18.7%,respectively, of total revenue.





None of our revenues from non-aeronautical services are regulated under our maximum-rate price regulation system, though they may be regulated by other authorities.  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 18.7% of revenues in 2008, 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 2008, 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, 2008, 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.





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·
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, 5-star 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. owns the other 10% and will operate the hotel.  The commercial areas included in this project, excluding the hotel, are expected to increase by approximately 40% the total commercial space operated by OMA. As of May 29, 2009, construction of the hotel was approximately 93% completed, and we expect the hotel to start operations in the third quarter of 2009.  The first stage of the commercial
area is expected to begin operations in 2010.





An airport’s revenues from commercial activities are largely dependent on passenger traffic, its passengers’ level of spending, its terminal design, the mix of commercial tenants and how fees are charged to businesses operating in the commercial area of the airport.  Revenues from commercial activities depend substantially
on the percentage of traffic represented by international passengers, who tend to spend greater amounts at our airports, particularly on duty-free items.  Revenues from commercial activities also depend on other factors, such as variations in the advertising budgets of Mexican companies in the case of advertising revenues.





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.





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·
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 Hermès, 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 2006, 2007 and 2008, our airports served a total of approximately 11.8 million, 14.2 million, and 14.1 million terminal passengers, respectively.  Monterrey International Airport accounted for approximately 44.6%, 46.2% and 46.8% of our terminal passenger traffic in 2006, 2007 and 2008, 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 21.2%, 18.5% and 18.2% of our terminal passenger traffic in 2006, 2007 and 2008, respectively.  Ciudad Juárez International Airport, our largest airport servicing a border city, accounted for approximately 5.9%, 6.4% and 6.4% of our terminal passenger traffic in 2006, 2007 and
2008, 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.





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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 31,2004


2005


2006


2007


2008Terminal(1)


Transit(2)


Total


Terminal(1)


Transit(2)


Total


Terminal(1)


Transit(2)


Total


Terminal(1)


Transit(2)


Total


Terminal(1)


Transit(2)


TotalTotal passengers:Acapulco


821,301



35,353



856,654



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



1,114,072Chihuahua


556,074



95,271



651,345



599,977



79,932



679,909



664,392



80,257



744,649



854,757



60,231



914,988



833,793



46,451



880,244Ciudad Juárez


570,923



5,596



576,519



611,942



31,032



642,974



698,765



44,856



743,621



908,938



26,033



934,868



903,129



23,212



926,341Culiacán


673,002



100,189



773,191



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



1,237,494Durango


210,774



44,885



255,659



214,920



47,334



262,254



236,200



24,933



261,133



279,310



36,405



315,715



233,471



23,709



257,180Mazatlán


741,267



89,918



831,185



799,801



106,125



905,926



819,214



91,839



911,053



905,010



120,261



1,025,271



833,714



109,124



942,838Monterrey


4,293,816



289,813



4,583,629



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



6,749,240Reynosa


145,075



2,508



147,583



146,250



1,777



148,027



136,991



1,417



138,408



191,326



1,208



192,534



247,339



991



248,330San Luis Potosí


195,700



3,875



199,575



233,610



832



234,442



227,102



1,160



228,262



264,349



1,973



266,322



261,049



2,007



263,056Tampico


333,696



12,687



346,383



402,122



13,292



415,414



485,125



12,570



497,695



580,117



14,880



594,997



582,328



13,452



595,780Torreón


361,400



109,324



470,724



374,559



91,188



465,747



410,124



52,479



462,603



522,295



80,903



603,198



481,265



56,173



537,438Zacatecas


236,692



57,040



293,732



297,137



72,469



369,606



332,224



122,865



455,089



277,339



57,191



334,530



267,344



40,791



308,135Zihuatanejo


599,720



5,104



604,824



608,897



4,062



612,959



681,581



4,150



685,731



674,612



8,352



682,964



644,029



6,105



650,134Total


9,739,440



851,563



10,591,003



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


______________


(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 31,2004


2005


2006


2007


2008Domestic


International


Total


Domestic


International


Total


Domestic


International


Total


Domestic


International


Total


Domestic


International


TotalTerminal departing passengers:Acapulco


251,552



168,251



419,803



256,715



192,531



449,246



296,841



207,896



504,737



348,822



189,869



538,691



382,157



167,744



549,901Chihuahua


248,329



28,232



276,561



261,361



36,808



298,169



290,516



41,988



332,504



380,161



46,424



426,585



366,151



48,949



415,100Ciudad Juárez


256,713



795



257,508



272,641



878



273,519



314,698



552



315,250



424,456



794



425,250



422,987



767



423,754Culiacán


313,146



26,754



339,900



365,805



25,748



391,553



407,618



20,651



428,269



549,967



28,322



578,289



534,556



25,463



560,019Durango


78,977



25,809



104,786



82,656



24,293



106,949



91,989



26,132



118,121



121,291



18,695



139,986



101,108



15,174



116,282Mazatlán


182,168



189,010



371,178



178,758



222,324



401,082



173,150



237,725



410,875



221,627



233,579



455,206



212,322



208,419



420,741Monterrey


1,692,546



463,357



2,155,903



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



3,249,685Reynosa


66,985



104



67,089



65,674



117



65,791



65,008



68



65,076



90,877



488



91,365



116,668



1,101



117,769San Luis Potosí


71,675



27,177



98,852



77,923



39,514



117,437



70,550



42,681



113,231



87,299



45,123



132,422



84,508



45,750



130,258Tampico


144,887



21,609



166,496



171,153



30,307



201,460



208,718



33,604



242,322



259,532



30,346



289,878



259,107



30,483



289,590Torreón


152,230



28,154



180,384



149,345



36,911



186,256



162,828



42,378



205,206



216,027



46,060



262,087



196,318



44,330



240,648Zacatecas


72,025



49,529



121,554



99,691



52,973



152,664



118,673



52,517



171,190



91,539



50,736



142,275



92,056



44,394



136,450Zihuatanejo


155,386



146,818



302,204



143,963



161,763



305,726



165,047



176,772



341,819



176,019



164,000



340,019



171,832



151,826



323,658Total


3,686,619



1,175,599



4,862,218



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





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Year ended December 31,2004


2005


2006


2007


2008Domestic


International


Total


Domestic


International


Total


Domestic


International


Total


Domestic


International


Total


Domestic


International


TotalTerminal arriving  passengers:Acapulco


290,885



110,613



401,498



298,273



132,671



430,944



341,685



147,864



489,549



391,401



127,255



518,656



436,514



101,559



538,073Chihuahua


258,468



21,045



279,513



271,814



29,994



301,808



297,980



33,908



331,888



392,448



35,724



428,172



381,821



36,872



418,693Ciudad Juárez


312,392



1,023



313,415



337,558



865



338,423



382,757



758



383,515



482,572



1,013



483,585



478,597



778



479,375Culiacán


320,278



12,824



333,102



366,652



10,913



377,565



410,628



5,092



415,720



547,829



11,453



559,282



533,082



5,937



539,019Durango


85,366



20,622



105,988



89,741



18,230



107,971



99,989



18,090



118,079



127,370



11,954



139,324



109,796



7,393



117,189Mazatlán


204,671



165,418



370,089



201,781



196,938



398,719



191,529



216,810



408,339



234,667



215,137



449,804



224,663



188,310



412,973Monterrey


1,697,834



440,079



2,137,913



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



3,336,505Reynosa


77,905



81



77,986



80,190



269



80,459



71,903



12



71,915



99,822



139



99,961



129,484



86



129,570San Luis Potosí


76,923



19,925



96,848



85,549



30,624



116,173



80,207



33,664



113,871



96,062



35,865



131,927



94,096



36,695



130,791Tampico


153,234



13,966



167,200



185,451



15,211



200,662



223,699



19,104



242,803



272,511



17,728



290,239



271,800



20,938



292,738Torreón


161,310



19,706



181,016



160,898



27,405



188,303



173,396



31,522



204,918



225,526



34,682



260,208



207,748



32,869



240,617Zacatecas


68,770



46,368



115,138



98,085



46,388



144,473



116,784



44,250



161,034



93,788



41,276



135,064



95,619



35,275



130,894Zihuatanejo


174,133



123,383



297,516



169,731



133,440



303,171



187,620



152,142



339,762



192,041



142,552



334,593



198,440



121,931



320,371Total


3,882,169



995,053



4,877,222



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





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The following table sets forth the air traffic movement capacity of each of our airports as of December 31, 2008.





Capacity by Airport(1)





Airport

Peak air traffic movements per hour


Runway Capacity(2)Acapulco


9



40Chihuahua


9



40Ciudad Juárez


8



20Culiacán


9



20Durango


4



40Mazatlán


11



22Monterrey


31



38Reynosa


5



18San Luis Potosí


5



20Tampico


8



22Torreón


9



20Zacatecas


4



20Zihuatanejo


8



20


______________________________


(1)
2008 figures.


(2)
Air traffic movements per hour.





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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 31,2004


2005


2006


2007


2008Acapulco


23,288



26,336



28,015



30,016



30,248Chihuahua


35,205



36,614



36,681



23,567



35,989Ciudad Juárez


17,565



20,424



19,612



61,675



21,059Culiacán


46,404



50,648



55,691



37,992



43,771Durango


15,075



15,599



15,672



17,112



16,255Mazatlán


21,984



23,965



24,046



25,292



25,942Monterrey


95,027



94,292



101,736



116,826



110,150Reynosa


6,386



6,513



7,877



9,483



10,403San Luis Potosí


20,361



22,102



22,150



23,696



22,184Tampico


19,512



21,299



22,730



27,938



24,453Torreón


22,344



21,523



21,546



25,101



22,923Zacatecas


7,942



9,112



10,381



9,169



9,001Zihuatanejo


14,923



13,899



16,474



16,190



14,856Total


346,016



362,326



382,611



424,057



387,234


______________________________


(1)
Includes departures and landings.





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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 31,2004


2005


2006


2007


2008Acapulco


35.3



33.4



35.5



35.2



36.0Chihuahua


15.8



16.4



18.1



22.5



23.2Ciudad Juárez


32.5



30.0



35.6



38.6



42.9Culiacán


14.5



15.2



15.2



18.4



25.1Durango


14.0



13.8



15.1



16.3



14.4Mazatlán


33.7



33.4



34.1



35.8



32.1Monterrey


45.2



49.4



51.6



56.1



59.8Reynosa


22.7



22.5



17.4



20.2



23.8San Luis Potosí


9.6



10.6



10.3



11.2



11.8Tampico


17.1



18.9



21.3



20.8



23.8Torreón


16.2



17.4



19.0



20.8



21.0Zacatecas


29.8



32.6



32.0



30.2



29.7Zihuatanejo


40.2



43.8



41.4



41.7



43.4Average of all airports


28.1



29.3



30.8



33.5



36.3


______________________________


(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 2008,
in terms of commercial aviation passenger traffic.  In 2006, 2007 and 2008, it accounted for approximately 44.6%, 46.2% and 46.8%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 5.3 million terminal passengers, 6.6 million terminal passengers and 6.6 million terminal passengers, respectively, were served by Monterrey International Airport.  Of the terminal passengers in 2006, 82.1% were domestic and 17.9% were international 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.  This airport serves primarily business travelers and is also a hub for the transportation of goods.





A total of 12 commercial airlines operate at the airport, the principal ones of which are Aeroméxico, Aviacsa, Aeroméxico Connect (formerly Aerolitoral), VivaAerobus, Mexicana and Interjet.  The airport is an important hub for Aviacsa, a maintenance center for Aeroméxico Connect (formerly Aerolitoral) and the headquarters
of VivaAerobus.  During 2008, VivaAerobus cancelled routes from Monterrey to Tampico, Torreón, San Luis Potosí, and Zihuatanejo. In addition, it reduced flights to other cities. Aviacsa cancelled flights to Los Angeles and Houston starting in January 2008. In September 2008, Aeroméxico Connect began flying new route to Querétaro.  The principal non-Mexican airlines operating at the airport are American and Continental.  Airlines operating at this airport serve
40 direct destinations, of which 27 are domestic and 13 are international.  Of these destinations, Mexico City, Toluca, Guadalajara, Cancún, Ciudad Juárez, Hermosillo, Houston, Dallas, Los Angeles, Atlanta, Las Vegas, Chicago, Detroit, New York, Austin and Madrid are the principal direct routes.  During 2008, five airlines ceased their operations at this airport.  Aerocalifornia was suspended on July 21, 2008, Aeromar suspended its operations on July 27, 2008, Aladia suspended
its operations on October 20, 2008, Alma de Mexico suspended its operations on November 7, 2008, and American Eagle suspended its operations on November 2, 2008. On June 2, 2009, the Transport and Communication Commissions (SCT) ordered the temporary suspension of operations of 25 aircraft of Aviacsa. Aviacsa has 60 days from the date of the suspension to respond. On June 5, 2009, the Fifth Federal Court in Ciudad Valles granted a temporary
suspension pursuant to a constitutional proceeding (juicio de amparo) and ordered the revocation of the decision of the SCT to suspend temporarily the operation of the 25 Aviacsa aircraft. 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 such
carriers, the principal one of which is VivaAerobus, have elected to establish their operations headquarters at our airport.





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Monterrey International Airport is located approximately 21 kilometers (13 miles) from the city of Monterrey, which has a population (including its suburbs) of approximately 4.3 million.  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 80% 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 4,987 square meters (53,681 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 5 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 2009.  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, and since 2004, 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.





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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 and on March and May 2008 we completed the acquisition of land surrounding the airport for an aggregate surface of 720 hectares for an aggregate price of Ps. 1,056,100,000 (US$ 126,660,000).





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 aircrafts operating nine routes.  By December 2008, VivaAerobus had
18 destinations with seven aircrafts 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 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.  Recently, the state of Nuevo Leon has requested 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 2008, in terms of commercial aviation passenger traffic.  In
2006, 2007 and 2008, it accounted for approximately 8.4%, 7.4% and 7.7%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 994,286 terminal passengers, 1,057,347 terminal passengers and 1,087,974 terminal passengers, respectively, were served by Acapulco International Airport.  Of the terminal passengers in 2006, 64.2% were domestic and 35.8% were international passengers.  Of the terminal passengers in 2007,
70.0% were domestic and 30.0% were international passengers.  In 2008, 75.2% were domestic and 24.8% 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.





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A total of thirteen commercial airlines operate at the airport. The principal Mexican airlines are Interjet, Mexicana, Aeroméxico, Volaris, Aviacsa 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. Other low-cost carriers have expressed an interest in commencing operations 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 1,587 square meters (17,083 square feet) is commercial space.





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 sixth most important airport in terms of passenger traffic.  According to the Mexican Bureau of Civil Aviation, Mazatlán International Airport was the eighteenth busiest airport in Mexico in 2008, in terms of commercial aviation passenger traffic.  In 2006, 2007 and 2008,
it accounted for approximately 7.0%, 6.4%, and 5.9% respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 819,214 terminal passengers, 905,010 terminal passengers and 833,714 terminal passengers, respectively, were served by Mazatlán International Airport.  Of the terminal passengers in 2006, 44.5% were domestic and 55.5% were international 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.  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.





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A total of nine commercial airlines operate at the airport.  The Mexican airlines are Mexicana, 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.





The non-Mexican airlines operating at the airport are Alaska Airlines, America West, Mesa Airlines, Continental Airlines and Frontier. The airlines’ operations at the airport serve 12 direct destinations.  Of these destinations, Mexico City, Toluca, Monterrey, Guadalajara, Tijuana, Los Cabos, La Paz, and Los Mochis 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,





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 1,390 square meters (14,963 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 2001platform 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 include 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 twentieth busiest airport in Mexico in 2008, in terms of commercial aviation passenger traffic.  In 2006, 2007 and 2008, it accounted
for approximately 5.8%, 4.7% and 4.6%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of, 681,581 terminal passengers, 674,612 terminal passengers and 644,029 terminal passengers, respectively, were served by Zihuatanejo International Airport.  Of the terminal passengers in 2006, 51.7% were domestic
and 48.3%were international passengers.  Of the terminal passengers in 2007, 54.6% were domestic and 45.4% were international passengers.  In 2008, 57.5% were domestic and 42.5% 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 NorthAmerica West.  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, Dallas, Houston, Phoenix and Los Angeles are the principal direct routes.





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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 930 square meters (10,012 square feet) of commercial space.  It has a five-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 fifth 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 seventeenth busiest airport in Mexico in 2008, in terms of commercial aviation passenger
traffic.  In 2006, 2007 and 2008, it accounted for approximately 5.6%, 6.0% and 5.9%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 664,392 terminal passengers, 854,757 and 833,793 terminal passengers, terminal passengers, respectively, were served by Chihuahua International Airport.  Of the terminal passengers in 2006, 88.6% were domestic and 11.4% were international passengers.  In 2007, 90.4% were domestic and
9.6% were international passengers.  In 2008, 89.7% were domestic and 10.3% 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 eight commercial airlines operate at the airport, of which the principal ones are Aeroméxico, Aeroméxico Connect (formerly Aerolitoral), VivaAerobus and Interjet.  On October 22, 2008, the low-cost airline Volaris began operating a direct route to Toluca at this airport.  Airlines operating at this
airport serve 12 destinations.  The principal routes are Toluca, Mexico City, Monterrey, Houston and Dallas.  On March 26, 2007, Mexican regulatory authorities announced an immediate suspension of Azteca, which accounted for approximately 7.1% of our revenue at the airport in 2006, due to safety concerns and financial problems.





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.





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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 769 square meters (8,276 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 recently completed 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 twelfth busiest airport in Mexico in 2008, in terms of commercial aviation passenger
traffic.  In 2006, 2007 and 2008, it accounted for approximately 7.2%, 8.0% and 7.8%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 843,989 terminal passengers, 1,137,571 terminal passengers and 1,099,038 terminal passengers respectively, were served by Culiacán International Airport.  Of the terminal passengers in 2006, 96.9% were domestic and 3.1% were international passengers.  In 2007, 96.5% were domestic
and 3.5% were international passengers.  In 2008, 97.1% were domestic and 2.9% 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 2006, 2007 and 2008, commercial aviation accounted for approximately 92.9%, 94.9% and 96.2%, respectively, and general aviation accounted for approximately 7.1% , 5.1% and 3.8%, 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), Mexicana, Volaris, VivaAerobus and Aeropacífico.  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 at the airport on  May 12, 2008 (as a result of the high fuel prices).  The market, served by Avolar was immediately absorbed by Volaris and Aerocalifornia.  Similarly, the market served by Aviacsa was immediately absorbed by VivaAerobús.  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 Chihuahhua.





Culiacán International Airport is located approximately 12 kilometers (7 miles) from downtown of the city of Culiacán, whose population is approximately 850,000 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.





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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 until 11:30 p.m. to service cargo operations.  Its runway capacity is 20 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 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, and a 73-space parking area for employees and authorities,
a five-position apron for commercial aviation and two air bridges.





Culiacán International Airport also includes military installations.  The presence of these installations does not currently limit the airport’s runway capacity or otherwise affect its civil aviation operations, and we have no reason to anticipate that it will do so in the future.





Durango International Airport





In each of 2006, 2007 and 2008, Durango International Airport accounted for approximately 1.7% of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 236,200 terminal passengers, 279,310 terminal passengers and 233,471 terminal passengers, respectively, were served by Durango International Airport.   Of the terminal passengers in 2006, 81.3% were domestic and 18.7% were international passengers.  Of the terminal passengers in
2007, 89.0% were domestic and 11.0% were international passengers.  In 2008, 90.3% were domestic and 9.7% 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 aircrafts.  On October 26, 2008, Aeromexico cancelled the Durango-Chicago route.





Airlines operating at this airport service 5 direct destinations.  Of these, Mexico City, Tijuana, and Houston were the most important routes at the end of the year 2008.





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 146 square meters (1,571 square feet) of commercial space.  It has a three-position commercial aviation apron, a 26-position general aviation apron, and a
140-space public parking area.  The airport has two gates for international or domestic flights.





