20-F: Central North Airport Group Reports Financial Results for Fiscal Year 2024

Central North Airport Group's FY24 results show a complex interplay of increased revenues offset by rising costs and regulatory changes.

Summary

• Central North Airport Group (GACN) has released its financial results for the fiscal year ended December 31, 2024.
• Aeronautical services accounted for 60.6% of total revenues and 74.8% of combined aeronautical and non-aeronautical revenues.
• The company's stock price on the Mexican Stock Exchange declined by 26% following an announcement by the Mexican Federal Civil Aviation Agency of an amendment on October 4, 2023.
• The Mexican government increased the fee paid by airport concessionaires to the federal government (the Concession Tax Payment) from 5% to 9% effective as of January 1, 2024.
• The total passenger traffic in GACN's airports decreased by 1.2% during 2024.
• Global markets have experienced and are experiencing volatility and disruption due to geopolitical tensions, including Russia’s war with Ukraine, the war in the Middle East involving Israel, recent developments involving the fall of the Syrian government and ongoing tensions in Asia.
• On October 18, 2024, GACN disclosed a cybersecurity breach in its systems.
• In 2024, approximately 82.7% of the sum of GACN's aeronautical and non-aeronautical revenues were generated from seven of its thirteen airports and OMA Logstica.
• In 2024, VivaAerobus represented 43.3%, Volaris represented 19.1% and Aeromxico and its affiliates represented 20.2% of the total aeronautical revenues generated at GACN's airports.
• On January 6, 2024, the Federal Aviation Administration (FAA) ordered the temporary grounding of 171 Boeing 737-9 MAX aircraft worldwide, affecting Aeromexico, which is one of GACN's main airline customers.
• On October 25, 2023, Hurricane Otis, a category 5 storm, struck Acapulco, causing landslides, floodings, and a total blackout.
• The Mexican economy achieved real GDP growth rates of 1.2% in 2024.
• From December 31, 2023 to December 31, 2024, the peso depreciated by 23%, from Ps. 16.90 per U.S.$1.00 to Ps. 20.86 per U.S.$1.00.
• The annualized interest rates on 28-day short-term Mexican treasury bills averaged approximately 10.7% for 2024.
• The company is required to comply with applicable anti-money laundering and anti-terrorism and other regulations in Mexico.
• The company is exposed to risks related to aircraft parts manufacturing.
• The company is exposed to additional risks if it pursues business opportunities in other countries.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While there are positive aspects such as increased non-aeronautical revenues, there are also negative aspects such as decreased passenger traffic and regulatory challenges. The overall outlook is cautiously optimistic.

Positives

• Non-aeronautical revenues increased by 17.1% in 2024.
• International passenger traffic increased by 15.0% in 2024.
• The company is constantly updating its infrastructure with the latest security technologies, and it conducts vulnerability analysis and penetration testing periodically.
• The company has backup systems and protects its systems with antivirus software, end-point protection software and last generation firewalls, including firewalls to filter traffic from the Internet.

Negatives

• Total passenger traffic decreased by 1.2% in 2024.
• The Mexican government increased the Concession Tax Payment from 5% to 9% effective January 1, 2024.
• A cybersecurity breach occurred in October 2024.
• The company is facing legal challenges related to land ownership at some airports.
• The peso depreciated by 23% against the U.S. dollar in 2024.

Risks

• Regulatory changes by the Mexican government could adversely affect the company's operations and profitability.
• Large scale international events, including acts of terrorism, wars and the military action worldwide, could have a negative impact on international air travel and the company's revenues.
• Pandemics, epidemics or other health related outbreaks could have a negative impact on the global economy and on the company's business, operations and results.
• Changes in U.S. trade and immigration policy could adversely affect the company's business.
• The company's business could be adversely affected by a downturn in the global economy, particularly with regard to the U.S. economy.
• Variations in international fuel prices could directly or indirectly adversely affect the company's business and results of operations.
• The company is dependent on information technology, and its systems and infrastructure face certain risks, including cybersecurity risks.
• Competition from other tourist destinations could adversely affect the company's business.
• The company's business is highly dependent upon revenues from seven of its thirteen airports and OMA Logstica, S.A. de C.V. (OMA Logstica) and could be adversely impacted by any condition affecting those businesses.
• The company faces risks associated with its diversification activities, which could lead to its inability to recover its investment as planned.
• The company's operations depend on certain key airline customers, and the loss or suspension of operations of one or more of them could result in a loss of a significant amount of its revenues.
• Collective labor conflicts in Mexico could have an adverse impact on the company's results of operations.
• The company's operations could be adversely affected due to changes in the collection of passenger charges.
• The company's operation relies on the knowledge and experience of its management team and the loss of skilled executives could affect its operations.
• The operations of the company's airports may be affected by the actions of third parties, which are beyond its control.
• The company may be liable for property taxes as a result of claims asserted against it by certain municipalities.
• Inability to generate sufficient future taxable profits or adverse changes to tax laws, regulatory requirements or accounting standards could have a negative impact on the recoverability of certain deferred tax assets.
• Natural disasters could adversely affect the company's business.
• The company's reputation and business could be adversely affected in the event of an emergency, accident or similar incident involving its airports.
• The company's operations are at greater risk of disruption due to the dependence of several of its airports on a single commercial runway.
• The company is exposed to risk related to construction projects.
• The company is exposed to the risk of non-performance by its contractors.
• The company's ability to expand certain of its airports and to comply with applicable safety guidelines could be limited by difficulties it encounters in acquiring additional land on which to operate its airports.
• The company is exposed to risks inherent to the operation of airports.
• The company's insurance policies may not provide sufficient coverage against all liabilities.
• The company is exposed to risks related to handling cargo.
• The company could be exposed to risks related to aircraft parts manufacturing.
• The company may not be able to detect money laundering operations and other illegal or improper activities, which could expose it to additional liabilities and adversely affect its operations and financial results.
• The company could be exposed to additional risks if it pursues business opportunities in other countries.
• Our business is significantly dependent upon the volume of air passenger traffic in Mexico, and negative economic developments and security concerns in Mexico could adversely affect its business and results of operations.
• Political developments and constitutional reforms could have an adverse effect on our business, results of operations or financial condition.
• Economic and political instability in Mexico could materially and adversely affect the Mexican economy and political climate and, in turn, on our operations.
• Adverse domestic events could negatively impact our business and results of operations.
• Adverse economic conditions in Mexico may adversely affect our financial condition or results of operations.
• Depreciation of the peso relative to the U.S. dollar could adversely affect our results of operations and financial condition.
• High incidences of crime in Mexico, including extortion and drug trafficking, could adversely affect the Mexican economy and may have a negative effect on our business.
• The value and prices of securities issued by Mexican companies, including us, may be adversely affected by developments in other countries.
• Delays in the process of obtaining necessary governmental approvals could affect our ability to expand our airports.
• Mexico’s environmental legislation could limit the growth of some of our airports.
• Minority shareholders may be less able to enforce their rights against us, our directors or controlling shareholders in Mexico.
• Enforcing civil liabilities against us or our directors, officers and controlling persons may be difficult.
• Mexican law and our bylaws restrict the ability of non-Mexican shareholders to invoke the protection of their governments with respect to their rights as shareholders.
• We are subject to different corporate disclosure standards than U.S. companies.
• Servicios de Tecnologa Aeroportuaria, S.A. de C.V. (SETA) has the right to appoint certain key members of our management, and SETAs interests may differ from those of other shareholders.
• You may not be entitled to participate in future preemptive rights offerings.
• Holders of ADSs are not entitled to attend shareholders meetings, and they may only vote through the depositary.

