20-F: Southeast Airport Group Reports FY24 Results: Passenger Traffic Up, Revenue Climbs

Southeast Airport Group's FY24 results show an increase in passenger traffic and a corresponding rise in revenue, driven by improvements in both aeronautical and non-aeronautical services.

Summary

• Southeast Airport Group (ASUR) reported its FY24 financial results, showcasing growth in key areas.
• Passenger traffic increased by 1.1% compared to 2023, contributing to higher revenues.
• Consolidated revenues reached Ps. 31,332.8 million, a 21.3% increase year-over-year.
• Aeronautical revenues rose by 22.1%, while non-aeronautical revenues saw a 6.4% increase.
• Construction revenues experienced a significant surge of 118.7%.
• Operating income increased by 14.9% to Ps. 17,519.8 million.
• The company's effective tax rate was 37.0% in 2024.
• Net income for the year was Ps. 14,030.4 million, a 31.4% increase from the previous year.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong revenue and profit growth, but also highlights several risks and challenges that could impact future performance.

Positives

• Increased passenger traffic led to higher aeronautical revenues.
• Growth in commercial activities boosted non-aeronautical revenues.
• Significant increase in construction revenues indicates ongoing infrastructure development.
• Overall, the company's financial performance improved, with higher operating and net income.

Negatives

• Operating expenses increased by 30.6%, outpacing revenue growth.
• The effective tax rate increased from 33.0% to 37.0%.

Risks

• International events, including acts of terrorism, wars, armed conflicts and global epidemics, could have a negative impact on international air travel.
• Hurricanes and other natural disasters have adversely affected our business in the past and could do so again in the future.
• The COVID-19 pandemic has had and could have a negative impact on our operations.
• Our business could be adversely affected by a downturn in the economies of the United States, Mexico or Colombia.
• Fluctuations in international petroleum prices could reduce demand for air travel.
• The loss or suspension of operations by one or more of our key customers could result in a loss of a significant amount of our revenues.
• We could be subject to fines, penalties and other adverse consequences pending the outcome of our appeal against the Mexican governments tax treatment of airport concessions at Cancn Airport.
• The FAA could downgrade Mexicos air safety rating again, which could result in a decrease in air traffic between the United States and our airports.
• Our business is highly dependent upon revenues from Cancn International Airport.
• Increases in prevailing interest rates could adversely affect our financial condition.
• Security enhancements have resulted in increased costs and may expose us to greater liability.
• Interruptions in the proper functioning of information systems or other technologies could disrupt operations and cause unanticipated increases in costs and/or decreases in revenues.
• Our revenues are highly dependent upon levels of passenger and cargo traffic volumes and air traffic, which depend in part on factors beyond our control.
• Our business is highly dependent upon the operations of certain airports, including Mexico City and Bogot Area airports.
• Competition from other tourist destinations could adversely affect our business.
• If a change in relations with our labor force should occur, such a change could have an adverse impact on our results of operations.
• The operations of our airports may be disrupted due to the actions of third parties beyond our control.
• Fernando Chico Pardo and Grupo ADO, S.A. de C.V., directly and through their own investment vehicles and their interests in Inversiones y Tcnicas Aeroportuarias, S.A.P.I. de C.V., (ITA), have a significant influence as stockholders and over our management, and their interests may differ from those of other stockholders.
• Some of our board members and stockholders may have business relationships that may generate conflicts of interest.
• Our operations are at greater risk of disruption due to the dependence of most of our airports on a single commercial runway.
• We are exposed to risks related to construction projects.
• We are exposed to risks related to other business opportunities.
• Our LMM Airport business is conducted through Aerostar, which has a minority shareholder.
• We are exposed to risks inherent to the operation of airports.
• Our insurance policies may not provide sufficient coverage against all liabilities.
• Our sustainability targets and objectives included in our sustainability report and other public statements may expose us to numerous risks.
• The price regulatory system applicable to our Mexican airports imposes maximum rates for each airport, which does not guarantee that our consolidated results of operations, or that the results of operations of any Mexican airport, will be profitable.
• Changes to Mexican laws, regulations and decrees applicable to us could have a material adverse impact on our results of operations.
• Our Mexican concessions may be terminated under various circumstances, some of which are beyond our control.
• The Mexican government could grant new concessions that compete with our airports, including the Cancn International Airport.
• 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.
• If we exceed the maximum rate at any Mexican airport at the end of any year, we could be subject to sanctions.
• Depreciation of the Mexican peso may cause us to exceed our maximum rates.
• The price regulatory system applicable to our Colombian airports does not guarantee that our consolidated results of operations, or that the results of operations of any Colombian airport, will be profitable.
• Our Colombian concessions may be terminated under various circumstances, some of which are beyond our control, and such termination could have a material adverse effect on our business and results of operations.
• Changes in existing or new laws and regulations in Mexico, Colombia, the United States and Puerto Rico, including tax laws, or regulatory enforcement priorities could adversely affect our businesses or investments.
• Appreciation, depreciation or fluctuation of the peso relative to the U.S. dollar could adversely affect our results of operations and financial condition.
• Economic developments in Mexico may adversely affect our business and results of operations.
• Political developments in Mexico could adversely affect our operations.
• Developments in other countries may affect the prices of securities issued by Mexican companies.
• The election of Donald J. Trump as President of the United States may create uncertainty for relations between Mexico and the United States, and could have a material adverse effect on our business, financial condition and results of operations.
• The results of presidential and congressional action in the United States could result in significant changes in, and uncertainty with respect to, immigration and border policy.
• The results of presidential and congressional action in the United States could result in significant changes in, and uncertainty with respect to, trade policy.
• Differences between the corporate disclosure requirements of Mexico and the United States may not adequately reflect our business and results of operations.
• 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.
• It may be difficult to enforce civil liabilities against us or our directors, officers and controlling persons.
• The protections afforded to minority shareholders in Mexico are different from those in the United States.
• Security risks in Mexico could increase, which could adversely affect our operations.
• Colombian government policies may significantly affect the economy, and, as a result, our business and operations in Colombia.
• Colombia has experienced several periods of violence and political instability, which could affect the economy and our operations.
• Changes in U.S. immigration and border policy could adversely affect passenger traffic to and from Mexico and Colombia.
• Our LMM Airport business is conducted through Aerostar, which has a minority shareholder.
• 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 sales of shares by us and our stockholders may depress the price of our Series B shares and ADSs.
• We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could subject U.S. investors in shares of our common stock or ADSs to adverse tax consequences, which may be significant.