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Recent improvements to the airport include the improvement of the 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 2006, 2007 and 2008, San Luis Potosí International Airport accounted for approximately 1.9%, 1.9% and 1.9%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 227,102 terminal passengers, 264,349 terminal passengers and 261,049 terminal passengers, respectively, were served by San Luis Potosí International Airport.  Of the terminal passengers in 2006, 66.4% were domestic and 33.6% were international passengers.  In 2007, 69.4% were domestic
and 30.6% were international.  In 2008, 68.4% were domestic and 31.6% 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 five commercial airlines operate at the airport, which are Aeroméxico Connect (formerly Aerolitoral), Click Mexicana, Aeromar, Continental Airlines and American Eagle.  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 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) 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 aircrafts flying daily to 12 domestic and 2 international destinations and maintains 1,500 vehicles for urban and interstate transportation.





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.  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 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 include 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 twenty-third busiest airport in Mexico in 2008, in terms of commercial aviation passenger traffic.  In 2006, 2007 and 2008, it accounted for approximately 4.1%, 4.1% and 4.1%, respectively, of our terminal passenger traffic.





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In 2006, 2007 and 2008, a total of 485,125 terminal passengers, 580,117 terminal passengers and 582,328 terminal passengers, respectively, were served by Tampico International Airport.  Of the terminal passengers in 2006, 89.1% were domestic and10.9% were international
passengers.  In 2007, 91.7% were domestic and 8.3% were international passengers.  In 2008, 91.2 % were domestic and8.8% 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.





Seven commercial airlines operate at the airport, the principal ones of which were Click Mexicana, Aeroméxico Connect (formerly Aerolitoral), Aviacsa, Interjet, Continental and American Eagle as of the end of December 2008. Alma de Mexico ceased operations and filed for bankruptcy on November 7, 2008, and VivaAerobus ceased operations
at the airport on January 1, 2008. On June 2, 2009, the Transport and Communication Commissions (SCT) ordered the temporary suspension of operations of 25 aircraft of Aviacsa. Aviacsa has 60 days from the date of the suspension to respond. On June 5, 2009, the Fifth Federal Court in Ciudad Valles granted a temporary suspension pursuant to a constitutional proceeding (juicio de amparo)
and ordered the revocation of the decision of the SCT to suspend temporarily the operation of the 25 Aviacsa aircraft.





At the end of 2008, Airlines operating at this airport serve four direct destinations:  Mexico City, Monterrey, Houston, and Dallas.  However, American Eagle cancelled its direct route to Dallas on January 6, 2009.  Aeromar began operating a direct route to Mexico City on November 10, 2008.





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.





The Tampico International Airport terminal was recently remodeled to include additional commercial space and an exhibition area.





Torreón International Airport





In 2006, 2007 and 2008, Torreón International Airport accounted for approximately 3.5%, 3.7% and 3.4% respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 410,124 terminal passengers, 522,295 terminal passengers and 481,265 terminal passengers, respectively, were served by Torreón International Airport.  Of the terminal passengers in 2006, 82.0% were domestic and 18.0% were international passengers.  In 2007, 84.5% were domestic and
15.5% were international passengers.  In 2008, 84.0% were domestic and 16.0 % 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 five commercial airlines operate at the airport, serving six direct destinations: Mexico City, Chihuahua, Guadalajara, Monterrey, Houston and Dallas.





The principal commercial airlines are Aeroméxico, Aeroméxico Connect (formerly Aerolitoral), Click Mexicana, 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.





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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 582 square meters (6,265square feet) of commercial space.





Zacatecas International Airport





In 2006, 2007, and 2008, Zacatecas International Airport accounted for approximately 2.8%, 2.0% and 1.9%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of 332,224 terminal passengers, 277,339 terminal passengers and 267,344 terminal passengers, respectively, were served by Zacatecas International Airport. Of the terminal passengers in 2006, 70.9% were domestic and 29.1% were international passengers.  In 2007, 66.8% were domestic and 33.2% were international.  In
2008, 70.2% were domestic and 29.8% 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 three Mexican commercial airlines that operate at the airport are Mexicana, Click Mexicana and Transportes Aeromar, which serve five direct destinations.  The airport’s national routes are Mexico City and Tijuana.  Airlines serving the airport recently added service to the United States cities of Chicago,
Los Angeles and Oakland. 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 227 parking spaces.





Border Cities





Ciudad Juárez International Airport





In 2006, 2007 and 2008, Ciudad Juárez International Airport accounted for approximately 5.9% 6.4% and 6.4% respectively, of our terminal passenger traffic.





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In 2006, 2007 and 2008, a total of, 698,765 terminal passengers, 908,835 terminal passengers and 903,129 terminal passengers, respectively, were served by Ciudad Juárez International Airport.  Of the terminal passengers in 2006, 99.8% were domestic.  In 2007, 99.8% were domestic.  In 2008, 99.8% were domestic.





Five commercial airlines operate at the airport, serving eight destinations.  The airport serves seven direct routes: Mexico City, Monterrey, Toluca, Guadalajara, Chihuahua, Tijuana and Hermosillo.





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 481 square meters (5,179 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 2006, 2007 and 2008, Reynosa International Airport accounted for approximately 1.2%, 1.3% and 1.8%, respectively, of our terminal passenger traffic.





In 2006, 2007 and 2008, a total of, 136,991 terminal passengers and 191,326 terminal passengers and 247,339 terminal passengers, respectively, were served by Reynosa International Airport.  Of the terminal passengers in 2006, 99.9% were domestic. Of the passengers in 2007, 99.7% were domestic.  Of the passengers in 2008,
99.5 % 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 and Poza Rica. On November 7, 2008, Alma ceased its operations and filed for bankruptcy, and 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.





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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 2,059 square meters (13,046 square feet), which includes 101 square meters (1,082 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 144 spaces.





Principal Customers





Principal Aeronautical Services Customers





Airline Customers





As of December 31, 2008, over 10 international airlines and 15 Mexican airlines operated flights at our 13 airports.  Aeroméxico and VivaAerobus operate the most flights at our airports, followed by Aeroméxico Connect (formerly Aerolitoral), Interjet and Mexicana.  In 2008, revenues from Aeroméxico and its
affiliates totaled Ps. 398 million (U.S.$ 28.7 million), revenues from VivaAerobus were Ps. 138 million (U.S.$ 9.9 million), while revenues from Mexicana and its affiliates were Ps. 237 million (U.S.$ 17.1million) and revenues from Aviacsa were Ps.112 million (U.S.$ 8.0, million), representing 24.6%, 8.5%,14.6% and 6.9%,  respectively, of our aeronautical revenues from airline customers for 2008.  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 2008, passengers traveling on discount and low-cost carriers, such as VivaAerobus, Interjet, Alma, Volaris, Avolar, and Aladia accounted for approximately 33% 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 one of our providers 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 and the Ministry of Communications and Transportation pursuant
to which we resolved existing disputes with our principal airline customers and established specific prices for aeronautical services applicable to those airlines.  The National Air Transportation Board agreed to cause our principal airline customers to enter into (a) contracts governing charges for 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 October 31, 2006, 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.  This agreement expired in December of 2008 and we are currently negotiating its renewal.  We continue to charge our principal airline customers
in accordance with the terms of this agreement during the pending of the negotiations. However, we cannot assure that the agreement will be actually renewed or that any airlines will adhere to the terms of such new agreement.





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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.





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The following chart sets forth our principal air traffic customers as of December 31, 2008.





Principal Air Traffic Customers


Percentage of 2007 Revenues


Percentage of 2008 RevenuesDomestic:Grupo Aeroméxico (Aeroméxico and Aeroméxico Connect)


25.1
%


24.6
%Grupo Mexicana (Mexicana and Click Mexicana)


14.0
%


14.6
%Interjet


4.6
%


9.2
%VivaAerobus


7.6
%


8.5
%Aviacsa


9.4
%


6.9
%Volaris


2.6
%


4.2
%Alma


2.7
%


2.9
%Grupo Aeromonterrey


2.5
%


2.0
%Aerocalifornia(1)


3.6
%


1.5
%Lнneas Aereas Azteca


0.5
%


0.1
%Other


9.2
%


11.3
%Total Domestic


81.8
%


85.8
%International:Continental


5.7
%


5.2
%American Airlines (including American Eagle)


3.7
%


3.4
%Alaska Airlines


1.8
%


1.7
%Delta


1.5
%


1.1
%America West (including Mesa Airlines)


0.8
%


1.0
%Charters


3.0
%


1.0
%Other


1.7
%


0.8
%Total International


18.2
%


14.2
%Total


100
%


100
%





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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.12.1 million of revenues in the form of access fees in 2008.  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 clients are Comisariato Gotre, S.A. de C.V. and Aerococina, S.A. de C.V., which provided Ps. 2.3 million in revenues in the aggregate in the form of access fees in 2008.





Principal Non-aeronautical Services Customers





As of December 31, 2008, we were party to approximately 806 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 2008, our largest commercial customers were Publitop (advertising), Aeroboutiques  (duty free and duty paid stores), Aerocomidas (food and beverage), Cenca  (magazines),
Telmex (Telecommunications), Aeroméxico, Mexicana, American Express (VIP lounges for commercial aviation passengers) 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.





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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.  Recently, the state of Nuevo Leon has requested 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;





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·
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.





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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.





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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 negotiating with
our principal airline customers to enter into service agreements pursuant to which we expect to agree to operate new screening equipment that we would purchase and install and to implement other security measures to facilitate our airline customers’ compliance with the new baggage screening guidelines.  Until we agree on the contractual terms 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 new 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.





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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;





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·
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.





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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.





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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 2008, approximately 88.2% 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.





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Historical Maximum Rates(1)





Year Ended December 31,2001


2002


2003


2004


2005Acapulco


146.31



144.84



143.39



141.96



140.54Ciudad Juárez


119.56



118.36



117.18



116.00



114.85Culiacán


137.11



135.74



134.37



133.04



131.70Chihuahua


143.80



142.36



140.94



139.52



138.14Durango


152.16



150.64



149.13



147.63



146.16Mazatlán


135.44



134.09



132.74



131.42



130.10Monterrey


140.45



139.05



137.67



136.28



134.91Reynosa


149.66



148.16



146.67



145.20



143.75San Luis Potosí


159.69



158.09



156.50



154.94



153.39Tampico


151.33



149.81



148.31



146.82



145.35Torreón


142.13



140.71



139.31



137.90



136.52Zacatecas


147.99



146.50



145.03



143.58



142.14Zihuatanejo


127.08



125.81



124.54



123.31



122.08


______________________________


(1)
Expressed in constant pesos as of December 31, 2008.





Current Maximum Rates(1)





Year ended December 31,2006


2007


2008


2009


2010Acapulco


154.38



153.21



152.07



150.93



149.79Ciudad Juárez


120.62



119.72



118.83



117.93



117.05Culiacán


133.50



132.51



131.51



130.52



129.54Chihuahua


130.85



129.87



128.89



127.92



126.96Durango


149.09



147.97



146.85



145.76



144.66Mazatlán


153.23



152.08



150.94



149.81



148.69Monterrey


123.48



122.55



121.63



120.73



119.82Reynosa


139.84



138.79



137.75



136.72



135.69San Luis Potosí


104.39



103.61



102.83



102.07



101.30Tampico


147.90



146.79



145.70



144.60



143.51Torreón


150.95



149.81



148.69



147.57



146.46Zacatecas


156.42



155.25



154.08



152.92



151.78Zihuatanejo


157.59



156.41



155.23



154.07



152.91


______________________________


(1)
Expressed in constant pesos as of December 31, 2008.





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.





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·
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, 2008, the daily minimum wage in Mexico City was Ps. 52.59.  As a result, the maximum penalty at such date could have been Ps. 2.6 (U.S 0.19 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.





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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.





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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;





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·
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;





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·
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, 2008, the daily minimum wage in Mexico City was Ps.52.59.  As a result, the maximum penalty at such
date could have been Ps. 2.6 (U.S 0.19 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.





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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 (LeyGeneral
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 (LeyGeneral 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.





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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 at of, and has issued compliance certificates for, all of our airports.  These certificates, which are known as Environmental Compliance
Certificates (Certificados de Cumplimiento Ambiental), certify compliance with applicable Mexican environmental laws, regulations and applicable Mexican Official Norms and must be renewed on an annual basis.  In addition, all of our airports, including the Monterrey International Airport, have received ISO 9000 service and quality certification; and as of April 24, 2007, ISO 9001:2000 service and quality certification.





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.





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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 Ambienteor 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.





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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 by Mr. Cuauhtémoc Velasco Oliva to make several reforms to the Mexican Airports Law, nevertheless, we cannot assure that the new members of the Transport and Communication Commissions of the Congress will approve such initiative or suggest changes, amendments or dismiss it.  As of May 29, 2009, 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.





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ORGANIZATIONAL STRUCTURE





The following table sets forth our consolidated subsidiaries as of December 31, 2008, including our direct and indirect ownership interest in each:





Name of Company

Jurisdiction of Establishment

Percentage Owned

DescriptionAeropuerto de Acapulco, S.A. de C.V.

Mexico

100

Holds concession for Acapulco International AirportAeropuerto de Ciudad Juárez, S.A. de C.V.

Mexico

100

Holds concession for Ciudad Juárez International AirportAeropuerto de Culiacán, S.A. de C.V.

Mexico

100

Holds concession for Culiacán International AirportAeropuerto de Chihuahua, S.A. de C.V.

Mexico

100

Holds concession for Chihuahua International AirportAeropuerto de Durango, S.A. de C.V.

Mexico

100

Holds concession for Durango International AirportAeropuerto de Mazatlán, S.A. de C.V

Mexico

100

Holds concession for Mazatlán International AirportAeropuerto de Monterrey, S.A. de C.V.

Mexico

100

Holds concession for Monterrey International AirportAeropuerto de Reynosa, S.A. de C.V.

Mexico

100

Holds concession for Reynosa International AirportAeropuerto de San Luis Potosí, S.A. de C.V.

Mexico

100

Holds concession for San Luis Potosí International AirportAeropuerto de Tampico, S.A. de C.V.

Mexico

100

Holds concession for Tampico International AirportAeropuerto de Torreón, S.A. de C.V.

Mexico

100

Holds concession for Torreón International AirportAeropuerto de Zacatecas, S.A. de C.V.

Mexico

100

Holds concession for Zacatecas International AirportAeropuerto de Zihuatanejo, S.A. de C.V.

Mexico

100

Holds concession for  Zihuatanejo International AirportServicios Aeroportuarios del Centro Norte, S.A. de C.V.

Mexico

100

Provider of administrative and other services at certain of our airports.





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Name of Company

Jurisdiction of Establishment

Percentage Owned

DescriptionOperadora 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. owns the other 10% and will operate the hotel.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.





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Item 4A.
Unresolved Staff Comments





None.





Item 5.
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 22 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  81.3%  of our total revenues in 2008 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 2008, 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 OMA’s fourth quarter and full year 2008 results, these factors principally affected the number of flight operations and the volume of passengers.





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The U.S. and Mexican economies are currently affected by 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.  Likewise, according to the Mexican
National Statistical, Geographic and Information Institute (INEGI), the Mexican gross domestic product decreased at an annualized rate of 3.4% during the fourth quarter of 2008.  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 2008, approximately 81% of the international passengers in our airports arrived or departed on flights originating in or departing to the United States and approximately
10% of our revenues in 2008 were derived from passengers charges impose on passengers departing from or arriving in the United States.  Similarly, in 2008, approximately 83% of our passengers traveled on domestic flights, and approximately 48% of our revenues in 2008 were derived from domestic passenger charges.





We believe that the U.S. and Mexican economic and financial crisis have each affected our results of operations differently.  International traffic in 2008 decreased 5.8% compared to 2007, 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 2008, international passenger traffic decreased 17.6% compared to the fourth quarter of 2007.  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 OMA’s 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 had some impact on domestic traffic for the full year 2008, which was essentially unchanged as compared to 2007, despite the exit from the market of four airlines during the year and significant reductions in capacity by several other carriers.  Five airports increased domestic passenger
traffic, with the main increases at the Acapulco, Reynosa, and Monterrey airports.  However, although domestic passenger traffic increased by 4.0% during the first three quarters of 2008 (as compared to the first three quarters of 2007), domestic passenger traffic fell 11.9% in the fourth quarter (when compared to the fourth quarter of 2007).  Such decreases are principally due to reductions in the volume of passengers carried by Aviacsa and VivaAerobus; 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.  The airports with the largest decreases during 2008 were Monterrey, Ciudad Juárez, Culiacán, Mazatlán and Chihuahua.  The Zacatecas, Acapulco, and Reynosa airports recorded increases in domestic traffic, in large part as a result of the performance of Volaris, Interjet, and Click Mexicana.  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 for Developments in Mexico City International Airport





OMA made a joint investment with the international hotel operator NH Hotels to develop and operate a 287-room, 5-star 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 Company will operate the commercial areas, and NH Hoteles will operate the hotel. The construction of the hotel is 93% completed as of May 29, 2009 and is expected to begin its activities at the end of the third quarter of 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.





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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 9.7 million passengers in 2008.  Airlines based in Terminal 2 include Aeromar, Aeroméxico and Aeroméxico
Connect, Continental, Copa, Delta and LAN Chile.  OMA considers this a key project within its efforts to increase its non-aeronautical revenues.





New Financing





On February 3, 2009, the Company signed a long-term bank credit facility for the amount of Ps. 500 million maturing on 2017 at an interest rate of “TIIE” (Tasa de Interés Interbancaria de Equilibrio) plus 450 basis points.




Management changes
 
 The board of directors has approved changes in senior management, as part of a normal rotation of personnel. Victor Bravo Martin will become Chief Executive Officer of OMA effective July 1, 2009. He succeeds Rubén López,
who has been granted a sabbatical to continue his professional development.
 
 The board of directors also named José Luis Guerrero Cortes as the new Chief Financial Officer effective July 1, 2009. Mr. Guerrero was an associate at Goldman Sachs in the business development, debt capital markets, and derivatives groups in 2008. He has also worked
in the finance group of Empresas ICA, where he assisted in the financing for many of ICA’s largest construction and infrastructure projects. Prior to working at ICA, Mr. Guerrero was an assistant brand manager at Procter & Gamble in Mexico and worked in the environmental research group of Veolia Environment in France. Mr. Guerrero has a degree in chemical engineering from the Universidad Iberoamericana and received his MBA from Harvard Business School.




The impact of the Influenza A(H1N1) outbreak





As a result of the preventive alert announced by the Mexican Ministry of Health 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 includes the establishment of checkpoints in airports to provide
information, as well as the provision of assistance to any persons who show signs of illness.





OMA is concerned for the entire airport community, including passengers, employees of the airlines and of other service providers, as well as our own employees. We have established dedicated response teams at headquarters level and at each airport. We are cooperating in the operations coordinated by the federal government and providing health
authorities any assistance they require to carry out their activities.





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 are being implemented at our airports. By order of the Ministry of Communications and Transportation, screening of every passenger traveling to international destinations is being
undertaken in order to identify symptoms of viral infection, including visual inspection, surveys and measure of body temperatures. Personnel of the Ministry of Health will be able to require additional tests, and will have the authority to determine if a passenger will be allowed to board a flight. This measure went into place on April 29, 2009.





Since this declaration of the World Health Organization, OMA’s airports have continued to operate normally. The World Health Organization recommended not to close borders and not to restrict international travel. However, persons are choosing to cancel or delay scheduled travel, and there has been a reduction in passenger traffic.





At the present time OMA cannot estimate the impact that this public health crisis will have on passenger traffic volumes, the number of flight operations; or on the financial condition of the company. Much will depend on how long this situation continues and its impact on domestic and global economic activity.





Passenger and Cargo Volumes





In 2008, approximately 83.4% of the terminal passengers using our airports were domestic, a decrease of 1.1% as compared to 2007.  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.