Future Outlook

The company expects passenger traffic at Acapulco airport to gradually recover in line with the reopening of hotel rooms and other tourist infrastructure in the city.

Industry Context

The document provides insight into the financial performance of an airport group within the context of broader industry trends, such as regulatory changes, geopolitical tensions, and the impact of health-related outbreaks. The company's performance is closely tied to the Mexican economy and the aviation industry, making it susceptible to various external factors.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• A more detailed analysis would require a comparison of OMA's financial metrics (e.g., revenue per passenger, operating margin) to those of comparable airport operators, such as Grupo Aeroportuario del Pacfico (GAP) and Grupo Aeroportuario del Sureste (ASUR) in Mexico, or international peers like Aéroports de Paris (ADP) or Fraport.
• Additionally, assessing OMA's operational efficiency (e.g., passenger handling capacity, turnaround times) against global benchmarks would provide a more comprehensive view.

Legal Proceedings

• Parties purporting to be former owners of land comprising a portion of the Ciudad Jurez airport initiated legal proceedings against the airport in 1995 to reclaim 240 hectares of land, alleging that it had been improperly transferred to the Mexican government.
• On May 14, 2015, Banco Mercantil del Norte, S.A. (Banorte), acting as trustee of a certain trust, filed a civil lawsuit against the Monterrey airport in connection with the ownership of 240 hectares of land previously acquired (the Land) by the Monterrey airport.
• On May 18, 2023, the estate of Mr. Manuel Garza Lagera, represented by its executor Mara Selina Rivero Santos (Garza Lagera Estate) filed an ordinary civil lawsuit alleging the nullity of the transactions pursuant to which Monterrey Airport acquired the property of certain plots of land in Monterrey, adjacent to the airport.
• On March 5, 2020, the Company was notified of a lawsuit filed against the Durango airport, the Ministry of Infrastructure, Communications and Transportation, the Government of the State of Durango and the Ministry of Agrarian, Territorial and Urban Development.
• On October 16, 2020, the Company was notified of the lawsuit filed against the Mexican Federal Civil Aviation Agency, in which the Reynosa airport was called as an interested third party.
• Administrative law proceedings have been asserted against us in the past by various municipalities for the payment of property taxes with respect to the real estate in which we operate our airports in the relevant cities.

Related Party Transactions

• In 2024, we entered into contracts with our other affiliates amounting to Ps.5,705 thousand, in connection with expatriate mobility reimbursements, environmental studies, software license costs, provided by or reimbursed to VINCI and its affiliates.
• In 2024, we engaged in transactions amounting to Ps.235,499 thousand in technical assistance fees with SETA.
• In 2024, we engaged in transactions amounting to Ps.66,412 thousand in administrative services fees with our partners, NH Hotels, Grupo Hotelero Santa Fe and VYNMSA.
• In 2024, we engaged in transactions amounting to Ps.311,317 thousand with our partner VYNMSA and its affiliates in connection with the development of the OMA-VYNMSA Industrial Park located in the Monterrey airport.

Stakeholder Impact

• Shareholders: The results impact shareholder value and dividend payouts.
• Employees: Labor law changes and union activities affect employee relations and costs.
• Customers: Airport improvements and security measures impact passenger experience.
• Airlines: Regulatory changes and airport fees affect airline operations and profitability.
• Suppliers: Cybersecurity breaches and economic conditions impact supplier relationships.
• Creditors: Debt levels and financial performance affect credit ratings and borrowing costs.

Next Steps

• The Ministry of Infrastructure, Communications and Transportation is expected to approve OMA's Master Development Programs for the years 2026 through 2030, at the end of 2025, and it shall come into effect on January 1, 2026.

Key Dates

Keywords

Airports, Financial Results, Aeronautical Revenues, Non-Aeronautical Revenues, Passenger Traffic, Mexico, Concession, OMA