Future Outlook

The company expects to continue to generate a significant portion of its revenues from a relatively small number of airlines in the foreseeable future. The company also expects that the airline industry will have a global net profit of U.S.$36.6 billion on revenues of U.S.$1,007 billion in 2025.

Industry Context

The air travel industry is influenced by economic conditions, geopolitical events, and health crises. The report highlights the impact of COVID-19, armed conflicts, and natural disasters on passenger traffic and airline operations. The company's performance is also affected by competition from other tourist destinations and regulatory changes in the aviation sector.

Comparison to Industry Standards

• The report mentions the International Air Transport Association (IATA) forecasts for the global commercial airline industry, providing a benchmark for industry profitability.
• The report compares ASUR's revenue from commercial activities to leading international airports, noting that ASUR aims to increase its commercial revenue to match industry standards.
• The report mentions that the LMM Airport is ranked as the eighth largest medium hub facility and the thirty-ninth largest airport in the United States by the FAA based on number of enplanements, as of December 31, 2024.

Legal Proceedings

• Aeropuerto de Cancn is appealing a decision from the Quintana Roos Tax Authority concerning a tax issue relating to the amortization of its concession for tax purposes.
• The United States District Court for the District of Puerto Rico held a hearing to consider the plan of adjustment for the Puerto Rico Electric Power Authority (PREPA).
• The United States Court of Appeals for the First Circuit reversed part of the lower courts decision ruling that bondholders have a lien on PREPAs present and future net revenues, reversing part of the lower courts decision.

Related Party Transactions

• The company has engaged in a variety of transactions with its affiliates, including with certain of its shareholders. The transactions with related parties disclosed in this section were carried out under market conditions.

Stakeholder Impact

• The company's performance impacts shareholders through dividends and stock value.
• Employees are affected by salary increases and potential changes in labor relations.
• Customers (airlines and passengers) benefit from improved airport facilities and services.
• Suppliers and creditors are impacted by the company's ability to meet its financial obligations.
• Local communities benefit from the company's participation in and support for local communities.

Next Steps

• The company will continue to monitor and manage risks related to economic conditions, geopolitical events, and regulatory changes.
• The company will continue to implement its business strategy, focusing on increasing revenues from commercial activities.
• The company will continue to work towards emissions reductions and energy efficiency through both on-site and off-site generation of solar power, adopt measures to supplement our water consumption with systems to capture and use rainwater, promote diversity in our workforce and on the companys Board, aim to achieve equitable pay, and create succession plans for our independent Board members and key executives.

Key Dates

Keywords

financial results, passenger traffic, aeronautical revenue, non-aeronautical revenue, airport operations, Southeast Airport Group, ASUR, airports, Mexico, Colombia, Puerto Rico