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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 31,2006


2007


2008Domestic terminal passengers(1)


9,258.3



11,740.5



11,732.8International terminal passengers(1)


2,525.3



2,471.9



2,327.8Total terminal passengers(1)


11,783.6



14,212.5



14,060.7Cargo(1)


810.9



818.3



790.3Total workload units(1)


12,594.5



15,030.8



14,851.0Change in total terminal passengers(2)


11.2
%


20.6
%


(1.1
) %Change in workload units(2)


10.4
%


19.3
%


(1.2
) %Aeronautical revenue(3)


1,371.0



1,549.8



1,617.2Change in aeronautical revenue(2)


15.0
%


13.0
%


4.3
%Aeronautical revenue per workload unit


108.9



103.1



115.12Change in aeronautical revenue per workload unit(1)( 2)


4.2
%


(5.3
) %


11.7
%Non-aeronautical revenue(3)


316.3



347.5



371.3Change in non-aeronautical revenue(2)


10.0
%


9.9
%


6.8
%Non-aeronautical revenue per terminal passenger


26.9



24.5



26.4Change in non-aeronautical revenue per terminal passenger(2)


(0.7
) %


(8.9
) %


7.8
%


_______________





(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 from January 1, 2008.





In 2008, we served 14.1 million terminal passengers, of which 11.7 million were domestic and 2.3 million were international, and approximately 0.9 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 2008, 81.3% of our revenues were derived from aeronautical services,
and the remainder of our revenues were 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.





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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.”





Depreciation in the Peso





From September 30, 2008 to May 29, 2009, the peso depreciated by approximately 20.1%, from 10.97 pesos per U.S. dollar on September 30, 2008 to 13.18 pesos per U.S. dollar on May 29, 2009.  This depreciation has affected 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, 2008, we had 22.8 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.





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The following table sets forth our revenue from aeronautical services for the periods indicated.





Aeronautical Revenue





Year ended December 31,2006


2007


2008Amount


Percent


Amount


Percent


Amount


Percent(In millions of pesos, except percentages)Aeronautical Revenue:Passenger charges


1,003.0



73.2
%


1,162.0



75.0
%


1,234.0



76.3
%Landing charges


114.1



8.3



119.6



7.7



111.7



6.9Aircraft parking charges


92.6



6.7



96.1



6.2



95.2



5.9Airport security charges


19.3



1.4



22.6



1.5



22.8



1.4Passenger walkway charges


24.8



1.8



23.1



1.5



23.9



1.5Leasing of space to airlines


117.2



8.6



126.4



8.1



129.6



8.0Revenues from complementary service providers(1)


0.0



0.0



0.0



0.0



0.0



0.0Total Aeronautical Revenue


1,371.0



100.0
%


1,549.8



100.0
%


1,617.2



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 2008, passenger charges represented 76.3% of our aeronautical services revenues.  In 2008, aeronautical services represented 81.3% 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 would need to 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 aircrafts operating nine routes.  By December 2007, VivaAerobus had
19 destinations with five aircrafts 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.





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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 and the Ministry of Communications and Transportation pursuant to which we resolved 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 October 31, 2006, 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.  This agreement expired in December of 2008 and we are currently negotiating its renewal.  We continue to charge our principal airline customers in accordance with the terms of this agreement during the pending of the negotiations.  However, we cannot assure that the agreement
will be actually renewed or that any airlines will adhere to the terms of such new 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 2008, our aeronautical revenues represented approximately 88.2% 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 smallerportion of our total revenues as compared to aeronautical services.  As part of our strategy to grow non-aernoautical revenues, we acquired an interest in the company Consorcio Grupo Hotelero
T2 that will develop and operate a hotel (in 2009) and 5,000 square meters (53,820 square feet) of commercial space (in 2010) in Terminal 2 of the Mexico City International Airport.  Additionally, OMA will develop a 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.  It will offer and provide new business lines.   The contribution to our total revenues from non-aeronautical
services was 18.7% in 2008.  Since 2006, our non-aeronautical revenue per terminal passenger decreased from Ps.26.9 in 2006 to Ps. 26.4 in 2008, due primarily to increases in passenger traffic from low-cost aviation companies.  Passengers on such aviation companies typically are most cost-conscious and as a result make fewer purchases at our airports.





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The following table sets forth our revenue from non-aeronautical activities for the periods indicated.





Non-aeronautical Revenue





Year ended December 31,2006


2007


2008Amount


Percent


Amount


Percent


Amount


Percent(In millions of pesos, except percentages)Non-aeronautical Revenue:Commercial Activities:Car parking charges

Ps.
90.8



28.7
%

Ps.
105.5



30.4
%


112.7



30.4
%Advertising


36.0



11.4



36.9



10.6



39.3



10.6Leasing of space(1)


36.2



11.4



39.9



11.5



36.6



9.8Car rentals


23.8



7.5



29.6



8.5



32.2



8.7Food and beverage operations


24.7



7.8



31.6



9.1



35.0



9.4Retail operations


30.6



9.7



34.6



9.9



36.2



9.7Duty-free operations


16.0



5.1



14.3



4.1



13.6



3.7Communications


3.9



1.2



4.0



1.2



4.3



1.2Financial services


1.5



0.5



1.8



0.5



1.9



0.5Time share


17.1



5.4



18.0



5.2



18.1



4.9Other


21.9



6.9



16.1



4.6



20.6



5.5Total commercial activities


302.5



95.6



332.3



95.6



350.5



94.4Recovery of costs(2)


13.8



4.4



15.2



4.4



20.8



5.6Total Non-aeronautical Revenue

Ps.
316.3



100.0
%

Ps.
347.5



100.0
%


371.3



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.





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Operating Costs





The following table sets forth our operating costs and certain other related information for the periods indicated.





Operating Costs





Year ended December 31,2006


2007


2008Amount


% change


Amount


% change


Amount


% change(In millions of Pesos except percentages)Operating Costs:Cost of services:Employee costs


140.3



10.20
%


143.1



2.0
%


156.2



9.1
%Maintenance


54.8



1.5



53.9



(1.6
)


54.0



0.2Safety, security & insurance


68.9



(3.9
)


74.9



8.7



81.0



8.1Utilities


92.2



6.3



94.4



2.4



112.8



19.5Other


41.3



(16.2
)


54.5



32.0



54.8



0.6Total cost of services


397.5



2.2



420.8



5.9



458.8



9.0General and administrative expenses


237.5



(2.9
)


256.7



8.1



318.3



24.0Technical assistance fees


49.5



23.4



57.4



16.0



55.6



(3.1
)Concession taxes


84.6



16.5



98.3



16.2



101.7



3.4Depreciation and amortization:Depreciation(1)


28.3



28.6



32.9



16.3



39.3



19.5Amortization(2)


263.8



25.2



303.3



15.0



327.4



8.0Total depreciation and amortization


292.1



28.2



336.2



15.1



366.7



9.1Total operating costs


1,061.2



8.9
%


1,169.4



10.2
%


1,301.1



11.3
%


_______________





(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.397.5 million in 2006 to Ps. 458.8 million in 2008.  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 23.6% in 2006 to 23.0% in 2008.





General and Administrative Expenses





Our general and administrative expenses consist primarily of administrative overhead costs, fees and expenses paid to consultants and other providers of professional services and other miscellaneous expenses.  In recent years, our general and administrative expenses have increased from Ps.237.5 million in 2006 to Ps. 256.7 in 2007
and to Ps. 318.3 million in 2008.  The increase of 24.0% from 2007 to 2008 was principally the result of an increase in the provisions for doubtful accounts in the second and fourth quarters of 2008, most notably including the provision for doubtful accounts in the amount 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.





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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 2008, our depreciation and amortization expenses increased 9.1%, as compared to 2007, as a result of the increase in improvements to our concession properties during 2008.





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.





Taxation





On October 1, 2007, the Business Flat Tax Law (LIETU) 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 LIETU, 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.  LIETU 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 effect net in the statement of income of Ps.476,353.  The Company continued to record a deferred IETU liability in 2008, which did not affect the Company’s cash flows.





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 2008.





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 2006, 2007 and 2008 was 29.5%, 96.2%, and 30.6% 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.





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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 31,2006


2007


2008Depreciation (appreciation) of the Mexican peso as computed to the U.S. dollar(1)


1.6
%


1.1
%


26.7%Mexican inflation rate(2)


4.1
%


3.8
%


6.5%U.S. inflation rate(3)


2.5
%


4.1
%


0.1%Increase (decrease) in Mexican gross domestic product(4)


4.8
%


3.3
%


1.3%


_______________


(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.10.80 per U.S. dollar as of December 30, 2006,  Ps.10.92 per U.S. dollar as of December 31, 2007 and Ps. 13.83  per U.S. dollar as of December
31, 2008.


(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 121.015 in 2006,125.564in 2007 and 133.761 in 2008.


(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.





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·
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.





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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 31,2006


2007


2008(millions of pesos, except percentages)Monterrey:Revenues:Aeronautical services


587.2



667.9



728.4Non-aeronautical services


159.8



179.9



195.8Total revenues


747.0



847.8



924.2Operating costs


655.2



804.9



867.7Costs of services


103.8



117.6



113.1General and administrative expenses


437.8



558.1



613.0Depreciation and amortization


76.1



84.5



93.4Income from operations


91.8



42.9



56.5Operating margin(1)


12.3
%


5.0
%


6.1
%Acapulco:Revenues:Aeronautical services


123.5



125.9



133.9Non-aeronautical services


21.4



22.5



23.7Total revenues


144.9



148.4



157.6Operating costs


124.8



142.1



147.9Costs of services


50.1



51.1



42.8General and administrative expenses


29.3



41.2



52.3Depreciation and amortization


38.3



42.2



44.9Income from operations


20.1



6.3



9.7Operating margin(1)


13.9
%


4.2
%


6.2
%Mazatlán:Revenues:Aeronautical services


97.1



111.0



106.6Non-aeronautical services


31.2



32.5



32.6Total revenues


128.3



143.5



139.2Operating costs


112.6



130.7



130.7Costs of services


35.6



34.5



26.5General and administrative expenses


44.2



59.9



65.2Depreciation and amortization


26.3



29.3



32.0Income from operations


15.7



12.8



8.5Operating margin(1)


12.2
%


8.9
%


6.1
%Culiacán:Revenues:Aeronautical services


98.8



127.1



121.0Non-aeronautical services


16.4



18.1



19.5Total revenues


115.2



145.2



140.5Operating costs


101.1



137.2



137.9Costs of services


26.6



26.4



25.5General and administrative expenses


48.4



79.8



81.0Depreciation and amortization


20.3



23.7



24.4Income from operations


14.1



8.0



2.6Operating margin(1)


12.2
%


5.5
%


1.8
%Chihuahua:Revenues:Aeronautical services


82.8



98.0



100.0Non-aeronautical services


16.7



18.7



20.4Total revenues


99.5



116.7



120.4Operating costs


87.3



103.0



104.8Costs of services


26.7



27.8



22.8General and administrative expenses


40.0



48.0



53.6Depreciation and amortization


15.6



21.2



22.4Income from operations


12.2



13.7



15.7Operating margin(1)


12.3
%


11.7
%


13.0
%





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Year ended December 31,2006


2007


2008(millions of pesos, except percentages)Zihuatanejo:Revenues:Aeronautical services


77.6



79.6



80.0Non-aeronautical services


16.7



16.6



16.6Total revenues


94.3



96.2



96.6Operating costs


82.7



91.6



91.0Costs of services


26.1



26.7



21.1General and administrative expenses


32.8



34.6



37.6Depreciation and amortization


19.1



25.3



27.4Income from operations


11.6



4.6



5.6Operating margin(1)


12.3
%


4.7
%


5.8
%Other:(2)Revenues:Aeronautical services


304.0



340.3



347.2Non-aeronautical services


67.9



70.8



70.7Total revenues


371.9



411.1



417.9Operating costs


326.3



388.8



393.4Costs of services


127.5



136.5



107.5General and administrative expenses


95.6



133.2



147.2Depreciation and amortization


85.1



98.4



117.9Income from operations


45.6



22.3



24.5Operating margin(1)


12.3
%


5.4
%


5.9
%Total:(3)Revenues:Aeronautical services


1,371.0



1,549.8



1,617.1Non-aeronautical services


330.1



359.1



379.3Total revenues


1,701.1



1,908.9



1,996.4Operating costs


1,490.0



1,798.3



1,873.4Costs of services


396.4



420.6



359.2General and administrative expenses


728.1



954.8



1,049.9Depreciation and amortization


280.8



324.6



362.4Income from operations


211.1



110.6



123.0Operating margin(1)


12.4
%


5.7
%


6.2
%


_______________


(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 us and our subsidiaries 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.





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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 ResultsYear ended December 31,2006


2007


2008(thousands of pesos, except percentages)Amount


% change


Amount


% change


Amount


% changeRevenues:Aeronautical services


1,370,968



15.0
%


1,549,827



13.0
%


1,617,195



4.3
%Non-aeronautical services


316,343



10.0
%


347,526



9.9
%


371,281



6.8
%Total revenues


1,687,311



14.0
%


1,897,353



12.4
%


1,988,476



4.8
%Operating costs:Cost of services


397,465



2.2
%


420,777



5.9
%


458,820



9.0
%General and administrative expenses


237,475



(3.0
)%


256,730



8.1
%


318,323



24.0
%Technical assistance fees


49,541



23.8
%


57,416



15.9
%


55,604



(3.2
)%Concession taxes


84,635



16.5
%


98,307



16.2
%


101,642



3.4
%Depreciation and amortization


292,096



28.2
%


336,202



15.1
%


366,719



9.1
%Total operating costs


1,061,212



8.9
%


1,169,432



10.2
%


1,301,108



11.3
%Income from operations


626,099



23.8
%


727,921



16.3
%


687,368



(5.6
)%Other income (expense)


(30,679
)


(896.2
)%


(7,584
)


(75.3
)%


104,792



N/ANet comprehensive financing income:Interest income, net


133,449



22.3
%


126,660



(5.1
)%


63,167



(50.1
)%Exchange gain (loss), net


12,446



(147.1
)%


11,905



(4.3
)%


(74,618
)


N/AMonetary position loss


(75,567
)


42.4
%


(42,347
)


(44
)%


-



N/ANet comprehensive financing income


70,328



137.5
%


96,218



36.8
%


(11,451
)


N/AIncome before income taxes


665,748



23.5
%


816,555



22.7
%


780,709



(4.4
)%Income taxes


196,511



24.4
%


785,363



299.7
%


238,906



(69.6
)%Consolidated net income


469,237



23.1
%


31,192



(93.4
)%


541,803



1,636.9
%Other operating data (unaudited):Operating margin(1)


37.1
%






38.4
%






34.6
%Net margin(2)


27.8
%






1.6
%






27.2
%


_______________


(1)
Income from operations divided by total revenue, expressed as a percentage.


(2)
Net income divided by total revenues, expressed as a percentage.





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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% or Ps. 67.4 million in 2008, as compared to 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 is 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%, which was primarily attributable to a more efficient operation from airlines as they operated at full capacity with less frequency of flights.





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 revenue 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.





Operating Results





Cost of Services





Cost of services increased 9.0%, 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 23.1% of revenues in 2008, mainly reflecting the increase in costs (mainly corporate reorganization costs, electricity and inflationary pressure) and decrease in revenues.





General and Administrative Expenses





Our general and administrative expenses consist primarily of administrative overhead costs, fees and expenses paid to consultants and other providers of professional services and other miscellaneous expenses.  General and administrative expenses increased from Ps. 256.7 million in 2007 to Ps. 318.3 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 the basis of calculation 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.





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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.





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).





Comprehensive Financing Result





Our net comprehensive financing result in 2008 generated a loss of Ps. 11.5 million, as compared to income of Ps. 96.2 million in 2007.  This decrease in income resulted primarily from a 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 an increase in operating expenses, 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.  The Company 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.





Results of operations for the year ended December 31, 2007 compared to the year ended December 31, 2006.





Revenues





Total revenues for 2007 were Ps. 1,897.4 million, higher than the Ps. 1,687.3 million recorded in 2006, as a result of increases in both aeronautical and non-aeronautical revenue.





Aeronautical revenue increased 13.0% in 2007, as compared to 2006, due primarily to an overall 15.8% increase in passengers paying passenger charges and an 8.6% increase in air traffic movements, which resulted in increases in revenues from passenger charges, landing charges and aircraft parking charges of Ps. 159.0 million, Ps 5.5 million
and Ps. 3.5 million, respectively.  Reflecting these volume increases, total workload units increased 19.3% in 2007 as compared to 2006.  Aeronautical revenue per workload unit in 2007 was Ps.103.1 compared to Ps.108.9 in 2006, a decrease of 5.3%, which was primarily attributable to incentives and discounts offered to carriers participating in the Mexico City airports decongestion plan and an increase in passenger traffic from low-cost carriers.  As part of our strategy of increasing
passenger traffic at our airports, we sometimes offer discounts and other incentives to carriers that meet certain passenger traffic and other criteria.  To date, low cost carriers have been the airlines availing themselves of these discounts and incentives.





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Non-aeronautical revenue increased 9.9% from Ps.316.3 million in 2006 to Ps.347.5 million in 2007, principally due to increases in revenue from car parking, which increased 16.2%, food and beverage operations, which increased 27.9%, as well as increases in other categories of non-aeronautical revenues.  These increases were driven
by the increase in passenger traffic at our airports.  Non-aeronautical revenue per terminal passenger decreased by 8.9%, from Ps.26.9 in 2006 to Ps.24.5 in 2007 primarily due to increases in passenger traffic from low-cost carriers. Passengers on such carriers typically are most cost-conscious and as a result make fewer purchases at our airports.





Operating Results





Cost of Services





Cost of services increased 5.9% in 2007 as compared to 2006, mainly as a result of increases in various categories of expenses, including security expenses (from Ps.68.9 million to Ps.74.9 million), payroll expenses (from Ps.140.3 million to Ps.143.1 million) and other expenses (from Ps.41.3 million to Ps.54.5 million).  As a percentage
of total revenues, cost of services decreased from 23.6% of revenues in 2006 to 22.2% of revenues in 2007, mainly reflecting the increase in costs and decrease in revenues from 14% to 12.4%.





General and Administrative Expenses





Our general and administrative expenses consist primarily of administrative overhead costs, fees and expenses paid to consultants and other providers of professional services and other miscellaneous expenses.  General and administrative expenses increased from Ps.237.5 million in 2006 to Ps.256.7 million in 2007, mainly due to higher
professional fees, IT services and other costs associated with being a public reporting company in Mexico and the U.S.





Technical Assistance Fee and Concession Tax





Our technical assistance fee increased 15.9% to Ps.57.4 million in 2007, as compared to Ps.49.5 million in 2006, reflecting our improved profitability in 2007.  Our concession tax increased 16.2% from Ps.84.6 million in 2006 to Ps.98.3 million in 2007, reflecting our increase in revenues in 2007.





Depreciation and Amortization





Our 15.1% increase in depreciation and amortization, from Ps.292.1 million in 2006 to Ps.336.2 million in 2007, was principally due to the increase in improvements to our concession properties during 2007.





Income from Operations





On a consolidated basis, operating income increased 16.3% to Ps.727.9 million in 2007, as compared to Ps.626.1 million during 2006.  This increase primarily reflected the 12.4% increase in our total revenues in 2007, which was offset in part by a proportionately smaller increase in total operating costs.  Our operating
margin increased from 37.1% in 2006 to 38.4% in 2007.





On an airport-by-airport basis, the principal contributors to operating income in 2007 were the Monterrey International Airport (Ps. 42.9 million), the Chihuahua International Airport (Ps. 13.7 million), the Culiacán International Airport (Ps. 8.0 million) and the Zihuatanejo International Airport (Ps. 4.6 million).





Comprehensive Financing Result





Our net comprehensive financing result in 2007 generated income of Ps.96.2 million, as compared to income of Ps.70.3 million in 2006.  This increase in income resulted primarily from a 44% decline in losses from monetary position, from a loss of Ps.75.6 million in 2006 to a loss of Ps.42.3 million in 2007.  Monetary position
loss represents the erosion of the purchasing power of monetary items caused by inflation and is calculated by applying Mexican National Consumer Price Index (INPC) factors to monthly net monetary position.  Losses result from maintaining a net monetary asset position.





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Income Taxes





For 2007, income tax expense was Ps. 785.3 million, an increase of 299.7% as compared to Ps. 196.5 million in 2006. The increase in income taxes was principally the net result of an increase in current income tax expense of Ps. 74.5 million as a result of an increase in taxable profit, a decrease of Ps. 559.5 million in deferred regular income
tax and an increase of Ps. 1,073.9 million related to the deferred tax effects of the new IETU Law.  The impact of the IETU on the Company’s deferred tax balances did not affect the Company’s cash flows in 2007.  The Company 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 2007 deferred taxes.





Our effective tax rate in 2006 and 2007 was 29.5% and 96.2%, 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.





Net Income





Principally as a result of the effects of the tax reform, net income in 2007 was Ps. 31.2 million, a decrease of 93.4% as compared to the prior year period.  Earnings per share were Ps. 0.08, and earnings per ADS were U.S.$0.06. 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.  The cash flow generated from our operations has generally been used to fund operating costs and capital expenditures, including expenditures under our master development programs, and the excess
of our cash flow has been added to our accumulated cash balances.  As of December 31, 2007 and December 31, 2008, we had Ps.1,756.7 million and Ps. 257.4 million, respectively, of cash and cash equivalents.





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 financing activities during 2008 were Ps. 352.1 million for payments of dividends and share repurchases.  Our cash flows used in investing activities were Ps. 1,882.6 million for purchases of capital assets as summarized below in the table “Historical Capital Expenditures by Type.” 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 2006, we generated Ps.729.1 million in resources from operating activities, principally reflecting our increased net income generated from our operations without considering non-cash items such as depreciation and amortization, deferred income tax and the change in our working capital.  We used no resources in financing activities
in 2005 but in 2006 we used Ps. 322.5 million, which was represented by the dividend payment of Ps. 446.7 million net of Ps. 124.2 million received for the exercise of SETA’s share option mentioned above.  Our resources used in investing activities were Ps.440.2 million, mainly for the purchase of capital assets as summarized below in the table “Historical Capital Expenditures by Type.”





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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.  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.  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 41.95% of our capital stock as well as 74.5% of the Series A shares of SETA.  The refinancing was approved at the extraordinary shareholders meeting held January 31, 2007.





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.  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 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.  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 and in April 27, 2008 allocated up to Ps. 400,000,000 for share repurchases during the 2008 fiscal year.  Share repurchases began in October of 2007.  As of May 29, 2009, the Company had used Ps.
168 million to repurchase a total of 5,582,300 Series B shares in accordance with the share repurchase program.  On April 24, 2009, our shareholders authorized the use of an amount of up to Ps. 400,000,000 for repurchases of Series B shares during 2009.





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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





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, beginning in 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.





Tax on assets (“IMPAC”) paid through 2007 that is expected to be recovered is recorded as an advanced payment of ISR and is presented in the consolidated balance sheets decreasing the deferred tax liability. The Asset Tax Law was repealed effective January 1, 2008.





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 (LIETU) 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 LIETU, 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.  LIETU 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 effect net in the statement of income of Ps.476,353.  The Company continued to record a deferred IETU liability in 2008.  The impact of the IETU on the Company’s deferred tax balances did not affect the Company’s cash flows in 2007 or in 2008.





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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 22 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 periodContractual Obligations

Total


Less than 1 year(2)


1-3 years


3-5 years


More than 5 years(in millions of pesos)Master development programs

Ps.
1,152


Ps.
506


Ps.
646


Ps.
N/A
(3)


N/APurchase obligations(1)


289.2



41.3



82.6



82.6



82.7Total

Ps.
1,441.2


Ps.
547.3


Ps.
728.6


Ps.
82.6


Ps.
82.7


_______________


(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.10.92 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 2008.
 (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.


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New Accounting Pronouncements





MFRS





With the purpose of conforming Mexican standards to international standards, in 2008, the Mexican Board for Research and Development of Financial Reporting Standards (CINIF) issued the following NIFs and Interpretations of Financial Reporting Standards (“INIF”), which became effective beginning January 1, 2009:





NIF B-7, Business Acquisitions





NIF B-8, Consolidated or Combined Financial Statements





NIF C-7, Investments in Associated Companies and other Permanent Investments





NIF C-8, Intangible Assets





NIF D-8, Share-based Payments





Some of the most important changes established by these standards are:





NIF B-7, Business Acquisitions, includes a change of concepts, from minority interest to non-controlling interest and requires fair value measurement of the non-controlling interest as of the acquisition date.  Consequently, the overall goodwill is recognized based on fair value.  NIF B-7 establishes that acquisition and
restructuring costs should not be part of the consideration paid and restructuring costs should not be recognized as an assumed liability from the acquisition, respectively.





NIF B-8, Consolidated or Combined Financial Statements, includes a change of concepts, from majority interest to controlling interest.  NIF B-8 establishes that special purpose entities, over which control is exercised, should be consolidated.  Provided certain requirements are met, it allows the option to present stand-alone
financial statements of intermediate controlling companies and requires that potential voting rights be considered to analyze whether control exists.





NIF C-7, Investments in Associated Companies and other Permanent Investments, requires that investments in special purpose entities where significant influence is exercised be valued using the equity method.  It also requires that potential voting rights be considered to analyze whether significant influence exists.  In
addition, NIF C-7 establishes a specific procedure and a set of caps to the recognition of losses in associated companies, and requires that investments in associated companies be presented including the related goodwill.





NIF C-8, Intangible Assets, requires that any pre-operating expenses incurred through December 31, 2008 to be canceled against retained earnings.





NIF D-8, Share-based Payments, sets the rules for recognition of share-based payments, including the granting of stock options to employees.  Therefore, the use of IFRS 2, Share-Based Payments, that was supplementally applied is discontinued.





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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, the Company has not fully assessed the effects of adopting these new standards on its financial information.





U.S. GAAP





In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 clarifies
the definition of exchange price as the price between market participants in an orderly transaction to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The changes to current practice resulting from the application of this statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value
measurements. SFAS 157 was effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years for financial assets and liabilities.  On October 10, 2008, the FASB issued Staff Position (“FSP”) FAS No. 157-3 (“FSP 157-3”), Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active. FSP 157-3 is effective upon issuance.  SFAS 157 has been deferred until fiscal years beginning after November 15,
2008 for nonfinancial assets and liabilities.  The Company adopted the provisions of this new accounting principle as it relates to financial assets and financial liabilities and determined that its effects were not considered to be material to its consolidated financial position, results of operations and cash flows.





In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and the deconsolidation of a subsidiary, including:
(a) changes the way the consolidated balance sheet and consolidated income statement are presented; (b) establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in a change of control or deconsolidation; (c) requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated; and (d) requires expanded disclosures in the consolidated financial statements that clearly identify and distinguish between the interests
of the parent and the interests of the non-controlling owners of a subsidiary. The accounting provisions of SFAS 160 must be applied prospectively the presentation and disclosure requirements must be applied retrospectively to provide comparability in the financial statements.  SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  Early adoption is prohibited.   The Company is in the process of determining
the impact of adopting the accounting provisions of this new accounting principle on its consolidated financial position, results of operations and cash flows.  In addition, the impact of adopting this pronouncement will also be dependent on the level of future transactions.





In December 2007, the FASB issued SFAS No. 141(R), Business Combinations—a replacement of FASB No. 141 (“SFAS 141(R)”). SFAS 141(R) requires (a) a company to recognize 100% of the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at fair value as of the acquisition date; and (b) an
acquirer in pre-acquisition periods to expense all acquisition-related costs, among various other modifications to SFAS 141.  SFAS 141(R) also amends SFAS 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.  SFAS 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 of the amendments to SFAS 109, which will also be applied to business combinations with acquisition dates prior to the effective date of this standard. Early adoption is prohibited.   The impact of this standard is dependent upon the level of future acquisitions.





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In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires companies to provide qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and
gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions.  The statement also requires companies to disclose more information about the location and amounts of derivative instruments in financial statements; how derivatives and related hedges are accounted for under SFAS 133, Accounting for Derivative Instruments and Hedging Activities; and how the hedges affect the entity’s financial position, financial performance and cash flows.
SFAS 161 is effective for periods beginning after November 15, 2008. The Company will comply with the disclosure provisions of SFAS 161 to the extent it has entered into derivative transactions in the year of adoption.





In April 2008, the FASB issued FSP FAS No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets (“SFAS 142”). The objective of the FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R). FSP 142-3 is effective for fiscal years beginning after December 15, 2008. Early application is not permitted. The Company is in the process of determining the impact of adopting this new accounting principle on its consolidated financial position, results
of operations and cash flows.





In January 2008, the FASB unveiled the FASB Accounting Standards Codification (the “Codification”) for a one-year verification period by constituents. While the Codification does not change U.S. GAAP, it does combine all authoritative accounting standards issued by bodies such as the FASB, AICPA, and EITF into a topically organized
comprehensive online database. The Codification will (a) reduce the amount of time and effort required to solve an accounting research issue; (b) improve usability of the literature thereby mitigating the risk of noncompliance with the standard; (c) provide real-time updates as new standards are released; (d) assist the FASB with the research and convergence efforts required during the standard-setting process; and (e) become the authoritative source of literature for the completed XBRL taxonomy. The Codification
does not represent authoritative guidance until after the verification period, at which time the Codification will supersede all existing accounting literature (other than guidance issued by the SEC).  Such Codification will apply for calendar year companies beginning in 2009.





On November 14, 2008, the Securities and Exchange Commission (“SEC”) issued its long-anticipated proposed International Financial Reporting Standards (“IFRS”) roadmap outlining milestones that, if achieved, could lead to mandatory transition to IFRS for U.S. domestic registrants starting in 2014. IFRS is a comprehensive
series of accounting standards published by the International Accounting Standards Board (IASB). Under the proposed roadmap, the Company could be required through the Parent Company to prepare financial statements in accordance with IFRS.  The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS for U.S. domestic registrants. Management is currently assessing the impact that this potential change would have on the Company’s consolidated financial statements, and will
continue to monitor the development of the potential implementation of IFRS.





Item 6.
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.





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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

AgeBernardo Quintana Isaac

Chairman and Director

December 21, 2005

67Alberto Felipe Mulás Alonso

Independent Director

October 2, 2006

48Salvador Alva Gómez

Independent Director

October 2, 2006

58Manuel Francisco Arce Rincón

Independent Director

October 2, 2006

67Luis Guillermo Zazueta Domínguez

Independent Director

October 2, 2006

63Fernando Flores Pérez

Independent Director

April 29, 2007

63Luis Fernando Zárate Rocha*

Director

September 22, 2000

65Alonso Quintana Kawage*

Director

March 14, 2003

35Sergio Fernando Montaño León

Director

December 21, 2005

61José Luis Guerrero Álvarez

Director

December 21, 2005

65Jean Marie Chevallier*

Director

December 13, 2006

64Jacques Follain*

Alternate Director

December 13, 2006

53


__________________


*  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.





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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 Rincon.  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 housing operations and overseas business development for Empresas ICA, as well as the operations of the airport operator SETA.  Mr. Zárate has been affiliated with Empresas ICA for over 36 years, during which time he has worked in business development as well as heavy 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 Dominguez.  Mr. Luis Guillermo Zazueta Dominguez 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.





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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 Mechanique 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.





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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)

AgeRubén Gerardo López Barrera(1)

Chief Executive Officer

December 11, 2003

39Nicolas Etienne Marcel Claude(1)

Chief Operating Officer

October 14, 2004

43Victor Humberto Bravo Martin(1)

Chief Financial Officer

March 20, 2006

43Manuel de la Torre Melendez

General Counsel

January 1, 2004

45Roberto Ontiveros

Infrastructure and Maintenance Director

July 22, 2008

44Jean Philippe Frederic Percheron(1)

Commercial and Marketing Director

April, 26, 2006

40Porfirio González Alvarez

Airports Director

April 26, 2006

58


_________________________________


(1)
Appointed by SETA as holder of Series BB shares.


(2)
Date of Appointment.





Rubén Gerardo López Barrerahas served as our Chief Executive Officer since December 2003.  Previously, he served as our General Vice President, Human Resources and Legal, and our Communications Director.  Mr. López has also previously
served as Business Development Director and Project Finance Director of ICA.  Mr. López received a degree in Civil Engineering from Universidad Iberoamericana, a diploma in finance from the Instituto Tecnológico Autónomo de México, a master’s degree in business administration from the Pontificia Universidad Católica de Chile and the Washington University and a certificate in airport management and development from ADP.





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.





Víctor Humberto Bravo Martínhas served as our Chief Financial Officer since March 2006.  Prior to joining us, he served in various capacities with 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, a master’s degree in business administration from the Leonard N. Stern School of Business at New York University and the Manchester School of Business.  He has also completed various specialization courses in the area of finance and management.





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Manuel de la Torre Melendez has served as OMA’s General Counsel since January 2004.  Prior to joining OMA, 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 is 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 Aeronautical Code for Latin America.  Has been the Secretary of the Board of Directors since March 2007.





Roberto Ontiveros Chávezhas served as our Infrastructure and Maintenance Director since July 2008.  Previously, he was Construction Manager for Libra Desarrollos, S.A and  Senior Engineer and Facilities Manager for the US Embassy in México
City.  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, and a diploma in Project Management, Customer Service and Management Skills. He also completed various specialization courses in the construction sector.





Jean Philippe Frederic Percheronhas served as our Commercial and Marketing Director since April 2006, previously serving as our Assistant Director of Commercial Affairs.  He also served as Manager of Commercial Activities at Aéroports de Paris and
as Marketing Studies Director for Georges Chetochine Consulting.  Mr. Percheron holds a degree in business administration from Ecole Superior de Commerce de Paris, a master’s degree in economics from Université de la Sorbonne de Paris, as well as a B.S. in civil engineering from the École Spéciale des Travaux Publics in Paris.





Porfirio González Álvarezhas 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.




The board of directors has approved changes in senior management, as part of a normal rotation of personnel. Victor Bravo Martin will become Chief Executive Officer of OMA effective July 1, 2009. He succeeds Rubén López,
who has been granted a sabbatical to continue his professional development.
 
 The board of directors also named José Luis Guerrero Cortes as the new Chief Financial Officer effective July 1, 2009. Mr. Guerrero was an associate at Goldman Sachs in the business development, debt capital markets, and derivatives groups in 2008. He has also worked
in the finance group of Empresas ICA, where he assisted in the financing for many of ICA’s largest construction and infrastructure projects. Prior to working at ICA, Mr. Guerrero was an assistant brand manager at Procter & Gamble in Mexico and worked in the environmental research group of Veolia Environment in France. Mr. Guerrero has a degree in chemical engineering from the Universidad Iberoamericana and received his MBA from Harvard Business School.




Compensation of Directors and Executive Officers





For 2008, the aggregate compensation earned by our 20 officers (including executive officers, corporate managers, coordinators and airport administrators) was approximately Ps. 48.9 million.  At the shareholders’ meeting held on April 27, 2007 and the Shareholders’ meeting held on April 24, 2009, 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).





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Committees





The Mexican Securities Law and the Bylaws of the Company 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 the Bylaws of the Company 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 the Company, 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.





The Chairman of this Special Committee was elected by our general shareholders’ meeting held on April 24, 2009.  The current members of the Special Committee are Luis Guillermo Zazueta Alberto Felipe Mulás Alonso, Fernando Flores Pérez and Manuel F. Arce Rincón.  Luis Guillermo Zazueta 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 the Company is controlled by a shareholder or group of shareholders representing 50% (fifty percent) or more of its 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.





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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.





NASDAQ Corporate Governance Comparison





Pursuant to Rule 4350(a)(1) 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.





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The table below discloses the significant differences between our corporate governance practices and the NASDAQ standards.





NASDAQ Standards

Our Corporate Governance PracticeDirector 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 4350(c)(1) & (c)(5).

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 4350(c)(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.Nominations Committee.Director nominees must be selected, or recommended for the board’s selection, either by a nominating committee comprised solely of independent directors or by a majority of independent directors.  Each listed company
also must certify that it has adopted a formal charter or board resolution addressing the nominations process.  “Controlled companies” are exempt from this requirement.  Rules 4350(c)(4)(A)-(B) & (c)(5).

Nominations Committee.We are not required to have a nominating committee.  According to the amendment of the bylaws ratified by the shareholders’ meeting held on April 3, 2008, this committee has been disbanded and its functions and responsibilities
are now carried out by the Board of Directors.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
4350(d).

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.





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NASDAQ Standards

Our Corporate Governance PracticeThe 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;





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NASDAQ Standards

Our Corporate Governance Practice·
analyzing and supervising the preparation of our financial statements;·
informing the board of our internal controls and their adequacy;·
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(i)
providing an annual report to the Board.





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NASDAQ Standards

Our Corporate Governance PracticeCompensation 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 4350(c)(3)(A)-(B) & (c)(5).

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.





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NASDAQ Standards

Our Corporate Governance PracticeEquity Compensation Plans.  Equity compensation plans require shareholder approval, subject to limited exemptions.  Rule 4350(i)(1)(A).

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 4350(i)(1)(B)-(D).

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.Code of 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 4350(n).

Code of 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 4350(h).

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 4350(g).

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.





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NASDAQ Standards

Our Corporate Governance PracticePeer Review.  A listed company must be audited by an independent public accountant that (i) has received an external quality control review by an independent public accountant ("peer review") that determines whether the auditor's system of quality control
is in place and operating effectively and whether established policies and procedures and applicable auditing standards are being followed or (ii) is enrolled in a peer review program and within 18 months receives a peer review that meets acceptable guidelines. Rule 4350(k).

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).





Employees





As of December 31, 2008, we had approximately 971 employees.  The total number of employees increased by 1.6% in 2007 and by 1.3% in 2008 due primarily to the addition of personnel operating our cargo facilities and security personnel.  At December 31, 2008, approximately 560 of our employees were unionized.





During 2008, the Company 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.  The Company provisioned Ps. 6.8 million as of December 31, 2008 for the costs related to such assumption of labor obligations by OACN.





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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 31,2006


2007


2008(2)Categories of activity:Airport operations


497



508



510Airport maintenance


153



155



151Administration(1)


294



296



302Geographic location:Acapulco


91



93



93Ciudad Juárez


49



48



51Culiacán


50



54



56Chihuahua


61



60



62Durango


42



42



41Mazatlán


69



70



71Monterrey


188



193



182Reynosa


27



31



34San Luis Potosí


40



41



43Tampico


57



57



58Torreón


47



49



50Zacatecas


42



40



43Zihuatanejo


47



47



47Servicios Aeroportuarios del Centro Norte, S.A. de C.V.


134



134



140Total(1)


944



959



971


_______________________________


(1)
As of December 31, 2006, 2007 and 2008, includes 134, 134 and 411 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 13separate collective labor agreements, each relating to one of our 13airport 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 last renegotiated our collective bargaining agreements with our unionized employees in October 2008.





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 2006, 2007 and 2008, we made a total of Ps.17.7 million, Ps. 20.4 million and Ps. 36.5 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.





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Item 7.
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 41.95% 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 29, 2009:





Number of shares


Percentage of total share capitalIdentity of stockholder

B Shares


BB Shares


B Shares


BB SharesAeroinvest(1)


167,802,700



-----



41.95
%


-----SETA(2)


8,000,000



58,800,000



2.00
%


14.7
%Public


143,710,586



-----



35.93
%


-----Officers and Directors


21,686,714



-----



5.42
%


-----


_______________________________


(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.





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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 Series B shares of OMA; and (vii) any sale or transfer of shares of SETA.





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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 41.95% 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 41.95% 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 SETA, OMA and the Ministry of Communications and Transportation to enter into a Participation Agreement, which established the framework for certain related agreements: the Option Agreement, the Technical Assistance Agreement and the
Bancomext Trust.  These agreements were approved, in accordance with our Related Party Guidelines, by our Board of Directors.





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 2008 amounted to Ps. 55.6   million (U.S.$ 4.1 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.





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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 2005, 2006, 2007 and 2008 we recognized expenses of U.S.$3.3 million, U.S.$4.3 million, U.S.$5.2 million and U.S.$4.1 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 41.95% 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.”





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Arrangements with Other Affiliates





We periodically engage ICA and its affiliates to provide construction and related services to us.  In 2008, we paid U.S.$15.7 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 OMA contracted to evaluate offers made by ICA. DICTEC determined that ICA’s offers were consistent
with market prices.





In April 2008, we entered into an agreement with ICA for Ps. 282.5 million in connection with construction works on new Terminal B of the Monterrey International Airport, which is expected to begin operations in the fourth quarter of 2009. In particular, these works will concern Terminal B’s the aprons, parking lots and roadways, as
well as finishings, electrical, hydraulic, sanitary and HAVC installations in the Terminal’s building.  In addition, in 2008 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 Ciudad Juárez, S.A. de C.V.
February
7.7Aeropuerto de Durango, S.A. de C.V.
February
15.2Aeropuerto de Chihuahua, S.A. de C.V.
June
5.8Aeropuerto de San Luis Potosí, S.A. de C.V.
June
10.2Aeropuerto de Torreón, S.A. de C.V.
June
29.2Aeropuerto de Zihuatanejo, S.A. de C.V.
October
36.2Total

104.3





Item8.
Financial Information





See “Item 18.  Financial Statements” beginning on page F-1.





LEGALPROCEEDINGS





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.  As of May 29, 2009, the Court has not yet notified the Federal Government the order to appear in the proceeding.  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 2008, the Ciudad Juárez International Airport represented 5.9% 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.





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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 Chihuahua, Tampico and Ciudad
Juárez (which amounted to Ps.25.3 million and Ps.1.02 million and Ps.1.8 million respectively) were dismissed on 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 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; as a consequence only a claim for Ps.1.6 million remains outstanding pending resolution before thee Administrative Court. 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.





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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., orBraniff, a cargo customer that leases a portion of the area originally dedicated to customs activities at the airport from Mexican customs authorities, asserted a legal claim 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 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 custom authorities in the near future.  In the event that the matter is not definitively resolved in favor of the Monterrey International Airport, Braniff and other cargo customers’ continued occupation of this space could impede the expansion and modernization of cargo operations as well as plans for the construction of new commercial terminals at the airport.





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.





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·
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.





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.





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 Ambienteor 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.  PROFEPA will then issue a resolution determining
the sanction (if any), which they consider appropriate based on their analysis of the documentation we have provided.  If this investigation is not resolved in our favor, PROFEPA may impose sanctions on the Monterrey International Airport of up to 50,000-fifty thousand times the minimum wages currently applicable in Mexico City.





DIVIDENDS





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.95.6 million at December 31, 2008 (excluding reserve amounts corresponding to 2008 net income), which represented 1% 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.





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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.





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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 as the new 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 15th, October 15th,
January 15Th. and April 15th, 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.





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.”





Item 9.
The Offer and Listing





STOCK PRICE HISTORY





The following table sets forth, for the periods indicated, the high and low 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.





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The annual high and low market prices for (i) the ADSs on the NASDAQ in U.S. dollars  and (ii) our common shares on the Mexican Stock Exchange in pesos since our initial public offering is as follows:





U.S.$ per ADR(1)


Pesos per Series B ShareLow


High


Low


High2006Fourth Quarter


20.85



22.31



28.45



30.182007First Quarter


21.85



27.11



29.51



33.44Second Quarter


25.78



29.50



35.42



40.18Third Quarter


23.30



29.32



32.71



40.01Fourth Quarter


24.49



31.00



33.23



42.212008First Quarter


20.94



24.75



28.56



34.20Second Quarter


16.58



23.98



21.51



31.72Third Quarter


11.29



17.96



15.52



22.55Fourth Quarter


7.06



11.60



12.29



19.25U.S.$ per ADR(1)


Pesos per Series B ShareLow


High


Low


HighMonthly PricesDecember, 2008


8.15



11.10



14.06



19.25January, 2009


7.74



11.36



13.96



19.30February, 2009


7.20



8.89



13.87



16.00March, 2009


6.52



7.54



12.53



13.41April, 2009


7.37



8.83



12.77



14.68May, 2009


8.45



9.62



14.46



15.75


_______________________________


(1)
8 Series B shares per ADR.


Sources: Mexican Stock Exchange and the NASDAQ.





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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, 2008, 125 Mexican companies, excluding mutual funds, had equity listed on the Mexican Stock Exchange.  In 2008, the ten most actively traded equity issues (excluding banks) represented approximately 75% 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.





Item10.
Additional Information





CORPORATE GOVERNANCE





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.





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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;





·
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;





·
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:





·
our general strategy;





·
annual approval of the business plan and the investment budget;





·
capital investments not considered in the approved annual budget for each fiscal year;





·
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;





·
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;





·
subject to certain conditions, the appointment of provisional members of the board, without the need for a shareholders’ meeting;





·
public tender offers;





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·
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;





·
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 29, 2009:





Capital Stock





As of May 29, 2009Authorized


Issued and outstandingCapital Stock:Series B shares


341,200,000



341,200,000Series BB shares


58,800,000



58,800,000Total


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.





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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:





·
extension of a company’s duration or voluntary dissolution;





·
an increase or decrease in a company’s minimum fixed capital;





·
change in corporate purpose or nationality;





·
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.





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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;





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·
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;





·
anticipated liquidation or dissolution;





·
capital increases or decreases of us or of our subsidiaries;





·
declaration and payment of dividends;





·
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.





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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:





·
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;





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·
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:





·
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:





·
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.





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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;





·
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.





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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.





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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).





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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.





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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.





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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.





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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.”





TAXATION





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.





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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 ADSs will
be treated as qualified dividends if: (i) the ADSs are readily tradable on an established securities market in the United States, and (ii) the issuer was not, in the year prior to the year in which the dividend was paid, and is not, in the years in which the dividend is paid, a passive foreign investment company (PFIC).  The ADSs are listed on the NASDAQ, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. 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 2007 and 2008 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 2009 taxable year.





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The U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of ADSs or common stock and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends.  Because such procedures have not yet
been issued, it is not clear whether we will be able to comply with them.  Holders of ADSs and common shares should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.





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. 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.





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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 2006, 2007 and 2008, approximately 16.2%, 14.6% and 14.0%, 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, 2008, we estimate that our revenues would have increased by Ps. 27.4 million.





As of December 31, 2006, 2007 and 2008, 22.6%, 15.4% and 1.2%, 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, 2008, we estimate that the value of our cash and cash equivalents would have increased by Ps. 0.3 million.





We did not have any foreign currency indebtedness at December 31, 2006 and 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.





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At December 31, 2006, 2007 and 2008, 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.





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PART II





Item 13.
Defaults, Dividend Arrearages and Delinquencies





Not applicable.





Item14.
Material Modifications to the Rights of Security Holders and Use of Proceeds





Not applicable.





Item15.
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, 2008.





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, 2008, 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, 2008.





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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, 2008.





(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, 2008, 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.





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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, 2008, 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, 2008 of the Company and our report dated May 7, 2009 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,NIF B-10, Effects of Inflation, NIF D-3, “Employee Benefits,” and NIF D-4 , “Income
Taxes,” (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 22 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, 2009





(d)
Changes in Internal Control over Financial Reporting





There has been no change in our internal control over financial reporting during 2008 that has materially affected, or is reasonably likely to materially affect, or internal control over financial reporting.





Item 16.
[Reserved]





Item 16A.
SpecialCommittee responsible forAudit Functions’ Financial Expert





Our Board of Director has determined that Mr. Luis Guillermo Zazueta, 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, 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.”





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 Table of Contents





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, 2007 and 2008:





2007


2008Audit fees


6,000



4,956Audit-related fees


1,490



0Tax fees


546



465Other fees


1,237



1,225Total fees


9,273



6,646





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.





158
 Table of Contents





Shares repurchased by OMA pursuant to the share repurchase program





2008

(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(1)


(d) Maximum number of shares that may yet be purchased under the plans or programs(1)January 1-31


10,200



33.90



10,200



N/AFebruary 1-29


0



N/A



0



N/AMarch 1-31


0



N/A



0



N/AApril 1-30


1,164,800



28.96



1,164,800



N/AMay 1-31


244,800



26.04



244,800



N/AJune 1-30


0



N/A



0



N/AJuly 1-31


0



N/A



0



N/AAugust 1-31


20,000



19.85



20,000



N/ASeptember 1-30


210,000



17.85



210,000



N/AOctober 1-31


168,800



15.49



168,800



N/ANovember 1-30


(1,617,300
)


14.02



(1,617,300
)


N/ADecember 1-31


1,920,100



15.00



1,920,100



N/A2008 Total


2,121,400







2,121,400





Shares purchased by Aeroinvest





2008

(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 programsJanuary 1-31


0






N/A



N/AFebruary 1-29


0






N/A



N/AMarch 1-31


0






N/A



N/AApril 1-30


97,000



30.84



N/A



N/AMay 1-31


571,100



25.89



N/A



N/AJune 1-30


1,350,700



23.54



N/A



N/AJuly 1-31


268,500



21.35



N/A



N/AAugust 1-31


472,400



20.34



N/A



N/ASeptember 1-30


1,006,800



17.65



N/A



N/AOctober 1-31


2,734,900



13.78



N/A



N/ANovember 1-30


2,899,400



14.14



N/A



N/ADecember 1-31


343,300



14.12



N/A



N/A2008 Total


9,744,100



17.85



N/A



N/A





159
 Table of Contents





PART III





Item 17.
Financial Statements





Not applicable.





Item 18.
Financial Statements





See pages F-1 through F-42, incorporated herein by reference.





160
 Table of Contents





Item 19.
Exhibits





Documents filed as exhibits to this annual report:




Exhibit No.

Description1.1

An English translation of the Amended and Restated Bylaws (Estatutos Sociales) of OMA.2.1

Deposit Agreement among OMA, 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 OMA, 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 OMA, 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 OMA’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 OMA, 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).





161
 Table of Contents




Exhibit No.

Description4.3

Amendment to Participation Agreement among OMA, 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 OMA 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 OMA 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 OMA (incorporated by reference to our registration statement on Form F-1 (File No. 333-138710) filed on November 15, 2006).





162
 Table of Contents




Exhibit No.

Description11.1

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).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. *


_________


*Filed herewith





163
 Table of Contents





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/ Víctor Humberto Bravo MartínName: Víctor Humberto Bravo MartínTitle:   Chief Financial Officer








Dated:  June 11, 2009




164
 Table of Contents




Consolidated Financial Statements
 for Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
 and Subsidiaries
 
 PageReport of Independent Registered Public Accounting Firm
F-3Consolidated Balance Sheets as of December 31, 2008 and 2007
F-5Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006
F-6Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2008, 2007 and 2006
F-7Consolidated Statement of Cash Flow for the Year Ended December 31, 2008
F-9Consolidated Statements of Changes in Financial Position for the Years Ended December 31, 2007 and 2006
F-10Notes to Consolidated Financial Statements
F-11
  F-1
 Table of Contents
 
 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, 2008, 2007 and 2006, and Report of Independent Registered Public Accounting Firm Dated May 7, 2009
  F-2
 Table of Contents
  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, 2008, and the related consolidated statements of income, changes in stockholders’ equity and of cash flows for the year then ended, as well as the consolidated
balance sheet as of December 31, 2007 and the related consolidated statements of income, changes in stockholders’ equity and changes in financial position for each of the two years in the period ended December 31, 2007, all expressed in millions 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 its subsidiaries as of December 31, 2008 and 2007, and the results of their operations and changes in their stockholders’ equity for each
of the three years in the period ended December 31, 2008, their cash flows for the year ended December 31, 2008 and changes in their financial position for each of the two years in the period 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 22 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.
  F-3
 Table of Contents
  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, 2008, 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, 2009 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, 2009
  F-4
 Table of Contents
  Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
 
 Consolidated Balance Sheets
 At December 31, 2008 and 2007
 (In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.))
  2008 (Convenience Translation; See Note 2)


2008


2007AssetsCurrent assets:Cash and cash equivalents (Note 4)

$
18,613


Ps.
257,420


Ps.
1,756,704Trade accounts receivable –  net (Note 5)


28,096



388,565



260,600Recoverable taxes


18,388



254,312



34,968Other current assets


2,126



29,398



31,785Total current assets


67,223



929,695



2,084,057Property, machinery and equipment  – net (Note 6)


139,960



1,935,641



316,947Investment in airport concessions – net (Note 7)


502,893



6,955,015



6,722,876Other assets – net


3,104



42,931



10,508Total

$
713,180


$
9,863,282


$
9,134,388Liabilities and stockholders’ equityCurrent liabilities:Short term debt

$
9,462


Ps.
130,863


Ps.
-Trade accounts payable


28,540



394,706



56,031Accrued expenses and taxes payable


14,646



202,556



89,227Accounts payable to related parties (Note 11)


23,389



323,472



148,577Advances from customers


287



3,967



2,301Dividends payable


6,568



90,841



101,613Statutory employee profit sharing


205



2,838



9,347Total current liabilities


83,097



1,149,243



407,096Guarantee deposits


1,479



20,461



19,477Employee benefits (Note 8)


1,692



23,402



41,843Deferred statutory employee profit sharing (Note 12)






-



104,230Deferred income taxes (Note 13)


82,460



1,140,416



1,087,400Total liabilities


168,728



2,333,522



1,660,046Commitments and contingencies (Notes 7, 14 and 15)Stockholders’ equity (Note 9):Capital stock – nominal value


314,994



4,356,361



4,379,741Restatement for inflation of capital stock


127,153



1,758,524



1,768,157Additional paid in capital


2,154



29,785



29,785Retained earnings


75,976



1,050,745



664,312Reserve for repurchase of shares


24,091



333,186



353,518Additional liability for employee benefits






-



4,968Cumulative initial effect of deferred income taxes






-



273,861Minority interest


84



1,159



-Total stockholders’ equity


544,452



7,529,760



7,474,342Total

$
713,180


Ps.
9,863,282


Ps.
9,134,388
 
 See accompanying notes to consolidated financial statements.
  F-5
 Table of Contents
  Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
 
 Consolidated Statements of Income
 For the years ended December 31, 2008, 2007 and 2006
 (In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.), except share and per share data)
  2008 (Convenience Translation; See Note 2)


2008


2007


2006Revenues (Note 17):Aeronautical services

$
116,934


Ps.
1,617,195


Ps.
1,549,827


Ps.
1,370,968Non-aeronautical services


26,846



371,281



347,526



316,343143,780



1,988,476



1,897,353



1,687,311Operating costs:Cost of services (Note 18)


33,176



458,820



420,777



397,465General and administrative expenses


23,017



318,323



256,730



237,475Concession taxes (Note 11)


7,349



101,642



98,307



84,635Technical assistance fees (Note 11)


4,020



55,604



57,416



49,541Depreciation and amortization


26,516



366,719



336,202



292,09694,078



1,301,108



1,169,432



1,061,212Income from operations


49,702



687,368



727,921



626,099Other income (expenses) – net (Note 12)


7,577



104,792



(7,584
)


(30,679
)Net comprehensive financing income (cost):Interest income – net


4,567



63,167



126,660



133,449Exchange (loss) gain – net


(5,395
)


(74,618
)


11,905



12,446Monetary position loss






-



(42,347
)


(75,567
)(828
)


(11,451
)


96,218



70,328Income before income taxes


56,451



780,709



816,555



665,748Current income tax expense (Note 13)


13,052



180,504



187,248



112,784Deferred income tax (benefit) expense (Note 13)


(2,427
)


(33,571
)


(475,744
)


83,727Current business flat tax expense (Note 13)


389



5,385



-



-Deferred business flat tax expense (Note 13)


6,261



86,588



1,073,859Consolidated net income

$
39,176


Ps.
541,803


Ps.
31,192


Ps.
469,237Majority net income

$
39,179


Ps.
541,844


Ps.
31,192


Ps.
469,237Minority net income


(3
)


(41
)


-



-Consolidated net income

$
39,176


Ps.
541,803


Ps.
31,192


Ps.
469,237Weighted average number of common shares outstanding (Note 9)


396,284,313



396,284,313



399,611,578



395,173,149Basic and diluted earnings per share

$
0.0989


Ps.
1.3672


Ps.
0.0781


Ps.
1.1874
 
 See accompanying notes to consolidated financial statements.
  F-6
 Table of Contents
  Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
 
 Consolidated Statements of Changes in Stockholders’ Equity
 For the years ended December 31, 2008, 2007 and 2006
 (In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.), except share data)
  Number of shares


Capital stock


Additional paid-in capital


Retained earnings


Reserve for repurchase of shares


Additional liability for employee benefits


Minority Interest


Cumulative initial effect of deferred income taxes


Total stockholders’ equityNominal value


Restatement for inflation of capital stockBalances as of January 1, 2006


392,000,000


Ps.
4,320,278


Ps.
1,773,715


Ps.
-


Ps.
1,479,197


Ps.
-


Ps.
-


Ps.
-


Ps.
273,861


Ps.
7,847,051Dividends declared (Ps.1.1167 per share)


-



-



-



-



(446,689
)


-



-



-



-



(446,689
)Issuance of common stock


8,000,000



88,169



6,270



-



-



-



-



-



-



94,439Additional paid in capital


-



-



-



29,785



-



-



-



-



-



29,785Comprehensive income


-



-



-



-



469,237



-



(11,872
)


-



-



457,365Balances as of December 31, 2006


400,000,000



4,408,447



1,779,985



29,785



1,501,745



-



(11,872
)


-



273,861



7,981,951Dividends declared (Ps.1.1103 per share


-



-



-



-



(444,125
)


-



-



-



-



(444,125
)Capitalization approved by shareholders


-



-



-



-



(11,872
)


-



11,872



-



-



-Reserve for repurchase of shares


(2,604,700
)


(28,706
)


(11,828
)


-



(412,628
)


353,518



-



-



-



(99,644
)Comprehensive income


-



-



-



-



31,192



-



4,968







-



36,160Balances as of December 31, 2007


397,395,300



4,379,741



1,768,157



29,785



664,312



353,518



4,968



-



273,861



7,474,342Dividends declared (Ps.1.0856 per share)


-



-



-



-



(434,240
)


-



-



-



-



(434,240
)Reserve for repurchase of shares


(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 minority interest


-



-



-



-



-



-



-



1,200



-



1,200Net income


-



-



-



-



541,844



-



-



(41
)


-



541,803Balances as of December 31, 2008


395,273,900


Ps.
4,356,361


Ps.
1,758,524


Ps.
29,785


Ps.
1,050,745


Ps.
333,186


Ps.
-


Ps.
1,159


Ps.
-


Ps.
7,529,760
  F-7
 Table of Contents
 
 Capital stockNumber 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


Minority Interest


Cumulative initial effect of deferred income taxes


Total stockholders’ equityBalances as of December 31,  2007 (Convenience translation;  Note 2)


397,395,300


$
316,684


$
127,849


$
2,154


$
48,034


$
25,562


$
359


$
-


$
19,802


$
540,444Dividends declared ($0.0784 per share)


-



-



-



-



(31,398
)


-



-



-



-



(31,398
)Reserve for repurchase of shares


(2,121,400
)


(1,690
)


(696
)


-



-



(1,471
)


-



-



-



(3,857
)Reclassification of  the cumulative initial effect of deferred income taxes and the effect of additional liability for employee benefits


-



-



-



-



20,161



-



(359
)


-



(19,802
)


-Increase of minority interest


-



-



-



-



-



-



-



87



-



87Comprehensive income


-



-



-



-



39,179



-



-



(3
)


-



39,176Balances as of December 31, 2008


395,273,900


$
314,994


$
127,153


$
2,154


$
75,976


$
24,091


$
-


$
84


$
-


$
544,452
 
 See accompanying notes to consolidated financial statements.
  F-8
 Table of Contents
  Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
 
 Consolidated Statement of Cash Flows
 For the year ended December 31, 2008
 (In thousands of U.S. dollars ($) and thousands of Mexican pesos (Ps.))
  2008 (Convenience Translation; See Note 2)


2008Operating activities:Income before income taxes

$
56,451


Ps.
780,709Items related to investment activities:Depreciation and amortization


26,516



366,719Interest income


(4,759
)


(65,813
)Items related to financing activities:Interest expense


191



2,646Exchange loss


4,905



67,83583,304



1,152,096(Increase) decrease in:Trade accounts receivables


(9,253
)


(127,965
)Recoverable taxes


(19,835
)


(274,323
)Other receivables


173



2,387(Increase) decrease in:Trade accounts payable


(837
)


(11,574
)Accrued expenses and taxes


(2,957
)


(40,896
)Accounts payable to related parties


11,432



158,101Advances from customers


120



1,666Guarantee deposits


71



984Employee benefits


(1,032
)


(14,273
)Employee profit sharing


(471
)


(6,509
)Deferred statutory employee profit sharing


(7,537
)


(104,230
)Net cash provided by operating activities


53,178



735,464Investing activities:Payments for purchase of land, machinery and equipment


(99,464
)


(1,375,586
)Payments for improvements to concessioned properties


(40,369
)


(558,310
)Other investing activities


(1,050
)


(14,519
)Interest collected


4,759



65,813Net cash used in investing activities


(136,124
)


(1,882,602
)Cash required before net cash used in financing activities


(82,946
)


(1,147,138
)Financing activities:Proceeds from short term debt


9,463



130,863Minority interest


87



1,200Interest paid


(191
)


(2,646
)Dividends paid


(30,963
)


(428,218
)Repurchase of shares


(3,857
)


(53,345
)Net cash used in financing activities


(25,461
)


(352,146
)Net decrease in cash and cash equivalents


(108,407
)


(1,499,284
)Cash and cash equivalents at beginning of year


127,020



1,756,704Cash and cash equivalents at end of year

$
18,613


Ps.
257,420
 
 See accompanying notes to consolidated financial statements
  F-9
 Table of Contents
  Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. and Subsidiaries
 
 Consolidated Statements of Changes in Financial Position
 For the years ended December 31, 2007 and 2006
 (In thousands Mexican pesos (Ps.))
 2007


2006Operating activities:Net income

Ps.
31,192


Ps.
469,237Items that did not require (generate) resources:Depreciation and amortization


336,202



292,096Employee benefits –net


5,313



7,457Deferred statutory employee profit sharing


(6,112
)


27,990Deferred income tax


552,985



81,087919,580



877,867Changes in operating assets and liabilities:(Increase) decrease in:Trade accounts receivable – net


(9,271
)


(114,510
)Accounts receivable from Consorcio Aeroméxico, S.A. de C.V., a related party


-



91,136Recoverable taxes


96,380



(96,749
)Other current assets


55,815



(64,496
)Increase (decrease) in:Trade accounts payable


(13,407
)


(2,900
)Accrued expenses and taxes


29,611



23,266Accounts payable to related parties


384



8,457Advances from customers


(9,046
)


(7,306
)Guarantee deposits


125



6,938Employee profit sharing


417



7,387Net resources generated by operating activities


1,070,588



729,090Financing activities:Dividends paid


(229,224
)


(446,689
)Issuance of common stock


-



123,124Repurchase of shares


(99,644
)


-Additional paid-capital


-



1,100Net resources used in investing activities


(328,868
)


(322,465
)Investing activities – Additions to property, property, machinery, equipment and improvements to concessioned properties


(658,010
)


(440,235
)Cash and cash equivalents:Net increase (decrease)


83,710



(33,610
)Balance at beginning of year


1,672,994



1,706,604Balance at end of year

Ps.
1,756,704


Ps.
1,672,994
 
 See accompanying notes to consolidated financial statements.
  F-10
 Table of Contents
  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, 2008, 2007 and 2006
 (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”) 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.
 
 Company revenues are classified as aeronautical and non-aeronautical services.  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.  .
 
 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.
 
 TheCompany 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 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.
 
 The value of the concessions of Ps. 5,813,656 (Ps. 3,962,405 historical pesos) was determined by the Mexican government on June 2, 2000, the date on which Servicios de Tecnología Aeroportuaria, S.A. de C.V. (“SETA”), the Company’s strategic partner, acquired 15% of the Company.
 
 On November 29, 2006, the Company carried out an initial public offering (“IPO”) under which the Mexican government sold its 48% participation in the Series B shares of the Company (including the exercise of the over allotment option) on the Mexican Stock Exchange and the NASDAQ Global Select Market.  A total of 192,080,000
shares were sold.  The Company did not receive any proceeds from the IPO.  As of December 31, 2008, 41% of the Company’s capital is owned by the public, 54.7% is held directly by Aeroinvest the majority shareholder of SETA, and 4.3 % is owned by Aérports de Paris Management, S.A. (ADP).
  F-11
 Table of Contents
  On October 2, 2006, the Company’s shareholders approved a 1-for-14.69482276 reverse stock split of the Company’s outstanding common stock, reducing the number of shares outstanding at such date from 5,877,929,102 shares to 400,000,000 shares.
 
 On August 28, 2006, the Company’s shareholders approved the issuance of 8,000,000 Series “B” shares increasing the number of shares outstanding at such date from 392,000,000 shares to 400,000,000 shares.  On September 5, 2006, SETA acquired such shares through the exercise of a stock option at a price per share
of $1.3527 (Ps.14.6735).
 
 The option of the 36% of Series “B” shares was assigned to and exercised by Aeroinvest during December 2005 at an exercise price per share of $1.4404 (Ps.15.3449).
 
 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.R.L de C.V., (“NH Hoteles”), with a 10% partnership interest.  Operations are scheduled to begin in the third quarter of 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–Theaccompanying consolidated financial statements of GACN and Subsidiaries have been prepared in conformity with Mexican
Financial Reporting Standards.
 
 Monetary unit of the financial statements–The financial statements and notes as of December 31, 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 years ended December 31, 2007 and 2006 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 22 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 13.83 Mexican pesos to one U.S. dollar, the noon buying rate of the Federal Reserve Bank of New York on December 31, 2008.  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% of the voting common stock or effective control  All significant intercompany balances, transactions and investments have been eliminated in the accompanying consolidated financial statements.
  F-12
 Table of Contents
  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. OACN and SACN will incur PTU beginning in 2009.
 (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 2008 there were no other items in comprehensive income. In 2007 and 2006, 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 sales.  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–As of December 31, 2007, the Company presented in separate items in the consolidated balance sheet the right to use airport facilities, airport concessions, and improvements to concessioned properties assets. Beginning in 2008, they are presented
in one sole line under the investment in airport concessions line item, and disclosed separately in the notes to the financial statements. The consolidated financial statements for the year ended December 31, 2007 have been grouped in a similar manner to conform their presentation with that used in 2008.
 
 Additionally, for the year ended December 31, 2008, capital stock (nominal and restated) and additional paid-in stock were reclassified. The consolidated balance sheet as of December 31, 2007 and the statements of changes in stockholders’ equity for the years ended December 31, 2007 and 2006 were reclassified to conform to the presentation
used in 2008.
 
 3.
Summary of significant accounting policies
 
 The accompanying consolidated financial statements have been prepared in conformity with MFRS, which require that management make certain estimates and use certain assumptions that affect the amounts reported in the financial statements and their related disclosures; however, actual results may differ from such estimates.  The Company’s
management, upon applying professional judgment, considers that estimates made and assumptions used were adequate under the circumstances.  The significant accounting policies of the Company are as follows:
  F-13
 Table of Contents
  a.
New accounting polices– Beginning January 1, 2008, the Company adopted the following NIF’s:
 
 NIF B-2, Statement of cash flows – This NIF establishes general rules for the presentation, structure and preparation of a cash flow statement, as well as the disclosures supplementing such statement, which replaces the statement of changes in financial position.  NIF
B-2 requires that the statement show a company’s cash inflows and outflows during the period.  Line items should be preferably presented gross.  Cash flows from financing activities are now presented below those from investing activities (a departure from the statement of changes in financial position).  In addition, NIF B-2 allows entities to determine and present their cash flows from operating activities using either the direct or the indirect method; the Company elected
the indirect method. According to NIF B-2, this accounting change should be recognized prospectively; consequently, the Company presents a statement of cash flows for 2008 and a statement of changes in financial position for 2007 and 2006.
 
 NIF B-10, Effects of inflation– Considers two economic environments: a) an inflationary environment, where cumulative inflation over a three-year period is 26% or more, in which case, the effects of inflation need to be recognized and b) non-inflationary environment,
where inflation is less than 26% in the same period, in which case, the effects of inflation may not be recognized in the financial statements. Also, NIF B-10 eliminates the replacement cost and specific index valuation methods for inventories and fixed assets, respectively, and requires that the cumulative gain (loss) from holding non-monetary assets if identified with realized, and those that have not been realized should be maintained in stockholders’ equity to apply it to the current earnings of the
period in which the originating item is realized. As a result of the adoption of this standard, and since cumulative inflation over the three preceding years is 11.56%, the Company is in a non-inflationary environment. Therefore, the Company discontinued recognition of the effects of inflation in its consolidated financial statements beginning January 1, 2008. However, assets, liabilities and stockholders’ equity at December 31, 2008 and 2007 include restatement effects recognized through December 31, 2007.
 
 NIF D-3, Employee benefits– Incorporates current and deferred statutory employee profit sharing (PTU) as part of its provisions and establishes that deferred PTU must be determined using the asset and liability method established in NIF D-4, Income
taxes. NIF D-3 eliminates recognition of the additional liability because its determination does not incorporate a salary increase, and incorporates the career salary concept, and the amortization period of most items is reduced to five years, with the option to fully amortize it against current earnings of 2008 under other income and expense. The beginning balance of actuarial gains and losses from termination benefits was recorded against results of 2008, in other income and expense.
 
 NIF D-4, Income taxes– This NIF relocates accounting for current and deferred PTU to NIF D-3, eliminates the permanent difference concept; clarifies and incorporates certain definitions, and requires that the balance of the initial cumulative effect of deferred
income taxes be reclassified to retained earnings unless it is identified with any of the other comprehensive income (loss) items pending to be applied against current earnings. Due to the application of this standard, the Company reclassified the initial cumulative effect of deferred income taxes to retained earnings.
 
 b.
Recognition of the effects of inflation – As mentioned in a) above, beginning January 1, 2008, the Company discontinued recognition of the effects of inflation.
 
 Through December 31, 2007, such recognition resulted mainly in inflationary gains or losses on non-monetary and monetary items that are presented in the financial statements under the caption monetary position result, which represents the erosion of purchasing power of monetary items caused by inflation and is calculated by applying National
Consumer Price Index (“NCPI”) factors to monthly net monetary position. Losses result from maintaining a net monetary asset position.
 
 Inflation rates for the years ended December 31, 2008, 2007 and 2006 were 6.52%, 3.75%, and 3.33%, respectively.
 
 c.
Cash and cash equivalents – This item mainly consists of bank deposits in checking accounts and daily investments of cash surpluses which may be immediately realized.  They are recorded at face value plus accrued yields which are recognized in results as they accrue.
 
 d.
Property, machinery and equipments–These amounts are initially recorded at acquisition cost.  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: 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.
 
 Total yearsMachinery and equipment


10Office furniture and equipment


10Vehicles


4Computers


3.3
  F-14
 Table of Contents
  e.
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.
 
 f.
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, 2008, 2007 and 2006, based on the analysis performed, the Company did not recognize any impairment losses.
 
 g.
Employee benefits–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 2008 and inflation adjusted rates in 2007 and 2006.  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 in 2008 resulted from comparing the accounting and tax basis of assets and liabilities and, in 2007, deferred PTU resulted from comparing the accounting result and income for PTU purposes.  Deferred PTU 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, beginning in 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.
  F-15
 Table of Contents
  Tax on assets (“IMPAC”) paid through 2007 that is expected to be recovered is recorded as an advanced payment of ISR and is presented in the consolidated balance sheets decreasing the deferred tax liability. The Asset Tax Law was repealed effective January 1, 2008.
 
 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 2008, 2007 and 2006, approximately 9.11%, 18.8% and 18.5%, respectively, of the Company’s accounts receivable correspond to amounts due from Compañía Mexicana de Aviación, S.A. de C.V. (“Mexicana”), approximately 18.2%, 24.2% and 28.3%, respectively, correspond to amounts due from Aerovías de México, S.A. de C.V. (“Aeromexico”), and approximately 6.9%, 13.6% and 11.7%, respectively, correspond to amounts due from Consorcio Aviacsa, S.A. de C.V.   In
addition, of the Company’s consolidated revenues for the years ended December 31, 2008, 2007 and 2006, approximately 8.5%, 9.3% and 10.3%, respectively, correspond to revenues generated by Mexicana, approximately 11.4%, 13.2% and 16.9%, respectively, correspond to revenues generated by Aeromexico and approximately 5.8%, 7.9% and 9.6%, respectively, correspond to revenues generated by Consorcio Aviacsa, S.A. de C.V.
 
 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.
 
 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
 
 2008


2007Cash equivalents

Ps.
232,090


Ps.
1,736,046Cash


25,330



20,658Ps.
257,420


Ps.
1,756,704
  F-16
 Table of Contents
  5.
Trade accounts receivable
 
 2008


2007Accounts receivable

Ps.
426,998


Ps.
269,894Allowance for doubtful accounts


(38,433
)


(9,294
)Ps.
388,565


Ps.
260,600
 
 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, 2008 and 2007, amounting to Ps.354,866 and  Ps.267,400, 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
 
 2008


2007Land

Ps.
1,578,123


Ps.
122,219Machinery and equipment


287,631



247,354Office furniture and equipment


50,737



49,906Vehicles


122,161



117,499Computers


22,596



21,5832,061,248



558,561Accumulated depreciation and amortization


(267,993
)


(241,614
)1,793,255



316,947Construction in-progress


142,386



-Ps.
1,935,641


Ps.
316,947
 
 Depreciation for the years ended December 31, 2008, 2007 and 2006 related to machinery and equipment was Ps.39,306, Ps.33,603 and Ps.28,257, respectively.  In addition, for the years ended December 31, 2008, 2007 and 2006, the Company incurred Ps.1,243, Ps.8,388 and Ps.8,090, respectively related to the amortization of other assets.
 
 Construction in-progress refers mainly to the construction of the hotel located in the Terminal 2 del AICM.  As part of its strategic investments, in 2008 territorial reserves were purchased to develop and expand the Company’s key airports.
  F-17
 Table of Contents
  7.
Investment in airport concessions
 
 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 3 e., 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 YearsCost of the concession from the SCT (Note 1 and 3e.)

Ps.
5,813,656Appraised amount assigned to:Rights to use airport facilities:Runways, aprons and platforms

Ps.
1,528,878



26Buildings


1,002,794



28Other infrastructure


349,935



20Land


2,043,447



414,925,054Airport concessions


888,602



41Total 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, 2008 and 2007, the net values of the rights to use the airport facilities, airport concessions and improvements to concessioned properties consist of the following:
 
 2008


2007Rights to use airport facilities


4,925,054



4,925,054Less – Accumulated amortization


(1,050,544
)


(924,664
)3,874,510



4,000,3902008


2007Airport concessions


888,602



888,602Less – Accumulated amortization


(159,947
)


(142,176
)728,655



746,4262008


2007Improvements to concessioned properties


2,990,390



2,432,192Less – Accumulated amortization


(638,540
)


(456,132
)2,351,850



1,976,060Total investment in airport concessions


6,955,015



6,722,876
 
 As of December 31, 2008 and 2007, as part of the concessioned properties improvements, there is construction-in-process amounting to Ps. 475,939 and Ps. 330,100, respectively.  As of December 31, construction-in-process refers mainly to the Monterrey Airport’s Terminal B.
 
 Amortization for rights to use the airport facilities and airport concessions for the years ended December 31, 2008, 2007 and 2006 were Ps. 143,693 Ps. 143,617 and Ps. 143,608, respectively. Amortization for the years ended December 31, 2008, 2007 and 2006 related to improvements to concessioned properties was Ps.182,477, Ps.150,594 and Ps.
112,141, respectively.
  F-18
 Table of Contents
  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. 2,484,917 (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 is Ps.1,152,080, which considers that part of the investment planned for the luggage review system of Ps.529,172 will be made in 2009 and will be finished in 2010.
 
 The amount per year is shown below:
 
 Year

Amount2009

Ps.
505,7332010


646,347Ps.
1,152,080
 
 As discussed in Note 11, Article 232-A of the Federal Duties Law establishes the obligation of the Company, as a concessionaire or holder of permits authorizing the use, enjoyment and development of public domain properties assigned to render public services, to pay taxes for such rights, equivalent to 5% of the gross revenue obtained from
such use.
 
 8.
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.
  F-19
 Table of Contents
  The present values of these obligations and the rates used for the calculations are:
 
 2008


2007Vested benefit obligation

Ps.
(23,300
)

Ps.
(34,555
)Unrecognized items:Past service costs and changes to the plan


(2,402
)


(17,076
)Prior service costs


1,197



-Initial transition asset


711



4,683Career wage concept


392



-Unrecognized actuarial gains and losses


-



17,536(23,402
)


(29,412
)(Additional liability)/intangible asset and effect on equity


-



(12,431
)Projected net liability

Ps.
(23,402
)

Ps.
(41,843
)
 
 Actuarial rates used:
 
 2008


2007%


%(1)


(2)Discount of projected benefit obligations at present value

8.50


4.50Wage increase

5.50


1.50Minimum wage increase rate

4.00


-
 
 (1)
Nominal rates
 (2)
Inflation adjusted rates
 
 Unamortized items are applied to earnings over five years.
 
 9.
Stockholders’ equity
 
 a.
As of December 31, 2008, 2007 and 2006, 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, 2008, 2007 and 2006 is solely comprised of fixed   capital and is represented by ordinary, registered no-par shares and is composed as follows:
 
 2008Number of shares


Historical value


Restatement effect


Restated capital stockFixed capital:Series B, Class I


341,200,000


Ps.
3,763,828


Ps.
1,515,334


Ps.
5,279,162Series BB, Class I


58,800,000



644,619



264,651



909,270Treasury 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
 
 2007Number of shares


Historical value


Restatement effect


Restated capital stockFixed capital:Series B, Class I


341,200,000


Ps.
3,763,828


Ps.
1,515,334


Ps.
5,279,162Series BB, Class I


58,800,000



644,619



264,651



909,270Treasury 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
  F-20
 Table of Contents
 
 2006Number of shares


Historical value


Restatement effect


Restated capital stockFixed capital:Series B, Class I


341,200,000


Ps.
3,763,828


Ps.
1,515,334


Ps.
5,279,162Series BB, Class I


58,800,000



644,619



264,651



909,270Total


400,000,000


Ps.
4,408,447


Ps.
1,779,985


Ps.
6,188,432
  c.
As of December 31, 2008, the Company held in treasury shares repurchased with a cost basis of Ps.152,989. This amount is represented by 4,726,100 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 in Ps.73,547 and Ps.79,442, respectively. The weighted average number of shares outstanding during
the year mentioned in Note 3.o. is affected considering the dates in which shares were repurchased.  On December 31, 2008, the market value of the Company’s shares as listed on the Mexican Stock Exchange was approximately 19.25 pesos.
 
 d.
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, of which a payment of  Ps. 220,922 is outstanding as of December 31, 2008.
 
 e.
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.
 
 f.
On October 2006, the Company’s shareholders approved a 1-for-14.69482276 reverse stock split of the Company’s outstanding common shares, reducing the number of shares outstanding at such date from 5,877,929,102 shares to 400,000,000 shares.  All share, per share and option data in the accompanying consolidated financial statements and notes thereto have been retroactively restated to reflect the
effects of the reverse stock split for all periods presented.
 
 g.
On August 28, 2006, the Company’s shareholders approved the issuance of 8,000,000 Series “B” shares.  On September 5, 2007, SETA acquired such shares through the exercise of a stock option granted to it by the Company as mentioned in Note 1. Additionally, in this meeting the stockholders declared a dividend Ps.446,689.
 
 h.
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, 2008, 2007 and 2006 the legal reserve amounted to Ps.97,085,  Ps 95,554, and Ps. 72,200  respectively.
 
 i.
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:
 
 2008


2007Contributed capital account

Ps.
6,214,242


Ps.
5,836,926Net taxable income account


145,420



119,795Reinvested net taxable income account


35,688



33,503Total

Ps.
6,395,350


Ps.
5,990,224
  F-21
 Table of Contents
  10.
Foreign currency balances and transactions
 
 As of December 31 the foreign currency monetary position in thousands of U.S. dollars is as follows:
 
 2008


2007Monetary assets

$
191


$
24,939Monetary liabilities


(22,788
)


(3,477
)Monetary asset position

$
(22,597
)

$
21,462Equivalent in Mexican pesos

Ps.
(311,276
)

Ps.
233,456
 
 Transactions denominated in foreign currency in thousands of U.S. dollars for the years ended December 31 were as follows:
 
 2008


2007


2006Technical assistance fee

$
4,063


$
5,154


$
4,340Payment of insurance policies


1,347



1,509



1,416Payments for machinery and maintenance safety equipment


4,780



2,202



-Professional services, fees and subscriptions public offering


684



2,866



2,358Purchase of land


36,082



-



-Other


583



-



-
 
 The exchange rate of Mexican pesos per one U.S. dollar, were as follows:
 
 December 31,2008


2007Purchase


Sale


Purchase


SaleInterbank

$
13.6850


$
13.7750


$
10.8795


$
10.9295
 
 As of March 6, 2009, the exchange rate was 15.2215 and 15.2300 pesos for the purchase and sale of one U.S. dollar respectively.
 
 11.
Balances and transactions with related parties
 
 Balances with related parties at December 31 were as follows:
 
 2008


2007Balances payable:SETA (1)

Ps.
61,825


Ps.
68,437Dividens payable to Aeroinvest, S.A. de C.V.


93,823



77,414Grupo ICA, S.A. de C.V.


3,450



-Ingenieros Civiles Asociados, S.A. de C.V.


164,374



2,726Ps.
323,472


Ps.
148,577
 
 (1) The balances payable to SETA include dividends of Ps. 36,258 and Ps. 35,874 in 2008 and 2007 respectively.
 
 Transactions with related parties, carried out in the ordinary course of business, for the years ended December 31 were as follows:
 
 2008


2007


2006Revenues generated by aeronautical and non-aeronautical services provided to Consorcio Aeroméxico


-





Ps.
339,898Expenses:Technical assistance fees and related out-of-pocket costs

Ps.
55,604


Ps.
57,416



49,541Concession taxes


-



-



77,224Administrative services provided by Grupo ICA, S.A. de C.V.


3,014



-



4,877Capital expenditures - Construction of  the Terminal "B" at the Monterrey airport, construction of  theTerminal 2 at AICM  and rehabilitation of the runways in Culiacán, Ciudad Juárez, Chihuahua and the Durango airports provided by Ingenieros Civiles Asociados, S.A.de C.V. (1)


422,104



223,237



27,314
 
 (1) 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.
  F-22
 Table of Contents
  The benefits granted to key personnel of the Company, were as follows:
 
 2008


2007


2006Short- and long-term direct benefits

Ps.
48,964


Ps.
43,842


Ps.
39,030
 
 The majority of the common stock of Consorcio Aeroméxico, S.A. de C.V. (“Consorcio Aeroméxico”) is owned by the Bank Savings Protection Institute (“IPAB”), a decentralized federal government entity, for which reason Consorcio Aeroméxico and the Mexican government were considered to be related parties
of the Company up to November 29, 2006, on which date the Mexican government sold its participation in the Company through a public offering.
 
 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 2008, 2007 and 2006, 5% of consolidated operating income was greater than of the fixed $3,000.
 
 As of December 31, 2008, SETA’s, stockholders were Aeroinvest, S.A. de C.V. (“Aeroinvest”) (subsidiary of Empresas ICA, S.A. de C.V.) with 74.5% and Aéroports de Paris, S.A 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, 2007.   After such date, SETA is entitled to transfer up to one eighth of such 51% during each year thereafter.
 
 Concession tax– According to 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.
 
 12.
Other (expenses) income
 
 Detail is as follows:
 
 2008


2007


2006Statutory employee profit sharing – current


(2,626
)


(9,587
)


(8,985
)Statutory employee profit sharing – deferred


104,230



2,097



(32,499
)Other (expenses) income


3,188



(94
)


10,805104,792



(7,584
)


(30,679
)
  F-23
 Table of Contents
  In 2007 and 2006, the principal items comprising deferred PTU are improvements to concessioned properties, machinery and equipment, rights to use airport facilities and airport concessions.
 
 13.
Taxes on income
 
 The Company is subject to ISR and to IETU in 2008, and was subject to ISR and IMPAC in 2007 and 2006. ISR is computed taking into consideration the taxable and deductible effects of inflation, such as depreciation calculated on restated asset values.  Taxable income is increased or reduced by the effects of inflation on certain
monetary assets and liabilities through the inflationary component, which is similar to the gain or loss from monetary position.  As of 2008 and 2007, the ISR rate is 28% and in 2006 it was 29%.  Due to changes in the tax legislation, effective January 1, 2007, taxpayers who file tax reports and meet certain requirements may obtain a tax credit equivalent to 0.5% or 0.25% of taxable income.  PTU paid is fully deductible.
 
 The Company is subject to ISR and, through 2007, IMPAC, on an individual entity basis.  The related tax results are combined in the consolidated financial statements.
 
 As discussed in Note 1, IETU Law went into effect on January 1, 2008. In addition, 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 refunded, 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, while in others, it will pay IETU, therefore, it recognizes their deferred taxes consideration of the expected tax payable.
 
 In 2007, IMPAC was calculated by applying 1.25% to the value of the assets of the year, without deducting any debt amounts.  Through 2006, IMPAC was calculated by applying 1.8% on the net average of the majority of restated assets less certain liabilities, including liabilities payable to banks and foreign entities.  IMPAC
is payable only to the extent that it exceeded ISR payable for the same period.
 
 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:
 
 2008
%


2007
%


2006
%Statutory rate


28.00



28.00



29.00Effect of permanent differences, mainly non-deductible expenses, restatement of taxes and effects of inflation for financial and tax purposes


(9.18
)


(4.86
)


(1.19
)Change in valuation allowance for recoverable tax on assets paid and  tax loss carryforwards


-



14.70



1.71Effect of canceling the deferred ISR liability


-



(73.17
)


-Effect of adding the deferred IETU liability


11.78



131.51



-Effective rate


30.60



96.18



29.52
 
 At December 31, the main items comprising the liability balance for deferred taxes are as follows:
 
 2008


2007Deferred ISR:Assets:Labor obligations and other current liabilities

Ps.
43,732


Ps.
12,093Liabilities:Other liabilities


(25,965
)


(26,494
)Machinery and equipment


(369
)


860Net deferred ISR asset (liability)


17,398



(13,541
)Tax loss carryforwards


945,578



866,198Recoverable tax on assets paid


235,095



221,0471,198,071



1,073,704Valuation allowance


(1,178,040
)


(1,087,245
)Net deferred ISR asset (liability)


20,031



(13,541
)
  F-24
 Table of Contents
 
 2008


2007Deferred IETU:Assets:Fixed assets acquired between January 1998 to August 2007

Ps.
106,259


Ps.
111,928IETU credits


213,555



-Fixed assets acquired between September 2007 to December 2007


17,399



12,908Credit from for the immediate deduction of tax loss carryforwards


4,992



5,546Other liabilities


68,955



29,987Deferred IETU asset


411,160



160,369Liabilities:Rights to use airport facilities and concessions


(805,551
)


(830,694
)Improvements to concessioned properties, property, machinery, and equipment


(724,175
)


(400,221
)Other liabilities


(41,881
)


(3,313
)Deferred IETU liability


(1,160,447
)


(1,073,859
)Total

Ps.
(1,140,416
)

Ps.
(1,087,400
)
 
 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 2008 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, 2008, as restated for inflation, are as follows:
 
 Year of origin

Tax loss carryforwards1998

Ps.
12,0271999


230,1052000


630,9682001


631,9482002


631,6662003


532,0222004


459,5322005


50,8092006


72,3502007


71,1322008


54,505Ps.
3,377,064
 
 In the calculation of deferred IETU, according to the paragraphs above, the effects of recoverable IMPAC paid of Ps. 235,095 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 assets2012

Ps.
74,6652013


66,9172014


58,5262015


16,2042016


8,9252017


9,858Ps.
235,095
  F-25
 Table of Contents
  14.
Contingencies
 
 At December 31, 2008, 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.
There are administrative-law enforcement proceedings against Aeropuerto de Reynosa, S.A. de C.V., Aeropuerto de Zihuatanejo, S.A. de C.V., Aeropuerto de Tampico, S.A. de C.V., and Aeropuerto de Ciudad Juárez, S.A. de C.V., to settle real estate tax liabilities. As of May, the restated tax liability amounts to 59.5 million Mexican pesos; 10.2 million Mexican pesos, 1.02 million Mexican pesos, and 1.8 million Mexican
pesos, respectively (approximate amounts). Nullification suits were brought against such tax liability settlements, which resolutions are outstanding. The resolutions for the entire lawsuits are outstanding. In the case of Reynosa, an incidental and principal sentence is expected, while for Tampico the suspension incident is expected to be resolved and a hearing of the principal proceeding is to be summoned and, lastly, in Zihuatanejo, a writ of injunction was obtained for the Airport appeal for a payment required
for the period from the fourth two months in 1996 to the fourth two months in 2001 of 8.6 million Mexican pesos. The Court of Appeals complied with the execution of the writ of injunction and pronounced a new judgment that states the nullity of the collection requirement for such period. Nullification suits brought for the other periods required (fifth two months in 2001 to second two months in 2006) amount to 2.8 million Mexican pesos are still outstanding.
 
 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.
 
 15.
Commitments
 
 a.
As discussed in Note 11, 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). Derived from such acquisition, the Company assumed the commitments set forth in the lease agreement signed with AICM for a 20-year period to construct, prepare and operate a hotel, and run commercial premises at the Mexico City International Airport Terminal 2, establishing a minimum guaranteed income (MGI) of Ps.18,453 annually as rent, plus
a share of the annual percentage of 18 on gross income obtained. The MGI will be adjusted on an annual basis using the NCPI.
  F-26
 Table of Contents
  16.
Information by industry segments
 
 The Company determines and evaluates its airports’ individual performances before allocating personnel-related costs and other costs incurred by Servicios Aeroportuarios del Centro Norte, S.A. de C.V. (“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 Airpor t. The financial information relating to the remaining seven airports, as well as that of SACN, OACN, Holding  and Consorcio, the last three beginning 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,  2008

Monterrey


Acapulco


Mazatlán


Culiacán


Chihuahua


Zihuatanejo


Other


Eliminations


TotalTotal 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.
1,988,476Operating income


56,479



9,609



8,491



2,577



15,657



5,643



709,239



(120,327
)


687,368Interest income - net


38,118



12,618



16,481



2,655



8,701



3,183



(18,589
)






63,167Income Tax


























146,933







146,933Business flat tax expense


58,482



5,689



747



2,358



7,260



3,822



13,615







91,973Total assets


4,699,129



859,262



791,498



565,413



555,556



565,718



10,370,325



(8,543,619
)


9,863,282Total liabilities


1,384,797



129,040



124,798



99,490



80,919



100,262



1,588,134



(1,173,918
)


2,333,522Capital expenditures


1,743,039



36,275



24,021



37,111



23,102



22,613



341,401







2,227,562Investment in airport concesions


2,723,142



624,383



492,430



481,295



426,699



498,153



1,708,913







6,955,015Depreciation 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


TotalTotal 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.
1,897,353Operating income


42,955



6,297



12,768



8,008



13,706



4,629



231,205



408,353



727,921Interest income - net


106,584



9,808



12,950



2,127



4,628



1,402



(10,839
)


-



126,660Income Tax


(358,508
)


(15,730
)


(28,738
)


(27,245
)


(26,859
)


(17,723
)


186,307



-



(288,496
)Business flat tax expense


411,342



107,935



84,279



74,378



64,541



76,295



255,089



-



1,073,859Total assets


4,121,808



842,262



744,157



551,894



534,103



560,300



9,734,982



(7,955,118
)


9,134,388Total liabilities


834,573



132,473



107,979



92,084



85,853



104,459



1,038,058



(735,433
)


1,660,046Capital expenditures


396,147



42,622



22,378



12,487



16,422



14,753



153,201



-



658,010Investment in airport concesions


2,502,215



639,765



509,619



490,936



424,152



500,945



1,655,244







6,722,876Depreciation and amortization


84,495



42,244



29,258



23,697



21,249



25,303



109,956



-



336,202
  December 31, 2006

Monterrey


Acapulco


Mazatlán


Culiacán


Chihuahua


Zihuatanejo


Other


Eliminations


TotalTotal revenues

Ps.
746,924


Ps.
144,880


Ps.
128,351


Ps.
115,232


Ps.
99,565


Ps.
94,272


Ps.
1,334,943


Ps.
(976,856
)

Ps.
1,687,311Operating income


91,722



20,037



15,762



14,151



12,227



11,576



635,970



(175,346
)


626,099Interest income - net


103,035



8,570



11,868



916



4,208



9,515



(4,663
)


-



133,449Income Tax


32,480



7,780



4,421



3,706



3,371



5,915



138,838



-



196,511Total assets


3,786,300



831,326



725,545



555,218



519,712



560,027



10,089,265



(8,193,443
)


8,873,950Total liabilities


573,711



41,926



53,249



57,861



49,465



51,959



646,052



(582,224
)


891,999Capital expenditures


166,480



28,872



25,204



26,438



52,252



22,777



118,212



-



440,235Investment in airport concesions


2,316,618



653,769



524,703



501,778



427,097



511,365



1,606,706







6,542,036Depreciation and amortization


76,080



38,252



26,313



20,283



15,604



19,141



96,423



-



292,096
  F-27
 Table of Contents
  17.
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, 2008, 2007 and 2006 of the Company’s revenues.
  2008


2007


2006Aeronautical servicesAirport services:Landing

Ps.
111,693


Ps.
119,624


Ps.
114,136Parking on embarking/disembarking platform


72,911



79,573



75,501Parking on extended stay or overnight platform


22,293



16,513



17,013Aerocars and jetways


23,847



23,093



24,818Passenger and carry-on baggage check, national and international


22,796



22,614



19,293Domestic passenger charges


955,466



884,738



729,015International passenger charges


278,579



277,255



273,972Complementary services – Airport real estate services and rights of access to other operators and complementary services


129,610



126,417



117,220Total aeronautical services revenues


1,617,195



1,549,827



1,370,968Non-aeronautical servicesCar parking charges


112,694



105,499



90,814Commercial concessions  (1):Retail operations


36,197



34,723



30,598Food and beverages


35,001



31,596



24,733Duty free


13,567



14,321



15,958VIP lounges


36,644



33,980



30,311Financial services


1,877



1,796



1,530Communications and networks


4,350



3,981



3,925Car rentals


32,175



29,633



23,773Advertising


39,304



36,937



35,992Time share


18,068



18,014



17,104Complementary service providers


2,475



5,908



6,000Expense recovery


20,777



15,221



13,837OMA freight


14,578



11,762



11,038Non-airport access fees


3,574



4,155



3,110Miscellaneous commercial-related revenues


-



-



7,620Total non-aeronautical services


371,281



347,526



316,343Total revenues

Ps.
1,988,476


Ps.
1,897,353


Ps.
1,687,311
  F-28
 Table of Contents
  (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, 2008, future minimum rentals are as follows:
 
 Year

Amount2009

Ps.
263,7092010


164,6292011


96,6352012


32,770Thereafter


406,443Total

Ps.
964,186
 
 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, 2008, 2007 and 2006 were Ps. 70,278, Ps. 68,379 and Ps. 57,527, respectively.
 
 Approximately 79%, 79% and 78% of consolidated revenues during the years ended December 31, 2008, 2007 and 2006, respectively, were generated by the six principal airports (Monterrey, Acapulco, Mazatlán, Culiacán, Chihuahua and Zihuatanejo).
 
 18.
Cost of services
 
 Cost of services for the years ended December 31 is as follows:
 
 2008


2007


2006Employee cost

Ps.
156,183


Ps.
143,067


Ps.
140,296Maintenance


54,020



53,900



54,836Safety, security and insurance


80,992



74,933



68,921Utilities


112,793



94,408



92,286Other


54,832



54,469



41,126Ps.
458,820


Ps.
420,777


Ps.
397,465
 
 19.
New accounting pronouncements
 
 With the purpose of making Mexican standards converge with International Financial Reporting Standards (“IFRS”), in 2008, the Mexican Board for Research and Development of Financial Reporting Standards (“CINIF”) issued the following NIFs and Interpretations of Financial Reporting Standards (“INIF”), which
become effective beginning January 1, 2009:
 
 NIF B-7, Business Acquisitions
 NIF B-8, Consolidated or Combined Financial Statements
 NIF C-7, Investments in Associated Companies and other Permanent Investments
 NIF C-8, Intangible Assets
 NIF D-8, Share-based Payments
 
 Some of the most important changes established by these standards are:
 
 NIF B-7, Business Acquisitions, includes a change of concepts, from minority interest to non-controlling interest and requires fair value measurement of the non-controlling interest as of the acquisition date.  Consequently,
the overall goodwill is recognized based on the fair value of the acquired entity.  NIF B-7 establishes that acquisition and restructuring costs should not be part of the consideration paid and restructuring costs should not be recognized as an assumed liability from the acquisition, respectively.
  F-29
 Table of Contents
  NIF B-8, Consolidated or Combined Financial Statements,includes achange of concepts, from majority interest to controlling interest.  NIF B-8 establishes
that special purpose entities, over which control is exercised, should be consolidated.  Provided certain requirements are met, it allows the option to present stand-alone financial statements of intermediate controlling companies and requires that potential voting rights be considered to analyze whether control exists.
 
 NIF C-7, Investments in Associated Companies and other Permanent Investments,requires that investments in special purpose entities where significant influence is exercised be valued using the equity method.  It also
requires that potential voting rights be considered to analyze whether significant influence exists.  In addition, NIF C-7 establishes a specific procedure and a set of caps to the recognition of losses in associated companies, and requires that investments in associated companies be presented including the related goodwill
 
 NIF C-8, Intangible Assets,requires that any pre-operating expenses incurred through December 31, 2008 to be canceled against retained earnings.
 
 NIF D-8, Share-based Payments,sets the rules for recognition of share-based payments, including the granting of stock options to employees.  Therefore, the use of IFRS 2, Share-Based Payments, that was applied as supplemental
guidance is discontinued.
 
 INIF 16, Transfer of Primary Financial Instruments for Trading to Another Classification,modifies paragraph 20 of the Amendments to Bulletin C-2  to consider that in the case that a primary financial instrument trades in a market that for unusual circumstances beyond the
Company’s control ceases to be active, thus losing its liquidity feature, such instrument may be reclassified as a financial instrument available-for-sale or held-to-maturity, if the instrument has a defined maturity date, and the Company has both the intention and the ability to hold the instrument through its maturity.  INIF 16 includes additional disclosures related to such transfers.
 
 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
beginning in 2012 (early adoption is permitted).
 
 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.
 
 20.
Subsequent events
 
 On February 3, 2009, the Company entered into a long-term bank line of credit of Ps.500,000 bearing interest at a rate of TIIE plus 4.5% points.
 
 21.
Authorization for issuance of financial statements
 
 On March 6, 2009, the issuance of these financial statements was authorized by Ing. Rubén Lopez Barrera General Director of Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.  These 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.
 
 22.
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.
  F-30
 Table of Contents
  As mentioned in Note 3, NIF B-10, is 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 ended December 31, 2008, the Mexican economic environment will not qualify as inflationary in 2008, thereby eliminating inflationary accounting in the Company’s consolidated financial statements.
 
 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:
 
 2008


2007


2006Reconciliation of net income (loss):Consolidated net income according to MFRS

Ps.
541,803


Ps.
31,192


Ps.
469,237U.S. GAAP adjustments:(i)    Amortization of assets under concession


85,734



85,734



85,734(ii)   Amortization of airport concession


17,772



17,771



17,772(iii)  Depreciation of fixed assets recorded at predecessor cost basis


(2,903
)


(3,164
)


(3,167
)(iv)  Deferred fees for technical assistance services


30,696



(10,133
)


(19,731
)(v)   Accrued vacation


(2,817
)


(3
)


(1,735
)(vi)  Provisions for seniority premiums and severance payments


(8,844
)


(4,232
)


3,060(vii) Deferred statutory employee profit sharing


(104,230
)


(6,112
)


27,989Total U.S. GAAP adjustments before the effect of income taxes


15,408



79,861



109,922(viii) Income taxes


456,243



(229,371
)


(30,361
)Consolidated net income (loss) according to U.S. GAAP

Ps.
1,013,454


Ps.
(118,318
)

Ps.
548,798
 
 2008


2007Reconciliation of stockholders’ equity:Consolidated stockholders’ equity according to MFRS

Ps.
7,529,760


Ps.
7,474,342U.S. GAAP adjustments:(i)    Cost of assets under concession


(3,683,547
)


(3,683,547
)(i)    Accumulated amortization of assets under concession


646,277



560,543(ii)   Amortized cost of airport concessions


(728,654
)


(746,426
)(iii)  Net carrying value of fixed assets recorded at predecessor cost basis


-



2,898(v)    Accrued vacation


(9,055
)


(6,238
)(vi)   Provision for seniority premiums and severance payments


(1,410
)


3,224(vii)  Deferred statutory employee profit sharing


-



104,230Total U.S. GAAP adjustments before the effect of income taxes and minority interest


(3,776,389
)


(3,765,316
)(viii) Income taxes


1,335,197



874,389(ix)   Minority interest


(1,159
)


-Consolidated stockholders’ equity according to U.S. GAAP

Ps.
5,087,409


Ps.
4,583,415
  F-31
 Table of Contents
  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


Total stockholders’ equityBalances at January 1, 2007

Ps.
1,830,114


Ps.
34,289


Ps.
3,361,335



-


Ps.
4,644


Ps.
5,230,382Dividends paid


-



-



(444,125
)


-



-



(444,125
)Deferred fees for technical assistance services


-



10,133



-



-



-



10,133Comprehensive income:Net loss


-



-



(118,318
)


-



-



(118,318
)Labor obligations


-



-



-



-



4,937



4,937Total comprehensive income


-



-



(118,318
)


-



4,937



(113,381
)Repurchase of shares


(40,484
)


-



(412,628
)

Ps.
353,518



-



(99,594
)Balances at December 31, 2007

Ps.
1,789,630


Ps.
44,422


Ps.
2,386,264


Ps.
353,518


Ps.
9,581


Ps.
4,583,415Dividends paid










(434,240
)










(434,240
)Deferred fees for technical assistance services






(30,696
)














(30,696
)Comprehensive income:Net income










1,013,454











1,013,454Labor obligations


















8,821



8,821Total comprehensive income










1,013,454







8,821



1,022,275Repurchase of shares


(33,013
)










(20,332
)






(53,345
)Balances at December 31, 2008

Ps.
1,756,617


Ps.
13,726


Ps.
2,965,478


Ps.
333,186


Ps.
18,402


Ps.
5,087,409
 
 Condensed consolidated balances sheets and statements of income including the aforementioned U.S. GAAP adjustments, as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006.
 
 2008


2007AssetsCurrent assets:Cash and cash equivalents

Ps.
257,420


Ps.
1,756,704Other current assets


672,275



327,353Total current assets


929,695



2,084,057Property, machinery and equipment  – net


1,935,637



319,845Investment in airport concessions – net


3,189,158



2,853,448Long-term deferred income taxes


194,780



-Other assets – net


42,930



6,342Total

Ps.
6,292,200


Ps.
5,263,692
  F-32
 Table of Contents
 
 2008


2007Liabilities and stockholders’ equity:Current liabilities

Ps.
1,158,298


Ps.
421,398Long-term deferred income taxes


-



204,977Other long-term liabilities


46,493



53,902Total liabilities


1,204,791



680,277Common stock


1,756,617



1,789,630Additional paid-in capital


13,726



44,422Retained earnings


2,965,478



2,386,264Reserve for repurchase of shares


333,186



353,518Accumulated other comprehensive income


18,402



9,581Total stockholders’ equity


5,087,409



4,583,415Total liabilities and stockholders’ equity

Ps.
6,292,200


Ps.
5,263,692
 
 2008


2007


2006Net revenues

Ps.
1,988,476


Ps.
1,897,353


Ps.
1,687,311Cost of operations:Cost of services


460,539



419,725



397,687General and administrative expenses


328,350



255,959



237,097Concession taxes


101,642



98,307



84,635Technical assistance fees


24,908



67,550



69,272Depreciation and amortization


266,031



235,122



191,757Statutory employee profit sharing


2,626



9,587



8,984Total cost


1,184,096



1,086,250



989,432Income from operations


804,380



811,103



697,879Net comprehensive financing (loss) income


(11,451
)


67,369



71,906Other income (expenses) – net


3,188



(94
)


10,804Income tax (benefit) expense


(217,337
)


996,696



231,791Consolidated net income (loss)

Ps.
1,013,454


Ps.
(118,318
)

Ps.
548,798Weighted average number of common shares outstanding


396,284,313



399,611,578



391,624,384Weighted average number of common shares and common share equivalents (unless antidilutive)


399,224,413



399,611,578



394,564,384Basic earnings per share (in Mexican pesos)


2.5574



(0.2961
)


1.4013Diluted earnings per share (in Mexican pesos)


2.5386



(0.2961
)


1.3909
 
 (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.e 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.
  F-33
 Table of Contents
  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 11, 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.
  F-34
 Table of Contents
  (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 2006.
 
 MFRS does not presently require the recognition of stock-based compensation costs.
 
 Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Accounting for Stock-Based Compensation”, 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, 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 EITF 96-18, 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 FIN No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans.”
 
 In 2006, 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. (30,696), Ps. 10,133 and Ps. 19,731 in 2008, 2007 and 2006, respectively.
 
 (v) Accrued vacation
 
 Under MFRS, there are no specific pronouncements establishing standards to accrue for liabilities related to employees’ rights to receive compensation for future absences; therefore, amounts related to vacation benefits earned by the Company’s employees but not yet taken are expensed when paid.
 
 Under U.S. GAAP, SFAS No. 43, “Accounting for Compensated Absences”, requires that such vacation benefits be accrued.  Accordingly, the Company has estimated such liability as of December 31, 2008 and 2007, and recognized the related expense in the U.S. GAAP reconciliation.
 
 (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 requires that nominal rates be used while MFRS allows the use
of real or “inflation-free” rates up to December 31, 2007. Beginning in 2008 computations should consider nominal rates.
 
 Beginning January 1 2008, 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.
  F-35
 Table of Contents
  The Company applies 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.  SFAS No. 158 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. SFAS No. 158 is applicable to the Company’s seniority premium plan, as well as its liability recognized for severance benefits, given that they are calculated using a methodology
similar to SFAS No. 87, “Employers’ Accounting for Pensions”.  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 Benefits2008


2007


2008


2007Projected benefit obligation – unfunded status

Ps.
(3,621
)

Ps.
(3,716
)

Ps.
(21,252
)

Ps.
(30,709
)
 
 Seniority Premium Benefits


Severance Benefits


Seniority Premium Benefits


Severance Benefits2008


2008


2007


2007Amounts recognized in accumulated other comprehensive incomePrior service cost, net of deferred tax of Ps.4,879 and  Ps. 5,207 for 2008 and 2007, respectively

Ps.
(12,546
)

Ps.
-


Ps.
(13,394
)

Ps.
-Actuarial net (gain) or loss, net of deferred tax of Ps. 2,277 and Ps. 1,482 for 2008 and 2007, respectively


(1,558
)


(4,298
)


(1,056
)


4,869Ps.
(14,104
)

Ps.
(4,298
)

Ps.
(14,450
)

Ps.
4,869
 
 Seniority Premium Benefits


Severance Benefits2008


2007


2008


2007Change in benefit obligation:Projected benefit obligation at beginning of year

Ps.
(3,716
)

Ps.
(3,523
)

Ps.
(30,709
)

Ps.
(37,932
)Service cost


(580
)


(559
)


(3,006
)


(3,681
)Interest cost


(281
)


(271
)


(2,270
)


(2,882
)Actuarial loss


779



371



12,012



10,736Benefits paid


177



364



2,721



8,260Settlements


-



(98
)


-



(5,210
)Projected benefit obligation at end of year

Ps.
(3,621
)

Ps.
(3,716
)

Ps.
(21,252
)

Ps.
(30,709
)
 
 Seniority Premium Benefits


Severance Benefits2008


2007


2008


2007Components of net periodic pension cost:Service cost

Ps.
580


Ps.
559


Ps.
3,006


Ps.
3,681Interest cost


281



271



2,270



2,882Amortization of net actuarial (gain) or loss


(1,259
)


(1,263
)


719



1,458Settlements


-



84



-



2,717Net periodic pension cost

Ps.
(398
)

Ps.
(349
)

Ps.
5,995


Ps.
10,738
  F-36
 Table of Contents
  Seniority Premium Benefits


Severance Benefits2008


2007


2008


2007Weighted-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 Benefits2009

Ps.
325


Ps.
3,5892010


322



3,4652011


338



3,3372012


379



3,2432013


400



3,176Thereafter


3,062



14,826Ps.
4,826


Ps.
31,636
 
 (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. 2,626 Ps. 9,587 and Ps. 8,984 for the years ended December 31, 2008, 2007 and 2006, respectively.
 
 (viii) Income taxes
 
 Under MFRS, the Company accounts for deferred income taxes in accordance with Bulletin D-4, ”Income Taxes”.  As a result of the new Business Flat Tax(“IETU”), which was enacted in 2007 and went into effect on January 1, 2008, the Company is required to determine
what deferred tax effects if any the IETU has on its financial statements for both MFRS and U.S. GAAP purposes.  Based on its financial projections for purposes of MFRS, which were performed over a four year period and according to INIF 8, “Effects of the Business Flat Tax”, the Company determined that it will essentially pay IETU.
  F-37
 Table of Contents
  For U.S. GAAP purposes, under SFAS No. 109, 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, 2008 and 2007, respectively are as follows:
 
 Reconciliation of deferred income taxes:

2008


2007Deferred income tax liability under MFRS

Ps.
(1,140,416
)

Ps.
(1,087,400
)Effect of cost of airport concession and rights to use airport facilities


595,344



623,096Effect of labor obligations


(6,745
)


(6,632
)Effect of cost of fixed assets acquired from Mexican government


301,876



(54,848
)Tax loss carryforwards


679,314



311,480IETU Tax credits


(213,555
)Other


(21,038
)


1,293Total U.S. GAAP adjustments to net deferred income tax liability


1,335,196



874,389Net deferred income tax asset (liability) under U.S. GAAP

Ps.
194,780


Ps.
(213,011
)
 
 Composition of net deferred income tax assets (liabilities):
 
 2008


2007Assets:Provisions

Ps.
35,222


Ps.
19,063Advances from customers


1,109



158Total current assets


36,331



19,221Liabilities:Other liabilities


(28,497
)


(27,255
)Net current deferred  tax asset  (liability)

Ps.
7,834


Ps.
(8,034
)Non-current assets (liabilities):Assets:Provisions for seniority premiums and severance payments

Ps.
-


Ps.
5,459IETU tax credits


9,416



9,509ISR tax loss carryforwards


945,342



866,205Recoverable tax on assets


235,095



221,047Valuation allowance for tax loss carryforwards and recoverable tax on assets


(493,498
)


(770,226
)Total non-current assets


696,355



331,994Liabilities:Provisions for seniority premiums and severance payments


(192
)Airport concessions and assets under concession


(210,207
)


(207,598
)Property, real estate, machinery, equipment and improvements to concessioned properties


(299,010
)


(329,373
)Total non-current liabilities


(509,409
)


(536,971
)Net non-current deferred income tax asset (liability)

Ps.
186,946


Ps.
(204,977
)
  F-38
 Table of Contents
  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) Minority interest
 
 Under MFRS, the minority interest in consolidated subsidiaries is presented as a separate component within the stockholders’ equity section of the consolidated balance sheet. For U.S. GAAP purposes, minority interest is not included in stockholders’ equity and is presented below total liabilities and above the stockholder’
equity section of the balance sheet.
 
 The effects of the U.S. GAAP differences as described in this note reflect the amounts assigned to the minority interests.
 
 (a) Earnings per share according to U.S. GAAP – In accordance with SFAS No. 128, “Earnings per Share”, 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, 2008 and 2006 includes 2,940,000 equivalent shares from the forfeitable shares, which are considered to be contingently issuable under SFAS No. 128, 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, 2007, 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 2006, 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:
 
 2008


2007


2006NumeratorNet (loss) income under U.S. GAAP

Ps.
1,013,454


Ps.
(118,318
)

Ps.
548,798Denominator (share amounts)Weighted average number of common shares outstanding


396,284,313



399,611,578



391,624,384Dilutive effects of forfeitable shares


2,940,000



-



2,940,000Total potential dilutive shares


399,224,413



399,611,578



394,564,384Basic earnings per share


2.5574



(0.2961
)


1.4013Diluted earnings per share


2.5386



(0.2961
)


1.3909
  F-39
 Table of Contents
  (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 SFAS No. 95,” Statement of Cash Flows”, 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, 2008, 2007, and 2006 is presented below:
 2008


2007


2006Cash flows from operating activities:Consolidated net income (loss)

Ps.
1,013,454


Ps.
(118,318
)

Ps.
548,798Adjustments to reconcile net income to cash provided by operating activities:Other provisions






-



-Depreciation and amortization


266,031



235,122



191,757Deferred fees for technical assistance services


(29,596
)


10,133



19,732Bad debt expense


33,523



387



(12,824
)Provisions for seniority premium and severance payments


(9,552
)


(5,530
)


(358
)Unrealized exchange loss


67,835



-



-Deferred income tax


(403,227
)


772,999



69,927Changes in operating assets and liabilities:Accounts receivable


(161,488
)


(18,763
)


(19,430
)Recoverable taxes


(222,913
)


91,621



(81,760
)Other current assets


2,387



52,641



(65,396
)Accounts payable and other accruals


89,113



17,570



36,565Accounts payable to related parties


158,101



1,649



9,487Advances from customers


1,666



(8,635
)


(6,578
)Value-added tax payable


-



3,569



(10,685
)Statutory employee profit sharing


(6,509
)


740



7,447Guarantee deposits


984



826



7,421Net cash provided by operating activities


799,809



1,036,011



694,103Cash flows from investing activities:Acquisitions of property, machinery, equipment and improvements to concessioned properties


(1,933,874
)


(657,018
)


(458,262
)Other investing activities


(14,519
)


-



-Net cash used in investing activities


(1,948,393
)


(657,018
)


(458,262
)Cash flows from financing activities:Dividends paid


(428,218
)


(229,224
)


(446,689
)Repurchase of shares


(53,345
)


(99,644
)


-Proceeds from bank loan


130,863Increase in capital


-



-



124,224Net cash used in financing activities


(350,700
)


(328,868
)


(322,465
)Effect of inflation on cash and cash equivalents


-



33,585



53,014Net (decrease)  increase in cash and cash equivalents


(1,499,284
)


83,710



(33,610
)Cash and cash equivalents at beginning of the year


1,756,704



1,672,994



1,706,604Cash and cash equivalents at end of the year

Ps.
257,420


Ps.
1,756,704


Ps.
1,672,994Cash paid for:Income taxes

Ps.
289,188


Ps.
134,680


Ps.
Ps.216,352Supplemental schedule of noncash investing activities:Acquisitions of property, machinery, equipment and improvements to concessioned properties on account

Ps.
452,690


Ps.
20,193


Ps.
19,113
  F-40
 Table of Contents
  (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 yearAllowance for doubtful accounts2008

Ps.
9,294


Ps.
33,523


Ps.
-


Ps.
(4,384
)

Ps.
38,4332007


9,242



2,285



(467
)


(1,766
)


9,2942006


22,959



(9,843
)


(894
)


(2,980
)


9,242Valuation allowance2008

Ps.
866,205



79,136











945,3412007


-


Ps.
866,205



-



-


Ps.
866,205
 
 New U.S. GAAP Accounting Standards -
 
 In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements(“SFAS 157”). SFAS 157 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. SFAS 157 clarifies the definition of exchange price as the price between market participants in an orderly transaction to sell an asset or transfer a liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. The changes to current practice resulting from the application of this statement relate to the definition of fair value, the methods used to measure fair value,
and the expanded disclosures about fair value measurements. SFAS 157 was effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years for financial assets and liabilities.  On October 10, 2008, the FASB issued Staff Position (“FSP”) FAS No. 157-3 (“FSP 157-3”), Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active. FSP 157-3 is effective
upon issuance.  SFAS 157 has been deferred until fiscal years beginning after November 15, 2008 for nonfinancial assets and liabilities.  The Company adopted the provisions of this new accounting principle as it relates to financial assets and financial liabilities and determined that its effects were not considered to be material to its consolidated financial position, results of operations and cash flows.
 
 In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51(“SFAS 160”). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a
subsidiary and the deconsolidation of a subsidiary, including: (a) changes the way the consolidated balance sheet and consolidated income statement are presented; (b) establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in a change of control or deconsolidation; (c) requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated; and (d) requires expanded disclosures in the consolidated financial statements
that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners of a subsidiary. The accounting provisions of SFAS 160 must be applied prospectively the presentation and disclosure requirements must be applied retrospectively to provide comparability in the financial statements.  SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  Early adoption is prohibited.   The
Company is in the process of determining the impact of adopting the accounting provisions of this new accounting principle on its consolidated financial position, results of operations and cash flows.  In addition, the impact of adopting this pronouncement will also be dependent on the level of future transactions.
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  In December 2007, the FASB issued SFAS No. 141(R), Business Combinations—a replacement of FASB No. 141(“SFAS 141(R)”). SFAS 141(R) requires (a) a company to recognize 100% of the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree
at fair value as of the acquisition date; and (b) an acquirer in preacquisition periods to expense all acquisition-related costs, among various other modifications to SFAS 141.  SFAS 141(R) also amends SFAS 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.  SFAS 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 of the amendments to SFAS 109, which will also be applied to business combinations with acquisition dates prior to the effective date of this standard. Early adoption is prohibited.   The impact of this standard is dependent upon the level of future acquisitions.
 
 In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires companies to provide qualitative disclosures about the objectives and strategies for using
derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions.  The statement also requires companies to disclose more information about the location and amounts of derivative instruments in financial statements; how derivatives and related hedges are accounted for under SFAS 133, Accounting for Derivative Instruments and Hedging Activities;
and how the hedges affect the entity’s financial position, financial performance and cash flows. SFAS 161 is effective for periods beginning after November 15, 2008. The Company will comply with the disclosure provisions of SFAS 161 to the extent it has entered into derivative transactions in the year of adoption.
 
 In April 2008, the FASB issued FSP FAS No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). The objective of the FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R). FSP 142-3 is effective for fiscal years beginning after December 15, 2008. Early application is not permitted. The Company is in
the process of determining the impact of adopting this new accounting principle on its consolidated financial position, results of operations and cash flows.
 
 In January 2008, the FASB unveiled the FASB Accounting Standards Codification (the “Codification”) for a one-year verification period by constituents. While the Codification does not change U.S. GAAP, it does combine all authoritative accounting standards issued by bodies such as the FASB, AICPA, and EITF into a topically organized
comprehensive online database. The Codification will (a) reduce the amount of time and effort required to solve an accounting research issue; (b) improve usability of the literature thereby mitigating the risk of noncompliance with the standard; (c) provide real-time updates as new standards are released; (d) assist the FASB with the research and convergence efforts required during the standard-setting process; and (e) become the authoritative source of literature for the completed XBRL taxonomy. The Codification
does not represent authoritative guidance until after the verification period, at which time the Codification will supersede all existing accounting literature (other than guidance issued by the SEC).  Such Codification will apply for calendar year companies beginning in 2009.
 
 On November 14, 2008, the Securities and Exchange Commission (“SEC”) issued its long-anticipated proposed International Financial Reporting Standards (“IFRS”) roadmap outlining milestones that, if achieved, could lead to mandatory transition to IFRS for U.S. domestic registrants starting in 2014. IFRS is a comprehensive
series of accounting standards published by the International Accounting Standards Board (IASB). Under the proposed roadmap, the Company could be required through the Parent Company to prepare financial statements in accordance with IFRS.  The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS for U.S. domestic registrants. Management is currently assessing the impact that this potential change would have on the Company’s consolidated financial statements, and will
continue to monitor the development of the potential implementation of IFRS.
 
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